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UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, DC 20549





FORM 10-K


(Mark One)


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


For the fiscal year ended: February 25, 2006


OR


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


For the transition period from ___ to ___. Commission File Number 1-11250
 
 GTECH HOLDINGS CORPORATION
  Delaware
    
    05-0450121(State or other jurisdiction
    
    (I.R.S. Employer Identification Number)of incorporation or organization)55 Technology Way, West Greenwich, Rhode Island
    

02817(Address of Principal Executive Offices)
    
    (Zip Code)
 (401) 392-1000
  Title of Each Class:
    
    Name of Each Exchange on which Registered:Common Stock $.01 par value
    
    New York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act: None
  o þ
 o þ
 þ o
 o
  þ
 o
 o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE
 Document
    
    Location in Form 10-KPortions of Registrants Proxy Statement
For our 2006 Annual Meeting of Shareholders
    
    Part III




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GTECH HOLDINGS CORPORATION
 FORM 10-K
 FOR THE FISCAL YEAR ENDED FEBRUARY 25, 2006
 INDEX
 PagePART 1Item 1.
    
    Business
    
    3Item 1A.
    
    Risk Factors
    
    41Item 1B.
    
    Unresolved Staff Comments
    
    41Item 2.
    
    Properties
    
    41Item 3.
    
    Legal Proceedings
    
    41Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    49Additional Information
    
    49PART IIItem 5.
    
    Market For Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    52Item 6.
    
    Selected Financial Data
    
    53Item 7.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    54Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    

    79Item 8.
    
    Financial Statements and Supplementary Data
    
    80Item 9.
    
    Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
    
    140Item 9A.
    
    Controls and Procedures
    
    141Item 9B.
    
    Other Information
    
    143PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    144Item 11.
    
    Executive Compensation
    
    144Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and RelatedStockholder Matters
    
    144Item 13.
    
    Certain Relationships and Related Transactions
    
    144Item 14.
    
    Principal Accountant Fees and Services
    
    144PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    145EX-10.7: LIST OF SIGNATORIES TO AGREEMENT RELATING TO POTENTIAL CHANGE OF CONTROLEX-10.9: SCHEDULE OF RECIPIENTS OF EXECUTIVE SEPARATION AGREEMENTSEX-10.10: SCHEDULE OF RECIPIENTS OF COMPANY CONTRIBUTIONS TO INCOME DEFERRAL PLANEX-12.1: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGESEX-21.1: SUBSIDIARIESEX-23.1: CONSENT OF ERNST & YOUNG LLPEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION
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PART 1
 When used in this report, the terms Company, we, our and us refer to GTECH Holdings
Corporation (Holdings) and our consolidated subsidiaries, including GTECH Corporation (GTECH).
 
 ITEM 1. BUSINESS
 General
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www.gtech.com
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Forward-Looking Information
 Certain statements contained or incorporated by reference in this report are forward-looking
statements within the meaning of the United States Private Litigation Reform Act of 1995. We
identify forward-looking statements by words such as may, will, should, could, expect,
plan, anticipate, intend, believe, estimate, continue, project or similar terms that
refer to the future. Such statements include, without limitation, statements relating to:
 o
    
    the future prospects for and stability of the lottery industry and other businesses
in which we are engaged or expect to be engaged;o
    
    our future operating and financial performance (including, without limitation,
expected future growth in revenues, profit margins and earnings per share);o
    
    our ability to secure and protect trademarks and other intellectual property rights;o
    
    our ability to retain existing contracts and to obtain and retain new contracts;o
    
    competition in the online lottery industry and other businesses in which we are
engaged or may engage and the impact of competition on our revenues and profitability;o
    
    our ability to realize the anticipated benefits of our acquisitions; ando
    
    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, among other things, the matters described in this report
under Certain Factors That May Affect Future Performance below.
 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, results of operations or prospects.
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We may be subject to adverse determinations in legal proceedings in Brazil which could result in
substantial monetary judgments, significant reputational damage and the non-extension of our
contract with Caixa Econômica Federal, the Brazilian bank and operator of Brazils National Lottery
(CEF).
 
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.
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Our lottery operations are dependent upon our continued ability to retain and extend our existing
contracts and win new contracts.
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Slow growth or declines in sales of online lottery goods and services could lead to lower revenues
and cash flows for us.
  We derive approximately half of our revenues from jurisdictions outside the United States and are
subject to the economic, political and social instability risks of doing business in these
jurisdictions.
   Our results of operations are exposed to non-United States 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.
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We have a concentrated customer base and the loss of any of our larger customers (or lower sales
from any of these customers) could lead to significantly lower revenue.
  Our quarterly operating results may fluctuate significantly.
  We operate in a highly competitive environment and increased competition may cause us to experience
lower net cash flows or to lose contracts.
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We are subject to substantial penalties for failure to perform under our contracts.
   We may not be able to respond to technological changes or to satisfy future technology demands of
our customers in which case we could fall behind our competitors.
  If we are unable to manage potential risks related to acquisitions, our business and growth
prospects could suffer.
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Expansion of online lottery and other forms of gaming face opposition which could limit our access
to some markets.
  Our business prospects and future success depend upon our ability to attract and retain qualified
employees.
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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,
including by reason of our relative lack of experience in markets outside our core lottery market
and, in the case of ventures into the non-lottery gaming market, the difficulty in obtaining
necessary licenses.
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If we are unable to protect our intellectual property or prevent its use by third parties, our
ability to compete in the market may be harmed.
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Third party infringement claims against us could limit or affect our ability to compete
effectively.
  Our systems are subject to network interruption risks which could have a negative impact on the
quality of the services offered by us, which could, in turn, negatively impact consumer demand and
result in a decrease in the volume of our customers sales and consequently our own revenues.
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Significant Developments Since The Start Of Fiscal 2006
 Lottery Contract Awards
  New Online Customers
    New Contracts With, And Extensions And Orders By, Existing Customers
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Other Products And Services
  Video Lottery And Gaming
 New Product Offerings And Developments
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Industry Background
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Online Lottery Business
 Online Lottery Contracts
 Overview .
 Facilities Management Contracts
 Product Sales Contracts
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Facilities Management Contracts
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Approximate
    
    
    
    
    
    Date of ExpirationNumber of Lottery
    
    Date of Commencement of Current
    
    of Current Contract
    
    Current ExtensionJurisdiction
    
    Terminals Installed (1)
    
    Contract
    
    Term
    
    Options*United States:Arizona (2)
    
    
    2,600
    
    
    
    9/99
    
    
    
    9/06
    
    
    
    California
    
    
    19,800
    
    
    
    10/03
    
    
    
    10/09
    
    
    4 one-yearD.C. (3)
    
    
    600
    
    
    
    6/99
    
    
    
    11/09
    
    
    
    Florida
    
    
    12,600
    
    
    
    1/05
    
    
    
    3/11
    
    
    2 two-yearGeorgia
    
    
    8,200
    
    
    
    9/03
    
    
    
    9/10
    
    
    
    Idaho (4)
    
    
    740
    
    
    
    2/99
    
    
    
    2/07
    
    
    
    Illinois
    
    
    8,260
    
    
    
    4/00
    
    
    
    10/07
    
    
    1 one-yearKansas
    
    
    1,900
    
    
    
    7/02
    
    
    
    6/08
    
    
    
    Kentucky
    
    
    3,000
    
    
    
    4/97
    
    
    
    6/08
    
    
    
    Louisiana
    
    
    2,500
    
    
    
    6/97
    
    
    
    6/10
    
    
    
    Michigan
    
    
    10,900
    
    
    
    1/98
    
    
    
    1/09
    
    
    
    Minnesota
    
    
    3,240
    
    
    
    2/03
    
    
    
    2/11
    
    
    2 one-yearMissouri
    
    
    4,230
    
    
    
    12/04
    
    
    
    6/12
    
    
    
    New Jersey (5)
    
    
    6,100
    
    
    
    6/96
    
    
    
    6/06
    
    
    
    New Mexico
    
    
    1,100
    
    
    
    6/96
    
    
    
    11/08
    
    
    
    New York
    
    
    16,200
    
    
    
    3/02
    
    
    
    3/07
    
    
    3 one-yearNorth
Carolina (6)
    
    
    
    
    
    
    1/06
    
    
    
    3/13
    
    
    
    Ohio
    
    
    8,600
    
    
    
    8/00
    
    
    
    6/07
    
    
    2 two-yearOregon
    
    
    3,170
    
    
    
    6/98
    
    
    
    6/08
    
    
    
    Rhode Island
    
    
    1,220
    
    
    
    7/03
    
    
    
    6/23
    
    
    
    Tennessee
    
    
    4,480
    
    
    
    1/04
    
    
    
    4/11
    
    
    
    Texas
    
    
    17,300
    
    
    
    8/02
    
    
    
    8/11
    
    
    
    
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Approximate
    
    Date of
    
    Date of Expiration
    
    CurrentNumber of Lottery
    
    Commencement
    
    of Current
    
    ExtensionJurisdiction
    
    Terminals Installed (1)
    

of Current Contract
    

Contract Term
    
    Options*Washington (7)
    
    
    4,400
    
    
    
    9/95
    
    
    
    6/06
    
    
    
    Wisconsin
    
    
    3,800
    
    
    
    6/04
    
    
    
    6/11
    
    
    2 one-yearInternational:AnguillaLILHCo
    
    
    10
    
    
    
    10/97
    
    
    
    10/07
    
    
    1 ten-year (8)Antigua/BarbudaLILHCo
    
    
    50
    
    
    
    1/00
    
    
    
    9/06
    
    
    1 ten-year (8)ArgentinaLoteria
National Sociedad del Estado(9)
    
    
    800
    
    
    
    11/93
    
    
    
    1/07
    
    
    
    Boldt
IPLC (9)
    
    
    3,400
    
    
    
    11/99
    
    
    
    11/09
    
    
    
    Barbados LILHCo
    
    
    225
    
    
    
    6/05
    
    
    
    6/23
    
    
    
    BermudaLILHCo
    
    
    1
    
    
    
    
    
    
    
    
    
    
    automatic annual renewalBrazilNational
Lottery (10)
    
    
    21,600
    
    
    
    5/00
    
    
    
    5/06
    
    
    
    Minas Gerais
    
    
    900
    
    
    
    10/94
    
    
    
    11/06
    
    
    
    ChinaBeijing Welfare
Lottery
    
    
    1,850
    
    
    
    4/04
    
    
    
    12/12
    
    
    
    Shenzen Welfare
Lottery
    
    
    90
    
    
    
    7/05
    
    
    
    11/13
    
    
    
    ColombiaETESA
(11)
    
    
    5,200
    
    
    
    12/99
    
    
    
    1/11
    
    
    1 five-yearCzech RepublicSAZKA
    
    
    7,000
    
    
    
    10/92
    
    
    
    12/17
    
    
    
    
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Approximate
    
    Date of
    
    Date of Expiration
    
    CurrentNumber of Lottery
    
    Commencement
    
    of Current
    
    ExtensionJurisdiction
    
    Terminals Installed (1)
    

of
Current Contract
    
    Contract Term
    
    Options*IrelandAn Post Natl
Lottery Company
    
    
    3,400
    
    
    
    6/02
    
    
    
    12/08
    
    
    
    (12
    )JamaicaSupreme Ventures
Limited
    
    
    840
    
    
    
    11/00
    
    
    
    1/16
    
    
    
    Luxembourg
(13)Loterie Nationale
    
    
    700
    
    
    
    6/01
    
    
    
    10/12
    
    
    
    MexicoPronosticos Para
La Assistencia
Publica
    
    
    7,100
    
    
    
    (14
    )
    
    
    (14
    )
    
    
    (14
    )MoroccoLa Societe de
Gestion de la
Loterie Nationale
and La Marocaine
des Jeux et Les
Sports
    
    
    1,400
    
    
    
    8/99
    
    
    
    4/09
    
    
    1 one-yearPolandTotalizator
Sportowy
    
    
    10,760
    
    
    
    5/01
    
    
    
    5/11
    
    
    1 six-monthSlovak RepublicTIPOS a.s.
    
    
    1,700
    
    
    
    3/96
    
    
    
    12/11
    
    
    
    South Africa
(15)National Lottery
    
    
    8,600
    
    
    
    7/99
    
    
    
    4/07
    
    
    1 one-year
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Approximate
    
    
    
    
    
    Date of ExpirationNumber of Lottery
    
    Date of Commencement
    
    of Current Contract
    
    Current ExtensionJurisdiction
    
    Terminals Installed (1)
    
    of Current Contract
    
    Term
    
    Options*Sri LankaMahapola Higher Education
Scholarship Trust Fund
    
    
    380
    
    
    
    6/04
    
    
    
    9/14
    
    
    1 five-yearSt. Kitts/NevisLILHCo
    
    
    45
    
    
    
    4/96
    
    
    
    4/16
    
    
    
    St. Maarten/Saba/ St.. EustatiusLILHCo
    
    
    40
    
    
    
    1/97
    
    
    
    9/07
    
    
    1 ten-year (8)TaiwanTaipei
Bank (16)
    
    
    5,500
    
    
    
    11/01
    
    
    
    12/06
    
    
    
    ThailandGovernment Lottery Office (17)
    
    
    
    
    
    
    8/05
    
    
    
    (17
    )
    
    
    Trinidad & TobagoNational Lotteries Control Board
    
    
    560
    
    
    
    7/99
    
    
    
    7/06
    
    
    1 three-yearTurkeyTurkish National Lottery (9)
    
    
    3,900
    
    
    
    2/96
    
    
    
    (18
    )
    
    
    (18
    )Turks & CaicosLILHCo
    
    
    10
    
    
    
    3/05
    
    
    
    3/15
    
    
    1 ten-year (8)United KingdomThe
National Lottery (19)
    
    
    28,000
    
    
    
    1/02
    
    
    
    1/09
    
    
    
    UkraineUkrainian
National Lottery (20)
    
    
    2,950
    
    
    
    4/05
    
    
    
    3/13
    
    
    
    U.S. Virgin IslandsLILHCo
    
    
    80
    
    
    
    1/02
    
    
    
    1/12
    
    
    2 five-year
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*Reflects extensions available to the lottery authority under the same terms as the current
contract. Lottery authorities occasionally negotiate extensions on different terms and
conditions.(1)
    
    Total does not include instant-ticket validation terminals or instant ticket vending
machines.(2)
    
    In November 2005, we entered into a new five-year facilities management contract with the
Arizona lottery authority. Sales are expected to commence under this new contract during the
second quarter of fiscal 2007.(3)
    
    Operated by Lottery Technology Enterprises, a joint venture in which we have a 1% interest,
and to which we supply lottery goods and services.(4)
    
    In April 2006, after the close of fiscal 2006, we were
notified by the Idaho lottery authority of its intent to negotiate a
new online gaming system contract with another vendor,
such contract to become operational upon the expiration of our existing
contract.(5)
    
    In November 2005, the New Jersey lottery authority named us as the apparent successful bidder
to provide services under a new facilities management contract, the terms of which are being
finalized. Sales are scheduled to begin under this new facilities management contract in June
2006. Implementation of this contract may be suspended pending resolution of a challenge by
one of our competitors to the award of this contract to us.(6)
    
    In January 2006, we signed a seven-year facilities management contract with the North
Carolina lottery authority. Sales under this contract commenced on
March 30, 2006.(7)
    
    In December 2005, the Washington lottery authority and GTECH entered into a new seven-year
facilities management contract. Sales under this contract are scheduled to begin upon
expiration of the term of the current contract.(8)
    
    The extension options for these contracts are at GTECHs option, subject, in certain cases,
to compliance by GTECH with the terms and conditions of the existing contract and/or review of
certain financial terms.(9)
    
    Under these contractual arrangements, the lottery authorities purchased the lottery system
and related software license from us at the commencement of the respective contracts.(10)
    
    Operated by GTECH Brasil Ltda. Holdings, S.A., a Brazilian company in which we own all voting
stock. The term of our contract with Caixa Econômica Federal, the operator of the National
Lottery runs until May 2006.(11)
    
    Our contract with the Colombia lottery authority is not a true facilities management contract
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(12)
    
    Our contract with the Ireland lottery authority may be extended for any period mutually
acceptable to GTECH and the Ireland lottery authority.(13)
    
    The Luxembourg lottery authority can extend the software license granted by us for up to 10
years after the end of the initial term and any extensions of the contract.(14)
    
    Our contract with the Mexico lottery authority is not a true facilities management contract.
Title to all equipment, which initially had been supplied under lease, has passed to the
lottery authority pursuant to the terms of our agreement. We provide maintenance and other
services if requested by the lottery authority. In September 2004, we signed a contract with
Pronósticos para la Asistencia Publica to provide equipment and services for a new online
lottery system and associated telecommunications network in Mexico. Implementation of this
contract had been suspended pending resolution of administrative and legal challenges by two
of our competitors to Pronósticoss award to us of this contract. In September 2005, we began
(with delayed timelines) implementation of the September 2004 agreement.(15)
    
    Operated by Uthingo consortium, in which we are a 10 percent equity owner.(16)
    
    Lottery Technology Services Corporation (LTSC), a consortium in which we own a 44% indirect
interest, entered into a Commission Agreement with the Bank of Taipei to operate the Taiwan
Public Welfare Lottery. ACER, Inc. indirectly owns the other 56% of LTSC. We supply
terminals to LTSC and provide to LTSC central system maintenance, software support and
consulting services pursuant to service and supply agreements.(17)
    
    In August 2005, Loxley GTECH Technology Co. Ltd., a joint venture in which we own a 49%
equity interest, entered into a five-year facilities management contract with the Government
Lottery Office of Thailand.(18)
    
    The term of the contract with the Turkey lottery authority renews for successive one-year
extension terms unless either party gives timely notice of non-renewal. In addition, the
Turkey lottery authority has the option to assume responsibility for the provision of certain
lottery services at any time after the second anniversary of system start-up.(19)
    
    Operated by Camelot Group plc, a consortium, on a facilities management basis.(20)
    
    In August 2005, we completed the sale of this system to our customer, the Ukranian National
Lottery. We continue to provide software services to the Ukranian National Lottery under a
software maintenance agreement and license. Product Sales Contracts
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Jurisdiction
    

CustomerAustralia
    
    Lotteries Commission of New South Wales
Western Australia Lotteries CommissionBelgium
    
    Loterie Nationale de BelgiqueCalifornia
    
    California State LotteryCanada
    
    Alberta Gaming & Liquor Commission
Atlantic Lottery Corporation
British Columbia Lottery Corporation
Western Canada Lottery CorporationChina
    
    Beijing Welfare Lottery CenterFinland
    
    Veikkus OyFrance
    
    La Francaise des JeuxGermany
    
    WestLotto
Sachsische Lotto  Gmbh
Lotterie Treuhandgesellschaft mbH ThuringenIsrael
    
    Mifal HapayisLuxembourg
    
    Loterie NationaleMassachusetts
    
    Massachusetts State Lottery CommissionNetherlands
    
    Stichting de Nationale Sport TotalisatorNew Zealand
    
    New Zealand Lotteries CommissionOregon
    
    Oregon State LotteryPennsylvania
    
    IGT OES Online Entertainment Systems, Inc.Poland
    
    Totalizator Sportowy Sp. Zo.oPortugal
    
    Santa Casa de Misericordia de LisboaSingapore
    
    Singapore Pools (Pte) Ltd.South Africa
    
    UthingoSpain
    
    Sistemas Tecnicos de Loterias del Estado
Organizacion Nacional de Ciegos EspanolesSweden
    
    AB Svenska SpelSwitzerland
    
    Loterie de la Suisse RomandeTaiwan
    
    Lottery Technology Services CorporationUnited Kingdom
    
    Camelot Group plcVirginia
    
    Virginia Lottery
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Video Lottery Contracts
 
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Instant Ticket Vending Machine Lottery Contracts
 Overview
 Facilities Management Contracts
  Product Sales Contracts
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Date ofFMC
    
    Approximate
    
    Commencement of
    
    Date of Expirationor
    
    Number of
    
    Current FMC
    
    of Current FMC
    
    Current ExtensionJurisdiction
    
    PSC
    
    ITVMs in service
    
    Contract
    
    Contract Term
    
    OptionsArizona
    
    FMC
    
    
    420
    
    
    
    7/03
    
    
    
    7/08
    
    
    
    California
    
    PSC
    
    
    4,200
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AIdaho
    
    PSC
    
    
    200
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AIllinois
    
    FMC
    
    
    3,400
    
    
    
    6/04
    
    
    
    9/10
    
    
    1 three-yearIndiana
    
    FMC
    
    
    1,400
    
    
    
    8/05
    
    
    
    11/07
    
    
    2 one-yearKentucky
    
    PSC
    
    
    1,290
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ALuxembourg
    
    FMC
    
    
    130
    
    
    
    9/05
    
    
    
    10/12
    
    
    
    Maine
    
    FMC
    
    
    150
    
    
    
    9/04
    
    
    
    8/07
    
    
    2 one-yearMaryland
    
    PSC
    
    
    1,200
    
    
    
    N/A
    
    
    
    6/08
    
    
    
    Massachusetts
    
    PSC
    
    
    1,500
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AMinnesota
    
    
    (1
    )
    
    
    110
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AMissouri
    
    FMC
    
    
    630
    
    
    
    6/01
    
    
    
    11/07
    
    
    
    New Hampshire
    
    FMC
    
    
    250
    
    
    
    6/05
    
    
    
    6/08
    
    
    1 two-yearNew Jersey
    
    
    (1
    )
    
    
    180
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ANew Mexico
    
    FMC
    
    
    150
    
    
    
    5/97
    
    
    
    6/07
    
    
    
    New York
    
    
    (3
    )
    
    
    4,100
    
    
    
    (3)
    
    
    
    (3)Ohio
    
    FMC
    
    
    1,500
    
    
    
    7/03
    
    
    
    6/07
    
    
    
    Oregon
    
    PSC
    
    
    500
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/APennsylvania
    
    PSC
    
    
    3,450
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ARhode Island
    
    
    (1
    )
    
    
    100
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ATexas
    
    FMC
    
    
    1,300
    
    
    
    9/03
    
    
    
    9/06
    
    
    2 one-yearVirginia (2)
    
    PSC
    
    
    1,500
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AWashington
    
    FMC
    
    
    900
    
    
    
    11/04
    
    
    
    11/07
    
    
    1 three-yearWest Virginia
    
    PSC
    
    
    110
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AWisconsin
    
    PSC
    
    
    500
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
 
 (1)
    
    Represents ITVMs installed under a lottery Facilities Management Contract. See Facilities
Management Contracts table above for additional information. - 33 -




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##### Table of Contents



(2)
    
    The Virginia Lottery entered into a seven-year contract with Oberthur Gaming Technologies
Corporation (OGT) under which we have subcontracted to provide new ITVMs and management of
warehousing and distribution of instant tickets.(3)
    
    We have entered into a contract to supply maintenance services for approximately 4,100 ITVMS
which are owned by the New York lottery authority. Contract Award Process
      Online Products And Services
    - 34 -




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##### Table of Contents



Terminals
         - 35 -




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##### Table of Contents



Software
  Central Computers
 Communications
  - 36 -




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##### Table of Contents



Games
          Marketing
 - 37 -




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##### Table of Contents



Warranty
  Non-Lottery Commercial Services
      Product Development
  - 38 -




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##### Table of Contents



Intellectual Property
  Production, Assembly And Components
  Backlog
  Competition
   Personnel
 - 39 -




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##### Table of Contents



- 40 -




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##### Table of Contents



ITEM 1A. RISK FACTORS
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
     
 ITEM 3. LEGAL PROCEEDINGS
 Brazilian Legal Proceedings
 The CEF Contract Proceedings
 Background
 - 41 -




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##### Table of Contents



Criminal Allegations Against Certain Employees And Related SEC Investigation
     - 42 -




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##### Table of Contents



Civil Action By The Public Ministry Attorneys
  - 43 -




---



##### Table of Contents



Popular Claim
 - 44 -




---



##### Table of Contents



TCU Audit
     - 45 -




---



##### Table of Contents



Serlopar Suit
  Other Legal Proceedings
 Shareholder Class Action Suits
  Ralph Sellite, individually
and on behalf of all others similar situated, v. GTECH Holdings Corporation, W. Bruce Turner,
Robert M. Dewey, Paget L. Alves, Christine M. Cournoyer, James F. McCann, The Rt. Hon. Sir Jeremy
Hanley KCMG, Philip R. Lochner, Jr., Anthony Ruys and Burnett W. Donoho
 Claire Partners, on
behalf of itself and all others similar situated, v. W. Bruce Turner, Robert M. Dewey, Jr., Paget
L. Alves, Christine M. Cournoyer,
 - 46 -




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##### Table of Contents



Burnett W. Donoho, The Rt. Hon. Sir Jeremy Hanley KCMG, Philip R.
Lochner, Jr., James F. McCann, Anthony Ruys, GTECH Holdings Corporation, and Lottomatica
S.p.A.
  Argentina Money Transfer Matter
    - 47 -




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##### Table of Contents



Trinidad and Tobago
     Cohen Suit
  Howard S. Cohen v. GTECH
Corporation, GTECH Holdings Corporation, Michael J. Tuchman, Levenfeld Pearlstein, Charlene F.
Marant and Marant Enterprises Holdings LLC
 - 48 -




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##### Table of Contents



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 Additional Information
  Executive Officers
  Name
    
    Age
    
    PositionW. Bruce Turner
    
    
    46
    
    
    President and Chief Executive Officer since
August 2002. Mr. Turner, who is also a
Director of Holdings, was elected the Chairman
of Holdings by the Board in July 2000, and
subsequently served as Holdings acting Chief
Executive Officer from August 2000 through
March 2001. Previously, Mr. Turner was an
independent consultant and private investor
from February 1999 to July 2000. Mr. Turner
was a Managing Director, Equity Research, for
Salomon Smith Barney (formerly Salomon
Brothers) from January 1994 until February
1999; and Director, Leisure Equity Research
for Raymond James & Associates from October
1989 until January 1994.Marc A. Crisafulli
    
    
    37
    
    
    Senior Vice President, Gaming Solutions since
December 2003; Senior Vice President, General
Counsel and Secretary from April 2001 until
December 2003 and Chief Compliance Officer
from September 2001 until December 2003.
Previously, Mr. Crisafulli was an associate
(from September 1994 through June 2000) and a
partner (from July 2000 through March 2001) of
the Providence-based law firm of Edwards &
Angell, LLP
 - 49 -




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##### Table of Contents



Name
    
    Age
    
    Position(now Edwards Angell Palmer & Dodge
LLP) where he practiced as a commercial trial
lawyer.Walter G. DeSocio
    
    
    51
    
    
    Senior Vice President, General Counsel and
Secretary since January 2005. Previously, Mr.
DeSocio served from September 2002 to December
2004 as Chief Administrative Officer, General
Counsel, and Corporate Secretary at Internap
Network Services Corporation, the leading
provider of intelligent routing services over
the Internet. Prior to joining Internap, Mr.
DeSocio served from June 1999 to September
2002 as General Counsel and Senior Vice
President of Regulatory Affairs at Concert
B.V., the multi-billion dollar global
communications business owned by AT&T and BT
Group, and from June 1996 to June 1999, as
AT&Ts Chief Regional Counsel for Europe,
Middle East, and Africa.Timothy B. Nyman
    
    
    55
    
    
    Senior Vice President of Global Services since
October 2002. Previously, beginning in 1981,
Mr. Nyman was employed by the Company in a
series of increasingly responsible positions
including, through September 2002, as the
Companys Vice President of Client Services.Jaymin B. Patel
    
    
    38
    
    
    Senior Vice President and Chief Financial
Officer since January 2000. Previously,
beginning in 1994, Mr. Patel was employed by
the Company in a series of increasingly
responsible positions including, from April
1998 until January 2000, as our Vice
President, Financial Planning and Business
Evaluation. Prior to his arrival at the
Company, Mr. Patel served as a Chartered
Accountant with PriceWaterhouse in London.William M. Pieri
    
    
    51
    
    
    Vice President and Treasurer since November
1999. Prior to this, Mr. Pieri, who joined
the Company in November 1992, served in
several positions of increasing responsibility
within the Companys Treasury function.Robert J. Plourde
    
    
    56
    
    
    Vice President, Corporate Controller and Chief
Accounting Officer, since September 2003.
Previously, Mr. Plourde served as Vice
President and Corporate Controller since March
1991. Mr. Plourde joined the Company as its
Corporate Controller in January 1984.Donald R. Sweitzer
    
    
    58
    
    
    Senior Vice President, Global Business
Development & Public Affairs, since February
2003. Mr. Sweitzer joined the Company in July
1998 as its Senior Vice President, Government
Relations, and later served as the Companys
Senior Vice President, Public Affairs, through
January 2003. Previously, Mr. Sweitzer was
President of the Dorset Resource and Strategy
Group, a government affairs consultancy, from
November 1996 through June 1998, and President
and Managing Partner of Politics Inc., a
political consulting firm, from January 1995
through August 1996. Mr. Sweitzer also served
as the Political Director of the Democratic
National Committee from April 1993 through
January 1995, and served as the Finance
Director of this same body from April 1985
through January 1989.Joseph S. Nadan
    
    
    63
    
    
    Senior Vice President and Chief Technology
Officer, since April 2005. Previously, Mr.
Nadan served, beginning in May 2003, as Chief
Technology Officer for AIG Technologies, a
member company of American International
Group, Inc. and a leading supplier of
information technology solutions; and, from
September 2001 through April 2003, as
 - 50 -




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##### Table of Contents



Name
    
    Age
    
    PositionPresident and Chief Executive Officer of
OptiDray LLC, a company founded by Mr. Nadan
to supply real-time marketplace information to
short-haul trucking and other related
transportation companies. Prior to this, Mr.
Nadan served in a number of increasingly
senior positions within Market Data
Corporation, an information technology and
financial services company, from 1988 to 2001,
including, during 2001, as a member of that
companys Executive Committee. Mr. Nadans employment
with the Company terminated on March 27, 2006.
  - 51 -




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##### Table of Contents



PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
    FISCAL 2006
    
    HIGH
    
    LOWFirst Quarter (February 27  May 28, 2005)
    
    $
    29.09
    
    
    $
    22.29Second Quarter (May 29  August 27, 2005)
    
    $
    30.65
    
    
    $
    27.77Third Quarter (August 28  November 26, 2005)
    
    $
    35.00
    
    
    $
    28.39Fourth Quarter (November 27, 2005  February 25, 2006)
    
    $
    33.65
    
    
    $
    29.76
 FISCAL 2005
    
    HIGH
    
    LOWFirst
Quarter (February 29  May 29, 2004)
    
    $
    32.48
    
    
    $
    24.13Second Quarter (May 30  August 28, 2004)
    
    $
    28.14
    
    
    $
    19.79Third Quarter (August 29  November 27, 2004)
    
    $
    25.73
    
    
    $
    22.34Fourth Quarter (November 28, 2004  February 26, 2005)
    
    $
    20.13
    
    
    $
    22.75
     - 52 -




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##### Table of Contents



ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
  Fiscal Year EndedFebruary 25,
    
    
    February 26,
    
    
    February 28,
    
    
    February 22,
    
    
    February 23,2006
    
    
    2005
    
    
    2004 (a)
    
    
    2003
    
    
    2002(Dollars in thousands, except per share amounts)Operating Data:Revenues:Services
    
    $
    1,122,668
    
    
    $
    1,017,683
    
    
    $
    957,471
    
    
    $
    868,896
    
    
    $
    831,787Sales of products
    
    
    182,138
    
    
    
    239,552
    
    
    
    93,859
    
    
    
    109,894
    
    
    
    177,914Total
    
    
    1,304,806
    
    
    
    1,257,235
    
    
    
    1,051,330
    
    
    
    978,790
    
    
    
    1,009,701Gross Profit:Services
    
    
    448,140
    
    
    
    401,050
    
    
    
    419,632
    
    
    
    333,855
    
    
    
    245,479Sales of products
    
    
    78,101
    
    
    
    81,578
    
    
    
    34,633
    
    
    
    30,951
    
    
    
    41,462Total
    
    
    526,241
    
    
    
    482,628
    
    
    
    454,265
    
    
    
    364,806
    
    
    
    286,941Operating income
    
    
    340,657
    
    
    
    312,816
    
    
    
    287,855
    
    
    
    226,945
    
    
    
    134,350Net income
    
    
    211,045
    
    
    
    196,394
    
    
    
    183,200
    
    
    
    142,021
    
    
    
    68,026Per Share Data: (b)Basic
    
    $
    1.73
    
    
    $
    1.68
    
    
    $
    1.57
    
    
    $
    1.24
    
    
    $
    0.58Diluted (c)
    
    
    1.63
    
    
    
    1.50
    
    
    
    1.40
    
    
    
    1.11
    
    
    
    0.51Cash dividends declared per common share
    
    $
    0.34
    
    
    $
    0.34
    
    
    $
    0.255
    
    
    $
    
    
    
    $
    Dividends Paid
    
    $
    41,672
    
    
    $
    39,830
    
    
    $
    29,977
    
    
    $
    
    
    
    $
    Balance Sheet Data (at end of period):Cash and cash equivalents
    
    $
    235,191
    
    
    $
    94,446
    
    
    $
    129,339
    
    
    $
    116,174
    
    
    $
    35,095Investment securities available-for-sale
    
    
    260,725
    
    
    
    196,825
    
    
    
    221,850
    
    
    
    
    
    
    
    Total assets
    
    
    2,099,902
    
    
    
    1,855,141
    
    
    
    1,559,131
    
    
    
    954,195
    
    
    
    853,829Long-term debt, less current portion
    
    
    542,259
    
    
    
    726,329
    
    
    
    463,215
    
    
    
    287,088
    
    
    
    329,715Shareholders equity
    
    
    1,005,372
    
    
    
    655,768
    
    
    
    562,289
    
    
    
    315,566
    
    
    
    202,955Cash Flow Data:Net cash provided by operating activities
    
    $
    429,624
    
    
    $
    375,209
    
    
    $
    415,067
    
    
    $
    332,256
    
    
    $
    345,230Net cash used for investing activities
    
    
    (221,114
    )
    
    
    (429,582
    )
    
    
    (612,459
    )
    
    
    (158,608
    )
    
    
    (164,726
    )Net purchases (maturities) of available-for-sale investment securities
    
    
    63,900
    
    
    
    (25,025
    )
    
    
    221,850
    
    
    
    
    
    
    
    Free cash flow (d)
    
    $
    272,410
    
    
    $
    (79,398
    )
    
    $
    24,458
    
    
    $
    173,648
    
    
    $
    180,504Net cash provided by (used for) financing activities
    
    $
    (70,991
    )
    
    $
    17,505
    
    
    $
    206,206
    
    
    $
    (96,193
    )
    
    $
    (188,341
    )Other Data:Income before income taxes
    
    $
    318,376
    
    
    $
    306,386
    
    
    $
    290,794
    
    
    $
    229,066
    
    
    $
    109,720Interest expense
    
    
    30,793
    
    
    
    19,213
    
    
    
    10,919
    
    
    
    11,267
    
    
    
    22,876Depreciation, amortization and other
    
    
    183,014
    
    
    
    158,615
    
    
    
    119,059
    
    
    
    138,185
    
    
    
    168,543EBITDA (e)
    
    $
    532,183
    
    
    $
    484,214
    
    
    $
    420,772
    
    
    $
    378,518
    
    
    $
    301,139Number of lottery customers at year-end (f)
    
    
    95
    
    
    
    99
    
    
    
    93
    
    
    
    83
    
    
    
    81
 (a)
    
    53-week year.(b)
    
    Per share data has been restated to reflect our 2-for-1 common stock split that occurred in July 2004.(c)
    
    We adopted EITF 04-8 in December 2004, which requires that all 12.7 million shares underlying our 1.75% Convertible Debentures be included
in diluted earnings per share computations, if dilutive, regardless of whether the conversion requirements have been met. The adoption of
EITF 04-8 resulted in a decrease to diluted earnings per share of $0.02, $0.10 and $0.06 in fiscal 2004, 2003 and 2002, respectively.(d)
    
    Free cash flow (net cash provided by operating activities less net cash used for investing activities, excluding the net purchases or maturities
of available-for-sale investment securities), represents the excess cash flows generated over and above the investment of capital required to
both maintain and grow our ongoing revenue streams. Based upon the long term contractual cycles in our business, we believe free cash
flow trends represent a useful guide to help determine the amount of internally generated capital available for enhancing long-term shareholder
value, through a balance of investing in new growth opportunities, the tax efficient return of capital to our shareholders and repayment
of debt obligations. As we define it, free cash flow may not be comparable to other similarly titled measures used by other companies.(e)
    
    We believe that earnings before interest, taxes, depreciation, amortization and other, or EBITDA, assists in explaining trends in our operating
performance, provides useful information about our ability to incur and service indebtedness and is a commonly used measure of
performance by securities analysts and investors in the gaming industry. EBITDA should not be considered as an alternative to operating
income as an indicator of our performance or to cash flows as a measure of our liquidity. As we define it, EBITDA may not be comparable to
other similarly titled measures used by other companies. Fiscal 2006
EBITDA includes impairment charges of $5.5 million which are included
within depreciation, amortization and other. There were no such
charges in fiscal 2005, 2004, 2003 or 2002.(f)
    
    A lottery customer is defined as a jurisdiction utilizing our systems or products for traditional lottery services. - 53 -




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##### Table of Contents



Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 Overview
  The discussion that follows assumes that the Company continues to operate on a stand alone basis
and does not reflect the potential impact of the proposed acquisition of the Company.
  
    
    Forward-Looking Statements cautionary information about forward-looking statements.
    
    Potential Change in Control of our Company a description of the potential change in control of our company.
    
    Our Business a general description of our business; our growth strategy and Brazil matters.
    
    Common Stock Split information about our prior year common stock split.
    
    New Accounting Pronouncements a summary of accounting pronouncements that we have not yet adopted due to a delayed
effective date.
    
    Application of Critical Accounting Policies a discussion of accounting policies that we believe are both most
critical to our financial condition and results of operations, and require managements most difficult, subjective or
complex judgments and estimates.
    
    Operations Review an analysis of our consolidated results of operations for the three years presented in our
financial statements. We operate in one business  Transaction Processing, and we have a single operating and
reportable business segment. Therefore, our discussions are not quantified by segment results.
    
    Liquidity, Capital Resources and Financial Position an analysis of cash flows, financial position, contractual
obligations and commitments.
    
    Financial Risk Management and Dividend Policy  information about financial risk management; interest rate market
risk; foreign currency exchange rate risk; and our dividend policy.
  - 54 -




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##### Table of Contents



Forward-Looking Statements
  Potential Change in Control of Our Company
   Our Business
 General
   Fiscal

    
    Fiscal

    
    FiscalConsolidated Revenues
    
    2006

    
    2005

    
    2004Lottery
    
    
    84%
    
    
    
    87%
    
    
    
    91%Commercial services
    
    
    9%
    
    
    
    7%
    
    
    
    7%Gaming solutions
    
    
    7%
    
    
    
    6%
    
    
    
    2%100%
    
    
    
    100%
    
    
    
    100%
 - 55 -




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- 56 -




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##### Table of Contents




    
    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 and sales;
    
    Part I, Item 3  Legal Proceedings;
    
    Note 15 to the consolidated financial statements.
 Growth Strategy
  
    
    Spielo Manufacturing Incorporated (Spielo) in
April 2004;
    
    Leeward Islands Lottery Holding Company Inc.
(LILHCo) in May 2004;
     Brazil Matters
   - 57 -




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Common Stock Split
  - 58 -




---



##### Table of Contents



New Accounting Pronouncements
 FASB Statement No. 123R
    SEC Staff Accounting Bulletin No. 107
  - 59 -




---



##### Table of Contents



Application of Critical Accounting Policies
  Revenue Recognition
 Lottery and Gaming Transaction Processing Services
  Facilities Management Contracts
  
    
    Persuasive evidence of an arrangement exists, which is typically
when a customer contract has been signed
    
    Services have been rendered
    
    Our fee is deemed to be fixed or determinable and free of
contingencies or significant uncertainties
    
    Collectibility is reasonably assured
  Product Sales Contracts
   - 60 -




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##### Table of Contents




    
    Persuasive evidence of an arrangement exists, which is typically
when a customer contract has been signed
    
    The product has been delivered
    
    Our fee is deemed to be fixed or determinable and free of
contingencies or significant uncertainties
    
    Collectibility is reasonably assured
   Non-Lottery Transaction Processing Services
  - 61 -




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##### Table of Contents



Liquidated Damage Assessments
  Income Tax Expense and Accruals
    Trade and other receivables, net
  - 62 -




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##### Table of Contents



Inventories and Obsolescence
 Goodwill and Other Intangible Assets
  Impairment of Long-Lived Assets
 - 63 -




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Operations Review
  SUMMARY FINANCIAL DATAFiscal Year EndedFebruary 25,
    
    February 26,
    
    February 28,2006

    
    2005

    
    2004(Dollars in thousands)Revenues:Services
    
    $
    1,122,668
    
    
    
    86.0
    %
    
    $
    1,017,683
    
    
    
    80.9
    %
    
    $
    957,471
    
    
    
    91.1
    %Sales of products
    
    
    182,138
    
    
    
    14.0
    
    
    
    239,552
    
    
    
    19.1
    
    
    
    93,859
    
    
    
    8.9Total
    
    
    1,304,806
    
    
    
    100.0
    
    
    
    1,257,235
    
    
    
    100.0
    
    
    
    1,051,330
    
    
    
    100.0Costs and expenses:Costs of services (a)
    
    
    674,528
    
    
    
    60.1
    
    
    
    616,633
    
    
    
    60.6
    
    
    
    537,839
    
    
    
    56.2Costs of sales (a)
    
    
    104,037
    
    
    
    57.1
    
    
    
    157,974
    
    
    
    65.9
    
    
    
    59,226
    
    
    
    63.1Total
    
    
    778,565
    
    
    
    59.7
    
    
    
    774,607
    
    
    
    61.6
    
    
    
    597,065
    
    
    
    56.8Gross profit
    
    
    526,241
    
    
    
    40.3
    
    
    
    482,628
    
    
    
    38.4
    
    
    
    454,265
    
    
    
    43.2Selling, general and administrative
    
    
    135,715
    
    
    
    10.4
    
    
    
    117,253
    
    
    
    9.3
    
    
    
    109,092
    
    
    
    10.4Research and development
    
    
    49,869
    
    
    
    3.8
    
    
    
    52,559
    
    
    
    4.2
    
    
    
    57,318
    
    
    
    5.4Operating expenses
    
    
    185,584
    
    
    
    14.2
    
    
    
    169,812
    
    
    
    13.5
    
    
    
    166,410
    
    
    
    15.8Operating income
    
    
    340,657
    
    
    
    26.1
    
    
    
    312,816
    
    
    
    24.9
    
    
    
    287,855
    
    
    
    27.4Other income (expense):Interest income
    
    
    10,912
    
    
    
    0.8
    
    
    
    4,615
    
    
    
    0.4
    
    
    
    5,733
    
    
    
    0.5Equity in earnings of unconsolidated affiliates
    
    
    1,941
    
    
    
    0.1
    
    
    
    2,812
    
    
    
    0.2
    
    
    
    6,236
    
    
    
    0.6Other income (expense)
    
    
    (4,341
    )
    
    
    (0.3
    )
    
    
    5,356
    
    
    
    0.4
    
    
    
    1,889
    
    
    
    0.2Interest expense
    
    
    (30,793
    )
    
    
    (2.4
    )
    
    
    (19,213
    )
    
    
    (1.5
    )
    
    
    (10,919
    )
    
    
    (1.0
    )(22,281
    )
    
    
    (1.7
    )
    
    
    (6,430
    )
    
    
    (0.5
    )
    
    
    2,939
    
    
    
    0.3Income before income taxes
    
    
    318,376
    
    
    
    24.4
    
    
    
    306,386
    
    
    
    24.4
    
    
    
    290,794
    
    
    
    27.7Income taxes
    
    
    107,331
    
    
    
    8.2
    
    
    
    109,992
    
    
    
    8.8
    
    
    
    107,594
    
    
    
    10.3Net income
    
    $
    211,045
    
    
    
    16.2
    %
    
    $
    196,394
    
    
    
    15.6
    %
    
    $
    183,200
    
    
    
    17.4
    %
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##### Table of Contents



Comparison of Fiscal 2006 with 2005
 Revenues and Gross Margin
 Fiscal Year EndedFebruary 25,
    
    
    February 26,
    
    
    Change2006
    
    
    2005
    
    
    $

    
    %(Dollars in millions)Domestic lottery
    
    $
    580.5
    
    
    $
    520.6
    
    
    $
    59.9
    
    
    
    11.5International lottery
    
    
    392.2
    
    
    
    381.9
    
    
    
    10.3
    
    
    
    2.7Commercial services
    
    
    115.9
    
    
    
    84.8
    
    
    
    31.1
    
    
    
    36.7Gaming solutions
    
    
    34.1
    
    
    
    27.4
    
    
    
    6.7
    
    
    
    24.4All other
    
    
    
    
    
    
    3.0
    
    
    
    (3.0
    )
    
    
    (100.0
    )Services
    
    $
    1,122.7
    
    
    $
    1,017.7
    
    
    $
    105.0
    
    
    
    10.3Sales of products
    
    
    182.1
    
    
    
    239.5
    
    
    
    (57.4
    )
    
    
    (24.0
    )Total revenues
    
    $
    1,304.8
    
    
    $
    1,257.2
    
    
    $
    47.6
    
    
    
    3.8
 Fiscal Year EndedFebruary 25,
    
    
    February 26,
    
    
    Change2006
    
    
    2005
    
    
    Percentage PointsService gross margin
    
    
    39.9%
    
    
    
    39.4%
    
    
    0.5Product gross margin
    
    
    42.9%
    
    
    
    34.1%
    
    
    8.8
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##### Table of Contents



Operating Expenses
 Fiscal Year EndedFebruary 25,
    
    
    February 26,
    
    
    Change2006
    
    
    2005
    
    
    $

    
    %(Dollars in millions)SG&A expenses
    
    $
    135.7
    
    
    $
    117.2
    
    
    $
    18.5
    
    
    
    15.8R&D expenses
    
    
    49.9
    
    
    
    52.6
    
    
    
    (2.7
    )
    
    
    (5.1
    )$
    185.6
    
    
    $
    169.8
    
    
    $
    15.8
    
    
    
    9.3Percentage of total revenueSG&A expenses
    
    
    10.4%
    
    
    
    9.3%R&D expenses
    
    
    3.8%
    
    
    
    4.2%
  Interest Income
 Fiscal Year EndedFebruary 25,
    
    
    February 26,
    
    
    Change2006
    
    
    2005
    
    
    $
    
    
    %(Dollars in millions)Interest income
    
    $
    10.9
    
    
    $
    4.6
    
    
    $
    6.3
    
    
    
    >100.0
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##### Table of Contents



Other Income (Expense)
 Fiscal Year EndedFebruary 25,
    
    February 26,
    
    Change2006
    
    2005
    
    $
    
    %(Dollars in millions)Minority interest in
consolidated subsidiaries
    
    $
    (3.0
    )
    
    $
    (3.8
    )
    
    $
    0.8
    
    
    
    21.1Foreign exchange losses, net
    
    
    (2.8
    )
    
    
    (1.4
    )
    
    
    (1.4
    )
    
    
    (100.0
    )Brazil financial lending tax
    
    
    (1.4
    )
    
    
    
    
    
    
    (1.4
    )
    
    
    (100.0
    )Gain on sale of investment
    
    
    1.3
    
    
    
    10.9
    
    
    
    (9.6
    )
    
    
    (88.1
    )Other
    
    
    1.6
    
    
    
    (0.3
    )
    
    
    1.9
    
    
    
    >100.0$
    (4.3
    )
    
    $
    5.4
    
    
    $
    (9.7
    )
    
    
    (>100.0
    )
    Interest Expense
 Fiscal Year EndedFebruary 25,
    
    
    February 26,
    
    
    Change2006
    
    
    2005
    
    
    $
    
    
    %(Dollars in millions)Interest expense
    
    $
    30.8
    
    
    $
    19.2
    
    
    $
    11.6
    
    
    
    60.4
  Weighted Average Diluted Shares
 Income Taxes
 - 67 -




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##### Table of Contents



Comparison of Fiscal 2005 with 2004
 Revenues and Gross Margin
 Fiscal Year EndedFebruary 26,
    
    
    February 28,
    
    
    Change2005
    
    
    2004
    
    
    $
    
    
    %(Dollars in millions)Domestic lottery
    
    $
    520.6
    
    
    $
    504.1
    
    
    $
    16.5
    
    
    
    3.3International lottery
    
    
    381.9
    
    
    
    359.5
    
    
    
    22.4
    
    
    
    6.2Commercial services
    
    
    84.8
    
    
    
    74.3
    
    
    
    10.5
    
    
    
    14.1Gaming solutions
    
    
    27.4
    
    
    
    16.9
    
    
    
    10.5
    
    
    
    62.1All other
    
    
    3.0
    
    
    
    2.6
    
    
    
    0.4
    
    
    
    15.4Services
    
    $
    1,017.7
    
    
    $
    957.4
    
    
    $
    60.3
    
    
    
    6.3Sales of products
    
    
    239.5
    
    
    
    93.9
    
    
    
    145.6
    
    
    
    >100.0Total revenues
    
    $
    1,257.2
    
    
    $
    1,051.3
    
    
    $
    205.9
    
    
    
    19.6
 Fiscal Year EndedFebruary 26,
    
    
    February 28,
    
    
    Change2005
    
    
    2004
    
    
    Percentage PointsService gross margin
    
    
    39.4%
    
    
    
    43.8%
    
    
    (4.4)Product gross margin
    
    
    34.1%
    
    
    
    36.9%
    
    
    (2.8)
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##### Table of Contents



Operating Expenses
 Fiscal Year EndedFebruary 26,
    
    
    February 28,
    
    
    Change2005

    
    2004

    
    $

    
    %(Dollars in millions)SG&A expenses
    
    $
    117.2
    
    
    $
    109.1
    
    
    $
    8.1
    
    
    
    7.4R&D expenses
    
    
    52.6
    
    
    
    57.3
    
    
    
    (4.7
    )
    
    
    (8.2
    )$
    169.8
    
    
    $
    166.4
    
    
    $
    3.4
    
    
    
    2.0Percentage of total revenueSG&A expenses
    
    
    9.3
    %
    
    
    10.4
    %R&D expenses
    
    
    4.2
    %
    
    
    5.4
    %
  Equity Earnings
 Fiscal Year EndedFebruary 26,
    
    
    February 28,
    
    
    Change2005

    
    2004

    
    $

    
    %(Dollars in millions)Equity earnings
    
    $
    2.8
    
    
    $
    6.2
    
    
    $
    (3.4
    )
    
    
    (54.8
    )
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##### Table of Contents



Other Income (Expense)
 Fiscal Year EndedFebruary 26,
    
    
    February 28,
    
    
    Change2005

    
    2004

    
    $

    
    %(Dollars in millions)Gain on sale of investment
    
    $
    10.9
    
    
    $
    
    
    
    $
    10.9
    
    
    
    100.0Foreign exchange losses, net
    
    
    (1.4
    )
    
    
    (0.2
    )
    
    
    (1.2
    )
    
    
    (>100.0
    )Minority interest in
consolidated subsidiaries
    
    
    (3.8
    )
    
    
    (4.5
    )
    
    
    0.7
    
    
    
    15.5One-time, non-cash gain
    
    
    
    
    
    
    5.3
    
    
    
    (5.3
    )
    
    
    (100.0
    )Other
    
    
    (0.3
    )
    
    
    1.3
    
    
    
    (1.6
    )
    
    
    (>100.0
    )$
    5.4
    
    
    $
    1.9
    
    
    $
    3.5
    
    
    
    >100.0
    Interest Expense
 Fiscal Year EndedFebruary 26,
    
    
    February 28,
    
    
    Change2005
    
    
    2004
    
    
    $
    
    
    %(Dollars in millions)Interest expense
    
    $
    19.2
    
    
    $
    10.9
    
    
    $
    8.3
    
    
    
    76.1
  Income Taxes
 - 70 -




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##### Table of Contents



Weighted Average Diluted Shares
 Liquidity, Capital Resources and Financial Position
 Analysis of Cash Flows
   - 71 -




---



##### Table of Contents



Financial Position
 February 25,
    
    
    February 26,
    
    
    Change2006
    
    
    2005
    
    
    $
    
    %(Dollars in millions)Inventories
    
    $
    88.0
    
    
    $
    61.1
    
    
    $
    26.9
    
    
    
    44.0Other current assets
    
    
    47.8
    
    
    
    26.6
    
    
    
    21.2
    
    
    
    79.7Systems, equipment and other
assets relating to contracts, net
    
    
    692.5
    
    
    
    720.4
    
    
    
    (27.9
    )
    
    
    (3.9
    )Goodwill
    
    
    346.1
    
    
    
    331.0
    
    
    
    15.1
    
    
    
    4.6Property, plant and
equipment, net
    
    
    101.4
    
    
    
    74.6
    
    
    
    26.8
    
    
    
    35.9Advance payments from customers
    
    
    63.8
    
    
    
    42.9
    
    
    
    20.9
    
    
    
    48.7Income taxes payable
    
    
    67.1
    
    
    
    16.5
    
    
    
    50.6
    
    
    
    >100.0Long-term debt
    
    
    542.3
    
    
    
    726.3
    
    
    
    (184.0
    )
    
    
    (25.3
    )Other liabilities
    
    
    106.7
    
    
    
    83.3
    
    
    
    23.4
    
    
    
    28.1Cost of treasury shares
    
    
    
    
    
    
    35.9
    
    
    
    (35.9
    )
    
    
    (100.0
    )
     - 72 -




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##### Table of Contents



Contractual Obligations
 Fiscal2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    Thereafter
    
    
    TotalLong-term debt
    
    $
    9.1
    
    
    $
    0.1
    
    
    $
    
    
    
    $
    148.1
    
    
    $
    245.8
    
    
    $
    148.3
    
    
    $
    551.4Operating leases
    
    
    20.4
    
    
    
    11.0
    
    
    
    8.0
    
    
    
    6.1
    
    
    
    4.0
    
    
    
    1.4
    
    
    
    50.9Total
    
    $
    29.5
    
    
    $
    11.1
    
    
    $
    8.0
    
    
    $
    154.2
    
    
    $
    249.8
    
    
    $
    149.7
    
    
    $
    602.3
 Commitments
 Performance and Other Bonds
  Total potentialcommitmentsPerformance bonds
    
    $
    258.6Financial guarantees
    
    
    44.6Litigation bonds
    
    
    7.9All other bonds
    
    
    5.0$
    316.1
 - 73 -




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##### Table of Contents



Master Contract with the Rhode Island Lottery
  Acquisition of Atronic
 - 74 -




---



##### Table of Contents



Option to Purchase PolCard Outstanding Equity
   - 75 -




---



##### Table of Contents



Buyout Percentageof the PolCard
    
    Range ofExercise Date Commencing In
    
    Outstanding Equity
    
    Buyout PriceMay 2007
    
    
    12.6
    %
    
    $
    20 to $30 millionMay 2008
    
    
    6.3
    %
    
    $
    11 to $17 millionMay 2009
    
    
    6.3
    %
    
    $
    13 to $19 million
 Financial Risk Management and Dividend Policy
 Financial Risk Management
 Interest Rate Market Risk
  Estimated Fair ValueAt February 25,
    
    
    10% Increase in
    
    
    10% Decrease in2006
    
    
    Interest Rates
    
    
    Interest Rates$250 million of 4.75% Senior Notes
    
    $
    249.1
    
    
    $
    245.1
    
    
    $
    253.1$150 million of 4.50% Senior Notes
    
    
    147.5
    
    
    
    145.4
    
    
    
    149.7$150 million of 5.25% Senior Notes
    
    
    151.3
    
    
    
    146.8
    
    
    
    156.0$6.6 million of 1.75% Convertible
Debentures
    
    
    16.1
    
    
    
    16.1
    
    
    
    16.1
  Interest RateEstimated Debt
    
    
    Swaps OutstandingFair Value
    
    
    (notional amount)$250 million of 4.75% Senior Notes
    
    $
    249.1
    
    
    $
    150.0$150 million of 4.50% Senior Notes
    
    
    147.5
    
    
    
    50.0$150 million of 5.25% Senior Notes
    
    
    151.3
    
    
    
    25.0
 - 76 -




---



##### Table of Contents



Interest rate swap agreements
 Treasury rate lock agreements
 Foreign Currency Exchange Rate Risk
   - 77 -




---



##### Table of Contents



Dividend Policy
 - 78 -




---



##### Table of Contents



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  - 79 -




---



##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 - 80 -




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 Board of Directors and Shareholders
GTECH Holdings Corporation and Subsidiaries
         
 - 81 -




---



##### Table of Contents



GTECH
HOLDINGS CORPORATION AND SUBSIDIARIES 
CONSOLIDATED BALANCE SHEETS
 February 25,

    
    February 26,2006

    
    2005(Dollars in thousands)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    235,191
    
    
    $
    94,446Investment securities available-for-sale
    
    
    260,725
    
    
    
    196,825Trade and other receivables, net
    
    
    183,561
    
    
    
    172,167Refundable performance deposit
    
    
    8,000
    
    
    
    8,000Inventories
    
    
    88,024
    
    
    
    61,135Deferred income taxes
    
    
    26,398
    
    
    
    31,435Other current assets
    
    
    47,819
    
    
    
    26,646TOTAL CURRENT ASSETS
    
    
    849,718
    
    
    
    590,654SYSTEMS, EQUIPMENT AND OTHER ASSETS RELATING TO CONTRACTS, net
    
    
    692,545
    
    
    
    720,438GOODWILL
    
    
    346,096
    
    
    
    331,022PROPERTY, PLANT AND EQUIPMENT, net
    
    
    101,416
    
    
    
    74,558INTANGIBLE ASSETS, net
    
    
    64,212
    
    
    
    70,839OTHER ASSETS
    
    
    45,915
    
    
    
    67,630TOTAL ASSETS
    
    $
    2,099,902
    
    
    $
    1,855,141LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    93,205
    
    
    $
    99,234Accrued expenses
    
    
    46,220
    
    
    
    54,227Employee compensation
    
    
    31,804
    
    
    
    21,862Advance payments from customers
    
    
    63,768
    
    
    
    42,865Deferred revenue and advance billings
    
    
    17,889
    
    
    
    29,705Income taxes payable
    
    
    67,098
    
    
    
    16,499Taxes other than income taxes
    
    
    17,106
    
    
    
    16,572Short-term borrowings
    
    
    
    
    
    
    334Current portion of long-term debt
    
    
    9,148
    
    
    
    2,476TOTAL CURRENT LIABILITIES
    
    
    346,238
    
    
    
    283,774LONG-TERM DEBT, less current portion
    
    
    542,259
    
    
    
    726,329OTHER LIABILITIES
    
    
    106,671
    
    
    
    83,260DEFERRED INCOME TAXES
    
    
    99,362
    
    
    
    106,010COMMITMENTS 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 - 200,000,000 shares authorized,
127,179,225 and 116,551,144 shares issued; 127,179,225 and 115,006,751 shares
outstanding at February 25, 2006 and February 26, 2005, respectively
    
    
    1,272
    
    
    
    1,166Additional paid-in capital
    
    
    444,810
    
    
    
    278,204Accumulated other comprehensive loss
    
    
    (35,662
    )
    
    
    (43,227
    )Retained earnings
    
    
    594,952
    
    
    
    455,5371,005,372
    
    
    
    691,680Less cost of 1,544,393 shares in treasury at February 26, 2005
    
    
    
    
    
    
    (35,912
    )1,005,372
    
    
    
    655,768TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    2,099,902
    
    
    $
    1,855,141
  - 82 -




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##### Table of Contents



GTECH
HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
 Fiscal Year EndedFebruary 25,
    
    February 26,
    
    February 28,2006
    
    2005
    
    2004(Dollars in thousands, except per share amounts)Revenues:Services
    
    $
    1,122,668
    
    
    $
    1,017,683
    
    
    $
    957,471Sales of products
    
    
    182,138
    
    
    
    239,552
    
    
    
    93,8591,304,806
    
    
    
    1,257,235
    
    
    
    1,051,330Costs and expenses:Costs of services
    
    
    674,528
    
    
    
    616,633
    
    
    
    537,839Costs of sales
    
    
    104,037
    
    
    
    157,974
    
    
    
    59,226778,565
    
    
    
    774,607
    
    
    
    597,065Gross profit
    
    
    526,241
    
    
    
    482,628
    
    
    
    454,265Selling, general and administrative
    
    
    135,715
    
    
    
    117,253
    
    
    
    109,092Research and development
    
    
    49,869
    
    
    
    52,559
    
    
    
    57,318Operating expenses
    
    
    185,584
    
    
    
    169,812
    
    
    
    166,410Operating income
    
    
    340,657
    
    
    
    312,816
    
    
    
    287,855Other income (expense):Interest income
    
    
    10,912
    
    
    
    4,615
    
    
    
    5,733Equity in earnings of unconsolidated affiliates
    
    
    1,941
    
    
    
    2,812
    
    
    
    6,236Other income (expense)
    
    
    (4,341
    )
    
    
    5,356
    
    
    
    1,889Interest expense
    
    
    (30,793
    )
    
    
    (19,213
    )
    
    
    (10,919
    )(22,281
    )
    
    
    (6,430
    )
    
    
    2,939Income before income taxes
    
    
    318,376
    
    
    
    306,386
    
    
    
    290,794Income taxes
    
    
    107,331
    
    
    
    109,992
    
    
    
    107,594Net income
    
    $
    211,045
    
    
    $
    196,394
    
    
    $
    183,200Basic earnings per share
    
    $
    1.73
    
    
    $
    1.68
    
    
    $
    1.57Diluted earnings per share
    
    $
    1.63
    
    
    $
    1.50
    
    
    $
    1.40Weighted
average shares outstanding - basic
    
    
    121,884
    
    
    
    116,739
    
    
    
    116,464Weighted
average shares outstanding - diluted
    
    
    130,385
    
    
    
    132,559
    
    
    
    132,625Cash dividends declared per common share
    
    $
    0.34
    
    
    $
    0.34
    
    
    $
    0.255
  - 83 -




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##### Table of Contents



GTECH
HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Fiscal Year EndedFebruary 25,

    
    February 26,

    
    February 28,2006

    
    2005

    
    2004(Dollars in thousands)OPERATING ACTIVITIESNet income
    
    $
    211,045
    
    
    $
    196,394
    
    
    $
    183,200Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation
    
    
    166,768
    
    
    
    145,999
    
    
    
    115,324Intangibles amortization
    
    
    10,582
    
    
    
    12,616
    
    
    
    3,735Other amortization
    
    
    154
    
    
    
    
    
    
    
    Deferred income taxes
    
    
    11,309
    
    
    
    34,740
    
    
    
    59,457Tax benefit related to stock award plans
    
    
    6,670
    
    
    
    11,254
    
    
    
    10,432Minority interest
    
    
    1,673
    
    
    
    3,799
    
    
    
    4,502Equity in earnings of unconsolidated affiliates, net of dividends received
    
    
    582
    
    
    
    3,461
    
    
    
    1,672Gain on sale of investments
    
    
    (751
    )
    
    
    (10,924
    )
    
    
    Non-cash gain from consolidation of West Greenwich Technology Associates, L.P.
    
    
    
    
    
    
    
    
    
    
    (5,292
    )Other
    
    
    26,991
    
    
    
    16,438
    
    
    
    10,726Changes in operating assets and liabilities:Trade and other receivables, net
    
    
    (17,420
    )
    
    
    (42,745
    )
    
    
    9,634Inventories
    
    
    (27,003
    )
    
    
    28,522
    
    
    
    3,030Other current assets
    
    
    (14,029
    )
    
    
    1,654
    
    
    
    (4,913
    )Accounts payable
    
    
    (4,854
    )
    
    
    14,248
    
    
    
    2,186Employee compensation
    
    
    8,295
    
    
    
    (15,118
    )
    
    
    (4,231
    )Advance payments from customers
    
    
    20,903
    
    
    
    (33,994
    )
    
    
    51,601Deferred revenue and advance billings
    
    
    (11,816
    )
    
    
    15,037
    
    
    
    (2,979
    )Income taxes payable
    
    
    54,675
    
    
    
    11,484
    
    
    
    (27,649
    )Other assets and liabilities
    
    
    (14,150
    )
    
    
    (17,656
    )
    
    
    4,632NET CASH PROVIDED BY OPERATING ACTIVITIES
    
    
    429,624
    
    
    
    375,209
    
    
    
    415,067INVESTING ACTIVITIESAcquisitions (net of cash acquired)
    
    
    (23,084
    )
    
    
    (200,730
    )
    
    
    (74,442
    )Purchases of systems, equipment and other assets relating to contracts
    
    
    (137,316
    )
    
    
    (245,592
    )
    
    
    (268,010
    )Purchases of available-for-sale investment securities
    
    
    (147,275
    )
    
    
    (246,975
    )
    
    
    (242,050
    )Maturities and sales of available-for-sale investment securities
    
    
    83,375
    
    
    
    272,000
    
    
    
    20,200Purchases of property, plant and equipment
    
    
    (9,656
    )
    
    
    (12,875
    )
    
    
    (12,772
    )License fees
    
    
    (1,750
    )
    
    
    
    
    
    
    (12,500
    )Investments in and advances to unconsolidated subsidiaries
    
    
    (1,488
    )
    
    
    (2,071
    )
    
    
    (2,885
    )Refundable performance deposit
    
    
    8,000
    
    
    
    
    
    
    
    (20,000
    )(Increase) decrease in restricted cash
    
    
    5,080
    
    
    
    (5,112
    )
    
    
    Proceeds from sale of investments
    
    
    3,000
    
    
    
    11,773
    
    
    
    NET CASH USED FOR INVESTING ACTIVITIES
    
    
    (221,114
    )
    
    
    (429,582
    )
    
    
    (612,459
    )FINANCING ACTIVITIESNet proceeds from issuance of long-term debt
    
    
    
    
    
    
    343,254
    
    
    
    252,588Principal payments on long-term debt
    
    
    (2,302
    )
    
    
    (167,692
    )
    
    
    (33,293
    )Purchases of treasury stock
    
    
    (32,051
    )
    
    
    (120,658
    )
    
    
    Dividends paid
    
    
    (41,672
    )
    
    
    (39,830
    )
    
    
    (29,977
    )Premiums and fees paid in connection with the early retirement of debt
    
    
    
    
    
    
    (10,610
    )
    
    
    (731
    )Proceeds from stock options
    
    
    9,473
    
    
    
    13,546
    
    
    
    23,943Other
    
    
    (4,439
    )
    
    
    (505
    )
    
    
    (6,324
    )NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES
    
    
    (70,991
    )
    
    
    17,505
    
    
    
    206,206Effect of exchange rate changes on cash
    
    
    3,226
    
    
    
    1,975
    
    
    
    4,351INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    140,745
    
    
    
    (34,893
    )
    
    
    13,165Cash and cash equivalents at beginning of year
    
    
    94,446
    
    
    
    129,339
    
    
    
    116,174CASH AND CASH EQUIVALENTS AT END OF YEAR
    
    $
    235,191
    
    
    $
    94,446
    
    
    $
    129,339
  - 84 -




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##### Table of Contents



GTECH
HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 AccumulatedAdditional
    
    
    OtherOutstanding
    
    Common
    
    Paid-in
    
    
    Comprehensive
    
    Retained
    
    TreasuryShares
    
    Stock
    
    Capital
    
    
    Loss
    
    Earnings
    
    Stock
    
    Total(Dollars in thousands)Balance at February 22, 2003
    
    
    113,276,662
    
    
    $
    923
    
    
    $
    235,266
    
    
    $
    (95,488
    )
    
    $
    684,653
    
    
    $
    (509,788
    )
    
    $
    315,566Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    183,200
    
    
    
    
    
    
    
    183,200Other comprehensive income (loss), net of tax:Foreign currency translation, net of tax
benefits of $13 million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,418
    
    
    
    
    
    
    
    
    
    
    
    26,418Unrecognized net loss on derivative instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,423
    )
    
    
    
    
    
    
    
    
    
    
    (1,423
    )Unrealized loss on investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15
    )
    
    
    
    
    
    
    
    
    
    
    (15
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    208,180Cash dividends declared on common stock ($0.255 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,178
    )
    
    
    
    
    
    
    (30,178
    )Shares issued to acquire Interlott Technologies, Inc.
    
    
    1,435,130
    
    
    
    
    
    
    
    20,622
    
    
    
    
    
    
    
    
    
    
    
    10,212
    
    
    
    30,834Shares issued under employee stock purchase
and stock award plans
    
    
    424,024
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    843
    
    
    
    2,669
    
    
    
    3,512Shares issued upon exercise of stock options
    
    
    3,259,352
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    752
    
    
    
    23,191
    
    
    
    23,943Tax benefits related to stock award plans
    
    
    
    
    
    
    
    
    
    
    10,432
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,432Balance at February 28, 2004
    
    
    118,395,168
    
    
    $
    923
    
    
    $
    266,320
    
    
    $
    (70,508
    )
    
    $
    839,270
    
    
    $
    (473,716
    )
    
    $
    562,289Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    196,394
    
    
    
    
    
    
    
    196,394Other comprehensive income (loss), net of tax:Foreign currency translation, net of tax
benefits of $4 million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,618
    
    
    
    
    
    
    
    
    
    
    
    24,618Unrecognized gain on interest rate locks
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,988
    
    
    
    
    
    
    
    
    
    
    
    1,988Unrecognized net gain on derivative instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    677
    
    
    
    
    
    
    
    
    
    
    
    677Unrealized loss on investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    (2
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    223,675Treasury shares purchased
    
    
    (5,262,900
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (120,658
    )
    
    
    (120,658
    )Cash dividends declared on common stock ($0.34 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40,101
    )
    
    
    
    
    
    
    (40,101
    )Shares issued under employee stock purchase
and stock award plans
    
    
    356,699
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    724
    
    
    
    4,409
    
    
    
    5,133Shares issued upon exercise of stock options
    
    
    1,517,784
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,320
    )
    
    
    24,866
    
    
    
    13,546Stock option compensation
    
    
    
    
    
    
    
    
    
    
    630
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    630Tax benefits related to stock award plans
    
    
    
    
    
    
    
    
    
    
    11,254
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,254Treasury stock retirement
    
    
    
    
    
    
    (349
    )
    
    
    
    
    
    
    
    
    
    
    (528,838
    )
    
    
    529,187
    
    
    
    July 2004 two-for-one stock split
    
    
    
    
    
    
    592
    
    
    
    
    
    
    
    
    
    
    
    (592
    )
    
    
    
    
    
    
    Balance at February 26, 2005
    
    
    115,006,751
    
    
    $
    1,166
    
    
    $
    278,204
    
    
    $
    (43,227
    )
    
    $
    455,537
    
    
    $
    (35,912
    )
    
    $
    655,768Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    211,045
    
    
    
    
    
    
    
    211,045Other comprehensive income (loss), net of tax:Foreign currency translation, net of tax
benefits of $4 million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,313
    
    
    
    
    
    
    
    
    
    
    
    7,313Amortization of unrecognized gain on interest rate
locks to interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (330
    )
    
    
    
    
    
    
    
    
    
    
    (330
    )Unrecognized net gain on derivative instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    507
    
    
    
    
    
    
    
    
    
    
    
    507Reclassification for loss included in net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75
    
    
    
    
    
    
    
    
    
    
    
    75Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    218,610Treasury shares purchased
    
    
    (1,326,100
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32,051
    )
    
    
    (32,051
    )Cash dividends declared on common stock ($0.34 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (41,947
    )
    
    
    
    
    
    
    (41,947
    )Shares issued under employee stock purchase
and stock award plans
    
    
    317,183
    
    
    
    1
    
    
    
    1,942
    
    
    
    
    
    
    
    (1,219
    )
    
    
    4,509
    
    
    
    5,233Shares issued upon exercise of stock options
    
    
    935,225
    
    
    
    5
    
    
    
    5,696
    
    
    
    
    
    
    
    (5,407
    )
    
    
    9,178
    
    
    
    9,472Shares issued upon conversion of debentures
    
    
    12,246,166
    
    
    
    100
    
    
    
    146,962
    
    
    
    
    
    
    
    (23,057
    )
    
    
    54,276
    
    
    
    178,281Unearned
compensation  restricted stock
    
    
    
    
    
    
    
    
    
    
    5,336
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,336Tax benefits related to stock award plans
    
    
    
    
    
    
    
    
    
    
    6,670
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,670Balance at February 25, 2006
    
    
    127,179,225
    
    
    $
    1,272
    
    
    $
    444,810
    
    
    $
    (35,662
    )
    
    $
    594,952
    
    
    $
    
    
    
    $
    1,005,372
  - 85 -




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##### Table of Contents



NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Organization
 Basis of presentation and consolidation
    Revenue recognition
 Lottery and gaming transaction processing services
 Facilities management contracts
 
    
    Persuasive evidence of an arrangement exists, which is typically when a customer contract has been signed
    
    Services have been rendered
    
    Our fee is deemed to be fixed or determinable and free of contingencies or significant uncertainties
    
    Collectibility is reasonably assured
  - 86 -




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##### Table of Contents



NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Product sales contracts
      
    
    Persuasive evidence of an arrangement exists, which is typically when a customer contract has been signed
    
    The product has been delivered
    
    Our fee is deemed to be fixed or determinable and free of contingencies or significant uncertainties
    
    Collectibility is reasonably assured
   - 87 -




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##### Table of Contents



NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Non-lottery transaction processing services
  Liquidated damage assessments
 Stock-based compensation
  - 88 -




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##### Table of Contents



NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Fiscal Year EndedFebruary 25, 2006
    
    
    February 26, 2005
        
    
    February 28, 2004(Dollars in thousands, except per share amounts)Net income, as reported
    
    $
    211,045
    
    
    $
    196,394
    
    
    $
    183,200Add: Stock-based compensation expense included
in reported net income, net of related tax effects
    
    
    3,857
    
    
    
    3,134
    
    
    
    2,067Deduct: Total stock-based compensation expense
determined under the fair value method for all
awards, net of related tax effects
    
    
    (8,497
    )
    
    
    (8,006
    )
    
    
    (6,540
    )Pro forma net income
    
    $
    206,405
    
    
    $
    191,522
    
    
    $
    178,727Basic earnings per share:As reported
    
    $
    1.73
    
    
    $
    1.68
    
    
    $
    1.57Pro forma
    
    
    1.69
    
    
    
    1.64
    
    
    
    1.53Diluted earnings per share:As reported
    
    $
    1.63
    
    
    $
    1.50
    
    
    $
    1.40Pro forma
    
    
    1.59
    
    
    
    1.46
    
    
    
    1.36Estimated weighted average fair value
of options granted per share
    
    $
    7.00
    
    
    $
    9.00
    
    
    $
    5.00Principal assumptions:Risk-free interest rate
    
    
    4.0
    %
    
    
    3.1
    %
    
    
    2.4
    %Expected life (in years)
    
    
    4.5
    
    
    
    4.1
    
    
    
    3.8Expected volatility
    
    
    34.8
    %
    
    
    37.6
    %
    
    
    39.0
    %Expected dividend yield
    
    
    1.4
    %
    
    
    1.1
    %
    
    
    2.0
    %
 FASB Statement No. 123R
  - 89 -




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##### Table of Contents



NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
  SEC Staff Accounting Bulletin No. 107
 Use of estimates
 Foreign currency translation
 Fiscal Year EndedFebruary 25, 2006
    
    
    February 26, 2005
        
    
    February 28, 2004(Dollars in thousands)Service revenue
    
    $
    1,461
    
    
    $
    (2,357
    )
    
    $
    (3,601
    )Other income (expense)
    
    
    (2,750
    )
    
    
    (1,365
    )
    
    
    (185
    )Total net foreign exchange losses
    
    $
    (1,289
    )
    
    $
    (3,722
    )
    
    $
    (3,786
    )
  - 90 -




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##### Table of Contents



NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Derivatives and hedging transactions
   Interest rate swaps
  Research and development
 Advertising costs
 - 91 -




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##### Table of Contents



NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Income taxes
 Cash and cash equivalents
 Investment securities available-for-sale
 Trade and other receivables, net
 Inventories and obsolescence
 - 92 -




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##### Table of Contents



NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Systems, equipment and other assets relating to contracts, net
 
    
    hard costs (for example: terminals, mainframe computers and communications equipment) and;
    
    soft costs (for example: software development).
   Property, plant and equipment, net
  Capitalized computer software costs
 Specific to customer contracts
 Product offerings
 - 93 -




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##### Table of Contents



NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
  February 25, 2006
    
    
    February 26, 2005(Dollars in thousands)Specific to customer contracts
    
    $
    55,644
    
    
    $
    53,407Product offerings
    
    
    4,980
    
    
    
    7,627$
    60,624
    
    
    $
    61,034
  Fiscal Year EndedFebruary 25, 2006
    
    
    February 26, 2005
    
    
    February 28, 2004(Dollars in thousands)Specific to customer contracts
    
    $
    15,251
    
    
    $
    12,420
    
    
    $
    10,447Product offerings
    
    
    2,799
    
    
    
    2,447
    
    
    
    1,544$
    18,050
    
    
    $
    14,867
    
    
    $
    11,991
 Goodwill and other intangible assets
  Impairment of long-lived assets
 - 94 -




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##### Table of Contents



NOTE 2  COMMON STOCK SPLIT AND TREASURY STOCK RETIREMENT
   NOTE 3  ACQUISITION OF THE COMPANY
   NOTE 4  BUSINESS ACQUISITIONS
 PolCard S.A.
   - 95 -




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##### Table of Contents



NOTE 4
 BUSINESS ACQUISITIONS (continued)
  Buyout Percentageof the PolCard

    
    Range ofExercise
Date Commencing In
    
    Outstanding Equity

    
    Buyout PriceMay 2007
    
    
    12.6
    %
    
    $
    20 to $30 millionMay 2008
    
    
    6.3
    %
    
    $
    11 to $17 millionMay 2009
    
    
    6.3
    %
    
    $
    13 to $19 million
 BillBird S.A.
 Leeward Islands Lottery Holding Company Inc.
 Spielo Manufacturing Incorporated
  Current assets
    
    $
    18,616Systems, equipment and other assets relating to contracts, net
    
    
    13,710Goodwill
    
    
    112,917Property, plant and equipment, net
    
    
    5,646Intangible assets, net
    
    
    31,470Sales-type lease receivables
    
    
    185Deferred income taxes
    
    
    1,683Total Assets Acquired
    
    
    184,227Current liabilities
    
    
    8,056Long-term debt, less current portion
    
    
    280Deferred income taxes
    
    
    12,644Total Liabilities Assumed
    
    
    20,980Net Assets Acquired
    
    $
    163,247
 - 96 -




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##### Table of Contents



NOTE 4  BUSINESS ACQUISITIONS (continued)
  Weighted

    
    GrossAverage

    
    CarryingPeriod

    
    Amount(in thousands)Subject to amortizationCustomer contracts
    
    
    7
    
    
    $
    19,840Computer software
    
    
    4
    
    
    
    8,200Non-compete agreement
    
    
    5
    
    
    
    370Trademarks
    
    
    4
    
    
    
    16028,570Not
subject to amortizationTrademarks
    
    
    
    
    
    
    2,900$
    31,470
 NOTE 5  INVENTORIES
 February 25, 2006
    
    
    February 26, 2005(Dollars in thousands)Raw materials
    
    $
    19,465
    
    
    $
    29,622Work in progress
    
    
    37,157
    
    
    
    15,492Inventoried costs related to long-term contracts
    
    
    25,606
    
    
    
    6,800Finished goods
    
    
    5,796
    
    
    
    9,221$
    88,024
    
    
    $
    61,135
   NOTE 6  SYSTEMS, EQUIPMENT AND OTHER ASSETS RELATING TO CONTRACTS, NET
 February 25, 2006
    
    
    February 26, 2005(Dollars in thousands)Land and buildings
    
    $
    1,182
    
    
    $
    1,182Computer terminals and systems
    
    
    1,436,750
    
    
    
    1,407,134Furniture and equipment
    
    
    176,440
    
    
    
    186,891Contracts in progress
    
    
    50,889
    
    
    
    30,4071,665,261
    
    
    
    1,625,614Less accumulated depreciation
    
    
    972,716
    
    
    
    905,176$
    692,545
    
    
    $
    720,438
 - 97 -




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##### Table of Contents



NOTE 7  PROPERTY, PLANT AND EQUIPMENT, NET
 February 25, 2006
    
    
    February 26, 2005(Dollars in thousands)Land and buildings
    
    $
    44,303
    
    
    $
    43,667Furniture and equipment
    
    
    127,871
    
    
    
    124,562Construction in progress
    
    
    38,751
    
    
    
    14,300210,925
    
    
    
    182,529Less accumulated depreciation
    
    
    109,509
    
    
    
    107,971$
    101,416
    
    
    $
    74,558
   NOTE 8  GOODWILL AND OTHER INTANGIBLE ASSETS
   Fiscal Year EndedFebruary 25, 2006
    
    
    February 26, 2005(Dollars in thousands)Balance at the beginning of the year
    
    $
    331,022
    
    
    $
    188,612Goodwill acquired during the year
    
    
    15,577
    
    
    
    144,532Adjustments to purchase price allocations during
the year
    
    
    (503
    )
    
    
    (2,122
    )Balance at the end of the year
    
    $
    346,096
    
    
    $
    331,022
 - 98 -




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NOTE 8  GOODWILL AND OTHER INTANGIBLE ASSETS (continued)
  Fiscal Year EndedFebruary 25, 2006
    
    
    February 26, 2005(Dollars in thousands)Balance at the beginning of the year
    
    $
    70,839
    
    
    $
    28,231Intangible assets acquired during the year:Purchase business combination related:Customer contracts
    
    
    3,852
    
    
    
    43,200Capitalized computer software
    
    
    134
    
    
    
    8,447Trademarks
    
    
    
    
    
    
    3,060Non-compete agreement
    
    
    
    
    
    
    4473,986
    
    
    
    55,154License fee
    
    
    1,750
    
    
    
    Total intangible assets acquired
    
    
    5,736
    
    
    
    55,154Other
    
    
    (1,781
    )
    
    
    70Amortization expense
    
    
    (10,582
    )
    
    
    (12,616
    )Balance at the end of the year
    
    $
    64,212
    
    
    $
    70,839
   As of February 25, 2006Weighted Average
    
    
    Gross
    
    
    
    
    
    
    NetAmortization
    
    
    Carrying
    
    
    Accumulated
    
    
    CarryingPeriod
    
    
    Amount
    
    
    Amortization
    
    
    Amount(Dollars in thousands)Subject to amortizationCustomer contracts
    

    10
    
    
    $
    56,162
    
    
    $
    15,735
    
    
    $
    40,427Capitalized computer software
    

    5
    
    
    
    24,599
    
    
    
    19,619
    
    
    
    4,980License fees
    

    20
    
    
    
    14,250
    
    
    
    1,728
    
    
    
    12,522Patents
    

    6
    
    
    
    5,100
    
    
    
    2,053
    
    
    
    3,047Non-compete agreement
    

    4
    
    
    
    669
    
    
    
    415
    
    
    
    254Trademarks
    

    4
    
    
    
    160
    
    
    
    78
    
    
    
    82100,940
    
    
    
    39,628
    
    
    
    61,312Not
subject to amortizationTrademarks
    
    
    
    
    
    
    2,900
    
    
    
    
    
    
    
    2,900$
    103,840
    
    
    $
    39,628
    
    
    $
    64,212
 - 99 -




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##### Table of Contents



NOTE 8  GOODWILL AND OTHER INTANGIBLE ASSETS (continued)
 As of February 26, 2005Weighted Average
    
    
    Gross
    
    
    
    
    
    
    NetAmortization
    
    
    Carrying
    
    
    Accumulated
    
    
    CarryingPeriod
    
    
    Amount
    
    
    Amortization
    
    
    Amount(Dollars in thousands)Subject to amortizationCustomer contracts
    

    10
    
    
    $
    54,244
    
    
    $
    9,810
    
    
    $
    44,434Capitalized computer software
    

    5
    
    
    
    24,465
    
    
    
    16,838
    
    
    
    7,627License fee
    

    20
    
    
    
    12,500
    
    
    
    1,038
    
    
    
    11,462Patents
    

    6
    
    
    
    5,100
    
    
    
    1,203
    
    
    
    3,897Non-compete agreement
    

    4
    
    
    
    669
    
    
    
    275
    
    
    
    394Trademarks
    

    4
    
    
    
    160
    
    
    
    35
    
    
    
    12597,138
    
    
    
    29,199
    
    
    
    67,939Not
subject to amortizationTrademarks
    
    
    
    
    
    
    2,900
    
    
    
    
    
    
    
    2,900$
    100,038
    
    
    $
    29,199
    
    
    $
    70,839
   Fiscal Year EndedFebruary 25, 2006
    
    
    February 26, 2005
    
    
    February 28, 2004(Dollars in thousands)Customer contracts
    
    $
    6,061
    
    
    $
    8,468
    
    
    $
    1,342Capitalized computer software
    
    
    2,799
    
    
    
    2,447
    
    
    
    1,544Patents
    
    
    850
    
    
    
    850
    
    
    
    353License fee
    
    
    690
    
    
    
    625
    
    
    
    413Non-compete agreement
    
    
    139
    
    
    
    191
    
    
    
    83Trademarks
    
    
    43
    
    
    
    35
    
    
    
    Total intangibles amortization
    
    $
    10,582
    
    
    $
    12,616
    
    
    $
    3,735
  AmortizationFiscal Year
    
    Expense2007
    
    $
    9,6752008
    
    
    9,1172009
    
    
    6,3452010
    
    
    5,6032011
    
    
    4,642Thereafter
    
    
    25,930Total
    
    $
    61,312
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##### Table of Contents



NOTE 9  LICENSE FEE
   NOTE 10  REFUNDABLE PERFORMANCE DEPOSIT
  On or before January 2, 2007
    
    $
    8,000On or before January 2, 2008
    
    
    2,000On or before January 2, 2009
    
    
    1,000On or before January 2, 2010
    
    
    1,000$
    12,000
  - 101 -




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##### Table of Contents



NOTE 11  RESTRICTED ASSETS
  NOTE 12  PRODUCT WARRANTIES
    Fiscal Year EndedFebruary 25, 2006
    
    
    February 26, 2005(Dollars in thousands)Balance at the beginning of the year
    
    $
    1,634
    
    
    $
    749Opening reserve balance associated with acquisitions
    
    
    
    
    
    
    1,126Additional reserves
    
    
    733
    
    
    
    1,508Charges incurred
    
    
    (630
    )
    
    
    (1,201
    )Change in estimate
    
    
    (524
    )
    
    
    (603
    )Other
    
    
    42
    
    
    
    55Balance at the end of the year
    
    $
    1,255
    
    
    $
    1,634
  - 102 -




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##### Table of Contents



NOTE 13  LONG -TERM DEBT
 February 25, 2006

    
    February 26, 2005(Dollars in thousands)4.75% Senior Notes due October 2010
    
    $
    249,745
    
    
    $
    249,6904.50% Senior Notes due December 2009
    
    
    149,687
    
    
    
    149,6045.25% Senior Notes due December 2014
    
    
    148,837
    
    
    
    148,7041.75% Convertible Debentures due December 2021
    
    
    6,615
    
    
    
    175,000Fair value of interest rate swaps
    
    
    (6,063
    )
    
    
    541Other, due through October 2007
    
    
    2,586
    
    
    
    5,266551,407
    
    
    
    728,805Less current portion
    
    
    9,148
    
    
    
    2,476$
    542,259
    
    
    $
    726,329
  Fiscal2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    Thereafter
    
    
    TotalLong-term debt
    
    $
    9,148
    
    
    $
    52
    
    
    $
    
    
    
    $
    148,093
    
    
    $
    245,810
    
    
    $
    148,304
    
    
    $
    551,407
 4.75% Senior Notes
  4.50% Senior Notes and 5.25% Senior Notes
  - 103 -




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##### Table of Contents



NOTE 13  LONG -TERM DEBT (continued)
 1.75% Convertible Debentures
    (i)
    
    if the sale price of our common stock is more than 120% of the conversion price
(approximately $16.50 per share) for at least 20 trading days in a 30 trading-day period prior
to the date of surrender for conversion;(ii)
    
    during any period in which the credit ratings assigned to the Debentures by Moodys or
Standard & Poors are reduced to below Ba1 or BB, respectively, or in which the credit rating
assigned to the Debentures is suspended or withdrawn by either rating agency;(iii)
    
    if the Debentures have been called for redemption; or(iv)
    
    upon the occurrence of specified corporate transactions.
   - 104 -




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##### Table of Contents



NOTE 13  LONG -TERM DEBT (continued)
 Credit Facility
    NOTE 14  FINANCIAL INSTRUMENTS
 Credit risk
 Cash and cash equivalents
 Investment securities available-for-sale
 February 25, 2006
    
    
    February 26, 2005(Dollars in thousands)State and Municipal Auction Rate Securities
    
    $
    176,025
    
    
    $
    196,825State and Municipal Variable Rate DemandObligations
    
    
    84,700
    
    
    
    $
    260,725
    
    
    $
    196,825
 - 105 -




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##### Table of Contents



NOTE 14  FINANCIAL INSTRUMENTS (continued)
 Long-term debt
 February 25, 2006

    
    February 26, 2005Estimated

    
    
    
    
    
    EstimatedCarrying

    
    Fair

    
    Carrying
    
    
    FairValue

    
    Value

    
    Value
    
    
    Value(Dollars in thousands)4.75% Senior Notes due October 2010
    
    $
    249,745
    
    
    $
    245,015
    
    
    $
    249,690
    
    
    $
    248,5654.50% Senior Notes due December 2009
    
    
    149,687
    
    
    
    145,946
    
    
    
    149,604
    
    
    
    148,6205.25% Senior Notes due December 2014
    
    
    148,837
    
    
    
    150,771
    
    
    
    148,704
    
    
    
    149,2381.75% Convertible Debentures due
December 2021
    
    
    6,615
    
    
    
    16,124
    
    
    
    175,000
    
    
    
    304,500Fair value of interest rate swaps
    
    
    (6,063
    )
    
    
    (6,063
    )
    
    
    541
    
    
    
    541Other, due through October 2007
    
    
    2,586
    
    
    
    2,586
    
    
    
    5,266
    
    
    
    5,266$
    551,407
    
    
    $
    554,379
    
    
    $
    728,805
    
    
    $
    856,730
 Foreign currency exchange contracts
 February 25, 2006
    
    
    February 26, 2005Buy
    
    
    Sell
    
    
    Buy
    
    
    SellContracts
    
    
    Contracts
    
    
    Contracts
    
    
    Contracts(Dollars in thousands)Brazilian real
    
    $
    10,000
    
    
    $
    15,000
    
    
    $
    10,100
    
    
    $
    Mexican peso
    
    
    5,579
    
    
    
    946
    
    
    
    3,929
    
    
    
    Taiwan dollar
    
    
    3,312
    
    
    
    627
    
    
    
    7,010
    
    
    
    Canadian dollar
    
    
    2,776
    
    
    
    3,211
    
    
    
    6,491
    
    
    
    Swedish krona
    
    
    2,351
    
    
    
    
    
    
    
    3,705
    
    
    
    1,250Euro
    
    
    2,207
    
    
    
    23,862
    
    
    
    6,195
    
    
    
    24,876Pounds sterling
    
    
    1,924
    
    
    
    
    
    
    
    7,643
    
    
    
    11,618Columbian peso
    
    
    
    
    
    
    4,079
    
    
    
    
    
    
    
    Czech koruna
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,108Other
    
    
    3,986
    
    
    
    4,339
    
    
    
    1,327
    
    
    
    8,106$
    32,135
    
    
    $
    52,064
    
    
    $
    46,400
    
    
    $
    48,958
  - 106 -




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##### Table of Contents



NOTE 14  FINANCIAL INSTRUMENTS (continued)
 Interest rate swaps
 February 25, 2006
    
    
    February 26, 2005Debt
    
    
    Interest Rate
    
    
    Debt
    
    
    Interest RateCarrying
    
    
    Swaps
    
    
    Carrying
    
    
    SwapsAmount
    
    
    Outstanding
    
    
    Amount
    
    
    Outstanding(Dollars in thousands)4.75% Senior Notes due October 2010
    
    $
    249,745
    
    
    $
    150,000
    
    
    $
    249,690
    
    
    $
    150,0004.50% Senior Notes due December 2009
    
    
    149,687
    
    
    
    50,000
    
    
    
    149,604
    
    
    
    50,0005.25% Senior Notes due December 2014
    
    
    148,837
    
    
    
    25,000
    
    
    
    148,704
    
    
    
    25,000
   Treasury rate lock agreements
 NOTE 15  COMMITMENTS AND CONTINGENCIES
 Contracts
 Acquisition
 - 107 -




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NOTE 15  COMMITMENTS AND CONTINGENCIES (continued)
    Litigation
 Brazilian Legal Proceedings
 The CEF Contract Proceedings  Background
  - 108 -




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##### Table of Contents



NOTE 15  COMMITMENTS AND CONTINGENCIES (continued)
   Criminal Allegations Against Certain Employees And Related SEC Investigation
       - 109 -




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##### Table of Contents



NOTE 15  COMMITMENTS AND CONTINGENCIES (continued)
     Civil Action By The Public Ministry Attorneys
  - 110 -




---



##### Table of Contents



NOTE 15  COMMITMENTS AND CONTINGENCIES (continued)
     Popular Claim
 - 111 -




---



##### Table of Contents



NOTE 15  COMMITMENTS AND CONTINGENCIES (continued)
  TCU Audit
    - 112 -




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##### Table of Contents



NOTE 15  COMMITMENTS AND CONTINGENCIES (continued)
  Serlopar Suit
 Other Legal Proceedings
 Shareholder Class Action Suits
 Ralph Sellite, individually
and on behalf of all others similar situated, v. GTECH Holdings Corporation, W. Bruce Turner,
Robert M. Dewey, Paget L. Alves, Christine M. Cournoyer, James F. McCann, The Rt. Hon. Sir Jeremy
Hanley KCMG, Philip R. Lochner, Jr., Anthony Ruys and Burnett W. Donoho
 - 113 -




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##### Table of Contents



NOTE 15  COMMITMENTS AND CONTINGENCIES (continued)
 Claire Partners, on
behalf of itself and all others similar situated, v. W. Bruce Turner, Robert M. Dewey, Jr., Paget
L. Alves, Christine M. Cournoyer, Burnett W. Donoho, The Rt. Hon. Sir Jeremy Hanley KCMG, Philip R.
Lochner, Jr., James F. McCann, Anthony Ruys, GTECH Holdings Corporation, and Lottomatica
S.p.A.
  Argentina Money Transfer Matter
   - 114 -




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##### Table of Contents



NOTE 15  COMMITMENTS AND CONTINGENCIES (continued)
 Trinidad and Tobago
    Cohen Suit
 - 115 -




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##### Table of Contents



NOTE 15  COMMITMENTS AND CONTINGENCIES (continued)
 Howard S. Cohen v. GTECH
Corporation, GTECH Holdings Corporation, Michael J. Tuchman, Levenfeld Pearlstein, Charlene F.
Marant and Marant Enterprises Holdings LLC
 NOTE 16  GUARANTEES AND INDEMNIFICATIONS
 Performance and other bonds
 Performance bonds
    
    $
    258,656Financial guarantees
    
    
    44,618Litigation bonds
    
    
    7,870All other bonds
    
    
    4,964$
    316,108
 - 116 -




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##### Table of Contents



NOTE 16  GUARANTEES AND INDEMNIFICATIONS (continued)
 Atronic
   Loxley GTECH Private Limited
 Lottery Technology Services Corporation
  - 117 -




---



##### Table of Contents



NOTE 16  GUARANTEES AND INDEMNIFICATIONS (continued)
 Lottery Technology Enterprises
 World Headquarters Facility
   - 118 -




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##### Table of Contents



NOTE 17  ACCUMULATED OTHER COMPREHENSIVE LOSS
  Foreign
    
    
    Net Gain (Loss)
    
    
    Unrealized
    
    
    TreasuryCurrency
    
    
    on Derivative
    
    
    Gain (Loss)
    
    
    RateTranslation
    
    
    Instruments
    
    
    on Investments
    
    
    Lock
    
    
    Total(Dollars in thousands)Balance at February 22, 2003
    
    $
    (95,695
    )
    
    $
    265
    
    
    $
    (58
    )
    
    $
    
    
    
    $
    (95,488
    )Changes during the year, net of tax
    
    
    26,418
    
    
    
    (1,423
    )
    
    
    (15
    )
    
    
    
    
    
    
    24,980Balance at February 28, 2004
    
    
    (69,277
    )
    
    
    (1,158
    )
    
    
    (73
    )
    
    
    
    
    
    
    (70,508
    )Changes during the year, net of tax
    
    
    24,618
    
    
    
    677
    
    
    
    (2
    )
    
    
    1,988
    
    
    
    27,281Balance at February 26, 2005
    
    
    (44,659
    )
    
    
    (481
    )
    
    
    (75
    )
    
    
    1,988
    
    
    
    (43,227
    )Changes during the year, net of tax
    
    
    7,313
    
    
    
    507
    
    
    
    75
    
    
    
    (330
    )
    
    
    7,565Balance at February 25, 2006
    
    $
    (37,346
    )
    
    $
    26
    
    
    $
    
    
    
    $
    1,658
    
    
    $
    (35,662
    )
 Foreign currency translation
 Treasury rate lock
 NOTE 18  CONSOLIDATION OF VARIABLE INTEREST ENTITIES
    - 119 -




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##### Table of Contents



NOTE 18  CONSOLIDATION OF VARIABLE INTEREST ENTITIES (continued)
 West Greenwich Technology Associates, L.P.
  Aitken Spence GTECH Private Limited
 NOTE 19  STOCK-BASED COMPENSATION PLANS
    - 120 -




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##### Table of Contents



NOTE 19  STOCK-BASED COMPENSATION PLANS (continued)
  Fiscal Year EndedFebruary 25, 2006
    
    February 26, 2005
    
    February 28, 2004Weighted
    
    
    
    
    
    Weighted
    
    
    
    
    
    WeightedShares
    
    Average
    
    Shares
    
    Average
    
    Shares
    
    Averageunder
    
    Exercise
    
    under
    
    Exercise
    
    under
    
    ExerciseOptions
    
    Price
    
    Options
    
    Price
    
    Options
    
    PriceOutstanding at beginning of year
    
    
    8,142,416
    
    
    $
    13.50
    
    
    
    8,675,900
    
    
    $
    10.52
    
    
    
    10,703,852
    
    
    $
    8.32Granted
    
    
    1,067,200
    
    
    
    24.04
    
    
    
    1,326,500
    
    
    
    28.77
    
    
    
    2,170,900
    
    
    
    17.10Exercised
    
    
    (935,225
    )
    
    
    10.13
    
    
    
    (1,517,784
    )
    
    
    8.92
    
    
    
    (3,259,352
    )
    
    
    7.35Forfeited
    
    
    (564,850
    )
    
    
    21.42
    
    
    
    (342,200
    )
    
    
    17.28
    
    
    
    (939,500
    )
    
    
    11.68Outstanding at end of year
    
    
    7,709,541
    
    
    
    14.79
    
    
    
    8,142,416
    
    
    
    13.50
    
    
    
    8,675,900
    
    
    
    10.52Exercisable at end of year
    
    
    4,928,860
    
    
    $
    10.14
    
    
    
    4,448,240
    
    
    $
    9.23
    
    
    
    3,927,000
    
    
    $
    8.60
  Weighted Average
    
    
    
    
    
    
    WeightedRemaining
    
    
    
    
    
    
    
    
    
    
    AverageRange of
    
    Options
    
    
    Contractual
    
    
    Exercise
    
    
    Options
    
    
    ExerciseExercise Prices
    
    Outstanding
    
    
    Life (Years)
    
    
    Price
    
    
    Exercisable
    
    
    Price$  4.00 - $10.00
    
    
    3,160,365
    
    
    
    5.2
    
    
    $
    7.45
    
    
    
    3,027,865
    
    
    $
    7.35$10.01 - $15.00
    
    
    1,293,000
    
    
    
    6.1
    
    
    
    12.37
    
    
    
    1,273,000
    
    
    
    12.35$15.01 - $25.00
    
    
    2,230,426
    
    
    
    8.0
    
    
    
    19.94
    
    
    
    530,624
    
    
    
    17.24$25.01 - $30.00
    
    
    1,025,750
    
    
    
    8.3
    
    
    
    29.28
    
    
    
    97,371
    
    
    
    29.147,709,541
    
    
    
    
    
    
    
    
    
    
    
    4,928,860
  - 121 -




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##### Table of Contents



NOTE 20  EMPLOYEE STOCK PURCHASE PLAN
  
    
    August 31, 2009;
    
    early termination by the Board of Directors or;
    
    the date the shares provided by the ESPP have been purchased.
  NOTE 21  EMPLOYEE BENEFITS
      - 122 -




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##### Table of Contents



NOTE 22  EARNINGS PER SHARE
  Fiscal Year EndedFebruary 25, 2006
    
    
    February 26, 2005
    
    
    February 28, 2004(In thousands, except per share amounts)Numerator:Net income (Numerator for basic earnings
per share)
    
    $
    211,045
    
    
    $
    196,394
    
    
    $
    183,200Effect of dilutive securities:Interest expense on 1.75% Convertible
Debentures, net of tax
    
    
    970
    
    
    
    2,125
    
    
    
    2,126Numerator for diluted earnings per share
    
    $
    212,015
    
    
    $
    198,519
    
    
    $
    185,326Denominator:Denominator
for basic earnings per share -
weighted average shares
    
    
    121,884
    
    
    
    116,739
    
    
    
    116,464Effect of dilutive securities:1.75% Convertible Debentures
    
    
    5,545
    
    
    
    12,727
    
    
    
    12,727Employee stock options
    
    
    2,696
    
    
    
    2,859
    
    
    
    3,158Unvested stock awards and employee stock
purchase plan shares
    
    
    260
    
    
    
    234
    
    
    
    276Dilutive potential common shares
    
    
    8,501
    
    
    
    15,820
    
    
    
    16,161Denominator
for diluted earnings per share -
adjusted weighted-average shares and
assumed conversions
    
    
    130,385
    
    
    
    132,559
    
    
    
    132,625Basic earnings per share
    
    $
    1.73
    
    
    $
    1.68
    
    
    $
    1.57Diluted earnings per share
    
    $
    1.63
    
    
    $
    1.50
    
    
    $
    1.40
  - 123 -




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##### Table of Contents



NOTE 23  INCOME TAXES
  Fiscal Year EndedFebruary 25, 2006
    
    
    February 26, 2005
    
    
    February 28, 2004(Dollars in thousands)United States
    
    $
    52,538
    
    
    $
    24,466
    
    
    $
    37,355Foreign
    
    
    265,838
    
    
    
    281,920
    
    
    
    253,439$
    318,376
    
    
    $
    306,386
    
    
    $
    290,794
  Fiscal Year EndedFebruary 25, 2006
    
    
    February 26, 2005
    

    
    February 28, 2004(Dollars in thousands)Current:Federal
    
    $
    49,480
    
    
    $
    12,254
    
    
    $
    (4,145
    )State
    
    
    2,862
    
    
    
    6,892
    
    
    
    5,877Foreign
    
    
    41,398
    
    
    
    56,106
    
    
    
    46,405Total Current
    
    
    93,740
    
    
    
    75,252
    
    
    
    48,137Deferred:Federal
    
    $
    6,800
    
    
    $
    44,007
    
    
    $
    58,510State
    
    
    569
    
    
    
    2,532
    
    
    
    3,049Foreign
    
    
    6,222
    
    
    
    (11,799
    )
    
    
    (2,102
    )Total Deferred
    
    
    13,591
    
    
    
    34,740
    
    
    
    59,457Total Provision
    
    $
    107,331
    
    
    $
    109,992
    
    
    $
    107,594
  February 25, 2006
    
    
    February 26, 2005(Dollars in thousands)Deferred tax assets:Accruals not currently deductible for tax purposes
    
    $
    16,851
    
    
    $
    21,933Cash collected in excess of revenue recognized
    
    
    16,503
    
    
    
    9,952Providence building lease
    
    
    11,469
    
    
    
    Depreciation
    
    
    9,454
    
    
    
    7,832Net operating losses
    
    
    8,045
    
    
    
    1,682Tax credit carryforward
    
    
    5,526
    
    
    
    13,658Inventory reserves
    
    
    3,445
    
    
    
    5,471Interest rate swap gain
    
    
    613
    
    
    
    736Other
    
    
    9,529
    
    
    
    9,67781,435
    
    
    
    70,941Valuation allowance for deferred tax assets
    
    
    (8,045
    )
    
    
    (1,682
    )Deferred tax assets, net of valuation allowance
    
    
    73,390
    
    
    
    69,259Deferred tax liabilities:Depreciation
    
    
    (120,999
    )
    
    
    (114,893
    )Acquired intangible assets
    
    
    (12,694
    )
    
    
    (15,333
    )Providence building lease
    
    
    (11,469
    )
    
    
    Contingent interest on convertible debt
    
    
    (540
    )
    
    
    (11,371
    )Other
    
    
    (652
    )
    
    
    (2,237
    )(146,354
    )
    
    
    (143,834
    )Net deferred tax liabilities
    
    $
    (72,964
    )
    
    $
    (74,575
    )
 - 124 -




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##### Table of Contents



NOTE 23  INCOME TAXES (continued)
      Fiscal Year EndedFebruary 25, 2006
    
    February 26, 2005
    
    February 28, 2004Federal income tax using statutory rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State taxes, net of federal benefit
    
    
    1.2
    
    
    
    2.0
    
    
    
    2.0Nondeductible expenses
    
    
    1.2
    
    
    
    0.4
    
    
    
    0.4Tax credits
    
    
    (0.3
    )
    
    
    (0.4
    )
    
    
    (0.4
    )Foreign tax rate differential
    
    
    (2.4
    )
    
    
    (0.1
    )
    
    
    (0.5
    )Other
    
    
    (1.0
    )
    
    
    (1.0
    )
    
    
    0.533.7
    %
    
    
    35.9
    %
    
    
    37.0
    %
 - 125 -




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##### Table of Contents



NOTE 24  TRANSACTIONS WITH RELATED PARTIES
  February 25, 2006
    
    
    February 26, 2005(Dollars in thousands)Lottery Technology Services Corporation
    
    $
    2,704
    
    
    $
    2,693Loxley GTECH Private Ltd.
    
    
    2,050
    
    
    
    Uthingo Management Proprietary Limited
    
    
    1,476
    
    
    
    1,641Italy (Cogetech)
    
    
    1,424
    
    
    
    Lottery Technology Enterprises
    
    
    407
    
    
    
    298Wireless Business Solutions (Proprietary) Limited
    
    
    316
    
    
    
    35$
    8,377
    
    
    $
    4,667
 Lottery Technology Services Corporation
 Loxley GTECH Private Limited
  Uthingo Management Proprietary Limited
 Italy (Cogetech SPA)
 Lottery Technology Enterprises
 - 126 -




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##### Table of Contents



NOTE 24  TRANSACTIONS WITH RELATED PARTIES (continued)
 Wireless Business Solutions (Proprietary) Limited
 West Greenwich Technology Associates, L .P.
 Spelparken
 Delaware LLC
 NOTE 25  LEASES
  Facilities
 Vehicles
 - 127 -




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##### Table of Contents



NOTE 25  LEASES (continued)
  LeaseFiscal Year
    
    Payments(in thousands)2007
    
    $
    20,4312008
    
    
    10,9962009
    
    
    8,0162010
    
    
    6,0782011
    
    
    3,966Thereafter
    
    
    1,428Total minimum lease payments
    
    $
    50,915
  NOTE 26  BUSINESS SEGMENT AND GEOGRAPHIC DATA
   Fiscal Year EndedFebruary 25, 2006
    
    
    February 26, 2005
    
    
    February 28, 2004(Dollars in thousands)Revenues from external sources:United States
    
    $
    667,229
    
    
    $
    599,914
    
    
    $
    531,776Brazil
    
    
    148,634
    
    
    
    93,084
    
    
    
    106,913Poland
    
    
    77,368
    
    
    
    68,499
    
    
    
    47,116United Kingdom
    
    
    69,789
    
    
    
    68,702
    
    
    
    85,595Other foreign
    
    
    341,786
    
    
    
    427,036
    
    
    
    279,930$
    1,304,806
    
    
    $
    1,257,235
    
    
    $
    1,051,330
 Fiscal Year EndedFebruary 25, 2006
    
    
    February 26, 2005
    
    
    February 28, 2004(Dollars in thousands)Systems, equipment and other assets
relating to contracts, net:United States
    
    $
    573,505
    
    
    $
    588,899
    
    
    $
    481,340Poland
    
    
    37,358
    
    
    
    40,857
    
    
    
    27,032Other foreign
    
    
    81,682
    
    
    
    90,682
    
    
    
    82,990$
    692,545
    
    
    $
    720,438
    
    
    $
    591,362
 - 128 -




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##### Table of Contents



NOTE 26  BUSINESS SEGMENT AND GEOGRAPHIC DATA (continued)
  NOTE 27  SUPPLEMENTAL CASH FLOW INFORMATION
  Fiscal Year EndedFebruary 25, 2006
    
    
    February 26, 2005
    
    
    February 28, 2004(Dollars in thousands)Income taxes paid
    
    $
    50,953
    
    
    $
    67,677
    
    
    $
    66,729Interest paid, net of amounts capitalized
    
    
    30,672
    
    
    
    16,412
    
    
    
    5,725
  Fiscal Year EndedFebruary 25, 2006
    
    
    February 26, 2005
    
    
    February 28, 2004(Dollars in thousands)Non-cash activities that occurred in connection
with the conversion of our 1.75% Convertible
Debentures:Issuance of 9,975,660 shares of Holding
common stock
    
    $
    137,166
    
    
    $
    
    
    
    $
    Issuance of 2,270,506 treasury shares
    
    
    31,219
    
    
    
    
    
    
    
    Excess deferred tax liabilities associated
with the contingent interest feature
    
    
    13,733
    
    
    
    
    
    
    
    Forfeited interest
    
    
    285
    
    
    
    
    
    
    
    Debt issuance costs
    
    
    (4,122
    )
    
    
    
    
    
    
    Reclassification to Shareholders Equity
    
    $
    178,281
    
    
    $
    
    
    
    $
    Non-cash investment related to our new world
headquarters facility in Providence, RI
    
    $
    26,393
    
    
    $
    6,604
    
    
    $
    Treasury shares issued under stock award plans
    
    
    2,846
    
    
    
    3,139
    
    
    
    2,437Issuance of 1,435,130 shares of Holding
common stock in connection with the
acquisition of Interlott Technologies, Inc.
    
    
    
    
    
    
    
    
    
    
    30,834
 - 129 -




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##### Table of Contents



NOTE 28  SUPPLEMENTAL GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION
    - 130 -




---



##### Table of Contents



NOTE 28  SUPPLEMENTAL GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (continued)
 
 Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    EliminatingCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Entries

    
    Consolidated(Dollars in thousands)AssetsCurrent Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    158,150
    
    
    $
    77,041
    
    
    $
    
    
    
    $
    235,191Investment securities
available-for-sale
    
    
    
    
    
    
    260,725
    
    
    
    
    
    
    
    
    
    
    
    260,725Trade and other receivables, net
    
    
    
    
    
    
    95,894
    
    
    
    87,667
    
    
    
    
    
    
    
    183,561Due from subsidiaries and
affiliates
    
    
    
    
    
    
    75,758
    
    
    
    
    
    
    
    (75,758
    )
    
    
    Refundable performance deposit
    
    
    
    
    
    
    
    
    
    
    8,000
    
    
    
    
    
    
    
    8,000Inventories
    
    
    
    
    
    
    32,329
    
    
    
    63,906
    
    
    
    (8,211
    )
    
    
    88,024Deferred income taxes
    
    
    
    
    
    
    15,418
    
    
    
    10,980
    
    
    
    
    
    
    
    26,398Other current assets
    
    
    
    
    
    
    12,982
    
    
    
    34,837
    
    
    
    
    
    
    
    47,819Total Current Assets
    
    
    
    
    
    
    651,256
    
    
    
    282,431
    
    
    
    (83,969
    )
    
    
    849,718Systems, Equipment and Other
Assets Relating to Contracts, net
    
    
    
    
    
    
    600,437
    
    
    
    104,241
    
    
    
    (12,133
    )
    
    
    692,545Investment in Subsidiaries and
Affiliates
    
    
    1,005,372
    
    
    
    474,696
    
    
    
    
    
    
    
    (1,480,068
    )
    
    
    Goodwill
    
    
    
    
    
    
    115,981
    
    
    
    230,115
    
    
    
    
    
    
    
    346,096Property, Plant and Equipment, net
    
    
    
    
    
    
    67,002
    
    
    
    34,414
    
    
    
    
    
    
    
    101,416Intangible Assets, net
    
    
    
    
    
    
    19,277
    
    
    
    44,935
    
    
    
    
    
    
    
    64,212Other Assets
    
    
    
    
    
    
    27,272
    
    
    
    18,643
    
    
    
    
    
    
    
    45,915Total Assets
    
    $
    1,005,372
    
    
    $
    1,955,921
    
    
    $
    714,779
    
    
    $
    (1,576,170
    )
    
    $
    2,099,902Liabilities and Shareholders EquityCurrent Liabilities:Accounts payable
    
    $
    
    
    
    $
    52,023
    
    
    $
    41,182
    
    
    $
    
    
    
    $
    93,205Due to subsidiaries and affiliates
    
    
    
    
    
    
    
    
    
    
    75,758
    
    
    
    (75,758
    )
    
    
    Accrued expenses
    
    
    
    
    
    
    23,231
    
    
    
    22,989
    
    
    
    
    
    
    
    46,220Employee compensation
    
    
    
    
    
    
    24,084
    
    
    
    7,720
    
    
    
    
    
    
    
    31,804Advance payments from
customers
    
    
    
    
    
    
    19,758
    
    
    
    44,010
    
    
    
    
    
    
    
    63,768Deferred revenue and advance
billings
    
    
    
    
    
    
    9,213
    
    
    
    8,676
    
    
    
    
    
    
    
    17,889Income taxes payable
    
    
    
    
    
    
    66,646
    
    
    
    452
    
    
    
    
    
    
    
    67,098Taxes other than income taxes
    
    
    
    
    
    
    6,409
    
    
    
    10,697
    
    
    
    
    
    
    
    17,106Current portion of long-term debt
    
    
    
    
    
    
    6,615
    
    
    
    2,533
    
    
    
    
    
    
    
    9,148Total Current Liabilities
    
    
    
    
    
    
    207,979
    
    
    
    214,017
    
    
    
    (75,758
    )
    
    
    346,238Long-Term Debt, less current
portion
    
    
    
    
    
    
    542,206
    
    
    
    53
    
    
    
    
    
    
    
    542,259Other Liabilities
    
    
    
    
    
    
    86,173
    
    
    
    20,498
    
    
    
    
    
    
    
    106,671Deferred Income Taxes
    
    
    
    
    
    
    93,847
    
    
    
    5,515
    
    
    
    
    
    
    
    99,362Shareholders Equity
    
    
    1,005,372
    
    
    
    1,025,716
    
    
    
    474,696
    
    
    
    (1,500,412
    )
    
    
    1,005,372Total Liabilities and
Shareholders Equity
    
    $
    1,005,372
    
    
    $
    1,955,921
    
    
    $
    714,779
    
    
    $
    (1,576,170
    )
    
    $
    2,099,902
 - 131 -




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##### Table of Contents



NOTE 28  SUPPLEMENTAL GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (continued)
 
 Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    EliminatingCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Entries

    
    Consolidated(Dollars in thousands)AssetsCurrent Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    23,020
    
    
    $
    71,426
    
    
    $
    
    
    
    $
    94,446Investment securities
available-for-sale
    
    
    
    
    
    
    196,825
    
    
    
    
    
    
    
    
    
    
    
    196,825Trade and other receivables, net
    
    
    
    
    
    
    85,427
    
    
    
    86,740
    
    
    
    
    
    
    
    172,167Due from subsidiaries and
affiliates
    
    
    
    
    
    
    53,345
    
    
    
    
    
    
    
    (53,345
    )
    
    
    Refundable performance deposit
    
    
    
    
    
    
    
    
    
    
    8,000
    
    
    
    
    
    
    
    8,000Inventories
    
    
    
    
    
    
    30,387
    
    
    
    34,366
    
    
    
    (3,618
    )
    
    
    61,135Deferred income taxes
    
    
    
    
    
    
    14,030
    
    
    
    17,405
    
    
    
    
    
    
    
    31,435Other current assets
    
    
    
    
    
    
    6,669
    
    
    
    19,977
    
    
    
    
    
    
    
    26,646Total Current Assets
    
    
    
    
    
    
    409,703
    
    
    
    237,914
    
    
    
    (56,963
    )
    
    
    590,654Systems, Equipment and Other
Assets Relating to Contracts, net
    
    
    
    
    
    
    616,204
    
    
    
    118,436
    
    
    
    (14,202
    )
    
    
    720,438Investment in Subsidiaries and
Affiliates
    
    
    655,768
    
    
    
    448,499
    
    
    
    
    
    
    
    (1,104,267
    )
    
    
    Goodwill
    
    
    
    
    
    
    115,981
    
    
    
    215,041
    
    
    
    
    
    
    
    331,022Property, Plant and Equipment, net
    
    
    
    
    
    
    40,120
    
    
    
    34,438
    
    
    
    
    
    
    
    74,558Intangible Assets, net
    
    
    
    
    
    
    22,157
    
    
    
    48,682
    
    
    
    
    
    
    
    70,839Other Assets
    
    
    
    
    
    
    32,890
    
    
    
    34,740
    
    
    
    
    
    
    
    67,630Total Assets
    
    $
    655,768
    
    
    $
    1,685,554
    
    
    $
    689,251
    
    
    $
    (1,175,432
    )
    
    $
    1,855,141Liabilities and Shareholders EquityCurrent Liabilities:Accounts payable
    
    $
    
    
    
    $
    41,525
    
    
    $
    57,709
    
    
    $
    
    
    
    $
    99,234Due to subsidiaries and affiliates
    
    
    
    
    
    
    
    
    
    
    53,345
    
    
    
    (53,345
    )
    
    
    Accrued expenses
    
    
    
    
    
    
    29,277
    
    
    
    24,950
    
    
    
    
    
    
    
    54,227Employee compensation
    
    
    
    
    
    
    13,252
    
    
    
    8,610
    
    
    
    
    
    
    
    21,862Advance payments from customers
    
    
    
    
    
    
    8,113
    
    
    
    34,752
    
    
    
    
    
    
    
    42,865Deferred revenue and advance
billings
    
    
    
    
    
    
    11,369
    
    
    
    18,336
    
    
    
    
    
    
    
    29,705Income taxes payable
    
    
    
    
    
    
    11,902
    
    
    
    4,597
    
    
    
    
    
    
    
    16,499Taxes other than income taxes
    
    
    
    
    
    
    7,688
    
    
    
    8,884
    
    
    
    
    
    
    
    16,572Short-term borrowings
    
    
    
    
    
    
    
    
    
    
    334
    
    
    
    
    
    
    
    334Current portion of long-term debt
    
    
    
    
    
    
    
    
    
    
    2,476
    
    
    
    
    
    
    
    2,476Total Current Liabilities
    
    
    
    
    
    
    123,126
    
    
    
    213,993
    
    
    
    (53,345
    )
    
    
    283,774Long-Term Debt, less current
portion
    
    
    
    
    
    
    723,539
    
    
    
    2,790
    
    
    
    
    
    
    
    726,329Other Liabilities
    
    
    
    
    
    
    64,035
    
    
    
    19,225
    
    
    
    
    
    
    
    83,260Deferred Income Taxes
    
    
    
    
    
    
    101,266
    
    
    
    4,744
    
    
    
    
    
    
    
    106,010Shareholders Equity
    
    
    655,768
    
    
    
    673,588
    
    
    
    448,499
    
    
    
    (1,122,087
    )
    
    
    655,768Total Liabilities and
Shareholders Equity
    
    $
    655,768
    
    
    $
    1,685,554
    
    
    $
    689,251
    
    
    $
    (1,175,432
    )
    
    $
    1,855,141
 - 132 -




---



##### Table of Contents



NOTE 28  SUPPLEMENTAL GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (continued)
 
 Parent
    
    
    Guarantor

    
    Non-Guarantor

    
    EliminatingCompany
    
    
    Subsidiaries

    
    Subsidiaries

    
    Entries

    
    Consolidated(Dollars in thousands)Revenues:Services
    
    $
    
    
    
    $
    753,180
    
    
    $
    369,488
    
    
    $
    
    
    
    $
    1,122,668Sales of products
    
    
    
    
    
    
    63,530
    
    
    
    118,608
    
    
    
    
    
    
    
    182,138Intercompany sales and fees
    
    
    
    
    
    
    178,547
    
    
    
    55,102
    
    
    
    (233,649
    )
    
    
    
    
    
    
    995,257
    
    
    
    543,198
    
    
    
    (233,649
    )
    
    
    1,304,806Costs and expenses:Costs of services
    
    
    
    
    
    
    441,692
    
    
    
    237,418
    
    
    
    (4,582
    )
    
    
    674,528Costs of sales
    
    
    
    
    
    
    32,504
    
    
    
    71,533
    
    
    
    
    
    
    
    104,037Intercompany cost of sales
and fees
    
    
    
    
    
    
    146,658
    
    
    
    13,950
    
    
    
    (160,608
    )
    
    
    
    
    
    
    620,854
    
    
    
    322,901
    
    
    
    (165,190
    )
    
    
    778,565Gross profit
    
    
    
    
    
    
    374,403
    
    
    
    220,297
    
    
    
    (68,459
    )
    
    
    526,241Selling, general & administrative
    
    
    
    
    
    
    84,953
    
    
    
    50,762
    
    
    
    
    
    
    
    135,715Research and development
    
    
    
    
    
    
    31,224
    
    
    
    18,645
    
    
    
    
    
    
    
    49,869Operating expenses
    
    
    
    
    
    
    116,177
    
    
    
    69,407
    
    
    
    
    
    
    
    185,584Operating income
    
    
    
    
    
    
    258,226
    
    
    
    150,890
    
    
    
    (68,459
    )
    
    
    340,657Other income (expense):Interest income
    
    
    
    
    
    
    8,623
    
    
    
    2,289
    
    
    
    
    
    
    
    10,912Equity in earnings of
unconsolidated affiliates
    
    
    
    
    
    
    2,644
    
    
    
    (703
    )
    
    
    
    
    
    
    1,941Equity in earnings of
consolidated affiliates
    
    
    211,045
    
    
    
    97,593
    
    
    
    
    
    
    
    (308,638
    )
    
    
    Other expense
    
    
    
    
    
    
    (481
    )
    
    
    (3,860
    )
    
    
    
    
    
    
    (4,341
    )Interest expense
    
    
    
    
    
    
    (29,376
    )
    
    
    (1,417
    )
    
    
    
    
    
    
    (30,793
    )211,045
    
    
    
    79,003
    
    
    
    (3,691
    )
    
    
    (308,638
    )
    
    
    (22,281
    )Income before income taxes
    
    
    211,045
    
    
    
    337,229
    
    
    
    147,199
    
    
    
    (377,097
    )
    
    
    318,376Income taxes
    
    
    
    
    
    
    113,646
    
    
    
    49,606
    
    
    
    (55,921
    )
    
    
    107,331Net income
    
    $
    211,045
    
    
    $
    223,583
    
    
    $
    97,593
    
    
    $
    (321,176
    )
    
    $
    211,045
 - 133 -




---



##### Table of Contents



NOTE 28  SUPPLEMENTAL GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (continued)
 
 Parent
    
    
    Guarantor

    
    Non-Guarantor

    
    EliminatingCompany
    
    
    Subsidiaries

    
    Subsidiaries

    
    Entries

    
    Consolidated(Dollars in thousands)Revenues:Services
    
    $
    
    
    
    $
    718,920
    
    
    $
    298,763
    
    
    $
    
    
    
    $
    1,017,683Sales of products
    
    
    
    
    
    
    105,848
    
    
    
    133,704
    
    
    
    
    
    
    
    239,552Intercompany sales and fees
    
    
    
    
    
    
    95,463
    
    
    
    63,651
    
    
    
    (159,114
    )
    
    
    
    
    
    
    920,231
    
    
    
    496,118
    
    
    
    (159,114
    )
    
    
    1,257,235Costs and expenses:Costs of services
    
    
    
    
    
    
    417,553
    
    
    
    202,522
    
    
    
    (3,442
    )
    
    
    616,633Costs of sales
    
    
    
    
    
    
    56,515
    
    
    
    101,472
    
    
    
    (13
    )
    
    
    157,974Intercompany cost of sales
and fees
    
    
    
    
    
    
    103,009
    
    
    
    22,008
    
    
    
    (125,017
    )
    
    
    
    
    
    
    577,077
    
    
    
    326,002
    
    
    
    (128,472
    )
    
    
    774,607Gross profit
    
    
    
    
    
    
    343,154
    
    
    
    170,116
    
    
    
    (30,642
    )
    
    
    482,628Selling, general & administrative
    
    
    
    
    
    
    76,904
    
    
    
    40,349
    
    
    
    
    
    
    
    117,253Research and development
    
    
    
    
    
    
    34,482
    
    
    
    18,077
    
    
    
    
    
    
    
    52,559Operating expenses
    
    
    
    
    
    
    111,386
    
    
    
    58,426
    
    
    
    
    
    
    
    169,812Operating income
    
    
    
    
    
    
    231,768
    
    
    
    111,690
    
    
    
    (30,642
    )
    
    
    312,816Other income (expense):Interest income
    
    
    
    
    
    
    2,137
    
    
    
    2,478
    
    
    
    
    
    
    
    4,615Equity in earnings of
unconsolidated affiliates
    
    
    
    
    
    
    2,891
    
    
    
    (79
    )
    
    
    
    
    
    
    2,812Equity in earnings of
consolidated affiliates
    
    
    196,394
    
    
    
    74,146
    
    
    
    
    
    
    
    (270,540
    )
    
    
    Other income
    
    
    
    
    
    
    2,571
    
    
    
    2,785
    
    
    
    
    
    
    
    5,356Interest expense
    
    
    
    
    
    
    (17,922
    )
    
    
    (1,291
    )
    
    
    
    
    
    
    (19,213
    )196,394
    
    
    
    63,823
    
    
    
    3,893
    
    
    
    (270,540
    )
    
    
    (6,430
    )Income before income taxes
    
    
    196,394
    
    
    
    295,591
    
    
    
    115,583
    
    
    
    (301,182
    )
    
    
    306,386Income taxes
    
    
    
    
    
    
    105,969
    
    
    
    41,437
    
    
    
    (37,414
    )
    
    
    109,992Net income
    
    $
    196,394
    
    
    $
    189,622
    
    
    $
    74,146
    
    
    $
    (263,768
    )
    
    $
    196,394
 - 134 -




---



##### Table of Contents



NOTE 28  SUPPLEMENTAL GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (continued)
 
 Parent
    
    
    Guarantor

    
    Non-Guarantor

    
    EliminatingCompany
    
    
    Subsidiaries

    
    Subsidiaries

    
    Entries

    
    Consolidated(Dollars in thousands)Revenues:Services
    
    $
    
    
    
    $
    684,299
    
    
    $
    273,172
    
    
    $
    
    
    
    $
    957,471Sales of products
    
    
    
    
    
    
    40,643
    
    
    
    53,216
    
    
    
    
    
    
    
    93,859Intercompany sales and fees
    
    
    
    
    
    
    101,932
    
    
    
    47,881
    
    
    
    (149,813
    )
    
    
    
    
    
    
    826,874
    
    
    
    374,269
    
    
    
    (149,813
    )
    
    
    1,051,330Costs and expenses:Costs of services
    
    
    
    
    
    
    372,109
    
    
    
    169,451
    
    
    
    (3,721
    )
    
    
    537,839Costs of sales
    
    
    
    
    
    
    21,433
    
    
    
    37,856
    
    
    
    (63
    )
    
    
    59,226Intercompany cost of sales
and fees
    
    
    
    
    
    
    100,111
    
    
    
    20,865
    
    
    
    (120,976
    )
    
    
    
    
    
    
    493,653
    
    
    
    228,172
    
    
    
    (124,760
    )
    
    
    597,065Gross profit
    
    
    
    
    
    
    333,221
    
    
    
    146,097
    
    
    
    (25,053
    )
    
    
    454,265Selling, general & administrative
    
    
    
    
    
    
    75,213
    
    
    
    33,879
    
    
    
    
    
    
    
    109,092Research and development
    
    
    
    
    
    
    39,530
    
    
    
    17,788
    
    
    
    
    
    
    
    57,318Operating expenses
    
    
    
    
    
    
    114,743
    
    
    
    51,667
    
    
    
    
    
    
    
    166,410Operating income
    
    
    
    
    
    
    218,478
    
    
    
    94,430
    
    
    
    (25,053
    )
    
    
    287,855Other income (expense):Interest income
    
    
    
    
    
    
    1,882
    
    
    
    3,851
    
    
    
    
    
    
    
    5,733Equity in earnings of
unconsolidated affiliates
    
    
    
    
    
    
    2,038
    
    
    
    4,198
    
    
    
    
    
    
    
    6,236Equity in earnings of
consolidated affiliates
    
    
    183,200
    
    
    
    61,334
    
    
    
    
    
    
    
    (244,534
    )
    
    
    Other income (expense)
    
    
    
    
    
    
    5,817
    
    
    
    (3,928
    )
    
    
    
    
    
    
    1,889Interest expense
    
    
    
    
    
    
    (9,724
    )
    
    
    (1,195
    )
    
    
    
    
    
    
    (10,919
    )183,200
    
    
    
    61,347
    
    
    
    2,926
    
    
    
    (244,534
    )
    
    
    2,939Income before income taxes
    
    
    183,200
    
    
    
    279,825
    
    
    
    97,356
    
    
    
    (269,587
    )
    
    
    290,794Income taxes
    
    
    
    
    
    
    103,535
    
    
    
    36,022
    
    
    
    (31,963
    )
    
    
    107,594Net income
    
    $
    183,200
    
    
    $
    176,290
    
    
    $
    61,334
    
    
    $
    (237,624
    )
    
    $
    183,200
 - 135 -




---



##### Table of Contents



NOTE 28  SUPPLEMENTAL GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (continued)
 
 Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    EliminatingCompany

    
    Subsidiaries

    
    Subsidiaries

    
    Entries

    
    Consolidated(Dollars in thousands)Net cash provided by operating
activities
    
    $
    
    
    
    $
    375,301
    
    
    $
    56,634
    
    
    $
    (2,311
    )
    
    $
    429,624Investing ActivitiesAcquisitions (net of cash acquired)
    
    
    
    
    
    
    
    
    
    
    (23,084
    )
    
    
    
    
    
    
    (23,084
    )Purchases of systems, equipment
and other assets relating to
contracts
    
    
    
    
    
    
    (106,101
    )
    
    
    (33,526
    )
    
    
    2,311
    
    
    
    (137,316
    )Purchases of available-for-sale
investment securities
    
    
    
    
    
    
    (147,275
    )
    
    
    
    
    
    
    
    
    
    
    (147,275
    )Maturities and sales of
available-for-sale investment
securities
    
    
    
    
    
    
    83,375
    
    
    
    
    
    
    
    
    
    
    
    83,375Purchases of property, plant and
equipment
    
    
    
    
    
    
    (8,213
    )
    
    
    (1,443
    )
    
    
    
    
    
    
    (9,656
    )License fee
    
    
    
    
    
    
    
    
    
    
    (1,750
    )
    
    
    
    
    
    
    (1,750
    )Investments in and advances to
unconsolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    (1,488
    )
    
    
    
    
    
    
    (1,488
    )Refundable performance deposit
    
    
    
    
    
    
    
    
    
    
    8,000
    
    
    
    
    
    
    
    8,000Decrease in restricted cash
    
    
    
    
    
    
    
    
    
    
    5,080
    
    
    
    
    
    
    
    5,080Proceeds from sale of investment
    
    
    
    
    
    
    
    
    
    
    3,000
    
    
    
    
    
    
    
    3,000Net cash used for investing
activities
    
    
    
    
    
    
    (178,214
    )
    
    
    (45,211
    )
    
    
    2,311
    
    
    
    (221,114
    )Financing ActivitiesPrincipal payments on long-term
debt
    
    
    
    
    
    
    
    
    
    
    (2,302
    )
    
    
    
    
    
    
    (2,302
    )Purchases of treasury stock
    
    
    (32,051
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32,051
    )Dividends paid
    
    
    (41,672
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (41,672
    )Proceeds from stock options
    
    
    9,473
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,473Intercompany capital transactions
    
    
    61,863
    
    
    
    (61,863
    )
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    2,387
    
    
    
    (129
    )
    
    
    (6,697
    )
    
    
    
    
    
    
    (4,439
    )Net cash used for financing
activities
    
    
    
    
    
    
    (61,992
    )
    
    
    (8,999
    )
    
    
    
    
    
    
    (70,991
    )Effect of exchange rate changes
on cash
    
    
    
    
    
    
    35
    
    
    
    3,191
    
    
    
    
    
    
    
    3,226Increase in cash and cash
equivalents
    
    
    
    
    
    
    135,130
    
    
    
    5,615
    
    
    
    
    
    
    
    140,745Cash and cash equivalents at
beginning of year
    
    
    
    
    
    
    23,020
    
    
    
    71,426
    
    
    
    
    
    
    
    94,446Cash and cash equivalents at end
of year
    
    $
    
    
    
    $
    158,150
    
    
    $
    77,041
    
    
    $
    
    
    
    $
    235,191
 - 136 -




---



##### Table of Contents



NOTE 28  SUPPLEMENTAL GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (continued)
 
 Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    EliminatingCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Entries
    
    
    Consolidated(Dollars in thousands)Net cash provided by operating
activities
    
    $
    
    
    
    $
    262,868
    
    
    $
    122,821
    
    
    $
    (10,480
    )
    
    $
    375,209Investing ActivitiesAcquisitions (net of cash acquired)
    
    
    
    
    
    
    
    
    
    
    (200,730
    )
    
    
    
    
    
    
    (200,730
    )Purchases of systems, equipment
and other assets relating to
contracts
    
    
    
    
    
    
    (204,163
    )
    
    
    (51,909
    )
    
    
    10,480
    
    
    
    (245,592
    )Purchases of available-for-sale
investment securities
    
    
    
    
    
    
    (246,975
    )
    
    
    
    
    
    
    
    
    
    
    (246,975
    )Maturities and sales of
available-for-sale investment
securities
    
    
    
    
    
    
    272,000
    
    
    
    
    
    
    
    
    
    
    
    272,000Purchases of property, plant and
equipment
    
    
    
    
    
    
    (12,331
    )
    
    
    (544
    )
    
    
    
    
    
    
    (12,875
    )Investments in and advances to
unconsolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    (2,071
    )
    
    
    
    
    
    
    (2,071
    )Increase in restricted cash
    
    
    
    
    
    
    
    
    
    
    (5,112
    )
    
    
    
    
    
    
    (5,112
    )Proceeds from sale of investment
    
    
    
    
    
    
    
    
    
    
    11,773
    
    
    
    
    
    
    
    11,773Net cash used for investing
activities
    
    
    
    
    
    
    (191,469
    )
    
    
    (248,593
    )
    
    
    10,480
    
    
    
    (429,582
    )Financing ActivitiesNet proceeds from issuance of
long-term debt
    
    
    
    
    
    
    343,254
    
    
    
    
    
    
    
    
    
    
    
    343,254Principal payments on long-term
debt
    
    
    
    
    
    
    (135,000
    )
    
    
    (32,692
    )
    
    
    
    
    
    
    (167,692
    )Purchases of treasury stock
    
    
    (120,658
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (120,658
    )Dividends paid
    
    
    (39,830
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39,830
    )Premiums and fees paid in
connection with the early
retirement of debt
    
    
    
    
    
    
    (10,610
    )
    
    
    
    
    
    
    
    
    
    
    (10,610
    )Proceeds from stock options
    
    
    13,546
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,546Intercompany capital transactions
    
    
    144,948
    
    
    
    (312,948
    )
    
    
    168,000
    
    
    
    
    
    
    
    Other
    
    
    1,994
    
    
    
    (2,904
    )
    
    
    405
    
    
    
    
    
    
    
    (505
    )Net cash provided by (used for)
financing activities
    
    
    
    
    
    
    (118,208
    )
    
    
    135,713
    
    
    
    
    
    
    
    17,505Effect of exchange rate changes
on cash
    
    
    
    
    
    
    873
    
    
    
    1,102
    
    
    
    
    
    
    
    1,975Increase (decrease) in cash and
cash equivalents
    
    
    
    
    
    
    (45,936
    )
    
    
    11,043
    
    
    
    
    
    
    
    (34,893
    )Cash and cash equivalents at
beginning of year
    
    
    
    
    
    
    68,956
    
    
    
    60,383
    
    
    
    
    
    
    
    129,339Cash and cash equivalents at end
of year
    
    $
    
    
    
    $
    23,020
    
    
    $
    71,426
    
    
    $
    
    
    
    $
    94,446
 - 137 -




---



##### Table of Contents



NOTE 28  SUPPLEMENTAL GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (continued)
 
 Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    EliminatingCompany
    
    Subsidiaries
    
    Subsidiaries
    
    Entries
    
    Consolidated(Dollars in thousands)Net cash provided by operating
activities
    
    $
    
    
    
    $
    339,643
    
    
    $
    76,286
    
    
    $
    (862
    )
    
    $
    415,067Investing ActivitiesAcquisitions (net of cash acquired)
    
    
    
    
    
    
    (40,691
    )
    
    
    (33,751
    )
    
    
    
    
    
    
    (74,442
    )Purchases of systems, equipment
and other assets relating to
contracts
    
    
    
    
    
    
    (252,273
    )
    
    
    (16,599
    )
    
    
    862
    
    
    
    (268,010
    )Purchases of available-for-sale
investment securities
    
    
    
    
    
    
    (242,050
    )
    
    
    
    
    
    
    
    
    
    
    (242,050
    )Maturities and sales of
available-for-sale investment
securities
    
    
    
    
    
    
    20,200
    
    
    
    
    
    
    
    
    
    
    
    20,200Purchases of property, plant and
equipment
    
    
    
    
    
    
    (12,772
    )
    
    
    
    
    
    
    
    
    
    
    (12,772
    )License fee
    
    
    
    
    
    
    (12,500
    )
    
    
    
    
    
    
    
    
    
    
    (12,500
    )Investments in and advances to
unconsolidated subsidiaries
    
    
    
    
    
    
    (1,185
    )
    
    
    (1,700
    )
    
    
    
    
    
    
    (2,885
    )Refundable performance deposit
    
    
    
    
    
    
    
    
    
    
    (20,000
    )
    
    
    
    
    
    
    (20,000
    )Net cash used for investing
activities
    
    
    
    
    
    
    (541,271
    )
    
    
    (72,050
    )
    
    
    862
    
    
    
    (612,459
    )Financing ActivitiesNet proceeds from issuance of
long-term debt
    
    
    
    
    
    
    251,006
    
    
    
    1,582
    
    
    
    
    
    
    
    252,588Principal payments on long-term
debt
    
    
    
    
    
    
    (27,759
    )
    
    
    (5,534
    )
    
    
    
    
    
    
    (33,293
    )Dividends paid
    
    
    (29,977
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,977
    )Premiums and fees paid in
in connection with the early
retirement of debt
    
    
    
    
    
    
    (731
    )
    
    
    
    
    
    
    
    
    
    
    (731
    )Proceeds from stock options
    
    
    23,943
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,943Intercompany capital transactions
    
    
    4,959
    
    
    
    (38,710
    )
    
    
    33,751
    
    
    
    
    
    
    
    Other
    
    
    1,075
    
    
    
    (2,125
    )
    
    
    (5,274
    )
    
    
    
    
    
    
    (6,324
    )Net cash provided by financing
activities
    
    
    
    
    
    
    181,681
    
    
    
    24,525
    
    
    
    
    
    
    
    206,206Effect of exchange rate changes
on cash
    
    
    
    
    
    
    164
    
    
    
    4,187
    
    
    
    
    
    
    
    4,351Increase (decrease) in cash and
cash equivalents
    
    
    
    
    
    
    (19,783
    )
    
    
    32,948
    
    
    
    
    
    
    
    13,165Cash and cash equivalents at
beginning of year
    
    
    
    
    
    
    88,739
    
    
    
    27,435
    
    
    
    
    
    
    
    116,174Cash and cash equivalents at end
of year
    
    $
    
    
    
    $
    68,956
    
    
    $
    60,383
    
    
    $
    
    
    
    $
    129,339
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NOTE 29  QUARTERLY RESULTS OF OPERATIONS (Unaudited)
  First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter(Dollars in thousands, except per share amounts)Fiscal year ended February 25, 2006:Service revenues
    
    $
    291,364
    
    
    $
    266,341
    
    
    $
    270,889
    
    
    $
    294,074Sales of products
    
    
    35,035
    
    
    
    43,601
    
    
    
    29,249
    
    
    
    74,253Gross profit
    
    
    135,878
    
    
    
    123,574
    
    
    
    117,824
    
    
    
    148,965Net income
    
    
    54,844
    
    
    
    48,952
    
    
    
    47,833
    
    
    
    59,416Basic earnings per share
    
    $
    .48
    
    
    $
    .41
    
    
    $
    .38
    
    
    $
    .47Diluted earnings per share
    
    
    .43
    
    
    
    .38
    
    
    
    .37
    
    
    
    .45Fiscal year ended February 26, 2005:Service revenues
    
    $
    253,326
    
    
    $
    248,114
    
    
    $
    251,945
    
    
    $
    264,298Sales of products
    
    
    26,879
    
    
    
    75,401
    
    
    
    63,702
    
    
    
    73,570Gross profit
    
    
    116,995
    
    
    
    131,160
    
    
    
    115,498
    
    
    
    118,975Net income
    
    
    53,615
    
    
    
    53,081
    
    
    
    45,855
    
    
    
    43,843Basic earnings per share
    
    $
    .45
    
    
    $
    .45
    
    
    $
    .40
    
    
    $
    .38Diluted earnings per share
    
    
    .40
    
    
    
    .40
    
    
    
    .35
    
    
    
    .34
      - 139 -




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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
  - 140 -




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ITEM 9A. CONTROLS AND PROCEDURES
 EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
   INTERNAL CONTROL OVER FINANCIAL REPORTING
 MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
     - 141 -




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Report of Independent Registered Public Accounting Firm
 Board of Directors and Shareholders
GTECH Holdings Corporation and Subsidiaries
     .
   
 - 142 -




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ITEM 9B. OTHER INFORMATION
  - 143 -




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PART III
 Incorporated by Reference
 
  - 144 -




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PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a) (1) Financial Statements:Page(s)
                 (2) Financial Statement Schedules to GTECH Holdings Corporation and subsidiaries:
   - 145 -




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(3) Exhibits :
 2.1
    
    Agreement and Plan of Merger, dated as of January 10, 2006, by and among Lottomatica S.p.A.,
Gold Holding Co., Gold Acquisition Corporation and GTECH Holdings Corporation (Holdings)
(incorporated by reference to Exhibit 2.1 of Holdings Current Report on Form 8-K filed on
January 10, 2006).3.1
    
    Restated Certificate of Incorporation of Holdings, as amended (incorporated by reference to
Exhibit 3.1 to the Form S-l of Holdings and GTECH Corporation (GTECH), Registration No.
33-31867).3.2
    
    Certificate of Amendment to the Certificate of Incorporation of Holdings (incorporated by
reference to Exhibit 3.2 to the Form S-1 of Holdings, Registration No. 33-48264).3.3
    
    Certificate of Amendment of the Certificate of Incorporation of Holdings (incorporated by
reference to Appendix C of Holdings 2004 Notice of Annual Meeting and Proxy Statement).3.4
    
    Amended and Restated By-Laws of Holdings (incorporated by reference to Exhibit 3.3 of
Holdings 2004 Form 10-K.4.1
    
    Credit Agreement, dated as of October 25, 2004, among GTECH, the Bank of America, N.A.,
Calyon New York Branch and the other lenders party thereto (incorporated by reference to
Exhibit 99(a) to Holdings Current Report on Form 8-K filed on October 29, 2004).4.2
    
    Indenture, dated as of December 18, 2001, by and among Holdings, GTECH, GTECH Rhode Island
Corporation, GTECH Latin America Corporation, and The Bank of New York (incorporated by
reference to Exhibit 4.1 of Holdings 10-Q for the quarterly period ended November 24, 2001).4.3
    
    Registration Rights Agreement, dated December 18, 2001, by and among Credit Suisse First
Boston Corporation, Bank of America Securities LLC, and Merrill Lynch, Pierce Fenner & Smith
Incorporated, as Representatives, and Holdings, GTECH, GTECH Rhode Island Corporation, and
GTECH Latin America Corporation (incorporated by reference to Exhibit 4.2 of Holdings 10-Q
for the quarterly period ended November 24, 2001).4.4
    
    Indenture, dated as of October 15, 2003, by and among Holdings, GTECH, GTECH Rhode Island
Corporation, GTECH Latin America Corporation, Interlott Technologies, Inc., and the Bank of
New York (incorporated by reference to Exhibit 4.1 of Registration Statement on Form S-4 filed
by Holdings, GTECH, GTECH Rhode Island Corporation, GTECH Latin America Corporation and
Interlott Technologies, Inc. on December 10, 2003 (the 2003 Form S-4)).4.5
    
    Registration Rights Agreement, dated October 9, 2003, by and among Citigroup Global Markets
Inc. and Merrill Lynch Pierce Fenner & Smith Incorporated, as representatives of the initial
purchasers, and Holdings, GTECH, GTECH Rhode Island Corporation, GTECH Latin America
Corporation and Interlott Technologies, Inc. (incorporated by reference to Exhibit 4.3 to the
2003 Form S-4).4.6
    
    Indenture, dated as of November 19, 2004, by and among Holdings, as issuer; GTECH, GTECH
Rhode Island Corporation and GTECH Latin America Corporation, as guarantors, and SunTrust
Bank, as trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K
filed on November 22, 2004).4.7
    
    Registration Rights Agreement, dated November 19, 2004, by and among Banc of America
Securities LLC and Citigroup Global Markets Inc., as representatives of the several initial
 - 146 -




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purchasers, and Holdings, GTECH, GTECH Rhode Island Corporation and GTECH Latin America
Corporation (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed
on November 22, 2004).4.8
    
    Specimen Form of certificate of Common Stock (incorporated by reference to Exhibit 4.18 of
the S-1 of Holdings, Registration No. 33-54236).10.1
    
    Agreement, dated as of January 10, 2006, by and among DeAgostini S.p.A. and Holdings
(incorporated by reference to Exhibit 10.1 of Holdings Current Report on Form 8-K filed on
January 10, 2006).10.2
    
    Form of Director Indemnification Agreement, dated as of August 10, 2005, between Holdings
and, respectively, each of Robert M. Dewey, Jr., Paget L. Alves, Christine Cournoyer, Burnett
W. Donaho, Sir Jeremy Hanley, Philip R. Lochner, Jr., James F. McCann, and Anthony Ruys
(incorporated by reference to Exhibit 99(a) of Holdings Current Report on Form 8-K filed on
August 12, 2005).10.3
    
    Amended and Restated Employment Agreement, dated August 2, 2005, by and among Holdings, GTECH
and W. Bruce Turner (incorporated by reference to Exhibit 10.1 of Holdings 10-Q forth
quarterly period ended August 27, 2005).*10.4
    
    Severance Agreement and Release, dated as of November 24, 2004, by and between Holdings and
Kathleen McKeough (incorporated by reference to Exhibit 10.5 of Holdings 2005 10-K).*10.5
    
    Separation Agreement and Release, dated as of April 15, 2005, by and between Holdings and
David J. Calabro (incorporated by reference to Exhibit 10.2 of Holdings 10-Q for the
quarterly period ending May 28, 2005).*10.5.1
    
    Separation Agreement and Release, dated as of April 22, 2005, by and between Holdings and
Barbara Burns (incorporated by reference to Exhibit 10.3 of Holdings 10-Q for the quarterly
period ended May 28, 2005).*10.6
    
    Form of Agreement, relating to a potential change of control involving Holdings, entered into
between Holdings and, respectively, certain members of senior management (incorporated by
reference to Exhibit 10.5 of Holdings 2000 10-K).*+10.7
    
    List of signatories to Agreement relating to potential change of control involving Holdings
and certain members of senior management, with the respective dates of such Agreements.*10.8
    
    Form of Executive Separation Agreement (incorporated by reference to Exhibit 10.12 of
Holdings 2003 10-K).*+10.9
    
    Schedule of Recipients of Executive Separation Agreements.*+10.10
    
    Schedule of Recipients of Company Contributions to the
Amended and Restated Income
Deferral Plan (1998).10.11
    
    Contract for Lottery Operations and Services, dated October 10, 2001, by and between the
Texas Lottery Commission and GTECH (incorporated by reference to Exhibit 10.1 of Holdings
10-Q for the quarterly period ended November 24, 2001.)
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10.12
    
    Amendment No. 1 to Contract for Lottery Operations and Services, dated October 18, 2001, by
and between the Texas Lottery Commission and GTECH (incorporated by reference to Exhibit 10.2
of Holdings 10-Q for the quarterly period ended November 24, 2001).10.13
    
    Agreement between Caixa Econômica Federal and RACIMEC Informatica Brasileira S.A.
(predecessor to GTECH Brasil Ltda.) dated May 26, 2000, respecting the provision of goods and
services for the Brazil National Lottery (incorporated by reference to Exhibit 10.12 of
Holdings 2000 10-K).10.14
    
    Amendment to Agreement between Caixa Econômica Federal and RACIMEC Informatica Brasileira
S.A. (predecessor to GTECH Brasil Ltda.) (incorporated by reference to Exhibit 10.21 of
Holdings 2001 10-K).10.15
    
    Amendment to Agreement between CEF and GTECH Brasil Ltda., dated September 14, 2001
(incorporated by reference to Exhibit 10.20 of Holdings 2003 10-K).10.16
    
    Amendment to Agreement between CEF and GTECH Brasil Ltda., dated July 1, 2002 (incorporated
by reference to Exhibit 10.21 of Holdings 2003 10-K).10.17
    
    Amendment to Agreement between CEF and GTECH Brasil Ltda., dated January 14, 2003
(incorporated by reference to Exhibit 10.22 of Holdings 2003 10-K).10.18
    
    Fifth Amendment to Agreement between CEF and GTECH Brasil Ltda., dated April 8, 2003
(incorporated by reference to Exhibit 10.23 of Holdings 2003 10-K).10.19
    
    Service Agreement between CEF and GTECH Brasil Ltda., dated May 12, 2005 (incorporated by
reference to Exhibit 10.1 of Holdings 10-Q for the quarterly period ended May 28, 2005).10.20
    
    Master Contract, dated as of May 12, 2003, by and between the Company and the Rhode Island
Lottery (incorporated by reference to Exhibit 10.2 of Holdings 10-Q for the quarterly period
ended May 24, 2003).10.21
    
    Participation Agreement, dated as of December 14, 2001, by and among GTECH, West Greenwich
Technology Associates, L.P., Key Corporate Capital Inc., Post Office Square Funding Inc.,
Credit Lyonnais New York Branch, The Bank of Nova Scotia, and the Lenders described therein
(incorporated by reference to Exhibit 10.24 of Holdings 2002 10-K).10.22
    
    Second Amended and Restated Indenture of Lease, dated as of December 14, 2001, by and
between West Greenwich Technology Associates, L.P., and GTECH (incorporated by reference to
Exhibit 10.25 of Holdings 2002 10-K).10.23
    
    Purchase Agreement, dated December 5, 2004, by and among Paul Gauselmann, Michael Gauselmann
and GTECH (incorporated by reference to Exhibit 10.23 of Holdings 2005 Form 10-K).10.24
    
    2nd Supplementary Agreement to Purchase Agreement of December 5, 2004, among Paul
Gauselmann, Michael Gauselmann and GTECH (incorporated by reference to Exhibit 10.3 of
Holdings Current Report on Form 8-K filed on January 10, 2006).10.25
    
    Master Agreement, dated December 5, 2004, by and among Paul Gauselmann, Michael Gauselmann
and GTECH (incorporated by reference to Exhibit 10.24 of Holdings 2005 10-K).
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10.26
    
    Supplementary Agreement to Master Agreement of December 5, 2004, among Paul Gauselmann,
Michael Gauselmann and GTECH (incorporated by reference to Exhibit 10.2 of Holdings Current
Report on Form 8-K filed on January 10, 2006).10.27
    
    1994 Stock Option Plan, as amended and restated (incorporated by reference to Exhibit 10.1
of Holdings 10-Q for the quarterly period ended May 31, 1997).*10.28
    
    1996 Non-Employee Directors Stock Option Plan (incorporated by reference to Exhibit 10.2 of
Holdings 10-Q for the quarterly period ended May 31, 1997).*10.29
    
    First Amendment to the 1996 Non-Employee Directors Stock Option Plan (incorporated by
reference to Exhibit 10.27 of Holdings 2001 10-K).*10.30
    
    1997 Stock Option Plan (incorporated herein by reference to the Appendix of Holdings 1997
Notice of Annual Meeting and Proxy Statement).*10.31
    
    Amendment to 1997 Stock Option Plan dated April 2, 2002 (incorporated by reference to
Exhibit 10.32 of Holdings 2002 10-K).*10.32
    
    Holdings 1998 Non-Employee Directors Stock Election Plan (incorporated by reference to
Exhibit 4.2 to the Form S-8 of Holdings, Registration Number 333-5781).10.33
    
    Amended and Restated Income Deferral Plan (1998) (incorporated by reference to Exhibit
10.32 of Holdings 2003 10-K).*10.34
    
    Holdings 1998 Employee Stock Purchase Plan, as amended and restated as of November 1, 2001
(incorporated by reference to Exhibit 10.4 of Holdings 10-Q for the quarterly period ended
November 24, 2001).*10.35
    
    1999 Non-Employee Directors Stock Option Plan (incorporated by reference to the Appendix of
Holdings 1999 Notice of Annual Meeting and Proxy Statement).*10.36
    
    First Amendment to the 1999 Non-Employee Directors Stock Option Plan (incorporated by
reference to Exhibit 10.32 of the Holdings 2001 10-K).*10.37
    
    Trust Agreement, dated December 18, 1998, by and between Holdings and The Bank of New York,
as Trustee, respecting the Income Deferral Plan  1998 (incorporated by reference to Exhibit
10.1 of the Holdings 10-Q for the quarterly period ended November 28, 1998).*10.38
    
    Holdings 2000 Restricted Stock Plan and Form of Restricted Stock Agreement (incorporated by
reference to Exhibit 10.4 of Holdings 10-Q for the quarterly period ended August 26, 2000).*10.39
    
    Holdings 2000 Omnibus Stock Option and Long-Term Incentive Plan (incorporated by reference
to Holdings Proxy Statement filed on September 22, 2000).*10.40
    
    Holdings 2002 Omnibus Stock Option and Long-Term Incentive Plan (incorporated by reference
to Holdings Proxy Statement filed on June 21, 2002).*10.41
    
    Holdings 2004 Employee Stock Purchase Plan (incorporated by reference to Appendix B of
Holdings Proxy Statement filed on June 25, 2004).*
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10.42
    
    Forms of Stock Option Agreement respecting awards under Holdings plans (incorporated by
reference to Exhibit 10.40 of Holdings 2005 10-K).10.43
    
    Forms of Restricted Stock Agreement respecting awards under Holdings plans (incorporated by
reference to Exhibit 10.41 of Holdings 2005 10-K).10.44
    
    Holdings Management Stock Bonus Program (incorporated by reference to Exhibit 10.40 of
Holdings 2003 10-K).*10.45
    
    Senior Staff Officer Stock Ownership Plan, dated July 1, 2003 (incorporated by reference to
Exhibit 10.1 of Holdings 10-Q for the quarterly period ended May 24, 2003).10.46
    
    OEM Purchase Agreement by and between GTECH and TransAct Technologies Incorporated, dated
July 2, 2002 (incorporated by reference to Exhibit 10.45 as Holdings 2004 10-K).10.47
    
    OEM Purchase Agreement, by and between GTECH and Tokyo Magnetic Printing Co. Ltd, dated July
9, 1999 (incorporated by reference to Exhibit 10.46 as Holdings 2004 10-K).10.48
    
    OEM Purchase Agreement, by and between GTECH and BCM Advanced Research, dated December 11,
2002 (incorporated by reference to Exhibit 10.47 as Holdings 2004 10-K).+12.1
    
    Computation of Ratio of Earnings to Fixed Charges.14.1
    
    The Companys Code of Conduct applicable to, among others, its Chief Executive Officer, Chief
Financial and principal accounting officer(incorporated by reference to Exhibit 14.1 of
Holdings 2003 10-K).+21.1
    
    Subsidiaries of the Company.+23.1
    
    Consent of Independent Registered Public Accounting Firm, Ernst & Young LLP.+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.
 
 +
    
    Filed herewith.*
    
    Indicates a management contract or compensatory plan or arrangement required to be filed as an
exhibit pursuant to Item 14(c) of Form 10-K. - 150 -




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SIGNATURES
  GTECH HOLDINGS CORPORATIONBy:
    
    /s/ W. Bruce TurnerW. Bruce Turner, Chief
Executive Officer
  SIGNATURE
    
    TITLE
    
    DATE/s/
W. Bruce Turner
    
    Chief Executive Officer
(principal executive officer)
and Director

    
    April 20, 2006W. Bruce Turner/s/
Jaymin B. Patel
    
    Senior Vice President & Chief
Financial Officer (principal financial officer)
    
    April 20, 2006Jaymin B. Patel/s/ Robert J. Plourde
    
    Vice President, Corporate
Controller and Chief Accounting
Officer (principal accounting
officer)

    
    April 20, 2006Robert J. Plourde/s/ Robert M. Dewey, Jr.
    
    Director, Chairman of the Board

    
    April 20, 2006Robert M. Dewey, Jr./s/
Christine M. Cournoyer
    
    Director
    
    April 20, 2006Christine M. Cournoyer
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SIGNATURE
    
    TITLE
    
    DATE/s/ Paget L. Alves
    
    Director
    
    April 20, 2006Paget L. AlvesDirector
    
    April 20, 2006Burnett W. Donoho/s/
Jeremy Hanley
    
    Director
    
    April 20, 2006The Rt. Hon.Sir Jeremy Hanley KCMGDirector
    
    April 20, 2006Philip R. Lochner, Jr.Director
    
    April 20, 2006James F. McCannDirector
    
    April 20, 2006Anthony Ruys
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SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
 GTECH HOLDINGS CORPORATION AND SUBSIDIARIES
 Column A
    
    Column B
    
    
    Column C
    
    
    Column D
    
    
    Column EAdditionsBalance at
    
    
    Charged
    
    
    Charged to
    
    
    
    
    
    
    Balance atbeginning
    
    
    to costs
    
    
    other
    
    
    
    
    
    
    end ofDescription
    
    of year
    
    
    and expenses
    
    
    accounts
    
    
    Deductions
    
    
    year(Dollars in thousands)Valuation accounts deducted from assets
to which they apply:Allowances for doubtful accounts
    
    $
    4,290
    
    
    $
    1,107
    
    
    $
    3,946
    (a)
    
    $
    (2,664
    ) (d)
    
    $
    6,679Allowances for liquidated damages
    
    
    5,033
    
    
    
    8,019
    
    
    
    199
    
    
    
    (5,966
    ) (e)
    
    
    7,285Inventory allowances
    
    
    5,828
    
    
    
    1,015
    
    
    
    44
    
    
    
    (1,509
    ) (f)
    
    
    5,378Other
    
    
    2,622
    
    
    
    (379
    )
    
    
    230
    
    
    
    
    
    
    
    2,473Total Fiscal Year Ended February 25, 2006
    
    $
    17,773
    
    
    $
    9,762
    
    
    $
    4,419
    
    
    $
    (10,139
    )
    
    $
    21,815Allowances for doubtful accounts
    
    $
    5,410
    
    
    $
    254
    
    
    $
    (266
    ) (a)
    
    $
    (1,108
    ) (d)
    
    $
    4,290Allowances for liquidated damages
    
    
    5,283
    
    
    
    2,276
    
    
    
    33
    
    
    
    (2,559
    ) (e)
    
    
    5,033Inventory allowances
    
    
    8,120
    
    
    
    3,407
    
    
    
    (5
    )
    
    
    (5,694
    ) (f)
    
    
    5,828Other
    
    
    2,474
    
    
    
    
    
    
    
    148
    
    
    
    
    
    
    
    2,622Total Fiscal Year Ended February 26, 2005
    
    $
    21,287
    
    
    $
    5,937
    
    
    $
    (90
    )
    
    $
    (9,361
    )
    
    $
    17,773Allowances for doubtful accounts
    
    $
    18,508
    
    
    $
    227
    
    
    $
    944
    (a)
    
    $
    (14,269
    ) (d)
    
    $
    5,410Allowances for liquidated damages
    
    
    2,127
    
    
    
    5,237
    
    
    
    721
    
    
    
    (2,802
    ) (e)
    
    
    5,283Inventory allowances
    
    
    14,561
    
    
    
    (379
    )
    
    
    6,349
    (b)
    
    
    (12,411
    ) (f)
    
    
    8,120Other
    
    
    2,360
    
    
    
    (1,072
    )
    
    
    1,200
    (c)
    
    
    (14
    )
    
    
    2,474Total Fiscal Year Ended February 28, 2004
    
    $
    37,556
    
    
    $
    4,013
    
    
    $
    9,214
    
    
    $
    (29,496
    )
    
    $
    21,287
 (a)
    
    Opening reserve balances associated with acquisitions or reserves for amounts billed
to customers which were not recorded as revenues(b)
    
    Opening reserve balances associated with acquisitions(c)
    
    Reserves transferred from accrued expenses and/or other assets(d)
    
    Write-offs and recoveries of previous write-offs(e)
    
    Payments made directly to customers(f)
    
    Disposal of obsolete material