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TRANSFORMATION THROUGH COMBINATION 2013 Annual Report Interactive Our Interactive Group, primarily through our Williams Interactive subsidiary, markets and distributes gaming entertainment products and services for real-money and social gaming across desktop and mobile devices. We provide our player-favorite casino slot games to real-money online casino operators through integration with our centrally located servers. We also integrate our Play4Fun Network™™ B2B operator- branded social casino pplatformlatform into tterrestrialerrestrial cascasinoino operatorsoperators’’ wewebsites.bsites. AddiAdditionally,tionally, we ooperateperate Jackpot Partyy® andand GoldGold FishFish® socialsocial casinoscasinos acrossacross a wide range ofof devices. Lottery Since creating the world’srld’s first secure instant lottery game inn 1973, our Lottery Group designs, pprintsrints and sells a comprehensive suite of creativcreativee instant games along wiwithth vavalue-addinglue-adding services to help our lotteryttery customers grow their revenues, includingncluding marketinmarketingg support, specialty games,mes, mercmerchandisinghandising and promotion packages,es, iinventorynventory management and fulfillmentlment services, and player loyalty programs.s. We also pproviderovide lottery systems, includinging eequipment,quipment, software, data communicationsnications services GamingGaming and support. Additionally,ally, we pproviderovide OurOur GamingGaming GroupGroup develops,devel software, hardware andnd related services mmanufactures,anufactures, markets aand distributes for sports betting, kenoo and instant ggameame ggamingaming content, ggamingaming machines and validation systems. related services fforor casicasinos,n racetracks, UU.K..K. bbettingetting sshops,hops, llotteryotte operators and other lelegalgal ggamingaming ooperators. We are hihighlyghly focused oonn developing iimaginativemaginative anandd ininnovative game content and featfeaturesu that provide a hihighgh level of playplayere entertainment andand operatoroperator performance;perfo and we generally oofferffer our proproductsd on a for-sale basis and on a participationparticipat or fixed daily fee leasinleasingg arranarrangement.gement Additionally, we provideprovide videovideo lotterylottery centralcen monitoring and control systems and networks for gaming regulators. Scientific Games 2013 Annual Report Our mission is to be a global leader in providing ¸technology, gaming content and services to the regulated lottery and gaming industries. We seek to realize this goal in a responsible manner that maximizes value for our stockholders. To my fellow stockholders: ¹ n 2013 we achieved significant A significant part of achieving these progress in strengthening and goals will result from realizing I diversifying Scientific Games the integration cost savings and through the acquisition of WMS other anticipated benefits from Industries Inc. (“WMS”). We have the acquisition of WMS. By driving established our organization structure organizational alignment to these focused on our Lottery, Gaming priorities, continuously improving our and Interactive business units and core competencies in developing we have developed strategies to innovative gaming content and David L. Kennedy grow and increase the value of our technologies and maintaining a sharp President & business. With the company-wide focus on serving our customers and Chief Executive Officer integration efforts we initiated, we players, we expect to continue to believe we have built the build shareholder value. foundation for performance I am most appreciative of the improvements in 2014 and beyond. dedicated efforts and progress Our key strategic priorities are to achieved by our employees around leverage our increased operating the world and the commitment, scale and business scope to improve counsel and support of our Board of our financial performance and returns Directors throughout the year. and generate increased cash flow through improved performance and a disciplined allocation of capital. 1 We are focused on increasing profit margins “and cash flow by driving efficiencies through continuous improvement. ” Total Revenue Notable among our accomplishments separate supply agreements, ($ in millions) in 2013 were: Scientific Games and our joint venture partner will provide $1,200 • We announced and completed the Northstar New Jersey with instant acquisition of WMS for $1.5 billion lottery games, lottery systems and and in doing so entered into a new 960 equipment and related services, credit agreement for $2.6 billion. with Scientific Games serving as We developed detailed integration the primary provider of instant 720 plans for both the WMS business lottery games. We have a 30% and also our existing businesses economic interest associated aimed at generating an expected with these supply arrangements. 480 $100 million in cost savings on Operations of Northstar New an annualized run-rate basis by Jersey began on October 1, 2013. 240 the end of 2015. Following the completion of the acquisition on • Scientific Games has a 16.5% October 18, 2013, we immediately equity interest in a consortium that was awarded a 12-year concession 2011 2012 2013* began to implement these integration plans and we are for the exclusive rights to the * Reflects 74 days of WMS results since its acquisition on October 18, 2013 achieving a faster-than-anticipated production, operation, promotion realization of the targeted savings. and management of instant games and certain traditional lotteries • Northstar New Jersey Lottery in Greece. Scientific Games Group (“Northstar New Jersey”), has exclusive responsibility for an equity investment in which instant lottery games design and Scientific Games owns an production. Operations in Greece approximate 18% equity interest, are expected to begin in the was awarded a 15-year contract second quarter of 2014. to provide marketing and sales services for the New Jersey • Early in 2013 prior to the Lottery. Additionally, under completion of the acquisition, 2 3CIENTIlCÏ'AMESÏÏ!NNUALÏ2EPORT WMS launched two new gaming Following the WMS acquisition, and other gaming entertainment machine cabinets – the Blade™ Scientific Games operates in three across the online distribution channel, cabinet for the product sale global business groups: Lottery, including the breadth of desktop and business and the Gamefield xD® Gaming and Interactive. Each of mobile platforms. cabinet for the service business our operating groups is led by an Each of these executives with their – both incorporating the robust experienced and dedicated executive. teams have developed well-defined capabilities of the next-generation Bill Huntley, with many years at ® business plans that clearly focus on CPU-NXT 3 operating platform. Scientific Games, leads the Gaming their customers and players, with These unique gaming machines, Group that now includes the WMS with their player-appealing games, strategies to improve performance, gaming machine operations along are providing superior performance continuously strengthen their core with the SG Gaming server-based for our casino customers. competencies and grow their business. gaming business operating primarily • Scientific Games teamed with in the U.K. We are integrating all WMS and was selected by the of our Lottery operations into one Delaware Lottery as the primary operating group to provide greater internet gaming and services alignment and focus on ensuring our supplier in partnership with 888 lottery customers have access to our Holdings for an initial period of entire comprehensive portfolio of five years. The lottery’s iGaming consumer-focused lottery products site was launched at the end of and value-adding services. Jim October 2013 and offers online Kennedy, with 29 years at Scientific poker, casino table games and Games, leads the Lottery Group. Orrin casino slots games. Edidin, with 17 years at WMS, leads • Financially, our revenue increased our Interactive Group, which includes to $1.1 billion as we benefited from the interactive operations acquired ongoing growth in our legacy lottery with WMS. Interactive is a dynamic business and the results of WMS business focused on the development for part of the 2013 fourth quarter. and distribution of game content 3 Scientific Games delivers iLottery content, ¸technology and services on a highly secure, flexible platform – and it all begins with our successful player loyalty and rewards solutions. In the lottery business a key priority that support our lottery customers in continues to be to drive value for our growing their revenues. ¹ lottery customers and operators, and Another key strategy in the Lottery to support their retail customers with Group is to win new or renew high performing game content and existing profitable contracts. We innovative game delivery systems won or renewed 13 contracts that leverage our secure platforms. globally in 2013. Having commenced We continuously strive to create operations and begun to sell instant exciting new instant and digital games, games in New Jersey in 2013 James C. Kennedy, Jr. and develop unique merchandising Executive Vice President & through Northstar New Jersey, we Group Chief Executive, Lottery and promotion programs. An added want to continue to win more of capability, recently strengthened by these opportunities as they become the addition of WMS, is the breadth available. and depth of our portfolio of licensed entertainment brands and access to Instant Products Revenue exciting new brands. From