Scientific Games Announces First Quarter 2013 Results

            Scientific Games Announces First Quarter 2013 Results

PR Newswire

NEW YORK, May 7, 2013

NEW YORK, May 7, 2013 /PRNewswire/ --Scientific Games Corporation (Nasdaq:
SGMS) today announced results for the first quarter ended March 31, 2013.

Summary Financial Results
($ in millions, except per share amounts)

                                                 Three Months Ended

                                                 March 31,
                                                 2013       2012
Revenue                                          $219.6     $231.2
Operating income                                 11.1       24.9
Attributable EBITDA:
 Continuing operations                         $78.6      $86.8
 Discontinued operations                       0.1        (0.1)
 Attributable EBITDA
                                                 $78.7      $86.7

Net (loss) income:
 Continuing operations                         $(12.3)    $3.9
 Discontinued operations                       (0.9)      (2.1)
 Net (loss) income                         $(13.2)    $1.8
Net (loss) income per share (basic and diluted):
 Continuing operations                         $(0.15)    $0.04
 Discontinued operations                       (0.01)     (0.02)
 Net (loss) income per share               $(0.16)    $0.02
Capital expenditures                             $36.3      $21.8
Free cash flow                                   (13.0)     0.1

Attributable EBITDA and free cash flow are non-GAAP financial measures defined
below under "Non-GAAP Financial Measures" and reconciled to GAAP financial
measures in the accompanying tables.

Scientific Games sold its installed base of gaming terminals in its pub
business on March 25, 2013. The results of this sale are presented as
discontinued operations in the Company's financial statements for all periods
presented. All financial results referenced in this press release are for
continuing operations only, unless otherwise noted. 

Recent Business Highlights

  oNorthstar New Jersey Lottery Group ("Northstar New Jersey"), a joint
    venture in which Scientific Games will own an approximate 18% equity
    interest, was notified in April of the intent to award it a 15-year
    contract to provide marketing and sales services for the New Jersey
    Lottery
  oA strategic alliance Scientific Games formed with a Panamanian company
    entered into a 10-year contract with the Loteria Nacional de Beneficencia
    of Panama ("National Lottery of Panama") to supply instant tickets under a
    cooperative services program; Panama is a new jurisdiction for instant
    tickets and Scientific Games is the exclusive supplier of instant tickets
    and related services for the term of the contract
  oScientific Games was selected by the Delaware Lottery as primary vendor
    with 888 Holdings to operate internet gaming systems and services for an
    initial period of five years; Williams Interactive, a subsidiary of WMS
    Industries Inc. (NYSE: WMS) ("WMS"), will provide game content
  oScientific Games' U.S. instant ticket customers' retail sales increased
    2.0% in the first quarter of 2013 compared to the prior-year period, based
    on third-party data
  oScientific Games' U.S. lottery systems customers' retail sales declined
    14.9% in the first quarter of 2013 compared to the prior-year period,
    based on third-party data; results reflect impact of record Mega
    Millions^® jackpot during the prior-year period
  oGlobal Draw's U.K. gross win per terminal per day decreased approximately
    1.2% in the first quarter of 2013 compared to the prior-year period
  oExecuted a one-year contract with the Oklahoma Lottery to continue
    supplying lottery systems and services and instant tickets until August
    2014; contract includes nine additional one-year extension options
  oSigned a two-year contract extension with the Montana Lottery to continue
    supplying instant tickets until August 2015

"We are highly focused on executing on a number of significant new business
developments, including our consortium's provisional award of the Greece
instant ticket concession, the launch of instant tickets in Panama, the
start-up of the Properties Plus^® loyalty and rewards program in Maryland, and
the opportunity in New Jersey for our joint venture. We anticipate that
momentum will accelerate as the year progresses based on the planned launch
and ramp up of these and other incremental revenue opportunities later in
2013," Chairman and Chief Executive Officer A. Lorne Weil commented. "In
addition, we are excited about the opportunities presented by our pending
acquisition of WMS, which is proceeding as expected and which we believe will
be transformational for our Company."

Jeffrey S. Lipkin, Senior Vice President and Chief Financial Officer, added,
"Our quarter's results reflected challenging comparisons to the prior-year
period in our lottery and gaming businesses and also included incremental
costs related to the pending acquisition of WMS.Our first quarter is
typically a seasonally slower quarter; however, our first quarter 2012 results
benefited from a few items which caused our results to be anomalous relative
to our first quarter trends historically. Looking ahead, we continue to lay
the groundwork for new growth opportunities that we expect will benefit our
Company."

Business Update

We believe our U.S. lottery business performed relatively well during the
first quarter of 2013 given the difficult comparisons with the same period
last year when instant ticket and lottery systems retail sales of our
customers grew 12.2% and 15.8%, respectively, which represented the high point
of retail sales growth during 2012. The first quarter 2012 results benefited
from the record $656 million Mega Millions jackpot.

While it is still early in the second quarter, instant ticket and lottery
systems retail sales in the U.S. reflected an improved year-over-year
percentage change in April relative to the year-over-year percentage change in
the first quarter of 2013.

In Italy, instant ticket retail sales decreased 2.8% in the quarter compared
to the prior-year period; however, the year-over-year percentage change in
retail sales in April 2013 improved relative to the same metric for both the
first quarter of 2013 and March 2013.

In China, instant ticket retail sales declined 12.5% in the first quarter of
2013 compared to the prior-year period. However, the percentage change in
retail sales on a year-over-year basis has now improved for two consecutive
quarters and also in April relative to the first quarter of 2013. We believe
the key factors driving the sequential improvement include more appealing
games, lower inventory held by retailers, increased retailer marketing and
promotions and the recent introduction of games with common themes that are
packaged together at retail locations to increase consumer awareness.

Our U.K. gaming business faced challenging year-over-year comparisons,
including due to the loss of the William Hill contract in early 2012, and was
impacted in the first quarter of 2013 by difficult economic conditions and
inclement weather that reduced player activity, along with lower product
sales, which can fluctuate from period to period due to their non-recurring
nature. Revenue and profitability of our gaming business outside the U.K. was
negatively affected by specific issues impacting two of our customers that we
are working to resolve. However, it is encouraging to note that our U.K. gross
win per terminal per day performance improved in each consecutive month in the
first quarter. Also, we anticipate a positive response from players as we
continue to roll out our new Infinity2 gaming terminals with enhanced
functionality to Gala Coral. We also realized increased revenue year-over-year
in the quarter from our collective U.K. LBO customers (excluding William Hill)
and our interactive business, and are pleased with the positive contributions
from ADS, the field service provider we acquired last year. Finally, the sale
of the gaming terminals in our pub business will allow us to focus our gaming
resources on our more lucrative businesses.

Northstar New Jersey, the joint venture in which we will own an approximate
18% equity interest, was recently notified of the intent to award it a
contract to provide marketing and sales services for the New Jersey Lottery
for a period of 15 years. Under separate arrangements with Northstar New
Jersey, Scientific Games is expected to serve as the primary instant ticket
supplier and have a 30% interest in the overall economics (and be responsible
for 30% of the capital requirements) associated with the supply of instant
tickets, lottery systems and services and potentially a player loyalty and
rewards program. We are excited about this opportunity as we have never been a
primary supplier to New Jersey and therefore have not had the level of
lottery-related supply revenue that is expected from this opportunity in the
future. In the New Jersey Lottery's latest reported fiscal year, instant
ticket retail sales were approximately $1.4 billion and the lottery purchased
approximately $16.7 million of instant tickets from vendors. The contract
award is subject to a protest filed by the Communication Workers of America,
the union that represents lottery workers.

We are very pleased that a strategic alliance we formed with a company in
Panama entered into a 10-year instant ticket cooperative services contract
with the National Lottery of Panama, and look forward to commencing operations
later this year. Currently, traditional draw-based lottery games are the only
lottery offering in Panama; we will be launching the first instant ticket
product into the marketplace. This is an important opportunity to demonstrate
how the products, technology and best practices we use around the world can be
successfully deployed in selling instant tickets in Panama to help grow our
customer's lottery business.

Last week we announced that Scientific Games had been selected with its
partners as the primary vendor team to operate internet gaming systems and
services for the Delaware State Lottery. Delaware is the first U.S. state to
implement comprehensive intrastate iGaming including poker, slots and bingo.
For this bid, we teamed up with 888 and Williams Interactive, a subsidiary of
WMS, to provide a full turnkey solution for the gaming platform, content and
operational services. This joint effort combines 888's decade-long experience
at the forefront of the online gaming industry with Scientific Games' proven
ability to provide added value, turnkey solutions to government-sponsored and
commercial gaming operators, and Williams Interactive's premium iGaming
products and services. We believe this joint effort with WMS is a prime
example of the type of opportunities that can be achieved by Scientific Games'
acquisition of WMS.

We are pleased with the progress we have been making toward our pending
acquisition of WMS. A meeting of WMS' stockholders to consider and vote on the
proposed merger has been scheduled for May 10, 2013. We have filed
applications (or otherwise provided the required documentation or information)
in each of the jurisdictions in which we are seeking gaming regulatory
approval prior to closing the merger. We continue to make progress in our
integration planning efforts and have engaged an integration consultant
experienced in the gaming industry. The completion of the WMS acquisition
remains subject to the approvals of WMS stockholders and gaming regulatory
authorities and other customary closing conditions, and there can be no
assurance that the merger will be completed. 

In connection with the pending WMS acquisition, we incurred regulatory costs,
professional fees and other expenses totaling approximately $3.8 million in
the first quarter of 2013, with additional transaction-related fees and
expenses anticipated to be incurred throughout the balance of 2013.

First Quarter 2013 Operating Results by Segment
($ in millions)

                  Revenue             Operating Income (Loss)
                  Three Months Ended  Three Months Ended

                  March 31,           March 31,
                  2013       2012     2013           2012
Printed Products  $126.3     $125.5   $33.9          $35.1
Lottery Systems   58.2       64.5     1.9            8.3
Gaming            35.1       41.2     (1.5)          3.7

Printed Products

Revenue

  oResults reflected a $1.3 million increase in revenue from international
    customers that purchase tickets on a percentage of sales basis, the
    acquisition of Provoloto, and a $2.9 million increase in our licensed
    properties business primarily driven by new Properties Plus^® contracts
  oOffsetting these increases were $4.8 million of lower U.S. and
    international revenue from price-per-thousand customers, along with a $2.0
    million decrease in sales to U.S. customers that purchase tickets on a
    percentage of sales basis, largely reflecting challenging comparisons with
    the strong retail sales levels in the prior-year period

Operating Income

  oOperating income decrease primarily reflected:

       o$1.5 million increase in selling, general and administrative expenses
         principally due to incremental overhead from the acquisition of
         Provoloto and a $2.2 million insurance recovery in the prior-year
         period, partially offset by lower incentive compensation expense in
         the current-year period
       o$1.0 million increase in depreciation and amortization primarily
         related to licensing brands

  oThe decrease in operating income was partially offset by the $1.5 million
    impact of a more profitable revenue mix

Lottery Systems

Revenue

  oSales revenue decreased $3.3 million, largely due to lower sales to
    international customers, which can fluctuate from period to period due to
    their non-recurring nature
  oService revenue decreased $3.0 million, primarily due to challenging
    retail sales comparisons with the prior-year period when our U.S. customer
    base benefited from a record $656 million Mega Millions jackpot

Operating Income

  oDecrease in operating income primarily reflected:

       o$4.0 million impact of lower and less profitable revenue mix
       o$2.0 million increase in depreciation and amortization related to new
         terminal hardware in China and the amortization of new technology
         development costs

Gaming

Revenue

  oThe service revenue decrease primarily reflected:

       o$2.0 million from the loss of the William Hill contract in 2012
       o$1.0 million decline in revenue from a customer in Puerto Rico
       o$0.9 million decrease in revenue from a customer in Italy, where
         Barcrest machines were deactivated in the second quarter of 2012

  oThe decline in service revenue was partially offset by revenue from the
    acquisition of ADS and increased revenue from U.K. LBO (excluding William
    Hill) and interactive customers
  oThe decline in sales revenue primarily reflected lower sales of Barcrest's
    gaming terminals, which can fluctuate from period to period due to their
    non-recurring nature

Operating Income

  oDecrease in operating income was principally due to:

       o$3.7 million impact of lower and less profitable revenue mix
       o$2.3 million increase in selling, general and administrative expenses

  oThe less profitable revenue mix was primarily attributable to:

       oLoss of $2.0 million in revenue from William Hill
       o$1.9 million decrease in revenue from our customers in Puerto Rico
         and Italy, while incurring costs associated with our Puerto Rico
         customer

  oIncrease in selling, general and administrative expenses was primarily due
    to $2.0 million in legal fees and expenses related to our gaming business
    in Italy and severance costs

First Quarter 2013 Consolidated Financial Results – Other information

Net Income

  oThe decline in net income reflected the decrease in operating income and
    the following:

       o$2.7 million decrease in earnings from equity investments, primarily
         due to lower results from RCN, China and Italy
       o$1.5 million decrease in other income principally driven by increase
         in foreign exchange transaction expense

  oThe decline was partially offset by a $2.0 million decrease in income tax
    expense

EBITDA from Equity Investments

  oEBITDA from equity investments declined by $1.4 million, reflecting lower
    results from Italy, China and RCN

Liquidity and Capital Resources

  oAt March 31, 2013, cash and cash equivalents of $90.0 million and
    availability under revolving credit facility of $205.7 million
  oTotal debt of $1,467.7 million as of March 31, 2013 compared to $1,468.2
    million at December 31, 2012
  oFree cash flow for the first quarter was ($13.0) million, compared to $0.1
    million in prior-year quarter, principally reflecting a $14.5 million
    increase in total capital expenditures primarily related to the purchase
    of gaming terminals and press upgrades in the U.S.
  oReceived $2.2 million in cash dividends from equity investments in first
    quarter of 2013

Pending Acquisition of WMS Industries Inc.

As previously announced on January 31, 2013, Scientific Games entered into an
agreement to acquire WMS for $26.00 in cash per common share, or approximately
$1.5 billion in the aggregate.

Completion of the transaction remains subject to approvals by WMS'
stockholders and gaming regulatory authorities and other customary closing
conditions.WMS has scheduled a special meeting of WMS' stockholders on May
10, 2013 to consider and vote on the proposed merger. Scientific Games and WMS
have filed applications (or otherwise provided the required documentation or
information) in each of the approximately 50 jurisdictions where gaming
regulatory approval is a condition to closing or have received confirmation
that receipt of such approval is not required prior to closing. Scientific
Games has also received notice from the Federal Trade Commission of early
termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 in connection with the merger, which satisfied the
related closing condition. Scientific Games has obtained commitments for a
term loan facility of $2.3 billion and a revolving credit facility of $300
million to finance the acquisition and continues to expect the transaction to
close by the end of 2013. However, no assurance can be given that the merger
will be completed.

Conference Call Details

Scientific Games will host a conference call today at 5:00 pm Eastern Time to
review these results and discuss other topics. To access the call live via a
listen-only webcast, please visit www.scientificgames.com and click on the
webcast link under the Investor Information section. To access the call by
telephone, please dial (866) 318-8615 (U.S. and Canada) or (617) 399-5134
(international). The conference ID is 15769477.

A presentation summarizing the results will also be provided in the Investor
Information section on our website prior to the conference call. A replay of
the webcast and accompanying presentation will be archived in the Investor
Information section on our website. 

About Scientific Games
Scientific Games Corporation is a global leader in providing customized,
end-to-end gaming solutions to lottery and gaming organizations worldwide.
Scientific Games' integrated array of products and services includes instant
lottery games, lottery gaming systems, terminals and services, and internet
applications, as well as server-based interactive gaming terminals and
associated gaming control systems. For more information, please visit our
website at www.scientificgames.com.

Company Contact:
Cindi Buckwalter, Investor Relations
(212) 754-2233

Forward-Looking Statements
In this press release, the Company makes "forward-looking statements" within
the meaning of the U.S. Private Securities Litigation Reform Act of 1995.
Forward-looking statements describe future expectations, plans, results or
strategies and can often be identified by the use of terminology such as
"may," "will," "estimate," "intend," "continue," "believe," "expect,"
"anticipate," "should," "could," "potential," "opportunity," or similar
terminology. These statements are based upon management's current
expectations, assumptions and estimates and are not guarantees of future
results or performance. Actual results may differ materially from those
contemplated in these statements due to a variety of risks and uncertainties
and other factors, including, among other things: competition; material
adverse changes in economic and industry conditions; technological change;
retention and renewal of existing contracts and entry into new or revised
contracts; availability and adequacy of cash flows to satisfy obligations and
indebtedness or future needs; protection of intellectual property; security
and integrity of software and systems; laws and government regulation,
including those relating to gaming licenses, permits and operations; inability
to identify, complete and integrate future acquisitions; inability to benefit
from, and risks associated with, strategic equity investments and
relationships; failure of our Northstar Illinois joint venture to meet the net
income targets or otherwise to realize the anticipated benefits under its
private management agreement with the Illinois Lottery; failure of our
Northstar New Jersey joint venture to enter into an agreement to provide
marketing and sales services to the New Jersey Lottery (including as a result
of the pending protest) or to meet the net income targets or other
requirements under any such agreement or otherwise to realize the anticipated
benefits under any such agreement; the seasonality of our business; inability
to obtain the approvals required to complete the merger with WMS Industries
Inc. ("WMS"); failure to complete the merger with WMS or, if completed,
failure to achieve the intended benefits of such merger or disruption of our
current plans and operations; inability to identify and capitalize on trends
and changes in the lottery and gaming industries, including the potential
expansion of regulated gaming via the internet; inability to enhance and
develop successful gaming concepts; dependence on suppliers and manufacturers;
liability for product defects; fluctuations in foreign currency exchange rates
and other factors associated with international operations; influence of
certain stockholders; dependence on key personnel; failure to perform under
our contracts; resolution of pending or future litigation; labor matters and
stock price volatility. Additional information regarding risks and
uncertainties and other factors that could cause actual results to differ
materially from those contemplated in forward-looking statements is included
from time to time in the Company's filings with the Securities and Exchange
Commission, including under the heading "Risk Factors" in the Company's
periodic reports. Forward-looking statements speak only as of the date they
are made and, except for the Company's ongoing obligations under the U.S.
federal securities laws, the Company undertakes no obligation to publicly
update any forward-looking statements whether as a result of new information,
future events or otherwise.

Non-GAAP Financial Measures
Attributable EBITDA, as used herein, is based on the definition of
"consolidated EBITDA" in our credit agreement (summarized below), except that
attributable EBITDA as used herein includes our share of the EBITDA of all of
our equity investments (whereas "consolidated EBITDA" for purposes of the
credit agreement generally includes our share of the EBITDA of our Italian
joint venture but only the income of our other equity investments to the
extent it has been distributed to us). Attributable EBITDA is a non-GAAP
financial measure that is presented herein as a supplemental disclosure and is
reconciled to net income (loss) in a schedule below.

Attributable EBITDA includes adjustments only to the extent contemplated by
the definition of "consolidated EBITDA" in our credit agreement (which
adjustments are summarized in the paragraph below). For purposes of
calculating our financial ratios under the credit agreement, consolidated
EBITDA is calculated over a trailing period of four consecutive fiscal
quarters and more recent adjustments may replace older adjustments within such
four-quarter period, subject to any caps specified in the credit agreement
with respect to particular categories of adjustments (as discussed below).
Accordingly, the aggregate amount of any such adjustments within a particular
category reported in our quarterly earnings releases over a four-quarter
period may exceed such cap over such period (but will not exceed such cap in
any particular quarter). Note that the adjustment referred to in clause (9) in
the paragraph below was added to the definition of "consolidated EBITDA" as
part of the March 11, 2011 amendment to our credit agreement and revised as
part of the August 25, 2011 amendment to our credit agreement.

"Consolidated EBITDA" means, for any period, "consolidated net income" as
defined in the credit agreement (i.e., generally our consolidated net income
(or loss) excluding the income (or deficit) of our equity investments (other
than our Italian joint venture) except to the extent that such income has been
distributed to us) for such period plus, to the extent deducted in calculating
such consolidated net income for such period, the sum of (1) income tax
expense, (2) depreciation and amortization expense, (3) interest expense
(other than any interest expense of our Italian joint venture in respect of
debt for borrowed money of such joint venture if such debt exceeds $25,000,000
in the aggregate), (4) amortization or write-off of debt discount and debt
issuance costs and commissions, discounts and other fees and charges
associated with debt (see line item captioned "Debt-Related Fees and Charges"
in the schedules below), (5) amortization of intangibles (including goodwill)
and organization costs (see line item captioned "Amortization of Intangibles"
in the schedules below), (6) earn-out payments with respect to certain
acquisitions that we have made or any other "permitted acquisitions"
(generally, acquisitions of companies that are primarily engaged in the same
or related line of business and that become subsidiaries of ours, or
acquisitions of all or substantially all of the assets of another company or
division or business unit of another company), including any loss or expense
with respect to such earn-out payments (see line item captioned "Earn-Outs for
Permitted Acquisitions" in the schedules below), (7) extraordinary charges or
losses determined in accordance with GAAP, (8) non-cash stock-based
compensation expenses, (9) any cash compensation expense incurred but not paid
in such period so long as no cash payment in respect thereof is made or
required to be made prior to the scheduled maturity of the borrowings under
the credit agreement (provided that up to $993,000 of non-cash compensation
expense accrued prior to August 25, 2011 may be added back notwithstanding
that cash payments may be required to be made in respect thereof prior to the
scheduled maturity of the borrowings) (see line item captioned "Deferred
Contingent Compensation Expense" in the schedules below), (10) up to
$3,000,000 of expenses, charges or losses resulting from certain Peru
investments (see line item captioned "Peru Investment Expenses, Charges or
Losses" in the schedules below), (11) the non-cash portion of any
non-recurring write-offs or write-downs as required in accordance with GAAP
(see line item captioned "Non-Recurring Write-Offs under GAAP" in the
schedules below), (12) advisory fees and related expenses paid to advisory
firms in connection with "permitted acquisitions" (see line item captioned
"Acquisition Advisory Fees" in the schedules below), (13) certain specified
"permitted add-backs" (i.e., (A) up to $15,000,000 (less the amount of certain
permitted pro forma adjustments to "consolidated EBITDA" in connection with
material acquisitions) of charges incurred during any 12-month period in
connection with (i) reductions in workforce, (ii) contract losses,
discontinued operations, shutdown expenses and cost reduction initiatives,
(iii) transaction expenses incurred in connection with potential acquisitions
and divestitures, whether or not consummated, and (iv) restructuring charges
and transaction expenses incurred in connection with certain transactions with
Playtech Limited or its affiliates, and (B) reasonable and customary costs
incurred in connection with amendments to the credit agreement) (see line item
captioned "Specified Permitted Add-Backs" in the schedules below) (provided
that the foregoing items (1) through (13) do not include write-offs or
write-downs of accounts receivable or inventory and, except with respect to
"permitted add-backs", any write-off or write-down to the extent it is in
respect of cash payments to be made in a future period), (14) to the extent
treated as an expense in the period paid or incurred, certain payments, costs
and obligations made or incurred by us in connection with any award of a
concession to operate the instant ticket lottery in Italy, including any
up-front fee required under the applicable tender process (see line item
captioned "Italian Concession Obligations" in the schedules below), (15)
restructuring charges, transaction expenses and shutdown expenses incurred in
connection with the disposition of all or part of our racing and venue
management businesses, together with any charges incurred in connection with
discontinued operations and cost-reduction initiatives associated with such
disposition, in an aggregate amount (for all periods combined) not to exceed
$7,325,000 (see line item captioned "Racing Disposition Charges and Expenses"
in the schedules below) and (16) up to 5,250,000 pounds Sterling during any
four-quarter period of expenses or charges incurred in connection with the
payment of license royalties or other fees to Playtech Limited or its
affiliates and for software services provided to Global Draw or Games Media by
Playtech Limited or its affiliates (see line item captioned "Playtech
Royalties and Fees" in the schedules below), minus, to the extent included in
the statement of such consolidated net income for such period, the sum of (1)
interest income, (2) extraordinary income or gains determined in accordance
with GAAP and (3) income or gains with respect to earn-out payments with
respect to acquisitions referred to above (see line item captioned "Income on
Earn-Outs for Permitted Acquisitions" in the schedules below), provided that
the aggregate amount of "consolidated EBITDA" that is attributable to the
Company's interest in its Italian joint venture that would not have otherwise
been permitted to be included in "consolidated EBITDA" prior to giving effect
to the March 11, 2011 amendment to the credit agreement will be capped at
$25,000,000 in any period of four consecutive fiscal quarters (or $30,000,000
in the case of any such period ending on or prior to June 30, 2012).
"Consolidated EBITDA" is also subject to certain adjustments in connection
with material acquisitions and dispositions as provided in the credit
agreement. The foregoing definitions of "consolidated net income" and
"consolidated EBITDA" are qualified in their entirety by reference to the full
text of such definitions in our credit agreement, which was amended and
restated on August 25, 2011, a copy of which is attached as Exhibit 10.1 to
our Current Report on Form 8-K filed with the Securities and Exchange
Commission on August 31, 2011.

Free cash flow, as included herein, represents net cash provided by operating
activities less total capital expenditures (which includes lottery and gaming
systems expenditures and other intangible assets and software expenditures).
Free cash flow is a non-GAAP financial measure that is presented herein as a
supplemental disclosure and is reconciled to net cash provided by operating
activities in a schedule below.

EBITDA from equity investments, as included herein, represents our share of
EBITDA from equity investments, which is defined as equity in earnings from
our equity investments (whether or not any such earnings have been distributed
to us) plus income tax expense, depreciation and amortization expense and
interest (income) expense, net of other. EBITDA from equity investments is a
non-GAAP financial measure that is presented herein as a supplemental
disclosure and is reconciled to earnings from equity investments in a schedule
below.

The Company's management uses the foregoing non-GAAP financial measures in
conjunction with GAAP financial measures to: monitor and evaluate the
performance of the Company's business operations, as well as the performance
of its equity investments, which have become a more significant part of the
Company's business; facilitate management's internal comparisons of the
Company's historical operating performance of its business operations;
facilitate management's external comparisons of the results of its overall
business to the historical operating performance of other companies that may
have different capital structures and debt levels; review and assess the
operating performance of the Company's management team; analyze and evaluate
financial and strategic planning decisions regarding future operating
investments; and plan for and prepare future annual operating budgets and
determine appropriate levels of operating investments. Accordingly, the
Company's management believes that these non-GAAP financial measures are
useful to investors to provide them with disclosures of the Company's
operating results on the same basis as that used by the Company's management.

In addition, the Company's management believes that attributable EBITDA is
helpful in assessing the overall operating performance of the Company and its
equity investments and highlighting trends in the Company's and its equity
investees' core businesses that may not otherwise be apparent when relying
solely on GAAP financial measures, because this non-GAAP financial measure
eliminates from the Company's and its equity investees' earnings financial
items that management believes have less bearing on the Company's and its
equity investees' performance, such as income tax expense, depreciation and
amortization expense and interest (income) expense. Moreover, management
believes attributable EBITDA is useful to investors because a significant and
increasing amount of the Company's business is through its equity
investments. Management further believes that attributable EBITDA and free
cash flow provide useful information regarding the Company's liquidity and its
ability to service debt and fund investments. Management believes that EBITDA
from equity investments is helpful in monitoring the financial performance of
the Company's equity investments and eliminates from the equity investees'
earnings financial items that management believes have less bearing on the
equity investments' performance.

The Company's management also believes attributable EBITDA is useful to
investors because the definition is derived from the definition of
"consolidated EBITDA" in our credit agreement, which is used to calculate the
Company's compliance with the financial covenants contained in the credit
agreement. Moreover, attributable EBITDA and free cash flow (calculated by
subtracting total capital expenditures (which includes lottery and gaming
systems expenditures and other intangible assets and software expenditures)
from attributable EBITDA) are metrics used in determining performance-based
bonuses (subject to certain additional adjustments in the discretion of the
Compensation Committee (e.g., to take into account changes in applicable
accounting rules during the year)).

Accordingly, the Company's management believes that the presentation of the
non-GAAP financial measures, when used in conjunction with GAAP financial
measures, provides both management and investors with financial information
that can be useful in assessing the Company's financial condition and
operating performance.

The non-GAAP financial measures used herein should not be considered in
isolation of, as a substitute for, or superior to, the financial information
prepared in accordance with GAAP. The non-GAAP financial measures as defined
in this press release may differ from similarly titled measures presented by
other companies. The non-GAAP financial measures, as well as other information
in this press release, should be read in conjunction with the Company's
financial statements filed with the Securities and Exchange Commission.



SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share amounts)
                                    Three Months Ended March 31,
                                    2013                  2012
Revenue:
Instant tickets                     $      122,813   $      123,324
Services                           81,767                86,905
Sales                              15,008                20,965
Total revenue                       219,588               231,194
Operating expenses:
Cost of instant tickets^(1)         68,194                69,963
Cost of services ^(1)               46,233                43,303
Cost of sales^(1)                   10,291                16,927
Selling, general and                50,641                45,298
administrative
Employee termination and            331                   2,304
restructuring
Depreciation and amortization       32,769                28,468
Operating income                    11,129                24,931
Other income (expense):
Interest expense                   (25,008)              (24,898)
Earnings from equity investments    6,136                 8,845
Other income (expense), net         (998)                 522
Total other expense                 (19,870)              (15,531)
Income (loss) before income tax     (8,741)               9,400
expense
Income tax expense                  3,546                 5,532
Net income (loss) from continuing   $      (12,287)  $       3,868
operations
Discontinued operations:
Loss from discontinued operations   $               $      
                                    (1,911)               (2,670)
Other income (expense)              (45)                  (44)
Gain on sale of assets              828                   -
Income tax benefit (expense)        262                   665
Net loss from discontinued          $              $      
operations                          (866)                 (2,049)
Net income (loss)                   $      (13,153)  $       1,819
Basic earnings per share:
Continuing operations               $               $       
                                    (0.15)               0.04
Discontinued operations             (0.01)                (0.02)
Basic net income (loss)             $               $       
                                    (0.16)               0.02
Diluted earnings per share:
Continuing operations               $               $       
                                    (0.15)               0.04
Discontinued operations             (0.01)                (0.02)
Diluted net income (loss)           $               $       
                                    (0.16)               0.02
Weighted average number of shares:
Basic shares                       84,607                92,484
Diluted shares                     84,607                94,224
(1) Exclusive of depreciation and amortization.



SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET DATA
(Unaudited, in thousands)
                                               March 31,       December 31,
                                               2013            2012
Assets:
Cash and cash equivalents                      $    90,019  $   109,015
Other current assets                           345,290         375,648
Property and equipment, net                    380,684         376,877
Equity investments                             312,069         316,234
Other long-term assets                         1,006,164       1,009,134
 Total assets                                $  2,134,226   $  2,186,908
Liabilities and Stockholders' Equity:
Current portion of long-term debt              $    16,895  $    16,458
Other current liabilities                      218,020         239,889
Long-term debt, excluding current portion      1,450,847       1,451,708
Other long-term liabilities                    132,314         114,062
Stockholders' equity                           316,150         364,791
 Total liabilities and stockholders' equity  $  2,134,226   $  2,186,908



SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
CONSOLIDATED SEGMENT OPERATING DATA
(Unaudited, in thousands)
                         Three Months Ended March 31, 2013
                                                         Unallocated
                         Printed   Lottery              Corporate
                         Products  Systems    Gaming     Expense      Totals
Instant tickets          $       $      $      $       $  
                         122,813    -       -       -        122,813
Services                 -         50,032     31,735     -            81,767
Sales                    3,474     8,161      3,373      -            15,008
 Total revenue        126,287   58,193     35,108     -            219,588
Cost of instant          68,194    -          -          -            68,194
tickets^(1)
Cost of services ^(1)    -         29,258     16,975     -            46,233
Cost of sales^(1)        2,443     5,729      2,119      -            10,291
Selling, general and     11,668    6,940      7,137      19,056       44,801
administrative
Stock-based              806       598        449        3,987        5,840
compensation
Employee termination     331       -          -          -            331
and restructuring
Depreciation and         8,972     13,758     9,879      160          32,769
amortization
Operating income (loss)  $      $      $       $         $   
from continuing          33,873    1,910      (1,451)   (23,203)     11,129
operations
                         Three Months Ended March 31, 2012
                                                         Unallocated
                         Printed   Lottery              Corporate
                         Products  Systems    Gaming     Expense      Totals
Instant tickets          $       $      $      $       $  
                         123,324    -       -       -        123,324
Services                 -         53,006     33,899     -            86,905
Sales                    2,163     11,471     7,331      -            20,965
 Total revenue        125,487   64,477     41,230     -            231,194
Cost of instant tickets  69,963    -          -          -            69,963
^(1)
Cost of services^(1)     -         29,359     13,944     -            43,303
Cost of sales^(1)        1,410     7,955      7,562      -            16,927
Selling, general and     10,193    6,510      4,877      17,975       39,555
administrative
Stock-based              822       543        357        4,021        5,743
compensation
Employee termination     -         -          2,304      -            2,304
and restructuring
Depreciation and         8,003     11,798     8,518      149          28,468
amortization
Operating income (loss)  $      $      $      $         $   
from continuing          35,096    8,312      3,668      (22,145)     24,931
operations
(1) Exclusive of depreciation and amortization.



SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO ATTRIBUTABLE EBITDA
RECONCILIATION OF EARNINGS FROM EQUITY INVESTMENTS TO EBITDA FROM EQUITY
INVESTMENTS
(Unaudited, in thousands)
                                     Three Months Ended March 31,
                                     2013                    2012
Net income (loss) from               $    (12,287)        $      3,868
continuing operations
Add: Income tax expense              3,546                   5,532
Add: Depreciation and                32,769                  28,468
amortization
Add: Interest expense                25,008                  24,898
Add: Early extinguishment of         -                       -
debt
Add/Less: Other (income) expense     998                     (522)
EBITDA from continuing               $     50,034        $     62,244
operations
Credit Agreement adjustments:
Add: Debt-Related Fees and           $        -       $        -
Charges ^(1)
Add: Amortization of                 -                       -
Intangibles
Add: Earn-outs for Permitted         -                       -
Acquisitions
Add: Extraordinary Charges or        -                       -
Losses under GAAP
Add: Non-Cash Stock-Based            5,840                   5,743
Compensation Expenses
Add: Deferred Contingent             -                       -
Compensation Expense
Add: Non-Recurring Write-Offs        -                       -
under GAAP
Add: Acquisition Advisory Fees      42                      -
Add: Specified Permitted             6,073                   2,456
Add-Backs ^(2)
Add: Italian Concession              -                       -
Obligations
Add: Racing Disposition Charges      -                       -
and Expenses
Add: Playtech Royalties and Fees     2,196                   1,602
Less: Interest Income                (93)                    (29)
Less: Extraordinary Income or        -                       -
Gains under GAAP
Less: Income on Earn-Outs for        -                       -
Permitted Acquisitions
Adjustments to conform to Credit
Agreement definition:
Add/Less: Other (income) expense     (998)                   522
^(3)
Less: Early extinguishment of        -                       -
debt
Less: Earnings from equity           (6,136)                 (8,845)
investments
Add: EBITDA from equity              21,677                  23,105
investments
Attributable EBITDA from             78,635                  86,798
continuing operations
Attributable EBITDA from             59                      (65)
discontinued operations
Attributable EBITDA                  $    78,694          $    86,733
EBITDA from equity investments
^(4):
Earnings from equity investments     $      6,136       $      8,845
Add: Income tax expense              3,143                   3,779
Add: Depreciation and                11,163                  9,585
amortization
Add: Interest expense, net of        1,235                   896
other
EBITDA from equity investments       $     21,677        $     23,105
EBITDA from discontinued
operations
Net income (loss) from               $      (866)      $     (2,049)
discontinued operations
Add: Income tax (benefit)            (262)                   (665)
expense
Add: Depreciation and                597                     2,050
amortization
Add: Credit agreement                590                     599
adjustments
EBITDA from discontinued             $        59      $      
operations                                                   (65)
(1) Amounts reflect write-off of unamortized deferred financing costs in
connection with early extinguishment of debt and other debt-related fees and
charges.
(2) Amounts include management transition expenses, transaction expenses and
restructuring expenses.
(3) Amounts include foreign exchange transactions, interest income, minority
interest and other items.
(4) EBITDA from equity investments includes results from the Company's
participation in Lotterie Nazionali S.r.l., Roberts Communications Network,
LLC, Beijing CITIC Scientific Games Technology Co., Ltd., Sportech Plc,
Sciplay (through January 23, 2012), Beijing Guard Libang Technology Co., Ltd.
and Northstar Lottery Group, LLC (beginning March 1, 2011).



SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
CALCULATION OF FREE CASH FLOW
(Unaudited, in thousands)
                                         Three Months Ended March 31,
                                         2013            2012
Net cash provided by operating           $          $     21,924
activities                               23,235
Less: Capital expenditures               (7,346)         (1,958)
Less: Lottery and gaming systems         (16,856)        (7,393)
expenditures
Less: Other intangible assets and        (12,078)        (12,446)
software expenditures
 Total Capital Expenditures           $           $    (21,797)
                                         (36,280)
Free cash flow                           $           $      
                                         (13,045)       127
For the first quarter ended March 31, 2013, the Company received no return of
capital payments from its
equity investments. For the first quarter ended March 31, 2012, the
Company received return of
capital payments from its equity investment in ITL of $2.2 million.
These items were not included in the Company's Free Cash Flow metric.



SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
KEY PERFORMANCE INDICATORS
(Unaudited, in millions, except terminals and ASP)
                                           Three Months Ended March 31,
                                           2013              2012
Italy - Gratta e Vinci ^(1):
Retail Sales (Euros) ^(1)                  2,546             2,620
China - China Sports Lottery ^(1):
Retail Sales (RMB)                         3,900             4,459
Tickets Sold                               501               605
ASP (RMB)                                  7.78              7.36
                                           As of March 31,
Terminal installed base at end of period:  2013              2012
Global Draw                               26,734            26,553
Games Media                               -                 3,353
Barcrest                                   3,017             4,662
(1) Information provided by third-party lottery operators.





SOURCE Scientific Games Corporation

Website: http://www.scientificgames.com
 
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