-----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, OoUzA68+eG2t97i/u78JyV7JfE64vn1id98h8whBZ8HLV3oHG6gtOi1183ZOIJZa w8RA997mhYlq2De1e0KTVA== 0000351903-96-000005.txt : 19960513 0000351903-96-000005.hdr.sgml : 19960513 ACCESSION NUMBER: 0000351903-96-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960510 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: 96559349 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 March 31, 1996 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 9,306,745 shares of the registrant's common stock outstanding as of May 3, 1996. JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES INDEX Part I. Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets - March 31, 1996 and June 30, 1995 Condensed Consolidated Statements of Income - Three and Nine Months Ended March 31, 1996 and 1995 Condensed Consolidated Statement of Stockholders' Equity - Nine Months Ended March 31, 1996 Condensed Consolidated Statements of Cash Flows - Nine Months Ended March 31, 1996 and 1995 Notes to Condensed Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Part II. Other Information Item 6. Exhibits and Reports on Form 8-K JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (Unaudited) March 31, June 30, ASSETS 1996 1995 ______ ________ ________ Current assets: Cash and cash equivalents $ 37,991 $ 32,916 Prepaid expenses 1,087 1,703 Other current assets 1,774 2,637 ________ ________ Total current assets 40,852 37,256 ________ ________ Property and equipment, at cost: Land and buildings 2,656 2,656 Gaming equipment 29,036 26,676 Other equipment 4,506 4,328 Leasehold improvements 724 713 ________ ________ 36,922 34,373 Less accumulated depreciation (21,817) (19,322) ________ ________ 15,105 15,051 Lease acquisition costs and other intangible assets, net of accumulated amortization of $6,978 and $6,061 5,994 7,292 Goodwill, net of accumulated amortization of $2,485 and $2,341 5,145 5,289 Lease and other security deposits 3,453 3,490 Other non-current assets 2,501 3,581 ________ ________ Total assets $ 73,050 $ 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) March 31, June 30, LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995 ____________________________________ ________ _______ Current liabilities: Current portion of long-term debt $ 678 Accounts payable $ 333 566 Other current liabilities 3,813 4,372 _______ _______ Total current liabilities 4,146 5,616 Long-term debt, less current portion 271 Deferred rent 3,290 3,506 Accrued pension and other liabilities 2,076 2,350 _______ _______ Total liabilities 9,512 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; 9,599,540 and 9,595,388 shares issued 96 96 Additional paid-in capital 63,767 63,935 Retained earnings (accumulated deficit) 3,310 (180) Less 293,748 and 293,741 shares of common stock in treasury, at cost (3,635) (3,635) _______ _______ Total stockholders' equity 63,538 60,216 _______ _______ Total liabilities and stockholders' equity $73,050 $71,959 ======== =======
See Notes to Condensed Consolidated Financial Statements. JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME THREE AND NINE MONTHS ENDED MARCH 31, 1996 AND 1995 (Dollars in thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended March 31, March 31, __________________ _________________ 1996 1995 1996 1995 _______ _______ _______ _______ Revenues: Route operations $21,000 $22,141 $62,055 $65,063 Casino operations 1,846 2,096 5,976 6,576 _______ _______ _______ _______ Totals 22,846 24,237 68,031 71,639 _______ _______ _______ _______ Costs and expenses: Route operations 16,344 16,685 47,689 48,965 Casino operations 1,745 1,881 5,237 5,946 Amortization 546 750 1,657 2,074 Depreciation 1,008 1,342 3,303 4,007 General and administrative 958 1,375 3,190 4,128 _______ _______ _______ _______ Totals 20,601 22,033 61,076 65,120 _______ _______ _______ _______ Operating income 2,245 2,204 6,955 6,519 _______ _______ _______ _______ Other income (expense): Interest and other income 463 315 1,177 720 Interest expense (22) (22) (125) _______ _______ _______ _______ Totals 463 293 1,155 595 _______ _______ _______ _______ Income before income tax 2,708 2,497 8,110 7,114 _______ _______ _______ _______ Provision for Federal income tax: Current 2,393 2,393 Deferred (1,527) 825 202 2,349 _______ _______ _______ _______ Totals 866 825 2,595 2,349 _______ _______ _______ _______ Net income $ 1,842 $ 1,672 $ 5,515 $ 4,765 ======= ======= ======= ======= Earnings per common and common equivalent share $ .20 $ .18 $ .59 $ .52 ======= ======= ======= ======= Cash dividends per share of common stock $ .08 $ .08 $ .24 $ .24 ======= ======= ======= =======
See Notes to Condensed Consolidated Financial Statements. JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY NINE MONTHS ENDED MARCH 31, 1996 (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) $60,216 Cash dividends ($.24 per share) (201) (2,025) (2,226) Issuance of shares on exercise of stock options 5 33 33 Net income 5,515 5,515 _____ ___ _______ _______ ____ _______ _______ Balance March 31, 1996 9,600 $96 $63,767 $ 3,310 (294) $(3,635) $63,538 ===== === ======= ======= ==== ======= =======
See Notes to Condensed Consolidated Financial Statements. JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED MARCH 31, 1996 AND 1995 (Dollars in thousands) (Unaudited) 1996 1995 _______ _______ Operating activities: Net income $ 5,515 $ 4,765 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,960 6,081 Deferred Federal income tax 202 2,349 Net gain on sales and retirements of property and equipment (344) (133) Other (200) Increase (decrease) from changes in: Prepaid expenses and other current assets 519 427 Other non-current assets (107) 204 Accounts payable (233) (891) Other current liabilities 686 134 Deferred rent (216) 913 Other liabilities (274) 138 _______ _______ Net cash provided by operating activities 10,708 13,787 _______ _______ Investing activities: Proceeds from sales of short-term investments 509 Net proceeds from location operators 181 180 Proceeds from sales of other non-current assets 500 617 Proceeds from sales of property and equipment 524 204 Purchases of property and equipment (3,422) (2,615) Advances to equity investee (1,498) Increase in lease acquisition costs and other intangible assets (311) (596) Decrease in lease and other security deposits 37 26 _______ _______ Net cash used in investing activities (2,491) (3,173) _______ _______ Financing activities: Repayments of long-term debt (949) (1,058) Proceeds from issuance of common stock 33 7 Dividends paid (2,226) (2,214) _______ _______ Net cash used in financing activities (3,142) (3,265) _______ _______ Net increase in cash and cash equivalents 5,075 7,349 Cash and cash equivalents at beginning of period 32,916 23,543 _______ _______ Cash and cash equivalents at end of period $37,991 $30,892 ======= ======= Supplemental disclosures of cash flow data: Cash paid during the period for: Interest $ 22 $ 125 Federal income tax $ 1,000 - Non-cash investing and financing activities: Common stock surrendered on exercise of stock options - $ 600 Tax benefit from exercise of stock options - $ 86 Reduction of debt upon sale of other non-current asset - $ 479
See Notes to Condensed Consolidated Financial Statements. JACKPOT ENTERPRISES, INC. 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 March 31, 1996, the results of its operations for the three and nine months ended March 31, 1996 and 1995 and its cash flows for the nine months ended March 31, 1996 and 1995. 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 fiscal year ended June 30, 1995 (the "1995 Form 10-K"). The earnings for the three and nine months ended March 31, 1996 and 1995 are not necessarily indicative of results for a full year. Note 2 - Earnings per share: Earnings per share for the three and nine months ended March 31, 1996 and 1995 are computed by dividing net income by the weighted average number of common shares outstanding. 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: For the nine months ended March 31, 1996, Jackpot paid cash dividends of approximately $2,226,000 ($.24 per common share). On April 29, 1996, Jackpot's Board of Directors declared a quarterly dividend of $.08 per common share for the three months ended March 31, 1996 which is payable on or about May 24, 1996 to stockholders of record on May 10, 1996. 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. Common stock warrants: As of June 30, 1995, there were 1,588,195 warrants outstanding and 1,747,015 shares of common stock reserved for issuance upon exercise of such warrants. In January 1996, 129 common shares were issued on exercise of 119 warrants leaving 1,588,076 warrants outstanding which expired pursuant to their terms on January 31, 1996. See Note 7 of Notes to Consolidated Financial Statements in the 1995 Form 10-K. 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. On or about March 7, 1996, Phar-Mor filed a lawsuit against Jackpot in the United States Bankruptcy Court for the Northern District of Ohio, claiming it is owed approximately $1 million under the Amended Agreement. Jackpot has filed an answer and counterclaim reflecting its position that under the Original Agreement Jackpot is owed in excess of $3 million. 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 nine months ended March 31, 1996 (the "1996 nine 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 March 31, 1996 approximated $38.0 million. Net cash provided by operating activities in the 1996 nine months was $10.7 million. Net cash used in investing activities in the 1996 nine months was approximately $2.5 million which included cash used of approximately $3.7 million and cash received of approximately $1.2 million. The $3.7 million of cash used was primarily for the purchase of property and equipment. The $1.2 million of cash received from investing activities consisted primarily of aggregate proceeds from sales of property and equipment and other non-current assets. Net cash used in financing activities in the 1996 nine months was approximately $3.1 million which resulted from the repayment of approximately $.9 million of long-term debt and the payment of approximately $2.2 million of dividends. Liquidity: At March 31, 1996, Jackpot had cash and cash equivalents of approximately $38.0 million, an increase of approximately $5.1 million from June 30, 1995. Jackpot's working capital and current ratio increased to approximately $36.7 million and 9.9 to 1, respectively, at March 31, 1996, from $31.6 million and 6.6 to 1, respectively, at June 30, 1995 primarily as a result of the activities described above. 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. On or about March 7, 1996, Phar-Mor filed a lawsuit against Jackpot in the United States Bankruptcy Court for the Northern District of Ohio, claiming it is owed approximately $1 million under the Amended Agreement. Jackpot has filed an answer and counterclaim reflecting its position that under the Original Agreement Jackpot is owed in excess of $3 million. 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, 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 $1.2 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 non-gaming. 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 three months ended March 31, 1996 (the "1996 three months") decreased approximately $1.4 million (from $24.2 million in the three months ended March 31, 1995 (the "1995 three months") to $22.8 million in the 1996 three months), while total revenues in the 1996 nine months decreased approximately $3.6 million (from $71.6 million in the nine months ended March 31, 1995 (the "1995 nine months") to $68.0 million in the 1996 nine months). The decreases in total revenues of $1.4 million and $3.6 million were the net result of decreases of $1.1 million (from $22.1 million in the 1995 three months to $21.0 million in the 1996 three months) and $3.0 million (from $65.1 million in the 1995 nine months to $62.1 million in the 1996 nine months), respectively, in gaming machine route operations revenues and decreases of $.3 million (from $2.1 million in the 1995 three months to $1.8 million in the 1996 three months) and $.6 million (from $6.6 million in the 1995 nine months to $6.0 million in the 1996 nine months), respectively, in casino operations revenues. The decreases in gaming machine route operations revenues of $1.1 million and $3.0 million were due primarily to the closing or loss, based on management's commitment to maintain pricing discipline, of certain non-chain locations and 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. The decreases in gaming machine route operations revenues resulted from a combination of additional revenues generated from new locations, net of lost revenues from terminated locations and decreases in revenues at existing locations. In the 1996 three months and 1996 nine months, new locations generated revenues of approximately $1.1 million and $3.3 million, respectively. Terminated locations had generated revenues of $1.8 million and $4.9 million in the 1995 three months and 1995 nine months, respectively, while revenues at existing locations decreased $.4 million and $1.4 million in the 1996 three months and 1996 nine months, respectively. The amount of gaming machine route operations revenues attributable to fixed payment leases and revenue sharing contracts for the three and nine months ended March 31, 1996 and 1995 are summarized below (dollars in thousands): Three Months Ended March 31, 1996 1995 _______________________ _____________________ Percent Percent of route of route operations operations Amount revenues Amount revenues _______ __________ _______ __________ Route operations: Fixed payment leases $13,521 64.4% $13,505 61.0% Revenue sharing contracts 7,479 35.6 8,636 39.0 _______ _____ _______ _____ Totals $21,000 100.0% $22,141 100.0% ======= ===== ======= =====
Nine Months Ended March 31, 1996 1995 _______________________ _____________________ Percent Percent of route of route operations operations Amount revenues Amount revenues _______ __________ _______ __________ Route operations: Fixed payment leases $39,433 63.5% $40,336 62.0% Revenue sharing contracts 22,622 36.5 24,727 38.0 _______ _____ _______ _____ Totals $62,055 100.0% $65,063 100.0% ======= ===== ======= =====
The decreases in casino operations revenues of $.3 million and $.6 million were due primarily to the decline in revenues generated at the Debbie Reynolds' Hotel and Casino. Effective March 31, 1996, the Company ceased operations at the Debbie Reynolds' Hotel and Casino. The Company, through its operating subsidiary Debbie's Casino, Inc. ("Debbie's"), had operated approximately 175 gaming machines at this location. Costs and expenses: Route operations expenses in the 1996 three months and 1996 nine months decreased approximately $.4 million (from $16.7 million in the 1995 three months to $16.3 million in the 1996 three months) and $1.3 million (from $49.0 million in the 1995 nine months to $47.7 million in the 1996 nine months) and, as a percentage of route operations revenues, increased to 77.8% and 76.8% in the 1996 three months and 1996 nine months from 75.4% and 75.3% in the respective 1995 periods. The decrease of $.4 million in the 1996 three months over the 1995 three months was due primarily to a decrease in location rent expense attributable to revenue sharing contracts. The decrease of $1.3 million in the 1996 nine months over the 1995 nine months was attributable to decreases of $.4 million in location rent, $.3 million in payroll costs, $.3 million in workers' compensation costs and $.3 million in other route operations expenses. Route operations expenses in the 1996 three months and 1996 nine months 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 and from the decrease in revenues at existing fixed payment lease locations in the 1996 three months and 1996 nine months. With respect to location rent, which is the single largest route operation expense, no contract with a material effect on operating results expires in the remainder of the fiscal year ending June 30, 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 in the 1996 three months, as a percentage of casino operations revenues, increased to 94.5% from 89.7% in the 1995 three months due primarily to the operating results of Debbie's. The decline in operating results at Debbie's was due principally to the decrease in revenues in the 1996 three months. Casino operations expenses in the 1996 nine months decreased approximately $.7 million (from $5.9 million in the 1995 nine months to $5.2 million in the 1996 nine months) and, as a percentage of casino operations revenues, casino operations expenses decreased to 87.6% in the 1996 nine months from 90.4% in the 1995 nine months due primarily to the closing in February 1995 of operations of Water Street Casino, Inc. dba the Post Office Casino (the "Post Office Casino"). With respect to casino operations expenses, the 1995 nine months included approximately $.9 million of costs and expenses incurred by the Post Office Casino. Amortization expense in the 1996 three months and 1996 nine months decreased approximately $.2 million (from $.7 million in the 1995 three months to $.5 million in the 1996 three months) and $.4 million (from $2.1 million in the 1995 nine months to $1.7 million in the 1996 nine months). The decrease in amortization expense in the respective 1996 periods 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 1996 three months and 1996 nine months decreased approximately $.3 million (from $1.3 million in the 1995 three months to $1.0 million in the 1996 three months) and $.7 million (from $4.0 million in the 1995 nine months to $3.3 million in the 1996 nine months). The decrease in depreciation expense in the respective 1996 periods 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 three months ended September 30, 1995. General and administrative expenses in the 1996 three months and 1996 nine months decreased approximately $.4 million (from $1.4 million in the 1995 three months to $1.0 million in the 1996 three months) and $.9 million (from $4.1 million in the 1995 nine months to $3.2 million in the 1996 nine months) primarily as a result of decreases in payroll and other compensation related costs. Interest and other income: Interest and other income in the 1996 three months and 1996 nine months increased approximately $.2 million (from $.3 million in the 1995 three months to $.5 million in the 1996 three months) and $.5 million (from $.7 million in the 1995 nine months to $1.2 million in the 1996 nine months) primarily from the increase in the net gain on sales of certain non-operating assets and 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 1996 three months and 1996 nine months was approximately 32%, which was slightly lower than the 33% rate in the 1995 three months and 1995 nine months primarily because of the increase in tax benefits from tax-exempt interest income in the respective 1996 periods. General: Despite the decrease in revenues in the respective 1996 periods, operating income in the 1996 three months remained constant at approximately $2.2 million compared to the 1995 three months, and in the 1996 nine months increased approximately $.5 million (from $6.5 million in the 1995 nine months to $7.0 million in the 1996 nine months). The increase in operating income of $.5 million in the 1996 nine months was due primarily to the decreases in amortization, depreciation and general and administrative expenses described above. Net income in the 1996 three months and 1996 nine months increased approximately $.1 million (from $1.7 million in the 1995 three months to $1.8 million in the 1996 three months) and $.7 million (from $4.8 million in the 1995 nine months to $5.5 million in the 1996 nine months) due to the results of operations described above. Earnings per share in the 1996 three months and 1996 nine months were $.20 and $.59 per share, respectively, compared to earnings per share in the 1995 three months and 1995 nine months of $.18 and $.52 per share, respectively. 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 and nine months ended March 31, 1996 and 1995. 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 March 31, 1996. 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 10, 1996 EX-11 2 EXHIBIT 11.1 JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE THREE AND NINE MONTHS ENDED MARCH 31, 1996 and 1995 (Dollars and shares in thousands, except per share data) Three Months Ended Nine Months Ended March 31, March 31, __________________ __________________ 1996 1995 1996 1995 _______ _______ _______ _______ Primary: Earnings: Net income $ 1,842 $ 1,672 $ 5,515 $ 4,765 ======= ======= ======= ======= Shares: Weighted average number of common shares outstanding (A) 9,305 9,247 9,303 9,229 ======= ======= ======= ======= Primary earnings per share $ .20 $ .18 $ .59 $ .52 ======= ======= ======= ======= Fully diluted (B): Earnings: Net income $ 1,842 $ 1,672 $ 5,515 $ 4,765 Add after-tax interest, net (C) 129 461 867 1,375 _______ _______ _______ _______ Net income, as adjusted $ 1,971 $ 2,133 $ 6,382 $ 6,140 ======= ======= ======= ======= Shares: Weighted average number of common shares and common share equivalents outstanding 9,305 9,247 9,303 9,229 Common shares issuable upon exercise of stock options and warrants, net of common shares assumed to be repurchased from the proceeds using the greater of the average market price for the period or the period-end price 799 2,571 1,588 2,485 _______ _______ _______ _______ Weighted average number of common shares and common share equivalents outstanding, as adjusted 10,104 11,818 10,891 11,714 ======= ======= ======= ======= Fully diluted earnings per share $ .20 $ .18 $ .59 $ .52 ======= ======= ======= =======
(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 computations 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 - March 31, 1996 and June 30, 1995 and its Consolidated Statements of Income - three and nine months ended March 31, 1996 and 1995 and is qualified in its entirety by reference to such financial statements. 9-MOS JUN-30-1996 MAR-31-1996 37,991 0 0 0 0 40,852 36,922 21,817 73,050 4,146 0 0 0 96 63,442 73,050 0 68,031 0 52,926 4,262 0 22 8,110 2,595 0 0 0 0 5,515 .59 .59
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