UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to___________________
Commission file 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)
702-263-5555
____________________________________________________
(Registrant's telephone number, including area code)
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 8,616,680 shares of the registrant's common stock outstanding as
of November 6, 1998.
JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES
INDEX
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
September 30, 1998 and June 30, 1998
Condensed Consolidated Statements of Income -
Three Months Ended September 30, 1998 and 1997
Condensed Consolidated Statement of Stockholders'
Equity - Three Months Ended September 30, 1998
Condensed Consolidated Statements of Cash Flows -
Three Months Ended September 30, 1998 and 1997
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
September 30, June 30,
ASSETS 1998 1998
______ _____________ ________
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 49,824 $ 50,275
Prepaid expenses 1,564 1,594
Other current assets 2,220 2,225
________ ________
Total current assets 53,608 54,094
________ ________
Property and equipment, at cost:
Land and buildings 1,535 1,535
Gaming equipment 29,180 28,988
Other equipment 4,450 4,758
Leasehold improvements 356 354
________ ________
35,521 35,635
Less accumulated depreciation (19,820) (19,850)
________ ________
15,701 15,785
Lease acquisition costs and other
intangible assets, net of
accumulated amortization of
$4,837 and $4,607 3,627 2,231
Goodwill, net of accumulated
amortization of $2,754 and
$2,713 3,867 3,908
Lease and other security deposits 1,532 3,082
________ ________
Total assets $ 78,335 $ 79,100
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.<PAGE>
JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(Concluded)
<TABLE>
September 30, June 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1998
____________________________________ _____________ ________
<S> <C> <C>
Current liabilities:
Accounts payable $ 1,545 $ 1,434
Other current liabilities 3,101 3,508
________ ________
Total current liabilities 4,646 4,942
Deferred rent 2,427 2,377
Deferred income tax 922 849
Other liabilities 61
________ ________
Total liabilities 7,995 8,229
________ ________
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; 9,860,252 and 9,854,327
shares issued 99 99
Additional paid-in capital 66,443 66,376
Retained earnings 17,574 16,466
Less 1,243,572 and 1,080,372 shares of
common stock in treasury, at cost (13,776) (12,070)
________ ________
Total stockholders' equity 70,340 70,871
________ ________
Total liabilities and
stockholders' equity $ 78,335 $ 79,100
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.<PAGE>
JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Dollars in thousands, except per share data)
<TABLE>
1998 1997
_______ _______
<S> <C> <C>
Revenues:
Route operations $21,685 $21,918
Casino operations 522 749
_______ _______
Totals 22,207 22,667
_______ _______
Costs and expenses:
Route operations 18,390 18,291
Casino operations 473 727
Amortization 286 276
Depreciation 1,010 868
General and administrative 870 925
_______ _______
Totals 21,029 21,087
_______ _______
Operating income 1,178 1,580
_______ _______
Other income:
Interest and other income 361 573
_______ _______
Totals 361 573
_______ _______
Income before income tax 1,539 2,153
_______ _______
Provision for Federal income tax:
Current 358 417
Deferred 73 164
_______ _______
Totals 431 581
_______ _______
Net income $ 1,108 $ 1,572
======= =======
Basic earnings per share $ .13 $ .17
======= =======
Dilutive earnings per share $ .13 $ .17
======= =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED SEPTEMBER 30, 1998
(Dollars and shares in thousands)
<TABLE>
Treasury
Common Stock Additional Stock Total
_____________ Paid-in Retained ________________ Stockholders'
Shares Amount Capital Earnings Shares Amount Equity
______ ______ __________ ________ ______ ________ ____________
<S> <C> <C> <C> <C> <C> <C> <C>
Balance
July 1,
1998 9,854 $99 $66,376 $16,466 (1,080) $(12,070) $70,871
Issuance of
shares on
exercise
of stock
options 6 67 67
Repurchases
of common
stock (164) (1,706) (1,706)
Net income 1,108 1,108
_____ ___ _______ _______ ______ ________ _______
Balance
September
30, 1998 9,860 $99 $66,443 $17,574 (1,244) $(13,776) $70,340
===== === ======= ======= ====== ======== =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.<PAGE>
JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Dollars in thousands)
<TABLE>
1998 1997
_______ _______
<S> <C> <C>
Operating activities:
Net income $ 1,108 $ 1,572
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,296 1,144
Deferred Federal income tax 73 164
Increase (decrease) from changes in:
Prepaid expenses and other current assets (5) (117)
Other non-current assets 76 (105)
Accounts payable and other current liabilities (106) 317
Deferred rent and other liabilities (11) 306
_______ _______
Net cash provided by operating activities 2,431 3,281
_______ _______
Investing activities:
Net proceeds from location operators 40 73
Proceeds from sales of property and equipment 36 4
Purchases of property and equipment (1,219) (1,570)
Increase in lease acquisition costs and other
intangible assets (100) (21)
_______ _______
Net cash used in investing activities (1,243) (1,514)
_______ _______
Financing activities:
Proceeds from issuance of common stock 67
Repurchases of common stock (1,706)
_______ _______
Net cash used in financing activities (1,639)
_______ _______
Net (decrease) increase in cash and cash equivalents (451) 1,767
Cash and cash equivalents at beginning of period 50,275 47,945
_______ _______
Cash and cash equivalents at end of period $49,824 $49,712
======= =======
Supplemental disclosures of cash flow data:
Cash paid during the period for:
Federal income tax $ 100 $ 400
</TABLE>
See Notes to Condensed Consolidated Financial Statements.<PAGE>
JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - General:
The accompanying unaudited condensed consolidated
financial statements included herein have been prepared by
Jackpot pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such rules and
regulations, although management believes that the disclosures
are adequate to make the information presented not misleading.
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 September
30, 1998 and the results of its operations and cash flows for
the three months ended September 30, 1998 and 1997. The
earnings for the three months ended September 30, 1998 and 1997
are not necessarily indicative of results for a full
year. Information included in the condensed consolidated
balance sheet as of June 30, 1998 has been derived from
Jackpot's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year ended June 30, 1998
(the "1998 Form 10-K"). These unaudited condensed consolidated
financial statements should be read in conjunction with
the consolidated financial statements and disclosures included in
the 1998 Form 10-K.
In June 1997, the Financial Accounting Standards Board (the
"FASB") issued Statement of Financial Accounting Standards No.
131, "Disclosure About Segments of an Enterprise and Related
Information" ("SFAS 131"), which is effective for fiscal years
beginning after December 15, 1997. SFAS 131 establishes
additional standards for segment reporting in the financial
statements. Management has begun its review of SFAS 131, however
it has not made a final determination of the extent of the
disclosures required by this statement.
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and
Hedging Activities" ("SFAS 133"), which is effective for fiscal
years beginning after June 15, 1999. SFAS 133 establishes
additional accounting and reporting standards for derivative
instruments and hedging activities. Management does not believe
the Company has any derivative instruments, or that Jackpot
participates in hedging activities. Accordingly, SFAS 133 is not
expected to have a significant effect on the results of
operations or related disclosures.
Note 2 - Comprehensive income:
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"),
which is effective for fiscal years beginning after December 15,
1997. SFAS 130 requires companies to classify items of other
comprehensive income by their nature in a financial statement and
display the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in
capital in the equity section of a statement of financial
position. Jackpot adopted this statement on July 1, 1998. For
the three months ended September 30, 1998 and 1997, Jackpot did
not have any items of other comprehensive income. Comprehensive
income for the three months ended September 30, 1998 and 1997 is
the following (dollars in thousands):
<TABLE>
Three Months Ended
September 30,
__________________
1998 1997
______ ______
<S> <C> <C>
Net income $1,108 $1,572
Other comprehensive income - -
______ ______
Comprehensive income $1,108 $1,572
====== ======
</TABLE>
Note 3 - Earnings per share:
In February 1997, the FASB issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"),
which is effective for periods, including interim periods, ending
after December 15, 1997. As required by SFAS 128, Jackpot
adopted this statement for the quarter ended December 31, 1997
and year ended June 30, 1998. SFAS 128establishes standards for
computing and presenting earnings per share ("EPS"), including
the replacement of the presentation of primary EPS with the
presentation of basic EPS, as defined. All prior-period EPS data
presented has been restated to conform to the provisions of the
statement.
Basic EPS for the three months ended September 30, 1998 and 1997
is computed by dividing net income by the weighted average number
of common shares outstanding for the respective period. Diluted
EPS for the three months ended September 30, 1998 and 1997 is
computed by dividing net income by the weighted average number of
common and common equivalent shares outstanding for the
respective period. Options to purchase common stock, whose
exercise price was greater than the average market price for the
respective period, have been excluded from the computation of
diluted EPS. Such antidilutive options outstanding for the three
months ended September 30, 1998 and 1997 were 262,000 and
501,000, respectively. The following is the amount of income and
number of shares used in the basic and diluted EPS computations
(dollars and shares in thousands, except per share data):
<PAGE>
<TABLE>
Three Months Ended
September 30,
__________________
1998 1997
______ ______
<S> <C> <C>
Basic earnings per share:
Earnings:
Income available to common
stockholders $1,108 $1,572
====== ======
Shares:
Weighted average number of common
shares outstanding 8,714 9,082
====== ======
Basic earnings per share $ .13 $ .17
====== ======
Diluted earnings per share:
Earnings:
Income available to common stockholders $1,108 $1,572
Effect of dilutive securities - -
______ ______
Income, as adjusted $1,108 $1,572
====== ======
Shares:
Weighted average number of common
shares outstanding 8,714 9,082
Common shares issuable upon assumed
exercise of dilutive stock options 1,509 1,497
Less common shares assumed to be
repurchased by application of the
treasury stock method to the proceeds
using the average market price for the
period 1,379 1,367
______ ______
Weighted average number of common shares
and common share equivalents outstanding 8,844 9,212
====== ======
Diluted earnings per share $ .13 $ .17
====== ======
</TABLE>
Note 4 - Stockholders' equity:
The 1992 Incentive and Non-qualified Stock Option Plan:
On September 30, 1998, the exercise price of the June 30, 1998
grant of nonqualified stock options to purchase an aggregate of
110,000 shares of common stock (27,500 each to four directors)
was vested at $9.94 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 6 of Notes to Consolidated Financial Statements in the 1998
Form 10-K for further information regarding the 1992 Plan and
option grants.
Common stock in treasury:
Jackpot purchased 163,200 shares of its common stock at the
market price on the date of purchase for a total cost of
approximately $1,706,000 during the three months ended September
30, 1998.
Note 5 - Subsequent event:
In October 1998, Jackpot and CRC Holdings, Inc., operating as
Carnival Resorts & Casinos ("CRC"), a privately owned company,
signed a non-binding letter of intent to merge the companies.
Such proposed transaction is subject to the completion of a
definitive agreement between the parties and regulatory and other
approvals. The proposed transaction contemplates that Jackpot
will acquire all the issued and outstanding common stock of CRC
in exchange for approximately 6.5 million shares of Jackpot's
common stock, subject to a reduction in such shares under certain
conditions. No assurance can be given that the proposed
transaction will be consummated or that it will be consummated on
the terms described herein.
<PAGE>
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 for the three months ended September
30, 1998 (the "1998 three months"), consisted of the cash flows from
operating activities and its available cash and cash equivalents which, at
June 30, 1998, was $50.3 million and at September 30, 1998 was $49.8 million.
Net cash provided by operating activities for the 1998 three months decreased
$.9 million, from $3.3 million for the three months ended September 30, 1997
(the "1997 three months") to $2.4 million for the 1998 three months. The
decrease of $.9 million was principally due to a decline in the gaming
machine route operations ("route operations") operating margin of $.3
million, from $3.6 million for the 1997 three months to $3.3 million for the
1998 three months, and to a decline in other income of $.2 million.
Net cash used in investing activities for the 1998 three months
decreased $.3 million, from $1.5 million for the 1997 three months to $1.2
million for the 1998 three months. Such decrease was primarily due to a
reduction of $.4 million for purchases of property and equipment during the
1998 three months.
Net cash used in financing activities for the 1998 three months was $1.6
million, and resulted from payments for repurchases of common stock of $1.7
million, net of proceeds of $.1 million from the issuance of common stock
upon the exercise of stock options.
Liquidity:
During the 1998 three months, Jackpot's cash and cash equivalents
decreased $.5 million primarily as a result of the activities described
above, while working capital remained constant at approximately $49 million.
On October 29, 1996, Jackpot's Board of Directors authorized management
to repurchase up to 500,000 shares of Jackpot's common stock at prevailing
market prices. Subsequently, on January 22, 1998, such authorization was
increased from 500,000 to 1,000,000 shares. From October 29, 1996 through
September 30, 1998, Jackpot repurchased 785,385 shares of common stock at a
cost of approximately $8.5 million.
In October 1998, Jackpot and CRC Holdings, Inc., operating as Carnival
Resorts & Casinos ("CRC"), a privately owned company, signed a non-binding
letter of intent to merge the companies. Such proposed transaction is
subject to the completion of a definitive agreement between the parties and
regulatory and other approvals. The proposed transaction contemplates that
Jackpot will acquire all the issued and outstanding common stock of CRC in
exchange for approximately 6.5 million shares of Jackpot's common stock,
subject to a reduction in such shares under certain conditions. No assurance
can be given that the proposed transaction will be consummated or that it
will be consummated on the terms described herein.
Management believes Jackpot's working capital and cash provided by
operations will be sufficient to enable Jackpot to meet its planned capital
expenditures and other cash requirements for the remainder of the year ending
June 30, 1999 ("fiscal 1999"). With respect to planned capital expenditures,
management anticipates Jackpot will purchase approximately $7.1 million of
property and equipment, exclusive of business acquisitions, if any, in the
remainder of fiscal 1999 to be used in existing and currently planned new
locations.
Jackpot continues to selectively explore expansion opportunities, both
in and outside Nevada, and various potential acquisitions, both gaming and
nongaming. Management believes working capital and cash provided by
operations will be sufficient to enable Jackpot to pursue expansion
opportunities; however, Jackpot may seek additional debt or equity financing
to facilitate expansion opportunities and potential acquisitions.
Recently Issued Accounting Standards:
In June 1997, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards No. 131, "Disclosure About
Segments of an Enterprise and Related Information" ("SFAS 131"), which is
effective for fiscal years beginning after December 15, 1997. SFAS 131
establishes additional standards for segment reporting in the financial
statements. Management has begun its review of SFAS 131, however it has not
made a final determination of the extent of the disclosure required by this
statement.
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"), which is effective for fiscal years beginning after
June 15, 1999. SFAS 133 establishes additional accounting and reporting
standards for derivative instruments and hedging activities. Management does
not believe the Company has any derivative instruments, or that Jackpot
participates in hedging activities. Accordingly, SFAS 133 is not expected to
have a significant effect on the results of operations or related
disclosures.
Results of Operations
_____________________
Revenues:
Total revenues decreased $.4 million, from $22.6 million for the 1997
three months to $22.2 million for the 1998 three months. The decrease of $.4
million was the net result of a decrease of $.2 million (from $21.9 million
for the 1997 three months to $21.7 million for the 1998 three months) in
route operations revenues and a decrease of $.2 million (from $.7 million for
the 1997 three months to $.5 million for the 1998 three months) in casino
operations revenues.
While Jackpot generated additional route operations revenues from new
locations of $1.1 million, such amount was not sufficient to offset lost
route operations revenues from terminated locations of $.8 million and the
decrease in route operations revenues at existing locations of $.5 million.
As a result, route operations revenues for the 1998 three months decreased
$.2 million.
Route operations revenues attributable to fixed payment leases and
revenue sharing contracts for the three months ended September 30, 1998 and
1997 are summarized below (dollars in thousands):
<PAGE>
<TABLE>
1998 1997
___________________ ___________________
Percent Percent
of route of route
operations operations
Amount revenues Amount revenues
_______ __________ _______ __________
<S> <C> <C> <C> <C>
Route operations:
Fixed payment leases $16,310 75.2% $16,444 75.0%
Revenue sharing contracts 5,375 24.8 5,474 25.0
_______ _____ _______ _____
Totals $21,685 100.0% $21,918 100.0%
======= ===== ======= =====
</TABLE>
Costs and expenses:
Route operations expenses increased $.1 million (from $18.3 million for
the 1997 three months to $18.4 million for the 1998 three months) and, as a
percentage of route operations revenues, increased to 84.8% for the 1998
three months from 83.5% for the 1997 three months. Such increases were
principally attributable to an increase in location rent. With respect to
location rent, which is the single largest route operations expense, Jackpot
entered into an agreement for a long-term extension with one of its largest
retail chain store customers in September 1998. Pursuant to the terms of the
new agreement, which will become effective July 1, 1999, rent expense will
increase significantly over the previous agreement. Such increase could
adversely affect the Company's results of operations for the year ending June
30, 2000. For a further description of the Company's lease and license
agreements, see Item 1 - Business - Gaming Machine Route Operations and Item
7 - Management's Discussion and Analysis of Financial Condition and Results
of Operations - Overview in the 1998 Form 10-K.
The increase in route operations expenses of $.1 million primarily
resulted from a combination of an increase of $.4 million in location rent,
which consisted principally of location rent for new locations of existing
chain store customers, net of an overall decrease of $.3 million in other
route operations expenses.
General and administrative expense and amortization expense for the 1998
three months, compared to the 1997 three months, remained constant at $.9
million and $.3 million, respectively, while depreciation expense increased
$.2 million, from $.8 million for the 1997 three months to $1.0 million for
the 1998 three months. The increase in depreciation expense was principally
attributable to new gaming machines purchased during the year ended June 30,
1998.
Other income:
Other income decreased approximately $.2 million, from $.6 million for
the 1997 three months to $.4 million for the 1998 three months. The decrease
was principally due to a reduction of approximately $.2 million, which was
earned from certain nonrecurring transactions in the 1997 three months.
Federal income tax:
The effective tax rate for the 1998 three months was 28%, which was
lower than the Federal statutory rate of 35%, primarily because of the tax
benefits realized from tax-exempt interest income. Such rate approximated
the effective tax rate for the 1997 three months.
General:
Operating income decreased $.4 million, from $1.6 million for the 1997
three months to $1.2 million for the 1998 three months. The decrease in
operating income resulted from the combination of a decrease in the route
operations operating margin of $.3 million, the increase in depreciation
expense of $.2 million mentioned above, net of an overall decrease in other
operating expenses of $.1 million. The decrease in the route operations
operating margin of $.3 million (from $3.6 million for the 1997 three months
to $3.3 million for the 1998 three months) was principally due to the
decrease in route operations revenues previously described.
Principally as a result of a highly competitive environment, which
management believes Jackpot will continue to face during the remainder of
fiscal 1999, revenues and net income declined in the 1998 three months
compared to the 1997 three months. Net income decreased $.5 million, from
$1.6 million for the 1997 three months to $1.1 million for the 1998 three
months, and basic and diluted earnings per share for the 1998 three months
was $.13 versus $.17 per share for the 1997 three months.
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 software may recognize a date using "00" as the year 1900 rather
than the year 2000. This situation 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.
Jackpot has conducted a comprehensive review of its computer systems and
other systems for the purpose of assessing its potential Year 2000 Problem,
and is in the process of modifying or replacing those systems which are not
Year 2000 compliant. Based upon this review, management believes such
systems will be compliant by mid-calendar 1999. However, if modifications
are not made or not completed timely, the Year 2000 Problem could have a
significant adverse impact on the Company's operations.
In addition, Jackpot has communicated with its major vendors and
suppliers to determine their state of readiness relative to the Year 2000
Problem and Jackpot's possible exposure to Year 2000 issues of such third
parties. However, there can be no guarantee that the systems of other
companies, which the Company's systems may rely upon, will be timely
converted or representations made to Jackpot by these parties are accurate.
As a result, the failure of a major vendor or supplier to adequately address
their Year 2000 Problem could have a significant adverse impact on the
Company's operations.
Planning for the Year 2000 Problem, including contingency planning, is
significantly complete and will be revised, if necessary. All costs related
to the Year 2000 Problem are expensed as incurred, while the cost of new
hardware is 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. As of September 30, 1998, the Company has incurred costs of
approximately $35,000 (primarily for internal labor) related to the system
applications and anticipates spending an additional $145,000 to become Year
2000 compliant. The estimated completion date and remaining costs are based
upon management's best estimates, as well as third party modification plans
and other factors. However, there can be no guarantee that such estimates
will occur and actual results could differ.
Forward-looking statements
__________________________
Certain information included in this Form 10-Q and other materials filed
or to be filed by the Company with the Securities and Exchange Commission
contains statements that may be considered forward-looking. In addition,
from time to time, the Company may release or publish forward-looking
statements relating to such matters as anticipated financial performance,
business prospects, technological developments and similar matters. The
Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements. In order to comply with the terms of the safe
harbor, the Company notes that a variety of factors could cause the Company's
actual results and experience to differ materially from the anticipated
results or other expectations expressed in the Company's forward-looking
statements. The risks and uncertainties that may affect the operations,
performance, development and results of the Company's business include, but
are not limited to, competitive pressures, the loss or nonrenewal of any of
Jackpot's significant contracts, conditioning or suspension of any gaming
license, unfavorable changes in gaming regulations, adverse results of
significant litigation matters, possible future financial difficulties
of a significant customer and the continued growth of the gaming industry
and population in Nevada. Readers are cautioned not to place undue
reliance on any forward-looking statements, which speak only as of the date
thereof. The Company assumes no obligation to update or supplement
forward-looking statements as a result of new circumstances or subsequent
events.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
_________________________________________________________
For the three months ended September 30, 1998, there were no changes to
the information incorporated by reference in Item 7A of the 1998 Form 10-K.
PART II. OTHER INFORMATION
_________________
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27.1 - Financial Data Schedule - three months ended September 30,
1998.
27.2 - Restated Financial Data Schedule - twelve months ended June
30, 1997.
27.3 - Restated Financial Data Schedule - six months ended December
31, 1996.
27.4 - Restated Financial Data Schedule - twelve months ended June
30, 1996.
(b) Reports on Form 8-K - No Form 8-K was filed for the three months
ended September 30, 1998.
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/ Bob Torkar
_________________________
BOB TORKAR
Senior Vice President - Finance,
Treasurer and Chief Accounting Officer
Date: November 12, 1998
<TABLE> <S> <C>
<ARTICLE>5
<LEGEND>
This schedule contain summary financial information extracted from
Jackpot's Condensed Consolidated Balance Sheets - September 30, 1998
and June 30, 1998 and its Condensed Consolidated Statements of Income -
three months ended September 30, 1998 and 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 49,824
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 53,608
<PP&E> 35,521
<DEPRECIATION> 19,820
<TOTAL-ASSETS> 78,335
<CURRENT-LIABILITIES> 4,646
<BONDS> 0
0
0
<COMMON> 99
<OTHER-SE> 70,241
<TOTAL-LIABILITY-AND-EQUITY> 78,335
<SALES> 0
<TOTAL-REVENUES> 22,207
<CGS> 0
<TOTAL-COSTS> 18,863
<OTHER-EXPENSES> 1,158
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,539
<INCOME-TAX> 431
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,108
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Jackpot's
Consolidated Balance Sheets - June 30, 1997 and 1996 and its Consolidated
Statements of Income - years ended June 30, 1997, 1996 and 1995 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 47,945
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 51,111
<PP&E> 34,671
<DEPRECIATION> 21,582
<TOTAL-ASSETS> 75,267
<CURRENT-LIABILITIES> 4,782
<BONDS> 0
0
0
<COMMON> 98
<OTHER-SE> 67,183
<TOTAL-LIABILITY-AND-EQUITY> 75,267
<SALES> 0
<TOTAL-REVENUES> 91,904
<CGS> 0
<TOTAL-COSTS> 72,740
<OTHER-EXPENSES> 4,605
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 11,368
<INCOME-TAX> 3,524
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,844
<EPS-PRIMARY> .85
<EPS-DILUTED> .84
</TABLE>
<TABLE> <S> <C>
<ARTICLE>5
<LEGEND>
This schedule contains summary financial information extracted from Jackpot's
Consolidated Balance Sheets - December 31, 1996 and June 30, 1996 and its
Consolidated Statements of Income - three and six months ended
December 31, 1996 and 1995 and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 43,310
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 46,459
<PP&E> 34,181
<DEPRECIATION> 21,294
<TOTAL-ASSETS> 71,415
<CURRENT-LIABILITIES> 3,660
<BONDS> 0
0
0
<COMMON> 97
<OTHER-SE> 64,769
<TOTAL-LIABILITY-AND-EQUITY> 71,415
<SALES> 0
<TOTAL-REVENUES> 44,515
<CGS> 0
<TOTAL-COSTS> 35,626
<OTHER-EXPENSES> 2,318
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,089
<INCOME-TAX> 1,578
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,511
<EPS-PRIMARY> .38
<EPS-DILUTED> .37
</TABLE>
<TABLE> <S> <C>
<ARTICLE>5
<LEGEND>
This schedule contains summary financial information extracted from Jackpot's
Consolidated Balance Sheets - June 30, 1996 and 1995 and its Consolidated
Statements of Operations - years ended June 30, 1996, 1995 and 1994 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-1-1995
<PERIOD-END> JUN-30-1996
<CASH> 39,024
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 44,279
<PP&E> 33,992
<DEPRECIATION> 20,697
<TOTAL-ASSETS> 70,742
<CURRENT-LIABILITIES> 3,943
<BONDS> 0
0
0
<COMMON> 96
<OTHER-SE> 63,399
<TOTAL-LIABILITY-AND-EQUITY> 70,742
<SALES> 0
<TOTAL-REVENUES> 91,108
<CGS> 0
<TOTAL-COSTS> 71,121
<OTHER-EXPENSES> 5,542
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22
<INCOME-PRETAX> 8,610
<INCOME-TAX> 2,755
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,855
<EPS-PRIMARY> .63
<EPS-DILUTED> .62
</TABLE>
