Anchor Gaming posts strong profit

Thursday, Aug. 9, 2001 | 11:03 a.m.

Anchor Gaming handily beat analyst expectations for the quarter ending June 30, with the Las Vegas company posting net income before one-time charges of $19.3 million, or $1.24 per share.

The net income figure was down 1 percent from the year-ago quarter, but earnings per share were up 48 percent. Per-share results rose because Anchor had 33 percent less shares outstanding than in the year-ago quarter. Analysts had expected Anchor to earn $1.07 per share before one-time charges.

Anchor's actual earnings were $1.07 per share, but only after one-time, after-tax charges of $2.6 million were included. The company's actual net income was $16.7 million, down 7 percent from the year-ago period.

Revenues declined 7 percent to $130.7 million, while cash flow increased 9 percent to $56.8 million.

Revenues fell primarily because of the sale of the Sunland Park Racetrack & Casino in New Mexico to former Anchor Chairman Stanley Fulton last year. Had Sunland's results not been included in the year-ago quarter, revenues would have been up 1 percent and cash flow would have risen 16 percent.

Anchor's growth business during the quarter was its joint venture with International Game Technology -- the company that has announced plans to buy Anchor for more than $1.3 billion in stock. Anchor received $39 million in revenue from the joint venture during the quarter, up 36 percent from the year-ago period.

Gaming machine revenue -- which doesn't include joint venture income, but does include joint venture royalties -- rose 12 percent to $15.6 million. But gaming operations revenue was down 21 percent to $36.9 million, while gaming systems revenue was down 23 percent to $40.6 million.

Gaming operations revenue included, for the first time, results from the Pala Casino near San Diego, which is managed by Anchor. The company posted $2.7 million in revenue and $2 million in pre-tax earnings from this venture during the quarter.

The results prompted Bear Stearns gaming analyst Marc Falcone to upgrade Anchor from "attractive" to "buy" this morning. Falcone cited the recent decline in the company's stock price, its improving valuation, "accelerating business trends" and "significant free cash flow generating ability" as grounds for the upgrade. Falcone set an asset value of $60 to $61 per share for the company.

Anchor stock rose $2.25 to $50.05 this morning.