Dover Motorsports, Inc.
Q3 2013 Earnings Call Transcript

Published: 24 Oct 2013

[Operator:]

Welcome and thank you for standing by. At this time, all participants are in a listen-only mode. Today's call is being recorded and if you have any objections, you may disconnect at this point. And now, I would like to hand the call over to your host, Mr. Denis McGlynn. Please go ahead sir.

[Denis McGlynn:]

Thank you, operator. Good morning everyone. I am joined this morning by Tim Horne, our CFO; Mike Tatoian, our Executive Vice President; and Klaus Belohoubek, our General Counsel. Tim, would you read our forward-looking statements disclaimer, and then we will get underway.

[Timothy 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, appear in the company's SEC filings.

[Denis McGlynn:]

Thanks Tim. Well year-over-year, it wasn't a bad quarter, considering that the Firefly Music Festival held here on our grounds occurred in this year's second quarter, but last year, it took place in the third quarter. So our results aren't totally comparable year-to-year. Tim will [add the] financial results from our September NASCAR Weekend in a moment, but from an operational standpoint, things went very smoothly. The racing was good all three days and TV viewership was up 11% for Sunday and 33% for Saturday, with both races showing strong growth in the youth and 18 to 34 adult segments. While overall attendance continued to be up from the previous year, we were encouraged by the success of our youth initiatives and our efforts to bring new fans to the sport. Our focus in each of these areas is on rebuilding our fan base and replacing those who are [easing out] or otherwise no longer attending in person, with new indoor younger fans, who will become our core customers for the future. Special youth ticket pricing and package offers bundling at a minimum headset radio, or even a three-day [fan vision] rental have grown youth and first time attendance to new highs this year. Youth tickets grew to 5% of Sunday ticket sales for the fall race, which equaled June's race, and first time visitors were 15% of our Sunday crowd, which also matched our June race. So we are very encouraged by both these results, and we look to build on them going forward. By next spring's NASCAR Weekend, we will be even better able to support our youth initiatives, with the installation of a distributed antenna system, or DAS, which will greatly enhance connectivity on-site and provide the social and digital opportunities that youth of today demands. And in similar vein, our Flash Seats digital ticket delivery system is catching on, especially with our younger and first time customers, and just this first year of offering Flash Seats, digital tickets already account for more than 10% of our ticket sales. Also, our Monster debit card introduced this past spring, expanded activations fivefold to more than 2,500 on-site customers during the fall race weekend. Ultimately, the Monster debit card will be the only card needed here, it's being accepted at all of our retail locations, and even adding the capability of having Flash Seats downloaded on to it. Finally, as you might have read, we have released our NASCAR dates for 2014. The Spring Race Weekend will be May 30-31, and June 1. The Fall Race Weekend will be September 26-27 and 28. So with that, I will turn it over to Tim for his review of the third quarter financials.

[Timothy Horne:]

Thanks Denis. Our Fall NASCAR [Triple Header] in Dover was held during the third quarter, both this year and last year. As Denis mentioned, the one item impact in comparisons, is the Firefly Music Festival, which is reflected in the third quarter numbers here for last year, whereas that event was held in the second quarter this year. If you look at the statement of earnings, you will see our revenues were $21 million, $25 million, compared to $22.7 million last year. Our Dover NASCAR Weekend saw total revenues that were pretty slack, compared to last year, with higher broadcast rights fees, offsetting lower admissions. Admissions revenues were off about 9%, and that reflects the continued economic challenges facing our typical race fan. Our average ticket prices were up slightly, compared to last year. Contracted broadcast rights fees for the Dover Weekend increased by a little more than 3% this year. Additionally, sponsorship revenues were up slightly, offsetting lower hospitality related sales, and slightly lower per cap revenue items. Event related expenses were up about $450,000 compared with last year, reflecting higher person (inaudible) fees, slightly higher marketing and promotional costs, and costs associated with enhanced security. As a result, the profits for race weekend as a whole were down a little less than 5%. These results were almost identical to what we saw back in the spring. As mentioned, the results for the second annual Firefly Festival held in June were reported in the second quarter. That event was in the third quarter last year, and last year's gross profit reflected here, show several hundred thousand dollars related to that event. Our general and administrative expenses were almost identical to last year at $1.7 million, as was our depreciation of $820,000. Net interest expense was down compared to 2012 at $237,000 versus $332,000 last year, and that was from lower rates and fees, and also from lower average borrowings compared to last year. Our net earnings for the quarter were down slightly at approximately $4.2 million or $0.11 per diluted share, compared with approximately $4.5 million or $0.12 per diluted share last year. The decreases from the slightly lower results for our fall race weekend and the fact that Firefly was held in the second quarter this year. Looking at our September 30 balance sheet, the large receivable is primarily related to our broadcast revenues, which will be received in a few days. Our tax liability is higher, as we selected a payment method that allows for payments to be made later in the year, and our federal net operating losses are fully utilized at this point. Deferred revenue was down about $1.2 million, almost all of this relates to the timing of our ticket sales, as tickets for next year went on sale later than they did at this time last year. Spring renewal deposits were due in August last year, whereas renewals for 2014 had a deadline in November, so it's all timing. We moved that deadline back to appease our fans and to help us market each race individually. Our loan balance is down to just over $18 million at September 30, compared to $24.6 million at this time last year, and $19.7 million at year end. Our broadcast revenues will not be received until next week, so our outstanding loan balance will go down significantly at that point, and our total equity is up to almost $55 million. Also included is the cash flow statement for the nine months ended September 30, where you will see our net cash provided by operating activities was about $2.6 million year-to-date, that obviously reflects the fact that the broadcast rights fees for the fall event weekend were not received as of September 30. Capital expenditures were $247,000 year-to-date, and at this point our plans for the year are for spending of about $300,000 in total. The company again repurchased shares in the open market during the quarter. In total we purchased and retired almost 236,000 shares at an average price of $2.43 a share during the quarter, which takes our year-to-date repurchases to almost 316,000 shares. The result of all this, is that we paid down $5.1 million during the quarter on our debt, and $1.6 million year-to-date and that will obviously fall significantly after we receive our broadcast fee. As was the case at this time last year, yesterday, our Board of Directors declared an increased annual cash dividend on both classes of common stock of $0.05 per share. That dividend will be payable on December 10 to shareholders of record at the close of business on November 11. Any decisions regarding future dividends will be evaluated on an ongoing basis. That concludes our prepared remarks and our third quarter call. Thank you very much for your participation.

[Operator:]

Thank you, and that concludes today's conference. You may go ahead and disconnect at this time. [No question-and-answer session for the conference call].