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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 September 30, 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
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Shares outstanding of each of the registrant's classes of common stock as of
November 12, 1997:
Class Outstanding as of November 12, 1997
----- -----------------------------------
Common stock, $.01 par value 12,981,532
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ANCHOR GAMING
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
INDEX
Page No.
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Part I. Financial Information
Item 1. Consolidated Condensed Financial Statements
Consolidated Condensed Balance Sheets at
September 30, 1997 (unaudited) and June 30, 1997 3
Consolidated Condensed Statements of
Income for the three months ended
September 30, 1997 and 1996 (unaudited) 4
Consolidated Condensed Statements of Cash
Flows for the three months ended September 30, 1997
and 1996 (unaudited) 5
Notes to Consolidated Condensed Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds 12
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
ANCHOR GAMING
CONSOLIDATED CONDENSED SEPTEMBER 30, JUNE 30,
BALANCE SHEETS 1997 1997
------------- ------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 69,958,080 $ 66,427,369
Accounts receivable, net 7,084,987 6,358,052
Inventory 2,091,145 3,196,918
Prepaid expenses 1,615,955 1,835,913
Other current assets 472,464 445,799
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Total current assets 81,222,631 78,264,051
Property and equipment, net 89,864,854 85,033,436
Long-term notes receivable, net 1,606,280 1,543,159
Intangible assets, net 2,075,479 2,128,306
Investments in unconsolidated affiliates 18,207,361 7,570,712
Deposits and other 14,698,319 14,336,705
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Total assets $207,674,924 $188,876,369
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,619,381 $ 2,663,156
Accrued salaries, wages and vacation pay 3,446,518 2,712,764
Income tax payable 7,567,641 2,138,934
Other current liabilities 7,495,173 6,103,394
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Total current liabilities 23,128,713 13,618,248
Long-term notes payable, principal stockholder 2,800,000 2,800,000
Other long-term liabilities 107,766 143,691
Minority interest in consolidated subsidiary 1,094,481 983,562
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Total liabilities and minority
interest in consolidated subsidiary 27,130,960 17,545,501
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Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000
shares authorized; 0 shares issued and
outstanding at September 30, 1997 and
June 30, 1997 - -
Common stock, $.01 par value, 50,000,000
shares authorized; 13,662,850 issued and
12,958,107 outstanding at September 30, 1997,
13,579,575 issued and 13,052,807 outstanding
at June 30, 1997 136,628 135,796
Additional paid-in capital 110,144,608 107,267,684
Treasury stock at cost, 704,743 shares at
September 30, 1997 and 526,768 shares at
June 30, 1997 (26,975,754) (16,569,329)
Retained earnings 97,238,482 80,496,717
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Total stockholders' equity 180,543,964 171,330,868
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Total liabilities and stockholders' equity $207,674,924 $188,876,369
------------ ------------
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The accompanying notes are an integral part of these
consolidated condensed financial statements
3
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ANCHOR GAMING THREE MONTHS ENDED SEPTEMBER 30,
CONSOLIDATED CONDENSED --------------------------------
STATEMENTS OF INCOME (UNAUDITED) 1997 1996
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Revenues:
Proprietary games $ 24,967,818 $ 9,212,611
Casino operations 20,046,846 17,586,357
Route operations 9,015,530 8,016,151
Food and beverage 451,043 360,713
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Total revenues 54,481,237 35,175,832
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Costs and expenses:
Proprietary games 3,236,193 3,074,148
Casino operations 8,108,391 6,939,265
Route operations 5,388,044 4,780,086
Food and beverage 420,544 396,399
Selling, general and administrative 8,417,629 6,287,428
Depreciation and amortization 2,860,772 1,481,016
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Total costs and expenses 28,431,573 22,958,342
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Income from operations 26,049,664 12,217,490
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Other income (expense):
Interest income 823,003 1,011,373
Interest expense (56,694) (97,107)
Other income 152,906 84,932
Minority interest in earnings
of consolidated subsidiary (182,055) (103,696)
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Total other income (expense) 737,160 895,502
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Income before provision for income taxes 26,786,824 13,112,992
Income tax provision (10,045,059) (4,871,396)
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Net income $ 16,741,765 $ 8,241,596
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Weighted average common and common
equivalent shares outstanding 13,636,263 13,737,290
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Earnings per common and common
equivalent share $ 1.23 $ 0.60
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The accompanying notes are an integral part of these
consolidated condensed financial statements
4
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<TABLE>
<CAPTION>
ANCHOR GAMING THREE MONTHS ENDED SEPTEMBER 30,
CONSOLIDATED CONDENSED --------------------------------
STATEMENTS OF CASH FLOWS (UNAUDITED) 1997 1996
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<S> <C> <C>
Net cash provided by operating activities $ 20,513,115 $ 14,290,510
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Cash flows from investing activities:
Capital expenditures (7,692,190) (12,409,962)
Expenditures for intangible assets & investments (80,614) (109,786)
Issuance of notes receivable (75,000) (107,000)
Principal reductions on notes receivable 19,700 63,206
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Net cash used in investing activities (7,828,104) (12,563,542)
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Cash flows from financing activities:
Net proceeds from sale of stock 1,252,125 778,458
Payments to acquire treasury stock (10,406,425) -
Principal payments on loans - (25,000)
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Net cash provided by (used in) financing activities (9,154,300) 753,458
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Net increase in cash and cash equivalents 3,530,711 2,480,426
Cash and cash equivalents, beginning of period 66,427,369 78,112,530
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Cash and cash equivalents, end of period $ 69,958,080 $ 80,592,956
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Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes $ 3,059,700 $ 757,800
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Interest $ 56,694 $ 89,661
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</TABLE>
The accompanying notes are an integral part of these
consolidated condensed financial statements.
5
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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 and cash flows for the three-month
periods ended September 30, 1997 and 1996 and its financial position at
September 30, 1997. These financial statements should be read in conjunction
with the Company's audited consolidated financial statements for the fiscal
year ended June 30, 1997. The operating results and cash flows for the three
months ended September 30, 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 $464,958 and
$594,615 at September 30, 1997 and June 30, 1997, 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.
INVESTMENTS IN UNCONSOLIDATED AFFILIATES
The Company has investments in unconsolidated affiliates that are
accounted for under the equity method. Under the equity method, original
investments are recorded at cost and adjusted by the Company's share of
earnings, losses and distributions of these companies. Investments in
unconsolidated affiliates consist primarily of a 50% interest in a joint
venture with IGT (the "Joint Venture") to distribute gaming machines on
wide-area progressive systems. Net income from the Joint Venture is included
in revenue from proprietary games operations.
6
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The Joint Venture operates on a September 30 year end and was not in
operation during the three months ended September 30, 1996. For the three
months ended September 30, 1997, revenues for the Joint Venture were
$38,540,000, expenses were $16,953,000, operating income was $21,588,000 and
net income was $21,223,000.
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. Significant estimates in the financial statements include
the estimated depreciable lives of property and equipment and certain
estimated liabilities and valuation reserves. Actual results could differ
from those estimates.
RECLASSIFICATIONS
Certain amounts in the June 30, 1997 balance sheet have been reclassified
to be consistent with the presentation used at September 30, 1997.
EARNINGS PER SHARE
Earnings per common and common equivalent share are computed by dividing
net income by the weighted average number of common and common equivalent
shares outstanding. Common equivalent shares include the effect of shares
issuable upon the exercise of stock options. Fully diluted
earnings per share amounts are substantially the same as primary per share
amounts for the periods presented.
3. COMMITMENTS AND CONTINGENCIES
At September 30, 1997 the Company had entered into various purchase
agreements to purchase gaming equipment for approximately $3.3 million.
7
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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 statements. These
risks and uncertainties include, but are not limited to: risks of proprietary
games such as pressure from competitors, changes in economic conditions,
obsolescence, declining popularity, and duplication by third parties;
competition in Black Hawk, Colorado; dependence on suppliers; changes in
gaming regulations and taxes; dependence upon key personnel; and other
factors described from time to time in the Company's reports filed with the
Securities and Exchange Commission, including the Company's Form 10-K for the
year ended June 30, 1997 and its Registration Statement file no. 333-34755.
OVERVIEW
The following table sets forth the percentage of Anchor's total revenues
attributable to proprietary games operations, casino operations, gaming
machine route operations, and food and beverage operations during the three
months ended September 30, 1997 and 1996. The growth in proprietary games
revenue as a percentage of total revenues is attributable primarily to the
commencement of the Company's joint venture with IGT during the second
half of fiscal 1997 and, to a lesser extent, growth in revenue from the
Company's proprietary game Wheel of Gold which began generating revenue in
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
SEPTEMBER 30,
SOURCES OF REVENUES: 1997 1996
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Proprietary games operations . . . . . . . . . 45.8% 26.2%
Casino operations . . . . . . . . . . . . . . 36.8 50.0
Route operations . . . . . . . . . . . . . . . 16.5 22.8
Food and beverage operations . . . . . . . . . .9 1.0
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Total Revenues 100.0% 100.0%
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THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1996
REVENUES. Total revenues were $54.5 million for the three months ended
September 30, 1997, an increase of $19.3 million or 54.8% from $35.2 million
for the three months ended September 30, 1996.
8
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Revenues from proprietary games operations were $25.0 million for the
three months ended September 30, 1997, an increase of $15.8 million or 171.7%
from $9.2 million for the three months ended September 30, 1996. This
increase is primarily due to revenues generated from the Company's joint
venture with IGT and, to a lesser extent, revenues generated from the
Company's proprietary games Wheel of Gold-TM- and Totem Pole-TM-. These
increases were offset to some extent by decreased revenues generated from the
proprietary game Silver Strike-TM-.
Revenues from casino operations were $20.0 million for the three months
ended September 30, 1997, an increase of $2.4 million or 13.6% from $17.6
million for the three months ended September 30, 1996. The increase is
primarily due to increased revenue at the Colorado Central Station Casino and
to a lesser extent due to increased revenues at the Colorado Grande Casino.
Revenues from route operations were $9.0 million for the three months
ended September 30, 1997, an increase of $1.0 million or 12.5% from $8.0
million for the three months ended September 30, 1996. Machines on route
increased to 816 at September 30, 1997, from 768 at September 30, 1996, while
average machines on route during the first quarter of fiscal 1998 were 80
machines greater than the first quarter of fiscal 1997.
COSTS AND EXPENSES. Total costs and expenses were $28.4 million for the
three months ended September 30, 1997, an increase of $5.4 million or 23.5%
from $23.0 million for the three months ended September 30, 1996. Total
costs and expenses as a percentage of total revenues decreased to 52.2%
during the first quarter of fiscal 1998 from 65.3% during the first quarter
of fiscal 1997.
Costs and expenses of proprietary games operations were $3.2 million for
the three months ended September 30, 1997, an increase of $100,000 or 3.2%
from $3.1 million for the three months ended September 30, 1996. Proprietary
games costs and expenses as a percentage of proprietary games revenues
decreased to 13.0% during the first quarter of fiscal 1998 from 33.4% during
the first quarter of fiscal 1997. The decrease in proprietary games costs as
a percentage of revenue is primarily due to revenues from the joint venture
with IGT, which, for accounting purposes, are reported net of expenses. The
Joint Venture was not in operation during the three month ended September
30, 1996. Additionally, revenues from the Company's proprietary games, such
as Wheel of Gold-TM- and Totem Pole-TM-, incur less costs and expenses as a
percentage of revenue than the Company's Silver Strike-TM- game, which
previously accounted for a larger percentage of the Company's proprietary
games revenue.
Costs and expenses of casino operations were $8.1 million for the three
months ended September 30, 1997, an increase of $1.2 million or 17.4% from
$6.9 million for the three months ended September 30, 1996. Casino costs and
expenses as a percentage of casino revenue increased to 40.4% during the
first quarter of fiscal 1998 from 39.5% during the first quarter of fiscal
year 1997. The increase in casino costs and expenses was primarily due to
increased gaming taxes and promotions at both of the Company's casinos.
9
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Costs and expenses of route operations were $5.4 million for the three
months ended September 30, 1997, an increase of $600,000 or 12.5% from $4.8
million for the three months ended September 30, 1996. Costs and expenses of
route operations as a percentage of route revenue remained fairly constant at
59.8% during the first quarter of fiscal 1998 compared to 59.6% during the
first quarter of fiscal 1997. The increase in route costs and expenses was
primarily due to increased location costs and to a lesser extent increased
direct payroll costs, both related to increased machines on route.
Selling, general, and administrative ("SG&A") expenses were $8.4 million
for the three months ended September 30, 1997, an increase of $2.1 million
or 33.3% from $6.3 million for the three months ended September 30, 1996.
SG&A expenses as a percentage of total revenue decreased to 15.5% during the
first quarter of fiscal 1998 compared to 17.9% during the first quarter of
fiscal 1997. The increase in total SG&A expenses is primarily due to
increased expenses in the Company's proprietary games operations of
approximately $1.9 million primarily due to increased payroll and
compensation costs and licensing costs offset to some extent by decreased
research and development costs.
Depreciation and amortization expense was $2.9 million for the three
months ended September 30, 1997, an increase of $1.4 million or 93.3% from
$1.5 million for the three months ended September 30, 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 $26.0 million for the three months ended September
30, 1997, an increase of $13.8 million or 113.2% from $12.2 million for the
three months ended September 30, 1996. As a percentage of total revenues,
income from operations increased to 47.8% during the first quarter of fiscal
1998 from 34.7% during the first quarter of fiscal 1997.
INTEREST INCOME. Interest income was $800,000 for the three months ended
September 30, 1997, a decrease of $200,000 or 20.0% from $1.0 million for the
three months ended September 30, 1996. This decrease is due to decreased
short-term investments resulting from increased capital expenditures during
the last three quarters of fiscal 1997 offset to some extent by increased
cash generated from operations during the first quarter of fiscal 1998.
INTEREST EXPENSE. Interest expense was $57,000 for the three months
ended September 30, 1997, a decrease of $40,000 or 41.2% from $97,000 for the
three months ended September 30, 1996. This decrease is due to reduced
average notes payable during the first quarter of fiscal 1998 as compared to
the first quarter of fiscal 1997.
NET INCOME. As a result of the factors discussed above, net income was
$16.7 million for the three months ended September 30, 1997, an increase of
$8.5 million or 103.7% from $8.2 million for the three months ended September
30, 1996.
10
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LIQUIDITY AND CAPITAL RESOURCES
Anchor's principal sources of liquidity have been cash flows from
operations and the net proceeds from the Secondary Offering in April 1996 and
the IPO in February 1994. Net proceeds to the Company from the Secondary
Offering were $53.9 million, and net proceeds from the IPO were $34.1
million. In October 1997, the Company completed a stock offering on behalf of
selling shareholders. The Company did not receive any proceeds from the
October 1997 offering. Net cash provided by operating activities was $20.5
million during the first quarter of fiscal 1998 and $14.3 million during the
first quarter of fiscal 1997. At September 30, 1997, the Company had cash
and cash equivalents of $70.0 million, working capital of $58.1 million, and
a $10.0 million unsecured revolving bank line of credit (the "Bank Revolver").
In the first quarter of fiscal 1998, the Company spent $7.7 million on
capital expenditures, primarily related to the purchase of gaming devices and
equipment for use in its proprietary games operations of approximately $7.0
million.
In September 1997, the Company, with a joint venture partner, was granted
permission to run six permanent full-time and one part-time charity based
gaming clubs in Ontario, Canada.
In April 1997, the board of directors authorized a repurchase of up to
1,000,000 shares of the Company's common stock. At September 30, 1997, the
Company had repurchased a total of 514,000 shares of stock at a cost of $23.9
million.
In April 1997, the Company entered into the Bank Revolver, which expires
November 30, 1998. The Bank Revolver bears interest at the prime rate of
interest 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. The Company has remained in compliance
with the covenants throughout the term of the credit facility. During the
first quarter of fiscal 1998 the Company did not borrow under the Bank
Revolver.
The Company believes its principal liquidity requirements will be the
purchase of additional proprietary gaming machines in formats that have
already been introduced to the market, as well as the development and
purchase of proprietary gaming machines in formats that have not yet been
introduced. At September 30, 1997, the Company had commitments to purchase
gaming equipment for approximately $3.3 million.
The Company believes that cash on hand, cash flow from operations, and
available borrowings under the Bank Revolver will be sufficient to fund its
currently planned capital expenditures.
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.
11
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PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On August 26, 1997, the Board of Directors of the Company adopted a
Stockholder Rights Plan, providing that one right (a "Right") will be
attached to each share of common stock, par value $.01 per share, of the
Company (the "COMMON STOCK") as of October 20, 1997 (the "RECORD DATE").
Each Right entitles the registered holder to purchase from the Company a unit
(a "UNIT") consisting of one one-thousandth of a share of Series A Junior
Participating Preferred Stock, par value $20.00 per share (the "PREFERRED
STOCK"), at a Purchase Price of $400.00 per Unit (the "PURCHASE PRICE"),
subject to adjustment. The description and terms of the Rights are set forth
in the Rights Agreement (the "RIGHTS AGREEMENT"), dated as of October 17,
1997, between the Company and The Chase Manhattan Bank, as Rights Agent (the
"RIGHTS AGENT").
Initially, the Rights will be attached to all Common Stock certificates
representing shares outstanding as of the Record Date, and no separate Rights
Certificate will be distributed. The Rights will separate from the Common
Stock and a Distribution Date will occur upon the earlier of (i) 10 days
following a public announcement that a person or group of affiliated or
associated persons (an "ACQUIRING PERSON") has acquired, or obtained the
right to acquire, beneficial ownership of 15% or more of the outstanding
shares of Common Stock (the "STOCK ACQUISITION DATE"), (ii) 10 business days
following the commencement of a tender offer or exchange offer that would
result in a person or group beneficially owning 15% or more of such
outstanding shares of Common Stock or (iii) 10 business days after the Board
of Directors of the Company determines that any Person or Persons have become
the Beneficial Owner of an amount of Common Stock that the Board of Directors
determines to be substantial (which amount will in no event be less than 10%
of the shares of Common Stock outstanding) and that (a) such Person or
Persons intend to cause the Company to repurchase the Common Stock
beneficially owned by such Person or Persons or to exert pressure against the
Company to take any action or enter into any transaction or series of
transactions with the intent or the effect of providing such Person or
Persons with short-term gains or profits under circumstances in which the
Board of Directors determines that the long-term interests of the Company and
its stockholders would not be served by taking such action or entering into
such transactions or series of transactions or (b) beneficial ownership by
such Person or Persons is reasonably likely to have a material adverse effect
on the business, competitive position, prospects, or financial condition of
the Company and its subsidiaries (an "ADVERSE PERSON"). Until the
Distribution Date, (i) the Rights will be evidenced by the Common Stock
certificates and will be transferred with and only with such Common Stock
certificates, (ii) new Common Stock certificates will contain a notation
incorporating the Rights Agreement by reference; and (iii) the surrender for
transfer of any certificates for Common Stock outstanding will also
constitute the transfer of the Rights associated with the Common Stock
represented by such certificate.
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The Rights Agreement provides that Stanley E. Fulton, and certain of his
transferees, donees or successors, who together will be beneficial owners of
more than 39.2% of the Common Stock of the Company outstanding on October 20,
1997, are excluded from the definition of "Acquiring Person." Mr. Fulton is
also excluded from the definition of "Adverse Person."
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on October 20, 2007, unless earlier redeemed
by the Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined
by the Board of Directors, only shares of Common Stock outstanding prior to
the Distribution Date will be issued with Rights.
In the event that (i) the Company is the surviving corporation in a merger
or combination with any Acquiring Person or any Adverse Person, or any
Associate or Affiliate of any Acquiring Person or Adverse Person, and its
Common Stock remains outstanding, (ii) any Acquiring Person or any Adverse
Person, or any Associate or Affiliate of any Acquiring Person or Adverse
Person, engages in one or more "self-dealing" transactions as set forth in
the Rights Agreement, (iii) an Acquiring Person becomes the beneficial owner
of 15% or more of the then outstanding shares of Common Stock (unless such
acquisition is made pursuant to a tender or exchange offer for all
outstanding shares of the Company, at a price determined by a majority of the
Continuing Directors of the Company who are not determined by a majority of
the Continuing Directors of the Company who are not representatives,
nominees, Affiliates, or Associates of an Acquiring Person to be fair and
otherwise in the best interest of the Company and its stockholders), (iv)
during such time as there is an Acquiring Person or Adverse Person an event
occurs that results in such Acquiring Person's or Adverse Person's ownership
interest being increased by more than 1% (E.G., a reverse stock split or
recapitalization), or (v) the Board of Directors determines that a person is
an Adverse Person, each holder of a Right will thereafter have the right to
receive, upon exercise, Common Stock (or, in certain circumstances, cash,
property, or other securities of the Company), having a value equal to two
times the Exercise Price of the Right. The Exercise Price is the Purchase
Price times the number of shares of Common Stock associated with each Right
(initially, one). Notwithstanding any of the foregoing, following the
occurrence of any of the events set forth in this paragraph (the "Flip-In
Events"), all Rights that are, or (under certain circumstances specified in
the Rights Agreement) were, beneficially owned by any Acquiring Person or any
Adverse Person, or an Associate or Affiliate of any Acquiring Person or
Adverse Person, will be null and void. However, Rights are not exercisable
following the occurrence of any of the Flip-In Events set forth above until
such time as the Rights are no longer redeemable by the Company as set forth
below.
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For example, at an exercise price of $400 per Right, each Right not
owned by an Acquiring Person or an Adverse Person (or by certain related
parties) following an event set forth in the preceding paragraph would
entitle its holder to purchase Common Stock with a value of $800 (or other
consideration, as noted above) for $400. Assuming that the Common Stock had
a per share value of $400 at such time, the holder of each valid Right would
be entitled to purchase 2.0 shares of Common Stock for $400. Alternatively,
the Company could permit the holder to surrender each Right in exchange for
stock or cash equivalent to one share of Common Stock (with a value of $400)
without the payment of any consideration other than the surrender of the
Right.
In the event that following the Stock Acquisition Date, (i) the Company
is acquired in a merger or consolidation in which the Company is not the
surviving corporation (other than a merger that follows a tender offer that
the Board of Directors has found to be fair to the stockholders of the
Company, as described above) or (ii) 50% or more of the Company's assets or
earning power is sold or transferred, each holder of a Right (except Rights
which have previously been voided as set forth above) will thereafter have
the right (a flip-over right) to receive, upon exercise of the Right, Common
Stock of the acquiring company having a value equal to two times the Exercise
Price of the Right.
The Purchase Price payable, and the number of Units of Preferred Stock
or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event
of a stock dividend on, or a subdivision, combination or reclassification of,
the Preferred Stock, (ii) if holders of the Preferred Stock are granted
certain rights or warrants to subscribe for Preferred Stock or convertible
securities at less than the current market price of the Preferred Stock, or
(iii) upon the distribution to holders of the Preferred Stock of evidences of
indebtedness or assets (excluding regular quarterly cash dividends) or of
subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustments in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional Units will be issued and, in lieu thereof, an
adjustment in cash will be made based on the market price of the Preferred
Stock on the last trading date prior to the date of exercise.
At any time until 10 days following the Stock Acquisition Date, the
Company may redeem the Rights in whole, but not in part, at a price of $.01
per Right. The ten day redemption period may be extended by the Board of
Directors so long as the Rights are still redeemable. Under certain
circumstances, the decision to redeem will require the concurrence of a
majority of the Continuing Directors referred to below. Immediately upon the
action of the Board of Directors ordering redemption of the Rights, the
Rights will terminate and the only right of the holders of Rights will be to
receive the $.01 redemption price.
14
<PAGE>
The term "Continuing Director" means any member of the Board of
Directors of the Company who was a member of the Board prior to the adoption
of the Rights Plan and any person who is subsequently elected to the Board if
such person is recommended or approved by a majority of the Continuing
Directors, but will not include an Acquiring Person or any Adverse Person, or
an Affiliate or Associate of an Acquiring Person or Adverse Person, or any
representative of the foregoing entities.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the
right to vote or to received dividends. While the distribution of the Rights
will not be taxable to stockholders or to the Company, stockholders may,
depending upon the circumstances, recognize taxable income in the event that
the Rights become exercisable for Common Stock (or other consideration) of
the Company as set forth above.
Any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by
the Board (in certain circumstances, with the concurrence of the Continuing
Directors) in order to cure any ambiguity, to make changes which do not
adversely affect the interests of holders of Rights (excluding the interest
of any Acquiring Person or any Adverse Person), or to shorten or lenghten any
time period under the Rights Agreement; provided that no amendment to adjust
the time period governing redemption will be made at such time as the Rights
are not redeemable.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the
Company in certain circumstance. Accordingly, the existence of the Rights may
deter certain acquirors from making takeover proposals or tender offers.
However, the Rights are not intended to prevent a takeover, but rather are
designed to enhance the ability of the Board of Directors to negotiate with
an acquiror on behalf of all the shareholders.
The Rights Agreement between the Company and the Rights Agent specifying
the terms of the Rights, which includes as Exhibit B the Form of Rights
Certificate, is attached as an exhibit and incorporated by reference. The
foregoing description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement.
15
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
See Index to Exhibits
(b) Reports on Form 8-K
Form 8-K dated September 10, 1997
Form 8-K dated October 14, 1997
Form 8-K dated October 15, 1997
16
<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)
Date NOVEMBER 12, 1997 /s/ STANLEY E. FULTON
----------------- ----------------------------
Stanley E. Fulton
Chairman and
Chief Executive Officer
Date NOVEMBER 12, 1997 /s/ GEOFFREY A. SAGE
----------------- ----------------------------
Geoffrey A. Sage
Corporate Controller and
Principal Accounting Officer
17
<PAGE>
INDEX TO EXHIBITS
EXHIBIT 4.1 Rights Agreement, dated as of August 26, 1997 between the
Registrant and The Chase Manhattan Bank, as the Rights Agent.
(Incorporated by reference to Exhibit 3.1 to the Company's
October 17, 1997 Report on Form 8-A (File No. 0-23124)).
EXHIBIT 27 Financial Data Schedule.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANCHOR
GAMING QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1997
AND IS QUALIFIED IN ITS ENITRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 69,958,080
<SECURITIES> 0
<RECEIVABLES> 7,084,987
<ALLOWANCES> 0
<INVENTORY> 2,091,145
<CURRENT-ASSETS> 81,222,631
<PP&E> 89,864,854
<DEPRECIATION> 0
<TOTAL-ASSETS> 207,674,924
<CURRENT-LIABILITIES> 23,128,713
<BONDS> 2,800,000
0
0
<COMMON> 136,628
<OTHER-SE> 180,543,964
<TOTAL-LIABILITY-AND-EQUITY> 207,674,924
<SALES> 0
<TOTAL-REVENUES> 54,481,237
<CGS> 0
<TOTAL-COSTS> 28,431,573
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 56,694
<INCOME-PRETAX> 26,786,824
<INCOME-TAX> 10,045,059
<INCOME-CONTINUING> 16,741,765
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,741,765
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 0
</TABLE>
