Dover Downs Gaming & Entertainment, Inc. Reports Results for the Fourth Quarter and Year Ended December 31, 2004

Dover Downs Gaming & Entertainment, Inc. Reports Results for the Fourth Quarter and Year Ended December 31, 2004 DOVER, Del., Jan. 27 /PRNewswire-FirstCall/ -- Dover Downs Gaming & Entertainment, Inc. (NYSE:DDE) today reported results for the three months and year ended December 31, 2004. Pro-forma earnings per share for the fourth quarter of 2004 were $.15 per diluted share compared with pro-forma earnings of $.12 per diluted share for the fourth quarter of 2003. Pro-forma net earnings improved 16.8% to $3,845,000 compared with pro-forma net earnings of $3,292,000 for the fourth quarter of 2003. The disclosure of pro-forma results is necessary as there were two items affecting the comparability of the fourth quarter of 2004 financial statements with the fourth quarter of 2003 financial statements: 1) Previously, the Company recorded the expense for customer reward points when they were redeemed by the customer, and disclosed the total outstanding obligation in its footnotes in accordance with generally accepted accounting principles. As a result of a fourth quarter change in how its customers can use their reward points, the Company was required to change its accounting. The Company must now expense reward points as they are earned by the customer, and as a result, the fourth quarter statement of earnings includes a one-time, net non-recurring charge of $2,250,000 to record the total points earned during the last nine years that were outstanding at the date of the program change. The earnings per share effect of the change in policy is $.05 per diluted share in the fourth quarter of 2004. 2) As previously disclosed, the Company received $1,300,000 in the fourth quarter of 2003 from its insurance carrier to settle a business interruption claim related to the opening of the Dover Downs Hotel and Conference Center. The earnings per share effect of the insurance proceeds was $.03 per diluted share in the fourth quarter of 2003. Without the pro-forma adjustments, net earnings for the fourth quarter of 2004 were $2,507,000, or $.10 per diluted share, compared with $4,063,000 or $.15 per diluted share for the fourth quarter of 2003. The Company's gross revenues for the fourth quarter of 2004 were $56,532,000 compared with $51,310,000 for the fourth quarter of 2003. Slot win improved more than 15% compared with the fourth quarter of 2003, as the Company's share of the Delaware slot market reached its highest levels to date. "We are extremely happy with our fourth quarter results, as well as our slot win growth for 2004 as a whole," stated Denis McGlynn, President and Chief Executive Officer. "Our level of play is increasing, but more importantly, our level of play from our Club customers is increasing faster. The increase in rated play has, and will continue to allow us to more effectively market to our customers with our recently installed slot data system." Occupancy levels for the Dover Downs Hotel and Conference Center remained strong, averaging more than 93% for the fourth quarter and almost 95% for calendar 2004. The Company continued the transformation of its casino floor to the new ticket in/ticket out technology, with 528 ticket in/ticket out games on line at the end of December 2004. The Company expects to have approximately 1,900 ticket in/ticket out games by the end of 2005. For the year ended December 31, 2004, gross revenues increased 9.7% to $227,717,000 compared with $207,499,000 for 2003. On the pro-forma basis described above, net earnings were $17,719,000 or $.67 per diluted share for the year ended December 31, 2004 compared with $16,466,000 or $.62 per diluted share for the year ended December 31, 2003. Without the pro-forma adjustments, net earnings were $16,381,000 or $.62 per diluted share compared with $17,237,000 or $.65 per diluted share for 2003. The Company announced yesterday that its Board of Directors declared a quarterly dividend of $.06 per share. The dividend is payable on March 10, 2005 to shareholders of record at the close of business on February 10, 2005. Also during the quarter, the Company successfully completed a self tender of 1,600,000 shares of Class A common stock and 1,040,421 shares of common stock at a purchase price of $12.00 per share. The repurchase represented approximately 10% of the Company's outstanding shares. 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 Slots - an 91,000-square-foot video lottery (slots) casino complex; the Dover Downs Hotel and Conference Center - featuring luxury accommodations with conference, banquet, fine dining, ballroom and concert hall facilities; and the Dover Downs Raceway - a harness racing track with pari-mutuel wagering on live and simulcast horse races. DOVER DOWNS GAMING & ENTERTAINMENT, INC. CONSOLIDATED STATEMENT OF EARNINGS AND COMPREHENSIVE EARNINGS In Thousands, Except Per Share Amounts (Unaudited) Three Months Ended Years Ended December 31, December 31, 2004 2003 2004 2003 Revenues: Gaming (1) $48,632 $42,069 $193,922 $175,023 Other operating 7,900 9,241 33,795 32,476 Gross revenues 56,532 51,310 227,717 207,499 Less - promotional allowances 4,820 5,018 19,973 18,667 - non-recurring charge (2) 448 - 448 - 51,264 46,292 207,296 188,832 Expenses: Gaming 38,702 33,909 152,725 138,423 Non-recurring gaming charge (2) 1,802 - 1,802 - Other operating 3,291 2,294 13,013 9,899 General and administrative 1,293 1,320 4,603 4,317 Depreciation 1,710 1,730 6,791 6,287 46,798 39,253 178,934 158,926 Operating earnings 4,466 7,039 28,362 29,906 Interest expense 250 179 762 842 Earnings before income taxes 4,216 6,860 27,600 29,064 Income taxes 1,709 2,797 11,219 11,827 Net earnings 2,507 4,063 16,381 17,237 Minimum pension liability - 95 - 127 Comprehensive earnings $2,507 $4,158 $16,381 $17,364 Net earnings per common share: - Basic $0.10 $0.15 $0.62 $0.65 - Diluted $0.10 $0.15 $0.62 $0.65 Average shares outstanding: - Basic 25,927 26,478 26,339 26,511 - Diluted 26,004 26,502 26,414 26,537 (1) Gaming revenues from the Company's video lottery (slot) machine 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) Effective December 2004, the Company changed how its customers can use their reward points. As a result, the Company recorded a net, non-recurring charge in the fourth quarter of 2004 to record the points outstanding at the date of the change. All reward points earned by customers are now expensed in the period earned. DOVER DOWNS GAMING & ENTERTAINMENT, INC. RECONCILIATION OF GAAP NET EARNINGS TO PRO-FORMA NET EARNINGS In Thousands, Except Per Share Amounts (Unaudited) Three Months Ended Years Ended December 31, December 31, 2004 2003 2004 2003 GAAP net earnings $2,507 $4,063 $16,381 $17,237 Non-recurring charge for points, net of income taxes (3) 1,338 - 1,338 - Insurance proceeds, net of income taxes (4) - (771) - (771) Pro forma net earnings $3,845 $3,292 $17,719 $16,466 GAAP net earnings per common share - diluted $0.10 $0.15 $0.62 $0.65 Non-recurring charge for points, net of income taxes (3) 0.05 - 0.05 - Insurance proceeds, net of income taxes (4) - (0.03) - (0.03) Pro forma net earnings per diluted share $0.15 $0.12 $0.67 $0.62 (3) Effective December 2004, the Company changed how its customers can use their reward points. As a result, the Company recorded a net, non-recurring charge in the fourth quarter of 2004 to record the points outstanding at the date of the change. All reward points earned by customers are now expensed in the period earned. (4) In the fourth quarter of 2003, the Company included in earnings proceeds of $1,300,000 ($771,000 after income taxes) relating to the settlement of a business interruption insurance claim. DOVER DOWNS GAMING & ENTERTAINMENT, INC. CONSOLIDATED BALANCE SHEET In Thousands (Unaudited) December 31, December 31, 2004 2003 ASSETS Current assets: Cash $17,688 $14,138 Accounts receivable 2,919 1,914 Due from State of Delaware 10,080 8,670 Inventories 2,147 1,801 Prepaid expenses and other 2,220 2,414 Receivable from Dover Motorsports, Inc. 2 - Deferred income taxes 2,168 878 Total current assets 37,224 29,815 Property and equipment, net 123,076 122,344 Total assets $160,300 $152,159 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $6,801 $6,516 Purses due horsemen 9,082 7,957 Accrued liabilities 11,990 6,015 Payable to Dover Motorsports, Inc. - 96 Income taxes payable 651 53 Deferred revenue 195 261 Total current liabilities 28,719 20,898 Notes payable to banks 51,950 31,225 Deferred income taxes 6,861 5,061 Stockholders' equity: Common stock 936 1,033 Class A common stock 1,448 1,615 Additional paid-in capital 35,764 67,454 Retained earnings 35,156 24,873 Deferred compensation (534) - Total stockholders' equity 72,770 94,975 Total liabilities and stockholders' equity $160,300 $152,159 DOVER DOWNS GAMING & ENTERTAINMENT, INC. CONSOLIDATED STATEMENT OF CASH FLOWS In Thousands (Unaudited) Years Ended December 31, 2004 2003 Operating activities: Net earnings $16,381 $17,237 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation 6,791 6,287 Amortization of credit facility origination fees 62 31 Amortization of deferred compensation 67 - Deferred income taxes 165 1,116 Changes in assets and liabilities: Accounts receivable (1,005) 1,077 Due from State of Delaware (1,410) 954 Inventories (346) (647) Prepaid expenses and other 132 (1,068) Receivable from/payable to Dover Motorsports, Inc. (98) 371 Accounts payable (909) (575) Purses due horsemen 1,125 (1,709) Accrued liabilities 5,975 62 Income taxes payable 943 912 Deferred revenue (66) 130 Net cash provided by operating activities 27,807 24,178 Investing activities: Capital expenditures (6,329) (6,383) Net cash used in investing activities (6,329) (6,383) Financing activities: Borrowings from revolving debt 226,905 158,480 Repayments of revolving debt (206,180) (168,145) Dividends paid (6,098) (5,305) Repurchase of common stock (32,555) (1,523) Net cash used in financing activities (17,928) (16,493) Net increase in cash 3,550 1,302 Cash, beginning of year 14,138 12,836 Cash, end of year $17,688 $14,138 Source: Dover Downs Gaming & Entertainment, Inc. CONTACT: Timothy R. Horne, Sr. Vice President-Finance, Dover Downs Gaming & Entertainment, Inc., +1-302-857-3292 Web site: http://www.doverdowns.com/ ------- Profile: International Entertainment