Dover Motorsports, Inc.
Q4 2016 Earnings Call Transcript

Published: 26 Jan 2017

[Operator:]

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

[Denis McGlynn:]

Thank you and good morning everyone. Tim Horne, our CFO is here with me this morning and after he reads our forward-looking statement disclaimer, we'll get under way with our 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 the 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. Our fall in NASCAR weekend fell mostly in the fourth quarter and similar to our spring race and last year's fall race. The weekend was weather-impacted which should affected our attendance in revenue results. Tim will have more on that during his comments. We were pleased with the announcement of Monster Energy as the new NASCAR Cup Series sponsor replacing Sprint, during aggressive marketer targeting the younger demographics our industry is seeking and we're looking forward to their involvement this year. We're also happy with NASCAR's recent announcement that they're revising the race formats with all three of its National Series this year. This is a dramatic change to NASCAR's tradition of running 400 to 500 miles, start to finish without breaks. This year, each cup race will consist of three stages with regular season points awarded during each days and an extra playoff point awarded to the stage winners. Just to clarify, the playoffs is the new name for NASCAR's Championship chase. The leader at the end of the third and final stage will be the overall race winner and an addition to the normal regular season points awarded according to the order of finish, they'll receive five bonus playoff points. This new format was the result of the collaborative effort among all the NASCAR stakeholders with input from every sector of the sport from the drivers, car owners, sponsors, TV networks, tracks and what have you. The overall objective here is to make every lap of every race more meaningful and compelling and also to create natural breaks for the networks to air commercials during the time when there's no racing under way. Of course the fans will get a break as well. Our format here at Dover will have two 100-lap stages and a 200-lap final stage. This is going to be an interesting and possibly huge step forward for the sport, so we're looking forward to it. This year, our spring race moves back to our traditional date on the first weekend in June, which we view as a plus. We're also completing the previously grandstand removal project in turn three, which will bring our seating capacity to 85,000. Our major CapEx project for the year will be the installation of NASCAR-mandated safer walls to our speedways front and back stretches. At this point, I'm going to turn it over to Tim for his review of the financials.

[Tim Horne:]

Thanks, Dennis. It's Saturday and Sunday of our fall in NASCAR tripleheader were held during the fourth quarter this year while the smaller Friday activities in the K&N Series race, which were on September 30 were reported in the third quarter results. The entire fall weekend sale in the fourth quarter of 2015. If you look at our statement of earnings for the quarter, you'll see our revenues were $20.1 million, compared to $21 million last year with the difference being some of the Friday activities occurring in Q3 this year and also from lower sponsorships and admissions revenues this year. For the Fall weekend as Dennis mentioned whether it was an issue again is we managed to get our Friday racing around the rain, had a complete washout on Saturday and started with rain on Sunday, but we're able to get both Saturdays and Sunday's events in on Sunday. As mentioned last quarter, the fact that Saturday's ticket sales were shut off when the event was moved to Sunday morning, contributed to weekend attendance that was down about 12%. That combined with lost concessions revenue, added to what was already a challenging attendance-environment. Additionally, our sponsorship revenue was down primarily from some lower entitlements this year. Of course, broadcast revenues were higher this year, pursuant to NASCAR's 10-year contract which was in its second year. Operating and marketing expenses were lower than last year as higher purse and sanction fees were offset by lower other race weekend expenses and expenses related to Friday that were recorded in the third quarter. G&A expenses were down almost 5% compared with last year at just over $1.8 million. We've recorded $203,000 of cost for the disposal of long-lived assets related to the continued deconstruction of seats in turn three as Dennis mentioned, which we started last year, the total cost of that will be about $500,000 with the balance falling in the first quarter of '17. Depreciation was $842,000 versus $949,000 last year, but recall last year at $177,000 in accelerated depreciation for those seats in turn three, we had $24,000 of such cost this year. Net interest expense was down compared to last year from lower outstanding borrowings, upset by slightly higher rates and our net earnings for the quarter were about $3.25 million or $0.09 per share, compared with net earnings of approximately $3.8 million or $0.10 per share last year. Looking at the year-end balance sheet, you'll see our financial position remains strong and continues to improve. Outstanding debt was $3.84 million at the end of the year, compared to $5.9 million at the end of 2015. Deferred revenue was up a little bit, compared to last year end, but it's simply too early to draw any conclusions regarding 2017 at this point. We have one of our Monster Cup Series event and one Xfinity Series event title as we head into the 2017 selling season. Also included in the cash flow statement for the year ended December 31 where you'll see our net cash provided by operating activities was fairly similar from year-to-year. Capital expenditures were $2.58 million for the year, the biggest components of which were for safer barriers, restroom upgrades, Wi-Fi upgrades, garages improvements and suite pit road and other facility improvements. We purchased about 38,000 shares of our stock this year and of course paid the $0.05 dividend which equate to $1.84 million during the fourth quarter. The result of all that is that we take down just over $2 million of debt this year. For 2017, our plan for capital spending is for just over $2 million as Dennis mentioned and a big component of that is for additional NASCAR-mandated safer barriers with the balance being other facility improvement. Regarding Nashville, it's previously reported on January 22. We added into an amendment to our August 25 agreement to sell that facility, which extends the agreement by 60 days. Closing is now scheduled to occur during the second quarter of 2017, but remains subset the zoning and other approvals and satisfactory completion of the purchaser's due diligence. That concludes our prepared remarks and our fourth quarter update. Thank you very much for your interest.

[End of Q&A:]

And that concludes today's conference. Thank you for your participation. You may now disconnect.