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Anchor Gaming Reports Record Q1 2002 Results

17 October 2001

LAS VEGAS, Nevada – (Press Release) --Oct. 17, 2001 -- Anchor Gaming (Nasdaq: SLOT) today reported record operating results for its first fiscal quarter ended September 30, 2001.

For the first quarter, after adjusting for the sale of Sunland Park Racetrack and Casino in December 2000, revenues and joint venture earnings increased 12% to a record $142 million compared to the quarter ended September 30, 2000. Earnings before interest, taxes, depreciation, amortization and stock-based compensation expense ("EBITDA") increased 38% to a record $69 million compared to the quarter ended September 30, 2000.

Net income increased 55% to a record $29 million compared to the prior year quarter. Diluted earnings per share increased 137% to a record $1.85 per share compared to the quarter ended September 30, 2000. For the first quarter of the previous year, revenues and joint venture earnings were $126 million, EBITDA was $50 million, net income was $18 million and diluted earnings per share were $0.78.

Quarterly Highlights By Operating Segment:

Gaming Machines

-- The Company's share of the Anchor-IGT joint venture earnings and related royalties was $40 million, an 18% increase from $34 million in the September 2000 quarter and a 3% increase from $39 million in the June 2001 quarter. Despite the unfavorable impact of lower interest rates, which increase the costs of funding jackpot payments, the joint venture achieved record results for the third quarter in a row.

As a result of the events of September 11, the Company expects that reduced gaming activity in Las Vegas may negatively impact the Gaming Machines segment. Play levels have declined on weekdays, but have returned to normal on weekends. To the extent that Anchor Gaming's participation games outperform the house average, the relative effect on the Company's games should be less than the effect on the average game.

-- The Company introduced several products at the Global Gaming Expo in Las Vegas in early October, including two new wheel products that will become part of the joint venture with IGT. American Bandstand(R) has been submitted for approval to Nevada gaming authorities and the Company expects placements of that game to begin by the end of November. The Company also unveiled Elvira(R) and game placements are expected to begin in spring 2002.

Gaming Operations

-- Gaming operations revenues and EBITDA were $42 million and $13 million for the quarter ended September 30, 2001 as compared (after adjusting for the sale of Sunland Park) to $35 million and $8 million for the quarter ended September 30, 2000, and $37 million and $10 million for the quarter ended June 30, 2001.

The increases were driven by management fees from the Pala Casino and revenues at the Colorado Central Station that were higher than any of the last eight quarters. During the quarter, Anchor recorded $5.5 million in total revenue and $4.8 million in pre-tax earnings from its relationship with the Pala Tribe. In the June 2001 quarter, revenues from the relationship were $2.7 million and pre-tax earnings were $2 million.

Gaming Systems

-- Anchor Gaming's on-line lottery business, AWI, had revenues and EBITDA of $38 million and $12 million for the quarter ended September 30, 2001. These results were much higher than expected and were driven by the $295 million Powerball multi-state jackpot in August. This jackpot was the second highest Powerball jackpot ever. The Company believes that the large August Powerball jackpot added $5.8 million in revenue and $5 million in EBITDA to the quarterly results.

The restructuring at AWI has resulted in a rationalization of its cost structure and a lower breakeven point for revenue. AWI's revenues and EBITDA were $32 million and $2.6 million for the quarter ended September 30, 2000 and $29 million and $1.5 million for the quarter ended June 30, 2001.

-- AWI was awarded a new seven-year contract with the State of Delaware to provide equipment and services to its long-time customer the Delaware State Lottery. The Company's video lottery business, VLC, signed a contract with the State of Oregon to provide 2,000 video gaming machines to the Oregon Lottery. This was the second largest single order for equipment in VLC's history. Anchor Gaming's pari- mutuel wagering subsidiary, United Tote, signed an agreement with Sportsystems Corporation, a Delaware North Company, to supply equipment at seven racetracks.

Corporate

-- During the quarter, the Company repaid $40 million under its senior credit facility. The Company's cash balance at September 30, 2001 was $38 million and working capital was $16 million. At September 30, 2001, the Company had total debt of $367 million and the Company had availability of $195 million under its senior credit facility. The Company's leverage ratio (based upon September 30, 2001 debt balances) is approximately 1.6 times.

-- During the quarter, the Company recorded expenses related to the pending merger with IGT and charitable donations related to the relief effort for victims of the tragic events of September 11 that offset almost entirely the gain on the sale of the Montana Route assets in late September 2001.

"This has been an exceptional quarter for Anchor Gaming, highlighted by record revenue, EBITDA, net income and EPS," said T.J. Matthews, CEO of Anchor Gaming. "The Company's results in the first quarter of fiscal 2002 demonstrate the stability of our diversified earnings and cash flow. Our business units are all strong and poised for growth prospects. Our expectations regarding EPS are that it will be at least $1.15 in the second quarter of fiscal 2002 and at least $5.75 for the year. We maintain our internal goal of growing year-over-year earnings per share by 15%."

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