Form 8-K DOVER DOWNS GAMING & For: Jan 26

 

United States

Securities And Exchange Commission

Washington, D.C. 20549

 

Form 8-K

 

Current Report

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): January 26, 2017

 

Dover Downs Gaming & Entertainment, Inc.

(Exact name of registrant as specified in its charter)

 

Commission File Number 1-16791

 

 

 

Registrant’s telephone number, including area code (302) 674-4600

 

N/A

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Item 2.02 Results of Operations and Financial Condition and

Item 7.01 Regulation FD Disclosure.

 

The following information is furnished pursuant to Item 2.02 Results of Operations and Financial Condition and Item 7.01 Regulation FD Disclosure.

 

On January 26, 2017, we issued a press release announcing our financial results for the fourth quarter ended December 31, 2016.  A copy of our press release is attached hereto as Exhibit 99.1 and hereby incorporated by reference.

 

Item 9.01 Financial Statements and Exhibits.

 

(d)                                 Exhibits

 

99.1                        Press Release dated January 26, 2017

99.2                        Reconciliation of Net (Loss) Earnings to EBITDA

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, we have duly caused this report to be signed on our behalf by the undersigned hereunto duly authorized.

 

	Dover Downs Gaming & Entertainment, Inc.
	/s/ Denis McGlynn
	Denis McGlynn
	President and Chief Executive Officer

 

Dated:           January 26, 2017

 

2

 

EXHIBIT INDEX

 

Exhibit
Number		Description
99.1		Press Release dated January 26, 2017, issued by Dover Downs Gaming & Entertainment, Inc.
99.2		Reconciliation of Net (Loss) Earnings to EBITDA

 

3

Exhibit 99.1

 

 

FOR IMMEDIATE RELEASE	For further information, call:
	Timothy R. Horne - Sr. Vice President-Finance
Dover, Delaware, January 26, 2017	(302) 857-3292

 

DOVER DOWNS GAMING & ENTERTAINMENT, INC. REPORTS RESULTS

FOR THE FOURTH QUARTER AND YEAR ENDED DECEMBER 31, 2016

 

Dover Downs Gaming & Entertainment, Inc. (NYSE: DDE) today reported results for the fourth quarter and year ended December 31, 2016.

 

The Company’s total revenues were $44,241,000 for the fourth quarter of 2016 compared with $46,111,000 for the fourth quarter of 2015.

 

Gaming revenues of $37,515,000 were down 4.0% compared to the fourth quarter of last year, primarily the result of lower table game and sports betting hold percentages.

 

Other operating revenues were $6,726,000 compared to $7,035,000 for the fourth quarter of last year.  The decrease was primarily from lower rooms and food and beverage revenues, and partially related to the fact that a portion of Dover International Speedway’s NASCAR weekend was held during the third quarter of this year compared to the fourth quarter of last year.  Additionally, convention rooms and related revenues were slightly lower this year. Occupancy levels in the Dover Downs Hotel were approximately 81% and 84% for the fourth quarters of 2016 and 2015, respectively.

 

General and administrative expenses were up to $1,524,000 for the fourth quarter compared to $1,334,000 last year, from higher employee related costs.

 

Interest expense decreased to $202,000 during the quarter as a result of lower average outstanding borrowings offset by slightly higher interest rates compared to last year.

 

Net loss was ($291,000), or ($.01) per diluted share, compared with net earnings of $768,000, or $.02 per diluted share for the fourth quarter of 2015.

 

For the year as a whole, total revenues were $182,292,000 for 2016 compared with $182,946,000 for 2015.

 

Gaming revenues were fairly consistent from year to year, however, marketing and promotional costs were higher given the increasingly competitive nature of the regional gaming market.

 

Other operating revenues for the year were almost identical to 2015, while other operating expenses increased primarily from higher health care costs compared to last year. Occupancy levels in the Dover Downs Hotel were approximately 84% for both annual periods.

 

 

Net earnings were $786,000, or $.02 per diluted share, compared with $1,873,000, or $.06 per diluted share for 2015.

 

Denis McGlynn, the Company’s President and Chief Executive Officer, stated:  “Our results for the fourth quarter and for the year reflect the continuing challenges the company, and our fellow Delaware casinos face with the formula for gaming revenue distribution within the state.

 

“In 2016, Dover Downs generated $77 million for the state and the horsemen, while the company carried more than $180 million in expenses and was left with less than one half of one percent profit margin.

 

“Exacerbating the state’s unbalanced gaming revenue sharing formula is the astounding increase in health care costs most employers are dealing with.

 

“The Delaware Gaming Industry has generated $3.8 billion that has gone directly to the State’s General Fund over the years and has become an employer of 4,500 mostly Delaware citizens. It’s our hope that a restructuring of the relationship with the State will be undertaken during the current legislative session to protect this valuable contribution of revenue and employment for the State.”

 

* * *

 

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.

 

Owned by Dover Downs Gaming & Entertainment, Inc. (NYSE: DDE), Dover Downs Hotel & Casino® is a premier gaming and entertainment resort destination in the Mid-Atlantic region. Gaming operations consist of approximately 2,300 slots and a full complement of table games including poker.  The AAA-rated Four Diamond hotel is Delaware’s largest with 500 luxurious rooms/suites and amenities including a full-service spa/salon, concert hall and 41,500 sq. ft. of multi-use event space.  Live, world-class harness racing is featured November through April, and horse racing is simulcast year-round.  Professional football parlay betting is accepted during the season.  Additional property amenities include multiple restaurants from fine dining to casual fare, bars/lounges and retail shops.  For more information, please visit www.doverdowns.com.

 

 

DOVER DOWNS GAMING & ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF (LOSS) EARNINGS

In Thousands, Except Per Share Amounts

(Unaudited)

 

		Three Months Ended						Years Ended
		December 31,						December 31,
		2016			2015			2016			2015
Revenues:
Gaming (1)		$	37,515		$	39,076		$	157,226		$	157,922
Other operating (2)		6,726			7,035			25,066			25,024
		44,241			46,111			182,292			182,946
Expenses:
Gaming		36,326			36,891			149,577			148,595
Other operating		4,722			4,645			17,316			16,602
General and administrative		1,524			1,334			5,375			5,499
Depreciation		1,944			2,022			7,743			8,375
		44,516			44,892			180,011			179,071
Operating (loss) earnings		(275		)	1,219			2,281			3,875
Interest expense		(202		)	(223		)	(863		)	(1,160		)
(Loss) earnings before income taxes		(477		)	996			1,418			2,715
Income tax benefit (expense)		186			(228		)	(632		)	(842		)
Net (loss) earnings		$	(291	)	$	768		$	786		$	1,873
Net (loss) earnings per common share:
- Basic		$	(0.01	)	$	0.02		$	0.02		$	0.06
- Diluted		$	(0.01	)	$	0.02		$	0.02		$	0.06
Weighted average shares outstanding:
- Basic		32,202			32,086			32,201			32,085
- Diluted		32,202			32,086			32,201			32,085

 

(1)         Gaming revenues from the Company’s slot machine and table game 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.

CONSOLIDATED BALANCE SHEETS

In Thousands

(Unaudited)

 

		December 31,			December 31,
		2016			2015
ASSETS
Current assets:
Cash		$	11,677		$	10,496
Accounts receivable		3,507			2,926
Due from State of Delaware		7,285			7,952
Inventories		1,910			1,912
Prepaid expenses and other		2,365			2,530
Receivable from Dover Motorsports, Inc.		7			—
Income taxes receivable		221			254
Deferred income taxes		—			1,308
Total current assets		26,972			27,378
Property and equipment, net		140,714			145,425
Other assets		594			672
Deferred income taxes		2,020			482
Total assets		$	170,300		$	173,957
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	3,749		$	3,380
Purses due horsemen		7,649			7,473
Accrued liabilities		9,732			8,538
Payable to Dover Motorsports, Inc.		—			44
Deferred revenue		361			408
Revolving line of credit		25,250			31,500
Total current liabilities		46,741			51,343
Liability for pension benefits		7,897			7,606
Total liabilities		54,638			58,949
Stockholders’ equity:
Common stock		1,814			1,799
Class A common stock		1,487			1,487
Additional paid-in capital		5,669			5,424
Retained earnings		111,288			110,502
Accumulated other comprehensive loss		(4,596		)	(4,204		)
Total stockholders’ equity		115,662			115,008
Total liabilities and stockholders’ equity		$	170,300		$	173,957

 

 

DOVER DOWNS GAMING & ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

In Thousands

(Unaudited)

 

		Years Ended
		December 31,
		2016			2015
Operating activities:
Net earnings		$	786		$	1,873
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation		7,743			8,375
Amortization of credit facility origination fees		89			111
Stock-based compensation		326			375
Deferred income taxes		(36		)	(508		)
Changes in assets and liabilities:
Accounts receivable		(581		)	912
Due from State of Delaware		667			(694		)
Inventories		2			(129		)
Prepaid expenses and other		204			(146		)
Receivable from/payable to Dover Motorsports, Inc.		(51		)	66
Income taxes receivable		99			(197		)
Accounts payable		149			(662		)
Purses due horsemen		176			556
Accrued liabilities		1,149			211
Deferred revenue		(47		)	19
Liability for pension benefits		(320		)	(443		)
Net cash provided by operating activities		10,355			9,719
Investing activities:
Capital expenditures		(2,812		)	(1,651		)
Purchase of available-for-sale securities		(55		)	(16		)
Proceeds from sale of available-for-sale securities		49			8
Proceeds from sale of property and equipment		—			25
Net cash used in investing activities		(2,818		)	(1,634		)
Financing activities:
Borrowings from revolving line of credit		46,850			52,060
Repayments of revolving line of credit		(53,100		)	(59,570		)
Repurchase of common stock		(66		)	(65		)
Credit facility fees		(40		)	(93		)
Net cash used in financing activities		(6,356		)	(7,668		)
Net increase in cash		1,181			417
Cash, beginning of year		10,496			10,079
Cash, end of year		$	11,677		$	10,496

 

Exhibit 99.2

 

DOVER DOWNS GAMING & ENTERTAINMENT, INC.

SUPPLEMENTAL DATA

RECONCILIATION OF NET (LOSS) EARNINGS TO EBITDA

In Thousands

(Unaudited)

 

		Three Months Ended December 31,						Years Ended December 31,
		2016			2015			2016			2015
Reconciliation of net (loss) earnings to EBITDA:
Net (loss) earnings		$	(291	)	$	768		$	786		$	1,873
Income tax (benefit) expense		(186		)	228			632			842
(Loss) earnings before income taxes		(477		)	996			1,418			2,715
Interest expense		202			223			863			1,160
Depreciation		1,944			2,022			7,743			8,375
EBITDA		$	1,669		$	3,241		$	10,024		$	12,250

 

We define EBITDA as earnings before interest, taxes, depreciation and amortization.  EBITDA is a supplemental non-GAAP financial measure commonly used by management and industry analysts to evaluate our operations and we believe that EBITDA provides useful information to investors.  EBITDA should not be construed as an alternative to net earnings (as an indicator of our operating performance) as determined in accordance with accounting principles generally accepted in the United States of America. Not all companies calculate EBITDA in the same manner, and EBITDA as presented by Dover Downs Gaming & Entertainment, Inc. may not be comparable to similarly titled measures presented by other companies.