Slot route operator posts quarterly loss

Wednesday, May 17, 2000 | 10:40 a.m.

Jackpot Enterprises Inc. of Las Vegas went into the red for the first three months of 2000, recording a net loss of $1.4 million, or 16 cents per share, for the quarter ending March 31.

The quarter was a significant decline over the net income of $1.8 million, or 21 cents per share, reported for the year-ago quarter. Revenues fell 13 percent to $21.4 million.

The company reported negative cash flow of $1.2 million for the quarter, compared to positive cash flow of $3.8 million in the year-ago quarter.

Jackpot blamed its worsening results on a number of factors, including a $2.8 million severance package paid to former Chief Executive Don Kornstein upon his departure in March.

Under a settlement signed earlier this year, Jackpot agreed to pull its operations from 15 disputed Albertson's stores, now owned by Raley's. Jackpot's contract to operate at these stores ended Feb. 1, driving revenues down for the quarter. Jackpot had sued in an attempt to prevent the transfer of these stores to United Coin Co., a competing slot route operator.

Jackpot said its earnings were also lower than expected at the 12 Rite Aid stores it has slots in. Jackpot settled a lawsuit against Rite Aid earlier this year that will result in $2.5 million in rent savings annually.

Legal fees from the Rite Aid and Albertson's lawsuits also hurt earnings, the company said.

Currently, Jackpot is converting itself from a slot route and casino operating company into an incubation and investment company focused on young, growing Internet companies. Jackpot, which plans to rename itself J Net Enterprises Inc., has established an $80 million fund for such investments.

Because of this shift, Jackpot is attempting to sell off its slot route operations, which consist of about 4,000 slot machines in operation around Nevada.

"There have been numerous inquiries related to the gaming business and (the company's investment advisers) have begun the process of exploring alternatives with interested parties," Jackpot said in a press release. No further information on the pending sale was disclosed.