Anchor Gaming Reports Q4 2001 and Full-Year Results

9 August 2001

Earnings before interest, taxes, depreciation, amortization, one-time charges and stock-based compensation expense (``EBITDA'') increased 16% to $57 million compared to the quarter ended June 30, 2000. Diluted earnings per share before one-time charges increased 48% to $1.24 per share compared to the quarter ended June 30, 2000. For the fourth quarter of the previous year, revenues and joint venture income were $130 million, EBITDA was $49 million, and diluted earnings per share before one-time charges were $0.84.

In addition to the quarterly results, Anchor Gaming announced the Company's share of the Anchor-IGT joint venture income and related royalties was $39 million, a 36% increase from $29 million in the June 2000 quarter and a 12% increase from $35 million in the March 2001 quarter. Despite the unfavorable impact of lower interest rates, which increase the costs of funding jackpot payments, the joint venture achieved record results. Anchor Gaming has reclassified its presentation of earnings from unconsolidated joint venture operations.

Previously, the Company reported all income related to the joint venture as a component of Gaming Machine revenues. In this release and prospectively, Anchor will report the earnings from the joint venture under a caption titled, Earnings of Unconsolidated Affiliates. Royalties related to joint venture activities will continue to be reported as Gaming Machine revenues. These royalties were approximately $1.5 million for the quarter and $5.0 million for the year ended June 30, 2001.

The quarter also marked the first time Anchor Gaming received management fees from the Pala Casino in San Diego, which opened on April 3. During the quarter, Anchor recorded $2.7 million in total revenue and $2 million in pre-tax earnings from its relationship with the Pala Tribe.

For the year ended June 30, 2001, after adjusting for the sale of Sunland Park in December 2000, revenues and joint venture income increased 6% to $502 million and EBITDA increased 17% to $206 million. Diluted earnings per share increased 31% to $3.64 before one-time charges compared to the year ended June 30, 2000. For the previous year, revenues and joint venture income were $475 million, EBITDA was $176 million, and diluted earnings per share were $2.77 before one-time charges.

Including the one-time charges, Anchor Gaming reported diluted earnings per share of $1.07 for the quarter ended June 30, 2001. The one-time charges incurred during the fourth quarter primarily consist of an adjustment to the provision for liquidated damages that were settled with the Florida Lottery and further restructuring activities at AWI, the company's on-line subsidiary.

Including the one-time charges, Anchor Gaming reported a loss per share of $3.03 for the year ended June 30, 2001. The one-time charges incurred during fiscal 2001 include the cumulative effect of a change in accounting principle in the first quarter for the implementation of a new accounting standard on derivatives, the second quarter charges in connection with the stock repurchase from the Fulton family, and the third and fourth quarter charges recorded primarily in connection with AWI's asset impairment and restructuring.

``This has been a successful year for Anchor Gaming as measured by its fiscal 2001 operating results and our ability to establish the basis for substantial growth in fiscal 2002,'' said T.J. Matthews, CEO of Anchor Gaming. ``The Gaming Machine segment continues to grow its installed base and corresponding financial performance. Our Gaming Operations continued to be a steady contributor to revenues and the opening of Pala will provide meaningful growth next fiscal year. Our Gaming Systems is now positioned to grow due to the restructuring effort that has been mostly completed.''

In discussing the proposed merger with IGT that was announced on July 8th, Matthews said. ``Capturing the full potential of the joint venture is one of the underlying fundamentals in bringing the two companies together. Our growth has been driven by new product introductions, two more of which will be showcased at the October gaming show. However, the collaborative efforts of the combined companies will substantially improve the timing and quantity of future product introductions. Employees at both companies are working very hard to complete the tasks necessary to close the transaction as soon as practical.''

Added Matthews, ``The Company believes that it is appropriate to provide guidance relative to both the first quarter of fiscal 2002 and the year. Our expectations regarding EPS are that it will be at least $1.25 for the first quarter of fiscal 2002 and at least $5.00 for the year. At this time, we're not comfortable giving guidance beyond fiscal 2002, although our internal goal is to grow year-over-year EPS by at least 15%.''

The Company's cash balance at June 30, 2001 was $24 million and working capital was $18 million. During the year, the Company repaid $65 million under its senior credit facility. At June 30, 2001, the Company had total debt of $407 million and the Company had availability of $167 million under its senior credit facility.

More information can be found at the Anchor Gaming website.