Dover Motorsports, Inc.
Q3 2015 Earnings Call Transcript

Published: 31 Oct 2015

[Operator:]

Welcome and thank you for standing by. At this time, all participants will be on a listen-only mode. This call is being recorded and if you any objections, please disconnect at this time. I’d now like to turn the call over to Mr. Denis McGlynn. Sir, you may 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. After Tim reads our forward-looking statement disclaimer, we'll get underway 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 that company's actual results might differ from any predictions we make today. Additional information regarding factors that cause such differences, appear in the company's SEC filings.

[Denis McGlynn:]

Thanks Tim. Well, clearly quarterly comparisons are irrelevant given our fall NASCAR weekend this year moved from the third quarter into the fourth quarter. The October 2nd, 3rd, and 4th race weekend was impacted by a passing weather front and the hurricane [indiscernible], but we did get all the races in and avoided any delays that would have required Monday or Tuesday operations. Obviously, we haven’t closed October yet, so we will be providing greater color on race weekend on our next conference call. As a general comment, this has been a good season for NASCAR with quality storyline surrounding Jeff Gordon’s final season as a full time driver and Kyle Busch’s come back from an injury related a 11-week absence from racing, who win several races and accumulate enough points to qualify for the Sprint Cup Championship Chase. And the chase itself is delivering a high-level of drama, it was designed for with Kevin Harvick’s must win victory here at Dover and last week’s chaotic finish at Talladega, which knocked Dale Earnhardt Jr. and several other top drivers out of contention. NASCAR’s new aero package was successfully tested at Darlington during the quarter and will be implemented at all cup tracks in 2016, and is expected to improve the competition, especially on mid-sized tracks like here at Dover. Also gas prices are down, TV ratings are good and digital and social media metrics for this sport are booming. And finally NASCAR announced earlier this week a change from single year to five-year sanction agreement with this member track starting in 2016. This is a welcome change for us and so far it provides stability over an extended timeframe which will greatly facilitate operational and financial planning. The new sanctions also provide for race dates to be settled on by April of each preceding year, which will assist us in getting ticket renewals out more expeditiously and allow fans and local service providers, especially hotels to better plan their following year schedules. All in all, a good season so far with more to come. I’m going to turn it over to Tim now for his financial commentary.

[Tim Horne:]

Thanks, Denis. As Denis mentioned, our fall NASCAR weekend fell in early October this year as opposed to September last year. So my comments will be fairly brief as the operating results we release today include no major events. If you look at the third quarter statement of earnings, you will see our revenues were $133,000 compared to about $21.1 million last year with the bulk of the difference obviously representing the race weekend. We obviously can’t discuss specific results of the fall NASCAR weekend yet, the broadcast revenues increased as did our sponsorship sales. And while we were lucky to dodge a hurricane and get all our events in during the weekend, the weather was pretty bad and walk-up attendance and therefore admissions revenue and per cap sales will be affected. Operating and marketing expenses are pretty typical for a non-event quarter. Our G&A expenses were almost identical to last year, $1,748,000 up just slightly from higher pension insurance premiums this year. Depreciation expense shown here is significantly higher this year at $1.4 million versus $805,000 last year. The increase is from accelerating depreciation for about 8100 seats in Turn 3 that we wont be removing in the fourth quarter. The depreciation is accelerated with a net book value and those assets will be zero after the October event. As a reminder the loss on disposal of assets last year of $2.4 million was from the removal of Grandstand seats back in 2014 and represented the remaining net book value of those assets, as well as the cost to remove them. As previously reported, the agreement we had to sell the NASCAR Superspeedway property has expired by its terms. As a result, we recognized an income during the third quarter of $1.86 million in the previous payments made to us. These were non-refundable payments made by the purchaser in 2015 for extending the closing date under the agreement, as well as payments made in 2014, it would have been applied to purchase price, had the transaction closed. The total pay to us in connection with this now expired agreement and recognized an income in 2015 is $2.9 million. We’ve expanded our sales efforts and are in discussions with additional prospective buyers, continue to explore all options for the property. Our net interest expense was down compared to the last year at $47,000 and that was primarily from lower outstanding borrowings this year. Our net loss for the quarter was approximately $1.4 million or $0.04 per diluted share, and that compares with net earnings of $2.6 million or $0.07 per share last year. This year’s results were obviously impacted by the accelerated depreciation and the national deposits recognized that I just discussed. And last year’s earnings were affected by the loss on disposal. We’ve attached the sheet that illustrated the impact of those items in the quarter for the year-to-date periods as well. Looking at the September 30, balance sheet, prepaid expenses and deferred revenue are higher and accounts receivable lower and that’s all from the race weekend timing. Our loan balance was $10.58 million at the end of September compared to $14.72 million at September 30 last year. Also included is cash flow statement for the nine months ended September 30, where you will see our net cash provided by operating activities were $631,000 through nine months compared to $1.78 million last year. The operating cash provided was less than last year, primarily from weekend cash receipts [indiscernible] in the period last year and not in the third quarter of this year. Capital expenditures are $1.35 million year-to-date. The biggest piece of what was through the installation of fiber required by NASCAR for this season back in the first quarter, we will have some IT and other facility improvements. We expect to make about another $100,000 or so in capital improvements for the balance of this year. These $1.2 million in non-refundable payments made this year will extend the closing date under the now expired agreement to purchase Nashville. The result of all that is that we paid down $180,000 of our credit facility through September. Of course we will receive our fall event TV money sometime next week. As with the case this time last year, yesterday our Board of Directors declared an annual cash dividend on both classes common stock of $0.05 per share. That dividend will be payable on December 10. The shareholders of record, the close of business on November 10. Any decisions regarding future dividends will be evaluated on an ongoing basis. That concludes our prepared remarks and our third quarter update. Thank you very much for your interest.

[Operator:]

That concludes today’s conference. Thank you all for your participation. You may now disconnect at this time. [No formal Q&A for this event]