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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/ X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1999 or
/__/ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission file number 1-11929
DOVER DOWNS ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 51-0357525
(State of Incorporation) (I.R.S. Employer Identification Number)
1131 North DuPont Highway, Dover, Delaware 19901
(Address of principal executive offices)
Registrant's telephone number including area code (302) 674-4600
Securities registered pursuant to Section 12(b) of the Act:
Title of Class Name of exchange on which registered
Common Stock, $.10 Par Value NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. /__/
The aggregate market value of the voting stock held by non-
affiliates of the registrant was $577,346,515 as of July 31, 1999.
As of July 31, 1999, the number of shares of each class of the
Registrant's common stock outstanding is as follows:
Common Stock - 11,405,184 shares
Class A Common Stock - 24,261,010 shares
The following documents are incorporated by reference:
Document
Part of this form into which incorporated
Proxy Statement in connection with
Annual Meeting of Shareholders to be
held October 29, 1999 III
ITEM 1. BUSINESS.
Dover Downs Entertainment, Inc. (Dover Downs or the Company) is a
leading promoter of motorsports events in the United States. The
Company operates five motorsports tracks (four permanent facilities and
one temporary circuit) in four states, promoting 15 major events
annually in the four premier sanctioning bodies in motorsports - the
National Association for Stock Car Auto Racing (NASCAR), Championship
Auto Racing Teams (CART), the Indy Racing League (IRL) and the National
Hot Rod Association (NHRA). The Company's major event markets reach 32
of the top 50 dominant market areas in the country.
Dover Downs also owns and operates the Dover Downs Raceway harness
racing track and a 65,000 square foot video lottery (slot) casino at a
multi-purpose gaming and entertainment complex in Dover, Delaware. The
facility is located in close proximity to the major metropolitan areas
of Philadelphia, Baltimore and Washington, D.C.
(a) Recent Developments
The Company and Grand Prix Association of Long Beach, Inc. ("Grand
Prix") entered into an Agreement and Plan of Merger on March 26, 1998,
pursuant to which Grand Prix became a wholly owned subsidiary of the
Company as of July 1, 1998. The merger was structured as a tax-free
exchange and was accounted for using the purchase method of accounting
for business combinations whereby each shareholder of Grand Prix
received .63 shares (1.26 shares after the stock split) of common stock
of Dover Downs for each share of common stock of Grand Prix owned by
such shareholder.
During fiscal 1999, 15,000 grandstand seats were added at Dover Downs
International Speedway, increasing the total seating capacity to more
than 122,000. Gateway International Raceway added more than 18,000
permanent seats to bring the total capacity at that facility to
approximately 70,000.
The Company expanded its casino gaming facility by 24,000 square feet
in fiscal 1999, increasing the number of slot machines installed at
year-end to 1,555. Also included in the expansion was a bus loading
and unloading area and an expansion of the Garden Cafe.
In December 1998, the Wilson County (Tennessee) Commission approved the
necessary zoning revisions for the construction of the Company's
planned Nashville Superspeedway complex. At June 30, 1999, the Company
had acquired approximately 1,390 acres of land for the project in
Wilson and Rutherford counties.
On March 31, 1999, the Company entered into a $50,000,000 long-term,
unsecured, revolving credit agreement with certain financial
institutions. Interest is based, at the Company's option, upon (i)
LIBOR plus .75% or (ii) the base rate (the greater of the prime rate or
the federal funds rate plus .5%) minus 1%. The agreement, which
expires in March 2002, is for seasonal funding needs, capital
improvements and other general corporate purposes. The agreement
contains certain restrictive covenants and requires the Company to
maintain certain financial ratios. At June 30, 1999, $15,500,000 was
outstanding under this line of credit.
(b) Financial Information About Operating Segments.
The Company's principal operations are grouped into two segments:
motorsports and gaming. Financial information concerning these
businesses is included on pages 9 through 13 and page 31 of this 1999
Annual Report on Form 10-K.
(c) Narrative Description of Business
Motorsports
Dover Downs International Speedway
Dover Downs has presented NASCAR-sanctioned racing events for 31
consecutive years at Dover Downs International Speedway and currently
conducts four major NASCAR-sanctioned events annually at the facility.
Two races are associated with the Winston Cup professional stock car
racing circuit and two races are associated with the Busch Series,
Grand National Division (Busch Series) racing circuit. The Company
also hosted an Indy Racing League event at Dover Downs International
Speedway in August 1999 and July 1998. Approximately 91% of
motorsports revenues at Dover Downs International Speedway are derived
from admissions, skybox rentals, sponsorships, concession and novelty
sales and broadcast rights at NASCAR-sanctioned events.
Each of the Busch Series events at Dover Downs is conducted on the day
before a Winston Cup event. Dover Downs is one of only six speedways
in the country that presents two Winston Cup events and two Busch
Series events each year. The June and September dates have
historically allowed Dover Downs to hold the first and last Winston Cup
events in the Maryland to Maine region each year.
The auto racing track is a high-banked, one-mile long, concrete
superspeedway with a current seating capacity of approximately 122,000.
Unlike some superspeedways, substantially all grandstand and skybox
seats offer an unobstructed view of the entire track. The concrete
racing surface makes the auto racing track the only concrete
superspeedway (one mile or greater in length) that conducts NASCAR-
sanctioned events.
Grand Prix Association of Long Beach
For the past 25 years, the Grand Prix Association of Long Beach, Inc.
has been organizing and promoting the Grand Prix of Long Beach, an
annual temporary circuit professional motorsports event in Long Beach,
California. The Grand Prix of Long Beach has the second highest paid
attendance of any Indy car race, second only to the Indianapolis 500.
The Grand Prix of Long Beach weekend has attracted in excess of 200,000
spectators in each of the past six years, and is currently broadcast to
more than 125 countries throughout the world.
Gateway International Raceway
Gateway International Raceway (Gateway), which was acquired in the
Grand Prix Association of Long Beach acquisition, has conducted NASCAR-
CART- and NHRA-sanctioned events since its opening in May 1997. The
auto racing facility includes a 1.25-mile oval track and road course
with current seating capacity of 70,000 and a national caliber drag
strip capable of seating approximately 30,000 people. The facility,
which was lighted for nighttime racing this year, is located on
approximately 416 acres of land in Madison, Illinois, 5 miles from the
St. Louis Arch.
Nashville Speedway USA
The Company acquired Nashville Speedway USA on January 2, 1998. The
Nashville facility hosted its first automotive race in 1904, making it
one of the oldest tracks in the country. The facility currently hosts
events in three of NASCAR's top national series - the Busch Series, the
Craftsman Truck Series and the Slim Jim All Pro Series. Based on
attendance, the track's Saturday night NASCAR Winston Racing Series is
regarded as one of the most successful weekly programs in the country.
To accommodate the demand for major motorsports in the Nashville area,
the Company plans to build a new superspeedway and motorsports complex
in Wilson County, Tennessee. The proposed 1.33-mile superspeedway
initially will have 50,000 grandstand seats with an infrastructure in
place to expand to 150,000 seats should demand require it.
Memphis Motorsports Park
Memphis Motorsports Park, also acquired in the Grand Prix Association
of Long Beach acquisition, has hosted NASCAR- and NHRA-sanctioned
events since its opening in June 1998. The tri-oval track is currently
undergoing an expansion that will bring its seating capacity (using
available portable seating) to approximately 25,000 seats and add
luxury suites for the inaugural Busch Series event in October 1999.
The drag strip also hosts an NHRA national event and has a seating
capacity in excess of 25,000.
Other
In recent years, television coverage and corporate sponsorship have
increased for NASCAR-sanctioned events. The Company's NASCAR-
sanctioned events are currently televised live by TNN, ABC and the ESPN
networks to a nationwide audience and broadcast nationally to a network
of radio stations affiliated with the Motor Racing Network.
In February 1999, NASCAR announced that they would retain the
television, audio and other electronic media rights for Winston Cup and
Busch Series events beginning with the 2000 race season, though the
current fee distribution formula is not expected to change. The
packaging of all media rights is expected to generate an increase in
revenues and increase NASCAR's presence on television.
Gaming
Dover Downs has presented pari-mutuel harness racing events for 31
consecutive years. On December 29, 1995, the Company introduced video
lottery (slot) machines to its entertainment mix.
Under an agreement with Caesars World Gaming Development Corporation
(Caesars), a leader in the gaming industry, Caesars supervises,
manages, markets and operates the Company's video lottery operations.
The Las Vegas-style, air-conditioned "video lottery casino" housing the
gaming operations was designed and built using expertise from Caesars.
On June 16, 1998, the Dover Planning Commission approved the Company's
plans for expansion of the casino gaming facility and improvements to
the Company's Garden Cafe and simulcasting parlor. In March 1999, the
24,000-square foot expansion of the casino facility was completed.
Additionally, the Garden Cafe was doubled in size and various
improvements were completed in the simulcasting parlor.
Dover Downs is a "Licensed Agent" authorized to conduct video lottery
operations under the Delaware State Lottery Code. Pursuant to
Delaware's Horse Racing Redevelopment Act enacted in 1994, the Delaware
State Lottery Office administers and controls the operation of the
video lottery operations. Dover Downs is permitted by law to set its
payout to customers between 87% and 95%. Prior approval from the
Director of the Delaware State Lottery Office would be required for any
deviation from the aforementioned payout rates. Since inception of its
slot operations on December 29, 1995, Dover Downs has maintained an
average payout of approximately 91%.
By law, video lottery operations in Delaware are limited to the three
locations in the State where thoroughbred horse racing or harness horse
racing was held in 1993. In addition to the Dover Downs complex in
Dover, Delaware, there are only two other locations permitted by law:
Delaware Park, a northern Delaware thoroughbred track; and Harrington
Raceway, a south central Delaware fairgrounds harness horse racing
track.
The harness horse racing track is a five-eighths mile track and is
lighted for nighttime operations. The track is located inside the one-
mile auto racing superspeedway. The configuration offers turns with a
wider than normal turning radius and 6 degree banking. This allows
trotting and pacing horses to remain in full stride through the turns.
The result has been higher than average speeds attained by horses in
competition. With the start of the race season beginning November
1996, live harness races conducted at Dover Downs were simulcast to
tracks and other off-track betting locations across North America, and
during 1999, were transmitted to more than 400 tracks and off-track
betting locations nationwide.
The Company has facilities for pari-mutuel wagering on both live
harness horse racing and on simulcast thoroughbred and harness horse
racing received from numerous tracks across North America. Within the
main grandstand is the simulcast parlor where patrons can wager on
harness and thoroughbred races received by satellite into Dover Downs.
Television monitors throughout the parlor area provide views of all
races simultaneously and the parlor's betting windows are tied into a
central computer allowing bets to be received on all races from all
tracks.
With the expansion of its simulcasting operations, pari-mutuel wagering
is now on a year-round basis. For the fiscal years ended June 30,
1999, 1998, and 1997, the Company had 361, 363 and 363 simulcast racing
dates, respectively.
Harness racing in the State of Delaware is governed by the Delaware
Harness Racing Commission. The Company holds a license from the
Commission by which it is authorized to hold harness race meetings on
its premises and to make, conduct and sell pools by the use of pari-
mutuel machines or totalizators. Pari-mutuel wagering refers to pooled
betting or wagering on harness horse racing by means of a totalizator.
Through pooled betting, the wagering public, not the track, determines
the odds and the payoff. The track retains a percentage of the amount
wagered. Simulcasting refers to the transmission of live horse racing
by television, cable or satellite signal from one race track to another
with pari-mutuel wagering being conducted at the sending and receiving
track and a portion of the handle being shared by the sending and
receiving tracks.
Competition
Motorsports
The Company's racing events compete with other racing events sanctioned
by various racing bodies and with other sports and recreational events
scheduled on the same dates. Racing events sanctioned by different
organizations are often held on the same dates at separate tracks. The
quality of the competition, type of racing event, caliber of the event,
sight lines, ticket pricing, location, and customer conveniences, among
other things, distinguish the motorsports facilities.
The two speedways closest to Dover Downs International Speedway that
currently sponsor Winston Cup races are in Richmond, Virginia
(approximately four hours to the South) and Pocono International
Raceway in Long Pond, Pennsylvania (approximately three and a half
hours to the North). Nazareth Speedway in Nazareth, Pennsylvania
(approximately two hours to the North) currently conducts Busch Series,
Craftsman Truck Series and CART races.
The speedway closest to Gateway International Raceway is Indianapolis
Motor Speedway (approximately four hours to the east), which currently
conducts one Winston Cup race and one IRL race.
The speedways closest to the Nashville Speedway are the Atlanta Motor
Speedway (approximately three hours to the southeast) and Talladega
Superspeedway (approximately three and one-half hours to the south).
Atlanta Motor Speedway currently hosts two Winston Cup races, one Busch
Series race and one IRL race. Talladega Superspeedway currently hosts
two Winston Cup races and one Busch Series race.
The speedway closest to Memphis Motorsports Park is Talladega
Superspeedway (approximately five and one-half hours to the southeast),
which currently hosts two Winston Cup races and one Busch Series race
annually.
Based on historical data, management does not believe that any of the
aforementioned facilities significantly impact the Company's
operations, although they may impact the Company's ability to secure
additional events in the future.
Gaming
The legalization of additional casino and other gaming venues in states
close to Delaware, particularly Maryland, Pennsylvania and New Jersey,
may have a material adverse effect on the Company's business. From
time to time, legislation has been introduced in these states that
would further expand gambling opportunities, including video lottery
(slot) machines at horse-tracks.
At present, video lottery (slot) machines are only permitted at two
other locations in Delaware: Delaware Park and Harrington Raceway. The
neighboring states of Pennsylvania and Maryland do not presently permit
video lottery operations. Pennsylvania, Maryland and New Jersey all
have state-run lotteries.
Atlantic City, New Jersey is located approximately 100 miles from Dover
Downs and a certain amount of market overlap exists. Casinos in
Atlantic City offer a full range of gaming products. Dover Downs does
not compete directly with Atlantic City because of the Company's
inability to offer a full range of casino gaming products, but it does
believe that it captures a portion of the existing Atlantic City slot
market in the Dover area, due to the facility's proximity, convenience
and multiple attractions.
The Company also competes for attendance with a wide range of other
entertainment and recreational activities available in the region,
including professional and collegiate sporting events.
Competition in horse racing is varied since race tracks in the
surrounding area differ in many respects. Some tracks only offer
thoroughbred or harness horse racing; others have both. Tracks have
live racing seasons that may or may not overlap with neighboring tracks.
Depending on the purse structure, tracks that are farther apart may
compete with each other more for quality horses than for patrons.
Live harness racing also competes with simulcasts of thoroughbred and
harness racing. All race tracks in the region are involved with
simulcasting. In addition, a number of off-track betting parlors
compete with track simulcasting activities. With respect to the
Company simulcasting its live harness races to tracks and other
locations, its simulcast signals are in direct competition with live
races at the receiving track and other races being simulcast to the
receiving location.
Within the State of Delaware, Dover Downs faces little direct live
competition from the State's other two tracks. Harrington Raceway, a
south central Delaware fairgrounds track, conducts harness horse racing
periodically between May and November. There is no overlap presently
with Dover Downs' live race season. Delaware Park, a northern Delaware
track, conducts thoroughbred horse racing from April through mid-
November. Its race season only overlaps with Dover Downs for
approximately five to six weeks each year.
The neighboring states of Pennsylvania, Maryland and New Jersey all
have harness and thoroughbred racing and simulcasting. Dover Downs
competes with Rosecroft Raceway in Maryland, Philadelphia Park in
Pennsylvania, Garden State Park and The Meadowlands in New Jersey and
a number of other race tracks in the surrounding area. The Company
also receives simulcast harness and thoroughbred races from
approximately 30 race tracks, including the tracks noted above.
Seasonality
The Company derives a substantial portion of its total revenues from
admissions and event-related revenue attributable to its motorsports
events which are currently held from April through October. As a
result, the Company's business has been, and is expected to remain,
highly seasonal. The seasonality was offset to some degree by the
year-round video lottery (slot) machine gaming operations and year-
round simulcasting.
Number of Employees
At June 30, 1999, the Company had a total of 566 full-time employees
and 219 part-time employees. The Company hires temporary employees to
assist during its auto racing events and its live harness racing
season.
ITEM 2. PROPERTIES.
Dover Properties
The Company maintains its headquarters, motorsports superspeedway
(Dover Downs International Speedway), harness racing track, and video
lottery casino all on approximately 825 acres of land owned by the
Company in Dover, Delaware.
Long Beach Properties
The Company owns its office at 3000 Pacific Avenue, Long Beach,
California, which consists of approximately 82,000 square feet of land
and a building with approximately 50,000 square feet of office and
warehouse space. The Company leases a 750-square foot ticket office in
downtown Long Beach for the sale of Grand Prix tickets and souvenirs
and storage facilities in Long Beach for its equipment and structures.
Gateway International Raceway Property
Gateway International Raceway is located on approximately 416 acres of
land in Madison, Illinois, five miles from the St. Louis Arch. The
Company owns approximately 123 acres and has three long-term leases
(expiring in 2011, 2026 and 2070) for an additional 259 acres, with
purchase options. The Company is also a party to a ten-year lease
(with four five-year renewals) of 20 acres for the purpose of providing
overflow parking for major events on a neighboring golf course, and a
five-year lease of approximately 14 acres for major event parking. The
Company has granted a first mortgage lien on all the real property
owned and a security interest in all property leased by the Company at
Gateway to Southwestern Illinois Development Authority (SWIDA) as
security for the repayment of principal and interest on its $21.5
million loan from SWIDA.
Nashville Speedway USA Property
The Nashville racing facility is located on 12 acres of land in
Nashville, Tennessee and is leased from the Metropolitan Board of Fair
Commissioners through 2008. Additionally, the Company has acquired
1,390 acres of land in Wilson and Rutherford counties, Tennessee to be
used as the site for a new racing facility.
Memphis Motorsports Park Property
Memphis Motorsports Park is located on 374 acres of land owned by the
Company approximately ten miles northeast of downtown Memphis,
Tennessee. The facility is encumbered by a first trust deed to First
Tennessee Bank for the purpose of securing a standby letter of credit
issued by First Tennessee Bank to Gateway to secure its obligation to
SWIDA.
ITEM 3. LEGAL PROCEEDINGS.
A group purportedly made up of Wilson County and Rutherford County,
Tennessee residents has filed a complaint in the Chancery Court for
Wilson County, Tennessee contesting the rezoning of the land upon which
the Nashville Superspeedway complex will be situated. The litigation,
if successful, would prevent, or at least significantly postpone, the
development of the facility. The Company believes the rezoning was
done properly. It is vigorously contesting the litigation and, based
on the advice of counsel, believes that it is unlikely to succeed on
its merits.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS.
The Common Stock of Dover Downs Entertainment, Inc. has traded on the
New York Stock Exchange under the symbol "DVD" since the Company's
initial public offering on October 3, 1996. There is no established
public trading market for the Company's Class A Common Stock. As of
July 31, 1999, there were 11,405,184 shares of Common Stock and
24,261,010 shares of Class A Common Stock outstanding. There were 978
record holders of Common Stock and 21 record holders of Class A Common
Stock at July 31, 1999.
The range of share prices for the Common Stock on the New York Stock
Exchange and per share dividends paid on Common Stock for the fiscal
years ended June 30, 1999 and 1998 are as follows:
Prices Dividends
1999 1998 1999 1998
High Low High Low
Fiscal Quarter (1)
First ........... $16 9/16 $12 7/16 $10 9/16 $ 8 3/8 $.04 $.04
Second .......... 13 7/8 10 3/16 11 3/4 9 11/16 .045 .04
Third ........... 15 1/2 12 1/4 15 10 11/16 .045 .04
Fourth .......... 19 7/16 14 7/8 16 13/16 14 3/16 .045 .04
(1) Prior year amounts have been adjusted to give retroactive effect
to a two-for-one stock split distributed on September 15, 1998.
ITEM 6. SELECTED FINANCIAL DATA.
Five Year Selected Financial Data
(Dollars in Thousands, Except Per Share Data)
Year Ended June 30, 1999 1998 1997 1996 1995
Revenues:
Motorsports $ 68,683 $ 25,874 $ 20,516 $ 18,110 $ 16,282
Gaming (1) 139,249 115,071 81,162 31,980 1,250
207,932 140,945 101,678 50,090 17,532
Earnings before income
taxes 45,771 37,655 28,239 15,593 7,239
Net earnings 26,891 21,913 16,472 9,196 4,284
Earnings per common
share(2) - basic .76 .72 .55 .34 .16
- diluted .74 .70 .54 .32 .15
Dividends per common
share(2) $ .18 $ .16 $ .08 $ - $ -
At June 30,
Total assets $255,212 $ 95,777 $ 71,261 $ 42,311 $ 25,422
Long-term debt, less
current portion 36,725 741 760 766 698
Shareholders' equity $172,658 $ 71,365 $ 54,300 $ 23,715 $ 14,225
(1) Gaming revenues from the Company's video lottery (slot) machine
gaming 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 operating expenses.
(2) Prior year per share amounts have been adjusted to give retroactive
effect to a two-for-one stock split distributed on September 15,
1998.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Results of Operations
Fiscal Year 1999 Compared With Fiscal Year 1998
Revenues increased by $66,987,000 to $207,932,000 as a result of growth
in the historical business of the Company and the acquisition of Grand
Prix Association of Long Beach, Inc. on July 1, 1998.
Gaming revenues increased by $24,178,000 or 21.0% to $139,249,000, the
result of having an average of 1,191 machines in fiscal 1999 compared
with an average of 1,000 machines in fiscal 1998, and expanded
marketing and promotional activities related to the Company's video
lottery casino.
Motorsports revenues increased by $42,809,000 or 165.5% to $68,683,000.
Approximately $2,432,000 of the revenue increase resulted from
increased attendance, $637,000 from increased ticket prices and
$1,598,000 from adding an IRL event at Dover Downs International
Speedway. Approximately $2,309,000 of the increase resulted from the
inclusion of the operating results of Nashville Speedway USA in the
consolidated results of Dover Downs Entertainment, Inc. for twelve
months in fiscal 1999 as compared to six months in fiscal 1998, and
$32,837,000 from the acquisition of Grand Prix Association of Long
Beach. The remainder of the increase was from increased sponsorship,
concessions and marketing-related revenues at Dover Downs International
Speedway.
Operating expenses increased by $45,623,000 reflecting the higher
revenues. Amounts retained by the State of Delaware, including amounts
collected for payment to the vendors under contract with the State who
provide the video lottery machines and associated computer systems and
fees to the manager who operates the video lottery (slot) machine
operation, increased by $9,004,000 in fiscal 1999. Amounts allocated
from the video lottery operation for harness horse racing purses were
$15,173,000 in fiscal 1999 compared with $12,721,000 in fiscal 1998.
Additional advertising, promotional and customer complimentary costs of
$2,557,000 were the other significant gaming-related operating cost
increases.
Motorsports operating expenses increased principally due to a
$1,139,000 increase in purse and sanction fee expenses and $1,666,000
from adding an IRL event at Dover Downs International Speedway, and
$1,533,000 from the inclusion of the operating results of Nashville
Speedway USA in the consolidated results of Dover Downs Entertainment,
Inc. for twelve months in fiscal 1999 as compared to six months in
fiscal 1998. The remainder of the increase is primarily the result of
the acquisition of Grand Prix Association of Long Beach.
Depreciation and amortization increased by $4,391,000 due to capital
expenditures related to the Company's motorsports facilities and casino
expansion and the depreciation of facilities and amortization of
goodwill related to the acquisition of Grand Prix Association of Long
Beach.
General and administrative expenses increased by $6,803,000 to
$11,213,000 from $4,410,000, $6,341,000 of which is the result of the
acquisition of Grand Prix Association of Long Beach.
Interest expense was $1,352,000 in fiscal 1999 as compared to $702,000
of interest income in fiscal 1998. The interest expense resulted from
increased borrowings on the revolving credit agreement and interest
payments made relating to the SWIDA loan.
The Company's effective income tax rates for the fiscal years ended
June 30, 1999 and 1998 were 41.2% and 41.8%, respectively.
Net earnings increased by $4,978,000 due to the expansion of the video
lottery (slot) machine operations, increased marketing efforts in the
casino, higher attendance and the growth in the number of motorsports
events presented by the Company, offset by increased interest and
amortization expense from the Grand Prix Association of Long Beach
acquisition.
Fiscal Year 1998 Compared With Fiscal Year 1997
Revenues increased by $39,267,000 to $140,945,000 primarily as a result
of expanding the casino facility and increasing the number of video
lottery (slot) machines from an average of 869 in fiscal 1997 to 1,000
machines during the entire fiscal year ended June 30, 1998. More
significant marketing efforts also led to the increase in revenue in
fiscal 1998. Motorsports revenues increased by $5,358,000 or 26.1% to
$25,874,000. Approximately $1,791,000 of the revenue increase resulted
from increased attendance, $295,000 from increased ticket prices, and
$1,692,000 from the inclusion of the operating results of Nashville
Speedway USA in the consolidated results of Dover Downs Entertainment,
Inc. for six months in fiscal 1998. The remainder of the increase was
from increased sponsorship, concessions and marketing related revenues.
Operating expenses increased by $28,316,000 reflecting the higher
revenues. Amounts retained by the State of Delaware, fees to the
manager who operates the video lottery (slot) machine operation, and
the amount collected by the State of Delaware for payment to the
vendors under contract with the State who provide the video lottery
machines and associated computer systems increased by $14,902,000 in
1998. Amounts allocated from the video lottery operation for harness
horse racing purses were $12,721,000 in 1998 compared with $9,157,000
in 1997. Advertising, promotional and customer complimentary cost
increases of $2,534,000 were the other significant cost increases.
Motorsports operating expenses increased principally due to a $358,000
increase in purse and sanction fee expenses and increased advertising
costs of $626,000 as a result of the addition of motorsports events
during the 1998 fiscal year. The inclusion of the operating results of
Nashville Speedway USA in the consolidated results of Dover Downs
Entertainment, Inc. for six months in fiscal 1998 is the other
significant operating cost increase.
Depreciation increased by $623,000 or 29.9% to $2,707,000 from
$2,084,000 as a result of a full year of depreciation expense related
to the Company's video lottery casino expansion being recognized in
1998 compared with eight months in 1997. Capital expenditures for the
expansion of the Company's motorsports facilities also contributed to
the increase in depreciation.
General and administrative expenses increased by $1,345,000 to
$4,410,000 from $3,065,000. Wage and benefit costs increased by
$469,000 and consulting and professional services increased by $223,000
principally due to the Company's expansion of the video lottery (slot)
machine operation and the acquisition of Nashville Speedway USA.
The Company's effective income tax rates for fiscal 1998 and fiscal
1997 were 41.8% and 41.7%, respectively.
Net earnings increased by $5,441,000 due to the expansion of the video
lottery (slot) machine operation, increased marketing efforts in the
casino and higher attendance and related revenues at the Company's
NASCAR-sanctioned events in September 1997 and June 1998.
Liquidity and Capital Resources
Cash flow from operations for the three years ended June 30, 1999,
1998, and 1997 was $34,808,000, $28,991,000 and $18,600,000,
respectively. The increase in fiscal 1999 reflected the Company's
higher net earnings before depreciation and amortization.
Capital expenditures for the year ended June 30, 1999 were $50,707,000.
Approximately $17,600,000 related to the expansion of and improvements
to the Dover Downs and Gateway racing facilities, approximately
$14,500,000 to the expansion of the casino facility in Dover, Delaware
and approximately $10,800,000 for the acquisition of land in Nashville
for the construction of the proposed Nashville Superspeedway complex.
The remainder of the expenditures were for land and other improvements
at the Dover and Memphis facilities.
Capital expenditures for the year ended June 30, 1998 were $7,504,000
and related primarily to the expansion of and improvements to the
racing facility as well as expansion of the administrative facilities.
The 1998 expenditures were less than in 1997 as the Company was also
constructing and expanding the casino facilities in 1997.
Capital expenditures for the year ended June 30, 1997 of $16,841,000
related primarily to the purchase of land for $1,060,000, the expansion
of the casino for $5,124,000, and the construction of additional
permanent motorsports seating for $8,061,000. The capital expenditures
were primarily funded with the proceeds from the Company's initial
public stock offering.
The Company has filed an application with the Dover City Planning
Department to build a 10-story, 520-room hotel in Dover, Delaware. The
current construction plans consist of two phases of 260 rooms each, and
include a multi-purpose ballroom/concert hall and a fine-dining
restaurant. The Company has not entered into any commitments related
to the project as of June 30, 1999. The cost of the first phase of the
project is estimated to be approximately $35,000,000.
On August 26, 1999, the Company began construction of the new Nashville
Superspeedway complex in Wilson County, Tennessee. The proposed
complex will include a 1.33-mile oval track and may include a paved
short track, a dirt track and a drag strip in future phases. The
aggregate cost of acquiring the land and developing Phase I of the
complex is estimated to be approximately $95,000,000. Of the total,
the State of Tennessee will fund approximately $18,400,000 for the
construction of an interchange and an access road near the proposed
complex. The Sports Authority of the County of Wilson and Nashville
Speedway USA, Inc., a subsidiary of the Company, have entered into an
agreement whereby the Sports Authority will issue its revenue bonds and
use the proceeds therefrom to acquire, construct and install certain
local infrastructure improvements that would be beneficial to the
operation of the superspeedway, the cost of which is estimated at
$20,700,000. The terms of the revenue bonds have not yet been
finalized, though the Company expects to provide some form of credit
enhancement. The Company has invested approximately $11,700,000 in the
project as of June 30, 1999, primarily for the purchase of land.
Effective January 2, 1998, the Company acquired all of the outstanding
common stock of Nashville Speedway USA, Inc. for $3,000,000 in cash
from available funds.
The Company and Grand Prix entered into an Agreement and Plan of Merger
pursuant to which Grand Prix became a wholly owned subsidiary of the
Company. The merger, which closed on July 1, 1998, was structured as
a tax-free exchange whereby each shareholder of Grand Prix received .63
shares (1.26 shares after the stock split) of common stock of Dover
Downs for each share of common stock of Grand Prix owned by such
shareholder.
The Company purchased 680,000 shares of common stock of Grand Prix from
two non-management shareholders in March of 1998 for $10,540,000.
The Company has a $50,000,000 long-term, unsecured revolving line of
credit from certain financial institutions to provide seasonal funding
needs, to finance capital improvements and other general corporate
purposes. The Company was in compliance with all terms of the facility
and there was $15,500,000 outstanding at June 30, 1999.
Year 2000 Issues
The Company is aware of the issues related to the approach of the year
2000 and has assessed and investigated what steps must be taken to
ensure that its critical systems and equipment will function
appropriately after the turn of the century. The assessments include
a review of what systems and equipment need to be changed or replaced
in order to function correctly. The Company believes its accounting
and ticketing hardware and software are year 2000 compliant and no
corrections will be needed to those systems as a result of the year
2000. The Delaware State Lottery has advised the Company that the
systems employed in its lottery operations will be made year 2000
compliant. The Company does not place substantial reliance on any
other systems, and no systems have been found to need substantial
correction.
The Company believes that issues related to the year 2000 will not have
a material effect on its results of operations or financial condition.
Forward-Looking Statements
The Company may make forward-looking statements relating to anticipated
financial performance, business prospects, acquisitions or
divestitures, new products, market forces, commitments and other
matters. The Private Securities Litigation Reform Act of 1995 provides
a safe harbor for forward-looking statements. In order to comply with
the terms of the safe harbor, the Company notes that a variety of
factors could cause the Company's actual results and experience to
differ materially from the anticipated results or other expectations
expressed in the Company's forward-looking statements. Forward-looking
statements typically contain such words as "anticipates", "believes",
"estimates", "expects", "forecasts", "predicts", or "projects", or
variations of these words, suggesting that future outcomes are
uncertain.
Various risks and uncertainties may affect the operation, performance,
development and results of the Company's business and could cause
future outcomes to differ materially from those set forth in
forward-looking statements, including the following factors: general
economic conditions, the Company's ability to finance its future
business requirements through outside sources or internally generated
funds, the availability of adequate levels of insurance, success or
timing of completion of ongoing or anticipated capital or maintenance
projects, the ability to successfully integrate recently acquired
companies, management retention and development, changes in Federal,
State, and local laws and regulations, including environmental
regulations, weather, relationships with sponsors, broadcast media and
sanctioning bodies as well as the risks, uncertainties and other
factors described from time to time in the Company's SEC filings and
reports.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of the Company and the
Independent Auditors' Report included in this report are shown on the
Index to Consolidated Financial Statements on page 18.
ITEM 9. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Except as presented below, the information called for by this Item 10
is incorporated by reference from the Company's Proxy Statement to be
filed pursuant to Regulation 14A for the Annual Meeting of Shareholders
to be held on October 29, 1999.
Executive Officers of the Registrant. As of June 30, 1999, the
Executive Officers of the registrant were:
Name Position Age Term of Office
Robert M. Comollo Treasurer 51 11/81 to date
Timothy R. Horne Vice President-Finance 33 11/96 to date
Michael B. Kinnard Vice President-General 41 6/94 to date
Counsel and Secretary
Denis McGlynn President and 53 11/79 to date
Chief Executive Officer
John W. Rollins, Sr. Chairman of the Board 83 10/96 to date
Edward J. Sutor Executive Vice President 49 3/99 to date
Robert M. Comollo has been employed by the Company for 19 years, of
which 18 years have been in the capacity of Treasurer.
Timothy R. Horne became Vice President-Finance in November of 1996.
From 1988 until 1996, Mr. Horne was employed by KPMG LLP, where he most
recently served as an assurance senior manager.
Michael B. Kinnard has been Vice President-General Counsel to the
Company since 1994. Mr. Kinnard also serves as Vice President-General
Counsel and Secretary to Matlack Systems, Inc. and Vice President-
General Counsel and Secretary to Rollins Truck Leasing Corp. Prior to
1995, Mr. Kinnard was a partner in the law firm of Baker, Worthington,
Crossley, Stansberry & Woolf (now known as Baker, Donelson, Bearman &
Caldwell).
Edward J. Sutor became Executive Vice President in March of 1999. From
1983 until 1999, Mr. Sutor served as Senior Vice President of Finance
at Caesers Atlantic City.
ITEM 11. EXECUTIVE COMPENSATION.
The information called for by this Item 11 is incorporated by reference
from the Company's Proxy Statement to be filed pursuant to Regulation
14A for the Annual Meeting of Shareholders to be held on October 29,
1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information called for by this Item 12 is incorporated by reference
from the Company's Proxy Statement filed pursuant to Regulation 14A for
the Annual Meeting of Shareholders to be held on October 29, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the year ended June 30, 1999, the following officers and/or
directors of the Company were also officers and/or directors of Rollins
Truck Leasing Corp.; Patrick J. Bagley, Michael B. Kinnard, John W.
Rollins, John W. Rollins, Jr. and Henry B. Tippie. The following
officers and/or directors of the Company were also officers and/or
directors of Matlack Systems, Inc.; Patrick J. Bagley, Michael B.
Kinnard, John W. Rollins, John W. Rollins, Jr. and Henry B. Tippie.
John W. Rollins owns directly and of record 12.5% and 11.4% of the
outstanding shares of common stock of Rollins Truck Leasing Corp. and
Matlack Systems, Inc., respectively, at June 30, 1999. The description
of transactions between the Company and Rollins Truck Leasing Corp.
appears under the caption "Related Party Transactions" on page 31 of
this 1999 Annual Report on Form 10-K.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(a) Financial Statements, Financial Statement Schedules and Exhibits
(1) Financial Statements - See accompanying Index to Consolidated
Financial Statements on page 18.
(2) Financial Statement Schedules - None.
(3) Exhibits:
2.1 Share Exchange Agreement and Plan of Reorganization dated
June 14, 1996 between Dover Downs Entertainment, Inc.,
Dover Downs, Inc., Dover Downs International Speedway, Inc.
and the shareholders of Dover Downs, Inc. as filed with the
Company's Registration Statement Number 333-8147 on Form S-
1 dated July 15, 1996, which was declared effective on
October 3, 1996, is incorporated herein by reference.
2.2 Agreement and Plan of Merger, dated as of March 26, 1998,
by and among Dover Downs Entertainment, Inc. FOG
Acquisition Corp., and Grand Prix Association of Long Beach
as filed with the Company's Registration Statement Number
333-53077 on Form S-4 on May 19, 1998, is incorporated
herein by reference.
3.1 Certificate of Incorporation of Dover Downs Entertainment,
Inc., amended June 14, 1996, and further amended on June
28, 1996 as filed with the Company's Registration Statement
Number 333-8147 on Form S-1 dated July 15, 1996, which was
declared effective on October 3, 1996, is incorporated
herein by reference.
3.2 Amended and Restated Bylaws of Dover Downs Entertainment,
Inc. as filed with the Company's Annual Report on Form 10-K
for the year ended June 30, 1997, is incorporated herein by
reference.
3.3 Amendment to Certificate of Incorporation of Dover Downs
Entertainment, Inc. dated as of June 30, 1998, as filed
with the Company's Annual Report on Form 10-K for the year
ended June 30, 1998, is incorporated herein by reference.
3.4 Amendment to Bylaws of Dover Downs Entertainment, Inc.
dated June 30, 1998, as filed with the Company's Annual
Report on Form 10-K for the year ended June 30, 1998, is
incorporated herein by reference.
4.2 Rights Agreement dated as of June 14, 1996 between Dover
Downs Entertainment, Inc. and ChaseMellon Shareholder
Services, L.L.C. as filed with the Company's Registration
Statement Number 333-8147 on Form S-1 dated July 15, 1996,
which was declared effective on October 3, 1996, is
incorporated herein by reference.
10.1 Credit Agreement among PNC Bank and First Union National
Bank and Dover Downs Entertainment, Inc. dated as of March
31, 1999.
10.2 Guaranty and Suretyship Agreement dated March 31, 1999 in
favor of PNC Bank and First Union National Bank.
10.7 Project Consulting and Management Agreement between Dover
Downs, Inc. and Caesars World Gaming Development
Corporation dated May 10, 1995 as filed with the Company's
Registration Statement Number 333-8147 on Form S-1 dated
July 15, 1996, which was declared effective on October 3,
1996, is incorporated herein by reference.
10.9 Dover Downs Entertainment, Inc. 1996 Stock Option Plan as
filed with the Company's Registration Statement Number 333-
8147 on Form S-1 dated July 15, 1996, which was declared
effective on October 3, 1996, is incorporated herein by
reference.
10.10 Dover Downs Entertainment, Inc. 1991 Stock Option Plan as
filed with the Company's Registration Statement Number 333-
8147 on Form S-1 dated July 15, 1996, which was declared
effective on October 3, 1996, is incorporated herein by
reference.
21.1 Subsidiaries
23.1 Consent of Independent Accountants
27 Financial Data Schedule for current Fiscal Year ended June
30, 1999
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
DATED: September 9, 1999 DOVER DOWNS ENTERTAINMENT, INC.
Registrant
BY: /s/ Denis McGlynn
Denis McGlynn
President and Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated:
/s/ Timothy R. Horne Vice President-Finance September 9, 1999
Timothy R. Horne
/s/ John W. Rollins Chairman of the Board September 9, 1999
John W. Rollins
/s/ Henry B. Tippie Vice Chairman of the Board September 9, 1999
Henry B. Tippie
/s/ John W. Rollins, Jr. Director September 9, 1999
John W. Rollins, Jr.
/s/ Patrick J. Bagley Director September 9, 1999
Patrick J. Bagley
/s/ Jeffrey W. Rollins Director September 9, 1999
Jeffrey W. Rollins
/s/ Melvin Joseph Director September 9, 1999
Melvin Joseph
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page(s)
Independent Auditors' Report on
Consolidated Financial Statements 19
Consolidated Statement of Earnings for the years
ended June 30, 1999, 1998 and 1997 20
Consolidated Balance Sheet at June 30, 1999 and 1998 21
Consolidated Statement of Cash Flows for the years
ended June 30, 1999, 1998 and 1997 22
Notes to the Consolidated Financial Statements 23-33
Independent Auditors' Report
The Shareholders and Board of Directors,
Dover Downs Entertainment, Inc.:
We have audited the accompanying consolidated balance sheets of Dover
Downs Entertainment, Inc. and subsidiaries as of June 30, 1999 and
1998, and the related consolidated statements of earnings and cash
flows for each of the years in the three-year period ended June 30,
1999. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Dover Downs Entertainment, Inc. and subsidiaries as of June 30, 1999
and 1998, and the results of their operations and their cash flows for
each of the years in the three-year period ended June 30, 1999, in
conformity with generally accepted accounting principles.
KPMG LLP
Philadelphia, Pennsylvania
July 23, 1999
CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in thousands, except per share data)
Year ended June 30,
1999 1998 1997
Revenues:
Motorsports $ 68,683 $ 25,874 $ 20,516
Gaming 139,249 115,071 81,162
207,932 140,945 101,678
Expenses:
Operating 142,498 96,875 68,559
Depreciation and
amortization 7,098 2,707 2,084
General and
administrative 11,213 4,410 3,065
160,809 103,992 73,708
Operating earnings 47,123 36,953 27,970
Interest expense (income) 1,352 (702) (269)
Earnings before
income taxes 45,771 37,655 28,239
Income taxes 18,880 15,742 11,767
Net earnings $ 26,891 $ 21,913 $ 16,472
Earnings per
common share:
Basic $ .76 $ .72 $ .55
Diluted $ .74 $ .70 $ .54
Average shares
outstanding (000):
Basic 35,566 30,492 29,712
Diluted 36,585 31,206 30,550
The Notes to the Consolidated Financial Statements are an integral part
of these statements.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
June 30,
1999 1998
ASSETS
Current assets:
Cash and cash equivalents $ 10,847 $ 18,694
Accounts receivable 6,706 2,818
Due from State of Delaware 2,932 2,099
Inventories 581 310
Prepaid expenses and other 4,456 2,319
Deferred income taxes 327 328
Total current assets 25,849 26,568
Property, plant and equipment, at cost:
Land 29,519 10,563
Casino facility 22,921 11,548
Racing facilities 113,202 44,877
Furniture, fixtures and equipment 24,390 6,444
Construction in progress 7,902 799
197,934 74,231
Less accumulated depreciation (24,021) (18,456)
173,913 55,775
Other assets, net 1,453 10,540
Goodwill, net 53,997 2,894
Total assets $255,212 $ 95,777
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,629 $ 2,343
Purses due horsemen 3,147 1,885
Accrued liabilities 9,407 5,006
Income taxes payable 2,726 3,951
Current portion of long-term debt 235 19
Deferred revenue 15,906 9,755
Total current liabilities 36,050 22,959
Long-term debt 36,725 741
Other liabilities 172 -
Deferred income taxes 9,607 712
Commitments (see Notes to the
Consolidated Financial Statements)
Shareholders' equity:
Preferred stock, $.10 par value;
1,000,000 shares authorized; issued
and outstanding: none
Common stock, $.10 par value; 75,000,000
shares authorized; issued and outstanding:
1999-11,403,684; 1998-5,997,900 1,140 300
Class A common stock, $.10 par value;
55,000,000 shares authorized; issued
and outstanding: 1999-24,262,510 shares;
1998-24,498,760 shares 2,426 1,225
Additional paid-in capital 99,683 21,109
Retained earnings 69,409 48,731
Total shareholders' equity 172,658 71,365
Total liabilities and
shareholders' equity $255,212 $ 95,777
The Notes to the Consolidated Financial Statements are an integral part
of these statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
Years ended June 30,
1999 1998 1997
Cash flows from operating activities:
Net earnings $ 26,891 $ 21,913 $ 16,472
Adjustments to reconcile
net earnings to net cash
provided by operating activities:
Depreciation and amortization 7,098 2,707 2,084
Loss on disposition of property - 3 -
(Increase) decrease in assets, net
of effect of acquisition:
Accounts receivable (1,645) (1,180) (392)
Due from State of Delaware (833) (116) (1,082)
Inventories (22) 92 (46)
Prepaid expenses (2,044) (1,539) (242)
Other assets (155) - -
Increase (decrease) in liabilities,
net of effect of acquisition:
Accounts payable (450) 335 671
Purses due horsemen 1,262 498 (49)
Accrued liabilities 464 2,719 (88)
Current and deferred income taxes 1,387 1,346 (267)
Deferred revenue 2,855 2,213 1,539
Net cash provided by
operating activities 34,808 28,991 18,600
Cash flows from investing activities:
Investment in Grand Prix
Association of Long Beach - (10,540) -
Acquisition of business, net of
cash acquired - (2,889) -
Capital expenditures (50,707) (7,504) (16,841)
Cash acquired in business
acquisition 1,490 - -
Net cash used in investing
activities (49,217) (20,933) (16,841)
Cash flows from financing activities:
Borrowings (repayments) on revolving
debt 13,161 - (3,500)
Repayment of long-term debt (760) (19) (9)
Loan repayments 207 - -
Net proceeds from initial
public offering - - 16,360
Dividends paid (6,213) (4,878) (2,429)
Proceeds from stock options exercised,
including related tax benefit 167 30 182
Net cash provided by (used in)
financing activities 6,562 (4,867) 10,604
Net (decrease) increase in cash
and cash equivalents (7,847) 3,191 12,363
Cash and cash equivalents, beginning
of year 18,694 15,503 3,140
Cash and cash equivalents, end
of year $ 10,847 $ 18,694 $ 15,503
Supplemental information:
Interest paid $ 2,474 $ 61 $ 168
Income taxes paid $ 18,231 $ 14,395 $ 12,034
Non-cash investing and financing
activities:
Land acquired $ 4,707 $ - $ -
Cash paid (3,054) - -
Land traded $ 1,653 $ - $ -
Stock issued in connection
with acquisition $ 80,241 $ - $ -
The Notes to the Consolidated Financial Statements are an integral part
of these statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - Business Operations
Dover Downs Entertainment, Inc. (Dover Downs or the Company) is a
leading promoter of motorsports events in the United States. The
Company operates five motorsports tracks (four permanent facilities and
one temporary circuit) in four states, promoting 15 major events
annually in the four premier sanctioning bodies in motorsports - the
National Association for Stock Car Auto Racing (NASCAR), Championship
Auto Racing Teams (CART), the Indy Racing League (IRL) and the National
Hot Rod Association (NHRA).
Dover Downs also owns and operates the Dover Downs Raceway harness
racing track and a 65,000 square foot video lottery (slot) casino at a
multi-purpose gaming and entertainment complex in Dover, Delaware. The
facility is located in close proximity to the major metropolitan areas
of Philadelphia, Baltimore and Washington, D.C.
Dover Downs, Inc. is authorized to conduct video lottery operations as
a "Licensed Agent" under the Delaware State Lottery Code. Pursuant to
Delaware's Horse Racing Redevelopment Act, enacted in 1994, the
Delaware State Lottery Office administers and controls the operation of
the video lottery.
The Company's license from the Delaware Harness Racing Commission must
be renewed on an annual basis. In order to maintain its license to
conduct video lottery operations, the Company is required to maintain
its harness horse racing license.
Due to the nature of the Company's business activities, it is subject
to various federal, state and local regulations.
NOTE 2 - Acquisition
On July 1, 1998, the Company completed its acquisition of Grand Prix
Association of Long Beach (Grand Prix) through the merger of a wholly
owned subsidiary of the Company with and into Grand Prix with Grand
Prix surviving as a wholly owned subsidiary of the Company. Grand Prix
developed and operates the Grand Prix of Long Beach, an annual
temporary circuit event which has been run in the streets of Long
Beach, California for 25 years, and owns permanent motorsports
facilities in Madison, Illinois (near St. Louis, Missouri) and in
Millington, Tennessee (near Memphis, Tennessee). The purchase price
was comprised of the conversion of the outstanding Grand Prix common
stock into 2,518,229 shares (5,036,458 shares after the stock split) of
the Company's stock and assumption by the Company of the outstanding
stock options of Grand Prix. On March 27, 1998, the Company acquired
680,000 shares of Grand Prix common stock at $15.50 per share in cash
pursuant to two separate stock purchase agreements, at which time the
Company owned approximately 14.6 % of the outstanding Grand Prix common
stock. The cost of these purchases was recorded as a long-term
investment at June 30, 1998. The acquisition qualified as a tax free
exchange and was accounted for using the purchase method of accounting
for business combinations. The excess of the purchase price over fair
market value of the underlying assets of $52,551,000 is being amortized
on a straight-line basis over 40 years.
The following summarized unaudited pro-forma statement of earnings
information gives effect to the Grand Prix transaction as though it had
occurred on July 1, 1997, after giving effect to certain adjustments,
primarily the amortization of goodwill and additional depreciation
expense. The pro-forma financial information, which is for
informational purposes only, is based upon certain assumptions and
estimates and does not necessarily reflect the results that would have
occurred had the transaction taken place at the beginning of the period
presented, nor are they necessarily indicative of future consolidated
results.
For the year ended
June 30, 1998
Revenues $170,972,000
Net earnings $ 19,974,000
Earnings per diluted share $ .55
NOTE 3 - Summary of Significant Accounting Policies
Consolidation-The consolidated financial statements include the
accounts of all subsidiaries. Intercompany transactions and balances
among these subsidiaries have been eliminated.
Revenue and expense recognition-Tickets to motorsports races are sold
and certain expenses are incurred in advance of the race date. Such
advance sales and corresponding expenses are recorded as deferred
revenue and prepaid expenses, respectively, until the race is held.
Gaming revenues represent the net win from video lottery (slot) machine
wins and losses, commissions from pari-mutuel wagering and other
miscellaneous gaming-related income. Payments to the State of Delaware
pursuant to the lottery legislation are reported in operating expenses.
For the video lottery operations, the difference between the amount
wagered by bettors and the amount paid out to bettors is referred to as
the win. The win is included in the amount recorded in the Company's
financial statements as gaming revenue. The Delaware State Lottery
Office sweeps the winnings from the video lottery operations, collects
the State's share of the winnings and the amount due to the vendors
under contract with the State who provide the video lottery machines
and associated computer systems, collects the amount allocable to
purses for harness horse racing, and remits the remainder to the
Company as its commission for acting as a Licensed Agent. Operating
expenses include the amounts collected by the State (i) for the State's
share of the winnings, (ii) for remittance to the providers of the
video lottery machines and associated computer systems, and (iii) for
harness horse racing purses.
Advertising costs-The costs of advertising, promotion and marketing
programs are charged to operations as incurred.
Earnings per share-The number of weighted average shares used in
computing basic and diluted earnings per share (EPS) are as follows (in
thousands):
1999 1998 1997
Basic EPS 35,566 30,492 29,712
Effect of options 1,019 714 838
Diluted EPS 36,585 31,206 30,550
Cash and cash equivalents-The Company considers as cash equivalents all
highly liquid investments with an original maturity of three months or
less.
Inventories-Inventories, primarily food, beverage and novelty items,
are stated at the lower of cost or market with cost being determined on
the first-in, first-out (FIFO) basis.
Property, plant and equipment-Property, plant and equipment is stated
at cost. Depreciation is computed on a straight-line basis over the
following estimated useful lives:
Racing and casino facilities 10 - 40 years
Furniture, fixtures and equipment 5 - 10 years
Interest is capitalized in connection with the construction of major
facilities. The capitalized interest is amortized over the estimated
useful life of the asset to which it relates. In 1999, $682,000 of
interest cost was capitalized. No interest was capitalized in 1998 or
1997.
Goodwill-Goodwill represents the excess of the purchase price over the
fair value of net assets acquired and is being amortized using the
straight-line method over a period of 40 years.
Income taxes-Deferred income taxes are provided in accordance with the
provisions of Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes" on all differences between the tax
bases of assets and liabilities and their reported amounts in the
financial statements based upon enacted statutory tax rates in effect
at the balance sheet date.
Use of estimates-The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities, and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Fair value of financial instruments-The carrying amount reported in the
balance sheet for current assets and current liabilities approximates
their fair value because of the short maturity of these instruments.
The carrying value of long-term debt at June 30, 1999 approximates its
fair value based on interest rates available on similar borrowings.
Accounting for stock options-The Company adopted the provisions of SFAS
No. 123, "Accounting for Stock-Based Compensation", on July 1, 1996.
SFAS No. 123 defines a fair-value based method of accounting for
stock-based compensation plans, however, it allows the continued use of
the intrinsic value method under Accounting Principles Board (APB)
Opinion No. 25, "Accounting for Stock Issued to Employees". The Company
has elected to continue to use the intrinsic value method.
Recent accounting pronouncements-The Company does not expect the
adoption of recently issued accounting pronouncements to have a
significant impact on its results of operations, financial position or
cash flows.
NOTE 4 - Indebtedness
Long-term debt is as follows:
June 30,
1999 1998
Note payable to bank $ 15,500,000 $ -
SWIDA loan for Gateway redevelopment 21,460,000 -
Note payable - 760,000
36,960,000 760,000
Less: current portion (235,000) (19,000)
$ 36,725,000 $ 741,000
On March 31, 1999, the Company entered into a $50,000,000 long-term,
unsecured, revolving credit agreement with certain financial
institutions. Interest is based, at the Company's option, upon (i)
LIBOR plus .75% or (ii) the base rate (the greater of the prime rate or
the federal funds rate plus .5%) minus 1%. The agreement, which
expires in March 2002, is for seasonal funding needs, capital
improvements and other general corporate purposes. The agreement
contains certain restrictive covenants and requires the Company to
maintain certain financial ratios. At June 30, 1999, $15,500,000 was
outstanding under this line of credit at a weighted average interest
rate of 6.05%.
A subsidiary of the Company entered into an agreement (the "SWIDA
loan") with Southwestern Illinois Development Authority ("SWIDA") to
receive the proceeds from the "Taxable Sports Facility Revenue Bonds,
Series 1996 (Gateway International Motorsports Corporation Project)",
a Municipal Bond Offering, in the aggregate principal amount of
$21,500,000. The offering of the bonds closed on June 21, 1996. The
repayment terms and debt service reserve requirements of the bonds
issued in the Municipal Bond Offering correspond to the terms of the
SWIDA loan. SWIDA loaned all of the proceeds from the Municipal Bond
Offering to the Company's subsidiary for the purpose of the
redevelopment, construction and expansion of Gateway International
Raceway, and the proceeds of the SWIDA loan were irrevocably committed
to complete construction of Gateway International Raceway, to fund
interest, to create a debt service reserve fund and to pay for the cost
of issuance of the bonds. The Company has established certain
restricted cash funds to meet debt service as required by the SWIDA
loan, which are held by the trustee (BNY Trust Company of Missouri).
At June 30, 1999, $548,000 of the Company's cash balance is restricted
by the SWIDA loan. A standby letter of credit for $2,502,000 also was
obtained to secure debt service. The SWIDA loan is secured by a first
mortgage lien on all the real property owned and a security interest in
all property leased by the Company's subsidiary at Gateway
International Raceway. The SWIDA loan bears interest at varying rates
ranging from 8.35% to 9.25% with an effective rate of approximately
9.1%. The structure of the bonds permits amortization from February
1997 through February 2017 with debt service beginning in 2000
following interest only payments from February 1997 through August
1999. In addition, a portion of the property taxes to be paid by the
Company (if any) to the City of Madison Tax Incremental Fund have been
pledged to the annual retirement of debt.
The scheduled maturities of long-term debt outstanding at June 30, 1999
are as follows: 2000-$235,000; 2001-$685,000; 2002-$16,135,000; 2003-
$685,000; 2004-$745,000; and thereafter-$18,475,000.
NOTE 5 - Income Taxes
The current and deferred income tax provisions (benefit) are as
follows:
Years ended June 30,
1999 1998 1997
Current:
Federal $13,277,000 $12,544,000 $ 9,207,000
State 3,929,000 3,296,000 2,498,000
17,206,000 15,840,000 11,705,000
Deferred:
Federal 1,599,000 (78,000) 49,000
State 75,000 (20,000) 13,000
1,674,000 (98,000) 62,000
Total income taxes $18,880,000 $15,742,000 $11,767,000
Deferred income taxes relate to the temporary differences between
financial accounting income and taxable income and are primarily
attributable to differences between the book and tax basis of property,
plant and equipment and net operating loss carryforwards. The Company
believes that it is more likely than not that the deferred tax assets
will be realized based upon reversals of existing taxable temporary
differences and future income.
A reconciliation of the effective income tax rate with the applicable
statutory federal income tax rate is as follows:
Years ended June 30,
1999 1998 1997
Federal tax at statutory rate 35.0% 35.0% 35.0%
State taxes, net of federal benefit 5.7% 5.7% 5.7%
Other .5% 1.1% 1.0%
Effective income tax rate 41.2% 41.8% 41.7%
NOTE 6 - Pension Plan
Benefits provided by the Dover Downs Entertainment, Inc. Pension Plan
are based on years of service and employees' remuneration over their
employment with the Company. Pension costs are funded in accordance
with the provisions of the Internal Revenue Code.
The following table sets forth the plan's funded status and amounts
recognized in the Company's consolidated balance sheet:
June 30,
1999 1998
Change in benefit obligation:
Benefit obligation at beginning of year $ 925,000 $ 531,000
Service cost 306,000 132,000
Interest cost 79,000 53,000
Amendments 122,000 -
Actuarial loss 26,000 211,000
Benefits paid (33,000) (2,000)
Benefit obligation at end of year 1,425,000 925,000
Change in plan assets:
Fair value of plan assets at
beginning of year 688,000 464,000
Actual return on plan assets 273,000 104,000
Employer contribution 386,000 122,000
Benefits paid (33,000) (2,000)
Fair value of plan assets at end of year 1,314,000 688,000
Funded status (111,000) (237,000)
Unrecognized net (gain)/loss (74,000) 111,000
Unrecognized prior service cost 277,000 173,000
Prepaid pension cost $ 92,000 $ 47,000
At June 30, 1999, the assets of the plan were invested 68% in equity
funds, 24% in intermediate bond funds and the balance in other
short-term interest-bearing accounts. The discount rate in 1999 and
1998 was 8.0% and 7.5%, respectively. The assumed rate of compensation
increase was 5% in both years. The expected long-term rate of return
on assets was 9% for 1999 and 1998.
The components of net periodic pension cost are as follows:
Years ended June 30,
1999 1998 1997
Service cost $ 306,000 $ 132,000 $ 61,000
Interest cost 79,000 53,000 32,000
Return on plan assets (273,000) (104,000) (68,000)
Net amortization 13,000 32,000 16,000
Deferral of net gain 201,000 63,000 36,000
$ 326,000 $ 176,000 $ 77,000
The Company also maintains a nonqualified, noncontributory defined
benefit pension plan for certain employees to restore pension benefits
reduced by federal income tax regulations. The cost associated with the
plan is determined using the same actuarial methods and assumptions as
those used for the Company's qualified pension plan.
The Company also maintains a defined contribution 401(k) plan which
permits participation by substantially all employees.
NOTE 7 - Shareholders' Equity
Changes in the components of shareholder's equity are as follows
(dollars in thousands, except per share data):
$.10 Par
$.10 Par Value
Value Class A Additional
Common Common Paid-in Retained
Stock Stock Capital Earnings
Balance at June 30, 1996 $ $1,393 $ 4,669 $17,653
Net earnings 16,472
Issuance of common stock, net 288 (180) 16,252
Dividends on common stock,
$.08 per share (2,429)
Exercise of stock options 22 160
Conversion of Class A shares 6 (6)
Balance at June 30, 1997 294 1,229 21,081 31,696
Net earnings 21,913
Dividends on common stock,
$.16 per share (4,878)
Exercise of stock options 2 28
Conversion of Class A shares 6 (6)
Balance at June 30, 1998 300 1,225 21,109 48,731
Net earnings 26,891
Dividends on common stock,
$.18 per share (6,213)
Exercise of stock options 4 8 155
Grand Prix acquisition 252 80,196
Two-for-one split 556 1,221 (1,777)
Conversion of Class A shares 28 (28)
Balance at June 30, 1999 $1,140 $2,426 $99,683 $69,409
Holders of Common Stock have one vote per share and holders of Class A
Common Stock have ten votes per share. Shares of Class A Common Stock
are convertible at any time into shares of Common Stock on a share for
share basis at the option of the holder thereof. Dividends on Class A
Common Stock cannot exceed dividends on Common Stock on a per share
basis. Dividends on Common Stock may be paid at a higher rate than
dividends on Class A Common Stock. The terms and conditions of each
issue of Preferred Stock are determined by the Board of Directors. No
Preferred shares have been issued.
The Company has adopted Rights Plans with respect to its Common Stock
and Class A Common Stock which include the distribution of Rights to
holders of such stock. The Rights entitle the holder, upon the
occurrence of certain events, to purchase additional stock of the
Company. The Rights are exercisable if a person, company or group
acquires 10% or more of the outstanding combined equity of Common Stock
and Class A Common Stock or engages in a tender offer. The Company is
entitled to redeem each Right for one cent.
On July 31, 1998, the Board of Directors authorized a two-for-one stock
split to be distributed September 15, 1998. All share and per share
information included in the accompanying consolidated financial
statements and notes thereto have been adjusted to give retroactive
effect to this stock split.
On October 3, 1996, the Company completed its initial public offering.
The Company issued 1,075,000 shares (2,150,000 shares after the stock
split) of the Company's Common Stock and received proceeds of
approximately $16,360,000, net of issuance costs of approximately
$1,913,000.
The Company has two stock option plans pursuant to which the Company's
Board of Directors may grant stock options to officers and key
employees at not less than 100% of the fair market value at the date of
the grant. Options granted under the 1991 Stock Option Plan are
exercisable for Class A Common Stock while options granted under the
1996 Stock Option Plan are exercisable for Common Stock. The 1991 Stock
Option Plan has been amended so that no additional options may be
granted thereunder. The 1991 and 1996 stock options have 7 and 8 year
terms, respectively, and generally vest equally over a period of 5 and
6 years from the date of grant, respectively. In all other material
respects, the 1991 Stock Option Plan is structured the same as the 1996
Stock Option Plan. The Company applies APB Opinion No. 25 and related
interpretations in accounting for its stock option plans. Accordingly,
no compensation cost has been recognized for its stock option plans.
For disclosure purposes, the Company determined compensation cost for
its stock options based upon the fair value at the grant date using the
Black Scholes option-pricing model with the following assumptions:
expected dividend yield - 1.02%, risk-free interest rate - 6%, an
expected life of six and one-half years and volatility of 25%. Had
compensation cost been recognized in accordance with SFAS No. 123, the
Company's diluted earnings per share disclosed in the accompanying
financial statements would be reduced by less than $.01 per share in
1999 and 1998.
Option activity was as follows:
June 30,
1999 1998 1997
Number of options:
Outstanding at beginning of year 1,035,528 945,528 1,170,000
Granted 734,562 135,000 225,528
Exercised (127,684) (45,000) (450,000)
Outstanding at June 30 1,642,406 1,035,528 945,528
At June 30:
Options available for grant 404,910 1,139,472 1,274,472
Options exercisable 932,545 262,000 45,000
Weighted Average Exercise Price:
Options granted $ 4.66 $ 11.58 $ 8.57
Options exercised $ 1.32 $ .67 $ .41
Options outstanding $ 4.38 $ 3.38 $ 2.55
Options exercisable $ 1.59 $ 1.78 $ .67
Included in the 734,562 options and the weighted average exercise price
for options granted in 1999 are 512,062 options relating to the Grand
Prix Association of Long Beach acquisition. The Grand Prix options
were converted into Dover Downs options at an exercise price of $.87
per share.
NOTE 8 - Related Party Transactions
During the years ended June 30, 1999, 1998 and 1997, the Company
purchased certain paving, site work and construction services involving
total payments of $432,000, $375,000 and $584,000 from a company
wholly-owned by an employee/director. The Company purchased
administrative services from Rollins Truck Leasing Corp. and affiliated
companies in 1999, 1998 and 1997. The total cost of these services,
which have been included in general and administrative expenses in the
Consolidated Statement of Earnings, was $380,000, $283,000 and $178,000
in 1999, 1998 and 1997, respectively.
In connection with the development of a new racing facility in Wilson
County, Tennessee, a subsidiary of the Company purchased options to
acquire certain properties being considered as possible locations for
the facility. During 1999, a development site was chosen and it was
determined that some of the properties under option would not be
needed. Prior to the options expiring, an officer/director of the
Company expressed an interest in purchasing several of the properties
that were not needed for development. The Company assigned its options
to the officer/director who subsequently purchased the property. At
June 30, 1999, $219,000 was due from this officer/director to reimburse
the Company for the cost of the options and certain surveying,
engineering and legal costs incurred by the Company. This amount was
repaid in July 1999.
At the date of the acquisition of Grand Prix Association of Long Beach,
$299,000 was due to Grand Prix from certain shareholders/officers for
outstanding loans made for the purpose of purchasing Grand Prix common
stock. As of June 30, 1999, $92,000 was outstanding and is due
December 1, 1999 from a current director of the Company.
In the opinion of management of the Company, the foregoing transactions
were effected at rates which approximate those which the Company would
have realized or incurred had such transactions been effected with
independent third parties.
NOTE 9 - Business Segment Information
The Company has two reportable segments, motorsports and gaming. The
business is operated and defined based on the products and services
provided by these segments. Certain operations within the motorsports
segment have been aggregated for purposes of the following disclosures
(dollars in thousands, except per share data):
Motorsports Gaming Consolidated
Year ended June 30, 1999
Revenue $ 68,683 $139,249 $207,932
Operating earnings 17,197 29,926 47,123
Identifiable assets at year-end 209,540 45,672 255,212
Capital expenditures 36,209 14,498 50,707
Depreciation and amortization 5,829 1,269 7,098
Interest expense $ 1,267 $ 85 $ 1,352
Year ended June 30, 1998
Revenue $ 25,874 $115,071 $140,945
Operating earnings 12,506 24,447 36,953
Identifiable assets at year-end 57,739 38,038 95,777
Capital expenditures 6,085 1,419 7,504
Depreciation and amortization $ 1,237 $ 1,470 $ 2,707
Year ended June 30, 1997
Revenue $ 20,516 $ 81,162 $101,678
Operating earnings 11,079 16,891 27,970
Identifiable assets at year-end 34,801 36,460 71,261
Capital expenditures 9,496 7,345 16,841
Depreciation and amortization $ 981 $ 1,103 $ 2,084
NOTE 10 - Commitments
The Company leases the racetrack at the Tennessee State Fairgrounds
pursuant to a lease expiring in 2008. Total rental expense charged to
the Company is a function of the profitability of the Nashville
operation and was $210,000 for the year ended June 30, 1999 and $66,000
for the six months ended June 30, 1998.
The Company leases certain property at the Madison, Illinois facility
with leases expiring at various dates through 2070. The leases are
subject to annual adjustments based on increases in the consumer price
index. Total rental payments charged to operations for these leases
amounted to $222,000 for the year ended June 30, 1999. The minimum
lease payments due under these leases are as follows:
2000 $ 237,000
2001 227,000
2002 214,000
2003 214,000
2004 214,000
Thereafter 4,510,000
In May 1995, Dover Downs, Inc., a subsidiary of the Company, entered
into a long-term management agreement with Caesars World Gaming
Development Corporation (Caesars). The initial term of the agreement
expired in December 1998 and Caesars exercised the first of two
additional three-year renewal options which Dover Downs may void if
certain financial results are not achieved. Caesars acts as the
exclusive agent to supervise, market, manage and operate the Company's
video lottery operations. Caesars has been properly licensed by the
Delaware State Lottery Office to perform these functions. Caesars'
performance-based fees for such services were $6,983,000 in fiscal
1999, $7,094,000 in fiscal 1998 and $5,185,000 in fiscal 1997. Amounts
owed to Caesars at June 30, 1999 and 1998 totaled $1,147,000 and
$1,246,000, respectively and are included in accrued liabilities. The
Company also has expensed and accrued additional amounts which Caesars
claims are due as a result of the recent casino expansions, but which
the Company does not believe are owed to Caesars.
The Company has entered into several sanctioning agreements to conduct
various motorsports events at Dover Downs International Speedway and
the Nashville Speedway, as well as at newly acquired venues in Long
Beach, California; Madison, Illinois and Millington, Tennessee. The
Company has held NASCAR-sanctioned events for 31 consecutive years and
its subsidiary, Grand Prix Association of Long Beach, has operated the
Grand Prix of Long Beach for 25 consecutive years. Nonrenewal of a
NASCAR event license or the CART agreement for the Long Beach event
would have a material adverse effect on the Company's financial
condition and results of operations.
NOTE 11 - Quarterly Results - in thousands, except per share data
(unaudited)
September 30 December 31 March 31 June 30
1999
Revenues $54,654 $37,651 $36,676 $78,951
Gross profit 17,520 7,188 6,851 26,777
Net earnings 8,278 2,513 2,207 13,893
Earnings per
common share (diluted) $ .23 $ .07 $ .06 $ .38
1998
Revenues $38,821 $25,962 $31,735 $44,427
Gross profit 14,301 5,236 6,649 15,177
Net earnings 7,833 2,518 3,295 8,267
Earnings per
common share (diluted) $ .25 $ .08 $ .11 $ .26
Exhibit 21.1
DOVER DOWNS ENTERTAINMENT, INC.
Subsidiaries of Registrant at June 30, 1999
Dover Downs, Inc.
Dover Downs International Speedway, Inc.
Dover Downs Properties, Inc.
Nashville Speedway USA, Inc.
Grand Prix Association of Long Beach, Inc.
Gateway International Motorsports Corporation, Inc.
Gateway International Services Corporation, Inc.
Memphis International Motorsports Corporation, Inc.
Motorsports Services Corporation of Memphis, Inc.
Exhibit 23.1
The Board of Directors and Shareholders
Dover Downs Entertainment, Inc.
We consent to the incorporation by reference in the registration
statement (No. 333-8147) on Form S-8 of Dover Downs Entertainment, Inc.
of our report dated July 23, 1999 relating to the consolidated balance
sheets of Dover Downs Entertainment, Inc. and subsidiaries as of June
30, 1999 and 1998, and the related consolidated statements of earnings
and cash flows for each of the years in the three-year period ended
June 30, 1999, which report appears in the June 30, 1999 annual report
on Form 10-K of Dover Downs Entertainment, Inc.
KPMG LLP
Philadelphia, Pennsylvania
September 8, 1999