Dover Downs turns profit for 2015
A late NASCAR race helped drive Dover Downs Gaming & Entertainment to a fourth-quarter profit, while cost cutting kept the publicly traded company in the black for 2015.
Now, the hotel and casino business is hoping a new legislative proposal aimed at reducing its taxes and fees will lead to bigger gains in the future.
Sen. Brian Bushweller, D-Dover, introduced a new bill late Wednesday that seeks to gradually restructure the state's casino take over a longer period than a proposal that stalled in committee last year.
"In order to increase our market share and rebuild our revenue base, fees and taxes cannot remain higher than in neighboring jurisdictions," Dover Downs CEO Denis McGlynn told investors and analysts Thursday. "Passage of this legislation will go a long way towards restoring our competitiveness, protecting jobs and maintaining our ability to generate significant revenue for the state."
Dover Downs reported net earnings of $768,000 in the last three months of 2015, or 2 cents per diluted share. That's up from the end of 2014 when the company recorded a net loss of $516,000.
Total revenue for the fourth quarter was $46.1 million, up 8.75 percent from a year earlier.
Gaming revenue slid 2.3 percent to $39 million, compared to late 2014. Other revenues, including sales of hotel room nights, food and beverage, increased nearly 23 percent.
Dover Downs attributed those upticks to the timing of this year's AAA 400 Sprint Cup Series race, which fell in early October this year. Occupancy rates at the 500-room hotel, for instance, hit 84 percent in the fourth quarter, compared to 80 percent in 2014 when the race was held in late September.
The long-struggling casino on Thursday also reported its first annual net profit since eking out a meager $13,000 in 2013.
Net earnings for 2015 hit $1.87 million, or 6 cents per share, compared to a $706,000 loss in 2014.
Total revenue on year dipped $2.4 million from 2014. Gaming revenue fell 1.5 percent from 2014 to nearly $158 million, while other revenue remained flat at $25 million.
Dover Downs, meanwhile, was able to turn an annual profit by reducing expenses by about 3 percent, or roughly $5.37 million.
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Those cuts included the elimination of 72 positions and a halt to overnight weekday table games in in the first half of 2015. The company also launched energy conservation and recycling initiatives while settling a legal dispute with a third-party retailer over unpaid rent.
"And we benefited from a full-year of expenses reductions resulting from the state assuming a greater share of slot machine lease costs in mid-2014," McGlynn said.
That $9.9 million payment was the last time the General Assembly provided relief to the state's three casinos, which also include the privately held Delaware Park Racetrack & Slots and Harrington Raceway & Casino.
The state began taking a larger share of casino revenue during the 2008 financial crisis. Casino owners have been asking for a readjustment for several years, arguing that the higher payments to the state are inhibiting their ability to compete against new facilities opening in Maryland and Pennsylvania.
The state has collected about 43 percent of statewide slot machine revenue since 2009, up from 36 percent before the increase was imposed. Over time, that has translated into an additional $196 million moving out of the casinos' pockets and into the state's General Fund.
A year ago, the state Lottery and Gaming Study Commission recommended providing about $46 million in annual relief to the three casinos, phased in over two years.
A bill sponsored by Bushweller that sought to enact those proposals stalled in committee last year. The first phase of that plan would have cost the state $15.8 million by reducing the take from table games, while covering a larger portion of the annual cost to maintain slot machines. A second phase would have provided casinos with a 5-percent tax credit based on annual slot revenues for marketing and capital expenses.
Bushweller's new proposal seeks to phase in similar recommendations, along with some new provisions, over four years instead of two. The legislation, he said, also would allow the casinos to add online sports parlays before the start of the 2016-2017 NFL season, eliminate annual table games licensing fees totaling $13.25 million and reduce the state's table games tax from 29.4 percent to 20 percent next year and 15 percent in 2018.
"After the number of years that we've been pursing relief, I think people have come to the conclusion that what we're asking for needs to be effected," McGlynn said. "How we effect it and over what period of time, I think, is probably more the issue. We've tried to make it as painless on the state as possible."
Dover Downs' shares were trading at 94 cents by mid-afternoon, up 7 percent from the opening bell. Over the last year, the stock has fallen about 22 percent from a high of $1.21 and 15 percent from a 3-month high of $1.11.
Contact business reporter Scott Goss at (302) 324-2281, sgoss@delawareonline.com or on Twitter @ScottGossDel.