-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PfaJA2ZmC3mIIVr2xvM8oUF3tUCKJ5blcgO7H9ICKDnUsNaeT7SDqEqjY5l9BFM4 2/U62CJYoOmdmFOZ/tmn6Q== 0000351903-95-000023.txt : 19951119 0000351903-95-000023.hdr.sgml : 19951119 ACCESSION NUMBER: 0000351903-95-000023 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: JACKPOT ENTERPRISES INC CENTRAL INDEX KEY: 0000351903 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 880169922 STATE OF INCORPORATION: NV FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09728 FILM NUMBER: 95590220 BUSINESS ADDRESS: STREET 1: 1110 PALMS AIRPORT DR CITY: LAS VEGAS STATE: NV ZIP: 89119 BUSINESS PHONE: 7023693424 MAIL ADDRESS: STREET 2: 1110 PALMS AIRPORT DRIVE CITY: LAS VEGAS STATE: NV ZIP: 89119 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 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 number 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 9,301,768 shares of the registrant's common stock outstanding as of October 27, 1995. JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (Unaudited) September 30, June 30, ASSETS 1995 1995 ______ _____________ _________ Current assets: Cash and cash equivalents $ 34,681 $ 32,916 Prepaid expenses 1,607 1,703 Other current assets 1,930 2,637 ________ ________ Total current assets 38,218 37,256 ________ ________ Property and equipment, at cost: Land and buildings 2,656 2,656 Gaming equipment 27,541 26,676 Other equipment 4,367 4,328 Leasehold improvements 721 713 ________ ________ 35,285 34,373 Less accumulated depreciation (20,245) (19,322) ________ ________ 15,040 15,051 Lease acquisition costs and other intangible assets, net of accumulated amortization of $6,503 and $6,061 6,856 7,292 Goodwill, net of accumulated amortization of $2,389 and $2,341 5,241 5,289 Lease and other security deposits 3,456 3,490 Other non-current assets 3,264 3,581 ________ ________ Total assets $ 72,075 $ 71,959 ======== ========
See Notes to Condensed Consolidated Financial Statements. JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share data) (Unaudited) (Concluded) September 30, June 30, LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1995 ____________________________________ _____________ ________ Current liabilities: Current portion of long-term debt $ 548 $ 678 Accounts payable 348 566 Other current liabilities 4,275 4,372 _______ _______ Total current liabilities 5,171 5,616 Long-term debt, less current portion 271 Deferred rent 3,258 3,506 Accrued pension and other liabilities 2,367 2,350 _______ _______ Total liabilities 10,796 11,743 _______ _______ 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; 9,595,388 shares issued 96 96 Additional paid-in capital 63,734 63,935 Retained earnings (accumulated deficit) 1,084 (180) Less 293,741 shares of common stock in treasury, at cost (3,635) (3,635) _______ _______ Total stockholders' equity 61,279 60,216 _______ _______ Total liabilities and stockholders' equity $72,075 $71,959 ======= =======
See Notes to Condensed Consolidated Financial Statements. JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (Dollars in thousands, except per share data) (Unaudited) 1995 1994 _______ _______ Revenues: Route operations $20,607 $21,076 Casino operations 2,194 2,547 _______ _______ Totals 22,801 23,623 _______ _______ Costs and expenses: Route operations 15,776 15,860 Casino operations 1,763 2,405 Amortization 562 660 Depreciation 1,244 1,335 General and administrative 1,189 1,333 _______ _______ Totals 20,534 21,593 _______ _______ Operating income 2,267 2,030 _______ _______ Other income (expense): Interest and other income 395 205 Interest expense (12) (58) _______ _______ Totals 383 147 _______ _______ Income before income tax 2,650 2,177 _______ _______ Provision for Federal income tax: Current Deferred 848 740 _______ _______ Totals 848 740 _______ _______ Net income $ 1,802 $ 1,437 ======= ======= Earnings per common and common equivalent share $ .19 $ .16 ======= ======= Cash dividends per share of common stock $ .08 $ .08 ======= =======
See Notes to Condensed Consolidated Financial Statements. JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY THREE MONTHS ENDED SEPTEMBER 30, 1995 (Dollars and shares in thousands, except per share data) (Unaudited) Retained Additional Earnings Treasury Total Common Stock Paid-in (Accumulated) Stock Stockholders' Shares Amount Capital Deficit) Shares Amount Equity ______ ______ __________ ____________ ______ _______ _________ Balance July 1, 1995 9,595 $96 $63,935 $ (180) (294) $(3,635) $60,216 Cash dividends ($.08 per share) (201) (538) (739) Net income 1,802 1,802 _____ ___ _______ ______ ____ _______ _______ Balance September 30, 1995 9,595 $96 $63,734 $1,084 (294) $(3,635) $61,279 ===== === ======= ====== ==== ======= =======
See Notes to Condensed Consolidated Financial Statements. JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (Dollars in thousands) (Unaudited) 1995 1994 ________ ________ Operating activities: Net income $ 1,802 $ 1,437 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,806 1,995 Deferred Federal income tax 848 740 Net gain on sales and retirements of property and equipment (120) (10) Increase (decrease) from changes in: Prepaid expenses and other current assets (45) 230 Other non-current assets (8) 14 Accounts payable (218) (329) Other current liabilities (97) 336 Deferred rent (248) 348 Other liabilities 17 58 ________ ________ Net cash provided by operating activities 3,737 4,819 ________ ________ Investing activities: Proceeds from sales of short-term investments 509 Net proceeds (advances) to location operators 76 (57) Proceeds from sales of property and equipment 393 31 Purchases of property and equipment (1,257) (729) Advances to equity investee (1,250) Increase in lease acquisition costs and other intangible assets (78) (188) Decrease in lease and other security deposits 34 ________ ________ Net cash used in investing activities (832) (1,684) ________ ________ Financing activities: Repayments of long-term debt (401) (349) Dividends paid (739) (738) ________ ________ Net cash used in financing activities (1,140) (1,087) ________ ________ Net increase in cash and cash equivalents 1,765 2,048 Cash and cash equivalents at beginning of period 32,916 23,543 ________ ________ Cash and cash equivalents at end of period $34,681 $ 25,591 ======== ======== Supplemental disclosures of cash flow data: Cash paid during the period for: Interest $ 12 $ 58 Federal income tax $ - $ -
See Notes to Condensed Consolidated Financial Statements. JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1 - General: In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, necessary to present fairly Jackpot's financial position as of September 30, 1995, and the results of its operations and cash flows for the three months ended September 30, 1995 and 1994. Information included in the condensed consolidated balance sheet as of June 30, 1995 has been derived from Jackpot's Annual Report to the Securities and Exchange Commission on Form 10-K for the year ended June 30, 1995 (the "1995 Form 10-K"). The earnings for the three months ended September 30, 1995 and 1994 are not necessarily indicative of results for a full year. Note 2 - Earnings per share: Earnings per share for the three months ended September 30, 1995 and 1994 are computed by dividing net income of $1,802,000 and $1,437,000, respectively, by the weighted average number of common shares outstanding of 9,302,000 and 9,221,000, respectively. Stock options and warrants have been excluded from the computations because they had no effect or were antidilutive on earnings per share. Note 3 - Stockholders' equity: Cash dividends: During the three months ended September 30, 1995, Jackpot paid cash dividends of approximately $739,000 ($.08 per common share). On October 26, 1995, Jackpot's Board of Directors declared a quarterly dividend of $.08 per common share for the three months ended September 30, 1995 which is payable on or about November 24, 1995 to stockholders of record on November 10, 1995. The 1992 Incentive and Non-qualified Stock Option Plan: On September 30, 1995, the exercise price of the June 30, 1995 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 $10.75 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 7 of Notes to Consolidated Financial Statements in the 1995 Form 10-K for further information regarding the 1992 Plan and option grants. JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 4 - Commitments and contingencies: Legal matter: On August 17, 1992, Phar-Mor, Inc. ("Phar-Mor"), a large chain store, announced that it had filed for protection under Chapter 11 of the U.S. Bankruptcy Code. Jackpot operated 51 gaming machines at three Phar- Mor store locations in Nevada under a license agreement dated February 10, 1990 (the "Original Agreement"). Under the Original Agreement, Jackpot made certain advances to Phar-Mor. Thereafter, Jackpot and Phar-Mor, subject to bankruptcy court approval, entered into an amended license agreement, dated January 1, 1993 (the "Amended Agreement"). If the Amended Agreement were to become final, Jackpot would receive credits for certain prepaid sums but would be required to pay certain additional obligations as described below. On May 12, 1995, Phar-Mor announced the closing of 41 stores, including its three stores in Nevada. On May 24, 1995 Jackpot notified Phar-Mor that it was in default under (i) the Original Agreement, and (ii) the Amended Agreement to the extent applicable. Jackpot has taken the position that the Amended Agreement has not become operative and has not replaced the Original Agreement. Jackpot has claimed monetary damages in excess of several millions of dollars resulting from Phar-Mor's alleged default, consisting of, but not limited to certain refundable monies, prepaid license fees, lost profits and other consequential and incidental damages. On July 25, 1995, Phar-Mor notified Jackpot that it disagreed with Jackpot's position that Phar-Mor has defaulted under the terms of either the Original Agreement or the Amended Agreement. Phar-Mor maintains that the Amended Agreement is the operative agreement and is seeking to enforce its rights thereunder. Jackpot, based upon discussions with counsel, does not believe it is probable that Phar-Mor will prevail in this matter. If Phar-Mor were to prevail and the Amended Agreement is determined to be the operative agreement, Jackpot could be liable for certain obligations under the Amended Agreement up to approximately $1 million. If Jackpot were to prevail, it would become an unsecured creditor with respect to its claims against Phar-Mor which exceed $3 million. 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, 1995 (the "1995 three months"), consisted of the cash flows from operating activities and its available cash and cash equivalents which, at June 30, 1995, approximated $32.9 million and at September 30, 1995 approximated $34.7 million. Net cash provided by operating activities in the 1995 three months was $3.7 million. Net cash used in investing activities in the 1995 three months was approximately $.8 million which included cash used of approximately $1.3 million and cash received of approximately $.5 million. The $1.3 million of cash used was primarily for the purchase of property and equipment. The $.5 million of cash received from investing activities consisted primarily of aggregate proceeds from sales of property and equipment. Net cash used in financing activities in the 1995 three months was approximately $1.1 million which resulted from the repayment of approximately $.4 million of long-term debt and the payment of approximately $.7 million of dividends. Liquidity: At September 30, 1995, Jackpot had cash and cash equivalents of approximately $34.7 million, an increase of approximately $1.8 million from the beginning of the 1995 three months. Jackpot's working capital increased to approximately $33.0 million at September 30, 1995 from $31.6 million at June 30, 1995 primarily as a result of the activities described above. Jackpot's current ratio at September 30, 1995 was approximately 7 to 1. On May 24, 1995, Jackpot notified Phar-Mor, Inc. ("Phar-Mor"), a large chain store, that it was in default under the terms of certain agreements. On July 25, 1995, Phar-Mor notified Jackpot that it disagreed with Jackpot's position and asserted that Jackpot was in default under the terms of the same agreements. Jackpot, based upon discussions with counsel, does not believe it is probable that Phar-Mor will prevail in this matter. If Phar-Mor were to prevail, Jackpot could be liable for certain obligations up to $1 million. If Jackpot were to prevail, it would become an unsecured creditor of Phar-Mor in an amount in excess of $3 million. Management believes Jackpot's working capital and cash provided by operations will be sufficient to enable Jackpot to meet its planned capital expenditures, meet its debt service requirements on its existing debt, pay quarterly cash dividends pursuant to Jackpot's current dividend policy and meet its other ongoing cash requirements as they become due in the fiscal year ending June 30, 1996. With respect to planned capital expenditures, management anticipates Jackpot will purchase approximately $4.3 million of property and equipment, exclusive of business acquisitions, if any, in the remainder of fiscal 1996 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 related. 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. Results of Operations Revenues: Total revenues in the 1995 three months decreased approximately $.8 million (from approximately $23.6 million in the three months ended September 30, 1994 (the "1994 three months") to $22.8 million in the 1995 three months). The decrease in total revenues of $.8 million was the net result of a decrease of $.5 million (from $21.1 million in the 1994 three months to $20.6 million in the 1995 three months) in gaming machine route operations revenues and a decrease of $.3 million (from $2.5 million in the 1994 three months to $2.2 million in the 1995 three months) in casino operations revenues. The decrease in gaming machine route operations revenues of $.5 million was primarily attributable to the loss of the Company's right to operate at all three Phar-Mor locations in Nevada due to the permanent closing by Phar-Mor of such locations in connection with Phar-Mor's bankruptcy reorganization plan. Revenues generated at existing locations and new locations, net of lost revenues from terminated locations (excluding the three Phar-Mor locations) in the 1995 three months approximated the 1994 three months. The amount of gaming machine route operations revenues attributable to fixed payment leases and revenue sharing contracts in the 1995 and 1994 three months are summarized below (dollars in thousands): 1995 1994 _____________________ __________________ Percent Percent of route of route operations operations Amount revenues Amount revenues _______ __________ _______ __________ Route operations: Fixed payment leases $12,840 62.3% $13,312 63.2% Revenue sharing contracts 7,767 37.7 7,764 36.8 _______ _____ _______ _____ Totals $20,607 100.0% $21,076 100.0% ======= ===== ======= =====
The decrease in casino operations revenues in the 1995 three months of $.3 million was primarily due to the closing in February 1995 of operations of Water Street Casino, Inc., dba the Post Office Casino (the "Post Office Casino"). The Post Office Casino had generated approximately $.4 million of revenues in the 1994 three months. Cost and expenses: Route operations expenses in the 1995 three months decreased approximately $.1 million (from $15.9 million in the 1994 three months to $15.8 million in the 1995 three months) and, as a percentage of route operations revenues, increased to 76.6% in the 1995 three months from 75.3% in the 1994 three months. The decrease of $.1 million was primarily attributable to a decrease of approximately $.2 million in payroll costs, net of an increase of approximately $.1 million in all other route operations expenses. Route operations expenses increased as a percentage of route operations revenues primarily because of the loss of the right to operate at the Phar-Mor locations, with which route operations expenses were lower as a percentage of route operations revenues than Jackpot's overall percentage. With respect to location rent, which is the single largest route operations expense, no contract with a material effect on operating results expires in fiscal 1996. See Item 1 - Business - Gaming Machine Route Operations in the 1995 Form 10-K for a further description of the Company's lease and license agreements. Casino operations expenses decreased approximately $.6 million (from $2.4 million in the 1994 three months to $1.8 million in the 1995 three months) and, as a percentage of casino operations revenues, casino operations expenses decreased to 80.3% in the 1995 three months from 94.4% in the 1994 three months. Such decreases were primarily due to the closing of the Post Office Casino. With respect to casino operations expenses, the 1994 three months included approximately $.8 million of costs and expenses incurred by the Post Office Casino. Amortization expense in the 1995 three months decreased by approximately $.1 million (from $.7 million in the 1994 three months to $.6 million in the 1995 three months). The decrease in amortization expense in the 1995 three months was primarily attributable to the decrease in amortization expense related to the three Phar-Mor locations. As a result of the permanent closing of Phar-Mor's three locations in Nevada, Jackpot wrote off all remaining lease acquisition costs related to Phar-Mor in the three months ended June 30, 1995. Depreciation expense in the 1995 three months decreased by approximately $.1 million (from $1.3 million in the 1994 three months to $1.2 million in the 1995 three months). The decrease of approximately $.1 million was primarily attributable to gaming machines acquired in connection with the purchase of a gaming machine route business in 1992, which had become fully depreciated in the 1995 three months. General and administrative expenses in the 1995 three months decreased approximately $.1 million (from $1.3 million in the 1994 three months to $1.2 million in the 1995 three months) primarily as a result of decreases in certain overhead expenses. Interest and other income: Interest and other income in the 1995 three months increased by approximately $.2 million (from $.2 million in the 1994 three months to $.4 million in the 1995 three months) primarily from the increase in interest income as a result of the increase in available cash and cash equivalents. Other: The effective tax rate in the 1995 three months was 32%, which was lower than the 34% rate in the 1994 three months primarily because of the increase in tax benefits from tax-exempt interest income. General: Operating income in the 1995 three months increased approximately $.3 million (from $2.0 million in the 1994 three months to $2.3 million in the 1995 three months). The increase in operating income of $.3 million was primarily due to the decreases in amortization, depreciation and general and administrative expenses described above. Net income in the 1995 three months increased approximately $.4 million (from $1.4 million in the 1994 three months to $1.8 million in the 1995 three months). The increase in net income of $.4 million in the 1995 three months was primarily due to the decreases in certain expenses as described above and an increase in interest and other income. Earnings per share in the 1995 three months was $.19 per share compared to earnings per share in the 1994 three months of $.16 per share. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit 11.1 - Computation of Earnings Per Common Share for the three months ended September 30, 1995 and 1994. Exhibit 27.1 - Financial Data Schedule (EDGAR version only). (b) Reports on Form 8-K - No Form 8-K was filed for the three months ended September 30, 1995. 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 13, 1995 EX-11 2 EXHIBIT 11.1 JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (Dollars and shares in thousands, except per share data) 1995 1994 _______ _______ Primary: Earnings: Net income $ 1,802 $ 1,437 ======= ======= Shares: Weighted average number of common shares outstanding (A) 9,302 9,221 ======= ======= Primary earnings per share $ .19 $ .16 ======= ======= Fully diluted (B): Earnings: Net income $ 1,802 $ 1,437 Add aftertax interest, net (C) 338 443 _______ _______ Net income, as adjusted $ 2,140 $ 1,880 ======= ======= Shares: Weighted average number of common shares and common share equivalents outstanding 9,302 9,221 Common shares issuable upon exercise of stock options and warrants, net of common shares assumed to be repurchased from the proceeds using the period-end price which exceeded the average market price for the period 1,983 2,235 _______ _______ Weighted average number of common shares and common share equivalents outstanding, as adjusted 11,285 11,456 ======= ======= Fully diluted earnings per share $ .19 $ .16 ======= =======
(A) Common shares issuable upon exercise of stock options and warrants, net of common shares assumed to be repurchased from the proceeds at the average market price for the period have been excluded from the computation because they had no effect or were antidilutive on primary earnings per share. (B) These calculations are submitted in accordance with Regulation S-K Item 601 (b) (ii) although not required by Footnote 2 to paragraph 14 of APB Opinion No. 15 because they had no effect on earnings per share. (C) Amounts represent a decrease in interest expense and an increase in interest income as a result of the assumed reduction in borrowings and increase in investments in U. S. government securities from the application of the portion of the proceeds from the assumed exercise of stock options and warrants which were not applied towards the repurchase of outstanding common shares (equivalent to 20% of the common shares outstanding at the end of the applicable period). EX-27 3
5 This schedule contains summary financial information extracted from Jackpot's Consolidated Balance Sheets - September 30, 1995 and June 30, 1995 and its Consolidated Statements of Income - three months ended September 30, 1995 and 1994 and is qualified in its entirety by reference to such financial statements. 3-MOS JUN-30-1996 JUL-1-1995 SEP-30-1995 34,681 0 0 0 0 38,218 35,285 20,245 72,075 5,171 0 96 0 0 61,183 72,075 0 22,801 0 17,539 1,571 0 12 2650 848 0 0 0 0 1,802 .19 .19
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