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Kentucky Lottery Signs GTECH & SG Deals as Sales Fall

21st April 2010 8:09 am GMT

After an extensive year-long procurement process during which lottery sales have fallen 6% below budgeted levels, the Kentucky Lottery Corporation has named GTECH Corporation as the apparent successful bidder to provide new lottery technology and online lottery products and services, with Scientific Games also selected as the primary vendor to supply instant tickets from next year.

Under the proposed contract, GTECH will provide the Kentucky Lottery and its retailers with a full suite of online and instant systems, 3,000 online lottery terminals, self-service lottery vending machines, a new dual-communications network as well as ongoing services.

The proposed seven-year contract is expected to commence June 29th 2011 and allows for eight one-year extension options for a total of 15 years, generating revenues of approximately $70 million for GTECH over the seven-year period.

"As a trusted partner for more than two decades, GTECH provides the level of assurance a successful lottery such as the Kentucky Lottery relies upon for delivering the maximum player experience, integrity, security, and profitability," said GTECH President and CEO Jaymin B. Patel.

Meanwhile Scientific Games has also been selected as the primary vendor to supply instant tickets to the Kentucky Lottery for an initial term of five years, also beginning June 2011, with contract extension options of up to ten years. Revenue to Scientific Games is based on a percentage of retail sales and estimated to be $5.2 million annually, a saving of approximately $0.8 million per year for the Kentucky Lottery.

"We have worked closely with the Kentucky Lottery since its inception in 1989 and we are proud to remain partners," said Michael R. Chambrello, President and CEO of Scientific Games.

The Kentucky Lottery added that it has achieved record instant ticket sales every year since 2002 with instant tickets now generating 60% of its total retail sales.

"These new contracts will allow us to provide new systems with state-of-the-art equipment and improved products and services at rates very close to or even less than what we're now paying," said Kentucky Lottery President and CEO Arch Gleason. "We will be able to create even more fun and entertaining games, and provide greater innovation and more efficient service to our retailers and players."

Last week the Kentucky Lottery reported a 4% drop in lottery sales to €579.5 million for the nine month period ended March 31st, with full year sales forecast to fall 4% to $776.1 million, some $52.9 million below budgeted levels for the year. Net income is expected to be sufficient to meet the revised budget estimate of $200 million plus unclaimed prizes of more than $10 million.

"Given the current economic conditions, the level of unemployment in the Commonwealth and corresponding decline in lottery sales, the first nine month's operating results are encouraging," continued Gleason. "These positive results are due primarily to an improved mix of product sales, favourable prize expense, and controlling operating costs within a reduced budget."

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