Breakup fee boosts Jackpot net slot machine operations struggle

Wednesday, Nov. 3, 1999 | 10:18 a.m.

Jackpot Enterprises Inc. of Las Vegas today said net income rose to $7.3 million, or 85 cents a share, for fiscal 2000's first quarter from $1.1 million, or 13 cents a share, in the fiscal 1999 first period.

Revenue rose to $22.8 million in the three months ended Sept. 30 from $22.2 million in the year-ago quarter.

The slot route operator said the earnings gain was due to receipt of a $13.5 million breakup fee from Players International Inc., which terminated a merger agreement in August.

Jackpot had offered to acquire Players for $8.25 a share, but Players opted to accept an offer from Harrah's Entertainment Inc. for $8.50 a share.

Jackpot said cash flow rose to $11.8 million in the latest quarter from $2.8 million in the year-ago period, due primarily to the breakup fee. The company posted a $900,000 operating loss in the 1999 third period, compared with operating income of $1.2 million in the 1998 quarter.

The decline was due in part to a "significant operating loss incurred at the locations of a large customer resulting from the failure of 17 new locations to achieve expected revenues, as well as a decrease in revenues at existing locations of the customer," Jackpot said.

Jackpot also cited "a significant increase in location rent at Albertson's, Jackpot's largest customer, pursuant to a long-term contract extension effective July 1, 1999, and the almost simultaneous sale of Albertson's Southern Nevada locations to Raley's, as well as legal costs incurred in connection with Jackpot's litigation against Albertson's and Raley's."

Jackpot is suing to keep 246 slots in the Albertson's stores Raley's bought.

Jackpot President Don Kornstein said, "We're disappointed with first-quarter operating results, but collection of the Players' breakup fee has further enhanced Jackpot's financial strength and future growth opportunities.

"While the circumstances creating the present situation were beyond our control, management is exploring and implementing all available options to improve short-term operating performance.

"We remain optimistic about our intermediate term prospects and, given our financial strength, Jackpot's growth opportunities."

Jackpot has about 4,000 slot and video games at 400 Nevada locations.