DDE Dover Downs Gaming & Entertainment

• Pays: $75 Million to State and Horsemen
• Loses: $1 Million for the Year

Dover Downs Gaming & Entertainment, Inc. (NYSE: DDE) today reported results for the fourth quarter and year ended December 31, 2017.

The Company’s total revenues were $44,377,000 for the fourth quarter of 2017 compared with $44,241,000 for the fourth quarter of 2016.

Gaming revenues of $37,966,000 were up 1.2% compared to the fourth quarter of last year, primarily the result of higher table game and sports betting hold percentages.

Other operating revenues were $6,411,000 compared to $6,726,000 for the fourth quarter of last year. Occupancy levels in the Dover Downs Hotel were approximately 80% and 81% for the fourth quarters of 2017 and 2016, respectively.

General and administrative expenses were down to $1,268,000 for the fourth quarter compared to $1,524,000 last year, from lower employee related costs.

Interest expense was consistent with last year as a result of lower average outstanding borrowings offset by slightly higher interest rates.

On December 22, 2017, the Tax Cuts and Jobs Act was signed into law. The fourth quarter of 2017 and full-year 2017 results reflect the impact of the new tax law, which resulted in an income tax expense of $662,000, or ($.02) per diluted share, primarily from revaluing the Company's net deferred tax assets to reflect the recently enacted 21% federal corporate tax rate.

Net loss for the fourth quarter was ($779,000), or ($.02) per diluted share, compared with net loss of ($291,000), or ($.01) per diluted share last year.

For the year as a whole, total revenues were $176,924,000 for 2017 compared with $182,292,000 for 2016.

Net loss was ($1,068,000), or ($.03) per diluted share, compared with net earnings of $786,000, or $.02 per diluted share for 2016.

Denis McGlynn, the Company's President and Chief Executive Officer, stated: “Once again the Company demonstrated substantial gaming operational profitability which once again was totally wiped out by an unfair and outdated gaming revenue sharing formula.

“Legislation has been introduced to implement a more fair and realistic formula and we hope the Delaware Legislature and Administration will act favorably on it.”

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 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, 2017 2016 2017 2016 Revenues: Gaming (1) $ 37,966 $ 37,515 $ 152,534 $ 157,226 Other operating (2)   6,411     6,726     24,390     25,066     44,377     44,241     176,924     182,292   Expenses: Gaming 36,507 36,326 146,209 149,577 Other operating 4,597 4,722 17,140 17,316 General and administrative 1,268 1,524 5,174 5,375 Depreciation   2,040     1,944     8,168     7,743     44,412     44,516     176,691     180,011     Operating (loss) earnings (35 ) (275 ) 233 2,281   Interest expense   (206 )   (202 )   (840 )   (863 )   (Loss) earnings before income taxes (241 ) (477 ) (607 ) 1,418   Income tax (expense) benefit   (538 )   186     (461 )   (632 )   Net (loss) earnings $ (779 ) $ (291 ) $ (1,068 ) $ 786     Net (loss) earnings per common share: - Basic $ (0.02 ) $ (0.01 ) $ (0.03 ) $ 0.02   - Diluted $ (0.02 ) $ (0.01 ) $ (0.03 ) $ 0.02     Weighted average shares outstanding: - Basic 32,322 32,202 32,321 32,201 - Diluted 32,322 32,202 32,321 32,201   _________________________ (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.

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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. RECONCILIATION OF GAAP NET (LOSS) EARNINGS TO ADJUSTED NET (LOSS) EARNINGS In Thousands, Except Per Share Amounts (Unaudited)           Three Months Ended Years Ended December 31, December 31, 2017 2016 2017 2016   GAAP net (loss) earnings $ (779 ) $ (291 ) $ (1,068 ) $ 786   Federal income tax reform (1)   662     -     662     -   Adjusted net (loss) earnings $ (117 ) $ (291 ) $ (406 ) $ 786     GAAP net (loss) earnings per common share - basic and diluted $ (0.02 ) $ (0.01 ) $ (0.03 ) $ 0.02   Federal income tax reform (1)   0.02     -     0.02     -   Adjusted net (loss) earnings per common share - basic and diluted $ -   $ (0.01 ) $ (0.01 ) $ 0.02

 

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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.

 

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 net (loss) earnings and adjusted net (loss) earnings per common share - basic and diluted are derived by adjusting amounts determined in accordance with GAAP for the aforementioned 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 net (loss) earnings or net (loss) earnings 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, 2017 2016 ASSETS   Current assets: Cash $ 10,714 $ 11,677 Accounts receivable 3,557 3,507 Due from State of Delaware 5,720 7,285 Inventories 1,928 1,910 Prepaid expenses and other 2,840 2,365 Receivable from Dover Motorsports, Inc. 7 7 Income taxes receivable   318     221   Total current assets 25,084 26,972   Property and equipment, net 134,527 140,714 Other assets 564 594 Deferred income taxes   1,630     2,020   Total assets $ 161,805   $ 170,300     LIABILITIES AND STOCKHOLDERS’ EQUITY   Current liabilities: Accounts payable $ 3,769 $ 3,749 Purses due horsemen 5,814 7,649 Accrued liabilities 9,811 9,854 Deferred revenue 316 361 Revolving line of credit   19,900     25,250   Total current liabilities 39,610 46,863   Liability for pension benefits   7,483     7,775   Total liabilities   47,093     54,638     Stockholders’ equity: Common stock 1,827 1,814 Class A common stock 1,487 1,487 Additional paid-in capital 5,877 5,669 Retained earnings 110,220 111,288 Accumulated other comprehensive loss   (4,699 )   (4,596 ) Total stockholders’ equity   114,712     115,662   Total liabilities and stockholders’ equity $ 161,805   $ 170,300       DOVER DOWNS GAMING & ENTERTAINMENT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS In Thousands (Unaudited)     Years Ended December 31, 2017 2016   Operating activities: Net (loss) earnings $ (1,068 ) $ 786

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

Depreciation 8,168 7,743 Amortization of credit facility origination fees 57 89 Stock-based compensation 295 326 Deferred income taxes 457 (36 ) Changes in assets and liabilities: Accounts receivable (50 ) (581 ) Due from State of Delaware 1,565 667 Inventories (18 ) 2 Prepaid expenses and other (446 ) 204 Receivable from/payable to Dover Motorsports, Inc. - (51 ) Income taxes receivable (96 ) 99 Accounts payable 232 149 Purses due horsemen (1,835 ) 176 Accrued liabilities (79 ) 1,174 Deferred revenue (45 ) (47 ) Liability for pension benefits   (437 )   (345 ) Net cash provided by operating activities   6,700     10,355     Investing activities: Capital expenditures (2,193 ) (2,812 ) Purchase of available-for-sale securities (59 ) (55 ) Proceeds from sale of available-for-sale securities   48     49   Net cash used in investing activities   (2,204 )   (2,818 )   Financing activities: Borrowings from revolving line of credit 69,280 46,850 Repayments of revolving line of credit (74,630 ) (53,100 ) Repurchase of common stock (74 ) (66 ) Credit facility fees   (35 )   (40 ) Net cash used in financing activities   (5,459 )   (6,356 )   Net (decrease) increase in cash (963 ) 1,181 Cash, beginning of year   11,677     10,496   Cash, end of year $ 10,714   $ 11,677    

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Dover Downs Gaming & Entertainment, Inc.Timothy R. Horne - Sr. Vice President-Finance302-857-3292