Dover Motorsports Management Discusses Q4 2013 Results - Earnings Call Transcript

Executives

Denis L. McGlynn - Chief Executive Officer, President, Executive Director, Member of Executive Committee, Chief Executive Officer of Dover Downs Gaming & Entertainment Inc, President of Dover Downs Gaming & Entertainment Inc and Director of Dover Downs Gaming & Entertainment Inc

Timothy R. Horne - Chief Financial Officer, Chief Accounting Officer and Senior Vice President of Finance

Dover Motorsports (DVD) Q4 2013 Earnings Call January 30, 2014 10:30 AM ET

Operator

Welcome, and thank you all for standing by. [Operator Instructions] Today's call is being recorded. If you have any objections you may disconnect at this point.

Now I will turn the meeting over to your host, Mr. Denis McGlynn. Sir, you may begin.

Denis L. McGlynn

Thank you. Good morning, everyone, thanks for joining us. Tim Horne, our CFO, is here along with Mike Tatoian, our Executive Vice President; and Klaus Belohoubek, our General Counsel. Tim is going to read our forward-looking statement disclaimer and then we'll start.

Timothy R. Horne

In order to help you understand the company and its results, we may make certain forward-looking statements. It is possible the company's actual results might differ from any predictions we make today. Additional information regarding factors that could cause such differences appear in the company's SEC filings.

Denis L. McGlynn

Thanks, Tim. Just a few summary comments about the year-just-ended. Our successes are often masked by the negative influence of the current economy. But we did make significant progress in many areas, which, while helping to mitigate the current economic challenges, should also provide positive momentum for when conditions improve.

Our youth ticket sales grew just under 300% from just 2 years ago, whereas, historically, youth sales were barely measurable. We saw a good number of first-time ticket buyers, which gives us a measure of confidence that we can replace lapsed customers who no longer attend for whatever reason, be it whether they aged out or whether the economy has put them on the sidelines. At any case, the programs we've put in place to earn these gains will be valuable in the near term and perhaps more so when the operating environment improves overall.

The amount and variety of activities we've built into our NASCAR weekends have been very well received by our customers, both new and old. Our Monster FanZone, FunZone, variety of musical performances, our barbecue fest for weekend campers and numerous opportunities for fans to interact with drivers, combined with our unique amenities such as Frankie's outdoor café, The Grove and, of course, the Casino and another restaurants on site allow us to offer, literally, something for everyone.

Our TV ratings here at Dover showed gains in both the spring and fall, and the networks were pleased with the strength and overall consistency of NASCAR's season ratings, which gives the industry momentum going into this year and that lead up to the new larger media rights agreement beginning in 2015.

And finally, the second year of the Firefly Music Festival shows substantial growth and increased popularity last June, and plans for further growth this year are in place. Red Frog Events has expanded the festival to 4 days from 3, and to more than 100 acts up from 70 last year.

Firefly is scheduled for 2.5 weeks after our Spring NASCAR Weekend and runs from June 19 through the 22nd.

Looking at the current year, early trends in ticket sales are more positive than in recent years due in good part to our dynamic pricing structure introduced last year to encourage early purchase. Both Spring Cup race entitlements are committed with just our 2 nationwide series races currently open.

As we prepare for the upcoming racing season, we were happy too with the recent announcement by NASCAR related to how qualifying for races in 2014 will be handled. This year, group qualifying with elimination sessions will be placed to single car time trial format. This is a major improvement to the fan experience and so far as fans of Dover will witness all the cars on the track simultaneously attempting to record the fastest single lap during a half-hour session. The 12 cars with the fastest single lap during this session advance to a 10-minute final session to compete for the pole position and the first 12 starting positions.

So fans will be treated to 40 minutes of intense competition for starting positions, which we believe will be well received by both new and traditional NASCAR fans.

On a related note, Brian France, NASCAR's Chairman, will be delivering his state of the sport speech at 1:00 p.m. today, and it will be streamed live on nascar.com. We believe there will be significant announcements concerning possible changes to the chase for the Spring Cup championship format, and we're looking forward to what he has to say. We're also looking forward to the start of the season. And with that, I'll turn it over to Tim for his financial review.

Timothy R. Horne

Thank you, Denis. My financial comments will be fairly brief for this quiet fourth quarter. First, we had an updated valuation of our land in Nashville Dawn, as it had been several years since we last did this. The appraisal valued our land at $26 million and, as such, we recorded a non-cash charge of $4.3 million to write down the property to that current value. The operational comments that follow exclude that adjustment. Chart reconciling adjusted earnings to GAAP earnings is attached to the earnings release. Operationally, we did not hold any major events in either the fourth quarter of this year or last year. If you look at the statement of earnings, you'll see our revenues were $129,000 in both periods, representing some rental-related income primarily in Nashville.

Our operating and marketing expenses were lower this year by about $130,000. And general and administrative expenses were lower by $330,000 compared to last year. This is primarily from lower Formula-based incentives and benefits in Dover. Depreciation expense was consistent with last year at $822,000. Our net interest expense was down compared to 2012 at $172,000, and that was from lower rates and fees as we deleveraged the balance sheet and also from lower average borrowings compared to last year.

And our adjusted net loss for the quarter was approximately $1.94 million, or $0.06 per diluted share, compared with a net loss of $2.3 million or $0.07 per share last year. After the aforementioned impairment charge, our GAAP net loss for the quarter was $4.7 million, or $0.13 per diluted share. For the year, as a whole, you can see our revenues were $46.2 million versus $46.7 million last year, with lower admission and event-related revenue offset by higher broadcasting revenue. And while our profits from the Firefly Festival improved for the year, our revenue from that event was somewhat lower than 2012 due to a new profit-sharing arrangement with the promoter, which requires that we record concessions revenues on a net basis.

And with expenses down, our EBITDA for the year was $12,280,000, compared with $12,499,000 last year. Interest expense was down $437,000 for the year, again from lower rates and lower borrowings. So as shown on the attached schedule, excluding the impairment charge this year, our adjusted net earnings were $4,838,000 or $0.13 per share, compared with prior year earnings of $4,571,000 or $0.12 per share.

After the impairment charge, our net earnings this year were $2,024,000 or $0.05 per share. Looking at the December 31 balance sheet, you'll see our deferred revenue was down from lower advance ticket sales compared to this time last year. The majority of that, however, can be attributed to timing as we put our fall race tickets on sale later this year, with the renewals not due until after year end, whereas the renewals were due in December of last year. So it's largely a timing issue at this point.

And our loan balance was down to $14.8 million at the end of the year, compared to $19.7 million at the end of 2012. And our equity is increased to $48.4 million from net earnings and improvements in the funded status of our pension plan, less $1.8 million in dividends and approximately $1.1 million in stock repurchases this year and also less the negative impact of the impairment charge.

Also included is a cash flow statement for the year, where you see our net cash from operating activities was just over $8.1 million for the year. That's lower than last year, primarily from higher cash paid for taxes, as our federal net operating losses are fully utilized, and also from the timing of the advance ticket sale collections I just mentioned. Our capital expenditures were $315,000 for the year. We paid an increased dividend of $1.8 million this year and repurchased and retired $1.1 million in stock.

During the fourth quarter, we repurchased approximately 127,000 shares of stock in the open market at an average price of $2.40. That takes our year-to-date repurchases to almost 443,000 shares.

The result of all that is that we were able to pay down almost $5 million on our outstanding loan balance for the year.

That concludes our prepared remarks and our fourth quarter call. Thank you very much for your participation.

Operator

And that concludes today's conference. Thank you all for participating. You may now disconnect.

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