Dover Downs Gaming & Entertainment, Inc. Reports Results for the Fourth Quarter and Year Ended December 31, 2018

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Dover Downs Gaming & Entertainment, Inc. (NYSE: DDE) today reported results for the fourth quarter and year ended December 31, 2018.

Gaming revenues increased 4.2% to $35,868,000 compared to $34,435,000 for the fourth quarter of 2017. Slot machine and table game win were both higher, and sports betting win improved as a result of recently expanded sports wagering in Delaware. These increases were offset by lower wagering on horse racing compared to last year.

Other operating revenues of $10,764,000 were up 9% compared to the fourth quarter of 2017 from an increase in food and beverage and rooms revenue. Occupancy levels in the Dover Downs Hotel were approximately 83% and 80% for the fourth quarters of 2018 and 2017, respectively.

General and administrative costs were $1,242,000 for the fourth quarter of 2018 compared to $1,297,000 last year.

Costs incurred during the fourth quarter related to the Companys pending merger with Twin River Worldwide Holdings, Inc. were $325,000.

Including the merger related costs, the Companys pretax earnings were $686,000 compared with a ($235,000) pretax loss for the fourth quarter of last year.

Net earnings were $419,000, or $.01 per diluted share compared with a net loss of ($841,000) or ($.03) per diluted share for the fourth quarter of 2017. The fourth quarter of 2017 results were impacted by the Tax Cuts and Job Act, which resulted in an income tax expense of $662,000, or ($.02) per diluted share.

For the year as a whole, total revenues increased 2% to $179,931,000, while pretax earnings were $417,000 compared to a pretax loss of ($619,000) in 2017. Excluding merger related costs, pretax earnings for 2018 were $1,507,000.

Capital spending was $4,826,000 for the year ended December 31, 2018 as compared to $2,193,000 for 2017.

This release contains or may contain forward-looking statements based on managements beliefs and assumptions. Such statements are subject to various risks and uncertainties that could cause results to vary materially. Please refer to the Companys 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 2,200 slots, a full complement of table games, including poker, and a newly expanded race and sports book taking single game wagers on professional and college sports. The AAA-rated Four Diamond hotel is Delawares 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. 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 EARNINGS (LOSS)
In Thousands, Except Per Share Amounts
(Unaudited)
                           
 
Three Months Ended Years Ended
December 31, December 31,
2018   2017 * 2018 2017 *
Revenues:
Gaming $ 35,868 $ 34,435 $ 140,620 $ 138,684
Other operating   10,764     9,879     39,311     37,744  
  46,632     44,314     179,931     176,428  
Expenses:
Gaming 33,975 33,494 133,967 133,921
Other operating 8,232 7,541 30,414 28,944
General and administrative 1,242 1,297 5,324 5,321
Merger costs 325 1,090
Depreciation   2,031     2,040     8,231     8,168  
  45,805     44,372     179,026     176,354  
 
Operating earnings (loss) 827 (58 ) 905 74
 
Interest expense (192 ) (206 ) (790 ) (840 )
Other income   51     29     302     147  
 
Earnings (loss) before income taxes 686 (235 ) 417 (619 )
 
Income tax expense   (267 )   (606 )   (387 )   (523 )
 
Net earnings (loss) $ 419   $ (841 ) $ 30   $ (1,142 )
 
Net earnings (loss) per common share:
– Basic $ 0.01   $ (0.03 ) $   $ (0.04 )
– Diluted $ 0.01   $ (0.03 ) $   $ (0.04 )
 
Weighted average shares outstanding:
– Basic 32,447 32,322 32,446 32,321
– Diluted 32,447 32,322 32,446 32,321
 
_________________________
*    

Prior-period information has been restated for the adoption of Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers, and ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which we adopted on January 1, 2018.

 
                   
DOVER DOWNS GAMING & ENTERTAINMENT, INC.
RECONCILIATION OF GAAP EARNINGS (LOSS) BEFORE INCOME TAXES
TO ADJUSTED EARNINGS (LOSS) BEFORE INCOME TAXES
AND RECONCILIATION OF GAAP NET EARNINGS (LOSS) TO ADJUSTED NET EARNINGS (LOSS)
In Thousands, Except Per Share Amounts
(Unaudited)
     
 
Three Months Ended Years Ended
December 31, December 31,
2018 2017 2018 2017
 
GAAP earnings (loss) before income taxes $ 686 $ (235 ) $ 417 $ (619 )
 
Merger costs (1)   325       1,090    
 
Adjusted earnings (loss) before income taxes $ 1,011 $ (235 ) $ 1,507 $ (619 )
 
 
GAAP net earnings (loss) $ 419 $ (841 ) $ 30 $ (1,142 )
 
Merger costs (1) 325 1,090
 
Federal income tax reform (2)     662       662  
 
Adjusted net earnings (loss) $ 744 $ (179 ) $ 1,120 $ (480 )
 
 
GAAP net earnings (loss) per common share – basic and diluted $ 0.01 $ (0.03 ) $ $ (0.04 )
 
Merger costs (1) 0.01 0.03
 
Federal income tax reform (2)     0.02       0.02  
 
Adjusted net earnings (loss) per common share – basic and diluted (3) $ 0.02 $ (0.01 ) $ 0.03 $ (0.01 )
 
_________________________
(1)    

Merger costs, which are non-deductible for income tax purposes, relate to legal, accounting and investment banking expenses incurred in connection with our pending merger with Twin River Worldwide Holdings, Inc.

 
(2)

The passage of the Tax Cuts and Jobs Act in December 2017 lowered our future federal income tax rate to 21% requiring us to revalue net deferred federal tax assets.

 
(3)

The components of GAAP net loss per common share for the year ended December 31, 2017 do not add to the adjusted net loss per common share due to rounding.

 
 

The above financial information is presented using other than generally accepted accounting principles (“non-GAAP”), and is reconciled to comparable information presented using GAAP.  Non-GAAP adjusted earnings (loss) before income taxes, net earnings (loss) and adjusted net earnings (loss) per common share – basic and diluted are derived by adjusting amounts determined in accordance with GAAP for the aforementioned merger costs and federal income tax reform.  We believe such non-GAAP information is useful and meaningful to investors, and is used by investors and us to assess core operations.  This non-GAAP financial information may not be comparable to similarly titled measures used by other entities and should not be considered as an alternative to earnings (loss) before income taxes, net earnings (loss) or net earnings (loss) per common share – basic and diluted, which are determined in accordance with GAAP.

 
 
DOVER DOWNS GAMING & ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
In Thousands
(Unaudited)
                     
 
December 31, December 31,
2018 2017 *
ASSETS
 
Current assets:
Cash $ 10,864 $ 10,714
Accounts receivable 4,297 3,557
Due from State of Delaware 7,498 5,720
Inventories 1,975 1,928
Prepaid expenses and other 2,810 2,840
Receivable from Dover Motorsports, Inc. 9 7
Income taxes receivable   116     318  
Total current assets 27,569 25,084
 
Property and equipment, net 131,322 134,527
Other assets 368 564
Deferred income taxes   1,456     1,786  
Total assets $ 160,715   $ 161,961  
 
LIABILITIES AND STOCKHOLDERS EQUITY
 
Current liabilities:
Accounts payable $ 2,865 $ 2,571
Purses due horsemen 7,533 5,814
Accrued liabilities 9,888 8,111
Deferred credits 76 49
Contract liabilities 4,126 3,724
Revolving line of credit   15,000     19,900  

Total current liabilities

39,488 40,169
 
Liability for pension benefits   6,883     7,483  
Total liabilities   46,371     47,652  
 
Stockholders equity:
Common stock 1,841 1,827
Class A common stock 1,487 1,487
Additional paid-in capital 6,028 5,877
Retained earnings 109,881 109,817
Accumulated other comprehensive loss   (4,893 )   (4,699 )
Total stockholders equity   114,344     114,309  
Total liabilities and stockholders equity $ 160,715   $ 161,961  
 

_________________________

*  

Prior-period information has been restated for the adoption of ASU No. 2014-09, Revenue from Contracts with Customers, which we adopted on January 1, 2018.

 
 
DOVER DOWNS GAMING & ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
In Thousands
(Unaudited)
                     
Years Ended
December 31,
2018 2017 *
 
Operating activities:
Net earnings (loss) $ 30 $ (1,142 )

Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:

Depreciation 8,231 8,168
Amortization of credit facility origination fees 41 57
Stock-based compensation 239 295
Deferred income taxes 394 519
Losses on equity investments 30
Changes in assets and liabilities:
Accounts receivable (740 ) (50 )
Due from State of Delaware (1,778 ) 1,565
Inventories (47 ) (18 )
Prepaid expenses and other 20 (446 )
Receivable from Dover Motorsports, Inc. (2 )
Income taxes receivable 200 (96 )
Accounts payable 274 23
Purses due horsemen 1,719 (1,835 )
Accrued liabilities 1,781 (127 )
Deferred credits 27 (37 )
Contract liabilities 402 261
Liability for pension benefits   (826 )   (437 )
Net cash provided by operating activities   9,995     6,700  
 
Investing activities:
Capital expenditures (4,826 ) (2,193 )
Purchase of equity investments (41 ) (59 )
Proceeds from sale of equity investments   29     48  
Net cash used in investing activities   (4,838 )   (2,204 )
 
Financing activities:
Borrowings from revolving line of credit 41,290 69,280
Repayments of revolving line of credit (46,190 ) (74,630 )
Repurchase of common stock (74 ) (74 )
Credit facility fees   (33 )   (35 )
Net cash used in financing activities   (5,007 )   (5,459 )
 
Net increase (decrease) in cash 150 (963 )
Cash, beginning of year   10,714     11,677  
Cash, end of year $ 10,864   $ 10,714  
 
_________________________
*  

Prior-period information has been restated for the adoption of ASU No. 2014-09, Revenue from Contracts with Customers, which we adopted on January 1, 2018.

 

Timothy R. Horne – Sr. Vice President-Finance
(302) 857-3292