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The Company's revenues fell 6.4% to $59,814,000 compared with $63,929,000 for the third quarter of 2008. Gaming revenues were down 5.8% while other operating revenues were down 13.3%.
Gaming expenses were higher from significantly increased gaming taxes and fees that became effective at the end of May of 2009. The impact of these tax increases was approximately $3.6 million or $.07 per diluted share for the third quarter of 2009.
Occupancy levels in the 500 room Dover Downs Hotel were approximately 95% for the third quarter of 2009, but cash room sales were lower than the comparable quarter last year. Margins for all other revenues improved during the quarter.
The Company had previously completed architectural and engineering work related to a Phase 7 casino expansion that would have included, among other things, a new sports book facility and a parking garage. Given the recent US Court of Appeals for the Third Circuit decision to limit the extent of sports wagering in Delaware and the higher gaming tax rates that were recently legislated, the Company has decided not to proceed with this project. As a result, $2,177,000 of previously capitalized costs related to this project were written off during the quarter.
Interest expense decreased $406,000 during the quarter, primarily from lower average borrowings and lower interest rates.
Excluding the impact of the non-cash impairment charge, net earnings were $2,523,000, or $.08 per diluted share, compared with $4,996,000, or $.16 per diluted share for the third quarter of 2008.
Including the impairment charge, net earnings were $1,231,000, or $.04 per diluted share.
Denis McGlynn, President and CEO of Dover Downs Gaming & Entertainment, Inc. stated, "Thanks to the high quality amenities we've assembled in recent years, our revenues held up fairly well considering the current operating environment. Our task will now be to continue to strive for growth and margin improvements".
The Company announced yesterday that its Board of Directors declared a regular quarterly dividend of $.05 per share. The dividend is payable on December 10, 2009 to shareholders of record at the close of business on November 10, 2009.
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 that could cause results to vary materially. Please refer to the Company's SEC filings for a discussion of such factors.
Dover Downs Gaming & Entertainment, Inc. is a diversified gaming and entertainment company whose operations consist of Dover Downs Slots -- a 165,000-square foot video lottery casino complex featuring the latest in slot machine offerings, multi-player electronic table games and a new Race and Sports Book; the Dover Downs Hotel and Conference Center -- a 500 room AAA Four Diamond hotel with conference, banquet, fine dining, ballroom and concert hall facilities; and Dover Downs Raceway -- a harness racing track with pari-mutuel wagering on live and simulcast horse races.
DOVER DOWNS GAMING & ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
In Thousands, Except Per Share Amounts
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Revenues:
Gaming (1) $ 55,172 $ 58,576 $ 163,385 $ 169,219
Other operating (2) 4,642 5,353 14,039 14,470
59,814 63,929 177,424 183,689
Expenses:
Gaming 46,815 45,733 132,431 129,587
Other operating 3,613 4,281 10,864 11,762
General and administrative 1,679 1,572 5,187 4,932
Impairment charge 2,177 - 2,177 -
Depreciation 2,898 2,885 8,919 7,745
57,182 54,471 159,578 154,026
Operating earnings 2,632 9,458 17,846 29,663
Interest expense 569 975 1,834 2,541
Earnings before income taxes 2,063 8,483 16,012 27,122
Income taxes 832 3,487 6,550 11,107
Net earnings $ 1,231 $ 4,996 $ 9,462 $ 16,015
Net earnings per common share:
- Basic $ 0.04 $ 0.16 $ 0.30 $ 0.50
- Diluted $ 0.04 $ 0.16 $ 0.30 $ 0.50
Weighted average shares outstanding:
- Basic 31,496 31,443 31,491 31,434
- Diluted 31,496 31,516 31,491 31,556
_________________________
(1) Gaming revenues from the Company's video lottery (slot) machine
operations include the total win from such operations. The Delaware
State Lottery Office collects the win and remits a portion thereof
to the Company as its commission for acting as a Licensed Agent. The
difference between total win and the amount remitted to the Company
is reflected in gaming expenses.
(2) Other operating revenues do not include the retail amount of
promotional allowances which are provided to customers on a
complimentary basis.
DOVER DOWNS GAMING & ENTERTAINMENT, INC.
RECONCILIATION OF GAAP EARNINGS TO ADJUSTED EARNINGS
In Thousands, Except Per Share Amounts
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
GAAP earnings before income tax expense $ 2,063 $ 8,483 $ 16,012 $ 27,122
Non-cash impairment charges (1) 2,177 - 2,177 -
Adjusted earnings before income tax expense $ 4,240 $ 8,483 $ 18,189 $ 27,122
GAAP net earnings $ 1,231 $ 4,996 $ 9,462 $ 16,015
Non-cash impairment charges, net of income taxes (1) 1,292 - 1,292 -
Adjusted net earnings $ 2,523 $ 4,996 $ 10,754 $ 16,015
GAAP net earnings per common share - diluted $ 0.04 $ 0.16 $ 0.30 $ 0.50
Non-cash impairment charges, net of income taxes (1) 0.04 - 0.04 -
Adjusted net earnings per common share - diluted $ 0.08 $ 0.16 $ 0.34 $ 0.50
_________________________
(1) We had previously completed architectural and engineering work
related to a Phase 7 casino expansion that would have included,
among other things, a new sports book facility and a parking
garage.Given the recent court decision to limit the extent of
sports wagering and the higher gaming tax rates that were recently
legislated, we decided not to proceed with this project.As a
result, $2,177,000 of previously capitalized costs were written
off during the quarter.
DOVER DOWNS GAMING & ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
In Thousands
(Unaudited)
September 30, December 31,
2009 2008
ASSETS
Current assets:
Cash $ 17,526 $ 17,889
Accounts receivable 2,682 2,661
Due from State of Delaware 12,479 10,870
Inventories 2,258 2,025
Prepaid expenses and other 2,918 2,029
Receivable from Dover Motorsports, Inc. 35 -
Prepaid income taxes 807 -
Deferred income taxes 1,217 1,317
Total current assets 39,922 36,791
Property and equipment, net 195,445 203,522
Other assets 893 1,019
Total assets $ 236,260 $ 241,332
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,623 $ 4,679
Purses due horsemen 11,283 9,395
Accrued liabilities 6,392 7,419
Payable to Dover Motorsports, Inc. - 11
Income taxes payable - 619
Deferred revenue 376 212
Total current liabilities 21,674 22,335
Revolving line of credit 98,075 108,325
Liability for pension benefits 6,322 6,099
Other liabilities 200 -
Deferred income taxes 3,730 3,488
Total liabilities 130,001 140,247
Stockholders' equity:
Common stock 1,546 1,521
Class A common stock 1,660 1,660
Additional paid-in capital 1,426 933
Retained earnings 103,914 99,263
Accumulated other comprehensive loss (2,287 ) (2,292 )
Total stockholders' equity 106,259 101,085
Total liabilities and stockholders' equity $ 236,260 $ 241,332
DOVER DOWNS GAMING & ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
In Thousands
(Unaudited)
Nine Months Ended
September 30,
2009 2008
Operating activities:
Net earnings $ 9,462 $ 16,015
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 8,919 7,745
Amortization of credit facility origination fees 28 30
Stock-based compensation 714 762
Deferred income taxes 70 (156 )
Impairment charge 2,177 -
Changes in assets and liabilities:
Accounts receivable (21 ) 1,393
Due from State of Delaware (1,609 ) (2,026 )
Inventories (233 ) (284 )
Prepaid expenses and other (746 ) (1,446 )
Receivable from/payable to Dover Motorsports, Inc. (46 ) (11 )
Prepaid income taxes/income taxes payable (1,294 ) (291 )
Accounts payable 48 464
Purses due horsemen 1,888 1,737
Accrued liabilities (1,027 ) (1,756 )
Deferred revenue 164 282
Other liabilities 388 71
Net cash provided by operating activities 18,882 22,529
Investing activities:
Capital expenditures (4,123 ) (36,377 )
Proceeds from the sale of available-for-sale securities 102 -
Purchase of available-for-sale securities (104 ) (100 )
Net cash used in investing activities (4,125 ) (36,477 )
Financing activities:
Borrowings from revolving line of credit 120,675 145,900
Repayments of revolving line of credit (130,925 ) (130,250 )
Dividends paid (4,811 ) (4,769 )
Repurchase of common stock (59 ) (1,040 )
Proceeds from stock options exercised - 366
Excess tax benefit on stock awards - 25
Net cash (used in) provided by financing activities (15,120 ) 10,232
Net decrease in cash (363 ) (3,716 )
Cash, beginning of period 17,889 22,456
Cash, end of period $ 17,526 $ 18,740
SOURCE: Dover Downs Gaming & Entertainment, Inc.
Dover Downs Gaming & Entertainment, Inc. Timothy R. Horne - Sr. Vice President-Finance (302) 857-3292
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