Scientific Games Second Quarter Revenues Up 21% to $240 Million

Scientific Games (Nasdaq: SGMS) today reported second quarter 2006 revenues of $239.6 million, up 21 percent from $197.4 million in the second quarter of 2005. Net income was $25.0 million or $0.26 per diluted share, net of $4.9 million of stock compensation expense, compared to $24.8 million or $0.27 per diluted share in the second quarter of 2005. Non-GAAP adjusted net income before stock compensation expense and excluding convertible debenture shares was $28.5 million or $0.30 per diluted share, up 11 percent from the second quarter of 2005.

EBITDA (see the following EBITDA definition and reconciliation) for the second quarter of 2006 was $69.6 million, up 20 percent from the second quarter of 2005. Excluding the stock compensation expense, adjusted EBITDA for the second quarter of 2006 was $74.6 million, or approximately 29 percent ahead of adjusted EBITDA of $57.8 million for the second quarter of 2005.

For the six months ending June 30, 2006, revenues were $447.8 million, compared to $382.0 million for the six months ending June 30, 2005, an increase of 17 percent. Net income was $47.3 million or $0.50 per diluted share, compared to $45.8 million or $0.50 per diluted share in 2005. EBITDA increased to $127.4 million, compared to $108.6 million in 2005. Excluding stock compensation expense, adjusted EBITDA increased 28 percent to $138.5 million.

This is the second quarter in which Scientific Games has reported through its three new reporting segments: Printed Products, Lottery Systems and Diversified Gaming. The acquisition of EssNet, which closed in March 2006, was consolidated into the Lottery Systems Group, and accounted for $9.8 million in revenue in the second quarter of 2006. The acquisition of Global Draw in April 2006 accounted for $20.8 million of revenue in the second quarter of 2006, and was consolidated into the Diversified Gaming Group for the full quarter.

"As expected, total instant ticket service revenue accelerated in the second quarter, growing at 21 percent. Excluding contribution of $3.6 million from new contracts, 'same-store' sales growth was approximately 16 percent," said Lorne Weil, Chairman and CEO of Scientific Games. "We benefited from continued growth in our licensed properties and cooperative services businesses."

"The Lottery Systems Group experienced strong service revenue growth of 32 percent, largely due to new contracts and the EssNet acquisition," added Weil. "Despite 'jackpot fatigue' from the two large Powerball jackpots during the first quarter, 'same store' on-line lottery revenues grew approximately 4 percent. Recovery from the 'jackpot fatigue' seems to be underway in the current quarter with the current Powerball jackpot of $178 million this week."

"The acquisition of EssNet has strengthened our position as a leader in the European lottery market," added Weil. "The integration has been a very smooth process, as evidenced by our recent contract wins in Norway and Hessen, which were existing EssNet customers. EssNet's margins in the second quarter were well below our historical margins in the lottery systems business, accounting for more than half of the year to year decline in the lottery systems gross margins. As we continue to integrate EssNet with our existing lottery operations, these margins are steadily improving and we expect that during 2007, they will reach a level consistent with our historical experience."

The Diversified Gaming Group revenue grew 53 percent in the second quarter. Excluding the Global Draw and Shoreline acquisitions, Diversified Gaming Group revenues were slightly down, but the division experienced an EBITDA margin improvement of approximately 20 percent due to cost-cutting initiatives and technology upgrades. Weil commented, "Global Draw contribution exceeded expectations, and we see Diversified Gaming contributing meaningfully to future earnings, especially when the group expands to Video Lottery Terminal (VLT) jurisdictions outside of the UK. During the quarter, a number of exciting sports betting opportunities came closer to maturity and we hope to report on these developments in the coming months."

Business development in the quarter included the award of the primary instant ticket contract in New Hampshire, an electronic bingo game in Michigan, a sports betting system in Norway, and an internet system in Hessen, Germany.

Convertible Debentures

During the second quarter of 2006, the average price of our common stock exceeded the specified conversion price of $29.10 of our Convertible Debentures. Because of this, an additional 1,994,000 shares and 1,416,000 shares of common stock have been included in our weighted average number of diluted shares for the second quarter and six months of 2006, respectively. Although we purchased a hedge in December 2004 to mitigate the potential economic dilution of the underlying Convertible Debenture shares, we are precluded from reflecting this hedge in our GAAP weighted average number of diluted shares because the effect would be anti-dilutive. Upon conversion of the debentures, the dilutive share count will revert to the true economic number.

Conference Call Details

Scientific Games Corporation invites you to join its conference call tomorrow at 8:30 a.m. EDT. To access the call live via webcast please visit http://www.scientificgames.com and click on the webcast link. To access the call by telephone, please dial (866) 831-6272 (US & Canada) or (617) 213-8859 (International) fifteen minutes before the start of the call. The Conference ID# is 34192839. The call will be archived for replay on the company's website for 30 days under the "Investors" tab.

About Scientific Games

Scientific Games Corporation is the leading integrated supplier of instant tickets, systems and services to lotteries, a leading supplier of fixed odds betting terminals and systems, interactive sports betting terminals and systems, and wagering systems and services to pari-mutuel operators. It is also a licensed pari-mutuel gaming operator in Connecticut and the Netherlands and is a leading supplier of prepaid phone cards to telephone companies. Scientific Games' customers are in the United States and more than 60 other countries. For more information about Scientific Games, please visit our web site at http://www.scientificgames.com.

Forward-Looking Statements

In this press release we make "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by the use of forward-looking terminology such as "may," "will," "estimate," "intend," "continue," "believe," "expect" or "anticipate," or the negatives thereof, variations thereon or similar terminology.

These forward-looking statements generally relate to plans and objectives for future operations and are based upon management's reasonable estimates of future results or trends. Although we believe that the plans and objectives reflected in or suggested by such forward-looking statements are reasonable, such plans or objectives may not be achieved.

Actual results may differ from projected results due, but not limited, to unforeseen developments, including developments relating to the following:

* economic, competitive, demographic, business and other conditions in our

local and regional markets;

* changes or developments in the laws, regulations or taxes in the gaming

and lottery industries;

* actions taken or omitted to be taken by third parties, including

customers, suppliers, competitors, members and shareholders, as well as

legislative, regulatory, judicial and other governmental authorities;

* changes in business strategy, capital improvements, development plans,

including those due to environmental remediation concerns, or changes in

personnel or their compensation, including federal, state and local

minimum wage requirements;

* the availability and adequacy of our cash flow to satisfy our

obligations, including our debt service obligations and our need for

additional funds required to support capital improvements, development

and acquisitions;

* an inability to renew or early termination of our contracts;

* an inability to engage in future acquisitions;

* the loss of any license or permit, including the failure to obtain an

unconditional renewal of a required gaming license on a timely basis;

and

* resolution of any pending or future litigation in a manner adverse to

us.

Actual future results may be materially different from what we expect. We will not update forward-looking statements even though our situation may change in the future.

Non-GAAP Disclosure

EBITDA, as included herein, represents net income plus income tax expense, interest expense, and depreciation and amortization expenses, net of other income. EBITDA is included in this document as it is a basis upon which we assess our financial performance, and it provides useful information regarding our ability to service our debt. In addition, EBITDA is useful to investors in evaluating the Company's financial performance because it is a commonly used financial analysis tool for measuring and comparing gaming companies in several areas of liquidity, operating performance and leverage. EBITDA should not be considered in isolation or as an alternative to net income, cash flows from operations, or other consolidated income or cash flow data prepared in accordance with generally accepted accounting principles as measures of our profitability or liquidity. EBITDA as defined in this document may differ from similarly titled measures presented by other companies.

Adjusted EBITDA, non-GAAP adjusted net income and diluted non-GAAP adjusted net income per share are non-GAAP financial measures that are presented as supplemental disclosures and are reconciled to GAAP net income and GAAP net income per diluted share in financial schedules accompanying this release. In calculating the adjusted financial measures, the Company excludes certain items in order to better facilitate an understanding of the Company's operating performance.

The Company's management uses these adjusted financial measures in conjunction with GAAP financial measures to monitor and evaluate the performance of the Company's business operations; facilitate management's internal comparisons of the Company's historical operating performance of its business operations; facilitate management's external comparisons of the results of its overall business to the historical operating performance of other companies that may have different capital structures and debt levels; review and assess the operating performance of the Company's management team and as a measure in evaluating employee compensation and bonuses; analyze and evaluate financial and strategic planning decisions regarding future operating investments; and plan for and prepare future annual operating budgets and determine appropriate levels of operating investments.

The Company's management believes that these adjusted financial measures are useful to investors to provide them with disclosures of the Company's operating results on the same basis as that used by the Company's management. The Company's management also believes that because it has historically provided such non-GAAP financial measures in its earnings releases, continuing to do so provides consistency in its financial reporting and continuity to investors for comparability purposes. Accordingly, the Company's management believes that the presentation of the adjusted non-GAAP financial measures, when used in conjunction with GAAP financial measures, provides both management and investors with useful financial information that can be used in assessing the Company's financial condition and operating performance.

The adjusted financial measures should not be considered in isolation or as a substitute for net income or net income per diluted share prepared in accordance with GAAP. The adjusted financial measures as defined in this document may differ from similarly titled measures presented by other companies. The adjusted financial measures, as well as other information in this document should be read in conjunction with the Company's financial statements filed with the Securities and Exchange Commission.

Contact Information:

Investor Relations-- Scientific Games Corporation -- (212) 754-2233

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended June 30, 2005 and 2006

(Unaudited, in thousands, except per share amounts)

Three Months Ended

June 30,

2005 2006

Operating revenues:

Services $160,867 214,232

Sales 36,557 25,405

197,424 239,637

Operating expenses :

Cost of services (exclusive of

depreciation and amortization) 87,432 118,595

Cost of sales (exclusive of

depreciation and amortization) 25,503 19,248

Selling, general and administrative expenses 25,725 35,346

Depreciation and amortization 17,119 23,525

Operating income 41,645 42,923

Other deductions:

Interest expense 6,812 11,115

Equity in net (income) loss of joint ventures 955 (3,157)

Other income (578) (226)

7,189 7,732

Income before income tax expense 34,456 35,191

Income tax expense 9,692 10,214

Net income $24,764 24,977

Basic and diluted net income per share:

Basic net income $0.28 0.27

Diluted net income $0.27 0.26

Weighted average number of shares used in

per share calculations:

Basic shares 89,207 91,202

Diluted shares 92,142 95,989

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Six Months Ended June 30, 2005 and 2006

(Unaudited, in thousands, except per share amounts)

Six Months Ended

June 30,

2005 2006

Operating revenues:

Services $316,621 391,192

Sales 65,359 56,574

381,980 447,766

Operating expenses :

Cost of services (exclusive of depreciation

and amortization) 172,681 213,543

Cost of sales (exclusive of depreciation

and amortization) 45,777 43,792

Selling, general and administrative expenses 53,453 67,738

Depreciation and amortization 31,594 42,817

Operating income 78,475 79,876

Other deductions:

Interest expense 13,222 18,317

Equity in net (income) loss of joint ventures 1,498 (4,733)

Other income (722) (869)

13,998 12,715

Income before income tax expense 64,477 67,161

Income tax expense 18,698 19,814

Net income $45,779 47,347

Basic and diluted net income per share:

Basic net income $0.51 0.52

Diluted net income $0.50 0.50

Weighted average number of sharesused in per

share calculations:

Basic shares 88,913 90,687

Diluted shares 92,047 94,992

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SELECTED CONSOLIDATED BALANCE SHEET DATA

December 31, 2005 and June 30, 2006

(Unaudited, in thousands)

December 31, June 30,

2005 2006

Assets:

Cash and cash equivalents $38,942 34,155

Other current assets ... 215,611 281,587

Property and equipment, net 366,219 427,693

Long-term assets 551,741 853,133

Total assets $1,172,513 1,596,568

Liabilities and Stockholders' Equity:

Current portion of long-term debt $6,055 2,818

Other current liabilities 135,307 179,163

Long-term debt, excluding current portion 574,680 855,229

Other long-term liabilities 69,638 81,567

Stockholders' equity 386,833 477,791

Total liabilities and stockholders'

equity: $1,172,513 1,596,568

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONSOLIDATED SEGMENT OPERATING DATA

Three Months Ended June 30, 2005 and 2006

(Unaudited, in thousands)

Three Months Ended June 30, 2005

Printed Lottery Diversified

Products Systems Gaming

Group Group Group Totals

Service revenues $83,426 42,904 34,537 160,867

Sales revenues 18,035 15,003 3,519 36,557

Total revenues 101,461 57,907 38,056 197,424

Cost of services (1) 42,472 20,709 24,251 87,432

Cost of sales (1) 13,380 9,835 2,288 25,503

Selling, general and

administrative

expenses 9,103 6,165 3,118 18,386

Depreciation and

amortization (2) 4,469 8,422 3,938 16,829

Segment operating

income $32,037 12,776 4,461 49,274

Unallocated corporate

expense 7,629

Consolidated operating

income $41,645

Three Months Ended June 30, 2006

Printed Lottery Diversified

Products Systems Gaming

Group Group Group Totals

Service revenues $100,615 56,659 56,958 214,232

Sales revenues 11,818 12,409 1,178 25,405

Total revenues 112,433 69,068 58,136 239,637

Cost of services (1) 52,695 33,694 32,206 118,595

Cost of sales (1) 9,206 8,861 1,181 19,248

Selling, general and

administrative

expenses 10,849 8,079 4,534 23,462

Depreciation and

amortization (2) 6,141 11,041 6,099 23,281

Segment operating

income $33,542 7,393 14,116 55,051

Unallocated corporate

expense 12,128

Consolidated operating

income $42,923

(1) Exclusive of depreciation and amortization

(2) Includes amortization of service contract software

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONSOLIDATED SEGMENT OPERATING DATA

Six Months Ended June 30, 2005 and 2006

(Unaudited, in thousands)

Six Months Ended June 30, 2005

Printed Lottery Diversified

Products Systems Gaming

Group Group Group Totals

Service revenues $166,943 82,778 66,900 316,621

Sales revenues 36,664 24,819 3,876 65,359

Total revenues 203,607 107,597 70,776 381,980

Cost of services (1) 85,631 41,439 45,611 172,681

Cost of sales (1) 26,888 16,186 2,703 45,777

Selling, general and

administrative

expenses 19,508 12,878 7,033 39,419

Depreciation and

amortization (2) 8,818 14,935 7,276 31,029

Segment operating

income $62,762 22,159 8,153 93,074

Unallocated corporate

expense 14,599

Consolidated operating

income $78,475

Six Months Ended June 30, 2006

Printed Lottery Diversified

Products Systems Gaming

Group Group Group Totals

Service revenues $194,194 109,376 87,622 391,192

Sales revenues 25,939 27,108 3,527 56,574

Total revenues 220,133 136,484 91,149 447,766

Cost of services (1) 98,986 61,367 53,190 213,543

Cost of sales (1) 19,979 20,453 3,360 43,792

Selling, general and

administrative

expenses 22,205 15,528 6,975 44,708

Depreciation and

amortization (2) 11,326 21,534 9,495 42,355

Segment operating

income $67,637 17,602 18,129 103,368

Unallocated corporate

expense 23,492

Consolidated operating

income $79,876

(1) Exclusive of depreciation and amortization

(2) Includes amortization of service contract software

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES CALCULATION OF NON-GAAP ADJUSTED NET INCOME AND DILUTED NON-GAAP ADJUSTED NET

INCOME PER SHARE

(Unaudited, in thousands, except per share amounts)

Three Months Ended Six Months Ended

June 30, June 30,

2005 2006 2005 2006

Income before income

tax expense $ 34,456 35,191 $64,477 67,161

Add: Lottery Systems Group

reduction in force charges -- -- -- 1,336

Add: Stock compensation,

SERP termination and

EssNet interest charges -- 4,949 -- 10,020

Non-GAAP adjusted net

income before income tax

expense 34,456 40,140 64,477 78,517

Non-GAAP adjusted income

tax expense 9,692 11,641 18,698 23,163

Non-GAAP adjusted net

income $ 24,764 28,499 $45,779 55,354

Diluted non-GAAP adjusted

net income per share 0.27 0.30 0.50 0.59

Diluted GAAP net income per

share 0.27 0.26 0.50 0.50

Weighted average number of

shares used in GAAP per

share calculation 92,142 95,989 92,047 94,992

Less: Diluted shares included

in weighted average number

of shares related to the

convertible debentures -- 1,994 -- 1,416

Weighted average number of

shares used in non-GAAP

adjusted per share

calculation 92,142 93,995 92,047 93,576

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA

(Unaudited, in thousands)

Three Months Ended Six Months Ended

June 30, June 30,

2005 2006 2005 2006

Net income $24,764 24,977 45,779 47,347

Add: Income tax expense 9,692 10,214 18,698 19,814

Add: Depreciation and

amortization expense 17,119 23,525 31,594 42,817

Add: Interest expense, net

of other income 6,234 10,889 12,500 17,448

EBITDA $57,809 69,605 108,571 127,426

Add: Lottery Systems Group

reduction in force charges -- -- -- 1,336

Add: Stock compensation and

SERP termination charge -- 4,949 -- 9,757

Adjusted EBITDA $57,809 74,554 108,571 138,519