Dover Motorsports, Inc.
Q4 2014 Earnings Call Transcript

Published: 29 Jan 2015

[Operator:]

Welcome and thank you for standing by. At this point all participants are in a listen-only mode throughout the discussion. This call is being recorded. If you have any objections, you may disconnect at this time. Now, I’ll turn the meeting over to your host, Mr. Denis McGlynn. Sir, you may now begin.

[Denis McGlynn:]

Thank you, operator and good morning everyone. Tim Horne, our CFO; and Klaus Belohoubek, our General Counsel are here with me this morning. And 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 can cause such differences, appear in the company's SEC filings.

[Denis McGlynn:]

Thanks Tim. Well, we had no major events take place during the quarter, so I’ll just take a moment to mention some of the highlights going into this year. 2015 will be the first year under the new 10 year media rights agreement, NASCAR negotiated with FOX and NBC. It’ll also be the first year with Xfinity, a series sponsored for the former nationwide series under a 10 year agreement Comcast signed with NASCAR. We’re looking forward to working with these new partners this year and in the years to come. Here at Dover, we have titled sponsors lined up for all six of our races in 2015 and expect to have a few announcements on that shortly, once the contracts are finalized. As for ticket sales, normally we have ticket sales dated this year that compared to the same number of days prior to the race last year. However, due to our seat widening project this year now involving the front stretch grandstands and therefore a substantially larger number of customers who needed to be notified by phone, our current sales curve is currently lagging last year and no comparable numbers are available. We’re nearly complete as far as the notification process is concerned and following the traditional upgrade and renewal process, we’ll see it in a backlog of pending ticket orders tickets to get to our normal date-to-date comparisons. As for CapEx projects, the replaced of the cash fence surrounding Speedway has been completed on time and on budget at $2.9 million. Also the initial phase of our grandstand rightsizing program has been completed. A total 16,900 seats were removed in turns two and three with a net project cost of $360,000. This leads our current seating capacity at 95,500 grandstand seats plus 2,700 skybox seats. We’re currently reviewing options for alternative use of the mezzanine structures which remain following the removal of seats, depending the outcome of this review will either repurpose these mezzanine areas or remove them along with an additional 8,100 seats which were slated for possible renewal pending the outcome of this review. The fourth annual Firefly Music Festival returns again this year, three weeks following our Sprint NASCAR race which we’d make at June 18th through the 21st. Red Frog Events the festival organizer is expanding their presence here at Dover this year with the addition of a second festival on the weekend following Firefly. The Big Barrel Festival will be a three day country music presentation scheduled for June 26, 27 and 28. Early response to the second festival has been very positive. One final item before I turn it over to Tim, the previously announced sale of Nashville Superspeedway to NeXovation is anticipated to close in the first quarter as the buyer continues to work on pre-closing related details. The buyer has already made non-refundable payments to us totaling $1.9 million of this amount $1.7 million will be applied against the original $27 million purchase price at closing. The additional $200,000 was paid as consideration for the most recent extension. Tim’s going to take over now with the review of the financials, so Tim.

[Tim Horne:]

Thanks Denis. Just a few brief comments sort of operationally on eventful fourth quarter, we didn’t hold any major events since the fourth quarter of this year or last year. If you look at the statement of earnings, our revenues are fairly immaterial and consistent from year-to-year, representing some rental related income in Nashville and some ancillary revenues in Dover as well. Our operating and marketing expenses were up by $137,000 this year, primarily from headcount related cost and unusual other items. G&A expenses were almost identical to last year at $1.786 million, while depreciation expense also fairly consistent with last year at [$830,000]. Net interest expense was down compared to 2013 at $132,000 versus $172,000 last year and that was from slightly lower rates, lower average borrowings and also lower fees compared to last year. Our net loss for the quarter was approximately $2.2 million or $0.06 per diluted share compared with a net loss of $4.75 million or $0.13 per share last year. In the last year’s fourth quarter, we recorded a non-cash charge of $4.3 million to write-down our Nashville property. Without that charge, last year’s fourth quarter loss was $1.94 million or $0.06 per diluted share as well, which you can see on the attached schedule that reconciles our net loss for the quarter, adjusted net loss that excludes that charge from last year. For the year as a whole, you can see revenues for $45.7 million versus $46.2 million last year, lower admissions and event related revenue offset by higher broadcasting revenue. With an increase in expenses primarily from purse and sanction fees related to broadcast increases. Our EBITDA was $11.4 million for the year compared with [12,300,000] in '13. Interest expense was down almost $0.5 million for the year from lower rates and borrowing. Net charge this year related to disposal of Dover grandstand seats and the aforementioned impairment charge last year for Nashville as well, if you exclude both of those as shown on the attached schedule, we had net earnings of $4.6 million this year versus $4.8 million last year or $0.13 per share in both years. Looking at the balance sheet, our deferred revenue is down about $395,000 from ticket sales that are a little behind in this time last year, but as Denis mentioned our capacity reduction in seat widening projects have backed up the sales cycle a few weeks. And we also require less of a deposit from customers this year, so it’s a little early to make any conclusions as to 2015 at this point. Our loan balance was down to $10.76 million at the end of the year and that compares to 14.820 million at the end of last year. Also included in the cash flow statement for the year, where you’ll see our net cash from operating activities was about $7.5 million for the year versus 8.1 million last year. Our capital spending was $3.1 million in 2014, the bulk of which was through the replacement of the debris fence around the track. Of course we paid an annual dividend in the fourth quarter, so the result of all that is that we paid down short to $4 million during the quarter and just over $4 million for the year as a whole. And at this point our capital plans for 2015 depend on a few things, but we could spend around $2.5 million if we purchase some land where we're looking at near the property in addition to doing things we need to do like install fiber, make final payments on the debris fence and do some IT and property related upgrades. As Denis mentioned as of now, we still expect the Nashville transaction to close by the end of the next month. The $27 million purchase price would create a small gain for book purposes and a slightly larger gain for tax purposes. And we would expect net proceed to be approximately $21 million to $22 million after income taxes and settlement adjustments. That concludes our prepared remarks and our fourth quarter update. Thank you very much for your interest.

[Operator:]

That concludes today’s conference. Thank you all for participating. You may now all disconnect. [No Q&A session for this event]