Jackpot profit falls 37%

Tuesday, Feb. 1, 2000 | 11:10 a.m.

Jackpot Enterprises Inc. of Las Vegas reported a 37 percent decline in quarterly earnings per share today, as contested store contracts cut into the Las Vegas slot route operator's bottom line.

Jackpot reported net income of $900,000 for the quarter ending Dec. 31, down from $1.4 million in the year-ago quarter. Earnings per share fell from 16 cents to 10 cents, while revenues fell 5 percent to $22.44 million.

Jackpot blamed the fall on "a significant operating loss incurred at the locations of Rite Aid Corp. ... resulting from the failure of 17 new locations to achieve expected revenues."

Other factors, Jackpot said, were a decline in operating income at 15 Clark County stores operated by Raley's and legal costs from a Jackpot lawsuit filed in hopes of keeping the Raley's contract.

Jackpot sued Rite Aid in federal court in December, claiming that the company was perceived as a "loser" by Las Vegas consumers, and that this perception was hurting machine play. The lawsuit sought the dissolution of the Rite Aid contract and damages of at least $20 million. In its earnings report, Jackpot Chief Executive Don Kornstein said the company was currently attempting to renegotiate its Rite Aid contract. The lawsuit is still pending.

"Further improvements to the cash flow of the gaming machine route business will be dependent upon Rite Aid's performance in the Nevada market," Kornstein said.

The other drag on Jackpot's earnings, the Raley's dispute, was resolved last week when Jackpot settled its lawsuit against Raley's and Albertson's, the former owner of the disputed stores. Under that settlement, Jackpot surrendered its rights to operate in the stores, but won significant rent concessions and expansion rights in Albertson's stores across Nevada. Jackpot noted that the stores had experienced "significantly lower gaming revenues" since Raley's took over.

Over the six-month period ending Dec. 31, Jackpot reported net income of $8.2 million, up substantially from the $2.5 million reported in the year-ago period. These earnings, however, were driven up by a $13.5 million break-up fee received from former merger partner Players International Inc. and the sale of 1 million shares of Players' stock.