<PAGE>

                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended November 22, 2003

Commission file number 1-11250

                           GTECH Holdings Corporation
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                  Delaware                                 05-0450121
     -------------------------------             -------------------------------
     (State or other jurisdiction of             (I.R.S. Employer Identification
     incorporation or organization)                          Number)

55 Technology Way, West Greenwich, Rhode Island                   02817
--------------------------------------------------------------------------------
(Address of principal executive offices)                        (Zip Code)

Registrant's telephone number, including area code: (401)392-1000

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934)

Yes [X] No [ ]

At December 27, 2003, there were 59,083,106 shares of the registrant's Common
Stock outstanding.

<PAGE>

INDEX

GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                              Number
                                                                                                              ------
<S>                                                                                                           <C>
PART I.  FINANCIAL INFORMATION

Item 1.     Financial Statements

            Consolidated Balance Sheets                                                                          3

            Consolidated Income Statements                                                                     4-5

            Consolidated Statements of Cash Flows                                                                6

            Consolidated Statements of Shareholders' Equity                                                      7

            Notes to Consolidated Financial Statements                                                        8-25

Item 2.     Management's Discussion and Analysis of Financial Condition
            and Results of Operations                                                                        26-42

Item 3.     Quantitative and Qualitative Disclosures about Market Risk                                          43

Item 4.     Controls and Procedures                                                                             43

PART II.  OTHER INFORMATION

Item 1.     Legal Proceedings                                                                                   43

Item 6.     Exhibits and Reports on Form 8-K                                                                    44

SIGNATURES                                                                                                      45

EXHIBITS
</TABLE>

<PAGE>

PART 1. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                                               (Unaudited)
                                                                                               November 22,   February 22,
                                                                                                   2003           2003
                                                                                               ------------   ------------
                                                                                                 (Dollars in thousands)
<S>                                                                                            <C>            <C>
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents                                                                    $   320,536    $   116,174
  Trade accounts receivable, net                                                                   122,718        107,666
  Sales-type lease receivables                                                                       7,288          4,400
  Inventories                                                                                       58,852         72,287
  Deferred income taxes                                                                             29,410         29,410
  Other current assets                                                                              27,202         18,660
                                                                                               -----------    -----------
           TOTAL CURRENT ASSETS                                                                    566,006        348,597

SYSTEMS, EQUIPMENT AND OTHER ASSETS RELATING TO CONTRACTS, net                                     561,930        410,911

GOODWILL, net                                                                                      188,809        115,498

OTHER ASSETS                                                                                       169,232         79,189
                                                                                               -----------    -----------
           TOTAL ASSETS                                                                        $ 1,485,977    $   954,195
                                                                                               ===========    ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable                                                                             $    74,171    $    74,042
  Accrued expenses                                                                                  52,903         51,200
  Employee compensation                                                                             32,170         37,494
  Advance payments from customers                                                                   95,856         52,442
  Deferred revenue and advance billings                                                             10,075         17,264
  Income taxes payable                                                                              56,072         54,043
  Taxes other than income taxes                                                                     28,017         16,020
  Short term borrowings                                                                              2,379          2,616
  Current portion of long-term debt                                                                  9,012          6,992
                                                                                               -----------    -----------
           TOTAL CURRENT LIABILITIES                                                               360,655        312,113

LONG-TERM DEBT, less current portion                                                               557,912        287,088

OTHER LIABILITIES                                                                                   51,716         39,428

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 - 150,000,000 shares authorized,
    92,296,404 and 92,296,404 shares issued; 59,065,006 and 56,638,331 shares
    outstanding at November 22, 2003 and February 22, 2003, respectively                               923            923
  Additional paid-in capital                                                                       267,759        235,266
  Accumulated other comprehensive loss                                                             (78,937)       (95,488)
  Retained earnings                                                                                801,204        684,653
                                                                                               -----------    -----------
                                                                                                   990,949        825,354
  Less cost of 33,231,398 and 35,658,073 shares in treasury at
    November 22, 2003 and February 22, 2003, respectively                                         (475,255)      (509,788)
                                                                                               -----------    -----------
                                                                                                   515,694        315,566
                                                                                               -----------    -----------
           TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                          $ 1,485,977    $   954,195
                                                                                               ===========    ===========
</TABLE>

See Notes to Consolidated Financial Statements

                                       -3-

<PAGE>

CONSOLIDATED INCOME STATEMENTS

GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                               (Unaudited)
                                                           Three Months Ended
                                                         -------------------------
                                                         November 22, November 23,
                                                             2003         2002
                                                         ------------ ------------
                                                          (Dollars in thousands,
                                                         except per share amounts)
<S>                                                      <C>          <C>
Revenues:
  Services                                                $ 231,225    $ 207,784
  Sales of products                                          23,697       48,682
                                                          ---------    ---------
                                                            254,922      256,466
Costs and expenses:
  Costs of services                                         131,991      129,122
  Costs of sales                                             13,094       39,070
                                                          ---------    ---------
                                                            145,085      168,192
                                                          ---------    ---------

Gross profit                                                109,837       88,274

Selling, general and administrative                          28,167       24,358
Research and development                                     12,926       10,903
                                                          ---------    ---------
  Operating expenses                                         41,093       35,261
                                                          ---------    ---------

Operating income                                             68,744       53,013

Other income (expense):
  Interest income                                             1,494        1,028
  Equity in earnings of unconsolidated affiliates             1,500        1,406
  Other income                                                4,052          234
  Interest expense                                           (2,986)      (2,728)
                                                          ---------    ---------
                                                              4,060          (60)
                                                          ---------    ---------

Income before income taxes                                   72,804       52,953

Income taxes                                                 26,937       20,122
                                                          ---------    ---------

Net income                                                $  45,867    $  32,831
                                                          =========    =========

Basic earnings per share                                  $    0.78    $    0.58
                                                          =========    =========

Diluted earnings per share                                $    0.69    $    0.57
                                                          =========    =========

Weighted average shares outstanding - basic                  58,820       56,981
                                                          =========    =========

Weighted average shares outstanding - diluted                66,927       58,062
                                                          =========    =========

Dividends per share - common stock                        $    0.17    $       -
                                                          =========    =========
</TABLE>

See Notes to Consolidated Financial Statements

                                       -4-

<PAGE>

CONSOLIDATED INCOME STATEMENTS

GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                   (Unaudited)
                                                                Nine Months Ended
                                                            -------------------------
                                                            November 22, November 23,
                                                                2003         2002
                                                            ------------ ------------
                                                             (Dollars in thousands,
                                                            except per share amounts)
<S>                                                         <C>          <C>
Revenues:
   Services                                                  $ 692,782    $ 643,119
   Sales of products                                            78,972       65,717
                                                             ---------    ---------
                                                               771,754      708,836
Costs and expenses:
   Costs of services                                           391,593      402,999
   Costs of sales                                               50,533       49,426
                                                             ---------    ---------
                                                               442,126      452,425
                                                             ---------    ---------

Gross profit                                                   329,628      256,411

Selling, general and administrative                             79,498       70,168
Research and development                                        41,422       24,575
                                                             ---------    ---------
   Operating expenses                                          120,920       94,743
                                                             ---------    ---------

Operating income                                               208,708      161,668

Other income (expense):
   Interest income                                               3,703        2,847
   Equity in earnings of unconsolidated affiliates               6,120        3,363
   Other income                                                  3,337        1,912
   Interest expense                                             (6,997)      (8,371)
                                                             ---------    ---------
                                                                 6,163         (249)
                                                             ---------    ---------

Income before income taxes                                     214,871      161,419

Income taxes                                                    79,502       61,340
                                                             ---------    ---------

Net income                                                   $ 135,369    $ 100,079
                                                             =========    =========

Basic earnings per share                                     $    2.34    $    1.75
                                                             =========    =========

Diluted earnings per share                                   $    2.12    $    1.71
                                                             =========    =========

Weighted average shares outstanding - basic                     57,882       57,252
                                                             =========    =========

Weighted average shares outstanding - diluted                   64,356       58,529
                                                             =========    =========

Dividends per share - common stock                           $    0.34    $       -
                                                             =========    =========
</TABLE>

See Notes to Consolidated Financial Statements

                                       -5-

<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS

GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                                            (Unaudited)
                                                                                          Nine Months Ended
                                                                                       ---------------------------
                                                                                       November 22,   November 23,
                                                                                           2003           2002
                                                                                       ------------   ------------
                                                                                        (Dollars in thousands)
<S>                                                                                    <C>          <C>
OPERATING ACTIVITIES
Net income                                                                             $    135,369   $    100,079
Adjustments to reconcile net income to net cash provided by
  operating activities:
     Depreciation                                                                            81,449        101,858
     Intangibles amortization                                                                 2,908          4,051
     Tax benefit related to stock award plans                                                11,871          7,299
     Non-cash gain from consolidation of West Greenwich Technology
       Associates, L.P.                                                                      (5,292)             -
     Termination of interest rate swaps                                                           -         11,357
     Deferred income taxes provision                                                              -          1,130
     Equity in earnings of unconsolidated affiliates, net of dividends received                (263)           559
     Other                                                                                    6,943          5,351
     Changes in operating assets and liabilities:
       Trade accounts receivable                                                              2,358         11,723
       Inventories                                                                           22,879         14,944
       Advance payments from customers                                                       43,414          5,211
       Other assets and liabilities                                                           8,300         17,402
                                                                                       ------------   ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                                   309,936        280,964

INVESTING ACTIVITIES
Purchases of systems, equipment and other assets relating to contracts                     (211,867)      (131,221)
Acquisitions (net of cash acquired)                                                         (74,174)             -
Refundable performance deposit                                                              (20,000)             -
License fee                                                                                 (12,500)             -
Other                                                                                        (9,691)        (1,350)
                                                                                       ------------   ------------
NET CASH USED FOR INVESTING ACTIVITIES                                                     (328,232)      (132,571)

FINANCING ACTIVITIES
Net proceeds from issuance of long-term debt                                                252,527              -
Principal payments on long-term debt                                                        (31,688)       (46,408)
Proceeds from stock options                                                                  22,068         15,842
Dividends paid                                                                              (19,928)             -
Purchases of treasury stock                                                                       -        (57,424)
Tender premiums and fees                                                                          -         (3,434)
Other                                                                                        (3,583)         2,926
                                                                                       ------------   ------------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES                                        219,396        (88,498)

Effect of exchange rate changes on cash                                                       3,262          2,519
                                                                                       ------------   ------------
INCREASE IN CASH AND CASH EQUIVALENTS                                                       204,362         62,414

Cash and cash equivalents at beginning of period                                            116,174         35,095
                                                                                       ------------   ------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                             $    320,536   $     97,509
                                                                                       ============   ============
</TABLE>

See Notes to Consolidated Financial Statements

                                       -6-
<PAGE>


CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - (Unaudited)

GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                                                      Accumulated
                                                                                     Additional          Other
                                                        Outstanding       Common      Paid-in        Comprehensive
                                                          Shares          Stock       Capital        Income (Loss)
                                                        -----------      --------    -----------     -------------
                                                                          (Dollars in thousands)
<S>                                                     <C>              <C>         <C>             <C>
Balance at February 22, 2003                             56,638,331      $    923    $   235,266     $     (95,488)

Comprehensive income:
 Net income                                                       -             -              -                 -
 Other comprehensive income (loss), net of tax:
  Foreign currency translation                                    -             -              -            19,190
  Unrecognized net loss on derivative instruments                 -             -              -            (2,624)
  Unrealized loss on investments                                  -             -              -               (15)

Comprehensive income
Cash dividends on common stock ($0.17 per share)                  -             -              -                 -
Shares issued to acquire Interlott Technologies, Inc.       717,565             -         20,622                 -
Shares issued under employee stock purchase
 and stock award plans                                      185,484             -              -                 -
Shares issued upon exercise of stock options              1,523,626             -              -                 -
Tax benefits related to stock award plans                         -            -          11,871                 -
                                                         ----------      --------    -----------     -------------

Balance at November 22, 2003                             59,065,006      $    923    $   267,759     $     (78,937)
                                                         ==========      ========    ===========     =============
<CAPTION>
                                                          Retained         Treasury
                                                          Earnings           Stock             Total
                                                        -----------      ------------        ----------
                                                                     (Dollars in thousands)
<S>                                                     <C>              <C>                 <C>
Balance at February 22, 2003                            $   684,653      $   (509,788)       $  315,566

Comprehensive income:
 Net income                                                 135,369                 -           135,369
 Other comprehensive income (loss), net of tax:
  Foreign currency translation                                    -                 -            19,190
  Unrecognized net loss on derivative instruments                 -                 -            (2,624)
  Unrealized loss on investments                                  -                 -               (15)
                                                                                             ----------
Comprehensive income                                                                            151,920
Cash dividends on common stock ($0.17 per share)            (20,069)                -           (20,069)
Shares issued to acquire Interlott Technologies, Inc.             -            10,212            30,834
Shares issued under employee stock purchase
 and stock award plans                                          865             2,639             3,504
Shares issued upon exercise of stock options                    386            21,682            22,068
Tax benefits related to stock award plans                         -                 -            11,871
                                                        -----------      ------------        ----------

Balance at November 22, 2003                            $   801,204      $   (475,255)       $  515,694
                                                        ===========      ============        ==========
</TABLE>

See Notes to Consolidated Financial Statements

                                      -7-

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

NOTE 1 - ORGANIZATION, BASIS OF PRESENTATION AND STOCK-BASED COMPENSATION PLANS

ORGANIZATION

GTECH Holdings Corporation ("Holdings") is a global information technology
company providing software, networks and professional services that power
high-performance, transaction processing solutions. When used in these notes,
the terms "Holdings", "the Company", "we", "our", and "us" refer to GTECH
Holdings Corporation and its consolidated subsidiaries, unless otherwise
specified. We have a single operating and reportable business segment, the
Transaction Processing segment. Our core market is the lottery industry, with a
growing presence in commercial services transaction processing. The accounting
policies of the Transaction Processing segment are the same as those described
in Note 1 - "Organization and Summary of Significant Accounting Policies" in our
Consolidated Financial Statements and footnotes included in our fiscal 2003
Annual Report on Form 10-K, as amended. Management evaluates the performance of
this segment based on operating income.

BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Holdings, the
parent of GTECH Corporation ("GTECH"), have been prepared in accordance with
generally accepted accounting principles ("GAAP") for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. They do not include all information and notes required by GAAP for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine-month period ended November 22,
2003 are not necessarily indicative of the results that may be expected for the
full fiscal year ending February 28, 2004. The balance sheet at February 22,
2003 has been derived from the audited financial statements at that date. For
further information refer to the Consolidated Financial Statements and footnotes
included in our fiscal 2003 Annual Report on Form 10-K, as amended.

Certain amounts in our prior period financial statements have been reclassified
to conform to the current period presentation.

STOCK-BASED COMPENSATION PLANS

We follow Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" and related Interpretations, in accounting for our
stock-based compensation plans and we have elected to continue to use the
intrinsic value-based method to account for stock option grants. We have adopted
the disclosure-only provisions of Statement of Financial Accounting Standards
No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure",
an amendment of Statement of Financial Accounting Standards No. 123.
Accordingly, no compensation expense has been recognized for our stock-based
compensation plans other than for restricted stock.

                                      -8-
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 1 - ORGANIZATION, BASIS OF PRESENTATION AND STOCK-BASED COMPENSATION PLANS
(continued)

Had we elected to recognize compensation expense based upon the fair value at
the grant dates for awards under these plans, net income and earnings per share
would have been reduced to the pro forma amounts listed in the table below. The
fair value of each grant is estimated on the date of grant using the
Black-Scholes option pricing model.

<TABLE>
<CAPTION>
                                                 Three Months Ended              Nine Months Ended
                                            ----------------------------   ---------------------------
                                            November 22,    November 23,   November 22,   November 23,
                                                2003            2002           2003           2002
                                            ------------    ------------   ------------   ------------
                                            (Dollars and shares in thousands, except per share amounts)
<S>                                         <C>             <C>            <C>            <C>
Net income, as reported                     $     45,867    $     32,831   $    135,369   $    100,079
Deduct: Total stock-based compensation
  expense determined under the fair value
  method for all awards, net of related
  tax effects                                       (893)         (1,862)        (3,803)        (5,293)
                                            ------------    ------------   ------------   ------------
Pro forma net income                        $     44,974    $     30,969   $    131,566   $     94,786
                                            ============    ============   ============   ============

Basic earnings per share:
  As reported                               $        .78    $        .58   $       2.34   $       1.75
  Pro forma                                          .76             .54           2.27           1.66
Diluted earnings per share:
  As reported                               $        .69    $        .57   $       2.12   $       1.71
  Pro forma                                          .68             .53           2.06           1.62
</TABLE>

NOTE 2 - BUSINESS ACQUISITIONS


POLCARD S.A.

On May 28, 2003, we completed the acquisition of a controlling equity position
in PolCard S.A. ("PolCard"), for a purchase price, net of cash acquired, of
$35.9 million. PolCard is the largest debit and credit card merchant transaction
acquirer and processor in Poland. At August 23, 2003, PolCard's outstanding
equity was owned 66.5% by us, 33.2% by two funds managed by Innova Capital Sp. z
o.o. ("Innova"), a Warsaw-based private equity investment advisor, and 0.3% by
the Polish Bank Association, one of PolCard's previous owners. In September
2003, Innova exercised its rights under an option agreement to purchase from us,
3.7% of PolCard's equity for a purchase price of $2.3 million. Following the
exercise of this right, we now own 62.8% of PolCard's outstanding equity, while
the two funds managed by Innova own, in aggregate, 36.9% of PolCard's
outstanding equity, the fair value of which approximated $22.2 million. The
Polish Bank Association continues to own 0.3% of the outstanding equity of
PolCard. We have a fair value option to purchase Innova's interest in PolCard,
and Innova has the reciprocal right to sell its interest in PolCard to us at
fair value, during the period commencing approximately four and ending
approximately six years after closing.

                                      -9-

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2 - BUSINESS ACQUISITIONS (continued)


INTERLOTT TECHNOLOGIES, INC.

On September 18, 2003, we completed the acquisition of Interlott Technologies,
Inc. ("Interlott"), a leading provider of instant ticket vending machines for
the worldwide lottery industry. Interlott shareholders were given the
opportunity to elect to receive either $9.00 per share in cash or a number of
shares of Holdings common stock having a value of $9.00, or a combination of
both, subject to adjustment so that the aggregate consideration we paid was
48.5% in cash and 51.5% in Holdings common stock. The final exchange ratio of
0.2156 shares of Holdings common stock for every share of Interlott common stock
was determined based on the average closing price of $41.74 for Holdings common
stock for the 20 trading day period commencing August 14, 2003 through September
11, 2003. For purposes of purchase accounting, Holdings common stock was valued
at $42.97 per share using the average price of Holdings common stock two days
prior to the acquisition date in accordance with Emerging Issues Task Force
Issue No. 99-12, "Determination of the Measurement Date for the Market Price of
Acquirer Securities issued in a Purchase Business Combination". The aggregate
purchase price, including assumed debt, was as follows:

<TABLE>
<CAPTION>
                                                                           Aggregate
                                                                         purchase price
                                                                         --------------
                                                                         (in millions)
<S>                                                                      <C>
Cash ($9.00 per share of Interlott common stock)                         $         28.2
Cash payment to cancel outstanding stock options relating to Interlott
 common stock                                                                       5.7
                                                                         --------------
   Cash purchase price                                                             33.9
Issuance of 717,565 shares of Holdings common stock                                30.8
                                                                         --------------
   Total aggregate purchase price                                                  64.7
Cash payment to settle Interlott debt                                              22.5
                                                                         --------------
                                                                         $         87.2
                                                                         ==============
</TABLE>

The PolCard and Interlott acquisitions are individually and in the aggregate,
not material to our consolidated financial statements and accordingly, pro forma
financial information has not been presented. Neither acquisition required the
approval of our shareholders.


SPIELO MANUFACTURING INC.

On November 7, 2003, we entered into an agreement to acquire all of the shares
of privately-held Spielo Manufacturing Inc. ("Spielo"), a leading provider of
video lottery terminals and related products and services to the global gaming
industry. This agreement provides for us to pay a potential aggregate cash
purchase price of approximately $185 million, which includes a $150 million cash
payment at the closing and an earn-out amount of up to $35 million in the 18
months following the closing, which Spielo shareholders are entitled to receive
based upon Spielo achieving certain video lottery terminal installation
objectives in New York. Our obligation to complete this acquisition is subject
to securing regulatory and gaming license approvals, and satisfying certain
other closing conditions. Approval of this transaction by our shareholders is
not required. We expect the closing of the Spielo acquisition to be completed in
the second quarter of fiscal year 2005.

                                      -10-
<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 3 - INVENTORIES

<TABLE>
<CAPTION>
                             November 22,   February 22,
                                 2003           2003
                             ------------   ------------
                               (Dollars in thousands)
<S>                          <C>            <C>
Inventories consist of:
      Raw materials          $      7,328   $     14,133
      Work in progress             49,509         54,855
      Finished goods                2,015          3,299
                             ------------   ------------
                             $     58,852   $     72,287
                             ============   ============
</TABLE>

Inventories include amounts we manufacture or assemble for our long-term service
contracts and amounts related to product sales contracts. Work in progress at
November 22, 2003 and February 22, 2003, includes approximately $46.2 million
and $51.3 million, respectively, related to product sale contracts.

Amounts received from customers in advance of revenue recognition (primarily
related to product sale contracts included in work in progress above) totaled
$95.9 million and $52.4 million at November 22, 2003 and February 22, 2003,
respectively.


NOTE 4 - LICENSE FEE

In the first quarter of this fiscal year, we entered into a Master Contract with
the Rhode Island Lottery (the "Lottery") that amends our existing contracts with
the Lottery and grants us the right to be the exclusive provider of online,
instant ticket and video lottery central systems and services for the Lottery
during the 20-year term of the Master Contract for a $12.5 million up-front
license fee which we paid in July 2003. This license fee is included in Other
Assets in our Consolidated Balance Sheet at November 22, 2003 and will be
amortized as a reduction in service revenue on a straight-line basis over the
20-year term of the Master Contract.


The Master Contract is part of a comprehensive economic development package that
provides incentives for us to keep our world corporate headquarters and
manufacturing operations in Rhode Island. Under the terms of the Master
Contract, we are to invest (or cause to be invested) at least $100 million in
the State of Rhode Island, in the aggregate, by December 31, 2008. This
investment commitment includes the $12.5 million up-front license fee; new
online and video lottery related hardware, software and services; the
development of a new world corporate headquarters facility of at least 210,000
square feet in Providence, Rhode Island by December 31, 2006; and improvements
to our existing manufacturing facility in West Greenwich, Rhode Island. We have
agreed to employ at least 1,000 people full-time in Rhode Island by the end of
calendar year 2005 and maintain that level of employment thereafter. In the
event the State of Rhode Island takes certain actions which affect our financial
performance, we will be automatically released from the in-state employment
obligation. We currently plan to satisfy our obligation to invest (or cause to
be invested) at least $100 million in the State of Rhode Island by December 31,
2008 by investing: (i) approximately $23 million during fiscal 2004; (ii)
approximately $24 million during fiscal 2005; (iii) approximately $51 million
during fiscal 2006; and (iv) the balance during fiscal 2007. In addition,
in July 2003 we entered into a tax stabilization agreement (the "Agreement")
with the City of Providence (the "City"), whereby the City agreed to stabilize
the real estate and personal property taxes payable in connection with our new
world corporate headquarters facility in the City and the personal property
associated with such facility for 20 years. We also agreed to complete and
occupy the facility by December 31, 2006, employ 500 employees at the facility
by 2009, and we made certain commitments regarding our employment, purchasing
and education activities in the City. The Lottery may terminate the Master
Contract in the event that we fail to meet our obligations as stated above.

                                      -11-
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 5- REFUNDABLE PERFORMANCE DEPOSIT

On September 23, 2003, we entered into a 12-year contract extension to provide
online lottery products and services to SAZKA, a.s. ("SAZKA"), the operator of
lottery and betting games in the Czech Republic. The contract extension will
commence on January 1, 2006 and expire on December 31, 2017. As part of the
agreement with SAZKA, we paid SAZKA a $20 million performance deposit that SAZKA
will repay upon achievement of certain milestones beginning in 2006, and is
scheduled to be fully repaid by 2010. This performance deposit is included in
Other Assets in our Consolidated Balance Sheet at November 22, 2003.


NOTE 6 - PRODUCT WARRANTIES

We offer a product warranty on all of our manufactured products (primarily
terminals and related peripherals) sold to our customers. Although we do not
have a standard product warranty, our typical warranty provides that we will
repair or replace defective products for a period of time (usually a minimum of
90 days) from the date revenue is recognized or from the date a product is
delivered and tested. We estimate product warranty costs that we expect to incur
during the warranty period and we record a charge to costs of sales for the
estimated warranty cost at the time the product sale is recorded. In determining
the appropriate warranty provision, consideration is given to historical
warranty cost information, the status of the terminal model in its life cycle
and current terminal performance. We periodically assess the adequacy of our
product warranty reserves and adjust them as necessary in the period when the
information necessary to make the adjustment becomes available.

We typically do not provide a product warranty on purchased products sold to our
customers but attempt to pass the manufacturer's warranty, if any, on to them.

A summary of product warranty activity, which is included in Accrued Expenses in
our Consolidated Balance Sheets, is as follows (dollars in thousands):

<TABLE>
<S>                                                                  <C>
Balance at February 23, 2003                                         $       437
Additional reserves                                                          519
Charges incurred                                                             (40)
                                                                     -----------
Balance at November 22, 2003                                         $       916
                                                                     ===========
</TABLE>

                                      -12-
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 7 - LONG-TERM DEBT

<TABLE>
<CAPTION>
                                              November 22,   February 22,
                                                  2003           2003
                                              ------------   ------------
                                                (Dollars in thousands)
<S>                                           <C>           <C>
Long-term debt consists of:
     4.75% Senior Notes due 2010              $    249,622   $          -
     1.75% Convertible Debentures due 2021         175,000        175,000
     7.87% Series B Senior Notes due 2007           90,000         95,000
     Loan on World Headquarters due 2007            27,933              -
     Other                                          24,369         24,080
                                              ------------   ------------
                                                   566,924        294,080
     Less current portion                            9,012          6,992
                                              ------------   ------------
                                              $    557,912   $    287,088
                                              ============   ============
</TABLE>

We have an unsecured revolving credit facility of $300 million expiring in June
2006 (the "Credit Facility"). There were no outstanding borrowings under the
Credit Facility at November 22, 2003 or February 22, 2003. Up to $100 million of
the Credit Facility may be used for the issuance of letters of credit. As of
November 22, 2003, there was $290.0 million available for borrowing under the
Credit Facility, after considering $10.0 million of letters of credit issued and
outstanding.

In September 2003, we repurchased $5.0 million of our 7.87% Series B Senior
Notes due 2007 (the "Series B Senior Notes"). The Series B Senior Notes are
unsecured and are guaranteed by Holdings and certain of our subsidiaries and
interest on each series is payable semi-annually in arrears on May 15 and
November 15 of each year.

In October 2003, we issued in a private placement, $250 million of 4.75% Senior
Notes due 2010 (the "Senior Notes"). The Senior Notes are unsecured and are
guaranteed by certain of our subsidiaries and interest is payable semi-annually
in arrears on April 15 and October 15 of each year, beginning in April 2004. We
intend to use the proceeds from the offering for general corporate purposes,
which may include funding future acquisitions. In conjunction with this Senior
Note offering, in October 2003, we entered into three interest rate swaps for an
aggregate amount of $150 million, which effectively entitle us to exchange fixed
rate payments for variable rate payments for the period October 15, 2003 to
October 15, 2010.


NOTE 8 - COMMITMENTS AND CONTINGENCIES

See "Legal Proceedings" in Part II, Item 1 and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in Part I, Item 2 of
this report.

                                      -13-
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 9 - GUARANTEES AND INDEMNIFICATIONS

PERFORMANCE AND OTHER BONDS

In connection with certain contracts and procurements, we have been required to
deliver performance bonds for the benefit of our customers and bid and
litigation bonds for the benefit of potential customers, respectively. These
bonds give the beneficiary the right to obtain payment and/or performance from
the issuer of the bond if the events set forth in the bond occur. In the case of
performance bonds, which generally have a term of one year, such events include
our failure to perform our obligations under the applicable contract. To obtain
these bonds, we are required to indemnify the issuers against the costs they
incur if a beneficiary exercises its rights under a bond. Historically, our
customers have not exercised their rights under these bonds and we do not
currently anticipate that they will do so. The following table provides
information related to potential commitments at November 22, 2003:

<TABLE>
<CAPTION>
                            Total potential
                              commitments
                            ---------------
                            (in thousands)
<S>                         <C>
Performance bonds           $       164,813
Financial guarantees                  7,294
All other bonds                       9,137
                            ---------------
                            $       181,244
                            ===============
</TABLE>

LOTTERY TECHNOLOGY SERVICES INVESTMENT CORPORATION

We have a 44% interest in Lottery Technology Services Investment Corporation
("LTSIC"), which we account for using the equity method of accounting. LTSIC's
wholly owned subsidiary, Lottery Technology Services Corporation ("LTSC"),
provides equipment and services (which we supplied to LTSC), to the Bank of
Taipei. The Bank of Taipei holds the license to operate the Taiwan Public
Welfare Lottery.

In order to assist LTSC with the financing they required to enable them to
perform under their obligation to operate the Taiwan Public Welfare Lottery on
behalf of the Bank of Taipei, at November 22, 2003, we guaranteed $4.9 million
principal amount of loans made by an unrelated commercial lender to LTSC. The
loans have a maturity date of January 2007 and our guarantee expires in July
2007. We did not receive any consideration in exchange for our guarantees on
behalf of LTSC. Rather, these guarantees were issued in connection with the
formation of LTSC and LTSIC.

We are recognizing 56% of our product sales to, and service revenue from, LTSC.
The remaining 44% of product sales (and related cost) and service revenue, has
been deferred as a result of our equity interest in LTSIC and related guarantee
of LTSC's debt, respectively, and is principally included in Other Liabilities
in our Consolidated Balance Sheets at November 22, 2003 and February 22, 2003.
Product sale deferrals are being recognized ratably over the life of our
contract with LTSC and service revenue deferrals are being recognized as the
guaranteed debt is repaid. At November 22, 2003, deferred product gross profit
and deferred service revenue totaled $3.8 million and $6.7 million,
respectively.

TIMES SQUARED INCORPORATED

We guaranteed outstanding lease obligations of Times Squared Incorporated
("Times Squared") for which we received no monetary consideration. The amount
outstanding under the lease at November 22, 2003, was $2.4 million. Our
guarantee expires in December 2013. Times Squared is a nonprofit corporation
established to provide, among other things, secondary and high school level
educational programs. Times Squared operates a Charter School for Engineering,
Mathematics, Science and Technology in Providence, Rhode Island that serves
inner city children who aspire to careers in the sciences and technology.

                                      -14-
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 9 - GUARANTEES AND INDEMNIFICATIONS (continued)

LOTTERY TECHNOLOGY ENTERPRISES

We have a 1% interest in Lottery Technology Enterprises ("LTE"), a joint venture
between us and District Enterprise for Lottery Technology Applications of
Washington, D.C. The joint venture agreement terminates on December 31, 2012.
LTE holds a 10-year contract (which expires in November 2009) with the District
of Columbia Lottery and Charitable Games Control Board. Under Washington, D.C.
law, by virtue of our 1% interest in LTE, we are jointly and severally liable,
with the other partner, for the acts of the joint venture.

GAMING ENTERTAINMENT (DELAWARE) L.L.C.

We have a 50% interest in Gaming Entertainment (Delaware) L.L.C. ("GED"). GED is
also owned 50% by a subsidiary of Full House Resorts, Inc. ("FHRI"). Pursuant to
a 1995 management agreement ("Agreement"), GED manages a casino for Harrington
Raceway, Inc. ("Harrington") and in return receives a percentage of gross
revenues and operating profits as defined in the Agreement. Along with FHRI, we
guarantee the payment of all amounts due Harrington under the Agreement. Our
guarantee expires on February 1, 2012 or upon expiration of the Delaware Horse
Racing Redevelopment Act. The consideration we receive in exchange for the
guarantee are the equity earnings from our ownership in GED.


NOTE 10 -- COMPREHENSIVE INCOME

The components of comprehensive income are as follows:

<TABLE>
<CAPTION>
                                         Three Months Ended           Nine Months Ended
                                     --------------------------   --------------------------
                                     November 22,  November 23,   November 22,  November 23,
                                         2003          2002           2003          2002
                                     ------------  ------------   ------------  ------------
                                                     (Dollars in thousands)
<S>                                  <C>           <C>            <C>           <C>
Net income                             $   45,867     $  32,831     $  135,369    $  100,079

Other comprehensive income (loss),
 net of tax
  Foreign currency translation             14,086        10,814         19,190         4,907
  Unrecognized net gain (loss) on
   derivative instruments                  (1,576)          129         (2,624)       (1,143)
  Unrealized loss on investments              (14)          (32)           (15)         (104)
                                       ----------     ---------     ----------    ----------
Comprehensive income                   $   58,363     $  43,742     $  151,920    $  103,739
                                       ==========     =========     ==========    ==========
</TABLE>

                                      -15-
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 11 - EARNINGS PER SHARE

The following table shows the computation of basic and diluted earnings per
share:

<TABLE>
<CAPTION>
                                                        Three Months Ended                Nine Months Ended
                                                 -------------------------------   -------------------------------
                                                  November 22,    November 23,      November 22,    November 23,
                                                      2003            2002             2003             2002
                                                 --------------  ---------------   --------------  ---------------
                                                    (Dollars and shares in thousands, except per share amounts)
<S>                                              <C>             <C>               <C>             <C>
Numerator:
  Net income (Numerator for basic earnings
     per share)                                  $       45,867  $        32,831   $      135,369  $       100,079

Effect of dilutive securities:
  Interest expense on 1.75% Convertible
     Debentures, net of tax                                 517                -            1,182                -
                                                 --------------  ---------------   --------------  ---------------
Numerator for diluted earnings per share         $       46,384  $        32,831   $      136,551  $       100,079
                                                 ==============  ===============   ==============  ===============

Denominator:
   Denominator for basic earnings per share-
   weighted-average shares                               58,820           56,981           57,882           57,252

Effect of dilutive securities:
   1.75% Convertible Debentures                           6,364                -            4,806                -
   Employee stock options                                 1,559            1,025            1,537            1,187
   Unvested restricted and stock bonus
     discount shares                                        184               56              131               90
                                                 --------------  ---------------   --------------  ---------------
     Dilutive potential common shares                     8,107            1,081            6,474            1,277

Denominator for diluted earnings per
     share-adjusted weighted-average shares
     and assumed conversions                             66,927           58,062           64,356           58,529
                                                 ==============  ===============   ==============  ===============

Basic earnings per share                         $          .78  $           .58   $         2.34  $          1.75
                                                 ==============  ===============   ==============  ===============

Diluted earnings per share                       $          .69  $           .57   $         2.12  $          1.71
                                                 ==============  ===============   ==============  ===============
</TABLE>

Our 1.75% Convertible Debentures ("Debentures") are convertible at the option of
the holder into shares of our common stock at an initial conversion rate of
36.3636 shares of common stock per $1,000 principal amount of Debentures, which
is equivalent to an initial conversion price of approximately $27.50 per share.
The Debentures become convertible when, among other circumstances, the closing
price of our common stock is more than 120% of the conversion price
(approximately $33 per share) for at least 20 out of 30 consecutive trading days
prior to the date of surrender for conversion. There are a total of 6.4 million
shares issuable upon the conversion of the Debentures.

The Debentures were convertible for all 64 trading days in the quarter ended
November 22, 2003, and all 6.4 million shares were included in the computation
of diluted earnings per share. For the quarter ended November 23, 2002, none of
the 6.4 million shares were included in the computation of diluted earnings per
share because, in accordance with their terms, the Debentures had not yet become
convertible.

                                      -16-
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 11 - EARNINGS PER SHARE (continued)

The Debentures were convertible for 144 out of 191 trading days during the nine
month period ended November 22, 2003, and approximately 4.8 million shares were
included in the computation of diluted earnings per share. For the nine months
ended November 23, 2002, none of the 6.4 million shares were included in the
computation of diluted earnings per share because, in accordance with their
terms, the Debentures had not yet become convertible.


NOTE 12 - CONSOLIDATION OF WEST GREENWICH TECHNOLOGY ASSOCIATES, L.P.

We have a 50% limited partnership interest in West Greenwich Technology
Associates, L.P. (the "Partnership"), which owns our world headquarters
facilities and leases them to us. The general partner of the Partnership is an
unrelated third party. Prior to the third quarter of fiscal 2004, we accounted
for the Partnership using the equity method of accounting. Beginning in the
third quarter of fiscal 2004, we consolidate the Partnership in accordance with
Financial Accounting Standards Board Interpretation No. 46, "Consolidation of
Variable Interest Entities", which requires the consolidation of a variable
interest entity (as defined) by its primary beneficiary. As a result, we
recorded our world headquarters facilities owned by the Partnership as an asset,
and the Partnership's debt obligation as a liability in our consolidated
financial statements. The adoption of this interpretation increased balance
sheet assets and liabilities by $30.0 million and $26.7 million, respectively,
and resulted in a one-time, non-cash, after-tax gain of $3.3 million. The
pre-tax gain of $5.3 million is recorded in Other Income in our consolidated
financial statements and not as a cumulative-effect adjustment because the gain
is not material to our consolidated financial statements.


NOTE 13 - INCOME TAXES

Our effective income tax rate is greater than the statutory rate primarily due
to state income taxes and certain expenses that are not deductible for income
tax purposes.


NOTE 14 - RECENT ACCOUNTING PRONOUNCEMENTS

In January 2003, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"),
which requires the consolidation of a variable interest entity (as defined) by
its primary beneficiary.  Primary beneficiaries are those companies that are
subject to a majority of the risk of loss or entitled to receive a majority of
the variable interest entity's residual returns, or both.  In determining
whether it is the primary beneficiary of a variable interest entity, a company
with a variable interest must also treat a variable interest held by the
company's related parties in that same entity as its own interests.  In December
2003, the FASB published a revision to FIN 46 to clarify some of the provisions
of FIN 46 and to exempt certain entities from its requirements.  FIN 46, as
revised, applies to variable interest entities that are commonly referred to as
special-purpose entities for periods ending after December 15, 2003 (our fiscal
2004 fourth quarter) and for all other types of variable interest entities for
periods ending after March 15, 2004 (our fiscal 2005 first quarter).  Earlier
application is permitted.

                                      -17-
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 14 - RECENT ACCOUNTING PRONOUNCEMENTS (continued)

We have applied the provisions of FIN 46 to our 50% limited partnership interest
in West Greenwich Technology Associates, L.P. (the "Partnership"), which owns
our world headquarters facilities and leases them to us, resulting in the
consolidation of the Partnership in the third quarter of fiscal 2004.  Refer to
Note 12 for detailed disclosures.

Our evaluation of the impact of FIN 46 on certain of our investments created
prior to February 1, 2003 is ongoing and is not expected to have a material
impact on our financial statements.  If applicable, we would not be required to
apply FIN 46 to these investments until our fiscal 2005 first quarter.


NOTE 15 - SUPPLEMENTAL GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION

On December 18, 2001, Holdings (the "Parent Company") issued $175 million
principal amount of 1.75% Convertible Debentures due 2021 (the "Convertible
Debentures"). On October 9, 2003, the Parent Company issued $250 million
principal amount of 4.75% Senior Notes due 2010 (the "Senior Notes"). The
Convertible Debentures and Senior Notes are unsecured and unsubordinated
obligations of the Parent Company that are jointly and severally, fully and
unconditionally guaranteed by GTECH and three of its wholly-owned subsidiaries:
GTECH Rhode Island Corporation, GTECH Latin America Corporation and Interlott
Technologies, Inc. (collectively with GTECH, the "Guarantor Subsidiaries").
Condensed consolidating financial information is presented below.

Selling, general and administrative costs and research and development costs are
allocated to each subsidiary based on the ratio of the subsidiaries combined
service revenue and sales of products to consolidated revenues.

The Parent Company conducts business through its consolidated subsidiaries and
unconsolidated affiliates and has, as its only material asset, an investment in
GTECH. Equity in earnings of consolidated affiliates recorded by the Parent
Company includes the Parent Company's share of the after-tax earnings of GTECH.
Taxes payable and deferred income taxes are obligations of the subsidiaries.
Income tax expense related to both current and deferred income taxes are
allocated to each subsidiary based on our consolidated effective income tax
rates.

                                      -18-
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 15 - SUPPLEMENTAL GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (continued)

Condensed Consolidating Balance Sheets
November 22, 2003

<TABLE>
<CAPTION>
                                           Parent         Guarantor      Non-Guarantor    Eliminating
                                          Company       Subsidiaries     Subsidiaries       Entries       Consolidated
                                       ---------------  -------------   ---------------  -------------   --------------
                                                            (Dollars in thousands)
<S>                                    <C>              <C>             <C>              <C>             <C>
Assets
Current Assets:
   Cash and cash equivalents           $             -  $     270,568   $        49,968  $           -   $      320,536
   Trade accounts receivable, net                    -         78,282            44,436              -          122,718
   Due from subsidiaries and
     affiliates                                      -         38,706                 -        (38,706)               -
   Sales-type lease receivables                      -          3,591             3,697              -            7,288
   Inventories                                       -         45,344            18,449         (4,941)          58,852
   Deferred income taxes                             -         24,700             4,710              -           29,410
   Other current assets                              -         10,980            16,222              -           27,202
                                       ---------------  -------------   ---------------  -------------   --------------
     Total Current Assets                            -        472,171           137,482        (43,647)         566,006

Systems, Equipment and Other
   Assets Relating to Contracts, net                 -        488,007            81,791         (7,868)         561,930
Investment in Subsidiaries and
   Affiliates                                  515,694        151,833                 -       (667,527)               -
Goodwill, net                                        -        114,807            74,002              -          188,809
Other Assets                                         -         89,841            79,391              -          169,232
                                       ---------------  -------------   ---------------  -------------   --------------
     Total Assets                      $       515,694  $   1,316,659   $       372,666  $    (719,042)  $    1,485,977
                                       ===============  =============   ===============  =============   ==============

Liabilities and Shareholders' Equity
Current Liabilities:
   Accounts payable                    $             -  $      49,614   $        24,557  $           -   $       74,171
   Due to subsidiaries and affiliates                -              -            38,706        (38,706)               -
   Accrued expenses                                  -         34,670            18,233              -           52,903
   Employee compensation                             -         25,036             7,134              -           32,170
   Advance payments from
     customers                                       -         43,138            52,718              -           95,856
   Deferred revenue and advance
     billings                                        -          7,202             2,873              -           10,075
   Income taxes payable                              -         51,690             4,382              -           56,072
   Taxes other than income taxes                     -         14,522            13,495              -           28,017
   Short term borrowings                             -              -             2,379              -            2,379
   Current portion of long-term debt                 -          3,537             5,475              -            9,012
                                        --------------  -------------   ---------------  -------------   --------------
     Total Current Liabilities                       -        229,409           169,952        (38,706)         360,655

Long-Term Debt, less current
   portion                                           -        524,038            33,874              -          557,912
Other Liabilities                                    -         34,709            17,007              -           51,716
Shareholders' Equity                           515,694        528,503           151,833       (680,336)         515,694
                                       ---------------  -------------   ---------------  -------------   --------------
     Total Liabilities and
     Shareholders' Equity              $       515,694  $   1,316,659   $       372,666  $    (719,042)  $    1,485,977
                                       ===============  =============   ===============  =============   ==============
</TABLE>

                                      -19-
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 15 - SUPPLEMENTAL GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (continued)

Condensed Consolidating Income Statements
Three Months Ended November 22, 2003

<TABLE>
<CAPTION>
                                         Parent        Guarantor      Non-Guarantor     Eliminating
                                        Company      Subsidiaries      Subsidiaries       Entries       Consolidated
                                    ---------------  -------------   ---------------   -------------   --------------
                                                                 (Dollars in thousands)
<S>                                 <C>              <C>             <C>               <C>             <C>
Revenues:
   Services                         $             -  $     164,238   $        66,987   $           -   $      231,225
   Sales of products                              -         14,308             9,389               -           23,697
   Intercompany sales and fees                    -         21,582            12,050         (33,632)               -
                                    ---------------  -------------   ---------------   -------------   --------------
                                                  -        200,128            88,426         (33,632)         254,922
Costs and expenses:
   Costs of services                              -         93,176            39,667            (852)         131,991
   Costs of sales                                 -          8,851             4,252              (9)          13,094
   Intercompany cost of sales
     and fees                                     -         16,285             5,796         (22,081)               -
                                    ---------------  -------------   ---------------   -------------   --------------
                                                  -        118,312            49,715         (22,942)         145,085
                                    ---------------  -------------   ---------------   -------------   --------------

Gross profit                                      -         81,816            38,711         (10,690)         109,837

Selling, general and administrative               -         19,718             8,449               -           28,167
Research and development                          -          9,045             3,881               -           12,926
                                    ---------------  -------------   ---------------   -------------   --------------
     Operating expenses                           -         28,763            12,330               -           41,093
                                    ---------------  -------------   ---------------   -------------   --------------

Operating income                                  -         53,053            26,381         (10,690)          68,744

Other income (expense):
     Interest income                              -            510               984               -            1,494
     Equity in earnings of
       unconsolidated affiliates                  -            430             1,070               -            1,500
     Equity in earnings of
       consolidated affiliates               45,867         18,038                 -         (63,905)               -
     Other income                                 -          3,574               478               -            4,052
     Interest expense                             -         (2,705)             (281)              -           (2,986)
                                    ---------------  -------------   ---------------   -------------   --------------
                                             45,867         19,847             2,251         (63,905)           4,060
                                    ---------------  -------------   ---------------   -------------   --------------

Income before income taxes                   45,867         72,900            28,632         (74,595)          72,804

Income taxes                                      -         26,973            10,594         (10,630)          26,937
                                    ---------------  -------------   ---------------   --------------  --------------

Net income                          $        45,867  $      45,927   $        18,038   $     (63,965)  $       45,867
                                    ===============  =============   ===============   =============   ==============
</TABLE>

                                      -20-

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 15 - SUPPLEMENTAL GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (continued)

Condensed Consolidating Income Statements
Nine Months Ended November 22, 2003

<TABLE>
<CAPTION>
                                        Parent         Guarantor      Non-Guarantor     Eliminating
                                        Company       Subsidiaries     Subsidiaries       Entries       Consolidated
                                    ---------------  -------------   ---------------   -------------   --------------
                                                                 (Dollars in thousands)
<S>                                 <C>              <C>             <C>               <C>             <C>
Revenues:
   Services                         $             -  $     503,436   $       189,346   $           -   $      692,782
   Sales of products                              -         34,393            44,579               -           78,972
   Intercompany sales and fees                    -         66,924            33,983        (100,907)               -
                                    ---------------  -------------   ---------------   -------------   --------------
                                                  -        604,753           267,908        (100,907)         771,754
Costs and expenses:
   Costs of services                              -        275,207           119,285          (2,899)         391,593
   Costs of sales                                 -         18,832            31,764             (63)          50,533
   Intercompany cost of sales
     and fees                                     -         70,889            14,348         (85,237)               -
                                    ---------------  -------------   ---------------   -------------   --------------
                                                  -        364,928           165,397         (88,199)         442,126
                                    ---------------  -------------   ---------------   -------------   --------------

Gross profit                                      -        239,825           102,511         (12,708)         329,628

Selling, general and administrative               -         55,404            24,094               -           79,498
Research and development                          -         28,860            12,562               -           41,422
                                    ---------------  -------------   ---------------   -------------   --------------
     Operating expenses                           -         84,264            36,656               -          120,920
                                    ---------------  -------------   ---------------   -------------   --------------

Operating income                                  -        155,561            65,855         (12,708)         208,708

Other income (expense):
     Interest income                              -          1,070             2,633               -            3,703
     Equity in earnings of
       unconsolidated affiliates                  -          3,001             3,119               -            6,120
     Equity in earnings of
       consolidated affiliates              135,369         42,551                 -        (177,920)               -
     Other income (expense)                       -          6,303            (2,966)              -            3,337
     Interest expense                             -         (5,897)           (1,100)              -           (6,997)
                                    ---------------  -------------   ---------------   -------------   --------------
                                            135,369         47,028             1,686        (177,920)           6,163
                                    ---------------  -------------   ---------------   -------------   --------------

Income before income taxes                  135,369        202,589            67,541        (190,628)         214,871

Income taxes                                      -         74,958            24,990         (20,446)          79,502
                                    ---------------  -------------   ---------------   -------------   --------------

Net income                          $       135,369  $     127,631   $        42,551   $    (170,182)  $      135,369
                                    ===============  =============   ===============   =============   ==============
</TABLE>

                                      -21-

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 15 - SUPPLEMENTAL GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (continued)

Condensed Consolidating Income Statements
Three Months Ended November 23, 2002

<TABLE>
<CAPTION>
                                         Parent        Guarantor      Non-Guarantor     Eliminating
                                        Company       Subsidiaries     Subsidiaries       Entries       Consolidated
                                    ---------------  -------------   ---------------   -------------   --------------
                                                                 (Dollars in thousands)
<S>                                 <C>              <C>             <C>               <C>             <C>
Revenues:
   Services                         $             -  $     156,069   $        51,715   $           -   $      207,784
   Sales of products                              -         43,266             5,416               -           48,682
   Intercompany sales and fees                    -         19,858            11,956         (31,814)               -
                                    ---------------  -------------   ---------------   -------------   --------------
                                                  -        219,193            69,087         (31,814)         256,466
Costs and expenses:
   Costs of services                              -         93,275            38,846          (2,999)         129,122
   Costs of sales                                 -         35,222             3,968            (120)          39,070
   Intercompany cost of sales
     and fees                                     -         14,835             5,739         (20,574)               -
                                    ---------------  -------------   ---------------   -------------   --------------
                                                  -        143,332            48,553         (23,693)         168,192
                                    ---------------  -------------   ---------------   -------------   --------------

Gross profit                                      -         75,861            20,534          (8,121)          88,274

Selling, general and administrative               -         18,958             5,400               -           24,358
Research and development                          -          8,421             2,482               -           10,903
                                    ---------------  -------------   ---------------   -------------   --------------
     Operating expenses                           -         27,379             7,882               -           35,261
                                    ---------------  -------------   ---------------   -------------   --------------

Operating income                                  -         48,482            12,652          (8,121)          53,013

Other income (expense):
     Interest income                              -            514               514               -            1,028
     Equity in earnings of
       unconsolidated affiliates                  -            289             1,117               -            1,406
     Equity in earnings of
       consolidated affiliates               32,831         10,976                 -         (43,807)               -
     Other income (expense)                       -         (3,562)            3,796               -              234
     Interest expense                             -         (2,351)             (377)              -           (2,728)
                                    ---------------  -------------   ---------------   -------------   --------------
                                             32,831          5,866             5,050         (43,807)             (60)
                                    ---------------  -------------   ---------------   -------------   --------------

Income before income taxes                   32,831         54,348            17,702         (51,928)          52,953

Income taxes                                      -         20,652             6,726          (7,256)          20,122
                                    ---------------  -------------   ---------------   -------------   --------------

Net income                          $        32,831  $      33,696   $        10,976   $     (44,672)  $       32,831
                                    ===============  =============   ===============   =============   ==============
</TABLE>

                                      -22-
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 15 - SUPPLEMENTAL GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION\
(continued)

Condensed Consolidating Income Statements
Nine Months Ended November 23, 2002

<TABLE>
<CAPTION>
                                         Parent       Guarantor     Non-Guarantor     Eliminating
                                         Company     Subsidiaries    Subsidiaries       Entries          Consolidated
                                     --------------  ------------  ---------------   -------------       -------------
                                                              (Dollars in thousands)
<S>                                  <C>             <C>           <C>               <C>             <C>
Revenues:
   Services                          $           -   $    487,222  $       155,897   $            -      $     643,119
   Sales of products                             -         53,401           12,316                -             65,717
   Intercompany sales and fees                   -         68,642           36,866         (105,508)                 -
                                     -------------   ------------  ---------------   --------------      -------------
                                                 -        609,265          205,079         (105,508)           708,836
Costs and expenses:
   Costs of services                             -        287,529          123,885           (8,415)           402,999
   Costs of sales                                -         41,078            8,783             (435)            49,426
   Intercompany cost of sales
     and fees                                    -         43,619           13,026          (56,645)                 -
                                     -------------    -----------  ---------------   --------------      -------------
                                                 -        372,226          145,694          (65,495)           452,425
                                     -------------    -----------  ---------------   --------------      -------------

Gross profit                                     -        237,039           59,385          (40,013)           256,411

Selling, general and administrative              -         53,515           16,653                -             70,168
Research and development                         -         18,738            5,837                -             24,575
                                     -------------    -----------  ---------------   --------------      -------------
     Operating expenses                          -         72,253           22,490                -             94,743
                                     -------------    -----------  ---------------   --------------      -------------

Operating income                                 -        164,786           36,895          (40,013)           161,668

Other income (expense):
     Interest income                             -          1,263            1,584                -              2,847
     Equity in earnings of
       unconsolidated affiliates                 -            585            2,778                -              3,363
     Equity in earnings of
       consolidated affiliates             100,079         29,206                -         (129,285)                 -
     Other income (expense)                      -         (5,233)           7,145                -              1,912
     Interest expense                            -         (7,075)          (1,296)               -             (8,371)
                                     -------------    -----------  ---------------   --------------      -------------
                                           100,079         18,746           10,211         (129,285)              (249)
                                     -------------    -----------  ---------------   --------------      -------------

Income before income taxes                 100,079        183,532           47,106         (169,298)           161,419

Income taxes                                     -         69,742           17,900          (26,302)            61,340
                                     -------------    -----------  ---------------   --------------      -------------

Net income                           $     100,079    $   113,790  $        29,206   $     (142,996)     $     100,079
                                     =============    ===========  ===============   ==============      =============
</TABLE>

                                      -23-

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 15 - SUPPLEMENTAL GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION
(continued)

Condensed Consolidating Statements of Cash Flows
Nine Months Ended November 22, 2003

<TABLE>
<CAPTION>
                                         Parent        Guarantor      Non-Guarantor     Eliminating
                                        Company       Subsidiaries     Subsidiaries       Entries       Consolidated
                                    ---------------  -------------   ---------------   -------------   --------------
                                                                 (Dollars in thousands)
<S>                                 <C>              <C>             <C>               <C>             <C>

Net cash provided by operating
   activities                       $             -  $     253,810   $        56,508   $       (382)    $     309,936

Investing Activities
   Purchases of systems, equipment
     and other assets relating to
     contracts                                    -       (200,454)          (11,795)           382          (211,867)
   Acquisitions (net of cash acquired)            -        (40,426)          (33,748)             -           (74,174)
   Refundable performance deposit                 -              -           (20,000)             -           (20,000)
   License fee                                    -        (12,500)                -              -           (12,500)
   Other                                          -         (9,691)                -              -            (9,691)
                                    ---------------  -------------   ---------------  -------------    --------------
Net cash used for investing
     activities                                   -       (263,071)          (65,543)           382          (328,232)

Financing Activities
   Net proceeds from issuance
     of long-term debt                            -        251,006             1,521              -           252,527
    Principal payments on long-term
     debt                                         -        (27,759)           (3,929)             -           (31,688)
   Proceeds from stock options               22,068              -                 -              -            22,068
   Dividends paid                           (19,928)             -                 -              -           (19,928)
   Intercompany capital transactions         (3,222)       (30,526)           33,748              -                 -
   Other                                      1,082         (1,819)           (2,846)             -            (3,583)
                                    ---------------  -------------   ---------------  -------------    --------------
Net cash provided by (used for)
     financing activities                         -        190,902            28,494              -           219,396

Effect of exchange rate changes
     on cash                                      -            188             3,074              -             3,262
                                    ---------------  -------------   ---------------  -------------    --------------
Increase in cash and cash
     equivalents                                  -        181,829            22,533              -           204,362
Cash and cash equivalents at
     beginning of period                          -         88,739            27,435              -           116,174
                                    ---------------  -------------   ---------------  -------------    --------------
Cash and cash equivalents at end
     of period                      $             -  $     270,568   $        49,968  $           -    $      320,536
                                    ===============  =============   ===============  =============    ==============
</TABLE>

                                      -24-

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 15 - SUPPLEMENTAL GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION
(continued)

Condensed Consolidating Statements of Cash Flows
Nine Months Ended November 22, 2003

<TABLE>
<CAPTION>
                                          Parent          Guarantor      Non-Guarantor     Eliminating
                                         Company         Subsidiaries    Subsidiaries         Entries      Consolidated
                                     ---------------    -------------   ---------------   -------------   --------------
                                                                 (Dollars in thousands)
<S>                                   <C>               <C>             <C>               <C>             <C>
Net cash provided by operating
   activities                        $             -    $     265,956   $        14,922   $         86    $       280,964

Investing Activities
   Purchases of systems, equipment
     and other assets relating to
     contracts                                     -         (121,396)           (9,739)           (86)         (131,221)
   Other                                           -           (1,350)                -              -            (1,350)
                                     ---------------    -------------   ---------------   -------------   --------------

Net cash used for investing
     activities                                    -         (122,746)           (9,739)           (86)         (132,571)

Financing Activities
   Principal payments on long-term
     debt                                          -          (42,989)           (3,419)             -           (46,408)
   Purchases of treasury stock               (57,424)               -                 -               -          (57,424)
   Proceeds from stock options                15,842                -                 -               -           15,842
   Tender premiums and fees                        -           (3,434)                -               -           (3,434)
   Intercompany capital transactions          40,698          (40,698)                -               -                -
   Other                                         884             (120)            2,162               -            2,926
                                     ---------------    -------------   ---------------   -------------   --------------
Net cash used for financing
     activities                                    -          (87,241)           (1,257)              -          (88,498)

Effect of exchange rate changes
     on cash                                       -           (1,767)            4,286               -            2,519
                                     ---------------    -------------   ---------------   -------------   --------------
Increase in cash and
     cash equivalents                              -           54,202             8,212               -           62,414
Cash and cash equivalents at
     beginning of period                           -           25,865             9,230               -           35,095
                                     ---------------    -------------   ---------------   -------------   --------------
Cash and cash equivalents at end
     of period                       $             -    $      80,067   $        17,442   $           -   $       97,509
                                     ===============    =============   ===============   =============   ==============
</TABLE>

                                      -25-
<PAGE>

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

The terms "Holdings", "the Company", "we", "our" and "us" refer to GTECH
Holdings Corporation and its consolidated subsidiaries, unless otherwise
specified.

Statements contained in this section and elsewhere in this report which are not
historical statements constitute "forward-looking statements" within the meaning
of Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act of 1934. Generally, the words "believe", "expect", "estimate", "anticipate",
"will", "may", "could", "plan", "continue" and similar expressions identify
forward-looking statements. Such statements may include, without limitation,
statements relating to:

     -    the future prospects for and stability of the lottery industry and
          other businesses in which we are engaged or expect to be engaged;

     -    our future operating and financial performance (including, without
          limitation, expected future growth in revenues, profit margins and
          earnings per share);

     -    our ability to retain existing contracts and to obtain and retain new
          contracts;

     -    the future performance of comparable investment opportunities; and

     -    the results and effects of legal proceedings and investigations.

These 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 the following:

     -    government regulations and other actions affecting the online lottery
          industry could have a negative effect on our business and sales;

     -    our lottery operations are dependent upon our continued ability to
          retain and extend our existing contracts and win new contracts;

     -    slow growth or declines in sales of online lottery goods and services
          and other transaction processing services could lead to lower revenues
          and net income;

     -    our results of operations are exposed to foreign currency exchange
          rate fluctuations, which could result in lower revenues, net income
          and cash flows when such results are translated into U.S. dollar
          accounts;

     -    we derive close to half of our revenues from foreign jurisdictions
          (including over ten percent from our Brazilian operations) and are
          subject to the economic, political and social instability risks of
          doing business in foreign jurisdictions;

     -    we have a concentrated customer base and the loss of any of these
          customers (or lower sales from any of these customers) could lead to
          lower revenues;

     -    our quarterly operating results may fluctuate significantly, including
          as a result of variations in the amount and timing of product sales,
          the occurrence of large jackpots in lotteries (which increase the
          amount wagered and our revenue) and expenses incurred in connection
          with lottery start-ups;

     -    we operate in a highly competitive environment and increased
          competition may cause us to experience lower net income or to lose
          contracts;

     -    we are subject to substantial penalties for failure to perform under
          our contracts;

     -    we may not be able to respond in a timely manner to technological
          changes or to satisfy future technology demands of our customers, in
          which case we may fall behind our competitors;

     -    if we are unable to manage potential risks related to acquisitions,
          our business and growth prospects could suffer;

     -    expansion of the gaming industry faces opposition which could limit
          our access to new or existing markets to the detriment of our
          business;

     -    our business prospects and future success depend upon our ability to
          attract and retain qualified employees;

                                      -26-
<PAGE>

     -    our business prospects and future success rely heavily upon the
          integrity of our employees and executives and the security of our
          systems;

     -    our dependence on certain suppliers creates a risk of implementation
          delays if the supply contract is terminated or breached, and any
          delays may result in substantial penalties;

     -    our non-lottery ventures, which are an increasingly important aspect
          of our business, may fail;

     -    we may not be able to successfully integrate the operations of
          companies that we acquire into our business, and may thereby fail to
          realize the strategic and financial benefits that we had expected from
          such acquisitions;

     -    we may be subject to adverse determinations in pending legal
          proceedings, which could involve substantial monetary judgments or
          reputational damage; and

     -    other risks and uncertainties set forth below and elsewhere in this
          report, in our fiscal 2003 Form 10-K, as amended, and in our
          subsequent press releases and Form 10-Q's and other reports and
          filings with the Securities and Exchange Commission.

The foregoing list of important factors is not all-inclusive.

General

We operate on a 52 or 53-week fiscal year ending on the last Saturday in
February and fiscal 2004 ends on February 28, 2004. Fiscal 2004 is a 53-week
year and we will include the extra week in our fourth quarter ending February
28, 2004.

We have derived substantially all of our revenues from the rendering of services
and the sale or supply of computerized online lottery systems and components to
government-authorized lotteries. Our service revenues are derived primarily from
lottery service contracts, which are typically at least five years in duration,
and generally provide compensation to us based upon a percentage of a lottery's
gross online lottery sales. These percentages vary depending on the size of the
lottery and the scope of services provided to the lottery. We derive product
sale revenues primarily from the installation of new online lottery systems,
installation of new software and sales of lottery terminals and equipment in
connection with the expansion of existing lottery systems. Our product margins
fluctuate depending on the mix, volume and timing of product sale contracts. The
size and timing of these transactions have resulted in variability in product
sale revenues from period to period. We currently anticipate that product sales
during fiscal 2004 will be in the range of $105 million to $110 million.

We continue to evaluate a variety of opportunities to broaden our offerings of
high-volume transaction processing services outside of our core market of
providing online lottery services, such as the processing and transmission of
commercial, non-lottery transactions including bill payments, electronic tax
payments, utility payments, prepaid cellular telephone recharges and
retail-based programs such as gift cards. Currently, our networks in Brazil,
Chile, the Czech Republic and Jamaica process bill payments and other commercial
service transactions. In addition, in May 2003 we acquired PolCard, the largest
debit and credit card merchant transaction acquirer and processor in Poland. In
the near term, we expect to concentrate our efforts to grow commercial service
revenues in Brazil, Poland, the United Kingdom and Turkey. While our goal is to
leverage our technology, infrastructure and relationships to drive growth in
commercial services, if, in the course of pursuing these opportunities, we see a
chance to gain access to certain markets through the acquisition of existing
businesses, we may consider making such acquisitions.

                                      -27-
<PAGE>

Our business is highly regulated, and the competition to secure new government
contracts is often intense. From time to time, competitors challenge our
contract awards and there have been, and may continue to be, investigations of
various types, including grand jury investigations conducted by governmental
authorities into possible improprieties and wrongdoing in connection with
efforts to obtain and/or the awarding of lottery contracts and related matters.
In light of the fact that such investigations frequently are conducted in
secret, we may not necessarily know of the existence of an investigation which
might involve us. Because our reputation for integrity is an important factor in
our business dealings with lottery and other governmental agencies, a
governmental allegation or a finding of improper conduct on our part or
attributable to us in any manner could have a material adverse effect on our
business, including our ability to retain existing contracts or to obtain new or
renewal contracts. In addition, continuing adverse publicity resulting from
these investigations and related matters could have a material adverse effect on
our reputation and business. See the following for further information
concerning these matters and other contingencies:

     -    "Legal Proceedings" in Part II, Item 1 in this report;

     -    "Legal Proceedings" in Part II, Item 1 in our Quarterly Report for the
          quarterly period ended May 24, 2003;

     -    Part I, Item 1 - "Certain Factors That May Affect Future Performance -
          Government regulations and other actions affecting the online lottery
          industry could have a negative effect on our business" in our fiscal
          2003 Annual Report on Form 10-K, as amended;

     -    Part I, Item 3 - "Legal Proceedings" in our fiscal 2003 Annual Report
          on Form 10-K, as amended;

     -    Note 11 to the Consolidated Financial Statements in our fiscal 2003
          Annual Report on Form 10-K, as amended

We are a global business and we derive a substantial portion of our revenue from
our operations outside the United States. In particular, in fiscal 2003, we
derived 49.2% of our revenues from international operations and 10.3% of our
revenues from our Brazilian operations alone (including 9.8% of our revenues
from Caixa Economica Federal, the operator of Brazil's National Lottery, our
largest customer in fiscal 2003 based on annual revenues). In addition, a
substantial portion of our assets, primarily consisting of equipment we use to
operate online lottery systems for our customers, are held outside of the United
States. We are also exposed to more general risks of international operations,
including increased governmental regulation of the online lottery industry in
the markets where we operate; exchange controls or other currency restrictions;
and significant political instability.


Significant Contract Bids and Extensions

A majority of our revenues and cash flow is derived from our portfolio of
long-term online lottery service contracts, each of which in the ordinary course
of our business is periodically the subject of competitive procurement or
renegotiation. In the third quarter of fiscal 2004, we continued to execute
against our growth strategy by signing new contracts and contract extensions
both domestically and abroad.

During the third quarter of fiscal 2004, following public, competitive
procurements, we were selected by both the Florida Lottery and Tennessee
Education Lottery Corporation to supply new online lottery systems, lottery
terminals, and related telecommunications networks in each of those respective
states. On November 26, 2003 (after the close of the third quarter of this
fiscal year), we signed a six-year integrated services contract with the Florida
Lottery which is expected to commence on February 1, 2005 and includes two,
two-year extension options. In Tennessee, the proposed seven-year integrated
services contract is expected to commence on February 10, 2004 and does not
include any extension options. In addition, during the third quarter of fiscal
2004, we signed a 12-year contract extension to provide online lottery products
and services to SAZKA a.s., the operator of lottery and betting games in the
Czech Republic and we also extended our relationship with lottery customers in
Denmark and Portugal.

                                      -28-
<PAGE>

In December 2003 (after the close of our fiscal 2004 third quarter), following a
public, competitive procurement, we signed a 10-year integrated services
contract to provide online, instant and passive lottery technology and
management services in Sri Lanka, which includes a five-year extension option.
We anticipate launching the new system in mid-2004.

Over the past several fiscal years, contract renewal and extension rates in the
United States have generally been lower than existing contract rates due to a
number of factors, including the substantial growth of lottery sales during the
latter part of the 1990's and calendar year 2002, reductions in the cost of
technology and telecommunications services, and general market and competitive
dynamics. In anticipation and response to these trends, beginning in fiscal
2001, we began the implementation of our new Enterprise Series-led technology
strategy combined with the implementation of a number of ongoing cost savings
initiatives and efficiency improvement programs designed to enable us to
maintain our market leadership in the lottery industry.



Recent Developments

POLCARD S.A.

On May 28, 2003, we completed the acquisition of a controlling equity position
in PolCard S.A. ("PolCard"), for a purchase price, net of cash acquired, of
$35.9 million. PolCard is the largest debit and credit card merchant transaction
acquirer and processor in Poland. At August 23, 2003, PolCard's outstanding
equity was owned 66.5% by us, 33.2% by two funds managed by Innova Capital Sp. z
o.o. ("Innova"), a Warsaw-based private equity investment advisor, and 0.3% by
the Polish Bank Association, one of PolCard's previous owners. In September
2003, Innova exercised its rights under an option agreement to purchase from us,
3.7% of PolCard's equity for a purchase price of $2.3 million. Following the
exercise of this right, we now own 62.8% of PolCard's outstanding equity, while
the two funds managed by Innova own, in aggregate, 36.9% of PolCard's
outstanding equity, the fair value of which approximated $22.2 million. The
Polish Bank Association continues to own 0.3% of the outstanding equity of
PolCard. We have a fair value option to purchase Innova's interest in PolCard,
and Innova has the reciprocal right to sell its interest in PolCard to us at
fair value, during the period commencing approximately four and ending
approximately six years after closing.


INTERLOTT TECHNOLOGIES, INC.

On September 18, 2003, we completed the acquisition of Interlott Technologies,
Inc. ("Interlott"), a leading provider of instant ticket vending machines for
the worldwide lottery industry. Interlott shareholders were given the
opportunity to elect to receive either $9.00 per share in cash or a number of
shares of Holdings common stock having a value of $9.00, or a combination of
both, subject to adjustment so that the aggregate consideration we paid was
48.5% in cash and 51.5% in Holdings common stock. The final exchange ratio of
0.2156 shares of Holdings common stock for every share of Interlott common stock
was determined based on the average closing price of $41.74 for Holdings common
stock for the 20 trading day period commencing August 14, 2003 through September
11, 2003. For purposes of purchase accounting, Holdings common stock was valued
at $42.97 per share using the average price of Holdings common stock two days
prior to the acquisition date in accordance with Emerging Issues Task Force
Issue No. 99-12, "Determination of the Measurement Date for the Market Price of
Acquirer Securities issued in a Purchase Business Combination". The aggregate
purchase price, including assumed debt, was as follows:

                                      -29-
<PAGE>

<TABLE>
<CAPTION>
                                                                                    Aggregate
                                                                                  purchase price
                                                                                  --------------
                                                                                   (in millions)
<S>                                                                               <C>
Cash ($9.00 per share of Interlott common stock)                                  $         28.2
Cash payment to cancel outstanding stock options relating to Interlott
  common stock                                                                               5.7
                                                                                  --------------
    Cash purchase price                                                                     33.9
Issuance of 717,565 shares of Holdings common stock                                         30.8
                                                                                  --------------
    Total aggregate purchase price                                                          64.7
Cash payment to settle Interlott debt                                                       22.5
                                                                                  --------------
                                                                                  $         87.2
                                                                                  ==============
</TABLE>

The PolCard and Interlott acquisitions did not require the approval of our
shareholders.


SPIELO MANUFACTURING INC.

On November 7, 2003, we entered into an agreement to acquire all of the shares
of privately-held Spielo Manufacturing Inc. ("Spielo"), a leading provider of
video lottery terminals and related products and services to the global gaming
industry. This agreement provides for us to pay a potential aggregate cash
purchase price of approximately $185 million, which includes a $150 million cash
payment at the closing and an earn-out amount of up to $35 million in the 18
months following the closing, which Spielo shareholders are entitled to receive
based upon Spielo achieving certain video lottery terminal installation
objectives in New York. Our obligation to complete this acquisition is subject
to securing regulatory and gaming license approvals, and satisfying certain
other closing conditions. Approval of this transaction by our shareholders is
not required. We expect the closing of the Spielo acquisition to be completed in
the second quarter of fiscal year 2005.


DIVIDEND

On October 31, 2003, we paid our second quarterly cash dividend of $0.17 per
share to shareholders of record as of October 15, 2003, for a total of $10.0
million.



Critical Accounting Policies

We have identified the accounting policies listed below that we believe are most
critical to our financial condition and results of operations, and that require
management's most difficult, subjective and complex judgments in estimating the
effect of inherent uncertainties. This section should be read in conjunction
with Note 1 to our Consolidated Financial Statements included in our fiscal 2003
Annual Report on Form 10-K, as amended, which includes other significant
accounting policies.


REVENUE RECOGNITION

Amounts received from customers in advance of revenue recognition are recorded
in Advance Payments from Customers in our Consolidated Balance Sheets. We record
liquidated damages (which equaled 0.47%, 0.14% and 0.47% of our total revenues
in fiscal 2003, 2002 and 2001, respectively) as a reduction of revenue in the
period they become probable and estimable.

Service revenues from commercial transaction processing services are recorded
based on the net amount retained, which is the amount billed to our customer
less the amount paid to our suppliers, in accordance with Emerging Issues Task
Force Issue No. 99-19, "Reporting Revenue Gross as a Principal Versus Net as an
Agent".

                                      -30-
<PAGE>

We generally conduct business under one of three types of contractual
arrangements: Product Sales Contracts, Operating Contracts and Facilities
Management Contracts.


PRODUCT SALES CONTRACTS

Under Product Sales Contracts, we construct, sell, deliver and install a turnkey
online lottery system ("lottery system") or lottery equipment and license the
computer software for a fixed price, and the lottery authority subsequently
operates the lottery system.

Because Product Sales Contracts include significant customization and
modification and other services prior to customer acceptance that are considered
essential to the lottery software inherent in our lottery systems, revenue is
recognized using contract accounting. Under contract accounting, amounts due to
us, and costs incurred by us in constructing the lottery system, prior to
customer acceptance, are deferred. Revenue attributable to the lottery system is
recognized upon customer acceptance as long as there are no substantial doubts
regarding collectibility (the completed contract method of accounting).

In certain Product Sale Contracts (primarily the sale of lottery terminals), we
are not responsible for installation. In these cases, we recognize revenue when
the four basic revenue recognition criteria of SEC Staff Accounting Bulletin 101
have been met.

1.       Persuasive evidence of an arrangement exists - Revenue is only
         recognized if a signed contract or legally enforceable purchase order
         is obtained.

2.       Delivery has occurred or services have been rendered - Revenue is only
         recognized if appropriate evidence of delivery is obtained and once any
         customer acceptance criteria have been met.

3.       The seller's price to the buyer is fixed or determinable - Revenue is
         only recognized if the sales price is fixed and determinable in the
         signed contract or legally enforceable purchase order.

4.       Collectibility is reasonably assured - Revenue is only recognized when
         there are no significant doubts regarding the collectibility of the
         amounts due from the customer.

Revenues received under Product Sale Contracts are classified as Sales of
Products in our Consolidated Income Statements.


OPERATING CONTRACTS

Under Operating Contracts, we generally construct, install and operate the
lottery system, but sell and transfer full title and interest in the lottery
system to the customer for a fixed fee. Fees paid to us for ongoing services and
the licensing of the computer software are generally variable and are based on a
percentage of a lottery's gross online and instant lottery sales.

Because Operating Contracts include significant customization and modification
and other services prior to customer acceptance that are considered essential to
the lottery software inherent in our lottery systems, revenue is recognized
using contract accounting. Under contract accounting, amounts due to us, and
costs incurred by us in constructing the lottery system, prior to customer
acceptance, are deferred. Revenue attributable to the lottery system is
recognized upon customer acceptance as long as there are no substantial doubts
regarding collectibility (the completed contract method of accounting) and are
classified as Sales of Products in our Consolidated Income Statements. Ongoing
service and license fees are recognized as revenue in the period earned and are
classified as Service Revenue in our Consolidated Income Statements.

We have not entered into any new Operating Contracts in the last three fiscal
years. Additionally, Operating Contract revenue accounted for less than 2% of
our consolidated revenue during fiscal 2003. These types of contractual
arrangements have diminished in importance and we expect similar levels of
revenue in the future.

                                      -31-

<PAGE>

FACILITIES MANAGEMENT CONTRACTS

Under typical Facilities Management Contracts, we construct, install and operate
the lottery system, and retain ownership of the lottery system. These contracts
generally provide for a variable amount of monthly or weekly service fees paid
to us directly from the lottery authority based on a percentage of a lottery's
gross online and instant lottery sales. These fees are recognized as revenue in
the period earned and are classified as Service Revenue in our Consolidated
Income Statements.


RECEIVABLES AND INVENTORY RESERVES

We evaluate the collectibility of trade accounts and sales-type lease
receivables on a customer-by-customer basis and we believe our reserves are
adequate; however, if economic circumstances change significantly resulting in a
major customer's inability or unwillingness to meet its financial obligations to
us, original estimates of the recoverability of amounts due to us could be
reduced by significant amounts requiring additional reserves.

Inventories are stated at the lower of cost (first-in, first-out method) or
market. Inventories include amounts related to products we manufacture or
assemble for our long-term service contracts, which are transferred to Systems,
Equipment and Other Assets Relating to Contracts in our Consolidated Balance
Sheets upon shipment. Inventories also include amounts related to product sales
contracts, including product sales under long-term contracts. We regularly
review inventory quantities on hand and record provisions for potentially
obsolete or slow-moving inventory based primarily on our estimated forecast of
product demand and production requirements. We believe our reserves are
adequate; however, should future sales forecasts change, our original estimates
of obsolescence could increase by a significant amount requiring additional
reserves.


IMPAIRMENT OF GOODWILL

We perform a test for the impairment of goodwill annually, during our fiscal
third quarter, or more frequently if events or circumstances indicate that
goodwill may be impaired. Because we have a single operating and reportable
business segment (the Transaction Processing Segment), we perform this test by
comparing the fair value of the Transaction Processing Segment with its book
value, including goodwill. If the fair value of the Transaction Processing
Segment exceeds its book value, goodwill is not impaired. If the book value
exceeds the fair value, we would calculate the potential impairment loss by
comparing the implied fair value of goodwill with the book value. If the implied
goodwill is less than the book value, a write-down would be recorded.


IMPAIRMENT OF LONG-LIVED ASSETS

We periodically evaluate the recoverability of long-lived assets whenever
indicators of impairment are present. Indicators of impairment include such
items as declines in revenues and earnings or cash flows or material adverse
changes in the economic or political stability of a particular country, which
may indicate that the carrying amount of an asset is not recoverable. If facts
and circumstances indicate that our long-lived assets may be impaired, the
estimated future undiscounted cash flows associated with these long-lived assets
would be compared to their carrying amounts to determine if a write-down to fair
value is necessary.

                                      -32-

<PAGE>

Consolidation of West Greenwich Technology Associates, L.P.

We have a 50% limited partnership interest in West Greenwich Technology
Associates, L.P. (the "Partnership"), which owns our world headquarters
facilities and leases them to us. The general partner of the Partnership is an
unrelated third party. Prior to the third quarter of fiscal 2004, we accounted
for the Partnership using the equity method of accounting. Beginning in the
third quarter of fiscal 2004, we consolidate the Partnership in accordance with
Financial Accounting Standards Board Interpretation No. 46, "Consolidation of
Variable Interest Entities", which requires the consolidation of a variable
interest entity (as defined) by its primary beneficiary. As a result, we
recorded our world headquarters facilities owned by the Partnership as an asset,
and the Partnership's debt obligation as a liability in our consolidated
financial statements. The adoption of this interpretation increased balance
sheet assets and liabilities by $30.0 million and $26.7 million, respectively,
and resulted in a one-time, non-cash, after-tax gain of $3.3. The pre-tax gain
of $5.3 million is recorded in Other Income in our consolidated financial
statements and not as a cumulative-effect adjustment because the gain is not
material to our consolidated financial statements.


Effect of Recent Accounting Pronouncements

In January 2003, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"),
which requires the consolidation of a variable interest entity (as defined) by
its primary beneficiary.  Primary beneficiaries are those companies that are
subject to a majority of the risk of loss or entitled to receive a majority of
the variable interest entity's residual returns, or both.  In determining
whether it is the primary beneficiary of a variable interest entity, a company
with a variable interest must also treat a variable interest held by the
company's related parties in that same entity as its own interests.  In December
2003, the FASB published a revision to FIN 46 to clarify some of the provisions
of FIN 46 and to exempt certain entities from its requirements.  FIN 46, as
revised, applies to variable interest entities that are commonly referred to as
special-purpose entities for periods ending after December 15, 2003 (our fiscal
2004 fourth quarter) and for all other types of variable interest entities for
periods ending after March 15, 2004 (our fiscal 2005 first quarter).  Earlier
application is permitted.

We have applied the provisions of FIN 46 to our 50% limited partnership interest
in West Greenwich Technology Associates, L.P. (the "Partnership"), which owns
our world headquarters facilities and leases them to us, resulting in the
consolidation of the Partnership in the third quarter of fiscal 2004.  Refer to
"Consolidation of West Greenwich Technology Associates, L.P." above for detailed
disclosures.

Our evaluation of the impact of FIN 46 on certain of our investments created
prior to February 1, 2003 is ongoing and is not expected to have a material
impact on our financial statements.  If applicable, we would not be required to
apply FIN 46 to these investments until our fiscal 2005 first quarter.


                                      -33-

<PAGE>

Results of Operations

THREE MONTHS ENDED NOVEMBER 22, 2003 VERSUS THREE MONTHS ENDED NOVEMBER 23, 2002

Revenues were $254.9 million in the third quarter of fiscal 2004, compared to
$256.5 million in the third quarter of fiscal 2003, down $1.5 million, or 0.6%.

The following discussion on service revenues should be read in conjunction with
the table below (in millions):

<TABLE>
<CAPTION>
                                                  Three Months Ended
                                   -------------------------------------------------------
                                                                             Change
                                    November 22,     November 23,      -------------------
Service revenues                        2003             2002              $           %
----------------------             --------------   --------------     ---------     -----
<S>                                <C>              <C>                <C>           <C>
Domestic lottery                   $        123.5   $        116.2     $     7.3       6.2
International lottery                        86.4             79.7           6.7       8.5
Commercial services                          20.7             11.2           9.5      85.8
All other                                     0.6              0.7          (0.1)    (21.0)
                                   --------------   --------------     ---------     -----
                                   $        231.2   $        207.8     $    23.4      11.3
                                   ==============   ==============     =========     =====
</TABLE>

Our domestic lottery service revenues were $123.5 million in the third quarter
of fiscal 2004, compared to $116.2 million in the third quarter of fiscal 2003,
up $7.3 million, or 6.2%. This 6.2% increase was primarily due to higher service
revenues of approximately 3% from an increase in sales by our domestic lottery
customers, with the balance of the increase due to the combined effect of higher
jackpot activity and new contracts, including the impact of the Interlott
acquisition, net of contractual rate changes. While we are not able to quantify
precisely the reasons for increases in sales by our domestic lottery customers,
we believe that in general, such increases are attributable to enhanced
marketing efforts by state lottery authorities seeking to offset declining tax
revenues and the successful introduction by state lottery authorities of new
games and products, modifications to existing games (such as matrix changes and
more frequent drawings) and expanded distribution channels, such as Keno.

Our international lottery service revenues grew to $86.4 million in the third
quarter of fiscal 2004, from $79.7 million in the third quarter of fiscal 2003,
up $6.7 million, or 8.5%. This 8.5% increase includes higher service revenues of
approximately 7% from an increase in sales by our international lottery
customers, with the balance of the increase due to the impact of favorable
foreign exchange rates, net of the combined effect of lower jackpot activity and
contractual rate changes. While we are not able to quantify precisely the
reasons for increases in sales by our international lottery customers, we
believe that in general, such increases are attributable to more rapid growth
rates typical of newer lottery jurisdictions and the successful introduction of
new games.

Service revenues from commercial transaction processing services were $20.7
million in the third quarter of fiscal 2004, compared to $11.2 million in the
third quarter of fiscal 2003, up $9.5 million, or 85.8%, primarily due to the
acquisition of PolCard, which contributed $6.8 million of service revenues in
the third quarter of this fiscal year.

Product sales were $23.7 million in the third quarter of fiscal 2004, compared
to $48.7 million in the third quarter of fiscal 2003, down $25.0 million or
51.3%. Product sales in the third quarter of the prior year included a one-time
sale of a turnkey system to our customer in France.

Our service margins improved from 37.9% in the third quarter of fiscal 2003 to
42.9% in the third quarter of fiscal 2004, primarily due to lower depreciation
of approximately 2 percentage points, principally related to fully depreciated
assets associated with our contract with Caixa Economica Federal in Brazil, with
the balance of the increase primarily due to the impact of higher service
revenues.

                                      -34-

<PAGE>

Our product margins fluctuate depending on the mix, volume and timing of product
sales contracts. Our product margins were 44.7% in the third quarter of fiscal
2004 compared to 19.7% in the third quarter of fiscal 2003. This change was
primarily due to the different mix of sales, with higher margin software and
equipment sales recorded in the third quarter of fiscal 2004.

Operating expenses were $41.1 million in the third quarter of fiscal 2004,
compared to $35.3 million in the third quarter of fiscal 2003, up $5.8 million,
or 16.5%. This increase was driven by $3.8 million of increased spending on
selling, general and administrative expenses, primarily driven by increased
business development activities and the consolidation of PolCard and Interlott.
In addition, our investment in research and development increased by $2.0
million as we continue our efforts to accelerate the development and deployment
of Enterprise Series into the marketplace. As a percentage of revenues,
operating expenses were 16.1% and 13.7% during the third quarters of fiscal 2004
and 2003, respectively.

Other income was $4.1 million in the third quarter of fiscal 2004, compared to
$0.2 million in the third quarter of fiscal 2003. This $3.9 million increase was
primarily due to a one-time, non-cash, pre-tax gain of $5.3 million resulting
from the consolidation of the partnership that owns our world headquarters
facilities, in compliance with Financial Accounting Standards Board
Interpretation No. 46, "Consolidation of Variable Interest Entities".

Weighted average diluted shares in the third quarter of fiscal 2004 increased by
8.9 million shares to 66.9 million shares, primarily due to the convertibility
during the third quarter of our $175 million principal amount of 1.75%
Convertible Debentures (the "Debentures") into shares of our common stock,
resulting in a decrease to diluted earnings per share of approximately $0.07.
These Debentures are convertible at the option of the holder into shares of our
common stock at a conversion price of approximately $27.50 per share when, among
other circumstances, our stock closes above $33 per share for at least 20 out of
30 consecutive trading days prior to the date of surrender for conversion. There
are a total of 6.4 million shares issuable upon the conversion of the
Debentures. The Debentures were convertible for all 64 trading days in the third
quarter of fiscal 2004, and accordingly, all 6.4 million shares were included in
the computation of diluted earnings per share.

Our effective income tax rate decreased from 38% in the third quarter of fiscal
2003 to 37% in the third quarter of fiscal 2004 principally due to a larger
percentage of international profits taxed at rates that are lower than the U.S.
statutory tax rate and the increased recognition of research and development tax
credits.



NINE MONTHS ENDED NOVEMBER 22, 2003 VERSUS NINE MONTHS ENDED NOVEMBER 23, 2002

Revenues were $771.8 million in the first nine months of fiscal 2004, compared
to $708.8 million in the first nine months of fiscal 2003, up $63.0 million, or
8.9%.

The following discussion on service revenues should be read in conjunction with
the table below (in millions):

<TABLE>
<CAPTION>
                                                  Nine Months Ended
                                   -------------------------------------------------------
                                                                             Change
                                    November 22,     November 23,      -------------------
Service revenues                        2003             2002              $           %
----------------                   --------------   --------------     ---------      ----
<S>                                <C>              <C>                <C>            <C>
Domestic lottery                   $        378.4   $        363.2     $    15.2       4.2
International lottery                       260.2            239.6          20.6       8.6
Commercial services                          52.3             38.3          14.0      36.3
All other                                     1.9              2.0          (0.1)     (8.0)
                                   --------------   --------------     ---------      ----
                                   $        692.8   $        643.1     $    49.7       7.7
                                   ==============   ==============     =========      ====
</TABLE>

                                      -35-

<PAGE>

Our domestic lottery service revenues were $378.4 million in the first nine
months of fiscal 2004, compared to $363.2 million in the first nine months of
fiscal 2003, up $15.2 million, or 4.2%. This 4.2% increase includes higher
service revenues of approximately 4% from an increase in sales by our domestic
lottery customers, with the balance of the increase due to the combined effect
of new contracts and the impact of the PolCard and Interlott acquisitions, net
of contractual rate changes. While we are not able to quantify precisely the
reasons for increases in sales by our domestic lottery customers, we believe
that in general, such increases are attributable to enhanced marketing efforts
by state lottery authorities seeking to offset declining tax revenues and the
successful introduction by state lottery authorities of new games and products,
modifications to existing games (such as matrix changes and more frequent
drawings) and expanded distribution channels, such as Keno.

Our international lottery service revenues were $260.2 million in the first nine
months of fiscal 2004, compared to $239.6 million in the first nine months of
fiscal 2003, up $20.6 million, or 8.6%. This 8.6% increase includes higher
service revenues of approximately 10% from an increase in sales by our
international lottery customers, along with the impact of favorable foreign
exchange rates, partially offset by the impact of contractual rate changes.
While we are not able to quantify precisely the reasons for increases in sales
by our international lottery customers, we believe that in general, such
increases are attributable to more rapid growth rates typical of newer lottery
jurisdictions and the successful introduction of new games.

Service revenues from commercial transaction processing services were $52.3
million in the first nine months of fiscal 2004, compared to $38.3 million in
the first nine months of fiscal 2003, up $14.0 million, or 36.3%, primarily due
to the consolidation of PolCard, which contributed $13.9 million of service
revenues in the first nine months of this fiscal year.

Product sales were $79.0 million in the first nine months of fiscal 2004,
compared to $65.7 million in the first nine months of fiscal 2003, up $13.3
million. This increase was primarily driven by the sale of our new interactive,
web-based software application, ES Interactive, to our customer in the United
Kingdom.

Our service margins improved from 37.3% in the first nine months of fiscal 2003
to 43.5% in the first nine months of fiscal 2004. This 6.2 percentage point
increase was primarily due to lower depreciation of 3.0 percentage points
(principally related to fully depreciated assets associated with our contract
with Caixa Economica Federal in Brazil), 1.4 percentage points from the absence
of certain consulting costs incurred during the first nine months of the prior
year, and the balance of the increase primarily due to the impact of higher
service revenues.

Our product margins fluctuate depending on the mix, volume and timing of product
sales contracts. Our product margins were 36.0% in the first nine months of
fiscal 2004 compared to 24.8% in the first nine months of fiscal 2003, primarily
due to the different mix of sales during the two periods.

Operating expenses were $120.9 million in the first nine months of fiscal 2004,
compared to $94.7 million in the first nine months of fiscal 2003, up $26.2
million, or 27.6%. This increase was driven by $16.9 million of increased
spending on research and development as we continue our efforts to accelerate
the development and deployment of Enterprise Series into the marketplace. In
addition, selling, general and administrative expense was up $9.3 million,
primarily driven by an increase in business development and related bidding
activity, along with expenses of PolCard and Interlott. As a percentage of
revenues, operating expenses were 15.7% and 13.4% during the first nine months
of fiscal 2004 and 2003, respectively.

                                      -36-

<PAGE>

The components of other income in the first nine months of fiscal 2004 and 2003
are as follows (in millions):

<TABLE>
<CAPTION>
                                                                                        Nine Months Ended
                                                                                ---------------------------------
                                                                                 November 22,      November 23,
                                                                                     2003              2002
                                                                                --------------    ---------------
<S>                                                                             <C>               <C>
Non-cash gain resulting from the consolidation of the partnership that          $          5.3    $             -
   owns our world headquarters facilities
Foreign exchange gains                                                                     0.3                5.4
Tender premiums and fees associated with the early retirement of our                         -               (2.1)
   7.75% Series A Senior Notes due 2004, net of proceeds from the sale
   of certain interest rate swaps associated with these notes
Other                                                                                     (2.3)              (1.4)
                                                                                --------------    ---------------
   Total other income                                                           $          3.3    $           1.9
                                                                                ==============    ===============
</TABLE>

Weighted average diluted shares in the first nine months of fiscal 2004
increased by 5.8 million shares to 64.4 million shares, primarily due to the
convertibility during the first nine months of this fiscal year of our $175
million principal amount of 1.75% Convertible Debentures (the "Debentures") into
shares of our common stock, resulting in a decrease to diluted earnings per
share of approximately $0.15. These Debentures are convertible at the option of
the holder into shares of our common stock at a conversion price of
approximately $27.50 per share when, among other circumstances, our stock closes
above $33 per share for at least 20 out of 30 consecutive trading days prior to
the date of surrender for conversion. There are a total of 6.4 million shares
issuable upon the conversion of the Debentures. The Debentures were convertible
for 144 out of 191 trading days in the first nine months of fiscal 2004, and
approximately 4.8 million shares were included in the computation of diluted
earnings per share.

Our effective income tax rate decreased from 38% in the first nine months of
fiscal 2003 to 37% in the first nine months of fiscal 2004 principally due to a
larger percentage of international profits taxed at rates that are lower than
the U.S. statutory tax rate and the increased recognition of research and
development tax credits.



Changes in Financial Position, Liquidity and Capital Resources

During the first nine months of fiscal 2004, we generated $309.9 million of cash
from operations which, along with cash on hand, was principally used to purchase
$211.9 million of systems, equipment and other assets relating to contracts and
to fund acquisitions of $74.2 million. In addition, during the third quarter of
this fiscal year, we issued $250 million of 4.75% Senior Notes. At November 22,
2003, we had $320.5 million of cash and cash equivalents on hand, of which
approximately $96.4 million was invested in a savings account at a major U.S.
financial institution with a credit rating of AA- and Aa2 from Standard and
Poor's and Moody's Investor Service, respectively, and approximately $196.1
million was invested in tax-exempt municipal and auction rate securities that
typically have a minimal credit rating of A- or A3 from Standard and Poor's and
Moody's Investor Service, respectively. At November 22, 2003, the weighted
average duration and weighted average taxable equivalent yield of the portfolio
was approximately eight days and 1.6%, respectively. At the end of the fiscal
2004 third quarter, there was $290.0 million available for borrowing under our
$300 million credit facility after considering $10.0 million of letters of
credit issued and outstanding under the credit facility.

Trade accounts receivable, net increased by $15.0 million, from $107.7 million
at February 22, 2003 to $122.7 million at November 22, 2003, primarily due to
$29.4 million related to the consolidation of PolCard and Interlott, partially
offset by collections related to product sales we recorded in the prior fiscal
year.

                                      -37-

<PAGE>

Inventories decreased by $13.4 million, from $72.3 million at February 22, 2003
to $58.9 million at November 22, 2003, primarily due to the sale of ES
Interactive to our customer in the United Kingdom, partially offset by an
increase of inventory associated with product sales expected to be recorded
during fiscal 2005 and inventory associated with the acquisition of Interlott.

Other current assets increased by $8.5 million, from $18.7 million at February
22, 2003 to $27.2 million at November 22, 2003, primarily due to $6.1 million of
prepayments and $3.9 million of value-added tax receivables, both related to
ongoing lottery system installations, primarily in Europe.

Systems, equipment and other assets relating to contracts, net, increased by
$151.0 million, from $410.9 million at February 22, 2003 to $561.9 million at
November 22, 2003, primarily due to the purchase of $211.9 million of systems,
equipment and other assets relating to contracts (principally related to lottery
system implementations in California and Georgia and the consolidation of
Interlott and PolCard), partially offset by depreciation expense.

Goodwill, net, increased by $73.3 million, from $115.5 million at February 22,
2003 to $188.8 million at November 22, 2003, primarily due to the acquisition of
PolCard, the largest debit and credit card merchant transaction acquirer and
processor in Poland, along with the acquisition of Interlott, a leading provider
of instant ticket vending machines for the worldwide lottery industry.

Other assets increased by $90.0 million, from $79.2 million at February 22, 2003
to $169.2 million at November 22, 2003, primarily due to the consolidation of
the partnership that owns our world headquarters facilities, a $20.0 million
refundable performance deposit we paid to our customer in the Czech Republic, a
$12.5 million up-front license fee we paid to the Rhode Island Lottery, with the
balance related to intangible assets recorded as a result of our acquisitions of
PolCard and Interlott.

Advance payments from customers increased by $43.5 million, from $52.4 million
at February 22, 2003 to $95.9 million at November 22, 2003, primarily due to
advances received from customers related to product sales that are expected to
be recorded during fiscal 2005 and 2006, partially offset by the sale of ES
Interactive to our customer in the United Kingdom.

Taxes other than income taxes increased by $12.0 million, from $16.0 million at
February 22, 2003 to $28.0 million at November 22, 2003, primarily due to $9.0
million of value-added tax payables related to ongoing lottery system
installations, primarily in Europe.

Long-term debt, less current portion, increased by $270.8 million, from $287.1
million at February 22, 2003 to $557.9 million at November 22, 2003, primarily
due to proceeds from the issuance of $250 million of 4.75% Senior Notes during
the third quarter of fiscal 2004 and the consolidation of the partnership that
owns our world headquarters facilities.

Other liabilities increased by $12.3 million, from $39.4 million at February 22,
2003 to $51.7 million at November 22, 2003 due to an advance payment we received
from a lottery customer that will be amortized to service revenue ratably over
the base contract term.

Our business is capital-intensive. We currently estimate that net cash to be
used for investing activities in fiscal 2004 will be in the range of $400
million to $410 million, including investments we made to acquire PolCard and
Interlott, and spending on new contract assets necessary for the recently
announced contracts in Tennessee and Sri Lanka. We expect our principal sources
of liquidity to be existing cash balances, along with cash we generate from
operations. Our credit facility provides for an unsecured revolving line of
credit of $300 million and matures in June 2006. As of November 22, 2003, there
were no borrowings under the credit facility. Up to $100 million of the Credit
Facility may be used for the issuance of letters of credit. As of November 22,
2003, there was $290.0 million available for borrowing under the Credit
Facility, after considering $10.0 million of letters of credit issued and
outstanding. We

                                      -38-

<PAGE>

currently expect that our cash flow from operations, existing cash balances and
available borrowings under our credit facility will be sufficient for the
foreseeable future to fund our anticipated working capital and ordinary capital
expenditure needs, to service our debt obligations, to fund anticipated internal
growth, to fund all or a portion of the cash needed for potential acquisitions,
to pay dividends, to fund the capital requirements under our Master Contract
with the Rhode Island Lottery, and to repurchase shares of our common stock,
from time to time, under our share repurchase programs. Notwithstanding the
foregoing, we may seek alternative sources of financing to fund certain of our
obligations under our Master Contract with the Rhode Island Lottery and to fund
future potential acquisitions and growth opportunities that are not currently
contemplated in the $400 million to $410 million range of fiscal 2004 investing
activities disclosed above.

Details of our contractual obligations for long-term debt and operating leases
as of February 22, 2003 are as follows (in millions):

<TABLE>
<CAPTION>
                                                           Fiscal
                         ----------------------------------------------------------------------------
                           2004       2005       2006       2007       2008     Thereafter     Total
                         --------   --------   --------   --------   --------   ----------   --------
<S>                      <C>        <C>        <C>        <C>        <C>        <C>          <C>
Long-term debt           $    7.0   $   5.6    $    5.1   $   5.8    $   95.6   $    175.0   $  294.1
Operating leases             18.7      14.8         7.3      33.4         3.1          6.1       83.4
                         --------   -------    --------   -------    --------   ----------   --------
Total                    $   25.7   $  20.4    $   12.4   $  39.2    $   98.7   $    181.1   $  377.5
                         ========   =======    ========   =======    ========   ==========   ========
</TABLE>

Operating lease payments include a $28 million residual value payment that we
may be required to pay in fiscal 2007, or earlier under certain limited
circumstances, related to the lease of our world headquarters facilities.



Guarantees and Indemnifications

PERFORMANCE AND OTHER BONDS

In connection with certain contracts and procurements, we have been required to
deliver performance bonds for the benefit of our customers and bid and
litigation bonds for the benefit of potential customers, respectively. These
bonds give the beneficiary the right to obtain payment and/or performance from
the issuer of the bond if the events set forth in the bond occur. In the case of
performance bonds, which generally have a term of one year, such events include
our failure to perform our obligations under the applicable contract. To obtain
these bonds, we are required to indemnify the issuers against the costs they
incur if a beneficiary exercises its rights under a bond. Historically, our
customers have not exercised their rights under these bonds and we do not
currently anticipate that they will do so. The following table provides
information related to potential commitments at November 22, 2003:

<TABLE>
<CAPTION>
                                    Total potential
                                      commitments
                                    ---------------
                                     (in millions)
<S>                                 <C>
Performance bonds                   $         164.8
Financial guarantees                            7.3
All other bonds                                 9.1
                                    ---------------
                                    $         181.2
                                    ===============
</TABLE>

LOTTERY TECHNOLOGY SERVICES INVESTMENT CORPORATION

We have a 44% interest in Lottery Technology Services Investment Corporation
("LTSIC"), which we account for using the equity method of accounting. LTSIC's
wholly owned subsidiary, Lottery Technology Services Corporation ("LTSC"),
provides equipment and services (which we supplied to LTSC), to the Bank of
Taipei. The Bank of Taipei holds the license to operate the Taiwan Public
Welfare Lottery.

                                      -39-

<PAGE>

In order to assist LTSC with the financing they required to enable them to
perform under their obligation to operate the Taiwan Public Welfare Lottery on
behalf of the Bank of Taipei, at November 22, 2003, we guaranteed $4.9 million
principal amount of loans made by an unrelated commercial lender to LTSC. The
loans have a maturity date of January 2007 and our guarantee expires in July
2007. We did not receive any consideration in exchange for our guarantees on
behalf of LTSC. Rather, these guarantees were issued in connection with the
formation of LTSC and LTSIC.

We are recognizing 56% of our product sales to, and service revenue from, LTSC.
The remaining 44% of product sales (and related cost) and service revenue, has
been deferred as a result of our equity interest in LTSIC and related guarantee
of LTSC's debt, respectively, and is principally included in Other Liabilities
in our Consolidated Balance Sheets at November 22, 2003 and February 22, 2003.
Product sale deferrals are being recognized ratably over the life of our
contract with LTSC and service revenue deferrals are being recognized as the
guaranteed debt is repaid. At November 22, 2003, deferred product gross profit
and deferred service revenue totaled $3.8 million and $6.7 million,
respectively.


TIMES SQUARED INCORPORATED

We guaranteed outstanding lease obligations of Times Squared Incorporated
("Times Squared") for which we received no monetary consideration. The amount
outstanding under the lease at November 22, 2003, was $2.4 million. Our
guarantee expires in December 2013. Times Squared is a nonprofit corporation
established to provide, among other things, secondary and high school level
educational programs. Times Squared operates a Charter School for Engineering,
Mathematics, Science and Technology in Providence, Rhode Island that serves
inner city children who aspire to careers in the sciences and technology.


LOTTERY TECHNOLOGY ENTERPRISES

We have a 1% interest in Lottery Technology Enterprises ("LTE"), a joint venture
between us and District Enterprise for Lottery Technology Applications of
Washington, D.C. The joint venture agreement terminates on December 31, 2012.
LTE holds a 10-year contract (which expires in November 2009) with the District
of Columbia Lottery and Charitable Games Control Board. Under Washington, D.C.
law, by virtue of our 1% interest in LTE, we are jointly and severally liable,
with the other partner, for the acts of the joint venture.


GAMING ENTERTAINMENT (DELAWARE) L.L.C.

We have a 50% interest in Gaming Entertainment (Delaware) L.L.C. ("GED"). GED is
also owned 50% by a subsidiary of Full House Resorts, Inc. ("FHRI"). Pursuant to
a 1995 management agreement ("Agreement"), GED manages a casino for Harrington
Raceway, Inc. ("Harrington") and in return receives a percentage of gross
revenues and operating profits as defined in the Agreement. Along with FHRI, we
guarantee the payment of all amounts due Harrington under the Agreement. Our
guarantee expires on February 1, 2012 or upon expiration of the Delaware Horse
Racing Redevelopment Act. The consideration we receive in exchange for the
guarantee are the equity earnings from our ownership in GED.



Market Risk Disclosures

The primary market risk inherent in our financial instruments and exposures is
the potential loss arising from adverse changes in interest rates and foreign
currency rates. Our exposure to commodity price changes is not considered
material and is managed through our procurement and sales practices. We did not
own any marketable equity securities during the first nine months of fiscal
2004.

                                      -40-

<PAGE>

Interest rates

Interest rate market risk is estimated as the potential change in the fair value
of our total debt or current earnings resulting from a hypothetical 10% adverse
change in interest rates. At November 22, 2003, after taking into consideration
$150 million of interest rate swaps, the estimated fair value of our $250
million of 4.75% Senior Notes due 2010 and $90 million of 7.87% Series B Senior
Notes due 2007 approximated $351.3 million (as determined by an independent
investment banker). At November 22, 2003, after taking into consideration the
interest rate swaps, a hypothetical 10% increase in interest rates would
decrease the estimated fair value of these Senior Notes to $349.1 million and a
hypothetical 10% decrease in interest rates would increase the estimated fair
value of these Senior Notes to $353.6 million.

At November 22, 2003, the estimated fair value of our $175 million principal
amount of 1.75% Convertible Debentures was $312.4 million (based on a quoted
market price of $178.50 per Debenture). At November 22, 2003, a hypothetical 10%
increase in interest rates would reduce the estimated fair value of the
Convertible Debentures to $311.8 million and a hypothetical 10% decrease in
interest rates would increase the estimated fair value of the Convertible
Debentures to $313.0 million.

A hypothetical 10% adverse or favorable change in interest rates applied to
variable rate debt would not have a material effect on current earnings.

We use various techniques to mitigate the risk associated with future changes in
interest rates, including entering into interest rate swaps. In October 2003, we
entered into three interest rate swaps for an aggregate amount of $150 million,
which effectively entitle us to exchange fixed rate payments for variable rate
payments for the period October 15, 2003 to October 15, 2010.



Equity price risk

At November 22, 2003, the estimated fair value of our $175 million principal
amount of 1.75% Convertible Debentures was $312.4 million (based on a quoted
market price of $178.50 per Debenture). At November 22, 2003, a hypothetical 10%
increase in the market price of our common stock would increase the estimated
fair value of the Convertible Debentures to $340.0 million and a hypothetical
10% decrease in the market price of our common stock would reduce the estimated
fair value of the Convertible Debentures to $285.6 million.



Foreign Currency Exchange Rates

We are subject to foreign exchange exposures arising from current and
anticipated transactions denominated in currencies other than our functional
currency (United States dollars) and from the translation of foreign currency
balance sheet accounts into United States dollar balance sheet accounts.

We seek to manage our foreign exchange risk by securing payment from our
customers in United States dollars, by sharing risk with our customers, by
utilizing foreign currency borrowings, by leading and lagging receipts and
payments, and by entering into foreign currency exchange and option contracts.
In addition, a significant portion of the costs attributable to our foreign
currency revenues are payable in the local currencies. In limited circumstances,
but whenever possible, we negotiate clauses into our contracts that allow for
price adjustments should a material change in foreign exchange rates occur.

                                      -41-

<PAGE>

From time to time, we enter into foreign currency exchange and option contracts
to reduce the exposure associated with current transactions and anticipated
transactions denominated in foreign currencies. However, we do not engage in
foreign currency speculation. At November 22, 2003, a hypothetical 10% adverse
change in foreign exchange rates would result in a translation loss of $15.9
million that would be recorded in the equity section of our balance sheet.

At November 22, 2003, a hypothetical 10% adverse change in foreign exchange
rates would result in a net pre-tax transaction loss of $1.6 million that would
be recorded in current earnings after considering the effects of foreign
exchange contracts currently in place.

At November 22, 2003, a hypothetical 10% adverse change in foreign exchange
rates would result in a net reduction of cash flows from anticipatory
transactions during the remainder of fiscal 2004 of $3.1 million, after
considering the effects of foreign exchange contracts currently in place. The
percentage of fiscal 2004 anticipatory cash flows that were hedged varied
throughout the first nine months of fiscal 2004, but averaged 50%.

As of November 22, 2003, we had contracts for the sale of foreign currency of
approximately $66.9 million (primarily Euro, pounds sterling and Brazilian real)
and the purchase of foreign currency of approximately $67.2 million (primarily
pounds sterling, Euro, Singapore dollars, Brazilian real and Swedish krona).

                                      -42-

<PAGE>

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See "Market Risk Disclosures" above.



Item 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our Securities Exchange Act reports is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms, and that such
information is accumulated and communicated to our management, including our
President and Chief Executive Officer ("CEO") and our Senior Vice President and
Chief Financial Officer ("CFO"), as appropriate, to allow timely decisions
regarding required disclosure. In designing and evaluating the disclosure
controls and procedures, management recognized that any controls and procedures,
no matter how well designed and operated, can provide only reasonable assurance
of achieving the desired control objectives and management was required to apply
its judgment in evaluating the cost-benefit relationship of possible controls
and procedures. Our controls and procedures are designed to provide a reasonable
level of assurance in reaching our desired controls and procedures objectives.

As of the end of the quarterly period covered by this report, we carried out an
evaluation under the supervision and with the participation of our management,
including our CEO and our CFO, of the effectiveness of the design and operation
of our disclosure controls and procedures (as defined in Rule 13a-15(e) under
the Securities Exchange Act of 1934), and of any changes in our internal control
over financial reporting (as defined in Rule 13a-15(f) under the Securities
Exchange Act of 1934) that occurred during the quarterly period covered by this
report. Based upon that evaluation, the CEO and CFO concluded that the Company's
disclosure controls and procedures were effective in reaching a reasonable level
of assurance of achieving management's desired controls and procedures
objectives, and that no change in our internal control over financial reporting
occurred during the quarterly period covered by this report that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting. Subsequent to the date of this evaluation, there have
been no significant changes in our internal controls or in other factors that
could significantly affect these controls, and no corrective actions have been
taken with regard to significant deficiencies or material weaknesses in such
controls.



PART II.  OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS

For information respecting certain legal proceedings, refer to Part I, Item 3 -
"Legal Proceedings" and Note 11 to the Consolidated Financial Statements in our
fiscal 2003 Annual Report on Form 10-K, as amended, and Part II, Item 1 - "Legal
Proceedings" in our Quarterly Report for the quarterly period ended May 24,
2003.

                                      -43-

<PAGE>

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits - The exhibits to this report are as follows:

     12.1      Computation of Ratio of Earnings to Fixed Charges

     31.1      Certification Pursuant to Section 302 of the Sarbanes-Oxley Act
               of 2002, of W. Bruce Turner, President and Chief Executive
               Officer of the Company

     31.2      Certification Pursuant to Section 302 of the Sarbanes-Oxley Act
               of 2002, of Jaymin B. Patel, Senior Vice President and Chief
               Financial Officer of the Company

     32.1      Certification Pursuant to 18 United States Code Section 1350, as
               Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
               2002, of W. Bruce Turner, President and Chief Executive Officer
               of the Company

     32.2      Certification Pursuant to 18 United States Code Section 1350, as
               Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
               2002, of Jaymin B. Patel, Senior Vice President and Chief
               Financial Officer of the Company

(b)  Reports on Form 8-K - We filed the following reports with the Securities
     and Exchange Commission on Form 8-K during the quarter to which this report
     relates:

     (i)       We filed a report on Form 8-K on September 12, 2003 incorporating
               by reference a press release we issued on September 12, 2003
               announcing our fiscal 2004 second quarter results. In addition,
               we incorporated by reference the transcripts from our fiscal 2004
               second quarter earnings conference call held on September 12,
               2003.

     (ii)      We filed a report on Form 8-K on September 18, 2003 incorporating
               by reference a press release we issued on September 18, 2003
               describing that we completed the acquisition of Interlott
               Technologies, Inc., a leading provider of instant ticket vending
               machines for the lottery industry worldwide.

     (iii)     We filed a report on Form 8-K/A on October 6, 2003 refiling our
               September 12, 2003 Form 8-K under the correct filing codes for
               GTECH Holdings Corporation.

     (iv)      We filed a report on Form 8-K on October 8, 2003 incorporating by
               reference a press release we issued on October 8, 2003 describing
               that we intended to offer approximately $200 million in aggregate
               principal amount of seven-year senior notes in an unregistered
               offering to qualified institutional buyers pursuant to Rule 144A
               under the Securities Act of 1933.

     (v)       We filed a report on Form 8-K on October 9, 2003 incorporating by
               reference a press release we issued on October 9, 2003 describing
               that we agreed to sell $250 million of 4.75% senior notes due
               2010, for aggregate proceeds of approximately $248.1 million.

     (vi)      We filed a report on Form 8-K on November 7, 2003 incorporating
               by reference a press release we issued on November 7, 2003
               describing our agreement to acquire all of the shares of
               privately-held Spielo Manufacturing Inc., a leading provider of
               video lottery terminals and related products and services to the
               global gaming industry. In addition, we incorporated by reference
               the transcripts from our conference call held on November 7, 2003
               respecting such acquisition.

                                      -44-

<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                               GTECH HOLDINGS CORPORATION

Date: January 5, 2004          By /s/ Jaymin B. Patel
                               -------------------------------------------------
                               Jaymin B. Patel, Senior Vice President and Chief
                               Financial Officer (Principal Financial Officer)



Date: January 5, 2004          By /s/ Robert J. Plourde
                               -------------------------------------------------
                               Robert J. Plourde, Vice President, Corporate
                               Controller and Chief Accounting Officer
                               (Principal Accounting Officer)

                                      -45-