8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):  November 2, 2011

SCIENTIFIC GAMES CORPORATION

(Exact name of registrant as specified in its charter)

0-13063

(Commission File Number)

Delaware	81-0422894
(State or other jurisdiction	(IRS Employer
of incorporation)	Identification No.)

750 Lexington Avenue, 25th Floor, New York, New York 10022

(Address of principal executive offices, including Zip Code)

Registrant’s telephone number, including area code:  (212) 754-2233

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 2 — Financial Information

Item 2.02.      Results of Operations and Financial Condition.

The information contained under Item 2.02 in this Current Report, including Exhibits 99.1 and 99.2, is being furnished and, as a result, such information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

On November 2, 2011, Scientific Games Corporation (the “Company”) issued a press release announcing, among other things, results for the three months and nine months ended September 30, 2011. Copies of the press release and the presentation that will be discussed on the Company’s earnings call are attached hereto as Exhibits 99.1 and 99.2, respectively, and are incorporated herein by reference.

The Company’s press release and presentation, in addition to containing results that are determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”), contain certain non-GAAP financial measures. Attributable EBITDA, as used in the press release and presentation, is based on the definition of “consolidated EBITDA” in the Company’s credit agreement (summarized below), except that attributable EBITDA as used in the press release and presentation includes the Company’s share of the EBITDA of all of the Company’s equity investments (whereas “consolidated EBITDA” for purposes of the credit agreement generally includes the Company’s share of the EBITDA of the Company’s Italian joint venture but only the income of the Company’s other equity investments to the extent it has been distributed to the Company).  Attributable EBITDA is a non-GAAP financial measure that is presented in the press release and presentation as a supplemental disclosure and is reconciled to net income (loss) in a schedule accompanying the press release.

Attributable EBITDA includes adjustments only to the extent contemplated by the definition of “consolidated EBITDA” in the Company’s credit agreement (which adjustments are summarized in the paragraph below). Note that the adjustment referred to in clause (9) in the paragraph below was added to the definition of “consolidated EBITDA” as part of the March 11, 2011 amendment to the Company’s credit agreement and revised as part of the August 25, 2011 amendment to the Company’s credit agreement.

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

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

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

Revenue excluding the Racing Business refers to the Company’s consolidated or segment (as the case may be) revenue excluding the revenue of the Racing Business, which was sold on October 5, 2010.  Operating income excluding the Racing Business refers to the Company’s consolidated or segment (as the case may be) operating income excluding the operating income (or loss) of the Racing Business.  These measures are non-GAAP financial measures that are presented in the press release and the presentation as supplemental disclosures and are reconciled to revenue or operating income (as the case may be) including the results from the Racing Business in a schedule accompanying the press release.

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

In addition, the Company’s management believes that attributable EBITDA is helpful in assessing the overall operating performance of the Company and its equity investments and highlighting trends in the Company’s and its equity investments’ core businesses that may not otherwise be apparent when relying solely on GAAP financial measures, because this non-GAAP financial measure eliminates from the Company’s and its equity investments’ earnings financial items that management believes have less bearing on the Company’s and its equity investments’ performance, such as income tax expense, depreciation and amortization expense and interest (income) expense.  Moreover, management believes attributable EBITDA is useful to investors because a significant and increasing amount of the Company’s business is from its equity investments.  Management further believes that attributable EBITDA and free cash flow provide useful information regarding the Company’s liquidity and its ability to service debt and fund investments.  Management believes that EBITDA from equity investments is helpful in monitoring the financial performance of the Company’s equity investments and eliminates from the equity investments’ earnings financial items that management believes have less bearing on the equity investments’ performance.  Management believes that providing operating results for prior periods that exclude the operating results of the Racing Business, which was sold on October 5, 2010, facilitates a more complete understanding of factors affecting the Company’s operating results and greater comparability of these results across periods.

The Company’s management also believes attributable EBITDA is useful to investors because the definition is derived from the definition of “consolidated EBITDA” in the Company’s credit agreement, which is used to calculate the Company’s compliance with the financial covenants contained in the credit agreement.  Moreover, attributable EBITDA and free cash flow (calculated by subtracting total capital expenditures (which includes lottery and gaming systems expenditures and other intangible assets and software expenditures) from attributable EBITDA) are metrics used in determining performance-based bonuses for 2011 (subject to certain additional adjustments in the discretion of the Compensation Committee (e.g., to take into account acquisitions, divestitures, sign-on or guaranteed bonuses approved by the Compensation Committee and accounting changes during the year)).

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

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

Section 9 — Financial Statements and Exhibits

Item 9.01.      Financial Statements and Exhibits.

(d)  Exhibits

Exhibit No.	Description
99.1	Press Release of Scientific Games Corporation, dated November 2, 2011.
99.2	Earnings Call Presentation.

SIGNATURES

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

SCIENTIFIC GAMES CORPORATION
By:	/s/ Jeffrey S. Lipkin
Name:	Jeffrey S. Lipkin
Title:	Senior Vice President and Chief Financial Officer

Date:  November 2, 2011

Exhibit Index

Exhibit No.	Description
99.1	Press Release of Scientific Games Corporation, dated November 2, 2011.
99.2	Earnings Call Presentation.

EX-99.1

Exhibit 99.1

Scientific Games Announces Third Quarter 2011 Results

Revenue Increased 17% Excluding the Racing Business

Performance Driven by Growth Across Core Lottery and Gaming Businesses

NEW YORK, November 2, 2011 - Scientific Games Corporation (Nasdaq: SGMS) today announced results for the third quarter ended September 30, 2011.

Summary Financial Results

($ in millions, except per share amounts)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2011			2010		2011			2010
Revenue	$	222.7		$	221.1	$	639.6		$	670.4
Revenue excl. Racing Business		222.7			190.9		639.6			587.8
Operating income		21.4			21.7		64.6			69.8
Attributable EBITDA		81.7			75.0		247.2			237.2
Net (loss) / income		(4.1	)		8.7		(4.0	)		9.2
Net (loss) / income per share	$	(0.04	)	$	0.09	$	(0.04	)	$	0.10
Total capital expenditures		24.2			25.6		68.4			78.5
Free cash flow		30.8			14.5		84.3			64.8

Revenue excluding Racing Business, attributable EBITDA and free cash flow as used herein are non-GAAP financial measures defined below under “Non-GAAP Financial Measures” and reconciled to GAAP financial measures in the accompanying tables.

The results for the three and nine months ended September 30, 2011 reported in this press release include the results of operations of Barcrest Group Limited (“Barcrest”), which was acquired on September 23, 2011. Barcrest’s revenue for the period September 23, 2011 through September 30, 2011 was approximately $2.8 million.

The 2010 results reported in this press release include the results of operations of the Company’s racing and venue management businesses (the “Racing Business”), which was sold on October 5, 2010. See the financial tables at the end of this release for a reconciliation of both the Company’s results and the Diversified Gaming Group’s results to the respective results excluding the Racing Business for the 2010 periods.

Business Highlights

§ Italian instant ticket retail sales increased 10.8% in the third quarter of 2011 versus the prior-year period

§ China Sports Lottery instant ticket retail sales increased 24.1% in the third quarter of 2011 versus the prior-year period

§ Global Draw’s U.K. total gross win and gross win per machine per day increased 65.4% and 5.9%, respectively, in the third quarter of 2011 versus the prior-year period

§ Completed the acquisition of Barcrest, a leading supplier of gaming content and machines in Europe with approximately 5,300 gaming machines, expanding the Company’s total installed base to over 35,000 server-based terminals worldwide

§ MDI’s internet-based players’ clubs and loyalty rewards programs continued to gain traction with lotteries; MDI launched an enhanced version of the Iowa Lottery’s VIP Club website and signed contracts with both the Tennessee Lottery and Missouri Lottery to provide internet-based player loyalty rewards programs

“Our global lottery and gaming operations performed very well this quarter, with mid-teens growth in revenue,” Chairman and Chief Executive Officer A. Lorne Weil commented. “We believe this reflects the investments we’ve made in the past year in our key growth initiatives.  We are especially pleased with these results in the face of a quarter that was marked by significant global economic uncertainty. The strength of our recession-resistant business model is borne out in challenging economic times like these, and the pipeline of new opportunities often expands as lotteries and other businesses seek new sources of revenue.”

Jeffrey S. Lipkin, Senior Vice President and Chief Financial Officer, added, "We have produced free cash flow of over $84 million year-to-date. Our recent credit agreement amendment has strengthened our balance sheet by extending our weighted average maturities to over five years. This positions us well to pursue additional growth opportunities while maintaining a stringent focus on enhancing return on invested capital."

Third Quarter 2011 Financial Results

Revenue was $222.7 million in the third quarter of 2011 compared to $221.1 million in the third quarter of 2010. The increase in revenue reflected growth in the Printed Products Group ($12.7 million) and Lottery Systems Group ($6.8 million), partially offset by a decline in the Diversified Gaming Group ($17.8 million) that was primarily the result of the sale of the Racing Business ($30.2 million). The Diversified Gaming Group benefited from the acquisition of Barcrest on September 23, 2011 and the inclusion of its revenue for eight days in the quarter ($2.8 million), which included product sales of $2.0 million. Excluding the results of the Racing Business in the third quarter of 2010, revenue in the third quarter of 2011 increased 16.7% versus the prior-year period, driven by growth across all three of the Company’s operating segments and the acquisition of Barcrest.

Operating income was $21.4 million in the third quarter of 2011 compared to operating income of $21.7 million in the prior-year period. This primarily reflected a higher and more profitable mix of revenue ($9.8 million) and the absence of a write-down related to the sale of the Racing Business that occurred in the third quarter of 2010 ($2.2 million), offset by higher selling, general and administrative expenses ($11.2 million), primarily due to $4.7 million of increased headcount, consultant and incentive compensation expense, $0.9 million of expense related to the Asia-Pacific incentive compensation plan, $3.9 million of increased transaction-related fees and a charge taken related to a potential customer claim, $0.7 million of increased stock-based compensation, a portion of which was attributable to the commencement of expensing of certain performance-conditioned equity awards, $0.9 million of increased expenses to support the expansion of the Global Draw business, $0.8 million of management transition costs, $0.7 million of expenses related to the recent credit agreement amendment and stock option exchange program, and $1.0 million related to foreign currency translation. The increase was partially offset by lower selling, general and administrative expenses due to the sale of the Racing Business ($3.1 million).

The Company’s share of EBITDA generated from equity investments improved to $22.8 million in the third quarter of 2011 from $15.0 million in the prior-year period, primarily due to higher EBITDA from the Company’s joint ventures in Italy and China and the inclusion of results from the Company’s equity interest in Sportech Plc. Attributable EBITDA was $81.7 million in the third quarter of 2011, compared to $75.0 million in the prior-year period.

Net loss in the third quarter of 2011 was $4.1 million, or $0.04 per share, compared to net income of $8.7 million, or $0.09 per share, in the prior-year period. In addition to the impact of the above-mentioned items, the decline in net income was attributable to higher interest expense ($1.7 million), an increase in debt extinguishment costs from the write-off of expenses in connection with the Company’s recent credit agreement amendment ($1.9 million), a change in other (income) expense ($4.7 million), primarily due to a gain on foreign currency hedging contracts in the third quarter of 2010 related to the Italian instant ticket concession tender ($3.2 million), along with an increase in foreign exchange transaction expense in the current year period ($1.1 million), and lower earnings from equity investments ($4.1 million).  The decline in earnings from equity investments was primarily due to the structure of Lotterie Nazionali S.r.l. (“LNS”), the Company’s joint venture that holds the concession for the Italian instant ticket lottery.  Beginning in the fourth quarter of 2010, the Company’s share of net earnings from Italy has been reported on an after-tax basis and reflects amortization of the upfront fee for the concession, which together reduced earnings from equity investments by $9.1 million in the third quarter of 2011 compared to the prior-year period. The Company also incurred $2.2 million in income tax expense, primarily attributable to its operations in foreign jurisdictions.

Net loss for the third quarter of 2011 was also impacted by the following items (which are adjustments to “consolidated EBITDA” under the Company’s credit agreement and reflected on a pre-tax basis in attributable EBITDA), presented below on an after-tax basis:

§ write-off of debt-related costs of $4.2 million in connection with the Company’s recent credit agreement amendment,

§ $3.0 million related to management transition expenses, transaction expenses and restructuring expenses,

§ acquisition advisory fees of $1.6 million, primarily consisting of professional fees related to the acquisition of Barcrest,

§ royalties and fees of $0.4 million related to Global Draw’s new technology platform,

§ non-recurring write-offs under GAAP of $0.3 million, and

§ stock-based compensation expense of $5.4 million.

By way of comparison, net income in the third quarter of 2010 was impacted by the following items (which are adjustments to “consolidated EBITDA” under the Company’s credit agreement and reflected on a pre-tax basis in attributable EBITDA), presented below on an after-tax basis:

§ write-down of $1.4 million related to the sale of the Racing Business,

§ write-off of debt-related costs of $1.4 million in connection with the Company’s debt refinancing,

§ permitted add-backs of $0.5 million related to restructuring expenses,

§ professional fees of $0.2 million related to the Italian instant ticket tender process,

§ acquisition advisory fees of $0.1 million, and

§ stock-based compensation expense of $3.0 million.

Printed Products Group

Printed Products Group revenue increased 11% from $117.0 million in the third quarter of 2010 to $129.6 million in the current year period.  The increase in instant ticket revenue resulted primarily from higher sales to U.S. customers ($7.3 million), due in part to higher instant ticket sales for the Illinois Lottery, which is now privately managed by the Company’s Northstar joint venture. Instant ticket revenue growth also reflected sales of higher price-point games in many states, and higher sales of licensed games by MDI, partially driven by the successful introduction of a multi-state licensed game in the second quarter of 2011. The Company also realized higher instant ticket revenue from sales to international customers ($0.9 million) and favorable foreign currency translation ($2.5 million).  Sales revenue in the third quarter of 2011 increased by approximately $1.9 million versus the prior-year period primarily as a result of higher product sales.

Operating income increased to $34.7 million in the third quarter of 2011 from $30.4 million in the prior-year period.  This improvement was driven by a higher and more profitable mix of revenue ($7.1 million), partially offset by an increase in selling, general and administrative expenses ($2.8 million), principally due to increased incentive compensation expense, an accrual for a potential customer claim and unfavorable foreign currency translation, partially offset by reduced professional fees.

Based on third-party data, the Company’s U.S. instant ticket customers' retail sales increased 5.6% in the third quarter of 2011 compared to the third quarter of 2010.  This increase reflects a widespread improvement in sales of instant tickets as most U.S. states reported significant year-over-year growth, which the Company believes was driven in part by sales of higher price-point games.

Lottery Systems Group

Lottery Systems Group revenue was $59.6 million in the third quarter of 2011 compared to $52.8 million in the third quarter of 2010.  The 7% increase in service revenue primarily reflected higher international revenue ($2.6 million), which included favorable foreign currency translation ($1.0 million) and increased revenue from the China Sports Lottery ($0.8 million), along with higher U.S. revenue ($0.7 million) reflecting improved terms under certain contracts and growth in instant ticket validation revenue.  The 57% year-over-year increase in sales revenue in the third quarter of 2011 resulted largely from higher sales of software and hardware to international customers ($2.0 million), increased hardware sales in the U.S. ($0.7 million) and favorable foreign currency translation ($0.8 million).

Operating income was $7.3 million in the third quarter of 2011 compared to $5.5 million in the third quarter of 2010. This increase was driven by a higher and more profitable mix of revenue ($3.6 million), partially offset by higher depreciation and amortization ($1.0 million) and selling, general and administrative expenses ($0.9 million).

Based on third-party data, the Company’s U.S. lottery systems customers' retail sales increased 0.5% in the third quarter of 2011 compared to the third quarter of 2010.

China Sports Lottery retail sales increased by 24.1% in the third quarter of 2011 versus the prior-year period, primarily driven by continued expansion of the retailer and validation network, along with the introduction of an instant ticket at a new 30 RMB price point.

Diversified Gaming Group

Diversified Gaming Group revenue was $33.5 million in the third quarter of 2011 compared to $51.3 million in the third quarter of 2010. The decrease was principally due to the sale of the Racing Business. Excluding the results of the Racing Business ($30.2 million) in the third quarter of 2010, Diversified Gaming Group revenue increased by $12.4 million, or 59%, in the third quarter of 2011 versus the prior-year period. This increase reflected higher service revenue due to a 42% year-over-year increase in the Company’s global installed base of server-based gaming terminals (prior to the acquisition of Barcrest), which was primarily driven by additional gaming machine placements in the U.K. and Puerto Rico, revenue from the acquisition of Barcrest ($2.8 million) and favorable foreign currency translation ($1.6 million).

Operating income was $3.2 million in the third quarter of 2011 compared to $0.2 million in the third quarter of 2010.  This increase was primarily due to the absence of a write-down related to the sale of the Racing Business ($2.2 million) in the prior-year period, partially offset by the impact of a less profitable revenue mix ($0.8 million). Excluding the results of the Racing Business in the third quarter of 2010, the Diversified Gaming Group’s operating income increased by $4.9 million in the third quarter of 2011 from the prior-year period, principally reflecting a higher and more profitable mix of revenue ($6.5 million) and the acquisition of Barcrest, partially offset by an increase in selling, general and administrative expenses ($1.4 million) and an increase in employee termination costs and restructuring charges ($0.4 million).

Liquidity and Capital Resources

At September 30, 2011, the Company had cash and cash equivalents of $86.9 million and availability under its revolving credit facility of $188.9 million. During the quarter, the Company acquired Barcrest for approximately $48.4 million in cash.  The Company had total indebtedness of $1,391.8 million as of September 30, 2011, compared to $1,396.7 million as of December 31, 2010.

The Company continued to manage working capital and capital expenditures, and focus on higher returns on invested capital while investing in growth, resulting in free cash flow of $30.8 million in the third quarter of 2011.  Total capital expenditures in the third quarter were $24.2 million.

Conference Call Details

Scientific Games will host a conference call today at 5:00 pm Eastern Daylight Time to review these results and discuss other topics.  To access the call live via a listen-only webcast, please visit www.scientificgames.com and click on the webcast link under the Investor Information section.  To access the call by telephone, please dial (866) 783-2137 (U.S. and Canada) or (857) 350-1596 (International) 15 minutes prior to the start of the call. The conference ID is 71647749. A presentation summarizing the results will also be provided in the Investor Information section on the Company’s website prior to the Company’s conference call. A replay of the webcast and accompanying presentation will be archived in the Investor Information section on the Company’s website.

About Scientific Games

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

Company Contact:

Cindi Buckwalter, Investor Relations

(212) 754-2233

Forward-Looking Statements

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

Non-GAAP Financial Measures

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

Attributable EBITDA includes adjustments only to the extent contemplated by the definition of “consolidated EBITDA” in our credit agreement (which adjustments are summarized in the paragraph below). Note that the adjustment referred to in clause (9) in the paragraph below was added to the definition of “consolidated EBITDA” as part of the March 11, 2011 amendment to our credit agreement and revised as part of the August 25, 2011 amendment to our credit agreement.

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

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

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

Revenue excluding the Racing Business refers to our consolidated or segment (as the case may be) revenue excluding the revenue of the Racing Business, which was sold on October 5, 2010.  Operating income excluding the Racing Business refers to our consolidated or segment (as the case may be) operating income excluding the operating income (or loss) of the Racing Business.  These measures are non-GAAP measures that are presented herein as supplemental disclosures and are reconciled to revenue or operating income (as the case may be) including the results from the Racing Business in a schedule below.

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

In addition, the Company’s management believes that attributable EBITDA is helpful in assessing the overall operating performance of the Company and its equity investments and highlighting trends in the Company’s and its equity investments’ core businesses that may not otherwise be apparent when relying solely on GAAP financial measures, because this non-GAAP financial measure eliminates from the Company’s and its equity investments’ earnings financial items that management believes have less bearing on the Company’s and its equity investments’ performance, such as income tax expense, depreciation and amortization expense and interest (income) expense.  Moreover, management believes attributable EBITDA is useful to investors because a significant and increasing amount of the Company’s business is from its equity investments.  Management further believes that attributable EBITDA and free cash flow provide useful information regarding the Company’s liquidity and its ability to service debt and fund investments.  Management believes that EBITDA from equity investments is helpful in monitoring the financial performance of the Company’s equity investments and eliminates from the equity investments’ earnings financial items that management believes have less bearing on the equity investments’ performance.  Management believes that providing operating results for prior periods that exclude the operating results of the Racing Business, which was sold on October 5, 2010, facilitates a more complete understanding of factors affecting the Company’s operating results and greater comparability of these results across periods.

The Company’s management also believes attributable EBITDA is useful to investors because the definition is derived from the definition of “consolidated EBITDA” in our credit agreement, which is used to calculate the Company’s compliance with the financial covenants contained in the credit agreement.  Moreover, attributable EBITDA and free cash flow (calculated by subtracting total capital expenditures (which includes lottery and gaming systems expenditures and other intangible assets and software expenditures) from attributable EBITDA) are metrics used in determining performance-based bonuses for 2011 (subject to certain additional adjustments in the discretion of the Compensation Committee (e.g., to take into account acquisitions, divestitures, sign-on or guaranteed bonuses approved by the Compensation Committee and accounting changes during the year)).

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

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

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Revenue:
Instant tickets	$	126,693		$	115,968		$	370,972		$	343,506
Services		81,429			92,813			237,272			287,527
Sales		14,617			12,280			31,399			39,400
Total revenue		222,739			221,061			639,643			670,433
Operating expenses:
Cost of instant tickets (1)		71,785			67,138			211,151			199,282
Cost of services (1)		42,562			57,723			122,944			167,336
Cost of sales (1)		10,332			7,977			21,383			27,843
Selling, general and administrative expenses		47,660			36,435			130,640			115,543
Write-down of assets held for sale		-			2,155			-			8,029
Employee termination and restructuring costs		1,030			602			1,030			602
Depreciation and amortization		27,994			27,284			87,902			82,017
Operating income		21,376			21,747			64,593			69,781
Other (income) expense:
Interest expense		26,297			24,617			79,161			74,176
Earnings from equity investments		(8,895	)		(13,031	)		(27,469	)		(42,474	)
Early extinguishment of debt		4,185			2,236			4,185			2,236
Other (income) expense, net		1,711			(3,011	)		(159	)		9,555
		23,298			10,811			55,718			43,493
Income (loss) before income tax expense		(1,922	)		10,936			8,875			26,288
Income tax expense		2,202			2,232			12,912			17,040
Net income (loss)	$	(4,124	)	$	8,704		$	(4,037	)	$	9,248
Net income (loss) per share:
Basic net income (loss)	$	(0.04	)	$	0.09		$	(0.04	)	$	0.10
Diluted net income (loss)	$	(0.04	)	$	0.09		$	(0.04	)	$	0.10
Weighted average number of shares:
Basic shares		92,125			91,844			92,027			93,122
Diluted shares		92,125			92,240			92,027			93,648

(1) Exclusive of depreciation and amortization.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SELECTED CONSOLIDATED BALANCE SHEET DATA

September 30, 2011 and December 31, 2010

(Unaudited, in thousands)

	September 30,		December 31,
	2011		2010
Assets:
Cash and cash equivalents	$	86,879	$	124,281
Other current assets		321,406		289,384
Property and equipment, net		438,299		450,581
Long-term assets		1,349,757		1,287,292
Total assets	$	2,196,341	$	2,151,538
Liabilities and Stockholders' Equity:
Current portion of long-term debt	$	9,391	$	8,431
Other current liabilities		224,881		187,567
Long-term debt, excluding current portion		1,382,393		1,388,259
Other long-term liabilities		118,899		114,623
Stockholders' equity		460,777		452,658
Total liabilities and stockholders' equity	$	2,196,341	$	2,151,538

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONSOLIDATED SEGMENT OPERATING DATA

Three Months Ended September 30, 2011 and 2010

(Unaudited, in thousands)

	Three Months Ended September 30, 2011
	Printed		Lottery		Diversified		Unallocated
	Products		Systems		Gaming		Corporate
	Group		Group		Group		Expense			Totals
Instant tickets	$	126,693	$	-	$	-	$	-		$	126,693
Service revenue		-		49,944		31,485		-			81,429
Sales revenue		2,953		9,640		2,024		-			14,617
Total revenue		129,646		59,584		33,509		-			222,739
Cost of instant tickets (1)		71,785		-		-		-			71,785
Cost of services (1)		-		26,899		15,663		-			42,562
Cost of sales (1)		1,906		6,813		1,613		-			10,332
Selling, general and administrative expenses		12,173		6,104		3,885		19,907			42,069
Stock-based compensation		856		522		353		3,860			5,591
Employee termination and restructuring costs		-		-		1,030		-			1,030
Depreciation and amortization		8,177		11,939		7,744		134			27,994
Operating income (loss)	$	34,749	$	7,307	$	3,221	$	(23,901	)	$	21,376

	Three Months Ended September 30, 2010
	Printed		Lottery		Diversified		Unallocated
	Products		Systems		Gaming		Corporate
	Group		Group		Group		Expense			Totals
Instant tickets	$	115,968	$	-	$	-	$	-		$	115,968
Service revenue		-		46,630		46,183		-			92,813
Sales revenue		1,024		6,141		5,115		-			12,280
Total revenue		116,992		52,771		51,298		-			221,061
Cost of instant tickets (1)		67,138		-		-		-			67,138
Cost of services (1)		-		26,450		31,273		-			57,723
Cost of sales (1)		954		4,063		2,960		-			7,977
Selling, general and administrative expenses (2)		9,399		5,377		5,598		11,211			31,585
Stock-based compensation (2)		870		395		519		3,066			4,850
Write-down of assets held for sale		-		-		2,155		-			2,155
Employee termination  and restructuring costs		-		-		602		-			602
Depreciation and amortization		8,184		10,969		8,005		126			27,284
Operating income (loss) (2)	$	30,447	$	5,517	$	186	$	(14,403	)	$	21,747

(1) Exclusive of depreciation and amortization.

(2) In connection with the realignment of its management structure in January 2011, the Company determined to no longer allocate certain overhead expenses to its reportable segments, effective as of January 1, 2011.  The segment information for the three months ended September 30, 2010 has been adjusted to reflect this change in segment reporting.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONSOLIDATED SEGMENT OPERATING DATA

Nine Months Ended September 30, 2011 and 2010

(Unaudited, in thousands)

	Nine Months Ended September 30, 2011
	Printed		Lottery		Diversified		Unallocated
	Products		Systems		Gaming		Corporate
	Group		Group		Group		Expense			Totals
Instant tickets	$	370,972	$	-	$	-	$	-		$	370,972
Service revenue		-		150,356		86,916		-			237,272
Sales revenue		6,810		22,447		2,142		-			31,399
Total revenue		377,782		172,803		89,058		-			639,643
Cost of instant tickets (1)		211,151		-		-		-			211,151
Cost of services (1)		-		79,087		43,857		-			122,944
Cost of sales (1)		4,150		15,585		1,648		-			21,383
Selling, general and administrative expenses		33,950		15,047		9,620		56,730			115,347
Stock-based compensation		2,571		1,375		1,180		10,167			15,293
Employee termination and restructuring costs		-		-		1,030		-			1,030
Depreciation and amortization		24,745		35,185		27,581		391			87,902
Operating income (loss)	$	101,215	$	26,524	$	4,142	$	(67,288	)	$	64,593

	Nine Months Ended September 30, 2010
	Printed		Lottery		Diversified		Unallocated
	Products		Systems		Gaming		Corporate
	Group		Group		Group		Expense			Totals
Instant tickets	$	343,506	$	-	$	-	$	-		$	343,506
Service revenue		-		148,334		139,193		-			287,527
Sales revenue		6,625		24,518		8,257		-			39,400
Total revenue		350,131		172,852		147,450		-			670,433
Cost of instant tickets (1)		199,282		-		-		-			199,282
Cost of services (1)		-		78,760		88,576		-			167,336
Cost of sales (1)		4,931		17,708		5,204		-			27,843
Selling, general and administrative expenses		29,890		16,972		15,984		35,314			98,160
Stock-based compensation		2,349		1,039		1,687		12,308			17,383
Write-down of assets held for sale		-		-		8,029		-			8,029
Employee termination and restructuring costs		-		-		602		-			602
Depreciation and amortization		25,150		32,622		23,872		373			82,017
Operating income (loss) (2)	$	88,529	$	25,751	$	3,496	$	(47,995	)	$	69,781

(1) Exclusive of depreciation and amortization.

(2) In connection with the realignment of its management structure in January 2011, the Company determined to no longer allocate certain overhead expenses to its reportable segments, effective as of January 1, 2011.  The segment information for the nine months ended September 30, 2010 has been adjusted to reflect this change in segment reporting.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

RECONCILIATION OF NET INCOME TO ATTRIBUTABLE EBITDA

RECONCILIATION OF EARNINGS FROM EQUITY INVESTMENTS TO EBITDA FROM EQUITY INVESTMENTS

(Unaudited, in thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Net income (loss)	$	(4,124	)	$	8,704		$	(4,037	)	$	9,248
Add: Income tax expense		2,202			2,232			12,912			17,040
Add: Depreciation and amortization expense		27,994			27,284			87,902			82,017
Add: Interest expense		26,297			24,617			79,161			74,176
Add: Early extinguishment of debt		4,185			2,236			4,185			2,236
Add: Other expense (income), net		1,711			(3,011	)		(159	)		9,555
EBITDA	$	58,265		$	62,062		$	179,964		$	194,272
Credit Agreement adjustments:
Add: Debt-Related Fees and Charges (1)	$	4,185		$	2,236		$	4,306		$	2,236
Add: Amortization of Intangibles		-			-			-			-
Add: Earn-outs for Permitted Acquisitions		-			-			105			-
Add: Extraordinary Charges or Losses under GAAP		-			-			-			-
Add: Non-Cash Stock-Based Compensation Expenses		5,591			4,850			15,293			17,383
Add: Deferred Contingent Compensation Expense		-			-			993			-
Add: Non-Recurring Write-Offs under GAAP		324			669			324			5,165
Add: Acquisition Advisory Fees		1,587			234			1,587			234
Add: Specified Permitted Add-Backs (2)		3,305			602			6,097			602
Add: Italian Concession Obligations		-			257			-			17,604
Add: Racing Disposition Charges and Expenses		18			1,486			96			2,864
Add: Playtech Royalties and Fees		494			-			1,653			-
Less: Interest Income		(69	)		(123	)		(274	)		(421	)
Less: Extraordinary Income or Gains under GAAP		-			-			-			-
Less: Income on Earn-Outs for Permitted Acquisitions		-			-			-			-
Adjustments to conform to Credit Agreement definition:
Add/Less: Other expense (income), net (3)		(1,711	)		3,011			159			(9,555	)
Add/Less: Early extinguishment of debt		(4,185	)		(2,236	)		(4,185	)		(2,236	)
Less: Earnings from equity investments		(8,895	)		(13,031	)		(27,469	)		(42,474	)
Add: EBITDA from equity investments		22,751			15,007			68,525			51,563
Attributable EBITDA	$	81,660		$	75,024		$	247,174		$	237,237
EBITDA from equity investments (4):
Earnings from equity investments	$	8,895		$	13,031		$	27,469		$	42,474
Add: Income tax expense		3,641			482			9,912			1,599
Add: Depreciation and amortization expense		9,259			1,604			27,494			5,052
Add: Interest expense, net of other		956			(110	)		3,650			2,438
EBITDA from equity investments	$	22,751		$	15,007		$	68,525		$	51,563

(1) Amount reflects write-off of unamortized deferred financing costs in connection with early extinguishment of debt.

(2) Amount includes management transition expenses, transaction expenses and restructuring expenses.

(3) Amounts include foreign exchange transactions, interest income, minority interest and other items.

(4) EBITDA from equity investments includes results from the Company's participation in Consorzio Lotterie Nazionali (through  September 30, 2010), Lotterie Nazionali S.r.l. (beginning October 1, 2010), Roberts Communications Network, LLC, CSG Lottery Technology (Beijing) Co. Ltd., Shandong Inspur Scientific Games Technology, Ltd. (through December 31, 2010), Sportech Plc (beginning October 5, 2010), Sciplay (beginning January 21, 2010), Guard Libang and Northstar Lottery Group, LLC (beginning March 1, 2011).

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CALCULATION OF FREE CASH FLOW

(Unaudited, in thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Net cash provided by operating activities	$	55,044		$	40,105		$	152,627		$	143,241
Less: Capital expenditures		(2,250	)		(3,544	)		(5,863	)		(6,873	)
Less: Lottery and gaming systems expenditures		(11,781	)		(13,755	)		(33,972	)		(45,257	)
Less: Other intangible assets and software expenditures		(10,164	)		(8,326	)		(28,536	)		(26,335	)
Total Capital Expenditures	$	(24,195	)	$	(25,625	)	$	(68,371	)	$	(78,465	)
Free cash flow	$	30,849		$	14,480		$	84,256		$	64,776

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

KEY PERFORMANCE INDICATORS

(Unaudited, in thousands, except terminals and ASP)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
Italy - Gratta e Vinci:
Retail Sales (Euros)		2,393,000		2,159,000		7,764,000		6,993,000
China - China Sports Lottery:
Retail Sales (RMB)		4,730,000		3,813,000		14,697,000		11,892,000
Tickets Sold		651,000		553,000		2,097,000		1,659,000
ASP (RMB)		7.27		6.90		7.01		7.17
	As of September 30,
	2011		2010
Terminal installed base at end of period:
Global Draw		26,632		18,490
Games Media		3,641		2,842
Barcrest		5,267		N/A

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES ("SGC")
RECONCILIATION OF COMPANY OPERATING RESULTS TO
RESULTS EXCLUDING THE RACING BUSINESS
(Unaudited, in thousands)
	Three Months Ended September 30, 2010
			Less:		SGC
	SGC		Racing		Excluding
	Total		Business		Racing
Instant tickets	$	115,968	$	-	$	115,968
Service revenue		92,813		25,200		67,613
Sales revenue		12,280		4,999		7,281
Total revenue		221,061		30,199		190,862
Cost of instant tickets (1)		67,138		-		67,138
Cost of services (1)		57,723		20,042		37,681
Cost of sales (1)		7,977		2,857		5,120
Selling, general and administrative expenses		31,585		3,062		28,523
Stock-based compensation		4,850		206		4,644
Write-down of assets held for sale		2,155		2,155		-
Employee terminations costs		602		-		602
Depreciation and amortization		27,284		13		27,271
Operating income	$	21,747	$	1,864	$	19,883
	Nine Months Ended September 30, 2010
			Less:		SGC
	SGC		Racing		Excluding
	Total		Business		Racing
Instant tickets	$	343,506	$	-	$	343,506
Service revenue		287,527		74,957		212,570
Sales revenue		39,400		7,719		31,681
Total revenue		670,433		82,676		587,757
Cost of instant tickets (1)		199,282		-		199,282
Cost of services (1)		167,336		57,174		110,162
Cost of sales (1)		27,843		4,735		23,108
Selling, general and administrative expenses		98,160		8,913		89,247
Stock-based compensation		17,383		610		16,773
Write-down of assets held for sale		8,029		8,029		-
Employee terminations costs		602		-		602
Depreciation and amortization		82,017		41		81,976
Operating income	$	69,781	$	3,174	$	66,607
(1) Exclusive of depreciation and amortization.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
RECONCILIATION OF DIVERSIFIED GAMING GROUP OPERATING
RESULTS TO RESULTS EXCLUDING THE RACING BUSINESS
(Unaudited, in thousands)
	Three Months Ended September 30, 2010
	Diversified		Less:		DGG
	Gaming		Racing		Excluding
	Group (DGG)		Business		Racing
Instant tickets	$	-	$	-	$	-
Service revenue		46,183		25,200		20,983
Sales revenue		5,115		4,999		116
Total revenue		51,298		30,199		21,099
Cost of instant tickets (1)		-		-		-
Cost of services (1)		31,273		20,042		11,231
Cost of sales (1)		2,960		2,857		103
Selling, general and administrative expenses		5,598		3,062		2,536
Stock-based compensation		519		206		313
Write-down of assets held for sale		2,155		2,155		-
Employee termination and restructuring costs		602		-		602
Depreciation and amortization		8,005		13		7,992
Operating income (loss)	$	186	$	1,864	$	(1,678	)
	Nine Months Ended September 30, 2010
	Diversified		Less:		DGG
	Gaming		Racing		Excluding
	Group (DGG)		Business		Racing
Instant tickets	$	-	$	-	$	-
Service revenue		139,193		74,957		64,236
Sales revenue		8,257		7,719		538
Total revenue		147,450		82,676		64,774
Cost of instant tickets (1)		-		-		-
Cost of services (1)		88,576		57,174		31,402
Cost of sales (1)		5,204		4,735		469
Selling, general and administrative expenses		15,984		8,913		7,071
Stock-based compensation		1,687		610		1,077
Write-down of assets held for sale		8,029		8,029		-
Employee termination and restructuring costs		602		-		602
Depreciation and amortization		23,872		41		23,831
Operating income	$	3,496	$	3,174	$	322
(1) Exclusive of depreciation and amortization.

EX-99.2

Exhibit 99.2