Dover Motorsports, Inc.
Q2 2018 Earnings Call Transcript

Published: 29 Jul 2018

[Denis McGlynn:]

Good morning, everyone, and welcome. I'm joined this morning by Tim Horne, our CFO. And Tim's going to read our forward-looking statement disclaimer, and then 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, our second quarter results were in line with the previous year following the month earlier running of our spring NASCAR race weekend and another successful Firefly Music Festival. A less-than-favorable weather forecast for Sunday of our NASCAR weekend which, in fact, experienced an hour and 40-minute rain delay, contributed to another decline in attendance. On the positive side, despite the early May race date with school still in session, we did exceed our target goals for youth ticket sales. We also saw a strength in our recently created multi-day ticket discounts and value-added ticket packages as well. And camping and hospitality package also remain strong. The Seventh Annual Firefly Music Festival had another successful four days with near-perfect weather and great crowds each day. One comment about Nashville before I turn it over to Tim. The Panattoni Group continues to make progress on its initial development of its 700,000 square-foot spec building. They indicated to us that they're advancing work ahead of scheduled on the remainder of the parcel they recently acquired. This is in response to what they described as a very robust development market in middle Tennessee. So we're happy with the progress out there so far. At this point, I'll turn it over to Tim for his review of the financials.

[Tim Horne:]

Thanks, Denis. We held our spring NASCAR weekend and hosted the Firefly Music Festival in the second quarter, both 2018 and 2017. If you look at the second quarter statement of earnings, you'll see our revenues were $25.8 million compared to about $25.5 million last year, with small increases from our race weekend and the Firefly Music Festival. Our NASCAR weekend was an operational success. Admissions revenues were lower, while broadcast revenues and sponsorships were higher. On the expense side, purse and sanction fees were higher, while all other costs were down in total with the end result in gross profit for the event similar to last year. The Seventh Annual Firefly Music Festival held over 4 days this past June was also an operational success. Similar to past years, we lease our property to the operator of the festival. And in addition to a rental fee, we also derived revenue from the sale of alcohol during the event. Rent was the same as in prior years, and our portion of alcohol sales were higher compared to last year's event given the improved attendance. G&A expenses were almost identical to last year at $1,799,000. Depreciation expense was also consistent with last year at $825,000. Our net interest expense was down compared to 2017 at $33,000 versus $68,000 last year and that was from lower average borrowings offset by slightly higher rates. Our effective income tax rate was approximately 26.7% versus 40.9% last year, obviously, lower from the recently enacted federal tax reform. So our net earnings for the quarter were $6,508,000 or $0.18 per diluted share compared with net earnings of approximately $5.2 million in the second quarter last year or $0.14 per share. Looking at the June 30 balance sheet, our financial position remained strong. We had no debt outstanding at June 30 compared to $11.2 million at June 30 of last year and about $3.25 million at the end of calendar '17. We've contributed another $1 million to our frozen pension plan this year to continue to capitalize on a higher tax rate available for this deduction for plan year 2017 contributions and that had the obvious effect of lowering our pension liability. Contract liabilities, which used to be referred to as deferred revenue, are down compared to June 30 last year. Much of this is from the timing of billing of our fall sponsors, while some is from sponsorships that remain open and ticket sales that are a little behind last year at this point. Also included is a cash flow statement for the six months ended June 30, where you'll see our net cash from operating activities was up a little more than $10 million compared to last year, primarily from the receipt of our TV money in the second quarter given the earlier race date this year. Last year, we received our Spring TV money in July. Offsetting that is the deferred revenue comments I just made. The fact that most weekend expenses were also paid during the quarter, and as mentioned, we contributed $1,000,000 to the pension plan in this year's 6-month period. Capital expenditures were $530,000 through six months, primarily for equipment purchases and facility improvements. And we bought back almost 55,000 shares of stock during the second quarter at an average price of $2.10, bringing our total purchases for the year to just over 147,000 shares. And the result of all that is that we paid down all of our debt and in fact, have about $5.25 million increase in cash so far this year and that was helped by our sales from land in Nashville back in the first quarter. Our plan for total capital spending in 2018 is for just under $1.5 million, the biggest components of which are for suite and restroom improvements and a garage redesign plan with the balance being other facility improvements. As of now, we'd expect to come in right around or a little below that number.

[Tim Horne:]

That concludes our second quarter update. Thank you for your interest.