Dover Motorsports, Inc. Reports Results for the Fourth Quarter and Year Ended December 31, 2016

27 Jan 2017
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Dover Motorsports, Inc. (NYSE: DVD) today reported its results for the fourth quarter and year ended December 31, 2016.

The Company’s NASCAR fall race weekend was held from September 30, 2016, through October 2, 2016. The K&N Pro Series East event was held during the third quarter of 2016 while the NASCAR XFINITY Series and NASCAR Sprint Cup Series races were held during the fourth quarter of 2016. The entire fall race weekend was held during the fourth quarter of 2015.

Revenues for the fourth quarter of 2016 were $20,112,000 compared with $21,016,000 in the fourth quarter of 2015.

Weather was again an issue for the Fall NASCAR weekend. Saturday’s NASCAR XFINITY race was rained out and moved to Sunday, contributing to lower admissions revenue. Additionally, we experienced lower sponsorship sales partially offset by higher Broadcast revenues compared to last year.

Operating and Marketing Expenses were lower than last year, as higher Purse and Sanction Fees were offset by lower other race weekend expenses.

General and administrative expenses decreased $89,000 to $1,826,000 for the fourth quarter of 2016, primarily from lower employee costs.

Costs to remove long-lived assets in 2016 represents costs incurred during the fourth quarter to remove a portion of grandstands, seats and structures that were taken out of service and written off in 2015. We expect to spend approximately $300,000 during the first quarter of 2017 to complete the removal of these structures.

Depreciation expense decreased to $842,000 in the fourth quarter of 2016 compared to $949,000 in the fourth quarter of 2015. The fourth quarter of 2015 includes additional depreciation expense due to the decision in 2015 to remove certain grandstand seats and structures after our 2015 race season. We changed the estimated useful lives of the impacted assets resulting in a $177,000 increase in our fourth quarter 2015 depreciation expense.

Earnings before income taxes for the fourth quarter of 2016 decreased $703,000 from $6,159,000 for the fourth quarter of 2015 to $5,456,000 in the fourth quarter of 2016. The decrease is primarily due to the race weekend results and the costs to remove long-lived assets.

Net earnings for the fourth quarter of 2016 were $3,245,000 or $.09 per diluted share compared to $3,791,000 or $.10 per diluted share for the fourth quarter of 2015.

For the year ended December 31, 2016, total revenues were $45,873,000 compared with $46,539,000 in the prior year. The decrease was from lower admissions, lower corporate sales for the fall weekend, and from the cancellation of the Big Barrel Country Music Festival in 2016, partially offset by higher broadcasting and other revenue.

Income from assets held for sale of $2,900,000 in 2015 represents non-refundable payments received to extend the closing date under a now expired agreement to sell our Nashville facility.

Net earnings for the year ended December 31, 2016 were $3,801,000 or $.10 per diluted share compared to $5,285,000 or $.14 per diluted share for the year ended December 31, 2015. The current year’s annual results include a pre-tax charge of $203,000 compared to $40,000 in the prior year for costs associated with the removal of grandstand seats. The current year’s annual results also include additional depreciation expense of $208,000 relating to renovations of certain facilities resulting in a change in the useful lives of the facilities. The 2015 results include additional depreciation expense of $2,216,000 from the previously mentioned change in useful lives of grandstand seats and structures we decided to remove after the completion of the 2015 race season. Excluding both charges and the $2,900,000 income from assets held for sale, 2016 adjusted net earnings were $4,045,000 or $.11 per diluted share compared to $4,739,000 or $.13 per diluted share for 2015.

As previously announced, on August 25, 2016, we entered into a definitive agreement to sell our Nashville Superspeedway facility along with some related equipment and other assets. The agreement provides for an aggregate purchase price of $27.5 million in cash plus the assumption by the purchaser of our obligations under certain Variable Rate Tax Exempt Infrastructure Revenue Bonds issued by the Sports Authority of the County of Wilson, Tennessee. The Bonds, which have a remaining principal balance of $16,300,000, are secured by a letter of credit provided by us which will be replaced by a letter of credit provided by the potential purchaser. An amendment was signed on January 22, 2017 to extend the agreement 60 days. Closing is now anticipated during the second quarter of 2017. The assets of Nashville Superspeedway are reported as assets held for sale in our consolidated balance sheet at December 31, 2016 and 2015.

The Company’s financial position continued to strengthen during 2016. Total borrowings outstanding decreased to $3,840,000 at December 31, 2016 from $5,900,000 at December 31, 2015. In December 2016 and 2015, the Company paid annual cash dividends on both classes of common stock of $.05 per share. Due to the seasonal nature of our business, we will evaluate dividends annually.

This release contains or may contain forward-looking statements based on management's beliefs and assumptions. Such statements are subject to various risks and uncertainties which could cause results to vary materially. Please refer to the Company's SEC filings for a discussion of such factors.

Dover Motorsports, Inc. is a leading promoter of NASCAR sanctioned motorsports events in the United States whose subsidiaries own and operate Dover International Speedway in Dover, Delaware and Nashville Superspeedway near Nashville, Tennessee. For further information, log on to dovermotorsports.com.

 
DOVER MOTORSPORTS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
In Thousands, Except Per Share Amounts
(Unaudited)
 
 
    Three Months Ended
December 31,
  Years Ended
December 31,
    2016   2015   2016   2015
Revenues:                
Admissions   $ 3,173     $ 3,755     $ 6,937     $ 7,967  
Event-related     2,972       3,794       7,938       8,617  
Broadcasting     13,962       13,463       30,984       29,949  
Other     5       4       14       6  
      20,112       21,016       45,873       46,539  
                 
Expenses:                
Operating and marketing     11,757       11,940       28,197       27,818  
General and administrative     1,826       1,915       7,399       7,414  
Costs to remove long-lived assets     203       -       203       40  
Depreciation     842       949       3,433       5,326  
      14,628       14,804       39,232       40,598  
                 
Income from assets held for sale     -       -       -       2,900  
                 
Operating earnings     5,484       6,212       6,641       8,841  
                 
Interest expense, net     (33 )     (43 )     (199 )     (323 )
(Provision) benefit for contingent obligation     (2 )     (4 )     (75 )     86  
Other income (expense)     7       (6 )     23       (5 )
                 
Earnings before income taxes     5,456       6,159       6,390       8,599  
                 
Income tax expense     (2,211 )     (2,368 )     (2,589 )     (3,314 )
                 
Net earnings   $ 3,245     $ 3,791     $ 3,801     $ 5,285  
                 
Net earnings per common share:                
Basic   $ 0.09     $ 0.10     $ 0.10     $ 0.14  
Diluted   $ 0.09     $ 0.10     $ 0.10     $ 0.14  
                 
Weighted average shares outstanding:                
Basic     36,216       36,157       36,232       36,156  
Diluted     36,216       36,157       36,232       36,156  
                                 
 
DOVER MOTORSPORTS, INC.
RECONCILIATION OF GAAP EARNINGS BEFORE INCOME TAXES
TO ADJUSTED EARNINGS BEFORE INCOME TAXES
AND RECONCILIATION OF GAAP NET EARNINGS TO ADJUSTED NET EARNINGS
In Thousands, Except Per Share Amounts
(Unaudited)
 
 
    Three Months Ended
December 31,
  Years Ended
December 31,
    2016   2015   2016   2015
                 
GAAP earnings before income taxes   $ 5,456   $ 6,159   $ 6,390   $ 8,599  
                 
Accelerated depreciation (1)     24     177     208     2,216  
                 
Income from assets held for sale (2)     -     -     -     (2,900 )
                 
Costs to remove long-lived assets (3)     203     -     203     40  
                 
Adjusted earnings before income taxes   $ 5,683   $ 6,336   $ 6,801   $ 7,955  
                 
GAAP net earnings   $ 3,245   $ 3,791   $ 3,801   $ 5,285  
                 
Accelerated depreciation, net of income taxes (1)     14     105     123     1,316  
                 
Income from assets held for sale, net of income taxes (2)     -     -     -     (1,886 )
                 
Costs to remove long-lived assets, net of income taxes (3)     121     -     121     24  
                 
Adjusted net earnings   $ 3,380   $ 3,896   $ 4,045   $ 4,739  
                 
                 
GAAP net earnings per common share - basic and diluted   $ 0.09   $ 0.10   $ 0.10   $ 0.14  
                 
Accelerated depreciation, net of income taxes (1)     -     -     -     0.04  
                 
Income from assets held for sale, net of income taxes (2)     -     -     -     (0.05 )
                 
Costs to remove long-lived assets, net of income taxes (3)     -     -     -     -  
                 
Adjusted net earnings per common share - basic and diluted (4)   $ 0.09   $ 0.11   $ 0.11   $ 0.13  
 

______________________

(1)

  During the first quarter of 2016, we began a renovation project of certain track related assets at our Dover International Speedway facility which will take approximately one year to complete. As a result, we shortened the service lives of these assets which resulted in accelerated depreciation being recorded in 2016.
     
    During the first quarter of 2015, we made the decision to remove certain grandstand seating at our Dover International Speedway facility at the end of the 2015 race season. As a result, we shortened the service lives of these assets which resulted in accelerated depreciation being recorded in 2015.
     

(2)

  On May 29, 2014, we entered into an agreement to sell our Nashville Superspeedway facility. The potential buyer made several payments to us to extend the closing date of settlement. The sale agreement expired on July 27, 2015 and all payments made to us have been recognized as income from assets held for sale.
     

(3)

  Costs to remove long-lived assets represents costs incurred to remove and dispose of certain grandstand seating at our Dover International Speedway facility.
     

(4)

  The components of earnings per common share for the year ended December 31, 2016 and three months ended December 31, 2015 do not add to the adjusted earnings per common share due to rounding.
     
    The above financial information is presented using other than generally accepted accounting principles ("non-GAAP"), and is reconciled to comparable information presented using GAAP. Non-GAAP adjusted earnings before income taxes, adjusted net earnings and adjusted net earnings per common share - basic and diluted are derived by adjusting amounts determined in accordance with GAAP for the aforementioned accelerated depreciation, income from assets held for sale and costs to remove long-lived assets. Income taxes are based on our approximate statutory tax rates applicable to each of these items. We believe such non-GAAP information is useful and meaningful to investors, and is used by investors and us to assess core operations. This non-GAAP financial information may not be comparable to similarly titled measures used by other entities and should not be considered as an alternative to earnings before income taxes, net earnings or net earnings per common share - basic and diluted, which are determined in accordance with GAAP.
     
 
DOVER MOTORSPORTS, INC.
CONSOLIDATED BALANCE SHEETS
In Thousands
(Unaudited)
 
 
    December 31,
2016
  December 31,
2015
         
ASSETS        
Current assets:        
Cash   $ 1     $ 1  
Accounts receivable     419       173  
Inventories     17       72  
Prepaid expenses and other     1,104       1,136  
Receivable from Dover Downs Gaming & Entertainment, Inc.     -       44  
Income taxes receivable     -       1  
Deferred income taxes     -       79  
Assets held for sale     26,000       26,000  
Total current assets     27,541       27,506  
         
Property and equipment, net     52,723       53,542  
Other assets     1,022       851  
Deferred income taxes     -       549  
Total assets   $ 81,286     $ 82,448  
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current liabilities:        
Accounts payable   $ 347     $ 137  
Accrued liabilities     2,858       3,215  
Payable to Dover Downs Gaming & Entertainment, Inc.     7       -  
Income taxes payable     218       -  
Deferred revenue     1,355       1,278  
Total current liabilities     4,785       4,630  
         
Revolving line of credit, net     3,840       5,900  
Liability for pension benefits     4,143       3,790  
Provision for contingent obligation     1,802       1,727  
Deferred income taxes     12,911       14,408  
Total liabilities     27,481       30,455  
         
Stockholders' equity:        
Common stock     1,828       1,822  
Class A common stock     1,851       1,851  
Additional paid-in capital     101,858       101,742  
Accumulated deficit     (48,340 )     (50,301 )
Accumulated other comprehensive loss     (3,392 )     (3,121 )
Total stockholders' equity     53,805       51,993  
Total liabilities and stockholders' equity   $ 81,286     $ 82,448  
                 
 
DOVER MOTORSPORTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
In Thousands
(Unaudited)
 
 
   

Years Ended
December 31,

    2016   2015
         
Operating activities:        
Net earnings   $ 3,801     $ 5,285  

Adjustments to reconcile net earnings to net cash provided by operating activities:

       
Depreciation     3,433       5,326  
Amortization of credit facility fees     87       96  
Stock-based compensation     284       316  
Excess tax benefits from stock-based compensation     (27 )     -  
Deferred income taxes     (661 )     (828 )
Provision (benefit) for contingent obligation     75       (86 )
Income from assets held for sale     -       (2,900 )
Changes in assets and liabilities:        
Accounts receivable     (246 )     (34 )
Inventories     55       (2 )
Prepaid expenses and other     (44 )     (125 )
Accounts payable     176       64  
Accrued liabilities     (457 )     (86 )
Payable to/receivable from Dover Downs Gaming & Entertainment, Inc.     51       (66 )
Income taxes payable/receivable     223       182  
Deferred revenue     77       (70 )
Liability for pension benefits     (17 )     (9 )
Net cash provided by operating activities     6,810       7,063  
         
Investing activities:        
Capital expenditures     (2,580 )     (1,448 )
Purchases of available-for-sale securities     (293 )     (40 )
Proceeds from sale of available-for-sale securities     203       20  
Non-refundable payments received related to assets held for sale     -       1,200  
Net cash used in investing activities     (2,670 )     (268 )
         
Financing activities:        
Borrowings from revolving line of credit     28,820       29,740  
Repayments on revolving line of credit     (30,880 )     (34,600 )
Dividends paid     (1,840 )     (1,837 )
Repurchase of common stock     (189 )     (121 )
Excess tax benefits from stock-based compensation     27       -  
Credit facility fees     (78 )     -  
Net cash used in financing activities     (4,140 )     (6,818 )
         
Net decrease in cash     -       (23 )
Cash, beginning of year     1       24  
Cash, end of year   $ 1     $ 1  


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