The purpose of this amendment is to properly submit the Ex. 11.1 and Ex. 27
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______________ to___________________
Commission File No. 1-9728
JACKPOT ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
NEVADA 88-0169922
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1110 Palms Airport Drive, Las Vegas, Nevada 89119
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (702) 263-5555
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
There were 9,249,319 shares of the registrant's common stock outstanding
as of January 27, 1995.
JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES
INDEX
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
December 31, 1994 and June 30, 1994
Condensed Consolidated Statements of Income -
Three and Six Months Ended December 31, 1994 and 1993
Condensed Consolidated Statement of Stockholders'
Equity - Six Months Ended December 31, 1994
Condensed Consolidated Statements of Cash Flows -
Six Months Ended December 31, 1994 and 1993
Notes to Condensed Consolidated Financial
Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Stockholders
Item 6. Exhibits and Reports on Form 8-K
JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
<TABLE>
December 31, June 30,
ASSETS 1994 1994
______ ___________ ________
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 28,510 $ 23,543
Short-term investments 509
Prepaid expenses 1,639 2,057
Deferred Federal income tax 3,569 5,093
Other current assets 1,784 1,614
________ ________
Total current assets 35,502 32,816
________ ________
Property and equipment, at cost:
Land and buildings 2,656 2,656
Gaming equipment 25,929 25,138
Other equipment 4,439 4,248
Leasehold improvements 1,074 1,037
________ ________
34,098 33,079
Less accumulated depreciation (18,663) (16,360)
________ ________
15,435 16,719
Lease acquisition costs and other
intangible assets, net of
accumulated amortization of
$6,145 and $6,241 9,259 10,278
Goodwill, net of accumulated
amortization of $2,246 and $2,150 5,384 5,480
Lease and other security deposits 3,658 3,689
Other non-current assets 4,048 4,477
________ ________
Total assets $ 73,286 $ 73,459
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(Unaudited)
(Concluded)
<TABLE>
December 31, June 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1994
____________________________________ ____________ ________
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 1,387 $ 1,447
Accounts payable 1,971 2,011
Due to equity investee 1,215 2,617
Other current liabilities 4,780 4,719
_______ _______
Total current liabilities 9,353 10,794
Long-term debt, less current portion 280 1,403
Deferred Federal income tax 471 471
Accrued rent 3,017 2,337
Accrued pension and other liabilities 2,280 2,188
_______ _______
Total liabilities 15,401 17,193
_______ _______
Commitments and contingencies
Stockholders' equity:
Preferred stock - authorized
1,000,000 shares of $1 par value;
none issued
Common stock - authorized
30,000,000 shares of $.01 par value;
9,345,575 and 9,345,240 shares issued 93 93
Additional paid-in capital 63,370 64,844
Accumulated deficit (3,703) (6,796)
Less 125,119 shares of common stock
in treasury, at cost (1,875) (1,875)
_______ _______
Total stockholders' equity 57,885 56,266
Total liabilities and
stockholders' equity $73,286 $73,459
======= =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE AND SIX MONTHS ENDED DECEMBER 31, 1994 AND 1993
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
Three Months Ended Six Months Ended
December 31, December 31,
1994 1993 1994 1993
________ _______ _______ _______
<S> <C> <C> <C> <C>
Revenues:
Route operations $21,846 $22,075 $42,922 $43,385
Casino operations 1,933 2,054 4,480 4,265
_______ _______ _______ _______
Totals 23,779 24,129 47,402 47,650
_______ _______ _______ _______
Costs and expenses:
Route operations 16,420 16,021 32,280 31,766
Casino operations 1,660 1,716 4,065 3,403
Amortization 664 888 1,324 1,656
Depreciation 1,330 1,389 2,665 2,688
General and administrative 1,420 1,569 2,753 2,890
_______ _______ _______ _______
Totals 21,494 21,583 43,087 42,403
Operating income 2,285 2,546 4,315 5,247
_______ _______ _______ _______
Other income (expense):
Interest and other income 200 125 405 434
Interest expense (45) (82) (103) (172)
Loss from investment in
equity investee (1,742) (1,742)
_______ _______ ______ _______
Totals 155 (1,699) 302 (1,480)
_______ _______ ______ _______
Income before income tax 2,440 847 4,617 3,767
_______ _______ ______ _______
Provision (credit) for Federal
income tax:
Current 296 1,653
Deferred 784 1,524 (335)
_______ _______ _______ _______
Totals 784 296 1,524 1,318
_______ _______ _______ _______
Net income $ 1,656 $ 551 $ 3,093 $ 2,449
======== ======= ======= =======
Earnings per common and
common equivalent share $ .18 $ .06 $ .34 $ .26
======= ======= ======= =======
Cash dividends per share of
common stock $ .08 $ .08 $ .16 $ .15
======= ======= ======= =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED DECEMBER 31, 1994
(Dollars and shares in thousands, except per share data)
(Unaudited)
<TABLE>
Treasury
Common Stock Additional Stock Total
____________ Paid-in Accumulated _____________ Stockholders'
Shares Amount Capital Deficit Shares Amount Equity
______ ______ __________ ___________ _______ ______ ___________
<S> <C> <C> <C> <C> <C> <C> <C>
Balance
July 1, 1994 9,345 $93 $64,844 $(6,796) (125) $(1,875) $56,266
Cash dividends
($.16 per
share) (1,474) (1,474)
Issurance of
shares on
exercise of
stock options 1
Net income 3,093 3,093
_____ ___ _______ _______ ____ _______ _______
Balance
December 31,
1994 9,346 $93 $63,370 $(3,703) (125) $(1,875) $57,885
===== === ======= ======= ==== ======= =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.<PAGE>
JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED DECEMBER 31, 1994 AND 1993
(Dollars in thousands)
(Unaudited)
<TABLE>
1994 1993
_______ _______
<S> <C> <C>
Operating activities:
Net income $ 3,093 $ 2,449
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,989 4,344
Deferred Federal income tax 1,524 (335)
Gain on sales, exchanges and retirements of assets (161) (36)
Loss from investment in equity investee 1,742
Other (75)
Increase (decrease) from changes in:
Prepaid expenses and other current assets 248 10
Other non-current assets (81) 370
Accounts payable (40) (102)
Other current liabilities 211 (794)
Accrued rent 680 660
Other liabilities 92 (368)
_______ _______
Net cash provided by operating activities 9,480 7,940
_______ _______
Investing activities:
Purchases of short-term investments (8)
Proceeds from sales of short-term investments 509 8,933
Net proceeds (advances) to location operators (124) 67
Proceeds from sale of other non-current asset 217
Proceeds from sales of property and equipment 82 371
Purchases of property and equipment (1,439) (7,934)
Advances to equity investee (1,402) (2,075)
Increase in lease acquisition costs and other
intangible assets (209) (2,312)
Lease and other security deposits 31 (2,206)
Increase in other assets related to casino facility (984)
Other (297)
_______ _______
Net cash used in investing activities (2,335) (6,445)
_______ _______
Financing activities:
Proceeds from long-term debt 255
Payments of long-term debt (704) (632)
Proceeds from issuance of common stock 355
Dividends paid (1,474) (1,403)
_______ _______
Net cash used in financing activities (2,178) (1,425)
_______ _______
See Notes to Condensed Consolidated Financial Statements.
JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED DECEMBER 31, 1994 AND 1993
(Dollars in thousands)
(Unaudited)
(Concluded)
Net increase in cash and cash equivalents 4,967 70
Cash and cash equivalents at beginning of period 23,543 18,993
_______ _______
Cash and cash equivalents at end of period $28,510 $19,063
======= =======
Supplemental disclosures of cash flow data:
Cash paid during the period for:
Interest $ 103 $ 172
Federal income tax $ 2,200
Non-cash financing activity: assumption of
debt upon sale of other non-current asset $ 479
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - General:
In the opinion of management, the accompanying unaudited
condensed consolidated financial statements reflect all
adjustments, consisting of normal recurring accruals, necessary
to present fairly Jackpot's financial position as of December
31, 1994, and the results of its operations for the three and
six months ended December 31, 1994 and 1993 and its cash flows
for the six months ended December 31, 1994 and 1993. Information
included in the condensed consolidated balance sheet as of June
30, 1994 has been derived from Jackpot's Annual Report to the
Securities and Exchange Commission on Form 10-K for the year
ended June 30, 1994 (the "1994 Form 10-K").
The earnings for the three and six months ended December 31, 1994
and 1993 are not necessarily indicative of results for a full
year.
Note 2 - Earnings per share:
Earnings per share for the three months ended December 31, 1994
and 1993 and the six months ended December 31, 1994 are computed
by dividing net income of $1,656,000, $551,000 and $3,093,000,
respectively, by the weighted average number of common shares
outstanding of 9,220,000, 9,205,000 and 9,220,000, respectively.
Stock options and warrants have been excluded from those
computations because they had no effect or were antidilutive on
earnings per share. Earnings per share for the six months ended
December 31, 1993 is computed by dividing (i) net income, as
adjusted (see Note 1 of Notes to Consolidated Financial Statements
in the 1994 Form 10-K for a description of the adjustments),
by (ii) the weighted average number of common shares outstanding
adjusted for the number of common share equivalents attributable
to stock options and warrants. The net income, as adjusted, used
for the computation for the six months ended December 31, 1993
was $2,720,000 and the weighted average number of common shares
and common share equivalents used in the computation for the
six months ended December 31, 1993 was 10,306,000.
Note 3 - Stockholders' equity:
Cash dividends:
During the six months ended December 31, 1994, Jackpot paid cash
dividends of approximately $1,474,000 ($.16 per common share).
On January 9, 1995, Jackpot's Board of Directors declared a
quarterly dividend of $.08 per common share (approximately
$738,000) for the quarter ended December 31, 1994 which was
paid on February 3, 1995 to stockholders of record on
January 20, 1995.
The 1992 Incentive and Non-qualified Stock Option Plan:
On September 30, 1994, the exercise price of the June 30, 1994
grant of nonqualified stock options to purchase an aggregate
of 82,500 shares of common stock (27,500 each to three directors)
was vested at $9.50 per share, the fair market value of the
stock on that date, pursuant to the terms of the 1992 Incentive
and Non-qualified Stock Option Plan (the "1992 Plan").
See Note 8 of Notes to Consolidated Financial Statements in the
JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - Stockholders' equity (continued):
The 1992 Incentive and Non-qualified Stock Option Plan (concluded):
1994 Form 10-K for further information regarding the 1992 Plan
and option grants.
On August 17, 1994, a committee of the Board of Directors granted
non-qualified stock options to certain officers and employees to
purchase 171,000 shares of common stock at the then fair market
value of $8.50 per share. Such options are exercisable for a
period of five years from the date of the grant. Also on August
17, 1994, the Board approved certain amendments (the "Amendments")
to the 1992 Plan which were approved by Jackpot's stockholders on
January 10, 1995 at the Annual Meeting of Stockholders. The
Amendments increased the number of shares of common stock
authorized for issuance pursuant to the 1992 Plan from 1,045,000
shares to 2,545,000 shares and allowed for the possibility of
extending the period of time under which options to purchase
common stock may be exercised under certain circumstances.
In connection with the employment of Don R. Kornstein (see Note
4), as President, Chief Executive Officer and Director effective
September 8, 1994, Mr. Kornstein was granted options to purchase
up to 700,000 shares of Jackpot common stock at $9.25 per share.
The exercise price per share was 100% of the fair market value
on September 8, 1994. These options will vest in equal
installments on each September 8 of 1995, 1996 and 1997,
respectively, subject to earlier vesting upon the achievement
of certain earnings tests, or a certain stock price test or upon
a change in control, as defined in Mr. Kornstein's employment
agreement. Such options expire ten years from the date of grant
and remain exercisable for a period of 18 months following the
termination of Mr. Kornstein's contract under certain
circumstances.
Other nonqualified stock options:
On August 17, 1994, the Board of Directors extended from October
18, 1994 to October 18, 1999 at the same exercise price the
expiration date of options to purchase an aggregate of 220,617
shares of common stock originally granted on October 18, 1989
at $9.19 per share to three directors and an officer. The
exercise price was in excess of 100% of the fair market value
of the common stock on the date of the extension of the grants.
Common stock surrendered in exercise of nonqualified stock options:
In January 1995, as consideration for the issuance of common stock
pursuant to the exercise of nonqualified stock options, three
directors surrendered 66,642 shares (22,214 shares each) of
common stock with an aggregate fair market value of $599,772
($199,924 each), or $9.00 per share, the fair market value of
the common stock based on the closing market price on the
exercise date. Such shares were recorded as treasury stock
and the exchanges were treated as "non-cash" transactions in
January 1995.
JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - Stockholders' equity (concluded):
Common stock warrants:
As of December 31, 1994, there were 1,588,195 warrants
outstanding and 1,747,015 shares of common stock reserved
for issuance upon exercise of such warrants (see Note 8 of
Notes to Consolidated Financial Statements in the 1994 Form 10-K).
Note 4 - Commitments and contingencies:
Employment agreements:
Jackpot entered into an employment agreement with Mr. Kornstein
effective September 8, 1994 which expires on September 30, 1997
but will automatically be extended for additional one year
periods on each October 1 commencing October 1, 1995 unless
notice is given by the Company or Mr. Kornstein. The aggregate
commitment for future salaries at December 31, 1994, excluding
bonuses, under all of Jackpot's employment agreements (see Note
10 of Notes to Consolidated Financial Statements in the 1994
Form 10-K) is approximately $2,700,000. Mr. Kornstein's
employment agreement provides for a bonus per fiscal year equal
to (i) 2% of all amounts up to the first $5 million by which
earnings before interest, taxes, depreciation and amortization,
as defined ("EBITDA") for such fiscal year exceeds $10 million,
(ii) 4% of all amounts up to the first $5 million by which
EBITDA for such fiscal year exceeds $15 million, (iii) 5% of
all amounts up to the first $5 million by which EBITDA for
such fiscal year exceeds $20 million, (iv) 6% of all amounts
up to the first $5 million by which EBITDA for such fiscal year
exceeds $25 million, plus (v) 7% of all amounts by which EBITDA
for such fiscal year exceeds $30 million. In addition, Mr.
Kornstein's employment agreement provides for the payment of
amounts equal to three years' his annual compensation including
bonuses if there is a termination of his employment. The
minimum contingent liability at December 31, 1994 under all
of Jackpot's employment and severance agreements is approximately
$2,800,000.
Financial instruments with concentration of credit risk:
Phar-Mor, a large chain store, is currently under Chapter 11
of the U.S. Bankruptcy Code (see Note 10 of Notes to
Consolidated Financial Statements in the 1994 Form 10-K).
As of December 31, 1994, Jackpot had approximately $1,500,000
of costs related to lease deposits, prepaid rent and other
lease connected expenditures for Phar-Mor.
Postemployment benefits:
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 112 "Employers' Accounting for
Postemployment Benefits" ("SFAS 112"), which is effective for
fiscal years beginning after December 15, 1993. This Statement
establishes accounting standards for employers who provide
postemployment benefits to former or inactive employees, their
beneficiaries and covered dependents, after employment but
before retirement and requires employers to accrue such benefits
if attributable to employees' services previously rendered.
JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Commitments and contingencies (concluded):
Postemployment benefits (concluded):
Effective July 1, 1994, Jackpot adopted the provisions of SFAS
112. Since Jackpot does not provide any significant benefits as
described in SFAS 112, the cumulative effect of adopting SFAS 112
for years prior to fiscal 1995 was not material.
Letter of credit:
In November 1993, Jackpot and the Mississippi Power & Light
Company ("MP&L") entered into a one-year letter of credit
whereby Jackpot guaranteed that it would use $1 million of
electric service in connection with the Tunica Facility
(see Note 10 of Notes to Consolidated Financial Statements
in the 1994 Form 10-K). In December 1994, Jackpot and MP&L
entered into a settlement and release agreement pursuant to
which the letter of credit was terminated. The settlement
did not have a material affect on Jackpot's financial position
or its results of operations.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Capital Resources and Liquidity
Cash Flows:
Jackpot's principal sources of cash in the six months ended December 31,
1994 (the "1994 six months") consisted of the cash flows from operating
activities and its available cash, cash equivalents and short-term
investments which, at June 30, 1994, approximated $24.1 million. Net cash
provided by operating activities approximated $9.5 million in the 1994 six
months, which exceeded the net cash used by investing and financing
activities by approximately $5.0 million in the 1994 six months.
Net cash used in investing activities in the 1994 six months was
approximately $2.3 million which included cash used of approximately
$3.2 million and cash received of approximately $.9 million. Of the
$3.2 million, $1.4 million was used for advances to the dockside casino
facility in Tunica County, Mississippi (the "Tunica Facility"), which
closed permanently on July 8, 1994. Such advances to the Tunica Facility
were used for payment toward Jackpot's share of unpaid liabilities and
estimated closing costs, which were fully accrued as of June 30, 1994.
Management has estimated that Jackpot will be required to advance an
additional amount of approximately $1.2 million in the remainder of
fiscal 1995 in connection with Jackpot's share of remaining unpaid
liabilities and closing costs of the Tunica Facility, which amounts
have also been fully accrued (see Note 5 of Notes to Consolidated
Financial Statements in Jackpot's 1994 Form 10-K). The remaining
$1.8 million of cash used in investing activities consisted primarily
of the purchase of equipment. The $.9 million of cash received from
investing activities included aggregate proceeds from sales of
short-term investments and sales of certain assets.
Net cash used in financing activities in the 1994 six months was
approximately $2.2 million which resulted from the payment of approximately
$.7 million of long-term debt and the payment of approximately $1.5 million
of dividends.
Liquidity:
At December 31, 1994, Jackpot had cash, cash equivalents and short-term
investments of approximately $28.5 million, an increase of approximately $4.4
million from the beginning of the 1994 six months. Primarily as a result of
that increase, as well as the investing and financing activities described
above, Jackpot's working capital and current ratio increased to approximately
$26.1 million and 3.8 to 1, respectively, at December 31, 1994, from
approximately $22.0 million and 3.0 to 1, respectively, at June 30, 1994.
Management believes Jackpot's working capital and cash generated from
operations will be sufficient to enable Jackpot to meet its planned capital
expenditures, meet its debt service requirements on its existing debt, pay
quarterly cash dividends pursuant to Jackpot's dividend policy and meet
its other ongoing cash requirements as they become due in fiscal 1995.
With respect to planned capital expenditures, management anticipates
Jackpot will purchase approximately $2.6 million of property and equipment,
exclusive of business acquisitions, in the remainder of fiscal 1995 to
be used in existing and currently planned new locations.
Jackpot continues to selectively explore various potential acquisitions
and expansion opportunities both in and outside Nevada. Management believes
working capital and cash generated from operations will be sufficient to
enable Jackpot to continue its expansion; however, Jackpot may seek additional
debt or equity financing to facilitate such acquisitions and expansion.
Results of Operations
Revenues:
Total revenues in the three months ended December 31, 1994 (the "1994
three months") decreased approximately $.3 million, from $24.1 million in
the three months ended December 31, 1993 (the "1993 three months") to
$23.8 million in the 1994 three months, while total revenues in the
1994 six months decreased approximately $.2 million, from $47.6 million
in the six months ended December 31, 1993 (the "1993 six months") to
$47.4 million in the 1994 six months. The decreases in total revenues of
$.3 million and $.2 million were the net result of decreases of $.2
million (from $22.1 million in the 1993 three months to $21.9 million
in the 1994 three months) and $.4 million (from $43.3 million in the
1993 six months to $42.9 million in the 1994 six months), respectively,
in gaming route operations revenues and a decrease of $.1 million
(from $2.0 million in the 1993 three months to $1.9 million in the 1994 three
months) and an increase of $.2 million (from $4.3 million in the 1993 six
months to $4.5 million in the 1994 six months), respectively, in casino
operations revenues.
The decreases in gaming route operations revenues of $.2 million and
$.4 million resulted from a combination of additional revenues generated
from existing and new locations, net of lost revenues from terminated
locations. In the 1994 three months and 1994 six months, new locations
generated approximately $2.2 million and $3.7 million, respectively, of
revenues, while existing locations generated approximately $.9 million and
$2.7 million, respectively, in additional revenues. Terminated locations had
generated $3.3 million and $6.8 million, in revenues in the 1993 three months
and 1993 six months, respectively. The loss of the revenues generated at the
terminated locations was primarily due to the expiration of the Company's
right to operate at certain locations of a major retail chain store customer
(the "Customer") on June 30, 1994 (see Item 1 - Business - Gaming Route
Operations in the 1994 Form 10-K). Jackpot generated approximately 9%
of its total revenues and a significantly greater percentage of its total
operating income from operations at locations of the Customer during the
year ended June 30, 1994.
The decrease in casino operations revenues in the 1994 three months was
primarily the result of a decrease in gaming play. The increase in casino
operations revenues in the 1994 six months was primarily due to the
commencement in July 1994 of operations of Water Street Casino, Inc. dba
the Post Office Casino (the "Post Office Casino") which was downsized
and converted into a gaming route location in the 1994 three months.
Cost and expenses:
Route operations expenses in the 1994 three months and 1994 six months
increased approximately $.4 million (from $16.0 million in the 1993 three
months to $16.4 million in the 1994 three months) and $.5 million (from $31.8
million in the 1993 six months to $32.3 million in the 1994 six months) and,
as a percentage of route operations revenues, increased to 75.2% in the
respective 1994 periods from 72.6% and 73.2% in the respective 1993 periods.
The increases of $.4 million and $.5 million over the 1993 periods were
attributable to increases of $.3 million and $.1 million, respectively, in
location rent and increases of $.1 million and $.4 million, respectively, in
payroll costs. Route operations expenses increased as a percentage of route
operations revenues primarily because of the loss of the Customer, with which
route operations expenses were lower as a percentage of route operations
revenues than Jackpot's prior year overall percentage. Although Jackpot was
able to replace a substantial portion of the revenues lost with revenues
generated by new and existing locations, generally the costs associated with
revenues generated at new locations have been greater as a percentage of
revenues than have the costs associated with the lost revenues. With respect
to location rent, which is the single largest route operation expense, no
contract with a material effect on operating results expires in the current
fiscal year. See Item 1 - Business - Gaming Route Operations in the 1994
Form 10-K for a further description of the Company's lease and license
agreements.
Casino operations expenses in the 1994 three months remained constant at
approximately $1.7 million compared to the 1993 three months and, as a
percentage of casino operations revenues increased to 85.9% in the 1994
three months from 83.5% in the 1993 three months due primarily to slightly
lower revenues in the 1994 three months as compared to the 1993 three months.
Casino operations expenses in the 1994 six months increased approximately
$.7 million (from $3.4 million in the 1993 six months to $4.1 million in
the 1994 six months) and, as a percentage of casino operations revenues,
casino operations expenses increased to 90.7% in the 1994 six months from
79.8% in the 1993 six months due to the lower than expected revenues of
the Post Office Casino. As a result of the operating performance of the
Post Office Casino, which generated an operating loss of approximately
$.2 million in the three months ended September 30, 1994, Jackpot,
with the concurrence of the location's landlord and approval of the
applicable gaming authorities, reduced the size of gaming operations at
the location from 175 gaming machines to 70 gaming machines and began
conducting operations as a gaming route location in the 1994 three months.
Such decision resulted in a one-time charge of $.2 million in the 1994 six
months to casino operations expenses for costs associated with the changes.
Amortization expense in the 1994 three months decreased by approximately
$.2 million (from $.9 million in the 1993 three months to $.7 million in the
1994 three months) and in the 1994 six months decreased by approximately
$.3 million (from $1.6 million in the 1993 six months to $1.3 million in
the 1994 six months). The decrease in amortization expense in the 1994
periods was primarily attributable to the decrease in amortization expense
related to certain locations whose lease acquisitions costs were fully
amortized as of June 30, 1994.
General and administrative expenses in both the 1994 three months and
the 1994 six months decreased approximately $.1 million (from $1.5 million
in the 1993 three months to $1.4 million in the 1994 three months and from
$2.9 million in the 1993 six months to $2.8 million in the 1994 six months)
primarily due to decreases in development costs and a minor gain from a
sale of a parcel of land in Henderson, Nevada.
With respect to other non-operating income and expense, the 1993 periods
included Jackpot's loss from the Tunica Facility of approximately $1.7 million.
The 1994 periods do not have any losses from the Tunica Facility because, as
previously described, Jackpot permanently closed the Tunica Facility on
July 8, 1994 and had accrued as of June 30, 1994 an estimate for all
anticipated closing costs associated with the closure.
The effective tax rate was approximately 32% in the 1994 three months and
approximately 33% in the 1994 six months, which were lower than the 35% rate
in the 1993 periods primarily because of the increase in estimated tax
benefits from tax-exempt interest income.
General:
Operating income decreased approximately $.2 million in the 1994 three
months (from $2.5 million in the 1993 three months to $2.3 million in the
1994 three months) and $.9 million in the 1994 six months (from $5.2 million
in the 1993 six months to $4.3 million in the 1994 six months). The
decreases in operating income of $.2 million and $.9 million were due to
the previously described effect on gaming route operations of the expiration
of the Company's right to operate at certain locations of the Customer on
June 30, 1994.
Net income increased approximately $1.1 million in the 1994 three months
(from $.6 million in the 1993 three months to $1.7 million in the 1994 three
months) and $.6 million in the 1994 six months (from $2.5 million in the
1993 six months to $3.1 million in the 1994 six months) due to the results
of operations described above. Earnings per share in the 1994 three months
and the 1994 six months were $.18 and $.34 per share, respectively, compared
to earnings per share in the 1993 three months and the 1993 six months of
$.06 and $.26 per share, respectively.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Stockholders
(a) Jackpot's 1994 Annual Meeting of Stockholders was held on
January 10, 1995.
(b) Proxies were solicited by Jackpot's management without
opposition and all nominees were elected to hold office
until the next annual meeting as described in the Proxy
Statement dated November 21, 1994.
(c) The matters voted upon and the results of the voting included
the following: (1) the stockholders voted 8,281,406 shares
"FOR", 382,550 shares "AGAINST", and 73,414 shares
"ABSTAINING" to approve the appointment of Deloitte & Touche as
Jackpot's independent auditors for fiscal 1995; and (2) the
stockholders voted 4,956,214 shares "FOR",1,828,893 shares
"AGAINST", and 116,703 shares "ABSTAINING" to approve certain
amendments to the 1992 Incentive and Non-qualified Stock Option
Plan to increase the number of shares of common stock authorized
for issuance from 1,045,000 shares to 2,545,000 shares and to
allow for the possibility of extending the period of time under
which options to purchase common stock may be exercised under
certain circumstances.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 11.1 - Computation of Earnings Per Common Share for
the three and six months ended December 31, 1994 and 1993.
Exhibit 27.1 - Financial Data Schedule (electronic filing only)
(b) Reports on Form 8-K - No Form 8-K was filed for the three months
ended December 31, 1994.
Signature
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.
JACKPOT ENTERPRISES, INC.
_________________________
(Registrant)
By: /s/ FREDERICK SANDVICK
__________________________
FREDERICK SANDVICK
Executive Vice President and
Chief Financial Officer
Date: February 10, 1995
EXHIBIT 11.1
JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
THREE AND SIX MONTHS ENDED DECEMBER 31, 1994 AND 1993
(Dollars and shares in thousands, except per share data)
<TABLE>
Three Months Ended Six Months Ended
December 31, December 31,
__________________ ________________
1994 1993 1994 1993
_______ _______ _______ _______
<S> <C> <C> <C> <C>
Primary:
Earnings:
Net income $ 1,656 $ 551 $ 3,093 $ 2,449
Add after-tax interest, net (A) 271
_______ _______ _______ _______
Net income, as adjusted $ 1,656 $ 551 $ 3,093 $ 2,720
======= ======= ======= =======
Shares:
Weighted average number of common
shares outstanding 9,220 9,205 9,220 9,197
Common shares issuable upon
exercise of stock options and
warrants, net of common shares
assumed to be repurchased from
the proceeds at the average market
price for the period 1,109
_______ _______ _______ _______
Weighted average number of common
shares and common share equivalents
outstanding 9,220 9,205 9,220 10,306
======= ======= ======= =======
Primary earnings per share:
Net income $ .18 $ .06 $ .34 $ .26
======= ======= ======= =======
Fully diluted (B):
Earnings:
Net income $ 1,656 $ 551 $ 3,093 $ 2,449
Add after-tax interest, net (A) 486 937 617
Add after-tax interest expense
applicable to 8.75% convertible
subordinated debentures 346
_______ _______ _______ _______
Net income, as adjusted $ 2,142 $ 897 $ 4,030 $ 3,066
======= ======= ======= =======
Shares:
Weighted average number of
common shares and common
share equivalents outstanding 9,220 9,205 9,220 10,306
JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
THREE AND SIX MONTHS ENDED DECEMBER 31, 1994 AND 1993
(Dollars and shares in thousands, except per share data)
(Concluded)
Common shares issuable upon
exercise of stock options and
warrants, net of common shares
assumed to be repurchased from
the proceeds using the greater
of the average market price
for the period or the
period-end price 2,663 2,240 2,449 1,120
_______ _______ _______ _______
Weighted average number of common
shares and common share
equivalents outstanding,
as adjusted 11,883 11,445 11,669 11,426
======= ======= ======= =======
Fully diluted earnings per share:
Net income $ .18 $ .08 $ .35 $ .27
======= ======= ======= =======
</TABLE>
________________________
(A) Amounts represent a decrease in interest expense and an increase in
interest income as a result of the assumed reduction in borrowings and
increase in investments in U. S. government securities from the application
of the portion of the proceeds from the assumed exercise of stock options
and warrants which were not applied towards the repurchase of outstanding
common shares (equivalent to 20% of the common shares outstanding at
the end of the applicable period).
(B) These calculations are submitted in accordance with Regulation S-K
Item 601 (b) (ii) although not required by Footnote 2 to paragraph 14 of
APB Opinion No. 15 because they had no effect or were antidilutive on
earnings per share.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Jackpot's
Condensed Consolidated Balance Sheets - December 31, 1994 and June 30,
1994 and its Condensed Consolidated Statements of Income - Three and Six
Months Ended December 31, 1994 and 1993 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 28,510
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 35,502
<PP&E> 34,098
<DEPRECIATION> 18,663
<TOTAL-ASSETS> 73,286
<CURRENT-LIABILITIES> 9,353
<BONDS> 280
<COMMON> 93
0
0
<OTHER-SE> 57,792
<TOTAL-LIABILITY-AND-EQUITY> 73,286
<SALES> 0
<TOTAL-REVENUES> 47,402
<CGS> 0
<TOTAL-COSTS> 36,345
<OTHER-EXPENSES> 3,436
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 103
<INCOME-PRETAX> 4,617
<INCOME-TAX> 1,524
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,093
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
</TABLE>
