-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KMrJJCiODaSIbS0KW3RpoCniexOKJUDuYxalA1v6OYT220FsoZsM6xRoXl8XNWgI xIhoiEqZB7E35gPQ/01Dkw== /in/edgar/work/0001017673-00-000017/0001017673-00-000017.txt : 20001030 0001017673-00-000017.hdr.sgml : 20001030 ACCESSION NUMBER: 0001017673-00-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001027 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DOVER DOWNS ENTERTAINMENT INC CENTRAL INDEX KEY: 0001017673 STANDARD INDUSTRIAL CLASSIFICATION: [7900 ] IRS NUMBER: 510357525 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11929 FILM NUMBER: 747626 BUSINESS ADDRESS: STREET 1: 1131 N DUPONT HIGHWAY CITY: DOVER STATE: DE ZIP: 19901 BUSINESS PHONE: 3027644600 MAIL ADDRESS: STREET 1: 2200 CONCORD PIKE CITY: WILMINGTON STATE: DE ZIP: 19803 10-Q 1 0001.txt Page 1 of 10 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-11929 DOVER DOWNS ENTERTAINMENT, INC. (Exact name of registrant as specified in its charter) DELAWARE 51-0357525 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1131 North DuPont Highway, Dover, Delaware 19901 (Address of principal executive offices) (Zip Code) (302) 674-4600 (Registrant's telephone number, including area code) ------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 [ ] As of September 30, 2000, the number of shares of each class of the registrant's common stock outstanding is as follows: Common stock - 13,951,500 shares Class A common stock - 23,904,985 shares FORM 10-Q Page 2 of 10 PART I - FINANCIAL INFORMATION Item 1. Financial Statements DOVER DOWNS ENTERTAINMENT, INC. CONSOLIDATED STATEMENT OF EARNINGS In Thousands, Except Per Share Amounts (Unaudited) Three Months Ended September 30, 2000 1999 Revenues: Motorsports $ 33,951 $ 28,610 Gaming 45,314 42,691 79,265 71,301 Expenses: Operating 50,955 46,368 Depreciation and amortization 2,456 1,965 General and administrative 3,377 3,323 56,788 51,656 Operating earnings 22,477 19,645 Interest expense, net 3 426 Earnings before income taxes 22,474 19,219 Income taxes 9,259 7,975 Net earnings $ 13,215 $ 11,244 Earnings per common share Basic $ .35 $ .31 Diluted $ .35 $ .31 Average shares outstanding Basic 37,856 35,803 Diluted 38,040 36,696 Dividends declared per common share $ .045 $ .045 The Notes to the Consolidated Financial Statements are an integral part of these statements. FORM 10-Q Page 3 of 10 DOVER DOWNS ENTERTAINMENT, INC. CONSOLIDATED BALANCE SHEET In Thousands, Except Share and Per Share Amounts (Unaudited) September 30, June 30, ASSETS 2000 2000 Current assets: Cash and cash equivalents $ 12,942 $ 12,413 Accounts receivable 14,723 12,700 Due from State of Delaware 8,048 3,176 Inventories 639 645 Prepaid expenses and other 4,344 4,518 Deferred income taxes 313 309 Total current assets 41,009 33,761 Property, plant and equipment, net 247,575 228,893 Other assets, net 1,434 1,453 Goodwill, net 52,307 52,671 Total assets $342,325 $316,778 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 5,633 $ 10,902 Purses due horsemen 7,864 2,982 Accrued liabilities 14,882 11,588 Income taxes payable 9,299 3,660 Current portion of long-term debt 585 585 Deferred revenue 6,641 17,489 Total current liabilities 44,904 47,206 Notes payable to bank 30,100 15,000 Long-term debt 20,540 20,540 Other liabilities 158 174 Deferred income taxes 17,279 16,067 Commitments and contingencies (see Part II Legal Proceedings) Shareholders' equity: Preferred stock, $.10 par value; 1,000,000 shares authorized; issued and outstanding: none Common stock, $.10 par value; 75,000,000 shares authorized; issued and outstanding: September - 13,951,500; June - 13,796,500 1,395 1,380 Class A common stock, $.10 par value; 55,000,000 shares authorized; issued and outstanding: September - 23,904,985; June - 24,054,985 2,390 2,405 Additional paid-in capital 119,264 119,222 Retained earnings 106,295 94,784 Total shareholders' equity 229,344 217,791 Total liabilities and shareholders' equity $342,325 $316,778 The Notes to the Consolidated Financial Statements are an integral part of these statements. FORM 10-Q Page 4 of 10 DOVER DOWNS ENTERTAINMENT, INC. CONSOLIDATED STATEMENT OF CASH FLOWS In Thousands (Unaudited) Three Months Ended September 30, 2000 1999 Cash flows from operating activities: Net earnings $13,215 $11,244 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 2,456 1,965 (Increase) decrease in assets: Accounts receivable (2,023) (333) Due from State of Delaware (4,872) (4,708) Inventories 6 (24) Prepaid expenses and other 174 856 Increase (decrease) in liabilities: Accounts payable (5,269) (48) Purses due horsemen 4,882 4,843 Accrued liabilities 3,294 (855) Current and deferred income taxes 6,847 6,418 Deferred revenue (10,848) (9,621) Net cash provided by operating activities 7,862 9,737 Cash flows from investing activities: Capital expenditures (20,754) (9,423) Net cash used in investing activities (20,754) (9,423) Cash flows from financing activities: Borrowings on revolving debt, net 15,100 4,500 Dividends paid (1,704) (1,613) Proceeds from stock options exercised and other 25 199 Net cash provided by financing activities 13,421 3,086 Net increase in cash and cash equivalents 529 3,400 Cash and cash equivalents, beginning of period 12,413 10,847 Cash and cash equivalents, end of period $12,942 $14,247 Supplemental information: Interest paid $ 349 $ 795 Income taxes paid $ 2,412 $ 1,557 The Notes to the Consolidated Financial Statements are an integral part of these statements. FORM 10-Q Page 5 of 10 DOVER DOWNS ENTERTAINMENT, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and generally accepted accounting principles, but do not include all of the information and footnotes required for complete financial statements. The statements should be read in conjunction with the consolidated financial statements and notes thereto included in the latest annual report on Form 10-K for Dover Downs Entertainment, Inc. and its wholly owned subsidiaries (the "Company"). In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of results of operations, financial position and cash flows have been included. Operating results for the three months ended September 30, 2000 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2001. Revenue Recognition For the video lottery operations, the difference between the amount wagered by bettors and the amount paid out to bettors is referred to as the win. The win is included in the amount recorded in the Company's financial statements as gaming revenue. The Delaware State Lottery Office sweeps the winnings from the video lottery operations, collects the State's share of the winnings and the amount due to the vendors under contract with the State who provide the video lottery machines and associated computer systems, collects the amount allocable to purses for harness horse racing and remits the remainder to the Company as its commission for acting as a Licensed Agent. Operating expenses include the amounts collected by the State (i) for the State's share of the winnings, (ii) for remittance to the providers of the video lottery machines and associated computer systems, and (iii) for harness horse racing purses. Earnings Per Share Pursuant to the provisions of Statement of Financial Accounting Standards No. 128, "Earnings Per Share," the number of weighted average shares used in computing basic and diluted earnings per share (EPS) are as follows (in thousands): Three Months Ended September 30, 2000 1999 Basic EPS 37,856 35,803 Effect of Options 184 893 Diluted EPS 38,040 36,696 FORM 10-Q Page 6 of 10 Business Segment Information The Company has two reportable segments, motorsports and gaming. The business is operated and defined based on the products and services provided by these segments. Certain operations within the motorsports segment have been aggregated for purposes of the following disclosures (in thousands): Three Months Ended September 30, 2000 1999 Revenues: Motorsports $33,951 $28,610 Gaming 45,314 42,691 Consolidated Revenues $79,265 $71,301 Operating Earnings: Motorsports $13,122 $10,339 Gaming 9,355 9,306 Consolidated Operating Earnings $22,477 $19,645 September 30, 2000 June 30, 2000 Identifiable Assets: Motorsports $278,550 $261,989 Gaming 63,775 54,789 Consolidated Assets $342,325 $316,778 Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations: Three Months Ended September 30, 2000 vs. Three Months Ended September 30, 1999 Revenues increased by $7,964,000 to $79,265,000 as a result of growth in the historical business of the Company. Gaming revenues increased by $2,623,000 or 6.1% to $45,314,000, primarily the result of expanding the casino facility and increasing the number of video lottery (slot) machines from an average of 1,568 in the first quarter of fiscal 2000 to 2,000 during the first quarter of fiscal 2001, and also from the results of expanded marketing and promotional activities related to the Company's video lottery casino. Motorsports revenues increased by $5,341,000 or 18.7%. Approximately $465,000 resulted from increased attendance, $222,000 from increased ticket prices and $2,889,000 from increased sponsorship and broadcast revenues from the Company's fall NASCAR weekend at Dover Downs International Speedway. The remainder of the motorsports revenue increase is primarily from adding a Craftsman Truck Series event to the Dover Downs' fall NASCAR weekend and the scheduling of the Championship Auto Racing Teams (CART) event at Gateway International Raceway in September 2000 compared with May 1999. The aforementioned increases in motorsports revenue were offset somewhat by the Company's decision not to promote an Indy Racing League (IRL) event at Dover Downs International Speedway in fiscal 2001 and the scheduling of the Craftsman Truck Series event at Gateway International Raceway in the fourth quarter of fiscal 2000 instead of the first quarter of fiscal 2001. FORM 10-Q Page 7 of 10 Operating expenses increased by $4,587,000 reflecting the higher gaming and motorsports revenues. Amounts retained by the State of Delaware, fees to the manager who operates the video lottery (slot) machine casino, and the amount collected by the State of Delaware for payment to the vendors under contract with the State who provide the video lottery machines and associated computer systems increased by $727,000 in the first quarter of fiscal 2001. Amounts allocated from the video lottery operation for harness horse racing purses were $4,993,000 in the first quarter of fiscal 2001 compared with $4,742,000 in the first quarter of fiscal 2000. Additional advertising, promotional and customer complimentary costs of $1,114,000 were the other significant operating cost increases. Motorsports operating expenses for the first quarter of fiscal 2001 increased as compared with the first quarter of fiscal 2000 due to the addition of a Craftsman Truck Series event to the Dover Downs fall NASCAR weekend and the scheduling of the CART event at Gateway International Raceway in September 2000 compared with May 1999. The aforementioned increases in motorsports operating expenses were offset somewhat by the Company's decision not to promote an IRL event at Dover Downs International Speedway in fiscal 2001 and the scheduling of the Craftsman Truck Series event at Gateway International Raceway in the fourth quarter of fiscal 2000 instead of the first quarter of fiscal 2001. Depreciation and amortization expense increased by $491,000 due to capital expenditures related to the Company's video lottery casino expansion and motorsports facilities expansion since the first quarter of fiscal 2000. General and administrative expenses increased by $54,000 to $3,377,000 from $3,323,000 in the first quarter of fiscal 2000. Despite the increased borrowings on the revolving bank credit agreement, interest expense decreased by $423,000 due to the capitalization of $900,000 of interest related to the construction of major facilities in the first quarter of fiscal 2001 compared with $300,000 in the first quarter of fiscal 2000. The Company's effective income tax rates for the three-month periods ended September 30, 2000 and 1999 were 41.2% and 41.5%, respectively. Net earnings increased by $1,971,000, primarily as a result of higher attendance and related revenues for the fall NASCAR event at Dover Downs International Speedway, and the scheduling of the CART Series event at Gateway International Raceway. Liquidity and Capital Resources Cash flows from operations for the three months ended September 30, 2000 and 1999 were $7,862,000 and $9,737,000, respectively. The reasons for the decrease in operating cash flows were primarily the timing of the receipt of broadcast revenues and the timing of construction- related payments, offset by the increase in earnings before depreciation and amortization. FORM 10-Q Page 8 of 10 Capital expenditures for the three months ended September 30, 2000 were $20,754,000. Approximately $2,827,000 related to the expansion of and improvements to the auto racing facilities in Dover, Delaware; Millington, Tennessee (near Memphis, Tennessee); and Madison, Illinois (near St. Louis, Missouri), approximately $1,386,000 to the construction of a hotel in Dover, Delaware, and approximately $16,024,000 for construction costs related to the Nashville Superspeedway complex. The remainder of the expenditures were for other equipment and improvements at the Company's facilities. Management believes that the cash flows from operations and funds expected to be available under the Company's bank credit facility will satisfy the Company's cash requirements for the remainder of fiscal 2001. Recent Accounting Pronouncements The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on its results of operations, financial position or cash flows. Year 2000 Issues As of the filing date of this Form 10-Q, the Company's business operations have not been materially impacted by Year 2000 ("Y2K") matters. The Company will continue to monitor its operations for possible Y2K information technology programming issues. Forward-Looking Statements The Company may make certain forward-looking statements in this Form 10-Q within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, relating to the Company's financial condition, profitability, liquidity, resources, business outlook, proposed acquisitions, market forces, corporate strategies, consumer preferences, contractual commitments, legal matters, capital requirements and other matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. To comply with the terms of the safe harbor, the Company notes that a variety of factors could cause the Company's actual results and experience to differ substantially from the anticipated results or other expectations expressed in the Company's forward-looking statements. When words and expressions such as: "believes," "expects," "anticipates," "estimates," "plans," "intends," "objectives," "goals," "aims," "projects," "forecasts," "possible," "seeks," "may," "could," "should," "might," "likely," "enable," or similar words or expressions are used in this Form 10-Q, as well as statements containing phrases such as "in the Company's view," "there can be no assurance," "although no assurance can be given," or "there is no way to anticipate with certainty," forward-looking statements are being made in all of these instances. Various risks and uncertainties may affect the operation, performance, development and results of the Company's business and could cause future outcomes to differ materially from those set forth in the Company's forward-looking statements, including the following factors: the Company's growth strategies; the Company's development and potential acquisition of new facilities; anticipated trends in the FORM 10-Q Page 9 of 10 motorsports and gaming industries; patron demographics; the Company's ability to enter into additional contracts with sponsors, broadcast media and race event sanctioning bodies; the Company's relationships with sponsors; general market and economic conditions; the Company's ability to finance future business requirements; the availability of adequate levels of insurance; the ability to successfully integrate acquired companies and businesses; management retention and development; changes in Federal, state, and local laws and regulations, including environmental and gaming license legislation and regulations; the affect of weather conditions on outdoor event attendance; as well as the risks, uncertainties and other factors described from time to time in the Company's SEC filings and reports. The Company undertakes no obligation to publicly update or revise any forward-looking statements as a result of future developments, events or conditions. New risk factors emerge from time to time and it is not possible for the Company to predict all such risk factors, nor can the Company assess the impact of all such risk factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ significantly from those forecast in any forward-looking statements. Given these risks and uncertainties, investors should not overly rely or attach undue weight to the Company's forward-looking statements as an indication of its actual future results. Item 3. Quantitative and Qualitative Disclosures About Market Risk The carrying values of the Company's long-term debt approximates its fair value at September 30, 2000 and 1999. The Company is exposed to market risks related to fluctuations in interest rates for its variable rate borrowings of $30,100,000 at September 30, 2000 under its revolving credit facility. A change in interest rates of one percent on the balance outstanding at September 30, 2000 would cause a change in total annual interest costs of $301,000. PART II - OTHER INFORMATION Item 1. Legal Proceedings A group made up of Wilson County and Rutherford County, Tennessee residents has filed a complaint in the Chancery Court for Wilson County, Tennessee contesting the rezoning of the land upon which the new Nashville Superspeedway complex will be situated. The litigation, if successful, would prevent, or at least significantly postpone, the development of the facility. Management believes the rezoning was done properly and is vigorously contesting the litigation. On May 30, 2000, the Chancery Court ruled in favor of the Company's position on a motion for summary judgment. That ruling has been appealed by the plaintiffs to the Court of Appeals for the State of Tennessee. Based on the advice of counsel, management continues to believe that the litigation is unlikely to succeed on its merits. The Company is also a party to ordinary routine litigation incidental to its business. Management does not believe that the resolution of any of these matters is likely to have a serious negative effect on the Company's financial condition or profitability. FORM 10-Q Page 10 of 10 Item 2. Changes in Securities and Use of Proceeds None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DATE: October 27, 2000 Dover Downs Entertainment, Inc. (Registrant) /s/ Denis McGlynn Denis McGlynn President and Chief Executive Officer /s/ Timothy R. Horne Timothy R. Horne Vice President-Finance and Chief Financial Officer (Principal Financial and Accounting Officer) EX-27 2 0002.txt
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DOVER DOWNS ENTERTAINMENT, INC. CONSOLIDATED STATEMENT OF EARNINGS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000, AND THE DOVER DOWNS ENTERTAINMENT, INC. CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS JUN-30-2001 SEP-30-2000 12,942 0 22,771 0 639 41,009 279,876 32,301 342,325 44,904 50,640 0 0 3,785 225,559 342,325 79,265 79,265 0 53,411 0 0 3 22,474 9,259 13,215 0 0 0 13,215 .35 .35
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