Dover Motorsports, Inc.
Q1 2018 Earnings Call Transcript

Published: 27 Apr 2018

[Operator:]

Good morning, everyone, and welcome. I’m joined by Tim Horne, our CFO. And after Tim reads our forward-looking statement disclaimer, we’ll get underway.

[Tim 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, as you know, this is always a quiet quarter for the company. But with no activities this year involving the removal of long-lived assets and with the gain on the sale of a portion of our land in Nashville, we produced improved first quarter results. Our developer in Nashville is getting underway with construction on his initial parcel and is recording growing interest in the land he has under option in addition to interest on portions of our remaining 1,000 acres. So we’re looking forward to reporting additional transactions during the year. Currently, we have title sponsorships for all three of our spring races, and we’re actively engaged with potential candidates for our fall race weekend. And actually, we’ll be making the appropriate announcements as deals are consummated. With that, I’m going to turn it over to Tim for his review of the first quarter financials.

[Tim Horne:]

Thanks, Denis. As Denies mentioned, we held no events in the first quarter of either 2018 or 2017. If you look at the first quarter statement of earnings, you’ll see our revenues were $226,000 compared to $110,000 last year with most of that increase from NASCAR’s revised estimates of ancillary rights revenue we will be receiving. Other than that, both quarters have rental revenue, primarily in Nashville. Our operating and marketing expenses are higher than last year, entirely from a change in accounting for advertising expenses, which we now expense as incurred as opposed to at the time of the event. General and administrative expenses were slightly lower than last year at $1.95 million from lower employee cost. Depreciation expense was $878,000 versus $821,000 last year, higher from prior year's additions. We had cost to remove long-lived assets in Q1 of last year related to the deconstruction of seats in Turn 3, and we had no such cost this year. The gain on sale relates to the closing on the sale of some of our land in Nashville. With sales proceeds of approximately $5 million after closing expenses, we had a book gain on the transaction of approximately $2.5 million. Net interest expense was down compared to last year at $40,000 versus $48,000 last year and was from lower outstanding borrowings offset by slightly higher rates. Our effective income tax rate was approximately 26.5% versus 41.5% for last year’s benefit, lower from federal tax reform. And our net loss for the quarter was $992,000 or $0.03 per diluted share compared with a net loss of approximately $2.4 million in the first quarter of last year or $0.07 per share. We’ve also attached a sheet to the earnings release that removed the impact of the Nashville sale and the prior year grandstand for more apples-to-apples comparison. Looking at the March 31st balance sheet, our financial position remains strong. Our loan balance was $500,000 at March 31st, compared to $3.24 million at the end of the last year and almost $6.4 million at March 31st of 2017. We made an additional $500,000 contribution to our frozen pension plan to continue to capitalize on a higher tax rate for this deduction for plan year 2017 contributions, and that had the obvious effect of lowering our pension liability. Deferred revenue, which is now referred to as contract liabilities, were up compared to March 31st of 2017. Much of this is from the earlier spring date this year for our race weekend as well as from some new corporate business offset slightly by ticket sales that are a little behind last year at this point. We’ve also included a cash flow statement for the quarter ended March 31st, where you’ll see our net cash used in operating activities was a little more than $1.4 million and was less than last year, primarily from the deferred revenue comments I just made and the timing of other payments offset by the pension contribution we made. Capital spending was $139,000 for the quarter, primarily from maintenance, concession and IT- related equipment purchases. As mentioned, the Nashville sale closed during the quarter, so you’ll see the net proceeds after closing expenses. And we bought back 92,479 shares of stock during the first quarter at an average price of $2.11, inclusive of nominal brokerage fees. The result of all that is that we paid down $2.74 million during the quarter. Our plan for capital spending in 2018 is for just under $1.5 million, the biggest components of which are suites, restrooms and a garage redesign plan, with the balance being other facility improvements. And as of now, we’d expect to come in right around that or a little below that number. That concludes our first quarter update. Thank you for your interest.