ANCHOR GAMING, 10-Q, 1999-02-11

ANCHOR GAMING
10-Q, 1999-02-11
MISCELLANEOUS AMUSEMENT & RECREATION

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<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 December 31, 1998

[ ] 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 10, 1999:

<TABLE>
<CAPTION>
Class Outstanding as of February 10, 1999
----- -----------------------------------
<S> <C>
Common stock, $.01 par value 12,075,107
</TABLE>

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<PAGE>

ANCHOR GAMING

FORM 10-Q
QUARTER ENDED DECEMBER 31, 1998

INDEX

<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
Part I. Financial Information

Item 1. Consolidated Condensed Financial Statements

Consolidated Condensed Balance Sheets at
December 31, 1998 and June 30, 1998 (unaudited) 3

Consolidated Condensed Statements of
Income for the three months ended
December 31, 1998 and 1997 (unaudited) 4

Consolidated Condensed Statements of
Income for the six months ended
December 31, 1998 and 1997 (unaudited) 5

Consolidated Condensed Statements of Cash
Flows for the six months ended
December 31, 1998 and 1997 (unaudited) 6

Notes to Consolidated Condensed Financial Statements
(unaudited) 7

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10

Part II. Other Information

Item 1. Legal Proceedings 20

Item 6. Exhibits 20

Signatures 21
</TABLE>

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<PAGE>

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
ANCHOR GAMING
CONSOLIDATED CONDENSED DECEMBER 31, JUNE 30,
BALANCE SHEETS (UNAUDITED) 1998 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS

Current assets:
Cash and cash equivalents $ 65,088,822 $ 73,187,295
Accounts receivable, net 10,969,534 8,977,254
Inventory 2,410,336 3,869,496
Prepaid expenses 1,255,554 1,951,947
Other current assets 764,785 53,688
------------------- -------------------
Total current assets 80,489,031 88,039,680
Property and equipment, net 94,172,618 94,791,189
Long-term notes receivable, net 2,328,610 2,234,856
Intangible assets, net 2,972,163 3,534,048
Investments in unconsolidated affiliates 32,101,798 32,638,738
Deposits and other 29,031,653 23,895,032
------------------- -------------------
Total assets $ 241,095,873 $ 245,133,543
------------------- -------------------
------------------- -------------------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable $ 5,048,543 $ 5,994,029
Accrued salaries, wages and vacation pay 2,282,384 3,905,951
Income tax payable 2,951,592 12,469,108
Other current liabilities 11,639,211 11,221,310
------------------- -------------------
Total current liabilities 21,921,730 33,590,398
Minority interest in consolidated subsidiary 1,206,408 1,061,470
------------------- -------------------
Total liabilities and minority interest in
consolidated subsidiary 23,128,138 34,651,868
------------------- -------------------
Commitments and contingencies - -
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares
authorized, 0 shares issued and outstanding at
December 31, 1998 and June 30, 1998 - -
Common stock, $.01 par value, 50,000,000 shares
authorized, 13,768,675 issued and 12,061,732
outstanding at December 31, 1998, 13,758,375 issued
and 12,593,232 outstanding at June 30, 1998 137,687 137,584
Additional paid-in capital 114,518,260 114,179,417
Treasury stock at cost, 1,706,943 shares at December 31,
1998, 1,165,143 shares at June 30, 1998 (81,279,901) (52,731,940)
Retained earnings 184,591,689 148,896,614
------------------- -------------------
Total stockholders' equity 217,967,735 210,481,675
------------------- -------------------
Total liabilities and stockholders' equity $ 241,095,873 $ 245,133,543
------------------- -------------------
------------------- -------------------
</TABLE>

The accompanying notes are an integral part of
these consolidated condensed financial statements.

-3-
<PAGE>

<TABLE>
<CAPTION>
ANCHOR GAMING THREE MONTHS ENDED DECEMBER 31,
CONSOLIDATED CONDENSED ------------------------------------------
STATEMENTS OF INCOME (UNAUDITED) 1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Proprietary games operations $ 30,938,462 $ 26,502,147
Casino operations 20,987,101 18,228,312
Route operations 9,524,824 8,367,801
Other operations 386,690 410,994
------------------- -------------------
Total revenues 61,837,077 53,509,254
------------------- -------------------
Costs and expenses:
Proprietary games operations 4,818,964 3,636,720
Casino operations 10,976,708 8,860,977
Route operations 6,218,754 5,216,526
Other operations 417,064 646,242
Selling, general and administrative 9,283,525 7,604,991
Depreciation and amortization 4,181,276 3,067,579
------------------- -------------------
Total costs and expenses 35,896,291 29,033,035
------------------- -------------------

Income from operations 25,940,786 24,476,219
------------------- -------------------
Other income (expense):
Interest income 846,355 842,322
Interest expense - (56,153)
Other income 99,415 517,954
Minority interest in earnings of consolidated subsidiary (144,078) (168,715)
------------------- -------------------

Total other income 801,692 1,135,408
------------------- -------------------

Income before provision for income taxes 26,742,478 25,611,627
Income tax provision 10,095,303 9,604,359
------------------- -------------------
Net income $ 16,647,175 $ 16,007,268
------------------- -------------------
------------------- -------------------

Basic earnings per share $1.37 $1.24
------------------- -------------------
------------------- -------------------

Weighted average shares outstanding 12,164,640 12,929,309
------------------- -------------------
------------------- -------------------

Diluted earnings per share $ 1.34 $1.20
------------------- -------------------
------------------- -------------------

Weighted average common and common equivalent
shares outstanding 12,433,431 13,337,979
------------------- -------------------
------------------- -------------------
</TABLE>

The accompanying notes are an integral part of
these consolidated condensed financial statements.

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<PAGE>

<TABLE>
<CAPTION>
ANCHOR GAMING SIX MONTHS ENDED DECEMBER 31,
CONSOLIDATED CONDENSED ------------------------------------------
STATEMENTS OF INCOME (UNAUDITED) 1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Proprietary games operations $ 64,009,796 $ 51,469,965
Casino operations 43,085,340 38,275,158
Route operations 18,471,372 17,383,332
Other operations 873,284 862,039
------------------- -------------------
Total revenues 126,439,792 107,990,494
------------------- -------------------
Costs and expenses:
Proprietary games operations 8,941,394 7,392,572
Casino operations 21,706,962 17,813,070
Route operations 12,107,733 10,604,570
Other operations 1,013,056 1,250,941
Selling, general and administrative 18,988,364 14,475,108
Depreciation and amortization 8,072,115 5,928,351
------------------- -------------------
Total costs and expenses 70,829,624 57,464,612
------------------- -------------------

Income from operations 55,610,168 50,525,882
------------------- -------------------
Other income (expense):
Interest income 1,911,549 1,665,327
Interest expense - (112,847)
Other income 183,046 670,860
Minority interest in earnings of consolidated subsidiary (363,249) (350,769)
------------------- -------------------

Total other income 1,731,346 1,872,571
------------------- -------------------

Income before provision for income taxes 57,341,514 52,398,453

Income tax provision 21,646,439 19,649,420
------------------- -------------------
Net income $ 35,695,075 $ 32,749,033
------------------- -------------------
------------------- -------------------

Basic earnings per share $2.89 $2.53
------------------- -------------------
------------------- -------------------

Weighted average shares outstanding 12,348,853 12,949,290
------------------- -------------------
------------------- -------------------

Diluted earnings per share $ 2.82 $ 2.45
------------------- -------------------
------------------- -------------------

Weighted average common and common equivalent
shares outstanding 12,653,742 13,351,680
------------------- -------------------
------------------- -------------------
</TABLE>
The accompanying notes are an integral part of
these consolidated condensed financial statements.

-5-
<PAGE>

<TABLE>
<CAPTION>
ANCHOR GAMING SIX MONTHS ENDED DECEMBER 31,
CONSOLIDATED CONDENSED ------------------------------------------
STATEMENTS OF CASH FLOWS (UNAUDITED) 1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net cash provided by operating activities $ 31,674,156 $ 26,184,577
------------------- -------------------
Cash flows from investing activities:
Acquisition and construction of property and equipment (10,553,544) (16,874,044)
Expenditures for intangible assets (42,000) (110,614)
Issuance of notes receivable (842,449) (964,541)
Principal reductions on notes receivable 89,725 49,305
------------------- -------------------
Net cash used in investing activities (11,348,268) (17,899,894)
------------------- -------------------
Cash flows from financing activities:
Net proceeds from sale of stock 123,599 1,589,225
Treasury stock purchases (28,547,960) (36,162,611)
------------------- -------------------
Net cash used in financing activities (28,424,361) (34,573,386)
------------------- -------------------
Net decrease in cash and cash equivalents (8,098,473) (26,288,703)
Cash and cash equivalents, beginning of period 73,187,295 66,427,369
------------------- -------------------
Cash and cash equivalents, end of period $ 65,088,822 $ 40,138,666
------------------- -------------------
------------------- -------------------

Supplemental disclosure of cash flow information:
Cash paid for interest $ - $ 112,540
------------------- -------------------
------------------- -------------------
Cash paid for income taxes $ 37,353,194 $ 19,283,454
------------------- -------------------
------------------- -------------------
</TABLE>

The accompanying notes are an integral part of these
consolidated condensed financial statements

-6-
<PAGE>

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 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, 1998 and 1997, its cash flows for the six months
ended December 31, 1998 and 1997 and its financial position at December 31,
1998. These financial statements should be read in conjunction with the
Company's audited consolidated financial statements for the fiscal year ended
June 30, 1998. The operating results for the three months and six months and
cash flows for the six months ended December 31, 1998 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 $573,000 and
$1,067,000 at December 31, 1998 and June 30, 1998, 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.

DEPOSITS AND OTHER ASSETS

Included in deposits and other assets are $16,860,000 and $10,630,000 in
deferred state and federal tax assets at December 31, 1998 and June 30, 1998,
respectively.

OTHER CURRENT LIABILITIES

Included in other current liabilities are: $4,558,000 and $3,519,000 in
employee royalties payable; and $4,047,000 and $3,452,000 in accrued gaming,
property, sales and use taxes at December 31, 1998 and June 30, 1998,
respectively.

INVESTMENTS IN UNCONSOLIDATED AFFILIATE

-7-
<PAGE>

The Company has an investment in an unconsolidated affiliate that is
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 affiliates. Investments in
unconsolidated affiliates consist of a 50% interest in a joint venture (the
"Joint Venture") with International Game Technology ("IGT"). The primary
business of the Joint Venture is to distribute gaming machines on wide-area
progressive systems. The Company's share of net earnings from the Joint
Venture and related activities are included in revenue from proprietary games
operations.

The Joint Venture operates on a September 30 year-end and began
operations during the quarter ended March 31, 1997. For the three months
ended January 2, 1999, operating revenues for the Joint Venture were
$71,750,000, operating expenses were $35,820,000, operating income was
$35,930,000 and net income was $36,400,000. For the three months ended
December 31, 1997, revenues were $47,333,000, expenses were $24,109,000,
operating income was $23,224,000 and net income was $23,372,000. For the six
months ended January 2, 1999, operating revenues for the Joint Venture were
$145,540,000, operating expenses were $72,270,000, operating income was
$73,270,000 and net income was $74,140,000. For the six months ended December
31, 1997, revenues were $85,873,000, expenses were $41,062,000, operating
income was $44,811,000 and net income was $44,595,000.

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 consolidated condensed financial statements for
the three months and six months ended December 31, 1997 have been
reclassified to be consistent with the presentation used for the three months
and six months ended December 31, 1998.

-8-
<PAGE>

EARNINGS PER SHARE

During the year ended June 30, 1998, the Company adopted FASB Statement
No. 128 "Earnings per Share." This statement established standards for
computing and presenting earnings per share and required restatement of all
prior-period earnings per share data presented. A reconciliation of income
and shares for basic and diluted earnings per share (EPS) is as follows:

<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
December 31, 1998 December 31, 1997
------------------------------------------ -----------------------------------------
Per Per
Share Share
Income Shares Amount Income Shares Amount
-------------- ------------ --------- -------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net Income $16,647,175 12,164,640 $ 1.37 $16,007,268 12,929,309 $ 1.24
Effect of Dilutive
Securities:
Options 268,791 (0.03) 408,670 (0.04)
-------------- ------------ --------- -------------- ------------- ---------
Diluted EPS:
Net Income $16,647,175 12,433,431 $ 1.34 $16,007,268 13,337,979 $ 1.20
-------------- ------------ --------- -------------- ------------- ---------
-------------- ------------ --------- -------------- ------------- ---------
</TABLE>

<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
December 31, 1998 December 31, 1997
------------------------------------------ -----------------------------------------
Per Per
Share Share
Income Shares Amount Income Shares Amount
-------------- ------------ --------- -------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net Income $35,695,075 12,348,853 $ 2.89 $32,749,033 12,949,290 $ 2.53
Effect of Dilutive
Securities:
Options 304,889 (0.07) 402,390 (0.08)
-------------- ------------ --------- -------------- ------------- ---------
Diluted EPS:
Net Income $35,695,075 12,653,742 $ 2.82 $32,749,033 13,351,680 $ 2.45
-------------- ------------ --------- -------------- ------------- ---------
-------------- ------------ --------- -------------- ------------- ---------
</TABLE>

2. COMMITMENTS AND CONTINGENCIES

Several securities class action lawsuits have been filed against the
Company and certain of its current and former officers and directors. The
lawsuits were filed in various jurisdictions following the Company's
announcement in early December 1997 that the Company's results for the
December quarter might not meet analysts' expectations. The lawsuits have
been brought on behalf of certain purchasers of the stock of the Company and
allege violations of state and/or federal securities laws arising out of
alleged misstatements and omissions to state material facts about the Company
over various periods of time covered by the suits. The lawsuits have all been
consolidated in Nevada, both in federal and state court. The consolidated
federal action is captioned IN RE ANCHOR GAMING SECURITIES LITIGATION, Civil
Action No. CV-S-97-01751-PMP (RJJ), and the consolidated state action is
captioned RYAN, ET AL. V. ANCHOR GAMING, ET AL., Civil No. A383456. Certain
other actions have been transferred and/or dismissed. The Company believes
that the claims are without merit, and the Company intends to vigorously
contest the lawsuits. The consolidated state court action has been stayed by
order of the court. The court dismissed the consolidated federal case on
January 6,

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<PAGE>

1999 with the court entering a judgement in favor of Anchor Gaming. The
Company cannot presently state the nature of further proceedings, if any, in
the state or federal actions.

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. ALL STATEMENTS OTHER THAN
STATEMENTS OF HISTORICAL FACT ARE "FORWARD-LOOKING STATEMENTS" FOR PURPOSES
OF THESE PROVISIONS, INCLUDING ANY PROJECTIONS OF EARNINGS, REVENUES OR OTHER
FINANCIAL ITEMS; ANY STATEMENTS OF THE PLANS, STRATEGIES, AND OBJECTIVES OF
MANAGEMENT FOR FUTURE OPERATION; ANY STATEMENTS CONCERNING PROPOSED NEW
PRODUCTS, SERVICES, OR DEVELOPMENTS; ANY STATEMENTS REGARDING FUTURE ECONOMIC
CONDITIONS OR PERFORMANCE; STATEMENTS OF BELIEF; AND ANY STATEMENT OF
ASSUMPTIONS UNDERLYING ANY OF THE FOREGOING. SUCH FORWARD-LOOKING STATEMENTS
ARE SUBJECT TO INHERENT RISKS AND UNCERTAINTIES, AND ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THOSE ANTICIPATED BY THE FORWARD-LOOKING STATEMENTS.
ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS REFLECTED IN ANY OF ITS
FORWARD-LOOKING STATEMENTS WILL PROVE TO BE CORRECT, ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THOSE PROJECTED OR ASSUMED IN THE COMPANY'S
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 OF
EXISTING GAMES, FAILURE OF NEW GAME IDEAS OR CONCEPTS TO BECOME POPULAR,
DUPLICATION BY THIRD PARTIES AND CHANGES IN INTEREST RATES AS THEY RELATE TO
THE WIDE AREA PROGRESSIVE MACHINE OPERATIONS WITHIN THE COMPANY'S JOINT
VENTURE WITH IGT; 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, 1998. THE COMPANY UNDERTAKES
NO OBLIGATION TO UPDATE ANY FORWARD-LOOKING STATEMENT.

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 other during the three months and six
months ended December 31, 1998 and 1997.

<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, December 31,
-------------------------- --------------------------
Sources of Revenues 1998 1997 1998 1997
- -------------------------------------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Proprietary games operations 50.0% 49.5% 50.6% 47.7%
Casino operations 33.9 34.1 34.1 35.4
Route operations 15.4 15.6 14.6 16.1
Other .7 .8 .7 .8
----------- ------------ ----------- -----------
100.0% 100.0% 100.0% 100.0%
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
</TABLE>

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<PAGE>

THREE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO THREE MONTHS ENDED DECEMBER
31, 1997

REVENUES. Total revenues were $61.8 million for the three months
ended December 31, 1998 an increase of $8.3 million or 15.5% from $53.5
million for the three months ended December 31, 1997.

Revenues from proprietary games operations were $30.9 million for
the three months ended December 31, 1998, an increase of $4.4 million or
16.6% from $26.5 million for the three months ended December 31, 1997. The
increase is primarily due to increased equity earnings in the Joint Venture,
which, for accounting purposes, is recorded net of expense. Revenues recorded
from the Joint Venture and related activities were $18.6 million for the
three months ended December 31, 1998, an increase of $6.9 million or 59.0%
from $11.7 million for the three months ended December 31, 1997. At December
31, 1998 there were more than 6,300 games, primarily Wheel of Fortune-TM-,
operating within the Joint Venture, as compared to more than 4,000 games at
December 31, 1997. This increase was offset by a reduction in proprietary
games revenues generated from Anchor's stand-alone business, or that business
operated outside of the Joint Venture and its related activities. Revenues
generated from Anchor's stand-alone business were $12.5 million for the three
months ended December 31, 1998, a decrease of $2.4 million or 16.1% from
$14.9 million for the three months ended December 31, 1997. Although the
number of units placed in casinos was greater at December 31, 1998 as
compared to December 31, 1997, the average win per unit was less during the
quarter ended December 31, 1998 as compared to the quarter ended December 31,
1997. Most of the decrease during the quarter was due to decreased revenues
from the Company's proprietary game Wheel of Gold-TM-. To a lesser extent,
stand-alone revenues decreased during the quarter due to decreased revenues
generated from the sale of tokens for the proprietary game Silver Strike-TM-
and decreased revenues generated from the proprietary games Clear Winner-TM-
and Totem Pole-TM-. These decreases were offset to some extent by increased
revenues during the quarter from the Company's proprietary games CashBall-TM-
and SafeBuster-TM-.

The Company expects the trend of decreased year over year revenue
comparisons for Wheel of Gold-TM-, Silver Strike-TM-, Clear Winner-TM- and
Totem Pole-TM- to continue due to the market maturity of these proprietary
games. These operations are also influenced by seasonal fluctuations as a
result of weather and casino patron traffic patterns. The Company expects
that these seasonal trends will continue in both the Joint Venture operations
and the proprietary games operations outside of the Joint Venture. In
addition, recent declines in interest rates had a negative effect on the
earnings of the Joint Venture. Since the current period's jackpot expense is
a function of the present value of future jackpot payments, future changes in
the interest rate environment will affect the profitability of the Joint
Venture. Specifically, decreases in interest rates will increase the then
current period's jackpot expense of the Joint Venture while future increases
in interest rates will decrease the then current period's jackpot expense of
the Joint Venture.

-11-
<PAGE>

During the quarter ended December 31, 1998, the Company received
Nevada regulatory approval, and placed in casinos on a limited basis, the
first units of the conversion game Tic Tac Disco-TM-. This is the first title
introduced under what is referred to by the Company as the conversion
opportunity. The conversion opportunity is an Anchor Gaming operation,
accounted for within the Joint Venture, whereby Anchor will upgrade existing,
casino owned, IGT gaming machines in exchange for a portion of the future
incremental revenue stream generated by the conversion. This upgrade will
generally take the form of placing a secondary bonusing type of event on or
in the existing base unit. Tic Tac Disco-TM- is the first of eleven
conversion titles, some mechanical and some video, that the Company has in
various stages of development and plans to introduce in the next twelve to
eighteen months. The Company cannot predict the level of success, if any, the
conversion opportunity will provide.

During the quarter ended December 31, 1998, Anchor was issued two
new patents that relate to the world of secondary events and bonusing
features within gaming machines. Management believes that this intellectual
property provides the Company with a strategic advantage in a highly
competitive game creation marketplace. The ultimate value of these patents is
uncertain, and the Company cannot predict what benefits, if any, it can
obtain as a result of owning this intellectual property.

Revenues from casino operations were $21.0 million for the three
months ended December 31, 1998, an increase of $2.8 million or 15.4% from
$18.2 million for the three months ended December 31, 1997. 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.
Two casinos, both larger and containing more gaming devices, opened near the
Colorado Central Station Casino as expected, on June 24, 1998, and December
29, 1998, respectively. The Company experienced lower year over year revenue
growth and increased marketing and personnel related costs as a result of the
new competition. The Company is aware of other casino projects in various
stages of planning in the Black Hawk market. The Company cannot predict the
effect that the new and proposed casino openings will have on the Company's
future Colorado casino operations. The Company does expect that the increased
competition will have a continued negative effect on revenues as well as on
costs of casino operations such as promotions and costs related to retaining
and recruiting qualified employees. Historically, revenues and casino
patronage in the Colorado casino operations are highest in the summer months
and other months unaffected by inclement weather. The Company expects this
seasonality trend to continue.

Revenues from route operations were $9.5 million for the three
months ended December 31, 1998, an increase of $1.1 million or 13.1% from
$8.4 million for the three months ended December 31, 1997. Machines on route
increased 43 machines or 5.3% to 859 machines at December 31, 1998 from 816
machines at December 31, 1997. Average machines on route during the second
quarter of fiscal 1999 increased 46 average machines or 5.6% to 862 average
machines from 816 average machines during the second quarter of fiscal 1998.
The increase in route revenue was due primarily to increased participation
revenue as a result of both increased participation units and increased
participation win per unit. The Company cannot predict whether this growth
trend will continue or if increased competition from expanding grocery store
chains and local casinos will lead back to the historical trend of generally
flat year over year route revenue comparisons. During the six months ended
December 31, 1998, several recently

-12-
<PAGE>

publicized quality of life issues surrounding the route operations were
settled in a manner acceptable to both Anchor and certain governmental
entities. The slot route industry and the Company, will alcove slot machines
in grocery stores, provide better ventilation for cigarette smoke, enhance
enforcement of the supervision over minors near slot areas, and provide
greater awareness of facilities for the treatment of problem gambling. The
Company cannot predict the effect, if any, that potential future efforts by
governmental or other agencies to limit or curtail slot route operations in
Nevada will have on the Company's route operations revenues and profits.

COSTS AND EXPENSES. Total costs and expenses were $35.9 million for
the three months ended December 31, 1998, an increase of $6.9 million or
23.8% from $29.0 million for the three months ended December 31, 1997. Total
costs and expenses as a percentage of total revenues increased to 58.0%
during the second quarter of fiscal 1999 from 54.3% during the second quarter
of fiscal 1998.

Costs and expenses of proprietary games operations were $4.8 million
for the three months ended December 31, 1998 an increase of $1.2 million or
33.3% from $3.6 million for the three months ended December 31, 1997.
Proprietary games costs and expenses as a percentage of proprietary games
revenues increased to 15.6% during the second quarter of fiscal 1999 from
13.7% during the second quarter of fiscal 1998. The increase in proprietary
games costs and expenses was primarily due to increased machine part usage,
increased token returns and increased production and service payroll. The
increase in proprietary games costs as a percentage of revenue is primarily
due to increased machine part and service type costs on a maturing
stand-alone game base as compared to reduced revenues from the maturing
stand-alone game base. Volatility in silver prices, which has occurred from
time to time over the past several years due to developments in world silver
markets, could also affect the future profitability of the Silver Strike-TM-
game.

Costs and expenses of casino operations were $11.0 million for the
three months ended December 31, 1998, an increase of $2.1 million or 23.6%
from $8.9 million for the three months ended December 31, 1997. Casino costs
and expenses as a percentage of casino revenue increased to 52.3% during the
second quarter of fiscal 1999 from 48.6% during the second quarter of fiscal
1998. The increase in casino costs and expenses was primarily due to
increased advertising and promotions and gaming taxes, and to a lesser extent
increased payroll and related costs at the Company's Colorado Central Station
Casino. Although the Company cannot predict the effect of the new and
proposed casino openings in Black Hawk on the Colorado Central Station
Casino's operations, management believes it is likely to increase both
promotion and payroll costs in future periods and as a result reduce
operating margins and potentially the casino's net income.

Costs and expenses of route operations were $6.2 million for the
three months ended December 31, 1998, an increase of $1.0 million or 19.2%
from $5.2 million for the three months ended December 31, 1997. Costs and
expenses of route operations as a percentage of route revenue increased to
65.3% during the second quarter of fiscal 1999 from 62.3% during the second
quarter of fiscal 1998. The increase in route costs and expenses was
primarily due to increased location costs directly related to the increase in
participation revenue.

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<PAGE>

Selling, general, and administrative ("SG&A") expenses were $9.3
million for the three months ended December 31, 1998, an increase of $1.7
million or 22.3% from $7.6 million for the three months ended December 31,
1997. SG&A expenses as a percentage of total revenue increased to 15.0%
during the second quarter of fiscal 1999 compared to 14.2% during the first
quarter of fiscal 1998. The increase in total SG&A expenses is primarily due
to increased expenses in the Company's proprietary games operations. These
increased expenses are primarily due to increased valuation allowances
related to gaming machines. In addition, increased SG&A expenses include:
payroll and compensation costs in all three of the Company's operating
divisions; research and development costs related to proprietary games;
political contributions; and corporate development costs.

Anchor had been in discussions with the Ontario provincial
government with respect to a settlement for the Company's work that resulted
from the Company's success in the request for proposal conducted for
charitable gaming. Those discussions are now concluded and the Company
reached a settlement with the Ontario Government. The Province of Ontario has
mandated that these discussions and their subsequent result be held in
confidence. Accordingly, the Company cannot disclose the effect of any such
settlement other than the financial effects of this matter will not be
reflected in any future period.

Depreciation and amortization expense was $4.2 million for the three
months ended December 31, 1998, an increase of $1.1 million or 35.5% from
$3.1 million for the three months ended December 31, 1997. This increase is
primarily due to increased depreciation and amortization expense incurred in
the Company's proprietary games operations due to the placement of additional
proprietary gaming machines.

INCOME FROM OPERATIONS. As a result of the factors discussed above,
income from operations was $25.9 million for the three months ended December
31, 1998, an increase of $1.4 million or 5.7% from $24.5 million for the
three months ended December 31, 1997. As a percentage of total revenues,
income from operations decreased to 42.0% during the second quarter of fiscal
1999 from 45.7% during the second quarter of fiscal 1998.

NET INCOME. As a result of the factors discussed above, net income
was $16.6 million for the three months ended December 31, 1998, an increase
of $600,000 or 3.8% from $16.0 million for the three months ended December
31, 1997.

SIX MONTHS ENDED DECEMBER 31, 1998 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1997

REVENUES. Total revenues were $126.4 million for the six months
ended December 31, 1998, an increase of $18.4 million or 17.0% from $108.0
million for the six months ended December 31, 1997.

Revenues from proprietary games operations were $64.0 million for
the six months ended December 31, 1998, an increase of $12.5 million or 24.3%
from $51.5 million for the six months ended December 31, 1997. The increase
is primarily due to increased equity earnings in the Joint Venture, which,
for accounting purposes, is recorded net of expense. Revenues recorded from
the

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<PAGE>

Joint Venture and related activities were $37.8 million for the six months
ended December 31, 1998, an increase of $15.5 million or 69.5% from $22.3
million for the six months ended December 31, 1997. This increase was offset
by a reduction in proprietary games revenues generated from Anchor's
stand-alone business, or that business operated outside of the Joint Venture
and its related activities. Revenues generated from Anchor's stand-alone
business were $26.2 million for the six months ended December 31, 1998, a
decrease of $3.0 million or 10.3% from $29.2 million for the six months ended
December 31, 1997. Although the number of units placed in casinos were
greater at December 31, 1998 as compared to December 31, 1997, the average
win per unit was less during the six months ended December 31, 1998 as
compared to the six months ended December 31, 1997. Most of the decrease
during the six-month period was due to decreased revenues from the Company's
proprietary game Wheel of Gold-TM-. To a lesser extent, stand-alone revenues
decreased during the six-month period due to decreased revenues generated
from the sale of tokens for the proprietary game Silver Strike-TM- and
decreased revenues generated from the proprietary games Clear Winner-TM- and
Totem Pole-TM-. These decreases were offset to some extent by increased
revenues during the six-month period from the Company's proprietary games
CashBall-TM- and SafeBuster-TM-.

The Company expects the trend of decreased year over year revenue
comparisons for Wheel of Gold-TM-, Silver Strike-TM-, Clear Winner-TM- and
Totem Pole-TM- to continue due to the market maturity of these proprietary
games. These operations are influenced by seasonal fluctuations as a result
of weather and casino patron traffic patterns. The Company expects that these
seasonal trends will continue in both the Joint Venture operations and the
proprietary games operations outside of the Joint Venture. In addition,
recent declines in interest rates had a negative effect on the earnings of
the Joint Venture. Since the current period's jackpot expense is a function
of the present value of future jackpot payments, future decreases in interest
rates will increase the then current period's jackpot expense of the Joint
Venture while future increases in interest rates will decrease the then
current period's jackpot expense of the Joint Venture.

Revenues from casino operations were $43.1 million for the six
months ended December 31, 1998, an increase of $4.8 million or 12.5% from
$38.3 million for the six months ended December 31, 1997. The increase is
primarily due to increased revenue at the Colorado Central Station Casino and
to a lesser extent due to increased revenue at the Colorado Grande Casino.
The competitive landscape began to materially change recently in the Black
Hawk market, where the Company's Colorado Central Station Casino is located.
Two casinos, both larger and containing more gaming devices, opened near the
Colorado Central Station Casino as expected, on June 24, 1998, and December
29, 1998, respectively. The Company experienced lower year over year revenue
growth and increased marketing and personnel related costs as a result of the
new competition. The Company is aware of other casino projects in various
stages of planning in the Black Hawk market. The Company cannot predict the
effect, if any, that the new and proposed casino openings will have on the
Company's future Colorado casino operations. The Company does expect that the
increased competition will have a continued negative effect on revenues as
well as on costs of casino operations such as promotions and costs related to
retaining and recruiting qualified employees. Historically, revenues and
casino patronage in the Colorado casino operations are highest in the summer

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<PAGE>

months and other months unaffected by inclement weather. The Company expects
this seasonality trend to continue.

Revenues from route operations were $18.5 million for the six months
ended December 31, 1998, an increase of $1.1 million or 6.3% from $17.4
million for the six months ended December 31, 1997. Average machines on route
during the six months ended December 31, 1998 was 854 machines, as compared
to 816 machines during the six months ended December 31, 1997. The increase
in route revenue was due primarily to increased participation revenue as a
result of both increased participation units and increased participation win
per unit. Management believes that the increased route revenue was primarily
due to the increased population base in Southern Nevada, its primary base of
route operations. The Company cannot predict whether this growth trend will
continue or if increased competition from expanding grocery store chains and
local casinos will lead back to the historical trend of generally flat year
over year route revenue comparisons. During the six months ended December 31,
1998, several recently publicized quality of life issues surrounding the
route operations were settled in a manner acceptable to both Anchor and
certain governmental entities. The slot route industry and the Company, will
alcove slot machines in grocery stores, provide better ventilation for
cigarette smoke, enhance enforcement of the supervision over minors near slot
areas, and provide greater awareness of facilities for the treatment of
problem. The Company cannot predict the effect, if any, that potential future
efforts by governmental or other agencies to limit or curtail slot route
operations in Nevada will have on the Company's route operations revenues and
profits.

COSTS AND EXPENSES. Total costs and expenses were $70.8 million for
the six months ended December 31, 1998, an increase of $13.3 million or 23.1%
from $57.5 million for the six months ended December 31, 1997. Total costs
and expenses as a percentage of total revenues increased to 56.0% during the
six months ended December 31, 1998 from 53.2% during the six months ended
December 31, 1997.

Costs and expenses of proprietary games operations were $8.9 million
for the six months ended December 31, 1998, an increase of $1.5 million or
20.2% from $7.4 million for the six months ended December 31, 1997.
Proprietary games costs and expenses as a percentage of proprietary games
revenues decreased to 14.0% during the six months ended December 31, 1998
from 14.4% during the six months ended December 31, 1997. The decrease in
proprietary games costs as a percentage of revenue is primarily due to
revenues from the Joint Venture, which, for accounting purposes, are recorded
net of expenses. This decrease was offset to some extent by increased machine
part and service type costs on a maturing stand-alone game base as compared
to reduced revenues from the maturing stand-alone game base. Volatility in
silver prices, which has occurred from time to time over the past several
years due to developments in world silver markets, could also affect the
future profitability of the Silver Strike-TM- game.

Costs and expenses of casino operations were $21.7 million for the
six months ended December 31, 1998, an increase of $3.9 million or 21.9% from
$17.8 million for the six months ended December 31, 1997. Casino costs and
expenses as a percentage of casino revenue increased to 50.4% during the six
months ended December 31, 1998 from 46.5% during the six months ended
December 31, 1997. The increase in casino costs and expenses was primarily
due

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<PAGE>

to increased advertising and promotions and gaming taxes, and to a lesser
extent increased payroll and related costs at the Company's Colorado Central
Station Casino. Although the Company cannot predict the effect of the new and
proposed casino openings in Black Hawk on the Colorado Central Station
Casino's operations, management believes it is likely to increase both
promotion and payroll costs in future periods and as a result reduce
operating margins and potentially the casino's net income.

Costs and expenses of route operations were $12.1 million for the
six months ended December 31, 1998, an increase of $1.5 million or 14.2% from
$10.6 million for the six months ended December 31, 1997. Costs and expenses
of route operations as a percentage of route revenue increased to 65.5%
during the six months ended December 31, 1998 compared to 61.0% during the
six months ended December 31, 1997. The increase in route costs and expenses
was primarily due to increased location costs directly related to the
increase in participation revenue.

Selling, general, and administrative ("SG&A") expenses were $19.0
million for the six months ended December 31, 1998, an increase of $4.5
million or 31.0% from $14.5 million for the six months ended December 31,
1997. SG&A expenses as a percentage of total revenue increased to 15.0%
during the six months ended December 31, 1998 from 13.4% during the six
months ended December 31, 1997. The increase in total SG&A expenses is
primarily due to increased expenses in the Company's proprietary games
operations. These increased expenses are primarily due to increased valuation
allowances related to gaming machines. In addition, increased SG&A expenses
include: payroll and compensation costs in all three of the Company's
operating divisions; research and development costs related to proprietary
games; political contributions; and corporate development costs.

Depreciation and amortization expense was $8.1 million for the six
months ended December 31, 1998, an increase of $2.2 million or 37.3% from
$5.9 million for the six months ended December 31, 1997. This increase is
primarily due to increased depreciation expense incurred in the Company's
proprietary games operations and to a lesser extent increased depreciation
incurred at the Colorado Central Station Casino.

INCOME FROM OPERATIONS. As a result of the factors discussed above,
income from operations was $55.6 million for the six months ended December
31, 1998, an increase of $5.1 million or 10.1% from $50.5 million for the six
months ended December 31, 1997. As a percentage of total revenues, income
from operations decreased to 44.0% during the six months ended December 31,
1998 from 46.8% during the six months ended December 31, 1997.

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<PAGE>

NET INCOME. As a result of the factors discussed above, net income
was $35.7 million for the six months ended December 31, 1998, an increase of
$3.0 million or 9.2% from $32.7 million for the six months ended December 31,
1997.

LIQUIDITY AND CAPITAL RESOURCES

Anchor's principal sources of liquidity have been cash flows from
operations. 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 $31.7
million during the first six months of fiscal 1999 and $26.2 million during
the first six months of fiscal 1998. At December 31, 1998, the Company had
cash and cash equivalents of $65.1 million, working capital of $55.5 million,
and a $10.0 million unsecured revolving bank line of credit (the "Bank
Revolver").

In the first six months of fiscal 1999, the Company spent $10.6
million on capital expenditures, primarily related to the purchase of gaming
devices and equipment for use in its proprietary games operations.

In April 1997, the board of directors authorized a repurchase of up
to 1,000,000 shares of the Company's common stock, $.01 par value per share
("Common Stock"). In December 1997, the board of directors authorized a
repurchase of up to 514,000 additional shares of common stock. In October
1998, the board of directors authorized a repurchase of up to 640,400
additional shares of common stock bringing the number of shares authorized
for repurchase back up to 1.0 million shares at October 21, 1998. As of
December 31, 1998, the Company had repurchased 1,516,175 shares of common
stock at a cost of $78.2 million: 361,800 shares were repurchased during the
second quarter of fiscal 1999 at a cost of $18.4 million; 180,000 shares were
repurchased during the first quarter of fiscal 1999 at a cost of $10.1
million; 638,375 shares were repurchased during fiscal 1998 at a cost of
$36.2 million; and 336,000 shares were repurchased during fiscal 1997 at a
cost of $13.5 million. At December 31, 1998 638,200 shares remained
authorized under the repurchase program.

In April 1997, the Company entered into the Bank Revolver, which was
amended in December 1998 to expire November 30, 1999. 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 six months of fiscal 1999 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.

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.

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<PAGE>

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.

YEAR 2000

In the past, many computer software programs were written using two
digits rather than four to define the applicable year. As a result,
date-sensitive computer software may recognize a date using "00" as the year
1900 rather than the year 2000. This is generally referred to as the "Year
2000 Problem." If this situation occurs, the potential exists for computer
system failures or miscalculations by computer programs, which could disrupt
operations.

The Company has conducted a comprehensive review of its computer and
other systems deemed to be date sensitive (as well as those of its
unconsolidated affiliates) to assess its exposure to the Year 2000 Problem.
The Company is already in the process of modifying or replacing those systems
that are not year 2000 compliant. Based upon a comprehensive review,
management believes that the Company's systems are compliant or will be
compliant by mid-1999. However, if modifications are not made or not
completed within an adequate time frame, the Year 2000 Problem could have a
material adverse effect on the operations of the Company.

In addition, the Company has communicated, and continues to
communicate, with its major vendors and suppliers to determine their state of
readiness relative to the Year 2000 Problem and the Company's exposure to
third party year 2000 issues. However, there can be no guarantee that the
systems of other companies on which the Company's systems rely will be timely
converted, or that representations made to the Company by third parties are
in fact accurate. As a result, the failure of a major vendor or supplier to
adequately address their Year 2000 Problem could have a material adverse
effect on the operations of the Company.

All costs related to the Company's Year 2000 Problem are being
expensed as incurred, while the cost of new hardware or software, is being
capitalized and amortized over its expected useful life. The costs associated
with year 2000 compliance have not been and are not anticipated to be
material to the Company's financial position or results of operations.
Specifically, as of December 31, 1998, the Company has spent less than
$100,000 and anticipates spending less than $500,000 thereafter. These costs
and estimated completion dates are based upon management's best estimates, as
well as third party modification plans and other factors. However, there can
be no guarantee that these estimates will be achieved and actual results
could differ from these plans. The Company does not have a contingency plan
relative to the Year 2000 Problem, although it intends to develop one before
June 30, 1999.

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<PAGE>

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Several securities class action lawsuits have been filed against the
Company and certain of its current and former officers and directors. The
lawsuits were filed in various jurisdictions following the Company's
announcement in early December 1997 that the Company's results for the
December quarter might not meet analysts' expectations. The lawsuits have
been brought on behalf of certain purchasers of the stock of the Company and
allege violations of state and/or federal securities laws arising out of
alleged misstatements and omissions to state material facts about the Company
over various periods of time covered by the suits. The lawsuits have all been
consolidated in Nevada, both in federal and state court. The consolidated
federal action is captioned IN RE ANCHOR GAMING SECURITIES LITIGATION, Civil
Action No. CV-S-97-01751-PMP (RJJ), and the consolidated state action is
captioned RYAN, ET AL. V. ANCHOR GAMING, ET AL., Civil No. A383456. Certain
other actions have been transferred and/or dismissed. The Company believes
that the claims are without merit, and the Company intends to vigorously
contest the lawsuits. The consolidated state court action has been stayed by
order of the court. The consolidated federal action was dismissed on January
6, 1999 with the court entering judgement in favor of Anchor Gaming. The
Company cannot presently state the nature of further proceedings, if any, in
the state or federal actions.

ITEM 6. (d) EXHIBITS

See index to exhibits

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<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 February 10, 1999 /s/Michael D. Rumbolz
------------------- -------------------------------
Michael D. Rumbolz
Chief Executive Officer and
President

Date February 10, 1999 /s/Geoffrey A. Sage
------------------- -------------------------------
Geoffrey A. Sage
Chief Financial Officer

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<PAGE>

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
2.1 Reorganization Agreement (the "Reorganization Agreement") among
Anchor Gaming, Anchor Coin, D D Stud, Inc., C. G. Investments,
Inc., Colorado Grande Enterprises, Inc., New AC, New DD, New CG,
and certain stockholders of such corporations. (Incorporated by
reference to Exhibit 2.1 to the Company's Registration Statement
on Form S-1 (Registration No. 33-71870)).
2.2 Amendment No. 1 to the Reorganization Agreement, dated as of
January 25, 1993. (Incorporated by reference to Exhibit 2.2 to
the Company's Registration Statement on Form S-1 (Registration
No. 33-71870)).
2.3 Purchase Agreement (Global Gaming Products, L.L.C.) between
Stanley E. Fulton, William Randall Adams, Global Products, Inc.,
Michael S. Stone, Thomas J. Matthews, James R. Purdy, and Anchor
Gaming, dated as of December 22, 1993. (Incorporated by reference
to Exhibit 2.3 to the Company's Registration Statement on Form
S-1 (Registration No. 33-71870)).
2.4 Purchase Agreement (Global Gaming Distributors, Inc.) between
Global Gaming Distributors, Michael S. Stone, Thomas J. Matthews,
James R. Purdy, and Anchor Gaming, dated as of December 22, 1993.
(Incorporated by reference to Exhibit 2.4 to the Company's
Registration Statement on Form S-1 (Registration No. 33-71870)).
3.1 Restated Articles of Incorporation of Anchor Gaming.
(Incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-1 (Registration No. 33-71870)).
3.2 Restated Bylaws of Anchor Gaming. (Incorporated by reference to
Exhibit 3.2 to the Company's Registration Statement on Form S-1
(Registration No. 33-71870)).
4.1 Specimen of Common Stock Certificate. (Incorporated by reference
to Exhibit 4.1 to the Company's Registration Statement on Form
S-1 (Registration No. 33-71870)).
4.2 Rights Agreement between the Company and the Rights Agent
(Incorporated by reference to Exhibit 4.2 to the Company's June
30, 1998 Annual Report on Form 10-K (File No. 0-23124)).
4.3 Certificate of Designation, Preferences, and Rights of Series A
Junior Participating Preferred Stock (Incorporated by reference
to Exhibit 4.3 to the Company's June 30, 1998 Annual Report on
Form 10-K (File No. 0-23124)).
9.1 Irrevocable Proxy of Elizabeth F. Jones in favor of Stanley E.
Fulton. (Incorporated by reference to Exhibit 9.1 to the
Company's June 30, 1994 Annual Report on Form 10-K (File
No. 0-23124)).
9.2 Irrevocable Proxy of Lucinda F. Tischer in favor of Stanley E.
Fulton. (Incorporated by reference to Exhibit 9.2 to the
Company's June 30, 1994 Annual Report on Form 10-K (File
No. 0-23124)).
9.3 Irrevocable Proxy of Stanley M. Fulton in favor of Stanley E.
Fulton. (Incorporated by reference to Exhibit 9.3 to the
Company's June 30, 1994 Annual Report on Form 10-K (File
No. 0-23124)).
9.4 Irrevocable Proxy of Deborah J. Fulton in favor of Stanley E.
Fulton (Incorporated by reference to Exhibit 9.4 to the Company's
June 30, 1996 Annual Report on Form 10-K (File No. 0-23124))
9.5 Irrevocable Proxy of Elizabeth F. Jones in favor of Stanley E.
Fulton (Incorporated by reference to Exhibit 9.5 to the Company's
June 30, 1996 Annual Report on Form 10-K (File No. 0-23124)).
9.6 Irrevocable Proxy of Stanley M. Fulton in favor of Stanley E.
Fulton (Incorporated by reference to Exhibit 9.6 to the Company's
June 30, 1996 Annual Report on Form 10-K (File No. 0-23124)).
9.7 Irrevocable Proxy of Michael B. Fulton in favor of Stanley E.
Fulton (Incorporated by reference to Exhibit 9.7 to the Company's
June 30, 1996 Annual Report on Form 10-K (File No. 0-23124)).
9.8 Irrevocable Proxy of Lucinda F. Tischer in favor of Stanley E.
Fulton (Incorporated by reference to Exhibit 9.8 to the Company's
June 30, 1996 Annual Report on Form 10-K (File No. 0-23124)).
9.9 Irrevocable Proxy of Virginia L. Fulton in favor of Stanley E.
Fulton (Incorporated by reference to Exhibit 9.9 to the Company's
June 30, 1996 Annual Report on Form 10-K (File No. 0-23124)).
10.1 Settlement Agreement between Anchor Gaming, Stanley E. Fulton,
and Michael B. Fulton, dated as of December 22, 1993.
(Incorporated by reference to Exhibit 10.2 to the Company's
Registration Statement on
<PAGE>

Form S-1 (Registration No. 33-71870)).
10.2 Commercial Note of Pelican Gaming, Inc. to Anchor Coin dated
March 15, 1995. (Incorporated by reference to Exhibit 10.1 to the
Company's March 31, 1994 Quarterly Report on Form 10-Q (File
No. 0-23124)).
10.3 Promissory Notes of Anchor Coin, D D Stud, Inc., and C. G.
Investments, Inc. to Stanley E. Fulton. (Incorporated by
reference to Exhibit 10.4 to the Company's Registration Statement
on Form S-1 (Registration No. 33-71870)).
10.4 Loan Agreement of Pelican Gaming, Inc. to Anchor Coin dated as of
March 15, 1994. (Incorporated by reference to Exhibit 10.2 to the
Company's March 31, 1994 Quarterly Report on Form 10-Q (File
No. 0-23124)).
10.5 Promissory Note of Colorado Grande Enterprises, Inc. to C.G.
Investments, Inc. (Incorporated by reference to Exhibit 10.5 to
the Company's Registration Statement on Form S-1 (Registration
No. 33-71870)).
10.6 Promissory Notes of Anchor Coin to Michael B. Fulton, Stanley M.
Fulton, Elizabeth Fulton Jones, Lucinda Fulton Tischer, Virginia
L. Fulton, and Deborah J. Fulton. (Incorporated by reference to
Exhibit 10.6 to the Company's Registration Statement on Form S-1
(Registration No. 33-71870)).
10.7 Promissory Note of Anchor Coin to Elizabeth Fulton and related
Stock Option Agreement. (Incorporated by reference to Exhibit
10.7 to the Company's Registration Statement on Form S-1
(Registration No. 33-71870)).
10.8 Loan Agreement between Bank of America Nevada and Anchor Coin,
dated as of June 13, 1994. (Incorporated by reference to Exhibit
10.6 to the Company's June 30, 1994 Annual Report on Form 10-K
(File No. 0-23124)).
10.9 Lease and Sublease Agreement between Smith's Food & Drug Centers,
Inc. and Anchor Coin, dated July 28, 1993. (Confidential
Treatment for a portion of this document was requested and
granted pursuant to Rule 406 under the Securities Act).
(Incorporated by reference to Exhibit 10.10 to the Company's
Registration Statement on Form S-1 (Registration No. 33-71870)).
10.10 Employment Agreement between Anchor Gaming and Stanley E. Fulton.
(Incorporated by reference to Exhibit 10.10 to the Company's June
30, 1994 Annual Report on Form 10-K (File No. 0-23124)).
10.11 Employment Agreement between Anchor Gaming and Michael S. Stone.
(Incorporated by reference to Exhibit 10.11 to the Company's June
30, 1994 Annual Report on Form 10-K (File No. 0-23124)).
10.12 Employment Agreement between Anchor Gaming and Thomas J.
Matthews. (Incorporated by reference to Exhibit 10.12 to the
Company's June 30, 1994 Annual Report on Form 10-K (File
No. 0-23124)).
10.13 Employment Agreement between Anchor Gaming and Joseph Murphy.
(Incorporated by reference to Exhibit 10.13 to the Company's June
30, 1994 Annual Report on Form 10-K (File No. 0-23124)).
10.14 Employment Agreement between Anchor Gaming and James R. Purdy.
(Incorporated by reference to Exhibit 10.14 to the Company's June
30, 1994 Annual Report on Form 10-K (File No. 0-23124)).
10.15 Employment Agreement between Anchor Gaming and Nick E. Greenwood.
(Incorporated by reference to Exhibit 10.15 to the Company's June
30, 1994 Annual Report on Form 10-K (File No. 0-23124)).
10.16 Employment Agreement between Anchor Gaming and William Randall
Adams. (Incorporated by reference to Exhibit 10.16 to the
Company's June 30, 1994 Annual Report on Form 10-K (File
No. 0-23124)).
10.17 Employment Agreement between Anchor Gaming and Salvatore T.
DiMascio. (Incorporated by reference to Exhibit 10.17 to the
Company's June 30, 1994 Annual Report on Form 10-K (File
No. 0-23124)).
10.18 Option Agreement between Michael S. Stone and Anchor Gaming.
(Incorporated by reference to Exhibit 10.18 to the Company's June
30, 1994 Annual Report on Form 10-K (File No. 0-23124)).
10.19 Option Agreement between Thomas J. Matthews and Anchor Gaming.
(Incorporated by reference to Exhibit 10.19 to the Company's June
30, 1994 Annual Report on Form 10-K (File No. 0-23124)).
10.20 Option Agreement between Joseph Murphy and Anchor Gaming.
(Incorporated by reference to Exhibit 10.20 to the Company's June
30, 1994 Annual Report on Form 10-K (File No. 0-23124)).
10.21 Option Agreement between William Randall Adams and Anchor Gaming.
(Incorporated by reference to Exhibit 10.21 to the Company's June
30, 1994 Annual Report on Form 10-K (File No. 0-23124)).
10.22 Option Agreement between Nick E. Greenwood and Anchor Gaming.
(Incorporated by reference to Exhibit 10.22 to the Company's June
30, 1994 Annual Report on Form 10-K (File No. 0-23124)).
10.23 Option Agreement between James R. Purdy and Anchor Gaming.
(Incorporated by reference to Exhibit 10.23 to the Company's June
30, 1994 Annual Report on Form 10-K (File No. 0-23124)).

<PAGE>

10.24 Option Agreement between Salvatore T. DiMascio and Anchor Gaming.
(Incorporated by reference to Exhibit 10.24 to the Company's June
30, 1994 Annual Report on Form 10-K (File No. 0-23124)).
10.25 Option Agreement between Anchor Gaming and Geoffrey A. Sage.
(Incorporated by reference to Exhibit 10.25 to the Company's June
30, 1994 Annual Report on Form 10-K (File No. 0-23124)).
10.26 Option Agreement between the Company and Stuart D. Beath.
(Incorporated by reference to Exhibit 10.26 to the Company's June
30, 1994 Annual Report on Form 10-K (File No. 0-23124)).
10.27 Option Agreement between the Company and Garret A. Scholz.
(Incorporated by reference to Exhibit 10.27 to the Company's June
30, 1994 Annual Report on Form 10-K (File No. 0-23124)).
10.28 Form of Stock Option Agreement between the Company and Glen J.
Hettinger (File No. 000-23124)).
10.29 Form of Indemnification Agreement between the Company and Officers
and Directors. (Incorporated by reference to Exhibit 10.28 to the
Company's June 30, 1994 Annual Report on 10-K (File No. 0-23124)).
10.30 Indemnification Agreement between the Company and Glen J.
Hettinger (Incorporated by reference to Exhibit 10.30 to the
Company's June 30, 1998 Annual Report on Form 10-K (File
No. 0-23124)).
10.31 Tax Indemnification Agreement between Stanley E. Fulton, Anchor
Gaming and its subsidiaries. (Incorporated by reference to
Exhibit 10.29 to the Company's June 30, 1994 Annual Report on
Form 10-K (File No. 0-23124)).
10.32 Option Agreement between the Company and Elizabeth Fulton.
(Incorporated by reference to Exhibit 10.30 to the Company's June
30, 1994 Annual Report on Form 10-K (File No. 0-23124)).
10.33 Option Agreement between the Company and Michael D. Rumbolz.
(Incorporated by reference to Exhibit 10.31 to the Company's June
30, 1995 Annual Report on Form 10-K (File No. 0-23124)).
10.34 Employment Agreement between the Company and Michael D. Rumbolz.
(Incorporated by reference to Exhibit 10.31 to the Company's June
30, 1995 Annual Report on Form 10-K (File No. 0-23124)).
10.35 Anchor Gaming 1995 Employee Stock Option Plan. (Incorporated by
reference to Exhibit 10.31 to the Company's June 30, 1995 Annual
Report on Form 10-K (File No. 0-23124)).
10.36 Addendum Agreement to amend the Employment and Stock Option
Agreements between the Company and Salvatore T. DiMascio
(Incorporated by reference to Exhibit 10.34 to the Company's June
30, 1996 Annual Report on Form 10-K (File No. 0-23124)).
10.37 Joint Venture Agreement, dated as of December 3, 1996 by and
between Anchor Games, a d.b.a. of Anchor Coin, a Nevada
corporation and Subsidiary of the Company, and IGT (File No.
000-23124)). (Incorporated by reference to Exhibit 10.37 to the
Company's June 30, 1997 Annual Report on Form 10-K (File
No. 0-23124)).

10.38 Stock Option Agreement of William Adams dated April 2, 1997
(Incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-8 (File No. 333-53257)).

10.39 Stock Option Agreement of Thomas J. Matthews dated April 2, 1997
(Incorporated by reference to Exhibit 4.2 to the Company's
Registration Statement on Form S-8 (File No. 333-53257)).

10.40 Stock Option Agreement of Joseph Murphy dated April 2, 1997
(Incorporated by reference to Exhibit 4.3 to the Company's
Registration Statement on Form S-8 (File No. 333-53257)).

21.1 List of Subsidiary Corporations (Incorporated by reference to
Exhibit 21.1 to the Company's June 30, 1998 Annual Report on Form
10-K (File No. 0-23124)).

27.1* Financial Data Schedule
</TABLE>

- -----------

* Filed herewith

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED CONDENSED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 65,088,822
<SECURITIES> 0
<RECEIVABLES> 10,969,534
<ALLOWANCES> 0
<INVENTORY> 2,410,336
<CURRENT-ASSETS> 80,489,031
<PP&E> 94,172,618
<DEPRECIATION> 0
<TOTAL-ASSETS> 241,095,873
<CURRENT-LIABILITIES> 21,921,730
<BONDS> 0
0
0
<COMMON> 137,687
<OTHER-SE> 217,830,048
<TOTAL-LIABILITY-AND-EQUITY> 241,095,873
<SALES> 0
<TOTAL-REVENUES> 126,439,792
<CGS> 0
<TOTAL-COSTS> 70,829,624
<OTHER-EXPENSES> (1,731,346)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 57,341,514
<INCOME-TAX> 21,646,439
<INCOME-CONTINUING> 35,695,075
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,695,075
<EPS-PRIMARY> 2.89
<EPS-DILUTED> 2.82

</TABLE>