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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ____________
Commission file number 000-23124
ANCHOR GAMING
(Exact name of registrant as specified in its charter)
NEVADA 88-0304253
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
815 PILOT ROAD, SUITE G
LAS VEGAS, NEVADA
89119
(Address of principal executive offices)
(Zip Code)
(702) 896-7568
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---- ----
Shares outstanding of each of the registrant's classes of common stock as of
February 4, 1997:
Class Outstanding as of February 4, 1997
----- ----------------------------------
Common stock, $.01 par value 13,354,557
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ANCHOR GAMING
FORM 10-Q
QUARTER ENDED DECEMBER 31, 1996
INDEX
Page No.
--------
Part I. Financial Information
Item 1. Consolidated Condensed Financial Statements
Consolidated Condensed Balance Sheets at
December 31, 1996 and June 30, 1996 3
Consolidated Condensed Statements of
Income for the three months ended
December 31, 1996 and 1995 4
Consolidated Condensed Statements of
Income for the six months ended
December 31, 1996 and 1995 5
Consolidated Condensed Statements of Cash
Flows for the six months ended December 31, 1996
and 1995 6
Notes to Consolidated Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. Other Information 13
Signatures
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
ANCHOR GAMING
CONSOLIDATED CONDENSED DECEMBER 31, JUNE 30,
BALANCE SHEETS 1996 1996
- -------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 70,932,912 $ 78,112,530
Accounts receivable, net 6,255,586 4,720,689
Current portion of notes receivable, net 513,937 881,173
Inventory 3,137,380 3,197,955
Prepaid expenses 1,388,212 1,739,263
Other current assets 321,587 300,761
------------- -------------
Total current assets 82,549,614 88,952,371
Property and equipment, net 82,880,285 57,776,237
Long-term notes receivable, net 1,475,793 311,856
Intangible assets, net 2,201,745 2,054,710
Deposits and other 13,157,949 13,216,623
------------- -------------
Total assets $ 182,265,386 $ 162,311,797
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion, long-term notes payable $ - $ 100,000
Accounts payable 5,685,360 4,574,213
Accrued salaries, wages and vacation pay 1,696,393 2,488,014
Income tax payable 643,669 281,886
Other current liabilities 5,321,235 3,530,130
------------- -------------
Total current liabilities 13,346,657 10,974,243
Long-term notes payable, principal stockholder 2,800,000 2,800,000
Long-term notes payable, net of current portion - 850,000
Other long-term liabilities 635,468 707,318
Minority interest in consolidated subsidiary 837,482 672,955
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Total liabilities and minority interest in
consolidated subsidiary 17,619,607 16,004,516
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Stockholders' equity:
Common stock, $.01 par value, 50,000,000
shares authorized; 13,543,825 issued and
13,353,057 outstanding at December 31, 1996,
13,474,150 issued and 13,283,382
outstanding at June 30, 1996. 135,438 134,742
Additional paid-in capital 106,334,668 104,448,080
Treasury stock at cost, 190,768 shares (3,095,830) (3,095,830)
Retained earnings 61,271,503 44,820,289
------------- -------------
Total stockholders' equity 164,645,779 146,307,281
------------- -------------
Total liabilities and stockholders' equity $ 182,265,386 $ 162,311,797
------------- -------------
------------- -------------
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The accompanying notes are an integral part of these
consolidated condensed financial statements.
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ANCHOR GAMING THREE MONTHS ENDED DECEMBER 31,
CONSOLIDATED CONDENSED -------------------------------
STATEMENTS OF INCOME 1996 1995
- --------------------------------------------------------------------------------
Revenues:
Casino operations $ 16,198,259 $ 15,726,792
Route operations 8,584,340 6,773,928
Proprietary games 10,593,046 4,449,186
Food and beverage 279,272 284,948
------------ -------------
Total revenues 35,654,917 27,234,854
------------ -------------
Costs and expenses:
Casino operations 7,138,267 6,368,561
Route operations 5,058,785 4,213,218
Proprietary games 2,773,828 2,849,269
Food and beverage 343,817 305,068
Selling, general and administrative 6,133,475 5,456,228
Depreciation and amortization 2,108,444 952,825
------------ -------------
Total costs and expenses 23,556,616 20,145,169
------------ -------------
Income from operations 12,098,301 7,089,685
------------ -------------
Other income (expense):
Interest income 965,329 459,214
Interest expense (79,832) (107,482)
Other income 112,839 46,343
Minority interest in earnings of consolidated
subsidiary (60,831) (32,903)
------------ -------------
Total other income 937,505 365,172
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Income before provision for income taxes 13,035,806 7,454,857
Income tax provision 4,826,190 2,768,181
------------ -------------
Net income $ 8,209,616 $ 4,686,676
------------ -------------
------------ -------------
Weighted average common and common equivalent
shares outstanding 13,720,293 11,746,576
------------ -------------
------------ -------------
Earnings per common and common equivalent share $ 0.60 $ 0.40
------------ -------------
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The accompanying notes are an integral part of these
consolidated condensed financial statements.
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ANCHOR GAMING SIX MONTHS ENDED DECEMBER 31,
CONSOLIDATED CONDENSED -------------------------------
STATEMENTS OF INCOME 1996 1995
- --------------------------------------------------------------------------------
Revenues:
Casino operations $ 33,784,616 $ 32,028,304
Route operations 16,600,491 13,240,284
Proprietary games 19,805,657 9,145,616
Food and beverage 639,985 643,271
------------ -------------
Total revenues 70,830,749 55,057,475
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Costs and expenses:
Casino operations 14,077,532 13,060,191
Route operations 9,838,871 8,232,676
Proprietary games 5,847,976 5,864,440
Food and beverage 740,216 644,506
Selling, general and administrative 12,420,903 10,633,594
Depreciation and amortization 3,589,460 1,822,852
------------ -------------
Total costs and expenses 46,514,958 40,258,259
------------ -------------
Income from operations 24,315,791 14,799,216
------------ -------------
Other income (expense):
Interest income 1,976,702 859,334
Interest expense (176,939) (219,167)
Other income 197,771 110,671
Minority interest in earnings of consolidated
subsidiary (164,527) (93,841)
------------ -------------
Total other income 1,833,007 656,997
------------ -------------
Income before provision for income taxes 26,148,798 15,456,213
Income tax provision 9,697,586 5,739,724
------------ -------------
Net income $ 16,451,212 $ 9,716,489
------------ -------------
------------ -------------
Weighted average common and common equivalent
shares outstanding 13,734,373 11,762,521
------------ -------------
------------ -------------
Earnings per common and common equivalent share $ 1.20 $ 0.83
------------ -------------
------------ -------------
The accompanying notes are an integral part of these
consolidated condensed financial statements.
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ANCHOR GAMING SIX MONTHS ENDED DECEMBER 31,
CONSOLIDATED CONDENSED -------------------------------
STATEMENTS OF CASH FLOWS 1996 1995
- --------------------------------------------------------------------------------
Net cash provided by operating activities $ 22,754,087 $ 11,614,540
------------- -------------
Cash flows from investing activities:
Acquisition and construction of property
and equipment (28,693,508) (5,328,589)
Expenditures for intangible assets (323,955) (65,000)
Issuance of notes receivable (1,242,595) (45,000)
Principal reductions on notes receivable 445,895 474,136
------------- -------------
Net cash used in investing activities (29,814,163) (4,964,453)
------------- -------------
Cash flows from financing activities:
Net proceeds from sale of stock 830,458 1,826,699
Principal payments on loans (950,000) -
Principal payments on loans from related
parties - (2,585,445)
------------- -------------
Net cash used in financing activities (119,542) (758,746)
------------- -------------
Net increase (decrease) in cash and cash
equivalents (7,179,618) 5,891,341
Cash and cash equivalents, beginning of period 78,112,530 26,132,411
------------- -------------
Cash and cash equivalents, end of period $ 70,932,912 $ 32,023,752
------------- -------------
------------- -------------
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Income taxes $ 8,278,975 $ 5,845,000
------------- -------------
------------- -------------
Interest $ 175,512 $ 210,072
------------- -------------
------------- -------------
The accompanying notes are an integral part of these
consolidated condensed financial statements.
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ANCHOR GAMING
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The consolidated condensed financial statements include the accounts of
Anchor Gaming and its subsidiaries ("the Company" or "Anchor"), Anchor Coin,
C.G. Investments, Inc. ("CGI"), Colorado Grande Enterprises, Inc. ("Colorado
Grande") and D D Stud, Inc. ("DD Stud"), which conduct gaming operations in
Nevada, in Black Hawk and Cripple Creek, Colorado, and in various other gaming
jurisdictions (collectively the "Subsidiaries"). All significant intercompany
accounts and transactions have been eliminated.
BASIS OF PRESENTATION
In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments necessary to present
fairly the results of its operations for the three-month and six-month periods
ended December 31, 1996 and 1995, its cash flows for the six-month periods ended
December 31, 1996 and 1995 and its financial position at December 31, 1996.
These financial statements should be read in conjunction with the Company's
audited consolidated financial statements for the fiscal year ended June 30,
1996. The operating results for the three months and six months and cash flows
for the six months ended December 31, 1996 are not necessarily indicative of the
results that will be achieved in future periods.
INVENTORY
Inventories consist of silver and silver tokens, parts for gaming machines,
and food and beverage items. Silver inventory of $1,174,940 and $1,092,671 at
December 31, 1996 and June 30, 1996, respectively, is classified as raw
material. The remainder of inventory is classified as finished goods. All
inventories are stated at the lower of cost (first-in, first-out) or market.
ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
effect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. RELATED PARTY TRANSACTIONS
In August 1996, the Company made certain payments to an entity controlled
by an employee of the Company. These funds were used to repay a debt of
$500,000 owed by the employee and his affiliate to Stanley E. Fulton. At
December 31, 1996, the Company had advanced $1,127,438, and had an outstanding
commitment of $72,562, under a $1.2 million line of credit arrangement
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with the employee's affiliate. At December 31, 1996, the Company had an
outstanding purchase agreement of $2.0 million with the employee's affiliate
which is included in the Company's total purchase agreements of $4.4 million.
3. COMMITMENTS AND CONTINGENCIES
At December 31, 1996 the Company had entered into various purchase
agreements to purchase gaming equipment for approximately $4.4 million.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Report on Form 10-Q contains certain forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934, as amended,
and other applicable securities laws. Such statements are subject to inherent
risks and uncertainties, and actual results could differ materially from those
anticipated by the forward-looking statement. These risks and uncertainties
include, among others, those set forth under "Risk Factors" in the Company's
Annual Report on Form 10-K for the year ended June 30, 1996.
OVERVIEW
The following table sets forth the percentage of Anchor's total revenues
attributable to casino operations, gaming machine route operations,
proprietary games operations and food and beverage operations during the
three months and six months ended December 31, 1996 and 1995. The Company's
proprietary game, Wheel of Gold-TM-began generating revenue during the third
quarter of fiscal 1996. The Company's food and beverage revenues are derived
primarily from its casino operations and, to a lesser extent, from its route
operations.
Three months ended Six months ended
December 31, December 31,
------------------ -----------------
Sources of Revenues 1996 1995 1996 1995
----------------------------- -------- -------- -------- --------
Casino operations 45.4% 57.7% 47.7% 58.2%
Gaming machine route operations 24.1 24.9 23.4 24.0
Proprietary games operations 29.7 16.3 28.0 16.6
Food and beverage operations .8 1.1 .9 1.2
-------- -------- -------- --------
100.0% 100.0% 100.0% 100.0%
-------- -------- -------- --------
-------- -------- -------- --------
THREE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO THREE MONTHS ENDED
DECEMBER 31, 1995
REVENUES. Total revenues were $35.7 million for the second quarter of
fiscal 1997, which ended December 31, 1996, an increase of $8.5 million or 30.9%
from $27.2 million for the second quarter of fiscal 1996.
Revenues from casino operations were $16.2 million for the second quarter
of fiscal 1997, an increase of $471,000 or 3.0% from $15.7 million for the
second quarter of fiscal 1996. During October 1996, the Company's Colorado
Central Station opened its new Black Diamond room, a
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3,000 square foot expansion of the existing building. Primarily as a result of
this expansion, the casino's machine count was approximately 685 at December 31,
1996, as compared to approximately 600 at December 31, 1995.
Revenues from route operations were $8.6 million for the second quarter of
fiscal 1997, an increase of $1.8 million or 26.7% from $6.8 million for the
second quarter of fiscal 1996. The increase is primarily attributable to an
increase in machines on route during the period. Machines on route increased to
754 at December 31, 1996, from 662 at December 31, 1995, while average machines
on route during the second quarter of fiscal 1997 were 105 machines greater than
the second quarter of fiscal 1996.
Revenues from proprietary games operations were $10.6 million for the
second quarter of fiscal 1997, an increase of $6.2 million or 138.1% from $4.4
million for the second quarter of fiscal 1996. This increase is primarily due
to revenues generated from the Company's proprietary game Wheel of Gold-TM-,
introduced on December 29, 1995. The Company's newest proprietary game, Totem
Pole-TM-, began generating revenue during the second quarter of fiscal 1997.
COSTS AND EXPENSES. Total costs and expenses were $23.6 million for the
second quarter of fiscal 1997, an increase of $3.5 million or 16.9% from $20.1
million for the second quarter of fiscal 1996. Total costs and expenses as a
percentage of total revenue decreased to 66.1% during the second quarter of
fiscal 1997 from 74.0% during the second quarter of fiscal 1996.
Costs and expenses of casino operations were $7.1 million for the second
quarter of fiscal 1997, an increase of $770,000 or 12.1% from $6.4 million for
the second quarter of fiscal 1996. Casino costs and expenses as a percentage of
casino revenue increased to 44.1% during the second quarter of fiscal 1997 from
40.5% during the second quarter of fiscal 1996. The increase in costs and
expenses is primarily due to increased promotions and to a lesser extent
increased gaming taxes. Gaming taxes increased as a result of a change in the
tax rate tiers and an increase in the maximum Colorado tax rate from 18% to 20%,
effective October 1, 1996.
Costs and expenses of route operations were $5.1 million for the second
quarter of fiscal 1997, an increase of $846,000 or 20.1% from $4.2 million for
the second quarter of fiscal 1996. Costs and expenses of route operations as a
percentage of route revenue decreased to 58.9% during the second quarter of
fiscal 1997 from 62.2% during the second quarter of fiscal 1996. The
increase in route costs and expenses was primarily due to increased location
costs, related to increased machines on route.
Costs and expenses of proprietary games operations were $2.8 million for
the second quarter of fiscal 1997, a decrease of $75,000 or 2.6%. Prior to
the introduction of Wheel of Gold-TM-, most of the Proprietary Games
operation's costs were associated with the production of Silver Strike-TM-
tokens. Proprietary games costs and expenses as a percentage of proprietary
games revenues decreased to 26.2% during the second quarter of fiscal 1997
from 64.0% during the second quarter of fiscal 1996. The decrease in
proprietary games costs as a percentage of revenue is a result of the
Company's proprietary game Wheel of Gold-TM- which incurs less costs and
expenses as a percentage of revenue than the Company's other proprietary
games.
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<PAGE>
Selling, general and administrative ("SG&A") expenses were $6.1 million for
the second quarter of fiscal 1997, an increase of $677,000 or 12.4% from $5.5
million for the second quarter of fiscal 1996. SG&A expenses as a percentage of
total revenue decreased to 17.2% during the second quarter of fiscal 1997 from
20.0% during the second quarter of fiscal 1996. The increase in SG&A is
primarily due to increased payroll, advertising, and research and development
costs.
Depreciation and amortization expense was $2.1 million for the second
quarter of fiscal 1997, an increase of $1.2 million or 121.3% from $953,000 for
the second quarter of fiscal 1996. This increase is primarily due to increased
depreciation and amortization expense incurred in the Company's proprietary
games operations.
INCOME FROM OPERATIONS. As a result of the factors discussed above, income
from operations was $12.1 million for the second quarter of fiscal 1997, an
increase of $5.0 million or 70.6% from $7.1 million for the second quarter of
fiscal 1996. As a percentage of total revenues, income from operations
increased to 33.9% during the second quarter of fiscal 1997 from 26.0% during
the second quarter of fiscal 1996.
INTEREST INCOME. Interest income was $965,000 for the second quarter of
fiscal 1997, an increase of $506,000 or 110.2% from $459,000 for the second
quarter of fiscal 1996. This increase is due to increased short-term
investments resulting from an increase in working capital.
INTEREST EXPENSE. Interest expense was $80,000 for the second quarter of
fiscal 1997, a decrease of $27,000 or 25.7% from $107,000 for the second quarter
of fiscal 1996.
NET INCOME. As a result of the factors discussed above, net income was
$8.2 million for the second quarter of fiscal 1997, an increase of $3.5 million
or 75.2% from $4.7 million for the second quarter of fiscal 1996.
SIX MONTHS ENDED DECEMBER 31, 1996 COMPARED TO SIX MONTHS ENDED
DECEMBER 31, 1995
REVENUES. Total revenues were $70.8 million for the first six months of
fiscal 1997, which ended December 31, 1996, an increase of $15.7 million or
28.6% from $55.1 million for the first six months of fiscal 1996.
Revenues from casino operations were $33.8 million for the first six months
of fiscal 1997, an increase of $1.8 million or 5.5% from $32.0 million for the
first six months of fiscal 1996.
Revenues from route operations were $16.6 million for the first six months
of fiscal 1997, an increase of $3.4 million or 25.4% from $13.2 million for the
first six months of fiscal 1996. The increase is primarily attributable to an
increase in machines on route during the period. Machines on route increased to
754 at December 31, 1996, from 662 at December 31, 1995, while average machines
on route during the first six months of fiscal 1997 were 103 machines greater
than the first six months of fiscal 1996.
Revenues from proprietary games operations were $19.8 million for the first
six months of fiscal 1997, an increase of $10.7 million or 116.6% from $9.1
million for the first six months of
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fiscal 1996. This increase is primarily due to revenues generated from the
Company's proprietary game Wheel of Gold-TM-, introduced on December 29,
1995. The Company's newest proprietary game, Totem Pole-TM-, began generating
revenue during the second quarter of fiscal 1997.
COSTS AND EXPENSES. Total costs and expenses were $46.5 million for the
first six months of fiscal 1997, an increase of $6.2 million or 15.5% from $40.3
million for the first six months of fiscal 1996. Total costs and expenses as a
percentage of total revenue decreased to 65.7% during the first six months of
fiscal 1997 from 73.1% during the first six months of fiscal 1996.
Costs and expenses of casino operations were $14.1 million for the first
six months of fiscal 1997, an increase of $1.0 million or 7.8% from $13.1
million for the first six months of fiscal 1996. Casino costs and expenses as a
percentage of casino revenue increased to 41.7% during the first six months of
fiscal 1997 from 40.8% during the first six months of fiscal 1996. The increase
in costs and expenses is primarily due to increased promotions and to a lesser
extent increased gaming taxes.
Costs and expenses of route operations were $9.8 million for the first six
months of fiscal 1997, an increase of $1.6 million or 19.5% from $8.2 million
for the first six months of fiscal 1996. Costs and expenses of route operations
as a percentage of route revenue decreased to 59.3% during the first six months
of fiscal 1997 from 62.2% during the first six months of fiscal 1996. The
increase in route costs and expenses was primarily due to increased location
costs, related to increased machines on route.
Costs and expenses of proprietary games operations were $5.8 million for
the six months of fiscal 1997, a decrease of $16,000 or .3%. Proprietary
games costs and expenses as a percentage of proprietary games revenues
decreased to 29.5% during the first six months of fiscal 1997 from 64.1%
during the first six months of fiscal 1996. Prior to the introduction of
Wheel of Gold-TM-, most of the Proprietary Games operation's costs were
associated with the production of Silver Strike-TM- tokens. The decrease in
proprietary games costs as a percentage of revenue is a result of the
Company's proprietary game Wheel of Gold-TM- which incurs less costs and
expenses as a percentage of revenue than the Company's other proprietary
games.
Selling, general and administrative ("SG&A") expenses were $12.4 million
for the first six months of fiscal 1997, an increase of $1.8 million or 16.8%
from $10.6 million for the first six months of fiscal 1996. SG&A expenses as a
percentage of total revenue decreased to 17.5% during the first six months of
fiscal 1997 from 19.3% during the second quarter of fiscal 1996. The increase
in SG&A is primarily due to increased payroll, advertising, and research and
development costs.
Depreciation and amortization expense was $3.6 million for the first six
months of fiscal 1997, an increase of $1.8 million or 96.9% from $1.8 million
for the first six months of fiscal 1996. This increase is primarily due to
increased depreciation and amortization expense incurred in the Company's
proprietary games operations.
INCOME FROM OPERATIONS. As a result of the factors discussed above, income
from operations was $24.3 million for the first six months of fiscal 1997, an
increase of $9.5 million or 64.3% from $14.8 million for the first six months of
fiscal 1996. As a percentage of total revenues, income
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from operations increased to 34.3% during the first six months of fiscal 1997
from 26.9% during the first six months of fiscal 1996.
INTEREST INCOME. Interest income was $2.0 million for the first six months
of fiscal 1997, an increase of $1.1 million or 130.0% from $859,000 for the
first six months of fiscal 1996. This increase is due to increased short-term
investments resulting from an increase in working capital.
INTEREST EXPENSE. Interest expense was $177,000 for the first six months
of fiscal 1997, a decrease of $42,000 or 19.3% from $219,000 for the first six
months of fiscal 1996.
NET INCOME. As a result of the factors discussed above, net income was
$16.5 million for the first six months of fiscal 1997, an increase of $6.8
million or 69.3% from $9.7 million for the first six months of fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $22.8 million during the
first six months of fiscal 1997 and $11.6 million during the first six months of
fiscal 1996. At December 31, 1996, the Company had cash and cash equivalents of
$70.9 million and working capital of $69.2 million.
During the first six months of fiscal 1997, the Company spent $28.7
million on capital expenditures, of which approximately $22.8 million was
related to the purchase of gaming devices for use in its proprietary games
operations. In addition, the Company spent $1.2 million during the first six
months of fiscal 1997 related to the planned development of a second casino
in Black Hawk, Colorado. Through December 31, 1996, the Company has spent
$12.9 million related to this planned development. On November 11, 1996, the
Company announced that it is re-evaluating the scope and nature of its
proposed addition of a new casino across the street from the Colorado Central
Station Casino. The Company continues to evaluate the scope and nature of
its future plans in Colorado. In connection with the planned development in
Colorado, the Company has capitalized $12.9 million of expenditures which is
comprised of $10.9 million for land acquisition, escavation and site
preparation, $1.2 million for architectural fees, building design and other
costs, and $723,000 for deferred land rent. Depending upon the results of
the Company's evaluation, it may determine that certain of these expenditures
will have limited or no future value, which could require a one-time,
non-recurring charge to earnings in the period when the determination is made.
On December 4, 1996, the Company announced that it has engaged Morgan
Stanley & Co., Incorporated as financial advisor in connection with its
review of strategic alternatives to enhance shareholder value, including a
possible sale, merger or business combination of the Company. The Company is
continuing this review of strategic alternatives. There can be no assurance
as to whether any transaction will result from the review of strategic
alternatives or as to value, timing or structure of any such transaction.
The Company entered into a $20 million revolving bank line of credit (the
"Bank Revolver") in fiscal 1994, which expired November 30, 1996. Company
management is re-evaluating its desire for such a facility and is considering
various credit alternatives which do not have non-use fees associated with the
product. The Bank Revolver was subject to a 3/8% unused commitment fee and bore
interest at the prime rate of interest plus 1/4%, or LIBOR plus 2 1/4 %, at the
Company's option. The Company had pledged substantially all of its assets as
collateral under the
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terms of the Bank Revolver and had agreed to maintain certain financial and
non-financial covenants customary with lending arrangements of this type. The
Company had remained in compliance with the covenants throughout the term of the
credit facility. The Company did not use the Bank Revolver during the term of
the facility.
The Company believes its principal liquidity requirements will be the
purchase of additional proprietary gaming machines, such as Wheel of Gold-TM-
and Totem Pole-TM-. The Company believes that cash on hand and cash flow from
operations will be sufficient to fund its currently planned capital projects and
operations.
The Company continually seeks opportunities to expand its gaming oriented
businesses in new and existing gaming jurisdictions. If successful in pursuing
another opportunity in any gaming oriented business and depending on the amount
of funding required, the Company may be required to obtain additional financing.
PART II. OTHER INFORMATION
Not Applicable
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized
ANCHOR GAMING
(Registrant)
/s/Stanley E. Fulton
--------------------
Stanley E. Fulton
Chairman and
Chief Executive Officer
Date February 4, 1997 /s/Salvatore T. DiMascio
------------------ ------------------------
Salvatore T. DiMascio
Executive Vice President and
Chief Financial Officer
-14-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ANCHOR
GAMING'S CONSOLIDATED CONDENSED BALANCE SHEETS AT DECEMBER 31, 1996 AND JUNE 30,
1996 AND CONSOLIDATED CONDENSED STATEMENTS OF INCOME FOR THE THREE MONTH AND SIX
MONTHS ENDED DECEMBER 31, 1996 AND 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 70,932,912
<SECURITIES> 0
<RECEIVABLES> 6,769,523
<ALLOWANCES> 0
<INVENTORY> 3,137,380
<CURRENT-ASSETS> 82,549,614
<PP&E> 82,880,285
<DEPRECIATION> 0
<TOTAL-ASSETS> 182,265,386
<CURRENT-LIABILITIES> 13,346,657
<BONDS> 2,800,000
0
0
<COMMON> 135,438
<OTHER-SE> 164,510,341
<TOTAL-LIABILITY-AND-EQUITY> 182,265,386
<SALES> 0
<TOTAL-REVENUES> 35,654,917
<CGS> 0
<TOTAL-COSTS> 15,314,697
<OTHER-EXPENSES> 8,241,919
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 79,832
<INCOME-PRETAX> 13,035,806
<INCOME-TAX> 4,826,190
<INCOME-CONTINUING> 8,209,616
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,209,616
<EPS-PRIMARY> .60
<EPS-DILUTED> 0
</TABLE>
