Dover Motorsports, Inc.
Q2 2020 Earnings Call Transcript

Published: 31 Jul 2020

[Denis McGlynn:]

Good morning, everyone. I'm joined by Tim Horne, our CFO, who's going to read our forward-looking statement disclaimer, and then we'll get underway.

[Timothy 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 McGlynn:]

Thanks, Tim. Well, the results for this second quarter are highly unusual due to the COVID-19 related postponement of our Spring NASCAR Weekend and the cancellation of June's Firefly Music Festival. As you may know, our Spring NASCAR Weekend has been rescheduled and combined into our regularly scheduled August 21 to 23 weekend, during which we'll conduct six NASCAR races over three days. All six races have title sponsors, and all will be televised live with the exception of Friday's ARCA Menards Series race, which will have a delayed telecast. Unfortunately, due to the resurgence of COVID-19 cases across the region, state officials have recommended that we conduct our races without fans in order to provide for the maximum safety of our fans and workers, and we're planning accordingly. Moving on to Nashville. Our announcement during the quarter regarding our reopening of Nashville Superspeedway next year was exceptionally well received by all sectors of the racing community and by government officials in the Nashville and Middle Tennessee business community as well. Along with various engineers and contractors, we're consolidating our plan to restore the facility to operational status. We've also begun the process of hiring staff and making sales calls in preparation for next June's race weekend out there. At this point, I'll turn it over to Tim for his review of the financials.

[Timothy Horne:]

Thanks, Denis. Given the COVID-19 pandemics impact on our 2020 slate of events, these quarterly results are obviously not comparable to last year. The second quarter of 2019 included our NASCAR event weekend, which was postponed this year. As we announced on July 8, these postponed May NASCAR events have been rescheduled and will be run with our previously scheduled second race weekend in August. As further announced on July 27, those races will be run without fans. Additionally, the second quarter of 2019 included the Firefly Music Festival and the pandemic forced that event to be canceled for 2020. So we held no major events in the second quarter of 2020, which essentially explains all the changes in our revenues and operating expenses. If you look at the second quarter statement of earnings, you'll see our revenues were $110,000 compared to $24.8 million last year. Our operating and marketing expenses were also significantly lower than last year from not holding any events. And we're also lower than the first quarter of this year given cost-cutting measures that were put in place when the pandemic surfaced. G&A expenses were up slightly from last year at $1.87 million from higher insurance costs and stock compensation expense. G&A expenses were also lower than the first quarter of this year. Depreciation was a little lower at $765,000 compared to $794,000 last year. Given our announced reopening of Nashville Superspeedway next year, we are able to, again, project sales taxes being available to be used for debt service on the Wilson County bonds, resulting in a reduction in the contingent bond liability of $353,000 this quarter. We had other income of $163,000 this year compared to $57,000 last year, with the increase being primarily driven by higher pension asset gains in the second quarter this year. Our effective income tax rate was a benefit of 75.8%, which is higher than you would expect as a result of reversing a portion of the previously booked valuation allowance on Tennessee deferred tax assets, which we now expect to realize with the reopening of the Speedway next year. So our net loss for the quarter was $689,000 or $0.02 per diluted share compared with net earnings of approximately $5.5 million or $0.15 per diluted share last year. Looking at our June 30 balance sheet. We had no debt at June 30, and our available cash was just under $2.9 million. Our contract liabilities are higher than last June as we still had deferred revenue for the postponed May events whereas that was realized by June 30 of last year. That was offset by lower deferred revenue for our second race weekend as we effectively shutdown the ticket sales when the pandemic hit. Now that we know we will not be able to have fans attend these events, we'll be honoring our patrons' requests to either refund the payments they've made or apply to credit to next year's Dover event. It's too early at this time to predict the choices that will be made by our customers. Also included is a cash flow statement for the six-month period ended June 30 where you'll see our net cash used in operating activities was approximately $4.4 million compared to cash provided by operating activities of just over $6 million last year. Obviously, the higher net cash used was related to lower receipts for the 2020 race season, primarily from the postponement of the May race weekend. Capital expenditures were $81,000 for the quarter and $196,000 year-to-date, and the result of all that was a decrease in cash of just under $4.7 million so far this year. One final thing, we closed yesterday on the sale of the third option parcel in Nashville. Proceeds from the sale, less closing costs, were almost $6.5 million. Recall that the buyer had previously deposited $500,000 with us, which was applied to the purchase price. The gain on this transaction will be reflected in our third quarter results. That concludes our second quarter update. Thank you for your interest.