Dover Motorsports, Inc.
Q1 2013 Earnings Call Transcript

Published: 25 Apr 2013

[Operator:]

Welcome, and thank you all for standing by. [Operator Instructions] The conference call is being recorded. If you have any objections, you may disconnect at this point. I now turn the meeting over to Mr. Denis McGlynn. Sir, you may begin.

[Denis L. McGlynn:]

, Thank you, operator. Good morning, everyone. Mike Tatoian, our Executive VP, is here; along with Tim Horne, our CFO; and Klaus Belohoubek, our General Counsel. Tim's going to read our forward-looking statement disclaimer, and then we'll get underway.

[Timothy R. 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 L. McGlynn:]

Thanks, Tim. Well, we're happy to report this first quarter saw continued improvement, both for Dover Motorsports and as well, for NASCAR and its various stakeholders. As for the company, it was a quiet quarter, with no major activities or events scheduled. Testing revenue at Nashville was higher than anticipated early in the quarter as teams prepared for the season-opening Daytona 500 and the introduction of NASCAR's next-generation car. The testing revenue, combined with continued expense controls here, delivered an improved bottom line for the company, and Tim will have more on that in a minute. As for NASCAR, the season got off to a great start, with teams and drivers excited about the new Gen 6 car. Also, the publicity surrounding Danica Patrick winning the Daytona 500 pole -- actually, leading it for several laps and finishing 8th -- provided a substantial momentum for the sport, which has carried over to the races that have followed. Each race of the season so far has gotten better as teams and drivers continue to learn what the new car is capable of. And with competition intensifying and new rivalries emerging among drivers, the season so far is seeing a level of drama not seen in years, and is seeing NASCAR's most popular driver, Dale Earnhardt Jr., among the leaders in the Sprint Cup point standings for the first time in recent years. The great start for the season has made for pretty compelling sports programming. And consequently, ratings and viewership for NASCAR on FOX finished up the quarter at -- up 3%, a welcome reversal from last year and certainly, timely, in light of the upcoming media rights renewal negotiations expected to take place this summer. Getting back to the company, I'm not going to talk about the economy except to mention that we're still constrained by it. And to the extent we deem ourselves qualified in all areas of sales and marketing, I think it's fair to say this down cycle has measurably improved our skills. We're seeing good results from our social and online marketing activities. Our bundled ticket packages and our loyal fan discount incentives have all been productive. One new initiative for this year, which will be a first in NASCAR, is our recently announced Flash Seats program. Flash Seats is a new paperless ticketing technology, which allows fans to have their tickets electronically loaded directly on to their credit card, which, when swiped at the gate, will gain them access in the Dover International Speedway. This new innovation eliminates the issues associated with lost or stolen tickets and the possibility of disputes created by counterfeit tickets. The Flash Seats program is -- will also allow us to more fully integrate our Monster card into our marketing efforts. The Monster card is a branded debit card, which we tested here at Dover last fall, and will fully launch this year. If you've ever been to Disney World, you may be familiar with their Key to the World card, which provides universal functionality. Everything from being your hotel room key to being how you pay for everything in the park is built into the card. Race tickets can also be loaded onto our Monster card, and customers will be able to make purchases with the card on-site for the multitude of offerings we have here at Dover International Speedway. Additionally, we can load onto the card special offers and promotions being extended by our sponsors, thus driving traffic to their stores and businesses. Over time, the Monster card will be the only card customers will need at the track, and we're excited about the convenience value the Monster card brings to the customer experience here at Dover International Speedway and also the possibility for increased per capita spending by our customers. One final item before I turn it over to Tim, the very successful Firefly Music Festival will return again this year, a month earlier than last year, on June 21, 22 and 23. We recently signed a 10-year agreement with Red Frog Entertainment, the festival's promoters, whereby Dover International Speedway will lease its property for the annual concert, which last year, right out-of-the-box, was nominated by Pollstar for the best festival of the year in its size category. We enjoy our relationship with Red Frog, and we're looking forward to helping them continue to grow this great event in the coming years. With that, I'm going to turn it over to Tim.

[Timothy R. Horne:]

Thanks, Denis. My comments will be very brief for this quiet quarter. If you look at the first quarter statement of earnings, you'll see our revenues were $116,000 compared to $126,000 last year as we held no major events during the first quarter of either year. These revenues were related primarily to team testing in Nashville during the quarter. Our operating and marketing expenses were also slightly lower than last year, as were general and administrative expenses. Depreciation expense was fairly consistent with last year at $825,000. Our net interest expense was down compared to 2012 at $275,000 versus $401,000 last year and was from lower rates and fees as we de-leverage the balance sheet, and also from lower average borrowings compared to last year. The other income is from the sale of some temporary grandstands in Nashville. Our effective income tax rate was a benefit of approximately 39.8% versus 36.7% last year, and our net loss for the quarter was about $2.3 million, or $0.06 per diluted share, compared with a net loss last year of $2.6 million, or $0.07 per diluted share. Looking at the March 31 balance sheet, accounts receivable are $1.5 million lower than they were at this time last year, primarily from the timing of billing our FedEx Sprint Cup sponsorship and some other smaller sponsorships, and also from not having a receivable related to NASCAR ancillary media rights this year, whereas there was about $0.5 million in receivables at this time last year. Deferred revenue was down about $2.2 million, partially from the aforementioned receivable items and also from lower advance ticket sales compared to this time last year. Ticket sales were off about 10% at March 31 compared to last year as the trend towards ticket buying closer to the event is continuing. This is in line with what we are seeing throughout the industry. Our loan balance was down to $21.2 million at March 31 compared to $30.1 million last year. Also included is a cash flow statement for the quarter where you'll see our net cash used in operating activities was about $1.5 million, which is more than last year by about $650,000 from the just mentioned lower advance ticket sales. Capital expenditures for the quarter were $52,000. And at this point, our plans for the year are for spending of about $250,000. The result of all that is that we borrowed $1.5 million during the quarter. That concludes our prepared remarks and our first quarter call. Thank you very much for your participation.

[Operator:]

Thank you. That does conclude today's conference call. Thank you all for participating. You may now disconnect.