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 Company’s pending merger with Twin River Worldwide Holdings, Inc. were $325,000.
Including the merger related costs, the Company’s 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 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 2,200 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 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. 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. | |
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