Dover Motorsports, Inc.
Q2 2017 Earnings Call Transcript

Published: 28 Jul 2017

[Operator:]

Welcome, and thank you for standing by. [Operator Instructions]. This call is being recorded. If you have any objections, you may disconnect at this time. Now I would like to turn the call over to your host, Mr. Denis McGlynn, you may begin.

[Denis McGlynn:]

Thank you, and good morning, everyone. Tim Horne, our CFO, is here with me this morning. And after Tim reads our forward-looking statement disclaimer, we will get underway with our review of the quarter.

[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, it was a decent quarter and first half of the company with growth in both revenues and net earnings. Overall, the Spring NASCAR weekend was a success, and while we along with many others involved in this sports and entertainment industries are experiencing declines in admissions, we find ourselves challenged to adjust to changing demographics and economic pressures, we were happy to see growth in our newly updated ticket packages, which bundled either multiple day tickets or tickets in a variety of amenities. Altogether, the programs we developed and continued to refine are developed -- are delivering solid results in both youth ticket sales and first-time customers. As everyone knows, developing the next-generation audience is critical to our future, and we are pleased with our progress in these areas so far. We also created new high-end camping packages this year, which sold out, and we are looking forward to expand on them going forward as well. All 3 races were sponsored in the spring, and everyone left happy having seen another great race under excellent weather conditions. And we were happy to learn from an outside research firm who performed a post-race survey that our likelihood to return numbers were substantially higher than our industry peers. An update on Nashville, before I turn it over to Tim. Having worked with Panattoni for about a year now, we've changed course on our agreement to sell them all 1,400 acres of our Nashville Superspeedway property. We've entered into a fourth amendment to our agreement with them to extend the agreement for 30 days, to allow us to finalize new agreements on a restructured transaction involving the sale of a portion of the property and an option for an additional portion. The amendment contemplates that we'll sell 150 acres of property for $35,000 per acre and grant an option for 3 years on an additional 150 acres for $55,000 an acre. This will leave us with over 1,000 acres of prime real estate, including the speedway, and we'll continue to explore development opportunities for this property with Panattoni going forward. With that, I'm going to turn it over to Tim for his review of the financials.

[Timothy Horne:]

Thanks, Denis. Our Spring NASCAR triple-header and the Firefly Music Festival were held during the second quarter of both 2017 and 2016. If you look at the second quarter statement of earnings, you will see our revenues were $25.6 million compared to $25.3 million last year of 1.3% increase. Our NASCAR weekend was an operational success in which our gross profit increased very slightly compared to last year. While admission's revenue and some hospitality items were down a little this year, they were offset by camping and concession improvement as well as the contracted increase in our broadcast rights revenues. The Sixth Annual Firefly Music Festival was held over 4 days in June and was another operational success. Similar to past years, we leased our property to Red Frog Events, the operator of the festival. And in addition to a rental fee, we also derived revenue from the sale of concessions during the event. Rent was the same as in prior years, and our portion of the concession sales was down a little compared to last year's event. G&A expenses were down slightly compared to last year at $1.78 million. Depreciation was down at $823,000. And our net interest expense was about the same as it was in the second quarter of last year from slightly lower average outstanding borrowings offset by slightly higher rates. And our net earnings for the quarter were up 2.7% at approximately $5.2 million or $0.14 per diluted share compared with net earnings of approximately $5.1 million in the second quarter of last year or $0.14 per share as well. Looking at the June 30 balance sheet, our financial position remains strong. You can see our receivables are up significantly compared to last year. Our NASCAR weekend last year was held in May, so our share of the TV money was received before June 30. This year's event was held in June, so those funds were received by us in July. Our loan balance, therefore, was $11.2 million at June 30 compared to $3.84 million at the year-end and $1.5 million at last year's June 30. The TV money timing, obviously, impacts that, and in fact, our loan balance today is less than $1 million. Deferred revenue is down a little compared to June 30 of last year from fall of ticket sales that are slightly behind last year at this point. Also included is a cash flow statement for the 6-month period, where you'll see our net cash used in operating activities was a little more than $5.5 million, that's obviously dramatically different than last year, but again, that's essentially [indiscernible] timing of the TV money that I just mentioned. Capital expenditures were $1.67 million through 6 months, the biggest piece of which was for safer wall additions, bathroom upgrades and miscellaneous equipment purchases and facility improvements. And the result of all that is that we borrowed $7.3 million through June. Our plans for capital spending in 2017 remain in total at approximately $2 million. That concludes our prepared remarks and our second quarter update. Thank you for your interest.