Dover Motorsports, Inc.
Q3 2016 Earnings Call Transcript

Published: 28 Oct 2016

[Operator:]

Welcome and thank you for standing by at this time. All participants will be in a listen-only mode of the whole duration of today's conference. This call is being recorded. If you have any objections, you may disconnect at this time. I would like to turn the call over to your host, Mr. Denis McGlynn. Sir, you may now begin.

[Denis McGlynn:]

Thank you and good morning everyone. Mike Tatoian, our Executive Vice President; Tim Horne, our CFO; and Klaus Belohoubek, our General Counsel are all here with me this morning. And after Tim reads our forward-looking statement disclaimer, we'll get underway with a review of the quarter.

[Tim Horne:]

In order to help you understand the company and its results, we may make certain forward-looking statements. It is possible that company's actual results might differ from any predictions we make today. Additional information regarding factors that could cause such differences appears in the company's SEC filings.

[Denis McGlynn:]

Thanks, Tim. With our fall NASCAR weekend falling mostly in the fourth quarter of this year, our third quarter was again fairly quiet. Some changes in depreciation expense along with some Nashville Superspeedway sale related income last year made for uneven comparisons with this year's third quarter that Tim will go overall of that in a minute. As for the sale of Nashville Superspeedway due diligence by the potential buyer is progressing on schedule and at this point they have not given with any reason to think that the anticipated closing in the first quarter of 2017 is a problem. With no major operational issues to report on this quarter, this is a good time to offer a few comments on this year's television broadcast performance. There's been a number of articles published this year about declines in TV ratings across all sports including the NFL. Well it's true that ratings are off especially among the younger demographics. It's also true that this age group is most likely to rely on second screens like computers and smartphones for their viewing needs. To date there has been no significantly reliable way to measure second screen viewership, but it is expected that those measurement protocols will be in place next year to better track the migration of viewership from traditional televisions to second screens. Commentary from FOX following the conclusion of its broadcasts of NASCAR's first half of the current season offers some helpful context. In their summation, FOX said NASCAR is still the ratings champion most weekends and produces the largest audiences week-in and week-out except for the NFL. Separately referring the sports in general, Nielsen and its annual media report says sports is still more dominant than either entertainment or reality programming pointing out that 93 of the top 100 rated live shows last year were live sports programs, this compares to fourteen ten years ago. Back to NASCAR, our broadcast partners expect ratings will improve next year with the later Sunday start times NASCAR announced earlier in the year. And with the prospects next year for measurement of second screen in various social and digital outlets, NASCAR's growing strengths in these areas should help to construct a more positive scenario down the road. Over the farther horizon lies the prospect for integrating virtual and augmented reality into the telecast, this technology is developing fast and could be a major component of future rights negotiations. At this point, I'll turn it over to Tim for his review of the third quarter financials.

[Tim Horne:]

Thanks, Denis. The majority of our fall NASCAR tripleheader was held during the fourth quarter of this year on October 1st and October 2nd, the smaller Friday activities and K&N Series race, which were on September 30th are in the third quarter results presented here. The entire fall weekends came in the fourth quarter of last year. If you look at the third quarter statement of earnings, you'll see our revenues were $369,000, compared to $133,000 last year, but the big difference being some of the Friday activities occurring in Q3 of this year. We obviously can't discuss the specifics of our fall NASCAR weekend yet, but the weather was an issue again. As we got our Friday race in around the rain drops had a washout on Saturday and woke up to rain on Sunday, but the day improved and we were able to hold both Saturday’s and Sunday’s events on Sunday. The logistics of this, the fact that Saturday sales were shutoff when the event was moved to Sunday morning and lost concession revenue added to what was already a challenging attendance environment. Operating and marketing expenses were also a little higher than last year for the same reason the revenue was a little higher. G&A expenses were fairly consistent with last year at just under $1.8 million. Depreciation was $828,000 versus $1.410 million last year, but recall last year had about $655,000 in accelerated depreciation for the seats in turn 3 that we will no longer use. In the third quarter of last year, we also recognized this income $1.867 million in nonrefundable deposits made to extend the closing date that now expired purchase agreement for Nashville Superspeedway. And as you know by now on August 25th, we entered into a purchase and sales agreement to sell the speedway to Panattoni Development Corp for $27.5 million plus the assumption of any liability we may have related to the variable rate bonds. Subject to due diligence, which is underway, we would expect that transaction to close in the first quarter of 2017. Net interest expense is down slightly compared to last year at $41,000 and that was from lower out outstanding borrowings offset by slightly higher rates. And our net loss for the quarter was approximately $2.2 million, or $0.06 per diluted share, compared with a net loss of approximately $1.4 million last year, or $0.04 per share, and that included the Nashville deposits and the accelerated depreciation without which the net loss last year would have been $2.2 million, or $0.06 per share, as well. Looking at the September 30th balance sheet, our financial position remains strong and continues to improve. Outstanding debt was just over $8 million at September 30th, compared to $10.580 million at September 30 last year. Deferred revenue is down compared to last year and most of this is from some opening entitlements we have for our fall weekend, most significant of which is obviously our cup race on Sunday and so much from ticket sales that were behind last year as well. Also included is a cash flow statement for the nine month period where you'll see our net cash provided by operating activities was down slightly compared to last year and lower advanced collections to-date offset by lower tax payments and the timing of other payments. Our capital expenditures were $1.9 million to $3 million so far this year. The biggest components of which were for safer barriers, rest room upgrades, WiFi upgrades, garage improvements and some other miscellaneous equipment purchases and facility improvements and we expect to spend between $750,000 to $1 million for the balance of the year to complete those projects. We also repurchased and retired 1,775 shares of our common stock at an average price of $2.12 during the quarter bringing repurchases for the year to just under 38,000 shares. The result of all that is that we borrowed $2.16 million so far this year, but, of course, a large payment for the broadcast rights related to our fall event weekend will come in next week. That concludes our prepared remarks and our third quarter update. Thank you for your interest.

[Operator:]

That concludes today's conference. Thank you all for your participation. You may disconnect at this moment.