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Anchor Gaming Reports Fiscal 2001 Q3 Results

For the first quarter of the previous year, revenues were $127 million, EBITDA was $43 million, net income was $16 million, and diluted earnings per share were $1.30. This quarter's EBITDA and diluted earnings per share were the highest in the Company's history.

``Our first quarter sets a good precedent for the rest of the fiscal year, which we expect to show the same performance trends through the rollout of our IGT joint venture game I Dream of Jeannie(TM), the continued demand for our Wheel of Fortune® products, and international opportunities in our gaming systems businesses,'' said Anchor Chief Executive Officer T.J. Matthews.

``Looking ahead, we expect very exciting things for Anchor Gaming, including the opening of the Pala casino, dining, and entertainment complex, currently scheduled to open in late March 2001,'' Matthews added.

As previously announced, the Company completed the purchase of 4.6 million shares from Stanley Fulton and members of the Fulton family on October 17, 2000. The Company has also agreed to sell Stanley Fulton substantially all of the assets relating to its Sunland Park Racetrack & Casino and its 25 percent interest in a Massachusetts horse racing facility.

If the stock repurchase transaction and related asset sales had occurred on July 1, 2000, pro forma EBITDA and diluted earnings per share would have been approximately $50 million and $1.86, respectively. These pro forma calculations do not contemplate additional non-cash expenses for stock-based compensation that will likely be incurred in future quarters.

In addition, the Board of Directors has authorized a 2-for-1 stock split. As a result of the split, shareholders of record as of October 31, 2000 will receive one additional share of Anchor Gaming common stock for every one share then owned. The new shares will be issued as soon as practical following the record date.

The Company had 7.1 million shares outstanding after the stock repurchase but without giving effect to the stock split. The attached financial statements and financial data included within this release have not been adjusted to reflect the stock split.

As the Company derives most of its revenues, EBITDA, and net income in each of its three segments from recurring sources, Anchor Gaming management believes that the exclusion of non-recurring items from reported results is a useful tool in determining its recurring profit levels, but should not be construed as a substitute for operating income or other profitability measures under generally accepted accounting principles.

Non-recurring items include one-time sales or events not expected to be significant in future quarters. The first quarter of fiscal 2001 included certain non-recurring items that affected diluted earnings per share. Non-recurring items that had a positive effect on diluted earnings per share this quarter included the margin related to a one-time sale on an international lottery contract and the cumulative effect of a change in an accounting principle for the implementation of a new accounting standard for derivatives.

Non-recurring items that had a negative effect on diluted earnings per share this quarter include the effects of an international lottery contract settlement charge, and incremental costs related to the United Kingdom lottery proposal.

The net effect of the non-recurring items reduced EBITDA and diluted earnings per share by approximately $1.3 million and $.07, respectively, in the first quarter of fiscal 2001. Non-recurring items reduced EBITDA and diluted earnings per share by approximately $250,000 and $.01, respectively, in the first quarter of fiscal 2000.

The Company's cash balance at September 30, 2000 was $27 million. During the quarter, the Company repaid approximately $21 million under its senior credit facility. At September 30, 2000, the outstanding balance under the senior credit facility was $201 million.

The Company has amended its existing $300 million senior credit facility to increase the maximum borrowings subject to certain covenants, to $325 million. On October 17, 2000, the Company completed the sale of $250 million of 9.875 percent senior subordinated notes due October 2008 that were priced to yield 10 percent.

The Company did not repurchase any shares during the September 2000 quarter but has repurchased 70,000 shares of its own common stock since September 30, 2000. There are 751,000 shares authorized for repurchase under Anchor's previously announced repurchase program. Purchases by Anchor of its common stock may be made through open market purchases, block transactions, privately negotiated purchases, or otherwise.

Purchases of Anchor Gaming common stock by Anchor, if any, will be made at prices and terms to be determined in light of then current circumstances. Anchor may temporarily or permanently suspend purchasing stock at any time without notice.

The Company will hold its annual meeting on December 15, 2000. The Board of Directors has fixed the close of business on November 20, 2000 as the record date for the determination of stockholders entitled to notice of and to vote at such meeting.

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