Dover Downs Gaming & Entertainment, Inc. (NYSE-DDE) today reported results for the three months ended September 30, 2010.

Gaming revenues were up 8.6% compared to the third quarter of 2009. Slightly lower slot win was offset by table game revenue for the quarter, and to a lesser extent, slightly higher harness racing and sports wagering commissions. This was the first full quarter with live table games at the facility. The Company commenced table game operations on June 25, 2010.

Other operating revenues were up 24.2% compared to the third quarter of 2009 from higher cash food and beverage and rooms revenues for the quarter.

General and administrative costs were $1,912,000 compared with $1,679,000 in the third quarter of last year. The increase was primarily from costs related to the proposed merger with Dover Motorsports, Inc. that was terminated in October.

Interest expense increased $291,000 during the quarter with lower average outstanding borrowings offset by higher interest rates.

Net earnings were $2,292,000, or $.07 per diluted share compared with $1,231,000 or $.04 per diluted share for the third quarter of 2009. The Company recorded a non-cash impairment charge in the third quarter of 2009 related to the decision to cancel a previously planned property expansion project. Excluding the impact of that charge, net earnings were $2,523,000 or $.08 per diluted share for the third quarter of 2009.

Denis McGlynn, President and CEO of Dover Downs Gaming & Entertainment, Inc. stated, “This quarter saw the successful operational implementation of table games at our facility. Competition is fierce in this market and our focus is on growing this new revenue stream by taking advantage of the complete entertainment destination we have created in Dover.”

The Company announced yesterday that its Board of Directors declared a regular quarterly dividend of $.03 per share. The dividend is payable on December 10, 2010 to shareholders of record at the close of business on November 10, 2010.

This release contains or may contain forward-looking statements based on management’s beliefs and assumptions. Such statements are subject to various risks and uncertainties that could cause results to vary materially. Please refer to the Company’s SEC filings for a discussion of such factors.

Dover Downs Gaming & Entertainment, Inc. is a diversified gaming and entertainment company whose operations consist of Dover Downs Casino – a 165,000-square foot casino complex featuring popular table games, the latest in slot machine offerings, multi-player electronic table games, the Crown Royal poker room, and a Race & Sports Book operation; the Dover Downs Hotel and Conference Center – a 500 room AAA Four Diamond hotel with conference, banquet, fine dining, spa, retail, ballroom and concert hall facilities; and Dover Downs Raceway – a harness racing track with pari-mutuel wagering on live and simulcast horse races.
 
DOVER DOWNS GAMING & ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
In Thousands, Except Per Share Amounts
(Unaudited)
         
 
Three Months Ended Nine Months Ended
September 30, September 30,
  2010   2009   2010   2009
Revenues:
Gaming (1) $ 59,934 $ 55,172 $ 164,352 $ 163,385

Other operating (2)
  5,766   4,642   15,856   14,039
  65,700   59,814   180,208   177,424
Expenses:
Gaming 51,696 46,815 140,497 132,431
Other operating 4,490 3,613 12,289 10,864
General and administrative 1,912 1,679 5,345 5,187
Impairment charge - 2,177 - 2,177
Depreciation   3,103   2,898   8,949   8,919
  61,201   57,182   167,080   159,578
 
Operating earnings 4,499 2,632 13,128 17,846
 
Interest expense   860   569   2,419   1,834
 
Earnings before income taxes 3,639 2,063 10,709 16,012
 
Income taxes   1,347   832   4,467   6,550
 
Net earnings $ 2,292 $ 1,231 $ 6,242 $ 9,462
 
Net earnings per common share:
- Basic $ 0.07 $ 0.04 $ 0.19 $ 0.30
- Diluted $ 0.07 $ 0.04 $ 0.19 $ 0.30
 
Weighted average shares outstanding:
- Basic 31,558 31,496 31,554 31,491

- Diluted
31,558 31,496 31,554 31,491
 
(1)  

Gaming revenues from the Company’s slot machine and table game operations include the total win from such operations. The Delaware State Lottery Office collects the win and remits a portion thereof to the Company as its commission for acting as a Licensed Agent. The difference between total win and the amount remitted to the Company is reflected in gaming expenses.

 
(2)

Other operating revenues do not include the retail amount of promotional allowances which are provided to customers on a complimentary basis.
 
       
DOVER DOWNS GAMING & ENTERTAINMENT, INC.
RECONCILIATION OF GAAP EARNINGS TO ADJUSTED EARNINGS
In Thousands, Except Per Share Amounts
(Unaudited)
   
 
Three Months Ended Nine Months Ended
September 30, September 30,
  2010   2009   2010   2009
 
GAAP earnings before income tax expense $ 3,639 $ 2,063 $ 10,709 $ 16,012
 
Non-cash impairment charges (1)   -   2,177   -   2,177
 
Adjusted earnings before income tax expense $ 3,639 $ 4,240 $ 10,709 $ 18,189
 
GAAP net earnings $ 2,292 $ 1,231 $ 6,242 $ 9,462
 
Non-cash impairment charges, net of income taxes (1)   -   1,292   -   1,292
 
Adjusted net earnings $ 2,292 $ 2,523 $ 6,242 $ 10,754
 
GAAP net earnings per common share - diluted $ 0.07 $ 0.04 $ 0.19 $ 0.30
 
Non-cash impairment charges, net of income taxes (1)   -   0.04   -   0.04
 
Adjusted net earnings per common share - diluted $ 0.07 $ 0.08 $ 0.19 $ 0.34
 

(1)
 

We had previously completed architectural and engineering work related to a Phase 7 casino expansion that would have included, among other things, a new sports book facility and a parking garage. Given the court decision to limit the extent of sports wagering and the higher gaming tax rates that were legislated, we decided not to proceed with this project. As a result, $2,177,000 of previously capitalized costs were written off during the third quarter of 2009.
 
 
DOVER DOWNS GAMING & ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
In Thousands
(Unaudited)
     
 
September 30, December 31,
2010 2009
ASSETS
 
Current assets:
Cash $ 16,931 $ 21,415
Accounts receivable 1,924 2,636
Due from State of Delaware 11,767 11,069
Inventories 2,155 2,170
Prepaid expenses and other 3,028 2,151
Receivable from Dover Motorsports, Inc. 40 5
Prepaid income taxes 838 129
Deferred income taxes   1,313     1,209  
Total current assets 37,996 40,784
 
Property and equipment, net 188,608 192,360
Other assets   819     863  
Total assets $ 227,423   $ 234,007  
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Current liabilities:
Accounts payable $ 3,930 $ 3,078
Purses due horsemen 11,784 10,219
Accrued liabilities 8,975 8,788
Deferred revenue   260     306  
Total current liabilities 24,949 22,391
 
Revolving line of credit 82,100 95,125
Liability for pension benefits 4,360 4,900
Other liabilities 730 186
Deferred income taxes   4,219     4,166  
Total liabilities   116,358     126,768  
 
Stockholders’ equity:
Common stock 1,564 1,546
Class A common stock 1,660 1,660
Additional paid-in capital 2,430 1,664
Retained earnings 106,898 103,559
Accumulated other comprehensive loss   (1,487 )   (1,190 )
Total stockholders’ equity   111,065     107,239  
Total liabilities and stockholders’ equity $ 227,423   $ 234,007  
 
     
DOVER DOWNS GAMING & ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
In Thousands
(Unaudited)
 
Nine Months Ended
September 30,
  2010     2009  
 
Operating activities:
Net earnings $ 6,242 $ 9,462
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 8,949 8,919
Amortization of credit facility origination fees 53 28
Stock-based compensation 901 714
Deferred income taxes (385 ) 70
Impairment charge - 2,177
Changes in assets and liabilities:
Accounts receivable 712 (21 )
Due from State of Delaware (698 ) (1,609 )
Inventories (334 ) (233 )
Prepaid expenses and other (881 ) (746 )
Receivable from/payable to Dover Motorsports, Inc. (35 ) (46 )
Prepaid income taxes/income taxes payable (172 ) (1,294 )
Accounts payable 560 48
Purses due horsemen 1,565 1,888
Accrued liabilities 187 (1,027 )
Deferred revenue (46 ) 164
Other liabilities   (499 )   388  
Net cash provided by operating activities   16,119     18,882  
 
Investing activities:
Capital expenditures (4,556 ) (4,123 )
Proceeds from sale of available-for-sale securities 46 102
Purchase of available-for-sale securities   (48 )   (104 )
Net cash used in investing activities   (4,558 )   (4,125 )
 
Financing activities:
Borrowings from revolving line of credit 90,585 120,675
Repayments of revolving line of credit (103,610 ) (130,925 )
Dividends paid (2,903 ) (4,811 )
Repurchase of common stock   (117 )   (59 )
Net cash used in financing activities   (16,045 )   (15,120 )
 
Net decrease in cash (4,484 ) (363 )
Cash, beginning of period   21,415     17,889  
Cash, end of period $ 16,931   $ 17,526  
 

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