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 March 31, 1999
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 May 7, 1999.
JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES
INDEX
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
March 31, 1999 and June 30, 1998
Condensed Consolidated Statements of Income -
Three and Nine Months Ended March 31, 1999 and 1998
Condensed Consolidated Statement of Stockholders'
Equity - Nine Months Ended March 31, 1999
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended March 31, 1999 and 1998
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 5. Other Information
Item 6. Exhibits and Reports on Form 8-K<PAGE>
JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
<TABLE>
March 31, June 30,
ASSETS 1999 1998
______ ________ ________
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 47,929 $ 50,275
Short-term investments, at fair value 6,340
Prepaid expenses 1,072 1,594
Other current assets 1,772 2,225
________ ________
Total current assets 57,113 54,094
________ ________
Property and equipment, at cost:
Land and buildings 1,535 1,535
Gaming equipment 29,276 28,988
Other equipment 4,473 4,758
Leasehold improvements 360 354
________ ________
35,644 35,635
Less accumulated depreciation (20,715) (19,850)
________ ________
14,929 15,785
Lease acquisition costs and other
intangible assets, net of
accumulated amortization of
$5,296 and $4,607 3,307 2,231
Goodwill, net of accumulated
amortization of $2,837 and $2,713 3,784 3,908
Lease and other security deposits 1,540 3,082
Other non-current assets 2,034
________ ________
Total assets $ 82,707 $ 79,100
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Concluded)
(Unaudited)
<TABLE>
March 31, June 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998
____________________________________ ________ ________
<S> <C> <C>
Current liabilities:
Accounts payable $ 2,290 $ 1,434
Other current liabilities 3,711 3,508
________ ________
Total current liabilities 6,001 4,942
Deferred rent 2,488 2,377
Deferred income tax 517 849
Other liabilities 61
________ ________
Total liabilities 9,006 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 66,465 66,376
Retained earnings 20,775 16,466
Less 1,243,572 and 1,080,372 shares of
common stock in treasury, at cost (13,776) (12,070)
Unrealized gain on available-for-sale
securities, net of tax 138
________ ________
Total stockholders' equity 73,701 70,871
________ ________
Total liabilities and
stockholders' equity $ 82,707 $ 79,100
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.<PAGE>
JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE AND NINE MONTHS ENDED MARCH 31, 1999 AND 1998
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
Three Months Ended Nine Months Ended
March 31, March 31,
__________________ __________________
1999 1998 1999 1998
_______ _______ _______ _______
<S> <C> <C> <C> <C>
Revenues:
Route operations $24,104 $22,667 $69,045 $67,534
Casino operations 472 704 1,485 2,114
_______ _______ _______ _______
Totals 24,576 23,371 70,530 69,648
_______ _______ _______ _______
Costs and expenses:
Route operations 19,836 18,303 57,615 55,206
Casino operations 402 616 1,380 2,034
Amortization 299 289 877 851
Depreciation 1,003 986 3,074 2,751
General and administrative 867 992 2,664 2,878
_______ _______ _______ _______
Totals 22,407 21,186 65,610 63,720
_______ _______ _______ _______
Operating income 2,169 2,185 4,920 5,928
_______ _______ _______ _______
Other income:
Interest and other income 346 435 1,064 1,460
_______ _______ _______ _______
Totals 346 435 1,064 1,460
_______ _______ _______ _______
Income before income tax 2,515 2,620 5,984 7,388
_______ _______ _______ _______
Provision (credit) for Federal
income tax:
Current 1,211 669 2,082 1,912
Deferred (507) 39 (407) 83
_______ _______ _______ _______
Totals 704 708 1,675 1,995
_______ _______ _______ _______
Net income $ 1,811 $ 1,912 $ 4,309 $ 5,393
======= ======= ======= =======
Basic earnings per share $ .21 $ .21 $ .50 $ .60
======= ======= ======= =======
Diluted earnings per share $ .21 $ .21 $ .50 $ .59
======= ======= ======= =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.<PAGE>
JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED MARCH 31, 1999
(Dollars and shares in thousands)
(Unaudited)
<TABLE>
Unrealized
gain on
available-
Common Stock Additional Treasury Stock for-sale
_____________ Paid-in Retained ________________ securities,
Shares Amount Capital Earnings Shares Amount net of tax Totals
______ ______ _________ ________ ______ _________ __________ _______
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
July 1,
1998 9,854 $99 $66,376 $16,466 (1,080) $(12,070) $70,871
Tax
benefit
from
stock
options 22 22
Issuance
of
shares
on
exercise
of
stock
options 6 67 67
Repurchases
of common
stock (164) (1,706) (1,706)
Unrealized
gain on
available-
for-sale
securities,
net of tax $138 138
Net
income 4,309 4,309
_____ ___ _______ _______ ______ _______ ____ _______
Balance
March 31,
1999 9,860 $99 $66,465 $20,775 (1,244) $(13,776) $138 $73,701
===== === ======= ======= ====== ======== ==== =======
>/TABLE>
See Notes to Condensed Consolidated Financial Statements.<PAGE>
JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 1999 AND 1998
(Dollars in thousands)
(Unaudited)
</TABLE>
<TABLE>
1999 1998
_______ _______
<S> <C> <C>
Operating activities:
Net income $ 4,309 $ 5,393
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,951 3,602
Deferred income tax (407) 83
Increase (decrease) from changes in:
Prepaid expenses and other current assets 953 189
Other non-current assets 12 (214)
Accounts payable and other current liabilities 193 (449)
Deferred rent and other liabilities 50 407
_______ _______
Net cash provided by operating activities 9,061 9,011
_______ _______
Investing activities:
Purchase of marketable securities (6,127)
Net proceeds from location operators 22 134
Proceeds from sales of property and equipment 1,676 325
Purchases of property and equipment (4,216) (5,674)
Increase in lease acquisition costs and other
intangible and non-current assets (1,123) (109)
_______ _______
Net cash used in investing activities (9,768) (5,324)
_______ _______
Financing activities:
Proceeds from issuance of common stock 67 244
Repurchases of common stock (1,706) (1,680)
_______ _______
Net cash used in financing activities (1,639) (1,436)
_______ _______
Net (decrease) increase in cash and cash equivalents (2,346) 2,251
Cash and cash equivalents at beginning of period 50,275 47,945
_______ _______
Cash and cash equivalents at end of period $47,929 $50,196
======= =======
Supplemental disclosures of cash flow data:
Cash paid during the period for:
Federal income tax $ 1,200 $ 2,000
======= =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.<PAGE>
JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1 - General:
The accompanying unaudited condensed consolidated financial
statements included herein have been prepared by Jackpot
Enterprises, Inc. ("Jackpot" or the "Company") 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 March 31,
1999, the results of its operations for the three and nine months
ended March 31, 1999 and 1998 and its cash flows for the nine
months ended March 31, 1999 and 1998. The earnings for the three
and nine months ended March 31, 1999 and 1998 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.
Jackpot accounts for investments in debt and equity securities in
accordance with Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS 115"). This statement addresses the
accounting and reporting for investments in equity securities
that have readily determinable fair values and for all
investments in debt securities, and requires such securities be
classified as either held to maturity, trading, or available-for-
sale. Management determines the appropriate
classification of its investments in securities at the time of
purchase and reevaluates such classification at each balance
sheet date. SFAS 115 requires available-for-sale securities be
carried at fair value with unrealized gains, net of tax, reported
as a separate component of stockholders' equity. Unrealized
gains and losses for available-for-sale securities are excluded
from earnings. For the three and nine months ended March 31,
1999 and 1998, there were no realized gains or losses from sales
of investment securities.
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. Presently, Jackpot does not
have any derivative instruments, nor does the Company participate
in hedging activities. Accordingly, SFAS 133 is not expected to
have a significant effect on the results of operations or related
disclosures.
In April 1998, the American Institute of Certified Public
Accountants' Accounting Standards Executive Committee issued
Statement of Position No. 98-5, "Reporting on the Costs of Start-
Up Activities". This standard provides guidance on the financial
reporting for start-up costs and organization costs. This
standard requires costs of start-up activities and organization
costs to be expensed as incurred, and is effective for fiscal
years beginning after December 15, 1998, although earlier
application is encouraged. Upon adoption, this statement will
not have a significant effect on Jackpot's results of operations
or its financial position.
Note 2 - Comprehensive income:
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("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. Comprehensive income for the three and nine months
ended March 31, 1999 and 1998 is the following (dollars in
thousands):
<TABLE>
Three Months Nine Months
Ended Ended
March 31, March 31,
______________ ______________
1999 1998 1999 1998
______ ______ ______ ______
<S> <C> <C> <C> <C>
Net income $1,811 $1,912 $4,309 $5,393
Other comprehensive income:
Unrealized gain on
available-for-sale
securities, net of tax 138 - 138 -
______ ______ ______ ______
Comprehensive income $1,949 $1,912 $4,447 $5,393
====== ====== ====== ======
</TABLE>
Note 3 - Earnings per share:
Basic earnings per share ("Basic EPS") for the three and nine
months ended March 31, 1999 and 1998 is computed by dividing net
income by the weighted average number of common shares
outstanding for the respective period. Diluted earnings per
share ("Diluted EPS") for the three and nine months ended March
31, 1999 and 1998 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 Diluted EPS computations. Such antidilutive options
outstanding for the three months ended March 31, 1999 and 1998
were 1,738,000 and 130,000, respectively, and for the nine months
ended March 31, 1999 and 1998 were 721,000 and 169,000,
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):
<TABLE>
Three Months Nine Months
Ended Ended
March 31, March 31,
_______________ ______________
1999 1998 1999 1998
______ ______ ______ ______
<S> <C> <C> <C> <C>
Basic earnings per share:
Earnings:
Income available to
common stockholders $1,811 $1,912 $4,309 $5,393
====== ====== ====== ======
Shares:
Weighted average number of
common shares outstanding 8,617 8,949 8,649 9,035
====== ====== ====== ======
Basic earnings per share $ .21 $ .21 $ .50 $ .60
====== ====== ====== ======
Diluted earnings per share:
Earnings:
Income available to common
stockholders $1,811 $1,912 $4,309 $5,393
Effect of dilutive
securities - - - -
______ ______ ______ ______
Income, as adjusted $1,811 $1,912 $4,309 $5,393
====== ====== ====== ======
Shares:
Weighted average number of
common shares outstanding 8,617 8,949 8,649 9,035
Common shares issuable upon
assumed exercise of
dilutive stock options 44 1,718 1,048 1,739
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 (43) (1,482) (1,000) (1,556)
______ ______ ______ ______
Weighted average number of
common shares and common
share equivalents
outstanding 8,618 9,185 8,697 9,218
====== ====== ====== ======
Diluted earnings per share $ .21 $ .21 $ .50 $ .59
====== ====== ====== ======
</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 a total of 163,200 shares of its common stock
during the nine months ended March 31, 1999, all at market prices
on the dates of purchase, for a total cost of approximately
$1,706,000.
Note 5 - Definitive agreement:
On February 8, 1999, Jackpot and Players International, Inc.
("Players") entered into a definitive agreement and plan of
merger (the "Agreement"). Pursuant to the terms of the
Agreement, Jackpot will acquire Players for $8.25 per share,
consisting of $6.75 per share in cash and $1.50 in Jackpot's
common stock for each share of Players outstanding common stock,
except that if the average closing price of Jackpot's common
stock during the 30 trading days immediately preceding the second
trading day before the completion of the merger is less than
$5.00 per share, Players stockholders may receive more than $6.75
in cash and less than $1.50 in Jackpot stock per share of Players
stock, but the sum of the cash and the value of Jackpot stock
received will in any case equal $8.25 per share of Players stock.
The completion of the merger is subject to a number of
conditions, including approval by the stockholders of both
companies, receipt of all the necessary regulatory and various
approvals, and the financing of the transaction.
On March 10, 1999, Jackpot purchased 1,014,400 shares of Players
common stock at $6.04 per share for a total cost of $6,127,000.
As of March 31, 1999, the shares purchased represent
approximately 3.2% of Players outstanding common stock. For
purposes of SFAS 115, the investment in Players common stock is
classified as available-for-sale securities, and carried at fair
value. "Short-term investments, at fair value" in the
accompanying condensed consolidated balance sheets consist
entirely of Jackpot's investment in Players common stock. As of
March 31, 1999, the gross unrealized gain was $213,000.
Note 6 - Other events:
On February 17, 1999, Jackpot and CRC Holdings, Inc. d/b/a
Carnival Resorts & Casinos ("CRC"), a privately owned company,
entered into a definitive agreement and plan of merger providing
for the acquisition of CRC by Jackpot. On April 15, 1999,
Jackpot and CRC mutually agreed to terminate the proposed
acquisition of CRC by Jackpot. As a result of the termination of
the definitive agreement between the parties, all capitalized
costs incurred in connection with the proposed acquisition of CRC
will be expensed in the quarter ending June 30, 1999. Management
estimates that the pretax charge will be approximately $900,000.
For further information regarding the above, see Item 2.
Management's Discussion and Analysis of Financial Condition and
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 for the nine months ended March 31,
1999 (the "1999 nine 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 March 31, 1999 was $47.9 million. Net cash
provided by operating activities for the 1999 nine months, compared to the
nine months ended March 31, 1998 (the "1998 nine months"), remained constant
at $9.0 million.
Net cash used in investing activities for the 1999 nine months was $9.8
million, and resulted primarily from purchases of marketable securities of
$6.1 million, payments of $4.2 million for purchases of property and
equipment, $1.1 million for lease acquisition costs and other intangible and
non-current assets, net of proceeds of $1.6 million from sales of property
and equipment.
Net cash used in financing activities for the 1999 nine 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:
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
March 31, 1999, Jackpot repurchased 785,385 shares of common stock at a cost
of approximately $8.5 million.
On February 8, 1999, Jackpot and Players International, Inc. ("Players")
entered into a definitive agreement and plan of merger (the "Agreement").
Pursuant to the terms of the Agreement, Jackpot will acquire Players for
$8.25 per share, consisting of $6.75 per share in cash and $1.50 in Jackpot's
common stock for each share of Players outstanding common stock. The
completion of the merger is subject to a number of conditions, including
approval by the stockholders of both companies, receipt of all the necessary
regulatory and various approvals, and the financing of the transaction. On
May 7, 1999, Jackpot filed a Registration Statement on Form S-4 with the
Securities and Exchange Commission in connection with the Company's
acquisition of Players.
On March 10, 1999, Jackpot purchased 1,014,400 shares of Players common
stock at $6.04 per share for a total cost of $6.1 million. Primarily as a
result of this transaction, Jackpot's cash and cash equivalents decreased
$2.4 million during the 1999 nine months, from $50.3 million at June 30, 1998
to $47.9 million at March 31, 1999. During the 1999 nine months working
capital increased $1.9 million, from $49.2 million at June 30, 1998 to $51.1
million at March 31, 1999.
On February 17, 1999, Jackpot signed a definitive agreement to acquire
CRC Holdings, Inc. d/b/a Carnival Resorts & Casinos ("CRC"), a privately
owned company. The agreement was subject to various conditions, including
the assignment to Jackpot of the management agreement relating to a casino
managed by CRC in Ontario, Canada. Because of CRC's inability to obtain the
necessary consent of the Ontario Casino Corporation (the "OCC"), one of the
casino's owners, the agreement was terminated by the mutual agreement of
Jackpot and CRC on April 15, 1999. The decision by the OCC, which is not the
gaming licensing authority in Ontario, was made without any inquiry of
Jackpot and prior to the filing of Jackpot's gaming application with the
Ontario Gaming Control Commission. As a result of the termination of the
definitive agreement between the parties, all capitalized costs incurred in
connection with the proposed acquisition of CRC will be expensed in the
quarter ending June 30, 1999. Management estimates that the pretax charge
will be approximately $.9 million. Such non-recurring charge will have a
material adverse effect on the results of operations for the quarter and year
ending June 30, 1999.
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 $1.3 million of
property and equipment, exclusive of business acquisitions, in the remainder
of fiscal 1999 to be used in existing and currently planned new locations.
Jackpot continues to explore additional gaming acquisition
opportunities. With respect to the acquisition of Players, management
intends to obtain financing through bank borrowings and long-term debt, and
believes the proceeds received from such financings, along with Jackpot's
available working capital and cash provided by operations will be sufficient
to enable Jackpot to finance this transaction. However, no assurance can be
given that Jackpot will obtain the necessary financing or that such
transaction will be successfully consummated.
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. Presently,
Jackpot does not have any derivative instruments, nor does the Company
participate in hedging activities. Accordingly, SFAS 133 is not expected to
have a significant effect on the results of operations or related
disclosures.
In April 1998, the American Institute of Certified Public Accountants'
Accounting Standards Executive Committee issued Statement of Position No.
98-5, "Reporting on the Costs of Start-Up Activities". This standard
provides guidance on the financial reporting for start-up costs and
organization costs. This standard requires costs of start-up activities and
organization costs to be expensed as incurred, and is effective for fiscal
years beginning after December 15, 1998, although earlier application is
encouraged. Upon adoption, this statement will not have a significant effect
on Jackpot's results of operations or its financial position.
Results of Operations
_____________________
Revenues:
Total revenues for the three months ended March 31, 1999 (the "1999
three months") increased $1.2 million, from $23.4 million for the three
months ended March 31, 1998 (the "1998 three months") to $24.6 million for
the 1999 three months, while total revenues for the 1999 nine months
increased $.9 million, from $69.6 million for the 1998 nine months to $70.5
million for the 1999 nine months. The increase in total revenues of $1.2
million for the 1999 three months was the net result of an increase of $1.4
million (from $22.7 million for the 1998 three months to $24.1 million for
the 1999 three months) in gaming machine route operations ("route
operations") revenues and a decrease of $.2 million (from $.7 million for the
1998 three months to $.5 million for the 1999 three months) in casino
operations revenues. The increase in total revenues of $.9 million for the
1999 nine months was the net result of an increase of $1.5 million (from
$67.5 million for the 1998 nine months to $69.0 million for the 1999 nine
months) in route operations revenues and a decrease of $.6 million (from $2.1
million for the 1998 nine months to $1.5 million for the 1999 nine months) in
casino operations revenues.
The increase in route operations revenues for the 1999 three months of
$1.4 million resulted from a combination of additional revenues generated
from new and existing locations of $1.5 million and $.5 million,
respectively, net of lost revenues from terminated locations of $.6 million.
The increase in route operations revenues for the 1999 nine months of $1.5
million resulted from a combination of additional revenues generated from new
locations of $3.8 million, net of lost revenues from terminated locations and
a decrease in revenues at existing locations of $2.1 million and $.2 million,
respectively.
Route operations revenues attributable to fixed payment leases and
revenue sharing contracts for the three and nine months ended March 31, 1999
and 1998 are summarized below (dollars in thousands):
<TABLE>
Three Months Ended March 31,
_________________________________________
1999 1998
___________________ ___________________
Percent Percent
of route of route
operations operations
Amount revenues Amount revenues
_______ __________ _______ __________
<S> <C> <C> <C> <C>
Route operations:
Fixed payment leases $17,973 74.6% $16,736 73.8%
Revenue sharing contracts 6,131 25.4 5,931 26.2
_______ _____ _______ _____
Totals $24,104 100.0% $22,667 100.0%
======= ===== ======= =====
Nine Months Ended March 31,
_________________________________________
1999 1998
___________________ ___________________
Percent Percent
of route of route
operations operations
Amount revenues Amount revenues
_______ __________ _______ __________
Route operations:
Fixed payment leases $51,912 75.2% $50,119 74.2%
Revenue sharing contracts 17,133 24.8 17,415 25.8
_______ _____ _______ _____
Totals $69,045 100.0% $67,534 100.0%
======= ===== ======= =====
</TABLE>
Jackpot has a significant amount of its route operations at retail
stores which are part of a group of affiliated retail store chains. The five
largest retail store chains with which Jackpot has agreements accounted for
approximately 64% and 66% of Jackpot's total revenues for the year ended June
30, 1998 and the nine months ended March 31, 1999, respectively. In August
1998, two of the retail store chains, Albertson's, Inc. and American Stores
Company (the parent company of Lucky Stores, Inc. and American Drug Stores,
Inc.), entered into a merger agreement. Route operations revenues generated
at the locations of those two entities accounted for approximately 55% and
58% of Jackpot's total revenues for the year ended June 30, 1998 and the nine
months ended March 31, 1999, respectively. If the merger of the two retail
chains is completed, a consolidation or disposition of selected locations may
occur which could affect Jackpot's revenues. Additional consolidations may
take place in the retail store industry that could result in the loss of
existing locations for Jackpot.
Costs and expenses:
Route operations expenses for the 1999 three months and 1999 nine months
increased $1.5 million (from $18.3 million for the 1998 three months to $19.8
million for the 1999 three months) and $2.4 million (from $55.2 million for
the 1998 nine months to $57.6 million for the 1999 nine months) and, as a
percentage of route operations revenues, increased to 82.3% and 83.4% for the
1999 three months and 1999 nine months, respectively, from 80.7% and 81.7%
for the 1998 three months and 1998 nine months, respectively. The increases
in route operations expenses of $1.5 million and $2.4 million for the 1999
three and nine month periods, respectively, resulted primarily from a
combination of increases of $1.0 million and $1.9 million in location rent,
which consisted principally of location rent for new locations of existing
chain store customers, increases in payroll costs of $.1 million and $.2
million and increases in other route operations expenses of $.4 million and
$.3 million.
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.
Amortization expense for the 1999 three months and 1999 nine months,
compared to the respective 1998 periods, remained constant at $.3 million and
$.9 million, respectively, while depreciation expense for the 1999 three
months, compared to the 1998 three months remained constant at $1.0 million,
and for the 1999 nine months increased $.3 million, from $2.8 million for the
1998 nine months to $3.1 million for the 1999 nine months. The increase in
depreciation expense for the 1999 nine months was principally attributable to
new gaming machines purchased during the year ended June 30, 1998.
General and administrative expense for the 1999 three months and 1999
nine months decreased $.1 million (from $1.0 million for the 1998 three
months to $.9 million for the 1999 three months) and $.2 million (from $2.9
million for the 1998 nine months to $2.7 million for the 1999 nine months),
respectively.
Other income:
Other income for the 1999 three months and 1999 nine months decreased
$.1 million (from $.4 million for the 1998 three months to $.3 million for
the 1999 three months) and $.4 million (from $1.5 million for the 1998 nine
months to $1.1 million for the 1999 nine months), respectively. Such
decreases resulted primarily from reductions in other income earned from
non-recurring transactions.
Federal income tax:
The effective tax rate for the 1999 three months and 1999 nine months
was 28%. Such rate, which approximated the effective tax rate for the 1998
three months and 1998 nine months, was lower than the Federal Statutory rate
of 35% primarily because of the tax benefits realized from tax-exempt
interest income.
General:
Operating income for the 1999 three months, compared to the 1998 three
months, remained constant at $2.2 million, while operating income for the
1999 nine months decreased $1.0 million, from $5.9 million for the 1998 nine
months to $4.9 million for the 1999 nine months. The decrease in operating
income resulted from the combination of a decrease in the route operations
operating margin of $.9 million, an increase in depreciation expense of $.3
million mentioned above, net of a decrease in all other operating expenses of
$.2 million. The decline in the route operations operating margin of $.9
million (from $12.3 million for the 1998 nine months to $11.4 million for
the 1999 nine months) was due principally to the decrease in route operations
revenues at existing locations and the increase in other route operations
expenses previously described, and to the operating results of new locations.
Principally as a result of a highly competitive environment, which
management believes Jackpot will continue to face during the remainder of
fiscal 1999, net income and earnings per share declined in the 1999 nine
months compared to the 1998 nine months. Net income decreased $1.1 million
(from $5.4 million for the 1998 nine months to $4.3 million for the 1999 nine
months) and diluted earnings per share decreased from $.59 per share to $.50
per share. Such declines were due principally to the decrease in the route
operations operating margin described above, an increase in depreciation
expense and a decrease in interest and other income. Basic and diluted
earnings per share for the 1999 three months remained constant at $.21 per
share compared to the 1998 three months, while net income decreased slightly,
from $1.9 million to $1.8 million.
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 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 depreciated 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 March 31, 1999, the Company had incurred costs of
approximately $125,000, principally for internal costs and system
applications, and anticipates spending an additional $155,000 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, the possible consolidation or disposition of
selected locations which could result from the pending merger of Albertson's,
Inc. and American Stores Company (each of which is a significant customer of
the Company), 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
_________________________________________________________
On March 10, 1999, the Company purchased a total of 1,014,400 shares of
common stock of Players International, Inc. in an open market transaction.
The Company acquired the shares of Players common stock because the
purchase price for those shares was significantly below the per share
consideration which the Company has agreed to pay for all outstanding shares
of Players pursuant to the Agreement and Plan of Merger dated as of February
8, 1999, which provides for the merger of Players into a wholly-owned
subsidiary of the Company. For further information concerning the merger
with Players and the purchase of Players common stock by the Company, see
Note 5 of Notes to Condensed Consolidated Financial Statements (Unaudited)
included elsewhere in this Form 10-Q.
The shares of Players which the Company acquired are being held by the
Company pending consummation of the merger with Players. However, unless and
until the merger is consummated, the Company is exposed to equity price risk
on those shares. The Company has not attempted to reduce or eliminate its
market exposure on those shares. A 10% adverse change in the price of the
Players common stock from the price at March 31, 1999 would result in a
decrease of approximately $634,000 in the fair value of Players common stock
currently owned by the Company.
In all other respects, for the three and nine months ended March 31,
1999, there were no changes from the information set forth in Item 7A of the
1998 Form 10-K.
PART II. OTHER INFORMATION
_________________
Item 5. Other Information
As reported in a Current Report on Form 8-K filed on March 8, 1999, the
Company had entered into an Agreement and Plan of Merger dated as of February
17, 1999 (the "Merger Agreement") with CRC Holdings, Inc. d/b/a Carnival
Resorts & Casinos ("CRC") which provided for the acquisition of CRC by the
Company. On April 15, 1999, the Merger Agreement was terminated by mutual
agreement of the Company and CRC. The termination was a result of CRC's
inability to obtain the necessary consent of the Ontario Casino Corporation,
one of the owners of the casino managed by CRC in Ontario, Canada, to the
assignment to the Company of the management agreement relating to that
casino. For further information concerning termination of the Merger
Agreement, see Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.13 - License agreement with Rite Aid Corporation.
10.14 - License agreement with Rite Aid Corporation.
27.1 - Financial Data Schedule (EDGAR filing only).
(b) Reports on Form 8-K:
During the three months ended March 31, 1999, Jackpot filed one
report on Form 8-K, dated March 8, 1999. The Form reported on "Item
5 - Other Events," two separate definitive merger agreements entered
into in connection with the acquisitions of Players International,
Inc. and CRC Holdings, Inc.
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: May 14, 1999
EXHIBIT 10.13
LICENSE AGREEMENT
THIS AGREEMENT is entered into as of the 12th day of March 1999, between
Rite Aid Corporation, a Delaware corporation ("Licensor"), and Cardivan
Company, a Nevada corporation ("Licensee"). Licensee and Licensor are
collectively referred to as "the Parties".
1. Purpose. This Agreement sets forth the terms and conditions under
which the Licensee shall have the exclusive right to operate certain gaming
devices (the "Devices") (i) within each of the stores operated by Licensor in
the State of Nevada which are designated on Exhibit "A" attached hereto and
incorporated herein by reference (the "Existing Locations"), and (ii) in any
additional stores other than stores deemed replacement stores under the
License Agreement between Rite Aid Corporation and Corral Coin, Inc. dated
March 12, 1999, opened or acquired by Licensor or an affiliate of Licensor
for business to the public in the state of Nevada during the term of this
Agreement which becomes subject to this Agreement pursuant to Section 4(c)
hereof (the "New Locations", together with the Existing Locations, the
"Licensed Locations"). Notwithstanding the foregoing, an off-site
replacement of a Licensed Location which constitutes a "replacement store" in
accordance with Licensor's internal policies, which opens concurrently with
the closing of the Licensed Location it is replacing, and which is located
not more than two miles from the Licensed Location it is replacing, shall not
constitute a New Location for purposes of this Agreement.
2. License. Licensor hereby grants to Licensee the use of such amount
of space (the "Gaming Space") as is reasonably required to set up the number
of Devices currently permitted at such Licensed Location. The Gaming Space
shall be located as close to the entrance and checkstand of the Licensed
Location as is reasonably practicable with the exact location and square
footage of the Gaming Space to be determined by mutual agreement of the
parties. Upon agreement of the Gaming Space, Licensor will not change
location of, or reduce the Gaming Space without Licensee's written consent.
Licensee is also hereby granted an exclusive right to operate up to the
maximum number of Devices currently allowed by the State of Nevada in each of
the Licensed Locations. However, Licensee may not operate fewer than RCT
Devices at any Licensed Location in Clark County or the city limits of either
Reno or Carson City.
3. Term. The term of the license for each Licensed Location shall
begin on RCT and shall expire at midnight on RCT. Licensee shall have first
right of refusal as against any other licensed operator to operate the
Devices on the premises of the Licensed Locations upon the expiration of this
Agreement. On or before the expiration of this Agreement, and upon
Licensor's disclosure to Licensee of the terms of another licensed operator's
firm offer, Licensee shall have thirty days to notify Licensor of its
intention to match such offer.
4. Fees.
a. During the initial term of this License Agreement, Licensee
agrees to pay Licensor the following amount per Licensed Location per month:
<TABLE>
Licensed Location Monthly Fee Per Licensed Location
___________________ ___________________________________
<S> <C>
RCT RCT RCT RCT
Rite Aid #6114 RCT RCT RCT RCT (1)
Rite Aid #6115 RCT RCT RCT RCT
Rite Aid #6116 RCT RCT RCT RCT (1)
Rite Aid #6121 RCT RCT RCT RCT
Rite Aid #6217 RCT RCT RCT (1) RCT (1)
</TABLE>
(1) Subject to RCT or more Licensed Locations in operation, including the
Licensed Locations in operation under the License Agreement between Rite Aid
Corporation and Corral Coin, Inc. dated March 12, 1999. If less than RCT
Licensed Locations in operation, monthly fee is the amount listed above for
the period RCT through RCT.
b. During the term of this Agreement, Licensee agrees to pay Licensor
the following amount per month for New Locations.
<TABLE>
Location (2) Period Monthly Fee Per New Location
_________________ ______ ____________________________
<S> <C> <C>
Clark County RCT RCT
RCT RCT
RCT RCT (1)
RCT RCT (1)
Reno/Carson City RCT RCT
(city limits) RCT RCT
RCT RCT
RCT RCT
</TABLE>
(1) Subject to RCT or more Licensed Locations in operation, including the
Licensed Locations in operation under the License Agreement between Rite Aid
Corporation and Corral Coin, Inc. dated March 12, 1999. If less than RCT
locations in operation, monthly fee for New Locations is the amount listed
above for the period RCT through RCT.
(2) For New Locations outside of Clark County or the city limits of either
Reno or Carson City, the monthly fee will be mutually agreed upon by the
Parties based on factors associated with each New Location.
c. During the term of this Agreement, if Licensor opens or acquires
any New Location and Licensor determines to include Devices at such New
Location, Exhibit A hereto shall be amended to include such New Location.
For store #6217 and New Locations opened or acquired on or after RCT, the
fees due pursuant to this Section 4 shall be RCT of the then monthly fee
during the RCT period following the date store #6217 and any New Locations
are opened for business by Licensor; provided, that if Licensor has not taken
all steps required to be taken by it to permit Licensee to commence
operations at a New Location, the RCT period shall not commence until all
such actions have been taken.
d. In the event an Existing Location is closed for renovation for a
period of RCT or more, the Fees with respect to such renovated Existing
Location shall be RCT of the then applicable monthly fee due pursuant to this
Section 4 during the RCT period following the date such renovated Existing
Location is reopened for business by Licensor; provided, that if Licensor has
not taken all steps required to be taken by it to permit Licensee to
recommence operations at such Existing Location, the RCT period shall not
commence until all such actions have been taken.
e. The above fee shall be due and payable on the first day of each
month. Fees for any partial month shall be prorated.
f. In the event that (i) Licensor should effect a material reduction
in the hours of operation of the Licensed Locations, from the hours of
operation in effect on the date of this Agreement, or (ii) there should be a
change in the laws or regulations applicable to the operation of gaming
devices in retail food and drug facilities which has the effect of materially
reducing the revenues received by Licensee from its operation of the Devices
hereunder, or (iii) a smoking ban is imposed at a Licensed Location by either
Federal, state or local authorities, or by the terms of a lease agreement
between Licensor and a third party, the parties shall negotiate in good faith
to arrive at an equitable adjustment to the terms of this Agreement.
5. Taxes. Licensee agrees to pay all taxes (other than real estate
taxes) payable in connection with the conduct of its business in the Licensed
Locations, including personal property taxes levied against the Devices,
fixtures, and other personal property of the Licensee in the Licensed
Locations. Licensee will pay all social security, unemployment, and old age
benefit taxes, state, federal, and local, or other similar taxes due with
respect to employees or wages paid to employees of the Licensee in the
Licensed Locations. Licensee will maintain and pay all license fees,
federal, state, county, or city, necessary for its operations in the Licensed
Locations.
6. Security System on Premises. If a Licensed Location is not open
twenty-four (24) hours a day, seven (7) days a week, Licensor agrees to
install and maintain or have maintained, a burglar alarm system at such
Licensed Location that is monitored at a central station over a dedicated
phone line. Said alarm system will cover all apertures in the walls and
ceiling of the Licensed Location and will include a motion detector which
will cover the area occupied by the Devices. Said alarm system will cause a
phone line failure violation at the alarm company's central station anytime
the phone line from the Licensor's premises to the alarm central office is
cut or disrupted.
7. Use and Operation. Licensee agrees to use the Gaming Space within
the Licensed Locations for the sole purpose of operating the Devices in such
space and will at all times conduct its business in a first-class business
like and attractive high-grade and proper manner, including, without
limitation, (1) maintaining the Devices in good condition and repair at its
own expense and at no expense to Licensor; (2) replacing any out of date
Devices at its own expense with modern, up-to-date Devices from time to time;
(3) employing a change cashier or installing money changing devices so that
the store cashiers in the Licensed Location will not be required to make
change for the operation of the Devices; and (4) not employing any person or
persons within the Licensed Locations deemed objectionable by Licensor. Upon
request of Licensor, Licensee agrees to remove any such objectionable
employee as quickly as reasonably possible under existing federal, state, and
local laws. Signs of such type and size as may be mutually agreed upon by
Licensor and Licensee shall be placed by Licensee in a conspicuous place at
each of the Licensed Locations stating that Licensee is the owner and
operator of the Devices. Licensor may not ban smoking in the Gaming Spaces
unless such change is required by law, lease or regulation.
8. Title to Property. All personal property (including, without
limitation, the Devices) placed on the Licensed Locations by Licensee shall
be and remain the personal property of Licensee (except as provided in
Section 13 with respect to default) and, upon the expiration or earlier
termination of this Agreement, Licensee shall within ten (10) days thereafter
and at its sole expense, remove from the Licensed Locations all such personal
property and restore such Licensed Locations to their original conditions,
ordinary wear and tear excepted.
9. General Covenants. Licensee agrees to comply with all applicable
laws, ordinances, and governmental regulations now in force or hereafter
enacted relating to the business operations of the Licensee in the Licensed
Locations; to make any and all alterations, repairs, and changes, at its
expense, required by any such laws, ordinances, or governmental regulations;
to maintain the Gaming Space occupied by Licensee within each of the Licensed
Locations in a clean state and in good condition and repair; not to make any
alterations in such space without the prior written consent of Licensor; and
at the expiration or termination of this Agreement, to surrender peaceable
possession thereof to Licensor in as good condition as it received the same,
loss or damage by fire (except if caused by the act or neglect of Licensee or
its employees) and wear and tear resulting from reasonable use excepted.
10. Indemnification and Insurance. Licensee agrees to indemnify and
hold Licensor harmless from all claims, demands, causes of action, losses,
damages, and liability, including costs and expenses and reasonable
attorneys' fees incurred by Licensor in connection with any claim by third
parties, including employees of Licensee, for injury to or death or damage to
property occurring in or on or about the portions of the Licensed Locations
licensed to Licensee or arising out of operations conducted by Licensee.
Licensee, at its own cost and expense, shall maintain commercial general
liability and automobile liability insurance with a limit of not less than
$1,000,000 applicable to any one occurrence. Such insurance shall name
Licensor as an additional insured with respect to operations conducted in
connection with this Agreement. Licensee shall maintain Workers'
Compensation insurance for its employees in the form required by the State of
Nevada or provide Workers' Compensation on a self-insured basis in compliance
with applicable Nevada regulations. Licensee shall, upon request, provide
Licensor with certificate(s) evidencing the foregoing insurance coverages.
Whether or not it elects to insure its personal property at locations covered
by this Agreement, Licensee hereby waives any right of recovery from Licensor
for any loss or damage to such property resulting from any of the perils
insured against in the standard form fire insurance policy with Extended
Coverages and Vandalism and Malicious Mischief Endorsements. To the extent
that any insurance maintained by Licensee includes coverage against
additional perils, this waiver shall apply with respect to loss damage
resulting from such other perils.
11. Termination of License. If Licensor ceases to do business in any
of the Licensed Locations for any reason whatsoever, this License Agreement
shall terminate as to the Licensed Locations where such business is
discontinued, effective at the time of such discontinuance, and thereafter no
license fees shall be payable under this Agreement with respect to the
Licensed Locations at which Licensor ceases to do business. If Licensor
ceases to do business in a location other than at the end of a calendar
month, the license fee for the month in which business ceases shall be
prorated. This License Agreement will continue to apply to all remaining
Licensed Locations.
12. Interruption of Business. If the business of any Licensed
Locations subject to this Agreement is substantially interrupted by reason of
a major remodeling, fire, other casualty, or any other cause not the fault of
Licensee, and such interruption substantially and adversely affects the
business of Licensee in such Licensed Location, then, from and after such
interruption and until the cause thereof has been corrected or eliminated,
the fees due Licensor hereunder for such Licensed Locations shall be
equitably reduced or abated to the extent agreed between the parties.
13. Default. If Licensee defaults in the payment of the fees payable
by it hereunder or fails to perform any other of its obligations under this
Agreement, and Licensee fails to cure such default within a period of fifteen
(15) days after written notice from Licensor and such default is not cured
within the applicable grace period provided therein, then Licensor shall have
all rights and remedies now or hereafter provided by law and, in addition,
may do any one or more of the following:
(a) Terminate this Agreement by giving written notice to Licensee;
resume possession of the space occupied by Licensee in the Licensed
Locations; retain all Devices, fixtures, and other personal property of
Licensee remaining on such space and full right and authority to sell, lease,
or otherwise dispose of the same or to store the same, all at the expense of
Licensee; and to recover from Licensee all fees due under this Agreement had
it not been terminated, less the net amount realized by Licensor from any
such sale, lease, or other disposition.
(b) Without terminating this Agreement, reenter and assume possession
of the space so licensed and of all Devices, fixtures, and other personal
property of Licensee located therein and relet the space and sell, lease, or
otherwise dispose of the Devices, fixtures, and other personal property, all
on such terms and conditions as Licensor deems advisable, and in any such
event, Licensee shall pay promptly upon demand the difference between the
fees due under this Agreement for the period of such reletting (but not
beyond the term of this Agreement) and the net amount received by Licensor
from such reletting and from such sale, lease, or other disposition.
(c) To treat all amounts due and not paid by Licensee to the date of
such default, together with all amounts payable under this Agreement during
the remaining term of this Agreement following such default, as an
indebtedness of Licensee immediately due and payable to Licensor and recover
the same.
In the event of any such default, Licensee shall have no right to remove
any Devices, fixtures, or other personal property of Licensee from the space
licensed, and Licensor shall have a lien thereon as security for the payment
of all amounts due Licensor under the Agreement.
14. Assignment. Licensee may not assign this Agreement without prior
written approval of Licensor, except that Licensee may assign this Agreement
to a wholly-owned subsidiary of Jackpot Enterprises, Inc. without such prior
written approval; provided, that such assignee agrees to be bound by all of
the terms and conditions of this Agreement and Licensee guarantees the
payment and performance by such assignee of its obligations hereunder during
the remaining term hereof. Subject to such provision, this Agreement shall
bind and its benefits shall inure to the parties hereto, their successors,
and assigns.
15. Notices and Demands. All notices and demands made pursuant to this
Agreement shall be sufficient if made in writing and delivered by fax or
overnight delivery service______________________________________, or to
Licensee at 1110 Palms Airport Drive, Las Vegas, Nevada 89119. All notices
mailed shall be deemed given when mailed.
16. Relationship Between the Parties. The relationship of Licensor and
Licensee shall be solely that of licensor and licensee and nothing herein
contained shall be construed to constitute Licensor and Licensee as landlord
and tenant, sublandlord and subtenant, partners, joint venturers or any other
relationship whatsoever.
17. Confidentiality. This Agreement and the information contained
herein, including but not limited to the fees payable to Licensor by
Licensee, is confidential and shall not be disclosed to any person except the
gaming licensing authorities of the State of Nevada upon proper request,
unless and to the extent required by laws or regulations applicable to the
parties.
18. Existing Agreement. The Parties heretofore entered into a License
Agreement dated June 19, 1990 as amended on April 24, 1997 (the "Existing
Agreement") for Licensee's operation of Devices in Licensor's Locations.
Upon entering into this License Agreement, the Existing Agreement is
terminated.
19. Additional Remedies. In addition to the remedies set forth in this
Agreement, Licensor and Licensee shall have all other remedies provided by
law to the same extent as if fully set forth herein. No remedy herein
conferred upon, or reserved to Licensor or Licensee, shall exclude any other
remedy herein or by law provided, but each shall be cumulative.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and
year first above written.
RITE AID CORPORATION
By /s/ Elliot Gerson
___________________________
Exec. V.P.
CARDIVAN COMPANY
By /s/ George Congdon
____________________________
President
<PAGE>
Exhibit A to License Agreement Between
Rite Aid Corporation and Cardivan Company
Dated March 12, 1999
<TABLE>
Location No. of Machines Store Hours
__________________________ _______________ ________________________
<S> <C> <C>
Rite Aid #6114 10 24 hours
5991 W. Cheyenne
Las Vegas, NV 89108
Rite Aid #6115 15 24 hours
2905 S. Maryland Parkway
Las Vegas, NV 89109
Rite Aid #6116 10 Mon.-Sat. 7 a.m.-9 p.m.
2950 E. Desert Inn Sun. 7 a.m.-6 p.m.
Las Vegas, NV 89121
Rite Aid #6121 6 Mon.-Sat. 8 a.m.-9 p.m.
1327 Highway 395 South Sun. 9 a.m. - 7 p.m.
Gardnerville, NV 89410
Rite Aid #6193 15 24 hours
1515 W. Craig Road
North Las Vegas, NV 89030
Rite Aid #6217 10 Mon.-Sat. 7 a.m.-9 p.m.
525 E. Windmill Sun. 7 a.m.-6 p.m.
Las Vegas, NV 89123
Rite Aid #6220 10 24 hours
2513 South Nellis
Las Vegas, NV 89121
Rite Aid #6221 15 24 hours
3845 E. Lake Mead Blvd.
N. Las Vegas, NV 89115
Rite Aid #6222 10 Mon.-Sat. 7 a.m.-9 p.m.
8500 South Eastern Sun. 7 a.m.-6 p.m.
Henderson, NV 89123
Rite Aid #6240 10 24 hours
10 North Eastern
Las Vegas, NV 89101
Rite Aid #6245 10 Mon.-Sat. 7 a.m.-9 p.m.
7575 W. Vegas Drive Sun. 7 a.m.-6 p.m.
Las Vegas, NV 89128
Rite Aid #6247 10 Mon.-Fri. 7:30 a.m.-9:00 p.m.
8485 Sun Valley Blvd. Sat. 7:30 a.m.-8 p.m.
Sun Valley, NV 89433 Sun. 9 a.m.-7 p.m.
Rite Aid #6260 10 Mon.-Sat. 7 a.m.-9 p.m.
8611 Spring Mountain Road Sun. 7 a.m.-6 p.m.
Las Vegas, NV 89117
Rite Aid #6261 10 Mon.-Sat. 7 a.m.-9 p.m.
3115 Las Vegas Blvd. Sun. 7 a.m.-6 p.m.
Las Vegas, NV 89109
Rite Aid #6271 10 24 hours
9350 West Sahara
Las Vegas, NV 89117
Rite Aid #6279 10 24 hours
1410 E. Prater Way
Sparks, NV 89434
</TABLE>
EXHIBIT 10.14
LICENSE AGREEMENT
THIS AGREEMENT is entered into as of the 12th day of March
1999, between Rite Aid Corporation, a Delaware corporation
("Licensor"), and Corral Coin, Inc., a Nevada corporation ("Licensee").
Licensee and Licensor are collectively referred to as "the Parties".
1. Purpose. This Agreement sets forth the terms and conditions under
which the Licensee shall have the exclusive right to operate certain gaming
devices (the "Devices") within each of the stores operated by Licensor in the
State of Nevada which are designated on Exhibit "A" attached hereto and
incorporated herein by reference (the "Licensed Locations"). Notwithstanding
the foregoing, an off-site replacement of a Licensed Location which constitutes
a "replacement store" in accordance with Licensor's internal policies, which
opens concurrently with the closing of the Licensed Location it is replacing,
and which is located not more than two miles from the Licensed Location it is
replacing, shall not constitute a new location for purposes of this Agreement.
Licensee shall have the exclusive right to operate Devices within each
replacement store.
2. License. Licensor hereby grants to Licensee the use of such amount of
space (the "Gaming Space") as is reasonably required to set up the number of
Devices currently permitted at such Licensed Location. The Gaming Space shall
be located as close to the entrance and checkstand of the Licensed Location as
is reasonably practicable with the exact location and square footage of the
Gaming Space to be determined by mutual agreement of the parties. Upon
agreement of the Gaming Space, Licensor will not change location of, or reduce
the Gaming Space without Licensee's written consent. Licensee is hereby granted
an exclusive right to operate up to the maximum number of Devices currently
allowed by the State of Nevada in each of the Licensed Locations. However,
Licensee may not operate fewer than RCT Devices at any Licensed Location in
Clark County or the city limits of either Reno or Carson City.
3. Term. The term of the license for each Licensed Location shall begin
on RCT and shall expire at midnight on RCT. Licensee shall have first right
of refusal as against any other licensed operator to operate the Devices on the
premises of the Licensed Locations upon the expiration of this Agreement. On
or before the expiration of this Agreement, and upon Licensor's disclosure to
Licensee of the terms of another licensed operator's firm offer, Licensee shall
have thirty days to notify Licensor of its intention to match such offer.
4. Fees.
a. During the initial term of this License Agreement, Licensee agrees
to pay Licensor the following amount per Licensed Location per month:
<TABLE>
Licensed Location Monthly Fee Per Licensed Location
_________________ ___________________________________________
<S> <C>
RCT RCT RCT
Rite Aid #6109 RCT RCT RCT
Rite Aid #6110 RCT RCT RCT
Rite Aid #6111 RCT RCT RCT
Rite Aid #6112 RCT RCT RCT
Rite Aid #6113 RCT RCT RCT
Rite Aid #6117 RCT RCT RCT
Rite Aid #6118 RCT RCT RCT
Rite Aid #6119 RCT RCT RCT
</TABLE>
b. During the term of this Agreement, Licensee agrees to pay Licensor
the following amount per month for a new location (the "New Location").
<TABLE>
Location (2) Period Monthly Fee Per New Location
__________________ ______ ____________________________
<S> <C> <C>
Clark County RCT RCT
RCT RCT
RCT RCT (1)
RCT RCT (1)
Reno/Carson City RCT RCT
(city limits) RCT RCT
RCT RCT
RCT RCT
</TABLE>
(1) Subject to RCT or more Licensed Locations in operation, including
the Licensed Locations in operation under the License Agreement between Rite Aid
Corporation and Cardivan Company dated March 12, 1999. If less than RCT
locations in operation, monthly fee for New Locations is the amount listed above
for the period RCT through RCT.
(2) For New Locations outside of Clark County or Reno/Carson City,
the monthly fee will be mutually agreed upon by the Parties based on factors
associated with each New Location.
c. During the term of this Agreement, if Licensor opens or acquires
any New Location and Licensor determines to include Devices at such New
Location, Exhibit A hereto shall be amended to include such New Location. In
the case of a New Location opened or acquired on or after RCT, the fees due
pursuant to this Section 4 with respect to such New Location shall be RCT of the
then monthly fee during the RCT period following the date such New Location is
opened for business by Licensor; provided, that if Licensor has not taken all
steps required to be taken by it to permit Licensee to commence operations at
such New Location, the RCT shall not commence until all such actions have been
taken.
d. In the event an Existing Location is closed for renovation for a
period of RCT or more, the Fees with respect to such renovated Existing Location
shall be RCT of the then applicable monthly fee due pursuant to this Section 4
during the RCT period following the date such renovated Existing Location is
reopened for business by Licensor; provided, that if Licensor has not taken all
steps required to be taken by it to permit Licensee to recommence operations at
such Existing Location, the RCT period shall not commence until all such actions
have been taken.
e. The above fee shall be due and payable on the first day of each
month. Fees for any partial month shall be prorated.
f. In the event that (i) Licensor should effect a material reduction
in the hours of operation of the Licensed Locations, from the hours of operation
in effect on the date of this Agreement, or (ii) there should be a change in the
laws or regulations applicable to the operation of gaming devices in retail food
and drug facilities which has the effect of materially reducing the revenues
received by Licensee from its operation of the Devices hereunder, or (iii) a
smoking ban is imposed at a Licensed Location by either Federal, state or local
authorities, or by the terms of a lease agreement between Licensor and a third
party, the parties shall negotiate in good faith to arrive at an equitable
adjustment to the terms of this Agreement.
5. Taxes. Licensee agrees to pay all taxes (other than real estate taxes)
payable in connection with the conduct of its business in the Licensed
Locations, including personal
property taxes levied against the Devices, fixtures, and other personal property
of the Licensee in the Licensed Locations. Licensee will pay all social
security, unemployment, and old age benefit taxes, state, federal, and local,
or other similar taxes due with respect to employees or wages paid to employees
of the Licensee in the Licensed Locations. Licensee will maintain and pay all
license fees, federal, state, county, or city, necessary for its operations in
the Licensed Locations.
6. Security System on Premises. If a Licensed Location is not open
twenty-four (24) hours a day, seven (7) days a week, Licensor agrees to install
and maintain or have maintained, a burglar alarm system at such Licensed
Location that is monitored at a central station over a dedicated phone line.
Said alarm system will cover all apertures in the walls and ceiling of the
Licensed Location and will include a motion detector which will cover the
area occupied by the Devices. Said alarm system will cause a phone line failure
violation at the alarm company's central station anytime the phone line from the
Licensor's premises to the alarm central office is cut or disrupted.
7. Use and Operation. Licensee agrees to use the Gaming Space within the
Licensed Locations for the sole purpose of operating the Devices in such space
and will at all times conduct its business in a first-class business like and
attractive high-grade and proper manner, including, without limitation, (1)
maintaining the Devices in good condition and repair at its own expense and at
no expense to Licensor; (2) replacing any out of date Devices at its own expense
with modern, up-to-date Devices from time to time;(3)employing a change cashier
or installing money changing devices so that the store cashiers in the Licensed
Location will not be required to make change for the operation of the Devices;
and (4) not employing any person or persons within the Licensed Locations
deemed objectionable by Licensor. Upon request of Licensor, Licensee agrees to
remove any such objectionable employee as quickly as reasonably possible under
existing federal, state, and local laws. Signs of such type and size as may be
mutually agreed upon by Licensor and Licensee shall be placed by Licensee in a
conspicuous place at each of the Licensed Locations stating that Licensee is the
owner and operator of the devices. Licensor may not ban smoking in the Gaming
Spaces unless such change is required by law, lease or regulation.
8. Title to Property. All personal property (including, without
limitation, the Devices) placed on the Licensed Locations by Licensee shall be
and remain the personal property of Licensee (except as provided in Section 13
with respect to default) and, upon the expiration or earlier termination of this
Agreement, Licensee shall within ten (10) days thereafter and at its sole
expense, remove from the Licensed Locations all such personal property and
restore such Licensed Locations to their original conditions, ordinary wear
and tear excepted.
9. General Covenants. Licensee agrees to comply with all applicable laws,
ordinances, and governmental regulations now in force or hereafter enacted
relating to the business operations of the Licensee in the Licensed Locations;
to make any and all alterations, repairs, and changes, at its expense, required
by any such laws, ordinances, or governmental regulations; to maintain the
Gaming Space occupied by Licensee within each of the Licensed Locations in a
clean state and in good condition and repair; not to make any alterations in
such space without the prior written consent of Licensor; and at the
expiration or termination of this Agreement, to surrender peaceable possession
thereof to Licensor in as good condition as it received the same, loss or damage
by fire (except if caused by the act or neglect of Licensee or its employees)
and wear and tear resulting from reasonable use excepted.
10. Indemnification and Insurance. Licensee agrees to indemnify and hold
Licensor harmless from all claims, demands, causes of action, losses, damages,
and liability, including costs and expenses and reasonable attorneys' fees
incurred by Licensor in connection with any claim by third parties, including
employees of Licensee, for injury to or death or damage to property occurring
in or on or about the portions of the Licensed Locations licensed to Licensee
or arising out of operations conducted by Licensee. Licensee, at its own cost
and expense, shall maintain commercial general liability and automobile
liability insurance with a limit of not less than $1,000,000 applicable to any
one occurrence. Such insurance shall name Licensor as an additional insured
with respect to operations conducted in connection with this Agreement.
Licensee shall maintain Workers' Compensation insurance for its employees in the
form required by the State of Nevada or provide Workers' Compensation on a
self-insured basis in compliance with applicable Nevada regulations. Licensee
shall, upon request, provide Licensor with certificate(s) evidencing the
foregoing insurance coverages. Whether or not it elects to insure its personal
property at locations covered by this Agreement, Licensee hereby waives any
right of recovery from Licensor for any loss or damage to such property
resulting from any of the perils insured against in the standard form fire
insurance policy with Extended Coverages and Vandalism and Malicious Mischief
Endorsements. To the extent that any insurance maintained by Licensee includes
coverage against additional perils, this waiver shall apply with respect to loss
damage resulting from such other perils.
11. Termination of License. If Licensor ceases to do business in any of
the Licensed Locations for any reason whatsoever, this License Agreement shall
terminate as to the Licensed Locations where such business is discontinued,
effective at the time of such discontinuance, and thereafter no license fees
shall be payable under this Agreement with respect to the Licensed Locations at
which Licensor ceases to do business. If Licensor ceases to do business in a
location other than at the end of a calendar month, the license fee for the
month in which business ceases shall be prorated. This License Agreement will
continue to apply to all remaining Licensed Locations.
12. Interruption of Business. If the business of any Licensed Locations
subject to this Agreement is substantially interrupted by reason of a major
remodeling, fire, other casualty, or any other cause not the fault of Licensee,
and such interruption substantially and adversely affects the business of
Licensee in such Licensed Location, then, from and after such interruption and
until the cause thereof has been corrected or eliminated, the fees due Licensor
hereunder for such Licensed Locations shall be equitably reduced or abated to
the extent agreed between the parties.
13. Default. If Licensee defaults in the payment of the fees payable by
it hereunder or fails to perform any other of its obligations under this
Agreement, and Licensee fails to cure such default within a period of fifteen
(15) days after written notice from Licensor and such default is not cured
within the applicable grace period provided therein, then Licensor shall have
all rights and remedies now or hereafter provided by law and, in addition, may
do any one or more of the following: (a) Terminate this Agreement by giving
written notice to Licensee; resume possession of the space occupied by Licensee
in the Licensed Locations; retain all Devices, fixtures, and other personal
property of Licensee remaining on such space and full right and authority to
sell, lease, or otherwise dispose of the same or to store the same, all at the
expense of Licensee; and to recover from Licensee all fees due under this
Agreement had it not been terminated, less the net amount realized by Licensor
from any such sale, lease, or other disposition.
(b) Without terminating this Agreement, reenter and assume possession
of the space so licensed and of all Devices, fixtures, and other personal
property of Licensee located therein and relet the space and sell, lease, or
otherwise dispose of the Devices, fixtures, and other personal property, all on
such terms and conditions as Licensor deems advisable, and in any such event,
Licensee shall pay promptly upon demand the difference between the fees due
under this Agreement for the period of such reletting (but not beyond the term
of this Agreement) and the net amount received by Licensor from such reletting
and from such sale, lease, or other disposition.
(c) To treat all amounts due and not paid by Licensee to the date of
such default, together with all amounts payable under this Agreement during the
remaining term of this Agreement following such default, as an indebtedness of
Licensee immediately due and payable to Licensor and recover the same.
In the event of any such default, Licensee shall have no right to remove
any Devices, fixtures, or other personal property of Licensee from the space
licensed, and Licensor shall have a lien thereon as security for the payment of
all amounts due Licensor under the Agreement.
14. Assignment. Licensee may not assign this Agreement without prior
written approval of Licensor, except that Licensee may assign this Agreement to
a wholly-owned subsidiary of Jackpot Enterprises, Inc. without such prior
written approval; provided, that such assignee agrees to be bound by all of the
terms and conditions of this Agreement and Licensee guarantees the payment and
performance by such assignee of its obligations hereunder during the remaining
term hereof. Subject to such provision, this Agreement shall bind and its
benefits shall inure to the parties hereto, their successors, and assigns.
15. Notices and Demands. All notices and demands made pursuant to this
Agreement shall be sufficient if made in writing and delivered by fax or
overnight delivery service to______________________, or to Licensee at 1110
Palms Airport Drive, Las Vegas, Nevada 89119. All notices mailed shall
be deemed given when mailed.
16. Relationship Between the Parties. The relationship of Licensor and
Licensee shall be solely that of licensor and licensee and nothing herein
contained shall be construed to constitute Licensor and Licensee as landlord
and tenant, sublandlord and subtenant, partners, joint venturers or any other
relationship whatsoever.
17. Confidentiality. This Agreement and the information contained
herein, including but not limited to the fees payable to Licensor by
Licensee, is confidential and shall not be disclosed to any person except the
gaming licensing authorities of the State of Nevada upon proper request,
unless and to the extent required by laws or regulations applicable to the
parties.
18. Existing Agreement. The Parties heretofore entered into a License
Agreement dated April 14, 1992 as amended on April 9, 1997 (the "Existing
Agreement") for Licensee's operation of Devices in Licensor's Locations.
Upon entering into this License Agreement, the Existing Agreement is
terminated.
19. Additional Remedies. In addition to the remedies set forth in this
Agreement, Licensor and Licensee shall have all other remedies provided by
law to the same extent as if fully set forth herein. No remedy herein
conferred upon, or reserved to Licensor or Licensee, shall exclude any other
remedy herein or by law provided, but each shall be cumulative.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and
year first above written.
RITE AID CORPORATION
By /s/ Elliot Gerson
___________________________
Exec. V.P.
CORRAL COIN, INC.
By /s/ George Congdon
___________________________
President
<PAGE>
Exhibit A to License Agreement Between
Rite Aid Corporation and Corral Coin, Inc.
Dated March 12, 1999
<TABLE>
Location No. of Machines Store Hours
_____________________________ _______________ _______________________
<S> <C> <C>
Rite Aid #6109 15 Mon.-Sat. 7 a.m.-9 p.m.
2255 N. Green Valley Parkway Sun. 7 a.m.-6 p.m.
Henderson, NV 89014
Rite Aid #6110 15 Mon.-Sat. 7 a.m. - 9 p.m.
716 S. Boulder Highway Sun. 7 a.m.-6 p.m.
Henderson, NV 89015
Rite Aid #6111 25 Mon.-Sat. 7 a.m.-9 p.m.
3852 W. Sahara Sun. 7 a.m.-6 p.m.
Las Vegas, NV 89102
Rite Aid #6112 15 Mon.-Sat. 7 a.m.-9 p.m.
4230 S. Rainbow Sun. 7 a.m.-6 p.m.
Las Vegas, NV 89103
Rite Aid #6113 16 Mon.-Sat. 7 a.m.-9 p.m.
4530 E. Charleston Sun. 7 a.m.-6 p.m.
Las Vegas, NV 89104
Rite Aid #6117 16 Mon.-Sat. 7 a.m.-9 p.m.
911. S. Rainbow Sun. 7 a.m.-6 p.m.
Las Vegas, NV 89128
Rite Aid #6118 10 24 hours
4911 W. Craig Road
Las Vegas, NV 89130
Rite Aid #6119 15 24 hours
8530 W. Lake Mead
Las Vegas, NV 89128
/TABLE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Jackpot's
Consolidated Balance Sheets - March 31, 1999 and June 30, 1998 and its
Consolidated Statements of Income - three and nine months ended March 31, 1999
and 1998 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 47,929
<SECURITIES> 6,340
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 57,113
<PP&E> 35,644
<DEPRECIATION> 20,715
<TOTAL-ASSETS> 82,707
<CURRENT-LIABILITIES> 6,001
<BONDS> 0
0
0
<COMMON> 99
<OTHER-SE> 73,602
<TOTAL-LIABILITY-AND-EQUITY> 82,707
<SALES> 0
<TOTAL-REVENUES> 70,530
<CGS> 0
<TOTAL-COSTS> 58,995
<OTHER-EXPENSES> 3,541
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,984
<INCOME-TAX> 1,675
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,309
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
</TABLE>
