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 September 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 October 31, 2004, the number of shares of each class of the registrant’s common stock outstanding is as follows:
| Common Stock - | 16,875,426 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 September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Revenues: |
||||||||||||||||
| Admissions |
$ | 15,790 | $ | 16,738 | $ | 36,307 | $ | 38,400 | ||||||||
| Event-related revenue |
12,468 | 13,905 | 30,841 | 33,076 | ||||||||||||
| Broadcasting revenue |
9,133 | 7,417 | 21,647 | 17,803 | ||||||||||||
| Other revenue |
1,011 | 147 | 1,655 | 744 | ||||||||||||
| 38,402 | 38,207 | 90,450 | 90,023 | |||||||||||||
| Expenses: |
||||||||||||||||
| Operating and marketing |
20,687 | 24,686 | 54,215 | 60,639 | ||||||||||||
| General and administrative |
3,907 | 3,521 | 11,316 | 11,269 | ||||||||||||
| Depreciation and amortization |
2,415 | 2,698 | 7,211 | 8,022 | ||||||||||||
| 27,009 | 30,905 | 72,742 | 79,930 | |||||||||||||
| Operating earnings |
11,393 | 7,302 | 17,708 | 10,093 | ||||||||||||
| Interest income |
1 | 155 | 485 | 161 | ||||||||||||
| Interest expense |
(1,009 | ) | (1,186 | ) | (3,102 | ) | (3,923 | ) | ||||||||
| Earnings before income taxes |
10,385 | 6,271 | 15,091 | 6,331 | ||||||||||||
| Income taxes |
6,249 | 1,806 | 8,978 | 1,836 | ||||||||||||
| Net earnings |
$ | 4,136 | $ | 4,465 | $ | 6,113 | $ | 4,495 | ||||||||
| Net earnings per common share: |
||||||||||||||||
| Basic |
$ | 0.10 | $ | 0.11 | $ | 0.15 | $ | 0.11 | ||||||||
| Diluted |
$ | 0.10 | $ | 0.11 | $ | 0.15 | $ | 0.11 | ||||||||
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)
| September 30, 2004 |
December 31, 2003 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 857 | $ | 3,348 | ||||
| Accounts receivable |
10,367 | 2,643 | ||||||
| Inventories |
255 | 259 | ||||||
| Prepaid expenses and other |
1,810 | 1,691 | ||||||
| Receivable from Dover Downs Gaming & Entertainment, Inc. |
105 | 96 | ||||||
| Income taxes receivable |
— | 5,819 | ||||||
| Deferred income taxes |
501 | 548 | ||||||
| Total current assets |
13,895 | 14,404 | ||||||
| Property and equipment, net |
225,191 | 229,603 | ||||||
| Restricted cash |
3,568 | 3,433 | ||||||
| Other assets, net |
1,390 | 1,434 | ||||||
| Deferred income taxes |
46 | 90 | ||||||
| Goodwill |
8,521 | 8,521 | ||||||
| Total assets |
$ | 252,611 | $ | 257,485 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 1,723 | $ | 3,333 | ||||
| Accrued liabilities |
6,716 | 4,587 | ||||||
| Income taxes payable |
1,049 | — | ||||||
| Current portion of long-term debt |
805 | 745 | ||||||
| Deferred revenue |
6,412 | 11,304 | ||||||
| Total current liabilities |
16,705 | 19,969 | ||||||
| Notes payable to banks |
27,800 | 43,045 | ||||||
| Long-term debt |
17,683 | 18,487 | ||||||
| Other liabilities |
64 | 85 | ||||||
| Deferred income taxes |
47,773 | 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: September 30, 2004-16,875,426 shares; December 31, 2003-16,557,898 shares |
1,688 | 1,656 | ||||||
| Class A common stock, $0.10 par value; 55,000,000 shares authorized; issued and outstanding: September 30, 2004-23,296,185 shares; December 31, 2003-23,436,185 shares |
2,330 | 2,344 | ||||||
| Additional paid-in capital |
128,483 | 127,783 | ||||||
| Retained earnings |
10,909 | 5,999 | ||||||
| Accumulated other comprehensive loss |
(403 | ) | (410 | ) | ||||
| Deferred compensation |
(421 | ) | — | |||||
| Total stockholders’ equity |
142,586 | 137,372 | ||||||
| Total liabilities and stockholders’ equity |
$ | 252,611 | $ | 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)
| Nine Months Ended September 30, |
||||||||
| 2004 |
2003 |
|||||||
| Operating activities: |
||||||||
| Net earnings |
$ | 6,113 | $ | 4,495 | ||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
7,211 | 8,022 | ||||||
| Amortization and write-off of credit facility fees |
220 | 928 | ||||||
| Amortization of deferred compensation |
32 | — | ||||||
| Tax benefit of options exercised |
6 | 526 | ||||||
| Deferred income taxes |
6,835 | 4,275 | ||||||
| Changes in assets and liabilities: |
||||||||
| Accounts receivable |
(7,724 | ) | (5,853 | ) | ||||
| Inventories |
4 | (206 | ) | |||||
| Prepaid expenses and other |
(27 | ) | 2,010 | |||||
| Receivable from/payable to Dover Downs Gaming & Entertainment, Inc. |
(9 | ) | (582 | ) | ||||
| Accounts payable |
(1,610 | ) | 1,319 | |||||
| Accrued liabilities |
2,129 | 1,547 | ||||||
| Income taxes payable/receivable |
9,377 | 2,617 | ||||||
| Deferred revenue |
(4,892 | ) | (4,411 | ) | ||||
| Other liabilities |
(21 | ) | (22 | ) | ||||
| Net cash provided by operating activities |
17,644 | 14,665 | ||||||
| Investing activities: |
||||||||
| Capital expenditures |
(2,735 | ) | (2,865 | ) | ||||
| Restricted cash |
(135 | ) | (626 | ) | ||||
| Other |
— | 70 | ||||||
| Net cash used in investing activities |
(2,870 | ) | (3,421 | ) | ||||
| Financing activities: |
||||||||
| Borrowings from notes payable to banks |
66,645 | 38,825 | ||||||
| Repayments on notes payable to banks |
(81,890 | ) | (47,800 | ) | ||||
| Repayments of long-term debt |
(744 | ) | (683 | ) | ||||
| Proceeds from stock options exercised |
259 | 132 | ||||||
| Credit facility origination and amendment fees |
(332 | ) | (470 | ) | ||||
| Dividends paid |
(1,203 | ) | (1,198 | ) | ||||
| Net cash used in financing activities |
(17,265 | ) | (11,194 | ) | ||||
| Net (decrease) increase in cash and cash equivalents |
(2,491 | ) | 50 | |||||
| Cash and cash equivalents, beginning of period |
3,348 | 1,485 | ||||||
| Cash and cash equivalents, end of period |
$ | 857 | $ | 1,535 | ||||
| Supplemental information: |
||||||||
| Interest paid |
$ | 3,149 | $ | 3,660 | ||||
| Income tax refunds, net of payments |
$ | (7,242 | ) | $ | (5,916 | ) | ||
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 nine-month periods ended September 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 promoted 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.
NOTE 3 - Summary of Significant Accounting Policies
Basis of consolidation and presentation—The accompanying consolidated financial statements include the accounts of DVD and its wholly owned subsidiaries. Intercompany transactions and balances have been eliminated.
Revenue recognition—The Company classifies its revenues as admissions, event-related revenue, broadcasting revenue and other revenue. “Admissions” includes ticket sales for all Company events. “Event-related revenue” includes amounts received from sponsorship fees, which includes tickets provided to sponsors; luxury suite rentals; hospitality tent rentals and catering; concessions and souvenir sales and vendor commissions for the right to sell concessions and souvenirs at our facilities; sales of programs; track rentals and other event-related revenues. “Broadcasting revenue” includes rights fees obtained for television and radio broadcasts of events held at the Company’s speedways and ancillary rights fees. “Other revenue” includes revenues from the Company’s grandstand rental business and other miscellaneous revenues.
Revenues pertaining to specific events are deferred until the event is held. Concession revenue from concession stand sales and sales of souvenirs are recorded at the time of sal