Anchor Gaming Reports Q2 2001 Results

24 January 2001

For the second quarter of fiscal 2001 compared to the second quarter of fiscal 2000, revenues increased slightly to $131 million, earnings before interest, taxes, depreciation (including Anchor Gaming's share of joint venture depreciation) amortization, and stock-based compensation expense (``EBITDA'') increased 15% to $51 million, and diluted earnings per share before one-time charges related to the stock repurchase from the Fulton family and related asset sale transactions (the ``Fulton Transaction'') increased 34% to $0.83.

The one-time charges related to the Fulton Transaction for the second quarter of fiscal 2001 include an after-tax loss on the sale of racetrack assets of $7 million (pre-tax gain of $8 million less taxes of $15 million), and other items related to the Fulton Transaction of approximately $1.5 million, net of taxes.

Including the one-time charges related to the Fulton Transaction, Anchor Gaming reported diluted earnings per share of $0.32 for the quarter ended December 31, 2000. For the second quarter of the previous year, revenues were $131 million, EBITDA was $44 million, and diluted earnings per share were $0.62.

For the six months ended December 31, 2000, compared to the six months ended December 31, 1999, revenues increased 5% to $270 million, EBITDA increased 19% to $104 million and diluted earnings per share before one-time charges related to the Fulton Transaction increased 25% to $1.59.

The one-time charges related to the first six months of fiscal 2001 include the Fulton transaction charges and the cumulative effect of a change in accounting principle for the implementation of a new accounting standard on derivatives of $100,000, net of taxes.

Including the one-time charges related to the Fulton Transaction, Anchor Gaming reported diluted earnings per share of $1.18 for the six months ended December 31, 2000. For the first six months of the previous year, revenues were $258 million, EBITDA was $88 million and diluted earnings per share were $1.27.

``The second quarter was unique because we completed all aspects of the highly accretive Fulton transaction and reinvigorated our management's direction toward a long-term growth strategy,'' said T.J. Matthews, Anchor Gaming Chief Executive Officer. ``In the third quarter, our gaming machine segment will continue to be a market leader and a major driver of EPS growth. We expect to increase the placement of our various games in many jurisdictions. Anchor Gaming is also confident that our intellectual property package covering coin-free technology will continue to gain recognition and acceptance within the industry.''

Added Matthews, ``The third quarter will also be our first complete quarter that reflects the full impact of the Fulton transaction on Anchor Gaming's earnings. We are also looking forward to opening our Pala Casino Dining & Entertainment project in northern San Diego County late in the quarter. Pala is a true entertainment destination and will bring an exceptionally unique product to the southern California gaming market.''

During the quarter ended December 31, 2000, the Company completed the following transactions: purchase of 9.2 million shares from Stanley Fulton and members of the Fulton family; the sale of substantially all of the assets relating to Sunland Park Racetrack & Casino; the sale of its 25% interest in a Massachusetts horse racing facility; the issuance of $250 million of 9.875% senior subordinated notes; and the completion of a two-for-one stock split. The attached financial data and financial statements included within this release have been adjusted to reflect the stock split.

The Company's cash balance at December 31, 2000 was $27 million. During the quarter, the Company repaid approximately $12.5 million under its senior credit facility. At December 31, 2000, the outstanding balance under the senior credit facility was $188 million and the Company had availability of $135 million under this facility. In addition to the Fulton share repurchase, the Company repurchased 140,000 shares during the quarter ended December 31, 2000.

There are 1.5 million 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.