United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2004
Commission file number 1-11929
Dover Motorsports, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 51-0357525 | |
| (State or Other Jurisdiction of Incorporation) |
(I.R.S. Employer Identification Number) |
1131 North DuPont Highway, Dover, Delaware 19901
(Address of principal executive offices)
(302) 674-4600
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
As of July 31, 2004, the number of shares of each class of the registrant’s common stock outstanding is as follows:
| Common Stock - | 16,806,898 shares | |
| Class A Common Stock - | 23,296,185 shares |
Part I – Financial Information
Item 1. Financial Statements
DOVER MOTORSPORTS, INC.
CONSOLIDATED STATEMENT OF EARNINGS
In Thousands, Except Per Share Amounts
(Unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Revenues: |
||||||||||||||||
| Admissions |
$ | 20,429 | $ | 20,021 | $ | 20,517 | $ | 21,662 | ||||||||
| Event-related revenue |
17,835 | 17,324 | 18,373 | 19,171 | ||||||||||||
| Broadcasting revenue |
12,514 | 10,386 | 12,514 | 10,386 | ||||||||||||
| Other revenue |
110 | 118 | 644 | 597 | ||||||||||||
| 50,888 | 47,849 | 52,048 | 51,816 | |||||||||||||
| Expenses: |
||||||||||||||||
| Operating and marketing |
31,203 | 29,483 | 33,528 | 35,953 | ||||||||||||
| General and administrative |
3,716 | 4,137 | 7,409 | 7,748 | ||||||||||||
| Depreciation and amortization |
2,404 | 2,698 | 4,796 | 5,324 | ||||||||||||
| 37,323 | 36,318 | 45,733 | 49,025 | |||||||||||||
| Operating earnings |
13,565 | 11,531 | 6,315 | 2,791 | ||||||||||||
| Interest income |
482 | 3 | 484 | 6 | ||||||||||||
| Interest expense |
(954 | ) | (1,488 | ) | (2,093 | ) | (2,737 | ) | ||||||||
| Earnings before income taxes |
13,093 | 10,046 | 4,706 | 60 | ||||||||||||
| Income taxes |
7,930 | 5,023 | 2,729 | 30 | ||||||||||||
| Net earnings |
$ | 5,163 | $ | 5,023 | $ | 1,977 | $ | 30 | ||||||||
| Net earnings per common share: |
||||||||||||||||
| Basic |
$ | 0.13 | $ | 0.13 | $ | 0.05 | $ | — | ||||||||
| Diluted |
$ | 0.13 | $ | 0.13 | $ | 0.05 | $ | — | ||||||||
The Notes to the Consolidated Financial Statements are an integral part of these consolidated statements.
2
DOVER MOTORSPORTS, INC.
CONSOLIDATED BALANCE SHEET
In Thousands, Except Share and Per Share Amounts
(Unaudited)
| June 30, 2004 |
December 31, 2003 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 4,587 | $ | 3,348 | ||||
| Accounts receivable |
15,032 | 2,643 | ||||||
| Inventories |
311 | 259 | ||||||
| Prepaid expenses and other |
4,347 | 1,691 | ||||||
| Receivable from Dover Downs Gaming & Entertainment, Inc. |
— | 96 | ||||||
| Income taxes receivable |
— | 5,819 | ||||||
| Deferred income taxes |
331 | 548 | ||||||
| Total current assets |
24,608 | 14,404 | ||||||
| Property and equipment, net |
226,565 | 229,603 | ||||||
| Restricted cash |
1,857 | 3,433 | ||||||
| Other assets, net |
1,515 | 1,434 | ||||||
| Deferred income taxes |
90 | 90 | ||||||
| Goodwill |
8,521 | 8,521 | ||||||
| Total assets |
$ | 263,156 | $ | 257,485 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 7,518 | $ | 3,333 | ||||
| Accrued liabilities |
6,320 | 4,587 | ||||||
| Payable to Dover Downs Gaming & Entertainment, Inc. |
22 | — | ||||||
| Income taxes payable |
105 | — | ||||||
| Current portion of long-term debt |
805 | 745 | ||||||
| Deferred revenue |
18,861 | 11,304 | ||||||
| Total current liabilities |
33,631 | 19,969 | ||||||
| Notes payable to banks |
30,600 | 43,045 | ||||||
| Long-term debt |
17,683 | 18,487 | ||||||
| Other liabilities |
64 | 85 | ||||||
| Deferred income taxes |
42,617 | 38,527 | ||||||
| Commitments and contingencies (see Notes to the Consolidated Financial Statements) |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, $0.10 par value; 1,000,000 shares authorized; issued and outstanding: none |
— | — | ||||||
| Common stock, $0.10 par value; 75,000,000 shares authorized; issued and outstanding: June 30, 2004-16,806,898 shares; December 31, 2003-16,557,898 shares |
1,681 | 1,656 | ||||||
| Class A common stock, $0.10 par value; 55,000,000 shares authorized; issued and outstanding: June 30, 2004-23,296,185 shares; December 31, 2003-23,436,185 shares |
2,330 | 2,344 | ||||||
| Additional paid-in capital |
128,225 | 127,783 | ||||||
| Retained earnings |
7,175 | 5,999 | ||||||
| Accumulated other comprehensive loss |
(410 | ) | (410 | ) | ||||
| Deferred compensation |
(440 | ) | — | |||||
| Total stockholders’ equity |
138,561 | 137,372 | ||||||
| Total liabilities and stockholders’ equity |
$ | 263,156 | $ | 257,485 | ||||
The Notes to the Consolidated Financial Statements are an integral part of these consolidated statements.
3
DOVER MOTORSPORTS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
In Thousands
(Unaudited)
| Six Months Ended June 30, |
||||||||
| 2004 |
2003 |
|||||||
| Operating activities: |
||||||||
| Net earnings |
$ | 1,977 | $ | 30 | ||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
4,796 | 5,324 | ||||||
| Amortization and write-off of credit facility fees |
154 | 743 | ||||||
| Amortization of deferred compensation |
13 | — | ||||||
| Tax benefit of options exercised |
— | 533 | ||||||
| Deferred income taxes |
1,786 | 3,220 | ||||||
| Changes in assets and liabilities: |
||||||||
| Accounts receivable |
(12,389 | ) | (8,384 | ) | ||||
| Inventories |
(52 | ) | (255 | ) | ||||
| Prepaid expenses and other |
(2,616 | ) | (1,048 | ) | ||||
| Accounts payable |
4,185 | 591 | ||||||
| Accrued liabilities |
1,733 | 1,777 | ||||||
| Payable to/receivable from Dover Downs Gaming & Entertainment, Inc. |
118 | (155 | ) | |||||
| Income taxes payable/receivable |
8,445 | 1,730 | ||||||
| Deferred revenue |
7,557 | 7,085 | ||||||
| Other liabilities |
(21 | ) | (22 | ) | ||||
| Net cash provided by operating activities |
15,686 | 11,169 | ||||||
| Investing activities: |
||||||||
| Capital expenditures |
(1,715 | ) | (2,604 | ) | ||||
| Restricted cash |
1,576 | 1,727 | ||||||
| Other |
— | 70 | ||||||
| Net cash used in investing activities |
(139 | ) | (807 | ) | ||||
| Financing activities: |
||||||||
| Borrowings from revolving debt agreement |
55,520 | 23,050 | ||||||
| Repayments on revolving debt agreement |
(67,965 | ) | (31,105 | ) | ||||
| Repayments of long-term debt |
(744 | ) | (683 | ) | ||||
| Proceeds from stock options exercised |
— | 132 | ||||||
| Credit facility origination and amendment fees |
(318 | ) | (245 | ) | ||||
| Dividends paid |
(801 | ) | (798 | ) | ||||
| Net cash used in financing activities |
(14,308 | ) | (9,649 | ) | ||||
| Net increase in cash and cash equivalents |
1,239 | 713 | ||||||
| Cash and cash equivalents, beginning of period |
3,348 | 1,485 | ||||||
| Cash and cash equivalents, end of period |
$ | 4,587 | $ | 2,198 | ||||
| Supplemental information: |
||||||||
| Interest paid |
$ | 1,800 | $ | 2,081 | ||||
| Income taxes paid, net of (refunds) |
$ | (7,504 | ) | $ | (6,141 | ) | ||
The Notes to the Consolidated Financial Statements are an integral part of these consolidated statements.
4
DOVER MOTORSPORTS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – Basis of Presentation
References in this document to “the Company,” “DVD,” “we,” “us” and “our” mean Dover Motorsports, Inc. and its wholly owned subsidiaries.
The accompanying consolidated financial statements have been prepared in compliance with Rule 10-01 of Regulation S-X and accounting principles generally accepted in the United States of America, but do not include all of the information and disclosures required for audited financial statements. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s latest Annual Report on Form 10-K filed on March 10, 2004. In the opinion of management, these statements include all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results of operations, financial position and cash flows for the interim periods presented. Operating results for the three and six-month periods ended June 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004 due to the seasonal nature of the Company’s business.
NOTE 2 - Business Operations
Dover Motorsports, Inc. is a leading marketer and promoter of motorsports entertainment in the United States. Its motorsports subsidiaries operate five motorsports tracks (four permanent facilities and one temporary circuit) in four states and are scheduled to promote 16 major events during 2004 under the auspices of four of the premier sanctioning bodies in motorsports - the National Association for Stock Car Auto Racing (“NASCAR”), the Indy Racing League (“IRL”), the National Hot Rod Association (“NHRA”) and the Champ Car World Series (“CCWS”). The Company owns and operates Dover International Speedway in Dover, Delaware; Nashville Superspeedway near Nashville, Tennessee; Gateway International Raceway near St. Louis, Missouri; and Memphis Motorsports Park in Memphis, Tennessee. The Company also organizes and promotes the Toyota Grand Prix of Long Beach in California.
On March 25, 2