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Anchor Gaming Reports Q4 and Full-Year Results

9 August 2000

LAS VEGAS, Nevada – (Press Release) --Aug. 9, 2000 -- Anchor Gaming (Nasdaq: SLOT) today reported its operating results for the fourth quarter and year ended June 30, 2000.

The June quarter is the fourth to include the results of the operating units acquired in the June 29, 1999 acquisition of Powerhouse Technologies, Inc. and comparisons to fiscal 1999 periods are presented on a pro forma basis, as if the acquisition occurred on July 1, 1998.

For the fourth quarter, revenues increased 16% to $142 million, earnings before interest, taxes, depreciation (including Anchor Gaming's share of joint venture depreciation), amortization, and impairment charges (``EBITDA'') increased 36% to $51 million, net income increased 48% to $18 million, and diluted earnings per share increased 54% to $1.54 per share compared to the pro forma quarter ended June 30, 1999.

These levels of revenues, EBITDA, and diluted earnings per share represent the highest such amounts in the Company's history. On a pro forma basis for the fourth quarter of the previous year, revenues were $122 million, EBITDA was $38 million, net income was $12 million, and diluted earnings per share were $1.00.

For the year ended June 30, 2000, revenues increased 13% to $525 million, EBITDA increased 17% to $185 million, net income increased 13% to $65 million, and diluted earnings per share increased 17% to $5.41 compared to the pro forma year ended June 30, 1999.

On a pro forma basis for the previous year, revenues were $466 million, EBITDA was $159 million, net income was $58 million, and diluted earnings per share were $4.63 per share.

The fourth quarter of fiscal 2000 included certain non-recurring items that impacted diluted earnings per share.

Non-recurring items that had a positive impact on diluted earnings per share primarily included one-time sales of international lottery equipment; the effects of the reduction of Anchor Gaming's effective tax rate; and non-recurring income related to the Company's agreements with the Pala Band of Mission Indians.

Non-recurring items that had a negative effect on diluted earnings per share include the effects of impairment and restructuring charges and write-downs of inventory. The net effect of the non-recurring items added $.05 to diluted earnings per share.

Summarizing the Company's performance, Anchor Gaming Chief Executive Officer T.J. Matthews said, ``After four consecutive quarters of year-over-year declines, we are extremely pleased to report our second consecutive quarter with year-over-year growth in revenue, EBITDA, and earnings per share. Our management team is excited about this momentum as well as our growth prospects for the next eight quarters and beyond.''

Matthews continued, ``These favorable results were driven primarily by accelerated placements of our joint venture Video Wheel of Fortune® game, new on-line lottery system installations in China and the Caribbean, and revenue increases at our Sunland Park Racetrack & Casino property after one full year with slot machines.''

He added, ``During the fourth quarter, we broke ground with the Pala Tribe and our partner Jerry Turk on the Pala Indian Casino & Entertainment Center project, which we believe will contribute to Anchor's earnings in the June 2001 quarter.''

``As we enter the new year, we believe that Anchor Gaming -- with the broadest portfolio of products and services in the gaming and wagering industries -- is exceptionally well positioned to benefit from the new California Native American gaming market, opportunities to place slot machines at racetracks, and the demand for new and replacement technology in the international lottery and pari-mutuel wagering jurisdictions,'' Matthews said.

The Company's cash balance at June 30, 2000 was $26 million, working capital was $51 million, and the available bank line of credit was $76 million.

In March 2000, Anchor Gaming expanded its share repurchase program to include authorization to buy back an additional one million shares of Anchor Gaming common stock.

Since January 1, 2000, the Company has repurchased 489,000 shares for $19 million, or an average price of $38.73 per share. Anchor Gaming has an 821,000-share balance remaining under the expanded program.

                                ANCHOR GAMING

                            SUMMARY OF OPERATIONS
                                 (unaudited)
                   (in thousands, except per share amounts)


                                         Three months ended
                                              June 30,
                                                    Pro forma      Percent
                                       2000            1999         Change
    Revenues                         $141,996        $121,938         16%
    Income from Operations             31,068          23,750         31%
    EBITDA                             50,892          37,451         36%
    Net Income                         17,884          12,044         48%
    Diluted Earnings Per Share          $1.54           $1.00         54%
    Weighted Average Common and
     Common Equivalent Shares
     Outstanding                       11,626          12,101


                                            Year ended
                                             June 30,
                                                    Pro forma     Percent
                                       2000            1999        Change
    Revenues                         $525,203        $465,925         13%
    Income from Operations            120,236         107,878         11%
    EBITDA                            185,169         158,599         17%
    Net Income                         64,959          57,503         13%
    Diluted Earnings Per Share          $5.41           $4.63         17%
    Weighted Average Common and
     Common Equivalent Shares
     Outstanding                       12,011          12,428


    ANCHOR GAMING                           Three months ended June 30,
    CONSOLIDATED STATEMENTS OF INCOME
     (Unaudited)                       2000           1999(a)     1999(b)
    (in thousands, except per
     share amounts)

    Revenues:
      Gaming operations             $  47,534       $  46,026   $  32,078
      Gaming machines and systems      48,277          44,200      30,593
      Lottery systems                  41,129          25,659          --
      Pari-mutuel systems               5,056           6,053          --
        Total revenues                141,996         121,938      62,671
    Costs of revenues:

      Gaming operations                31,470          27,712      18,037
      Gaming machines and systems      11,444          17,693       9,367
      Lottery systems                  26,639          16,986          --
      Pari-mutuel systems               3,205           3,526          --
        Total costs of revenues        72,758          65,917      27,404
    Gross margin                       69,238          56,021      35,267
    Other costs:

      Selling, general and
       administrative                  17,843          17,508       6,253
      Research and development          3,792           3,462         979
      Acquired in-process research
       and development                     --              --      17,500
      Impairment and restructuring
       charges                          2,641              --          --
      Depreciation and amortization    13,894          11,301       4,782
        Total other costs              38,170          32,271      29,514
    Income from operations             31,068          23,750       5,753

    Other income (expense):

      Interest income                     465             625       1,021
      Interest expense                 (4,312)         (4,087)       (113)
      Other income                      1,980            (181)       (189)
      Minority interest in earnings
       of consolidated subsidiary        (163)           (163)       (133)
        Total other income             (2,030)         (3,806)        586
    Income before provision for
     income taxes                      29,038          19,944       6,339
    Income tax provision               11,154           7,900       8,999
    Net income (loss)               $  17,884       $  12,044    $  (2,660)

    Basic earnings (loss) per share $    1.55       $    1.01    $   (0.22)
    Weighted average shares
     outstanding                       11,511          11,895      11,895

    Diluted earnings (loss)
     per share                      $    1.54       $    1.00    $   (0.22)
    Weighted average common and
     common equivalent shares
     outstanding                       11,626          12,101      11,895

    (a)Pro forma, presented as if the acquisition of Powerhouse Technologies,
        Inc. occurred on July 1, 1998
    (b) Historical


    ANCHOR GAMING                              Years ended June 30,
    CONSOLIDATED STATEMENTS OF INCOME
     (Unaudited)                       2000          1999(a)      1999(b)
    (in thousands, except per
     share amounts)

    Revenues:
      Gaming operations             $ 189,938       $ 159,632   $ 125,233
      Gaming machines and systems     180,750         183,849     123,698
      Lottery systems                 134,813         101,569          --
      Pari-mutuel systems              19,702          20,875          --
        Total revenues                525,203         465,925     248,931
    Costs of revenues:

      Gaming operations               124,529          96,145      70,419
      Gaming machines and systems      47,451          69,010      34,401
      Lottery systems                  80,622          62,067          --
      Pari-mutuel systems              12,902          13,213          --
        Total costs of revenues       265,504         240,435     104,820
    Gross margin                      259,699         225,490     144,111

    Other costs:

      Selling, general and
       administrative                  69,343          64,662      24,243
      Research and development         16,528          11,038       1,173
      Acquired in-process research
       and development                     --              --      17,500
      Impairment and restructuring
       charges                          2,641              --          --
      Depreciation and amortization    50,951          41,912      17,380
        Total other costs             139,463         117,612      60,296
    Income from operations            120,236         107,878      83,815

    Other income (expense):

      Interest income                   1,998           2,239       3,850
      Interest expense                (16,475)        (15,189)       (113)
      Other income                      2,219             281          47
      Minority interest in earnings
       of consolidated subsidiary        (608)           (700)       (670)
        Total other income            (12,866)        (13,369)      3,114
    Income before provision for
     income taxes                     107,370          94,509      86,929
    Income tax provision               42,411          37,006      39,422
    Net income                      $  64,959       $  57,503   $  47,507

    Basic earnings per share        $    5.49       $    4.73   $    3.91
    Weighted average shares
     outstanding                       11,833          12,164      12,164

    Diluted earnings per share      $    5.41       $    4.63   $    3.82
    Weighted average common and
     common equivalent shares
     outstanding                       12,011          12,428      12,428

    (a)Pro forma, presented as if the acquisition of Powerhouse Technologies,
        Inc. occurred on July 1, 1998
    (b) Historical


    ANCHOR GAMING                                    June 30,     June 30,
    CONSOLIDATED BALANCE SHEETS (Unaudited)            2000        1999
    (in thousands, except share amounts)

                        ASSETS
    Current assets:
      Cash and cash equivalents                     $  25,883    $  32,835
      Accounts and notes receivable, net               43,959       38,526
      Inventory, net                                   17,378       21,375
      Other current assets                             18,907        8,928
        Total current assets                          106,127      101,664
    Property and equipment, net                       200,976      188,048
    Goodwill, net                                     117,218      117,436
    Other intangible assets, net                       43,896       34,520
    Investments in unconsolidated affiliates           66,822       29,053
    Other long-term assets                             17,862       36,448
        Total assets                                $ 552,901    $ 507,169


           LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
      Accounts payable                              $  17,777    $  21,073
      Current portion of long-term debt                 1,524        4,051
      Income tax payable                                6,040        5,146
      Other current liabilities                        30,177       42,486
        Total current liabilities                      55,518       72,756
    Long-term debt, net of current portion            222,770      212,805
    Minority interest in consolidated subsidiary        4,093        1,255
        Total liabilities and minority interest
         in consolidated subsidiary                   282,381      286,816

    Stockholders' equity:

      Preferred stock, $.01 par value, 1,000,000
       shares authorized, 0 shares issued and
       outstanding at June 30, 2000 and
       June 30, 1999                                       --           --
      Common stock, $.01 par value, 50,000,000
       shares authorized, 14,049,850 issued and
       11,525,707 outstanding at June 30, 2000,
       13,841,750 issued and 11,866,307 outstanding
       at June 30,1999                                    140          138
      Treasury stock at cost, 2,524,143 shares
       at June 30, 2000 and 1,975,443 at
       June 30, 1999                                 (115,342)     (93,043)
      Additional paid-in capital                      124,357      116,854
      Retained earnings                               261,365      196,404
        Total stockholders' equity                    270,520      220,353
        Total liabilities and stockholders' equity  $ 552,901    $ 507,169

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