Dover Downs reports earnings up in Q4

DOVER — While Dover Downs Gaming and Entertainment Inc. reported slightly better financial numbers to end 2015, officials said the current business model returns are not sustainable moving forward.

Through a news release and conference call on Thursday, Dover Downs reported net earnings of $768,000 in the fourth quarter, earning 2 cents per diluted share. That compared to a $516,000 and 2 cents loss in the same 2014 period,

Company President and Chief Executive Officer Denis McGlynn attributed the improvement to the state assuming a greater portion of slot machine leasing costs in the middle of 2014; ongoing energy and waste recycling initiatives; and in-house retail operations formerly leased to third parties.

Denis McGlynn

Denis McGlynn

“Despite a reduction in gaming revenues, we managed to achieve minor earnings improvement last year through various cost containment measures,” he said in a news release.

“We remain focused on the challenges to come. In addition to cost increases most businesses are dealing with, such as in health care, minimum wage and property taxes, new competition will enter the market later this year in Maryland, and in Pennsylvania in the next couple of years.

“This means our need to reinvest in our hotel and other amenities, as well as our ability to market and promote, become more important.”

Also, a one-time six-figure settlement was received regarding a case of unpaid back rent, Mr. McGlynn said.
Dover Downs reported total revenue was $46.1 million in 2015, compared to $45.7 million in the fourth quarter of 2014.

In its report, Dover Downs said gaming revenues dropped 2.3 percent from 2014’s fourth quarter, due to lower slot machine revenue.

Operating revenues increased to $7.03 million,up from $5.75 million from 2014’s fourth quarter, and 2015’s numbers were boosted by Dover International Speedway’s NASCAR weekend falling in the fourth quarter. Hotel and food beverage sales benefited, according to the report.

General and administrative expenses were cut to $1.13 million in the fourth quarter, following $1.42 million in the same 2014 time period. Also down was interest expense, which dropped to $223,000 due to favorable interest rates and fewer outstanding borrowings, according to Dover Downs.

In a conference call reviewing 2015, Mr. McGlynn noted that 72 jobs were eliminated in the past 12 months.

Though earnings rose, Mr. McGlynn said more resources are needed to “maintain and rejuvenate (the hotel) and other amenities” that potential customers will compare against out-of-state competitors.

Intensified marketing is needed to retain customers, Mr. McGlynn said, which will add to cost.

Legislative possibilities

Mr. McGlynn said a large component of Dover Downs’ future is resting on potential legislation, and mentioned legislation introduced Wednesday in the state Senate that could restructure the distribution of gaming revenues between the state of Delaware and the state’s three casinos.

Senate Bill 183, recommended by the Lottery and Gaming Commission’s study last year, is a must, he said. It would be phased in for four years to minimize any perceived trauma to the state’s General Fund.

“Passage of this legislation will go a long way toward restoring our competitiveness, protecting jobs and maintaining our ability to generate significant revenue for the state,” Mr. McGlynn said.

There’s support among legislators, Mr. McGlynn said.

“We do have a number of people down in Legislative Hall who are very supportive of this and we’re hopeful we can move the ball down the field this session,” he said.

Also, Mr. McGlynn said, there’s a “reality check that’s now pervasive at Legislative Hall that something needs to be done.

“I think that was true last year as well, but it wasn’t able to get done because of the budgetary situation … but after a number of years we’ve been pursuing relief, people have come to the conclusion that what we’re asking for needs to be affected. How we affect it and over what amount of time is probably more the issue.”

Legislation could eliminate a $3 million annual licensing fee for table games, and reduce tax from 29.4 percent to 20 percent by Jan. 1, 2017, and then 15 percent a year later, better matching other state’s rates, according to Dover Downs.

The company said it needs capital expenditure and marketing credits, without which the revenue base will continue to shrink.

Senior Vice President of Finance Timothy Horne said two large capital projects likely are upcoming, including a critical upgrade of the casino management system that “we’ve been putting off for years” and “is our biggest marketing database, and tool to reward customers.”

Also coming is a project involving new bonus modules on some floor games which could be a positive return on investment.

Mr. Horne said there’s been no significant demographic changes regarding number of average trips for club players and money spent and that higher-end playing remains strong.

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