<PAGE>
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 March 31, 1997
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
May 6, 1997:
Class Outstanding as of May 6, 1997
----- -----------------------------
Common stock, $.01 par value 13,356,307
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ANCHOR GAMING
FORM 10-Q
QUARTER ENDED MARCH 31, 1997
INDEX
Page No.
--------
Part I. Financial Information
Item 1. Consolidated Condensed Financial Statements
Consolidated Condensed Balance Sheets at
March 31, 1997 (unaudited) and June 30, 1996 3
Consolidated Condensed Statements of
Income for the three months ended
March 31, 1997 and 1996 (unaudited) 4
Consolidated Condensed Statements of
Income for the nine months ended
March 31, 1997 and 1996 (unaudited) 5
Consolidated Condensed Statements of Cash
Flows for the nine months ended March 31, 1997
and 1996 (unaudited) 6
Notes to Consolidated Condensed Financial Statements
(unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. Other Information 14
Signatures
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
ANCHOR GAMING MARCH 31,
CONSOLIDATED CONDENSED 1997 JUNE 30,
BALANCE SHEETS (UNAUDITED) 1996
----------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 74,251,518 $ 78,112,530
Accounts receivable, net 6,208,679 4,720,689
Current portion of notes receivable, net 235,688 881,173
Inventory 2,813,921 3,197,955
Prepaid expenses 1,961,319 1,739,263
Other current assets 347,705 300,761
------------ ------------
Total current assets 85,818,830 88,952,371
Property and equipment, net 85,105,282 57,776,237
Long-term notes receivable, net 1,535,891 311,856
Intangible assets, net 2,143,893 2,054,710
Deposits and other 14,603,836 13,216,623
------------ ------------
Total assets $189,207,732 $162,311,797
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion, long-term notes payable $ -- $ 100,000
Accounts payable 3,141,088 4,574,213
Accrued salaries, wages and vacation pay 2,025,238 2,488,014
Income tax payable 1,130,456 281,886
Other current liabilities 5,345,726 3,530,130
------------ ------------
Total current liabilities 11,642,508 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 599,543 707,318
Minority interest in consolidated subsidiary 912,079 672,955
------------ ------------
Total liabilities and minority interest in
consolidated subsidiary 15,954,130 16,004,516
------------ ------------
Stockholders' equity:
Common stock, $.01 par value, 50,000,000
shares authorized; 13,546,325 issued and
13,355,557 outstanding at March 31, 1997,
13,474,150 issued and 13,283,382
outstanding at June 30, 1996. 135,463 134,742
Additional paid-in capital 106,364,643 104,448,080
Treasury stock at cost, 190,768 shares (3,095,830) (3,095,830)
Retained earnings 69,849,326 44,820,289
------------ ------------
Total stockholders' equity 173,253,602 146,307,281
------------ ------------
Total liabilities and stockholders' equity $189,207,732 $162,311,797
------------ ------------
------------ ------------
The accompanying notes are an integral part of these
consolidated condensed financial statements.
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ANCHOR GAMING THREE MONTHS ENDED MARCH 31,
CONSOLIDATED CONDENSED ----------------------------
STATEMENTS OF INCOME (UNAUDITED) 1997 1996
- -------------------------------------------------------------------------------
Revenues:
Casino operations $16,981,602 $16,171,914
Route operations 8,020,369 7,630,780
Proprietary games 11,492,498 4,961,367
Food and beverage 295,864 284,686
----------- -----------
Total revenues 36,790,333 29,048,747
----------- -----------
Costs and expenses:
Casino operations 7,086,188 6,642,171
Route operations 4,896,095 4,404,796
Proprietary games 2,379,968 3,117,696
Food and beverage 339,422 319,976
Selling, general and administrative 6,842,967 5,063,874
Depreciation and amortization 2,418,238 1,043,706
----------- -----------
Total costs and expenses 23,962,878 20,592,219
----------- -----------
Income from operations 12,827,455 8,456,528
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Other income (expense):
Interest income 893,168 334,692
Interest expense (54,926) (106,991)
Other income 36,200 53,185
Minority interest in earnings of
consolidated subsidiary (74,597) (52,348)
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Total other income 799,845 228,538
----------- -----------
Income before provision for income taxes 13,627,300 8,685,066
Income tax provision 5,049,477 3,220,056
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Net income $ 8,577,823 $ 5,465,010
----------- -----------
----------- -----------
Weighted average common and common
equivalent shares outstanding 13,653,693 11,853,324
----------- -----------
----------- -----------
Earnings per common and common
equivalent share $ 0.63 $ 0.46
----------- -----------
----------- -----------
The accompanying notes are an integral part of these
consolidated condensed financial statements.
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ANCHOR GAMING NINE MONTHS ENDED MARCH 31,
CONSOLIDATED CONDENSED ---------------------------
STATEMENTS OF INCOME (UNAUDITED) 1997 1996
- -------------------------------------------------------------------------------
Revenues:
Casino operations $ 50,766,218 $ 48,200,217
Route operations 24,620,860 20,871,064
Propriety games 31,298,165 14,106,984
Food and beverage 935,849 927,956
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Total revenues 107,621,092 84,106,221
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Costs and expenses:
Casino operations 21,163,732 19,702,360
Route operations 14,734,965 12,637,472
Proprietary games 8,227,944 8,982,137
Food and beverage 1,079,635 964,483
Selling, general and administrative 19,263,870 15,697,469
Depreciation and amortization 6,007,698 2,866,557
------------ ------------
Total cost and expenses 70,477,844 60,850,478
------------ ------------
Income from operations 37,143,248 23,255,743
------------ ------------
Other income (expense):
Interest income 2,869,870 1,194,026
Interest expense (231,865) (326,158)
Other income 233,972 163,856
Minority interest in earnings of consolidated
subsidiary (239,124) (146,189)
------------ ------------
Total other income 2,632,853 885,535
------------ ------------
Income before provision for income taxes 39,776,101 24,141,278
Income tax provision 14,747,063 8,959,779
------------ ------------
Net income $ 25,029,038 $ 15,181,499
------------ ------------
------------ ------------
Weighted average common and common equivalent
shares outstanding 13,712,645 11,786,120
------------ ------------
------------ ------------
Earnings per common and common equivalent share $ 1.83 $ 1.29
------------ ------------
------------ ------------
The accompanying notes are an integral part of these
consolidated condensed financial statements.
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ANCHOR GAMING NINE MONTHS ENDED MARCH 31,
CONSOLIDATED CONDENSED ---------------------------
STATEMENTS OF CASH FLOWS (UNAUDITED) 1997 1996
- -------------------------------------------------------------------------------
Net cash provided by operating activities $ 31,940,027 $ 19,149,005
------------ ------------
Cash flows from investing activities:
Acquisition and construction of property and
equipment (33,336,742) (16,588,459)
Expenditures for intangible assets (363,614) (65,000)
Investments in joint ventures (1,432,591) --
Issuance of notes receivable (1,375,157) (51,614)
Payments to extend operating leases -- (5,000,000)
Principal reductions on notes receivable 796,607 711,396
------------ ------------
Net cash used in investing activities (35,711,497) (20,993,677)
------------ ------------
Cash flows from financing activities:
Net proceeds from sale of stock 860,458 2,252,740
Principal payments on loans (950,000) (25,000)
Principal payments on loans from related parties -- (2,973,038)
------------ ------------
Net cash used in financing activities (89,542) (745,298)
------------ ------------
Net decrease in cash and cash equivalents (3,861,012) (2,589,970)
Cash and cash equivalents, beginning of period 78,112,530 26,132,411
------------ ------------
Cash and cash equivalents, end of period $ 74,251,518 $ 23,542,441
------------ ------------
------------ ------------
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Income taxes $ 12,841,665 $ 8,515,000
------------ ------------
------------ ------------
Interest $ 230,438 $ 315,134
------------ ------------
------------ ------------
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
(UNAUDITED)
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 nine-month
periods ended March 31, 1997 and 1996, its cash flows for the nine-month
periods ended March 31, 1997 and 1996 and its financial position at March 31,
1997. 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 nine months
and cash flows for the nine months ended March 31, 1997 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 $740,698 and
$1,092,671 at March 31, 1997 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 affect 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.
RECENTLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board recently issued SFAS No. 128
"Earnings per Share." This statement establishes standards for computing
and presenting earnings per share and is effective for financial statements
issued for periods ending after
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December 15, 1997. Earlier application of this statement is not permitted
and upon adoption requires restatement (as applicable) of all prior-period
earnings per share data presented. Management has not determined the effect
of this statement on earnings per share as presented.
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
March 31, 1997, the Company had advanced $1.2 million under a line of credit
arrangement with the employee's affiliate. The Company had a $2.0 million
purchase agreement with the employee's affiliate, however, at March 31, 1997
this purchase agreement had been cancelled.
3. COMMITMENTS AND CONTINGENCIES
At March 31, 1997 the Company had entered into various purchase agreements
to purchase gaming equipment for approximately $3.0 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 nine months ended March 31, 1997 and 1996. 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.
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
------------------ ------------------
Sources of Revenues 1997 1996 1997 1996
- ------------------- -------- -------- ------- --------
<S> <C> <C> <C> <C>
Casino operations 46.2% 55.7% 47.2% 57.3%
Gaming machine route operations 21.8 26.3 22.9 24.8
Proprietary games operations 31.2 17.1 29.1 16.8
Food and beverage operations .8 .9 .8 1.1
-------- -------- -------- --------
100.0% 100.0% 100.0% 100.0%
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
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<PAGE>
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996
REVENUES. Total revenues were $36.8 million for the third quarter of
fiscal 1997, which ended March 31, 1997, an increase of $7.8 million or
26.7% from $29.0 million for the third quarter of fiscal 1996.
Revenues from casino operations were $17.0 million for the third quarter
of fiscal 1997, an increase of $810,000 or 5.0% from $16.2 million for the
third quarter of fiscal 1996.
Revenues from route operations were $8.0 million for the third quarter of
fiscal 1997, an increase of $390,000 or 5.1% from $7.6 million for the third
quarter of fiscal 1996. The increase is primarily attributable to an
increase in machines on route during the period. Machines on route increased
to 760 at March 31, 1997, from 669 at March 31, 1996, while average machines
on route during the third quarter of fiscal 1997 were 101 machines greater
than the third quarter of fiscal 1996.
Revenues from proprietary games operations were $11.5 million for the
third quarter of fiscal 1997, an increase of $6.5 million or 131.6% from $5.0
million for the third 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.
During the third quarter of fiscal 1997, the Company began recording revenue
from its interest in a venture marketing the recently introduced Anchor/IGT
Wheel of Fortune-TM- wide area progressive system machines.
COSTS AND EXPENSES. Total costs and expenses were $24.0 million for the
third quarter of fiscal 1997, an increase of $3.4 million or 16.4% from $20.6
million for the third quarter of fiscal 1996. Total costs and expenses as a
percentage of total revenue decreased to 65.1% during the third quarter of
fiscal 1997 from 70.9% during the third quarter of fiscal 1996.
Costs and expenses of casino operations were $7.1 million for the third
quarter of fiscal 1997, an increase of $444,000 or 6.7% from $6.6 million for
the third quarter of fiscal 1996. Casino costs and expenses as a percentage
of casino revenue increased slightly to 41.7% during the third quarter of
fiscal 1997 from 41.1% during the third quarter of fiscal 1996. The increase
in costs and expenses is primarily due to increased promotions and 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 $4.9 million for the third
quarter of fiscal 1997, an increase of $491,000 or 11.2% from $4.4 million
for the third quarter of fiscal 1996. Costs and expenses of route operations
as a percentage of route revenue increased to 61.0% during the third quarter
of fiscal 1997 from 57.7% during the third quarter of fiscal 1996. The
increase in route costs and expenses was primarily due to increased location
costs, related to increased machines on route.
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<PAGE>
Costs and expenses of proprietary games operations were $2.4 million for
the third quarter of fiscal 1997, a decrease of $738,000 or 23.7% from $3.1
million for the third quarter 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. Costs and
expenses of proprietary games operations decreased primarily due to a
decrease in Silver Strike-TM- token sales during the third quarter fiscal 1997
as compared to the third quarter fiscal 1996. Proprietary games costs and
expenses as a percentage of proprietary games revenues decreased to 20.7%
during the third quarter of fiscal 1997 from 62.8% during the third 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.
Selling, general and administrative ("SG&A") expenses were $6.8 million
for the third quarter of fiscal 1997, an increase of $1.7 million or 35.1%
from $5.1 million for the third quarter of fiscal 1996. SG&A expenses as a
percentage of total revenue increased to 18.6% during the third quarter of
fiscal 1997 from 17.4% during the third 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 $2.4 million for the third
quarter of fiscal 1997, an increase of $1.4 million or 131.7% from $1.0
million for the third quarter of fiscal 1996. This increase is primarily due
to increased depreciation expense related to new machine placements in the
Company's proprietary games operations.
INCOME FROM OPERATIONS. As a result of the factors discussed above,
income from operations was $12.8 million for the third quarter of fiscal
1997, an increase of $4.3 million or 51.7% from $8.5 million for the third
quarter of fiscal 1996. As a percentage of total revenues, income from
operations increased to 34.9% during the third quarter of fiscal 1997 from
29.1% during the third quarter of fiscal 1996.
INTEREST INCOME. Interest income was $893,000 for the third quarter of
fiscal 1997, an increase of $558,000 or 166.9% from $335,000 for the third
quarter of fiscal 1996. This increase is due to increased short-term
investments resulting from an increase in working capital generated from
operations as well as cash invested from the Company's April 1996 secondary
offering.
INTEREST EXPENSE. Interest expense was $55,000 for the third quarter of
fiscal 1997, a decrease of $52,000 or 48.7% from $107,000 for the third
quarter of fiscal 1996.
NET INCOME. As a result of the factors discussed above, net income was
$8.6 million for the third quarter of fiscal 1997, an increase of $3.1
million or 57.0% from $5.5 million for the third quarter of fiscal 1996.
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NINE MONTHS ENDED MARCH 31, 1997 COMPARED TO NINE MONTHS ENDED MARCH 31, 1996
REVENUES. Total revenues were $107.6 million for the first nine months of
fiscal 1997, which ended March 31, 1997, an increase of $23.5 million or
28.0% from $84.1 million for the first nine months of fiscal 1996.
Revenues from casino operations were $50.8 million for the first nine
months of fiscal 1997, an increase of $2.6 million or 5.3% from $48.2 million
for the first nine months of fiscal 1996.
Revenues from route operations were $24.6 million for the first nine
months of fiscal 1997, an increase of $3.7 million or 18.0% from $20.9
million for the first nine months of fiscal 1996. The increase is primarily
attributable to an increase in machines on route during the period.
Revenues from proprietary games operations were $31.3 million for the
first nine months of fiscal 1997, an increase of $17.2 million or 121.9% from
$14.1 million for the first nine months 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. During the third quarter of fiscal 1997, the Company
began recording revenue from its interest in a venture marketing the recently
introduced Anchor/IGT Wheel of Fortune-TM- wide area progressive system
machines.
COSTS AND EXPENSES. Total costs and expenses were $70.5 million for the
first nine months of fiscal 1997, an increase of $9.6 million or 15.8% from
$60.9 million for the first nine months of fiscal 1996. Total costs and
expenses as a percentage of total revenue decreased to 65.6% during the first
nine months of fiscal 1997 from 72.3% during the first nine months of fiscal
1996.
Costs and expenses of casino operations were $21.2 million for the first
nine months of fiscal 1997, an increase of $1.5 million or 7.4% from $19.7
million for the first nine months of fiscal 1996. Casino costs and expenses
as a percentage of casino revenue increased to 41.7% during the first nine
months of fiscal 1997 from 40.9% during the first nine months of fiscal 1996.
The increase in costs and expenses is primarily due to increased promotions
and increased gaming taxes.
Costs and expenses of route operations were $14.7 million for the first
nine months of fiscal 1997, an increase of $2.1 million or 16.6% from $12.6
million for the first nine months of fiscal 1996. Costs and expenses of
route operations as a percentage of route revenue decreased to 59.8% during
the first nine months of fiscal 1997 from 60.6% during the first nine 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 $8.2 million for
the nine months of fiscal 1997, a decrease of $754,000 or 8.4% from $9.0
million for the first nine months of
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fiscal 1996. Proprietary games costs and expenses as a percentage of
proprietary games revenues decreased to 26.3% during the first nine months of
fiscal 1997 from 63.7% during the first nine 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. Costs and expenses of proprietary games operations
decreased primarily due to a decrease in Silver Strike-TM- token sales during
the first nine months of fiscal 1997 as compared to the first nine months 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.
SG&A expenses were $19.3 million for the first nine months of fiscal 1997,
an increase of $3.6 million or 22.7% from $15.7 million for the first nine
months of fiscal 1996. SG&A expenses as a percentage of total revenue
decreased to 17.9% during the first nine months of fiscal 1997 from 18.7%
during the first nine months 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 $6.0 million for the first nine
months of fiscal 1997, an increase of $3.1 million or 109.6% from $2.9
million for the first nine months of fiscal 1996. This increase is primarily
due to increased depreciation expense related to new machine placements in
the Company's proprietary games operations.
INCOME FROM OPERATIONS. As a result of the factors discussed above,
income from operations was $37.1 million for the first nine months of fiscal
1997, an increase of $13.8 million or 59.7% from $23.3 million for the first
nine months of fiscal 1996. As a percentage of total revenues, income from
operations increased to 34.5% during the first nine months of fiscal 1997
from 27.7% during the first nine months of fiscal 1996.
INTEREST INCOME. Interest income was $2.9 million for the first nine
months of fiscal 1997, an increase of $1.7 million or 140.4% from $1.2
million for the first nine months of fiscal 1996. This increase is due to
increased short-term investments resulting from an increase in working
capital generated from operations as well as cash invested from the Company's
April 1996 secondary offering.
INTEREST EXPENSE. Interest expense was $232,000 for the first nine months
of fiscal 1997, a decrease of $94,000 or 28.9% from $326,000 for the first
nine months of fiscal 1996.
NET INCOME. As a result of the factors discussed above, net income was
$25.0 million for the first nine months of fiscal 1997, an increase of $9.8
million or 64.9% from $15.2 million for the first nine months of fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
Anchor's principal sources of liquidity have been cash flow from
operations, the net proceeds from its secondary offering in April 1996, and
the Company's initial public offering (IPO) in February 1994. Net proceeds
to the Company from its secondary offering were $53.9
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million, and net proceeds from the IPO were $34.1 million. Net cash provided
by operating activities was $31.9 million during the first nine months of
fiscal 1997 and $19.1 million during the first nine months of fiscal 1996.
At March 31, 1997, the Company had cash and cash equivalents of $74.3 million
and working capital of $74.2 million.
During the first nine months of fiscal 1997, the Company spent $33.3
million on capital expenditures, of which approximately $26.3 million related
to the purchase of gaming devices for use in its proprietary games operations.
On April 17, 1997, the Company announced that it continues to evaluate
strategic alternatives to maximize stockholder value, and in connection with
this evaluation, the Board of Directors has authorized the repurchase of up
to 1,000,000 shares of the Company's common stock. There are currently
13,713,000 weighted average common shares and common stock equivalent shares
of Anchor Gaming outstanding. The Company stated that repurchases could be
effected through open market purchases, privately negotiated transactions, or
otherwise at prices and at times determined by the management of the Company.
There can be no assurance that any repurchases will ultimately be effected.
The Company intends to fund any repurchases out of cash flow from operations
and will hold any stock repurchased in treasury to fund option exercises
under present and future option grants to employees of Anchor Gaming and its
subsidiaries, and for other corporate purposes.
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. As of March 31, 1997,
the Company has capitalized $14.1 million in costs related to the acquisition
and development of property and plans associated with the site and proposed
casino. Of this amount, land costs were $8.7 million; land development and
parking lot improvements were $2.2 million; costs associated with the
movement of Miner's Mesa Road were $1.1 million; architectural fees, building
design and other costs were $1.4 million; and deferred land rent was
$723,000. Depending on the outcome of the Company's re-evaluation process, a
portion of the $14.1 million capitalized through March 31, 1997 may be
subject to a one time, non-recurring write-off. Management believes that
certain capital expenditures are more or less likely to be subject to such a
write-off depending upon the ultimate outcome of the re-evaluation process.
Costs associated with land acquisition, land development, parking lot
improvements and road movement, for example, are far less likely to be
subject to such a write-off, as compared to costs associated with
architectural fees, building design and deferred land rent, for example.
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.
In April 1997, the Company entered into a $10 million unsecured revolving
bank line of credit (the "Bank Revolver") expiring November 30, 1998. The
Bank Revolver bears interest at the prime rate, or LIBOR plus 2%, at the
Company's option. The Company has agreed to maintain certain financial and
non-financial covenants customary with lending arrangements of this type.
-13-
<PAGE>
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-, and depending upon the outcome of the Company's
re-evaluation of the scope and nature of its Colorado expansion plans, the
funding of such an expansion. 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
-14-
<PAGE>
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/ Stantley E. Fulton
------------------------------------
Stanley E. Fulton
Chairman and
Chief Executive Officer
Date May 6, 1997 /s/ Salvatore T. DiMascic
----------- ------------------------------------
Salvatore T. DiMascio
Executive Vice President and
Chief Financial Officer
-15-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ANCHOR
GAMING'S CONSOLIDATED CONDENSED BALANCE SHEETS AT MARCH 31, 1997 AND
JUNE 30, 1996 AND CONSOLIDATED CONDENSED STATEMENTS OF INCOME FOR THE THREE
MONTHS AND NINE MONTHS ENDED MARCH 31, 1997 AND 1996 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> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 74,251,518
<SECURITIES> 0
<RECEIVABLES> 6,444,367
<ALLOWANCES> 0
<INVENTORY> 2,813,921
<CURRENT-ASSETS> 85,818,830
<PP&E> 85,105,282
<DEPRECIATION> 0
<TOTAL-ASSETS> 189,207,732
<CURRENT-LIABILITIES> 11,642,508
<BONDS> 2,800,000
0
0
<COMMON> 135,463
<OTHER-SE> 173,118,139
<TOTAL-LIABILITY-AND-EQUITY> 189,207,732
<SALES> 0
<TOTAL-REVENUES> 36,790,333
<CGS> 0
<TOTAL-COSTS> 14,701,673
<OTHER-EXPENSES> 9,261,205
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,926
<INCOME-PRETAX> 13,627,300
<INCOME-TAX> 5,049,477
<INCOME-CONTINUING> 8,577,823
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,577,823
<EPS-PRIMARY> .63
<EPS-DILUTED> 0
</TABLE>
