Dover Downs reports net loss in 2014

Dover Downs fell into the red in 2014, following a nearly 2 percent drop in fourth-quarter revenue compared to 2013.

The company Thursday reported a net loss of $706,000 in 2014, after eking out a meager $13,000 in net earnings for 2013. It's the first year-end net loss for the company since it added slot machines in 1996.

"During the year just ended, Dover Downs distributed $92 million to the state, the horseman and the slot machine vendors," said Denis McGlynn, the company's president and CEO. "The share of gaming revenues we were left with was insufficient to cover all expenses ... Clearly, this demonstrates the irrationality of the current gaming revenue sharing formula and the need for a rebalancing."

McGlynn said it's too early to tell whether the latest earnings report will translate into layoffs.

"We have to take things one step at a time," he said. "Right now, we're pursuing a relief package down at Legislative Hall that looks at rebalancing who gets what of our profits. Hopefully, the Legislature will revisit that so we can continue to go on."

Casino owners have long said the percentage of their earnings taken by the state is too high. The state began taking a larger cut of casino revenue during the 2008 financial crisis, but never reverted that rate back.

Last year, the state approved a $9.9 million payment to help the state's three casinos cover their payments to slot machine vendors. Without that relief, Dover Downs would have ended the year several million dollars in the hole, McGlynn said.

"I think everyone recognized that was a Band-Aid when major surgery is required," he said.

Last week, a panel studying ways to find fiscal relief for the state's gambling industry recommended a nearly $46 million bailout.

The recommendation would cost the state $15.8 million in the first year via several components, including the elimination of the fee to operate table games, a cut to the state's share of revenue from table games and the state picking up more of the cost to maintain and operate slot machines.

The state's horse racing industry would also stand to make more money from slot machines as part of a late amendment.

Year two of the proposal pitched by Sen. Brian Bushweller, a Dover Democrat, would provide a 5 percent tax credit, based on yearly slot revenues, for both marketing and capital expenses. One casino executive estimated that to be as much as $30 million a year.

The recommendations, which could be put into legislation, is opposed by members of Gov. Jack Markell's administration.

"We need to look for a long-term solution and I don't believe this is the long-term solution at this point," Finance Secretary Tom Cook said.

McGlynn said it should come as no surprise that Dover Downs is continuing to struggle without an adjustment to the state's share of casino revenues.

"It's certainly no secret to anyone at Legislative Hall," he said. "They've raised the state's share seven times since we started as a casino 19 years ago, and we've told them that competition was coming and would affect our ability to function. No one wanted to listen and here we are experiencing exactly what we predicted."

According to the earnings report released Thursday, Dover Downs' fourth quarter revenue slid to about $45.7 million in 2014, compared to $46.59 million in the final quarter of 2013. That resulted in a $516,000 net loss in the final three months of the year, nearly 23.5 percent more than the $418,000 loss it recorded in the final quarter of 2013.

Gaming revenues also fell about 2 percent during the quarter to about $39.98 million, primarily as a result of lower table game revenue, the company reported.

Other operating revenue also declined about 1.4 percent to $5.74 million, while occupancy levels at Dover Downs Hotel slid from 81 percent in the fourth quarter of 2013 to 80 percent in the final three months of 2014.

Dover Downs did spend less on interest payments during the fourth quarter, but general and administrative expenses increased, which the company credited to increased pension expenses.

Dover Downs Gaming & Entertainment's stock fell 8 percent from an opening price of 90 cents at the opening bell after the year-end earning results were announced. It had bounced back to 87 cents as of about 2:30 p.m.

Staff writer Jonathan Offredo contributed to this article.

Contact Scott Goss at (302) 324-2281 or email sgoss@delawareonline.com.