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Dover Motorsports Inc (NYSE:DVD)

Q2 2014 Earnings Conference Call

July 24, 2014 10:30 AM ET

Executives

Denis McGlynn - Chief Executive Officer

Mike Tatoian - Executive Vice President

Tim Horne - Chief Financial Officer

Klaus Belohoubek - General Counsel

Operator

Welcome, and thank you all for standing by. (Operator Instructions) This call is being recorded. If you have any objections you may disconnect at this point.

Now I will turn the meeting over to your host, Mr. Denis McGlynn. Sir, you may begin.

Denis McGlynn

Thank you, operator and good morning everyone. Mike Tatoian, our Executive Vice President; Tim Horne, our CFO and Klaus Belohoubek, our General Counsel are all here with me this morning. And after Tim reads our forward-looking statement disclaimer we’ll get underway with the review of the quarter.

Tim Horne

In order to help you understand the Company and its results, we may make certain forward-looking statements. It's possible the Company's actual results might differ from any predictions we make today. Additional information regarding factors that could cause such differences appear in the Company's SEC filings.

Denis McGlynn

Thanks Tim. So we had three major occurrences during the quarter, our Spring NASCAR Weekend, the negotiations for the sale of Nashville Super Speedway and the third annual Firefly music festival. Starting with the NASCAR Weekend, Tim will review the financial highlights in a minute, but operationally it was a great weekend, we had three days of fantastic weather. Paid attendance was off slightly which was attributable to two group purchasers who didn’t return for this year’s race, but on the whole we were encouraged by the progress we’re making with attendance in certain targeted segments. For example our youth ticket sales to kids 14 and under grew another 7.5% on Sunday continuing a three year trend. Youth sales were 5.7% of Sunday’s sales whereas three years they were just 1.5%. And ticket sales to first time customers were also 7.5% of June’s Sunday paid attendance, another continuing positive trend.

So we feel pretty good about our ability to attract new customers at a time when the economy is so difficult for everyone. TV ratings for the weekend were flat on Friday and Saturday and was down slightly on Sunday, the telecast was still the highest rated sporting event of the weekend on network television in sight with Fox TV show 24 as the highest rated telecast of the week. Fox was also happy with the 100% viewership growth in both the male and female 18-24 age brackets.

Over -- regarding Nashville, we were fortunate this year to have interest in our Nashville Super Speedway emerge from several different potential purchasers. We ultimately signed a definitive agreement with a Nashville corporation named NeXovation who made a $1.5 million deposit, a deal that did not contain any finance [indiscernible] due diligence has proceeded without any issues and closing is expected towards the end of the third quarter although the buyer [indiscernible] interest in closing maybe ahead of schedule perhaps in August.

As far as the Firefly Music Festival was concerned, in its third year Firefly came back bigger and better on all fronts with record crowds enjoying 124 acts over four days. By all industry news accounts Firefly has now taken its place among the top five music festivals in the country, Billboard magazine declared Firefly to be an A-class international music event on a par with festivals like Bonnaroo and Lollapalooza, All Star provided similar commentary.

Looking at our upcoming Fall Race, the AAA 400 will be the first knock out race in NASCAR Sprint Cup championship format. As a refresher 16 drivers will qualify for the ten race championship chase which begins with the race in Chicago on September 14. Our Fall Cup Race is the third race in the chase and four drivers will be eliminated from championship contention at the end of our race. Four more drivers will be eliminated after the sixth race at Talladega and four more eliminated after the ninth race at Phoenix. This will leave four drivers to go head to head for the Sprint Cup Championship during the season finale at Halmstad. So our race will play an important early role in the championship competition and we’ll be promoting this heavily in the weeks leading up to it. I think that’s it for the operational side, so I’m going to turn it over Tim now for his financial review.

Tim Horne

Thank you, Denis. Our Spring NASCAR tripleheader as well as the Firefly Music Festival were both held in the second quarter of this year and last year. So if you look at our second quarter statements of earnings, you’ll see our revenues were $24.3 million compared with $24.5 million last year. Our Dover NASCAR Weekend saw total revenues that were down about 1%, the entire broadcast rights fees offsetting lower admission.

Sprint Cup attendance was off about 6% while our nationwide and truck sales were down a little less. Our average ticket prices for the weekend were down a couple percent primarily for the nationwide event, contracted broadcast rights fees for the Dover Weekend increased a little more than 4% this year. Our sponsorship revenues were down primarily as our nationwide event was titled fairly late in the game. Our event related expenses were up about $300,000 compared with last year reflecting higher purse and sanction fees, slightly higher marketing and cost associated with enhanced security. As a result profits for the race weekend as a whole were down about 4.5%.

As for the third annual Firefly Music Festival held over four days on our ground in June, we were again the lessor of our property to Red Frog Events, the operator of this festival and in addition to a rental fee we also derived revenue from the sale of alcohol related to the event. All in all this added several hundred thousand to our gross profit during the quarter which was a little higher than last year’s event.

G&A expenses were down a little more than 3% at $1.77 million, while depreciation expense was fairly consistent with last year at $818,000. Our net interest expense was down compared to last year at $99,000 to $175,000 last year, that was from lower rates, lower average borrowing and lower fees compared to the last year. And our net earnings for the quarter were down $55,000 at approximately 4.8 million or $0.13 per diluted share compared with our net earnings last year of $4.9 million or $0.13 per share. Looking at the June 30 balance sheet our deferred revenue is down just over $900,000 primarily from lower event fixed sales collections for the Fall Race compared to this last year. Large portion of this attributable to a later debt buying for payment for the Fall event. Last year’s final payments were due in April whereas this year’s final payments due August. Ticket sales for the Fall event were soft additionally some non [indiscernible] revenue, partially from its certain billing, partially from some category [indiscernible]. Our loan balance was up $15.9 million compared to 23.1 million at this time last year.

Our broadcast revenue [indiscernible] after June 30 so our outstanding balance has gone down significantly since then. And our total equity is now just over 51 million, also included is cash flow payments for six months period where you’ll see our net cash used in operating equity at $1.6 million, which is less than we spent the last year, again that obviously the fact that broadcast rights fees for the June NASCAR event were not received till July.

Capital expenditures are $322,000 year-to-date. At this point our plans for spending a little more than $3.5 million in total, this plan to replace the fence around the race track and [indiscernible] NASCAR required for 2015. We did not repurchase many shares in the open market during the quarter but we did have purchases in the first quarter as you see there. Result of all this are [indiscernible] million going [indiscernible] as mentioned that loan balance fell significantly after the end of the quarter. Denis mentioned at this point we’ll expect the Nashville transaction to close by the end of the third quarter, $27 million purchase price would create a small gain for [indiscernible] business slightly larger gain [indiscernible]. We would expect net proceeds to be approximately $21 million to $22 million after income taxes and settlement adjustments. That concludes our prepared remarks for our second quarter call. Thank you very much for your participation.

Question-and-Answer Session

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Source: Dover Motorsports' (SQBK) CEO Denis McGlynn on Q2 2014 Results - Earnings Call Transcript

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