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Anchor Takes Big Loss on Lottery Unit

25 April 2001

LAS VEGAS, Nevada – April 25, 2001 -- Las Vegas-based Anchor Gaming Inc. reported a huge loss for the quarter ending March 31, the result of the restructuring of its lottery subsidiary.

Anchor reported a loss of $94 million, or $6.41 per share, for the quarter. This loss was entirely the result of a one-time charge of $133 million associated with the restructuring of subsidiary AWI. About $124 million of these charges were non-cash charges.

Without this restructuring, Anchor would have posted earnings per share of 87 cents, up 30 percent from the year-ago quarter. That bested analyst expectations of 80 cents per share.

By early afternoon trading today, Anchor stock had fallen $1.28 to $55.70.

Anchor's revenues increased 11 percent to $123 million, while cash flow rose 12 percent to $49 million. Anchor attributed these gains to growth in its gaming machines business, driven by its joint slot machine venture with International Game Technology.

Anchor officials said they decided to restructure AWI, its online lottery subsidiary, after it failed to win lottery contracts in the U.K. and Poland. Following these failed bids, there were few international business prospects for the AWI operations, company officials said.

About $120 million of the $133 million charges came from the write-down of goodwill associated with Anchor's $280 million acquisition of Powerhouse Technologies Inc. in 1999. Anchor said it expects to reduce costs by at least $15 million from the restructuring. Additional charges may come in the fourth quarter, though these are expected to be less than $10 million, Anchor said.

Anchor also announced it bought out a management partner in the Pala Casino for an undisclosed sum. Anchor said it is now entitled to receive 68 percent of management fees from the San Diego-area casino, which opened to large crowds earlier this month.

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