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29.10.2009 12:42:00
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Dover Downs Gaming & Entertainment, Inc. Reports Results for the Third Quarter Ended September 30, 2009
Dover Downs Gaming & Entertainment, Inc. (NYSE:DDE) today reported results for the three months ended September 30, 2009.
The Company’s revenues fell 6.4% to $59,814,000 compared with $63,929,000 for the third quarter of 2008. Gaming revenues were down 5.8% while other operating revenues were down 13.3%.
Gaming expenses were higher from significantly increased gaming taxes and fees that became effective at the end of May of 2009. The impact of these tax increases was approximately $3.6 million or $.07 per diluted share for the third quarter of 2009.
Occupancy levels in the 500 room Dover Downs Hotel were approximately 95% for the third quarter of 2009, but cash room sales were lower than the comparable quarter last year. Margins for all other revenues improved during the quarter.
The Company had previously completed architectural and engineering work related to a Phase 7 casino expansion that would have included, among other things, a new sports book facility and a parking garage. Given the recent US Court of Appeals for the Third Circuit decision to limit the extent of sports wagering in Delaware and the higher gaming tax rates that were recently legislated, the Company has decided not to proceed with this project. As a result, $2,177,000 of previously capitalized costs related to this project were written off during the quarter.
Interest expense decreased $406,000 during the quarter, primarily from lower average borrowings and lower interest rates.
Excluding the impact of the non-cash impairment charge, net earnings were $2,523,000, or $.08 per diluted share, compared with $4,996,000, or $.16 per diluted share for the third quarter of 2008.
Including the impairment charge, net earnings were $1,231,000, or $.04 per diluted share.
Denis McGlynn, President and CEO of Dover Downs Gaming & Entertainment, Inc. stated, "Thanks to the high quality amenities we’ve assembled in recent years, our revenues held up fairly well considering the current operating environment. Our task will now be to continue to strive for growth and margin improvements”.
The Company announced yesterday that its Board of Directors declared a regular quarterly dividend of $.05 per share. The dividend is payable on December 10, 2009 to shareholders of record at the close of business on November 10, 2009.
This release contains or may contain forward-looking statements based on management’s beliefs and assumptions. Such statements are subject to various risks and uncertainties that could cause results to vary materially. Please refer to the Company’s SEC filings for a discussion of such factors.
Dover Downs Gaming & Entertainment, Inc. is a diversified gaming and entertainment company whose operations consist of Dover Downs Slots – a 165,000-square foot video lottery casino complex featuring the latest in slot machine offerings, multi-player electronic table games and a new Race and Sports Book; the Dover Downs Hotel and Conference Center – a 500 room AAA Four Diamond hotel with conference, banquet, fine dining, ballroom and concert hall facilities; and Dover Downs Raceway – a harness racing track with pari-mutuel wagering on live and simulcast horse races.
| DOVER DOWNS GAMING & ENTERTAINMENT, INC. | |||||||||||||
| CONSOLIDATED STATEMENTS OF EARNINGS | |||||||||||||
| In Thousands, Except Per Share Amounts | |||||||||||||
| (Unaudited) | |||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||
| September 30, | September 30, | ||||||||||||
| 2009 | 2008 | 2009 | 2008 | ||||||||||
| Revenues: | |||||||||||||
| Gaming (1) | $ | 55,172 | $ | 58,576 | $ | 163,385 | $ | 169,219 | |||||
| Other operating (2) | 4,642 | 5,353 | 14,039 | 14,470 | |||||||||
| 59,814 | 63,929 | 177,424 | 183,689 | ||||||||||
| Expenses: | |||||||||||||
| Gaming | 46,815 | 45,733 | 132,431 | 129,587 | |||||||||
| Other operating | 3,613 | 4,281 | 10,864 | 11,762 | |||||||||
| General and administrative | 1,679 | 1,572 | 5,187 | 4,932 | |||||||||
| Impairment charge | 2,177 | - | 2,177 | - | |||||||||
| Depreciation | 2,898 | 2,885 | 8,919 | 7,745 | |||||||||
| 57,182 | 54,471 | 159,578 | 154,026 | ||||||||||
| Operating earnings | 2,632 | 9,458 | 17,846 | 29,663 | |||||||||
| Interest expense | 569 | 975 | 1,834 | 2,541 | |||||||||
| Earnings before income taxes | 2,063 | 8,483 | 16,012 | 27,122 | |||||||||
| Income taxes | 832 | 3,487 | 6,550 | 11,107 | |||||||||
| Net earnings | $ | 1,231 | $ | 4,996 | $ | 9,462 | $ | 16,015 | |||||
| Net earnings per common share: | |||||||||||||
| - Basic | $ | 0.04 | $ | 0.16 | $ | 0.30 | $ | 0.50 | |||||
| - Diluted | $ | 0.04 | $ | 0.16 | $ | 0.30 | $ | 0.50 | |||||
| Weighted average shares outstanding: | |||||||||||||
| - Basic | 31,496 | 31,443 | 31,491 | 31,434 | |||||||||
| - Diluted | 31,496 | 31,516 | 31,491 | 31,556 | |||||||||
| _________________________ | ||
| (1) | Gaming revenues from the Company’s video lottery (slot) machine operations include the total win from such operations. The Delaware State Lottery Office collects the win and remits a portion thereof to the Company as its commission for acting as a Licensed Agent. The difference between total win and the amount remitted to the Company is reflected in gaming expenses. | |
| (2) | Other operating revenues do not include the retail amount of promotional allowances which are provided to customers on a complimentary basis. | |
| DOVER DOWNS GAMING & ENTERTAINMENT, INC. | ||||||||||||
| RECONCILIATION OF GAAP EARNINGS TO ADJUSTED EARNINGS | ||||||||||||
| In Thousands, Except Per Share Amounts | ||||||||||||
| (Unaudited) | ||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||
| September 30, | September 30, | |||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||
| GAAP earnings before income tax expense | $ | 2,063 | $ | 8,483 | $ | 16,012 | $ | 27,122 | ||||
| Non-cash impairment charges (1) | 2,177 | - | 2,177 | - | ||||||||
| Adjusted earnings before income tax expense | $ | 4,240 | $ | 8,483 | $ | 18,189 | $ | 27,122 | ||||
| GAAP net earnings | $ | 1,231 | $ | 4,996 | $ | 9,462 | $ | 16,015 | ||||
| Non-cash impairment charges, net of income taxes (1) | 1,292 | - | 1,292 | - | ||||||||
| Adjusted net earnings | $ | 2,523 | $ | 4,996 | $ | 10,754 | $ | 16,015 | ||||
| GAAP net earnings per common share - diluted | $ | 0.04 | $ | 0.16 | $ | 0.30 | $ | 0.50 | ||||
| Non-cash impairment charges, net of income taxes (1) | 0.04 | - | 0.04 | - | ||||||||
| Adjusted net earnings per common share - diluted | $ | 0.08 | $ | 0.16 | $ | 0.34 | $ | 0.50 | ||||
| _________________________ | ||
| (1) |
We had previously completed architectural and engineering work related to a Phase 7 casino expansion that would have included, among other things, a new sports book facility and a parking garage. Given the recent court decision to limit the extent of sports wagering and the higher gaming tax rates that were recently legislated, we decided not to proceed with this project. As a result, $2,177,000 of previously capitalized costs were written off during the quarter. |
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| DOVER DOWNS GAMING & ENTERTAINMENT, INC. | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| In Thousands | ||||||||
| (Unaudited) | ||||||||
| September 30, | December 31, | |||||||
| 2009 | 2008 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 17,526 | $ | 17,889 | ||||
| Accounts receivable | 2,682 | 2,661 | ||||||
| Due from State of Delaware | 12,479 | 10,870 | ||||||
| Inventories | 2,258 | 2,025 | ||||||
| Prepaid expenses and other | 2,918 | 2,029 | ||||||
| Receivable from Dover Motorsports, Inc. | 35 | - | ||||||
| Prepaid income taxes | 807 | - | ||||||
| Deferred income taxes | 1,217 | 1,317 | ||||||
| Total current assets | 39,922 | 36,791 | ||||||
| Property and equipment, net | 195,445 | 203,522 | ||||||
| Other assets | 893 | 1,019 | ||||||
| Total assets | $ | 236,260 | $ | 241,332 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 3,623 | $ | 4,679 | ||||
| Purses due horsemen | 11,283 | 9,395 | ||||||
| Accrued liabilities | 6,392 | 7,419 | ||||||
| Payable to Dover Motorsports, Inc. | - | 11 | ||||||
| Income taxes payable | - | 619 | ||||||
| Deferred revenue | 376 | 212 | ||||||
| Total current liabilities | 21,674 | 22,335 | ||||||
| Revolving line of credit | 98,075 | 108,325 | ||||||
| Liability for pension benefits | 6,322 | 6,099 | ||||||
| Other liabilities | 200 | - | ||||||
| Deferred income taxes | 3,730 | 3,488 | ||||||
| Total liabilities | 130,001 | 140,247 | ||||||
| Stockholders’ equity: | ||||||||
| Common stock | 1,546 | 1,521 | ||||||
| Class A common stock | 1,660 | 1,660 | ||||||
| Additional paid-in capital | 1,426 | 933 | ||||||
| Retained earnings | 103,914 | 99,263 | ||||||
| Accumulated other comprehensive loss | (2,287 | ) | (2,292 | ) | ||||
| Total stockholders’ equity | 106,259 | 101,085 | ||||||
| Total liabilities and stockholders’ equity | $ | 236,260 | $ | 241,332 | ||||
| DOVER DOWNS GAMING & ENTERTAINMENT, INC. | ||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| In Thousands | ||||||||
| (Unaudited) | ||||||||
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2009 | 2008 | |||||||
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Operating activities:
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||||||||
| Net earnings | $ | 9,462 | $ | 16,015 | ||||
| Adjustments to reconcile net earnings to | ||||||||
| net cash provided by operating activities: | ||||||||
| Depreciation | 8,919 | 7,745 | ||||||
| Amortization of credit facility origination fees | 28 | 30 | ||||||
| Stock-based compensation | 714 | 762 | ||||||
| Deferred income taxes | 70 | (156 | ) | |||||
| Impairment charge | 2,177 |
- |
||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | (21 | ) | 1,393 | |||||
| Due from State of Delaware | (1,609 | ) | (2,026 | ) | ||||
| Inventories | (233 | ) | (284 | ) | ||||
| Prepaid expenses and other | (746 | ) | (1,446 | ) | ||||
| Receivable from/payable to Dover Motorsports, Inc. | (46 | ) | (11 | ) | ||||
| Prepaid income taxes/income taxes payable | (1,294 | ) | (291 | ) | ||||
| Accounts payable | 48 | 464 | ||||||
| Purses due horsemen | 1,888 | 1,737 | ||||||
| Accrued liabilities | (1,027 | ) | (1,756 | ) | ||||
| Deferred revenue | 164 | 282 | ||||||
| Other liabilities | 388 | 71 | ||||||
| Net cash provided by operating activities | 18,882 | 22,529 | ||||||
| Investing activities: | ||||||||
| Capital expenditures | (4,123 | ) | (36,377 | ) | ||||
| Proceeds from the sale of available-for-sale securities | 102 |
- |
||||||
| Purchase of available-for-sale securities | (104 | ) | (100 | ) | ||||
| Net cash used in investing activities | (4,125 | ) | (36,477 | ) | ||||
| Financing activities: | ||||||||
| Borrowings from revolving line of credit | 120,675 | 145,900 | ||||||
| Repayments of revolving line of credit | (130,925 | ) | (130,250 | ) | ||||
| Dividends paid | (4,811 | ) | (4,769 | ) | ||||
| Repurchase of common stock | (59 | ) | (1,040 | ) | ||||
| Proceeds from stock options exercised | - | 366 | ||||||
| Excess tax benefit on stock awards | - | 25 | ||||||
| Net cash (used in) provided by financing activities | (15,120 | ) | 10,232 | |||||
| Net decrease in cash | (363 | ) | (3,716 | ) | ||||
| Cash, beginning of period | 17,889 | 22,456 | ||||||
| Cash, end of period | $ | 17,526 | $ | 18,740 | ||||
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