-----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, S23CB7ritNsYJQHbpnqB5zMwoANaVkk4tBYVvuVjsvRI5o3MFSPgP4NDFv25u3pU kBPDIlXNHbpAgQOZxKdFig== 0000351903-98-000013.txt : 19981113 0000351903-98-000013.hdr.sgml : 19981113 ACCESSION NUMBER: 0000351903-98-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981112 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: SEC FILE NUMBER: 001-09728 FILM NUMBER: 98744766 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 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to___________________ Commission file no. 1-9728 JACKPOT ENTERPRISES, INC. _____________________________________________________________________________ (Exact name of registrant as specified in its charter) NEVADA 88-0169922 _______________________________ ____________________________________ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 1110 Palms Airport Drive, Las Vegas, Nevada 89119 ___________________________________________ __________ (Address of principal executive offices) (Zip Code) 702-263-5555 ____________________________________________________ (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No _____ _____ There were 8,616,680 shares of the registrant's common stock outstanding as of November 6, 1998. JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES INDEX Part I. Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets - September 30, 1998 and June 30, 1998 Condensed Consolidated Statements of Income - Three Months Ended September 30, 1998 and 1997 Condensed Consolidated Statement of Stockholders' Equity - Three Months Ended September 30, 1998 Condensed Consolidated Statements of Cash Flows - Three Months Ended September 30, 1998 and 1997 Notes to Condensed Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosure About Market Risk Part II. Other Information Item 6. Exhibits and Reports on Form 8-K JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) September 30, June 30, ASSETS 1998 1998 ______ _____________ ________ Current assets: Cash and cash equivalents $ 49,824 $ 50,275 Prepaid expenses 1,564 1,594 Other current assets 2,220 2,225 ________ ________ Total current assets 53,608 54,094 ________ ________ Property and equipment, at cost: Land and buildings 1,535 1,535 Gaming equipment 29,180 28,988 Other equipment 4,450 4,758 Leasehold improvements 356 354 ________ ________ 35,521 35,635 Less accumulated depreciation (19,820) (19,850) ________ ________ 15,701 15,785 Lease acquisition costs and other intangible assets, net of accumulated amortization of $4,837 and $4,607 3,627 2,231 Goodwill, net of accumulated amortization of $2,754 and $2,713 3,867 3,908 Lease and other security deposits 1,532 3,082 ________ ________ Total assets $ 78,335 $ 79,100 ======== ========
See Notes to Condensed Consolidated Financial Statements. JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share data) (Concluded) September 30, June 30, LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1998 ____________________________________ _____________ ________ Current liabilities: Accounts payable $ 1,545 $ 1,434 Other current liabilities 3,101 3,508 ________ ________ Total current liabilities 4,646 4,942 Deferred rent 2,427 2,377 Deferred income tax 922 849 Other liabilities 61 ________ ________ Total liabilities 7,995 8,229 ________ ________ Commitments and contingencies Stockholders' equity: Preferred stock - authorized 1,000,000 shares of $1 par value; none issued Common stock - authorized 30,000,000 shares of $.01 par value; 9,860,252 and 9,854,327 shares issued 99 99 Additional paid-in capital 66,443 66,376 Retained earnings 17,574 16,466 Less 1,243,572 and 1,080,372 shares of common stock in treasury, at cost (13,776) (12,070) ________ ________ Total stockholders' equity 70,340 70,871 ________ ________ Total liabilities and stockholders' equity $ 78,335 $ 79,100 ======== ========
See Notes to Condensed Consolidated Financial Statements. JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (Dollars in thousands, except per share data) 1998 1997 _______ _______ Revenues: Route operations $21,685 $21,918 Casino operations 522 749 _______ _______ Totals 22,207 22,667 _______ _______ Costs and expenses: Route operations 18,390 18,291 Casino operations 473 727 Amortization 286 276 Depreciation 1,010 868 General and administrative 870 925 _______ _______ Totals 21,029 21,087 _______ _______ Operating income 1,178 1,580 _______ _______ Other income: Interest and other income 361 573 _______ _______ Totals 361 573 _______ _______ Income before income tax 1,539 2,153 _______ _______ Provision for Federal income tax: Current 358 417 Deferred 73 164 _______ _______ Totals 431 581 _______ _______ Net income $ 1,108 $ 1,572 ======= ======= Basic earnings per share $ .13 $ .17 ======= ======= Dilutive earnings per share $ .13 $ .17 ======= =======
See Notes to Condensed Consolidated Financial Statements. JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY THREE MONTHS ENDED SEPTEMBER 30, 1998 (Dollars and shares in thousands) Treasury Common Stock Additional Stock Total _____________ Paid-in Retained ________________ Stockholders' Shares Amount Capital Earnings Shares Amount Equity ______ ______ __________ ________ ______ ________ ____________ Balance July 1, 1998 9,854 $99 $66,376 $16,466 (1,080) $(12,070) $70,871 Issuance of shares on exercise of stock options 6 67 67 Repurchases of common stock (164) (1,706) (1,706) Net income 1,108 1,108 _____ ___ _______ _______ ______ ________ _______ Balance September 30, 1998 9,860 $99 $66,443 $17,574 (1,244) $(13,776) $70,340 ===== === ======= ======= ====== ======== =======
See Notes to Condensed Consolidated Financial Statements. JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (Dollars in thousands) 1998 1997 _______ _______ Operating activities: Net income $ 1,108 $ 1,572 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,296 1,144 Deferred Federal income tax 73 164 Increase (decrease) from changes in: Prepaid expenses and other current assets (5) (117) Other non-current assets 76 (105) Accounts payable and other current liabilities (106) 317 Deferred rent and other liabilities (11) 306 _______ _______ Net cash provided by operating activities 2,431 3,281 _______ _______ Investing activities: Net proceeds from location operators 40 73 Proceeds from sales of property and equipment 36 4 Purchases of property and equipment (1,219) (1,570) Increase in lease acquisition costs and other intangible assets (100) (21) _______ _______ Net cash used in investing activities (1,243) (1,514) _______ _______ Financing activities: Proceeds from issuance of common stock 67 Repurchases of common stock (1,706) _______ _______ Net cash used in financing activities (1,639) _______ _______ Net (decrease) increase in cash and cash equivalents (451) 1,767 Cash and cash equivalents at beginning of period 50,275 47,945 _______ _______ Cash and cash equivalents at end of period $49,824 $49,712 ======= ======= Supplemental disclosures of cash flow data: Cash paid during the period for: Federal income tax $ 100 $ 400
See Notes to Condensed Consolidated Financial Statements. JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1 - General: The accompanying unaudited condensed consolidated financial statements included herein have been prepared by Jackpot pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, necessary to present fairly Jackpot's financial position as of September 30, 1998 and the results of its operations and cash flows for the three months ended September 30, 1998 and 1997. The earnings for the three months ended September 30, 1998 and 1997 are not necessarily indicative of results for a full year. Information included in the condensed consolidated balance sheet as of June 30, 1998 has been derived from Jackpot's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended June 30, 1998 (the "1998 Form 10-K"). These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and disclosures included in the 1998 Form 10-K. In June 1997, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards No. 131, "Disclosure About Segments of an Enterprise and Related Information" ("SFAS 131"), which is effective for fiscal years beginning after December 15, 1997. SFAS 131 establishes additional standards for segment reporting in the financial statements. Management has begun its review of SFAS 131, however it has not made a final determination of the extent of the disclosures required by this statement. In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"), which is effective for fiscal years beginning after June 15, 1999. SFAS 133 establishes additional accounting and reporting standards for derivative instruments and hedging activities. Management does not believe the Company has any derivative instruments, or that Jackpot participates in hedging activities. Accordingly, SFAS 133 is not expected to have a significant effect on the results of operations or related disclosures. Note 2 - Comprehensive income: In June 1997, the FASB issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"), which is effective for fiscal years beginning after December 15, 1997. SFAS 130 requires companies to classify items of other comprehensive income by their nature in a financial statement and display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position. Jackpot adopted this statement on July 1, 1998. For the three months ended September 30, 1998 and 1997, Jackpot did not have any items of other comprehensive income. Comprehensive income for the three months ended September 30, 1998 and 1997 is the following (dollars in thousands): Three Months Ended September 30, __________________ 1998 1997 ______ ______ Net income $1,108 $1,572 Other comprehensive income - - ______ ______ Comprehensive income $1,108 $1,572 ====== ======
Note 3 - Earnings per share: In February 1997, the FASB issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"), which is effective for periods, including interim periods, ending after December 15, 1997. As required by SFAS 128, Jackpot adopted this statement for the quarter ended December 31, 1997 and year ended June 30, 1998. SFAS 128establishes standards for computing and presenting earnings per share ("EPS"), including the replacement of the presentation of primary EPS with the presentation of basic EPS, as defined. All prior-period EPS data presented has been restated to conform to the provisions of the statement. Basic EPS for the three months ended September 30, 1998 and 1997 is computed by dividing net income by the weighted average number of common shares outstanding for the respective period. Diluted EPS for the three months ended September 30, 1998 and 1997 is computed by dividing net income by the weighted average number of common and common equivalent shares outstanding for the respective period. Options to purchase common stock, whose exercise price was greater than the average market price for the respective period, have been excluded from the computation of diluted EPS. Such antidilutive options outstanding for the three months ended September 30, 1998 and 1997 were 262,000 and 501,000, respectively. The following is the amount of income and number of shares used in the basic and diluted EPS computations (dollars and shares in thousands, except per share data): Three Months Ended September 30, __________________ 1998 1997 ______ ______ Basic earnings per share: Earnings: Income available to common stockholders $1,108 $1,572 ====== ====== Shares: Weighted average number of common shares outstanding 8,714 9,082 ====== ====== Basic earnings per share $ .13 $ .17 ====== ====== Diluted earnings per share: Earnings: Income available to common stockholders $1,108 $1,572 Effect of dilutive securities - - ______ ______ Income, as adjusted $1,108 $1,572 ====== ====== Shares: Weighted average number of common shares outstanding 8,714 9,082 Common shares issuable upon assumed exercise of dilutive stock options 1,509 1,497 Less common shares assumed to be repurchased by application of the treasury stock method to the proceeds using the average market price for the period 1,379 1,367 ______ ______ Weighted average number of common shares and common share equivalents outstanding 8,844 9,212 ====== ====== Diluted earnings per share $ .13 $ .17 ====== ======
Note 4 - Stockholders' equity: The 1992 Incentive and Non-qualified Stock Option Plan: On September 30, 1998, the exercise price of the June 30, 1998 grant of nonqualified stock options to purchase an aggregate of 110,000 shares of common stock (27,500 each to four directors) was vested at $9.94 per share, the fair market value of the stock on that date, pursuant to the terms of the 1992 Incentive and Non-qualified Stock Option Plan (the "1992 Plan"). See Note 6 of Notes to Consolidated Financial Statements in the 1998 Form 10-K for further information regarding the 1992 Plan and option grants. Common stock in treasury: Jackpot purchased 163,200 shares of its common stock at the market price on the date of purchase for a total cost of approximately $1,706,000 during the three months ended September 30, 1998. Note 5 - Subsequent event: In October 1998, Jackpot and CRC Holdings, Inc., operating as Carnival Resorts & Casinos ("CRC"), a privately owned company, signed a non-binding letter of intent to merge the companies. Such proposed transaction is subject to the completion of a definitive agreement between the parties and regulatory and other approvals. The proposed transaction contemplates that Jackpot will acquire all the issued and outstanding common stock of CRC in exchange for approximately 6.5 million shares of Jackpot's common stock, subject to a reduction in such shares under certain conditions. No assurance can be given that the proposed transaction will be consummated or that it will be consummated on the terms described herein. Item 2. Management's Discussion and Analysis of Financial _________________________________________________ Condition and Results of Operations ___________________________________ Capital Resources and Liquidity _______________________________ Cash Flows: Jackpot's principal sources of cash for the three months ended September 30, 1998 (the "1998 three months"), consisted of the cash flows from operating activities and its available cash and cash equivalents which, at June 30, 1998, was $50.3 million and at September 30, 1998 was $49.8 million. Net cash provided by operating activities for the 1998 three months decreased $.9 million, from $3.3 million for the three months ended September 30, 1997 (the "1997 three months") to $2.4 million for the 1998 three months. The decrease of $.9 million was principally due to a decline in the gaming machine route operations ("route operations") operating margin of $.3 million, from $3.6 million for the 1997 three months to $3.3 million for the 1998 three months, and to a decline in other income of $.2 million. Net cash used in investing activities for the 1998 three months decreased $.3 million, from $1.5 million for the 1997 three months to $1.2 million for the 1998 three months. Such decrease was primarily due to a reduction of $.4 million for purchases of property and equipment during the 1998 three months. Net cash used in financing activities for the 1998 three months was $1.6 million, and resulted from payments for repurchases of common stock of $1.7 million, net of proceeds of $.1 million from the issuance of common stock upon the exercise of stock options. Liquidity: During the 1998 three months, Jackpot's cash and cash equivalents decreased $.5 million primarily as a result of the activities described above, while working capital remained constant at approximately $49 million. On October 29, 1996, Jackpot's Board of Directors authorized management to repurchase up to 500,000 shares of Jackpot's common stock at prevailing market prices. Subsequently, on January 22, 1998, such authorization was increased from 500,000 to 1,000,000 shares. From October 29, 1996 through September 30, 1998, Jackpot repurchased 785,385 shares of common stock at a cost of approximately $8.5 million. In October 1998, Jackpot and CRC Holdings, Inc., operating as Carnival Resorts & Casinos ("CRC"), a privately owned company, signed a non-binding letter of intent to merge the companies. Such proposed transaction is subject to the completion of a definitive agreement between the parties and regulatory and other approvals. The proposed transaction contemplates that Jackpot will acquire all the issued and outstanding common stock of CRC in exchange for approximately 6.5 million shares of Jackpot's common stock, subject to a reduction in such shares under certain conditions. No assurance can be given that the proposed transaction will be consummated or that it will be consummated on the terms described herein. Management believes Jackpot's working capital and cash provided by operations will be sufficient to enable Jackpot to meet its planned capital expenditures and other cash requirements for the remainder of the year ending June 30, 1999 ("fiscal 1999"). With respect to planned capital expenditures, management anticipates Jackpot will purchase approximately $7.1 million of property and equipment, exclusive of business acquisitions, if any, in the remainder of fiscal 1999 to be used in existing and currently planned new locations. Jackpot continues to selectively explore expansion opportunities, both in and outside Nevada, and various potential acquisitions, both gaming and nongaming. Management believes working capital and cash provided by operations will be sufficient to enable Jackpot to pursue expansion opportunities; however, Jackpot may seek additional debt or equity financing to facilitate expansion opportunities and potential acquisitions. Recently Issued Accounting Standards: In June 1997, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards No. 131, "Disclosure About Segments of an Enterprise and Related Information" ("SFAS 131"), which is effective for fiscal years beginning after December 15, 1997. SFAS 131 establishes additional standards for segment reporting in the financial statements. Management has begun its review of SFAS 131, however it has not made a final determination of the extent of the disclosure required by this statement. In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"), which is effective for fiscal years beginning after June 15, 1999. SFAS 133 establishes additional accounting and reporting standards for derivative instruments and hedging activities. Management does not believe the Company has any derivative instruments, or that Jackpot participates in hedging activities. Accordingly, SFAS 133 is not expected to have a significant effect on the results of operations or related disclosures. Results of Operations _____________________ Revenues: Total revenues decreased $.4 million, from $22.6 million for the 1997 three months to $22.2 million for the 1998 three months. The decrease of $.4 million was the net result of a decrease of $.2 million (from $21.9 million for the 1997 three months to $21.7 million for the 1998 three months) in route operations revenues and a decrease of $.2 million (from $.7 million for the 1997 three months to $.5 million for the 1998 three months) in casino operations revenues. While Jackpot generated additional route operations revenues from new locations of $1.1 million, such amount was not sufficient to offset lost route operations revenues from terminated locations of $.8 million and the decrease in route operations revenues at existing locations of $.5 million. As a result, route operations revenues for the 1998 three months decreased $.2 million. Route operations revenues attributable to fixed payment leases and revenue sharing contracts for the three months ended September 30, 1998 and 1997 are summarized below (dollars in thousands): 1998 1997 ___________________ ___________________ Percent Percent of route of route operations operations Amount revenues Amount revenues _______ __________ _______ __________ Route operations: Fixed payment leases $16,310 75.2% $16,444 75.0% Revenue sharing contracts 5,375 24.8 5,474 25.0 _______ _____ _______ _____ Totals $21,685 100.0% $21,918 100.0% ======= ===== ======= =====
Costs and expenses: Route operations expenses increased $.1 million (from $18.3 million for the 1997 three months to $18.4 million for the 1998 three months) and, as a percentage of route operations revenues, increased to 84.8% for the 1998 three months from 83.5% for the 1997 three months. Such increases were principally attributable to an increase in location rent. With respect to location rent, which is the single largest route operations expense, Jackpot entered into an agreement for a long-term extension with one of its largest retail chain store customers in September 1998. Pursuant to the terms of the new agreement, which will become effective July 1, 1999, rent expense will increase significantly over the previous agreement. Such increase could adversely affect the Company's results of operations for the year ending June 30, 2000. For a further description of the Company's lease and license agreements, see Item 1 - Business - Gaming Machine Route Operations and Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview in the 1998 Form 10-K. The increase in route operations expenses of $.1 million primarily resulted from a combination of an increase of $.4 million in location rent, which consisted principally of location rent for new locations of existing chain store customers, net of an overall decrease of $.3 million in other route operations expenses. General and administrative expense and amortization expense for the 1998 three months, compared to the 1997 three months, remained constant at $.9 million and $.3 million, respectively, while depreciation expense increased $.2 million, from $.8 million for the 1997 three months to $1.0 million for the 1998 three months. The increase in depreciation expense was principally attributable to new gaming machines purchased during the year ended June 30, 1998. Other income: Other income decreased approximately $.2 million, from $.6 million for the 1997 three months to $.4 million for the 1998 three months. The decrease was principally due to a reduction of approximately $.2 million, which was earned from certain nonrecurring transactions in the 1997 three months. Federal income tax: The effective tax rate for the 1998 three months was 28%, which was lower than the Federal statutory rate of 35%, primarily because of the tax benefits realized from tax-exempt interest income. Such rate approximated the effective tax rate for the 1997 three months. General: Operating income decreased $.4 million, from $1.6 million for the 1997 three months to $1.2 million for the 1998 three months. The decrease in operating income resulted from the combination of a decrease in the route operations operating margin of $.3 million, the increase in depreciation expense of $.2 million mentioned above, net of an overall decrease in other operating expenses of $.1 million. The decrease in the route operations operating margin of $.3 million (from $3.6 million for the 1997 three months to $3.3 million for the 1998 three months) was principally due to the decrease in route operations revenues previously described. Principally as a result of a highly competitive environment, which management believes Jackpot will continue to face during the remainder of fiscal 1999, revenues and net income declined in the 1998 three months compared to the 1997 three months. Net income decreased $.5 million, from $1.6 million for the 1997 three months to $1.1 million for the 1998 three months, and basic and diluted earnings per share for the 1998 three months was $.13 versus $.17 per share for the 1997 three months. Year 2000 _________ In the past, many computer software programs were written using two digits rather than four to define the applicable year. As a result, date- sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This situation is generally referred to as the "Year 2000 Problem". If this situation occurs, the potential exists for computer system failures or miscalculations by computer programs, which could disrupt operations. Jackpot has conducted a comprehensive review of its computer systems and other systems for the purpose of assessing its potential Year 2000 Problem, and is in the process of modifying or replacing those systems which are not Year 2000 compliant. Based upon this review, management believes such systems will be compliant by mid-calendar 1999. However, if modifications are not made or not completed timely, the Year 2000 Problem could have a significant adverse impact on the Company's operations. In addition, Jackpot has communicated with its major vendors and suppliers to determine their state of readiness relative to the Year 2000 Problem and Jackpot's possible exposure to Year 2000 issues of such third parties. However, there can be no guarantee that the systems of other companies, which the Company's systems may rely upon, will be timely converted or representations made to Jackpot by these parties are accurate. As a result, the failure of a major vendor or supplier to adequately address their Year 2000 Problem could have a significant adverse impact on the Company's operations. Planning for the Year 2000 Problem, including contingency planning, is significantly complete and will be revised, if necessary. All costs related to the Year 2000 Problem are expensed as incurred, while the cost of new hardware is capitalized and amortized over its expected useful life. The costs associated with Year 2000 compliance have not been and are not anticipated to be material to the Company's financial position or results of operations. As of September 30, 1998, the Company has incurred costs of approximately $35,000 (primarily for internal labor) related to the system applications and anticipates spending an additional $145,000 to become Year 2000 compliant. The estimated completion date and remaining costs are based upon management's best estimates, as well as third party modification plans and other factors. However, there can be no guarantee that such estimates will occur and actual results could differ. Forward-looking statements __________________________ Certain information included in this Form 10-Q and other materials filed or to be filed by the Company with the Securities and Exchange Commission contains statements that may be considered forward-looking. In addition, from time to time, the Company may release or publish forward-looking statements relating to such matters as anticipated financial performance, business prospects, technological developments and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that a variety of factors could cause the Company's actual results and experience to differ materially from the anticipated results or other expectations expressed in the Company's forward-looking statements. The risks and uncertainties that may affect the operations, performance, development and results of the Company's business include, but are not limited to, competitive pressures, the loss or nonrenewal of any of Jackpot's significant contracts, conditioning or suspension of any gaming license, unfavorable changes in gaming regulations, adverse results of significant litigation matters, possible future financial difficulties of a significant customer and the continued growth of the gaming industry and population in Nevada. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date thereof. The Company assumes no obligation to update or supplement forward-looking statements as a result of new circumstances or subsequent events. Item 3. Quantitative and Qualitative Disclosure About Market Risk _________________________________________________________ For the three months ended September 30, 1998, there were no changes to the information incorporated by reference in Item 7A of the 1998 Form 10-K. PART II. OTHER INFORMATION _________________ Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 27.1 - Financial Data Schedule - three months ended September 30, 1998. 27.2 - Restated Financial Data Schedule - twelve months ended June 30, 1997. 27.3 - Restated Financial Data Schedule - six months ended December 31, 1996. 27.4 - Restated Financial Data Schedule - twelve months ended June 30, 1996. (b) Reports on Form 8-K - No Form 8-K was filed for the three months ended September 30, 1998. Signature _________ Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. JACKPOT ENTERPRISES, INC. _________________________ (Registrant) By: /s/ Bob Torkar _________________________ BOB TORKAR Senior Vice President - Finance, Treasurer and Chief Accounting Officer Date: November 12, 1998 EX-27.1 2
5 This schedule contain summary financial information extracted from Jackpot's Condensed Consolidated Balance Sheets - September 30, 1998 and June 30, 1998 and its Condensed Consolidated Statements of Income - three months ended September 30, 1998 and 1997 and is qualified in its entirety by reference to such financial statements. 3-MOS JUN-30-1999 JUL-01-1998 SEP-30-1998 49,824 0 0 0 0 53,608 35,521 19,820 78,335 4,646 0 0 0 99 70,241 78,335 0 22,207 0 18,863 1,158 0 0 1,539 431 0 0 0 0 1,108 .13 .13
EX-27.2 3
5 This schedule contains summary financial information extracted from Jackpot's Consolidated Balance Sheets - June 30, 1997 and 1996 and its Consolidated Statements of Income - years ended June 30, 1997, 1996 and 1995 and is qualified in its entirety by reference to such financial statements. 12-MOS JUN-30-1997 JUL-01-1996 JUN-30-1997 47,945 0 0 0 0 51,111 34,671 21,582 75,267 4,782 0 0 0 98 67,183 75,267 0 91,904 0 72,740 4,605 0 0 11,368 3,524 0 0 0 0 7,844 .85 .84
EX-27.3 4
5 This schedule contains summary financial information extracted from Jackpot's Consolidated Balance Sheets - December 31, 1996 and June 30, 1996 and its Consolidated Statements of Income - three and six months ended December 31, 1996 and 1995 and is qualified in its entirety by reference to such financial statements. 6-MOS JUN-30-1997 JUL-01-1996 DEC-31-1996 43,310 0 0 0 0 46,459 34,181 21,294 71,415 3,660 0 0 0 97 64,769 71,415 0 44,515 0 35,626 2,318 0 0 5,089 1,578 0 0 0 0 3,511 .38 .37
EX-27.4 5
5 This schedule contains summary financial information extracted from Jackpot's Consolidated Balance Sheets - June 30, 1996 and 1995 and its Consolidated Statements of Operations - years ended June 30, 1996, 1995 and 1994 and is qualified in its entirety by reference to such financial statements. YEAR JUN-30-1996 JUL-1-1995 JUN-30-1996 39,024 0 0 0 0 44,279 33,992 20,697 70,742 3,943 0 0 0 96 63,399 70,742 0 91,108 0 71,121 5,542 0 22 8,610 2,755 0 0 0 0 5,855 .63 .62
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