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Edited Transcript of DVD earnings conference call or presentation 24-Oct-19 1:00pm GMT

Q3 2019 Dover Motorsports Inc Earnings Call

DOVER Oct 25, 2019 (Thomson StreetEvents) -- Edited Transcript of Dover Motorsports Inc earnings conference call or presentation Thursday, October 24, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Denis L. McGlynn

Dover Motorsports, Inc. - President, CEO & Executive Director

* Timothy R. Horne

Dover Motorsports, Inc. - Senior VP of Finance, CFO & Director

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Presentation

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Denis L. McGlynn, Dover Motorsports, Inc. - President, CEO & Executive Director [1]

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Morning, everyone, and welcome. I'm joined by Tim Horne, our CFO, who'll read our forward-looking statement disclaimer and then we'll get underway.

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Timothy R. Horne, Dover Motorsports, Inc. - Senior VP of Finance, CFO & Director [2]

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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.

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Denis L. McGlynn, Dover Motorsports, Inc. - President, CEO & Executive Director [3]

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Thanks, Tim. As you know, our third quarter is traditionally a loss quarter. This year there were a couple of extraordinary events during the quarter, which Tim will explain in a moment, and which resulted in improved third quarter results. Otherwise, with no major events, it was a quiet operational quarter. Our attention was mainly focused on the continuing promotion of our 50th year celebration and preparations for our 100th NASCAR Cup Series race held earlier this month, and which will be reported on as a fourth quarter event.

During the quarter, we completed the construction of our new NASCAR Cup Series garage area on time and on budget. Overall, the garage area was expanded by 22% and the building itself is 28% larger than the former 50-year-old structure. And across-the-board, it's been well received by the entire NASCAR community.

After analyzing current demand versus current grandstand capacity, we've elected to reduce our current seating capacity of 83,000 seats down to 54,000 seats. This project is already underway and is expected to be completed in time for our spring NASCAR weekend. Project cost is expected to be approximately $1.5 million.

One final note, before I turn it over to Tim, progress continues on the sale and redevelopment of land at Nashville Superspeedway. Having leased its 1 million-plus square foot initial building, our developer, Panattoni, is underway on construction with 2 additional buildings, totaling another 1 million square feet plus an additional paid-ready site to accommodate a 250,000 square foot building.

So far, we sold 288 acres to Panattoni, and they have a current option on 97 acres, which leaves us with approximately 1,000 acres of developable land at site.

With that, I'll turn it over to Tim.

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Timothy R. Horne, Dover Motorsports, Inc. - Senior VP of Finance, CFO & Director [4]

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Thanks, Denis. Similar to 2018, we held no major events during the third quarter of 2019. If you look at statement of earnings, you'll see our revenues were $202,000 compared to $227,000 last year, with this year's revenue from rental activity in Nashville.

Regarding our October NASCAR weekend, the races and activities were well received and operationally successful. And as Denis mentioned, we'll be reporting those operating results with our fourth quarter report.

General and administrative expenses were up a little compared to last year, just over $1.8 million. You'll see a rather large increase in depreciation expense this quarter. This is driven by our decision to remove some grandstand seats here in Dover. We've changed the estimated useful life of the affected assets and therefore, recorded $879,000 of accelerated depreciation in the third quarter, accounting for all of the increase from last year.

As previously disclosed, back in July, we sold approximately 133 acres of land in Nashville for proceeds, less closing costs of approximately $6.4 million. This transaction yielded the book gain of almost $4.2 million you see recorded in the third quarter.

Given the fact that we are now debt free and have cash on hand, we had net interest income this quarter compared to a small expense in the third quarter of 2018.

Our effective income tax rate was at 29.6% benefit versus 32.8% last year. So our quarterly pretax loss was $588,000 compared with just over $4 million last year. Attached to our release is a schedule that removes the impact of the various land sales and the accelerated depreciation this quarter, which shows an adjusted pretax loss of $3.895 million compared to $3.915 million last year.

So our net loss for the quarter was $414,000 or $0.01 per diluted share compared with a net loss of approximately $2.7 million or $0.07 per share in the third quarter of last year.

Again, the attached schedule, it removes the impact of the land sales and accelerated depreciation this quarter, show the adjusted net loss and per share loss.

Looking at the September 30 balance sheet, we had no debt at quarter end. And our cash was up to approximately $4.8 million.

Contract liabilities, which used to be referred to as deferred revenue are almost identical to September 30 of last year from slightly lower fall admissions offset by more sponsors for the fall compared to this time last year and higher comparable sales for next spring as well.

Included as well as a cash flow statement for the 9-month period ended September 30, where you'll see our net cash used in operating activities was just over $1.6 million compared to $800,000 last year. It's higher from the lower year-to-date earnings exclusive of the land sale and the timing of collections from sponsors and partners, partially offset by last year's pension contribution.

Capital expenditures were $4.651 million through 9 months, almost 90% of which were for the construction of the new Cup Series garage with the balance from various equipment repurchases.

We bought back just over 158,000 shares of stock during the third quarter at an average price of $2.04, bringing total buybacks through 9 months to a little more than 208,000 shares. And the result of all that was an increase in cash of $833,000 so far this year.

Lastly, yesterday, our Board declared an increased annual cash dividend of $0.10 per share payable on December 10 to shareholders of record at the close of business on November 11. Dividends will continue to be evaluated annually.

That concludes our third quarter update. Thank you for your interest.