Dover Motorsports Inc. (DVD, Financial) filed Quarterly Report for the period ended 2009-06-30.
Dover Motorsports Inc. is a leading promoter of motorsports events in the United States. Its motorsports subsidiaries operate motorsports tracks and promote motorsports events under the auspices of four of the premier sanctioning bodies in motorsports-- NASCAR CART IRL and NHRA. The Company owns and operates Dover International Speedway in Dover DE; the new Nashville Superspeedway near Nashville TN; Gateway International Raceway near St. Louis MO; and Memphis Motorsports Park near Memphis TN. Dover Motorsports Inc. has a market cap of $50.2 million; its shares were traded at around $1.37 with a P/E ratio of 137 and P/S ratio of 0.6. Dover Motorsports Inc. had an annual average earning growth of 12.3% over the past 10 years.
Net cash used in financing activities was $9,281,000 for the six months ended June 30, 2009 as compared to net cash provided by financing activities of $2,004,000 for the six months ended June 30, 2008. We had net repayments on our outstanding line of credit of $7,400,000 in the first six months of 2009. We had an increase in borrowings on our line of credit of $3,100,000 in the first six months of 2008. Our ability to repay our line of credit in the second quarter of 2009 was primarily due to the aforementioned timing of the receipt of our broadcast revenue. Repayments of our outstanding SWIDA bonds were $1,129,000 for the first six months of 2009 as compared to $110,000 for the first six months of 2008. We paid $733,000 in cash dividends in the first six months of 2009 as compared to $1,092,000 in the first six months of 2008. During the first six months of 2009 and 2008, we purchased and retired 12,785 and 20,877 shares of our common stock at an average purchase price of $1.51 and $6.56 per share, respectively.
Effective October 21, 2005, we entered into an interest rate swap agreement that effectively converted $37,500,000 of our variable-rate debt to a fixed-rate basis, thereby hedging against the impact of potential interest rate changes. The notional amount of the swap agreement decreased to $30,000,000 on November 1, 2006, to $20,000,000 on November 1, 2007, and to $10,000,000 on November 1, 2008. The agreement terminates on November 1, 2009. Under this agreement, we pay a fixed interest rate of 4.74%. In return, the issuing lender refunds to us the variable-rate interest paid to the bank group under our revolving credit agreement on the same notional principal amount, excluding the margin that varies between 125 and 200 basis points depending on the leverage ratio (200 basis points at June 30, 2009).
Cash provided by operating activities is expected to substantially fund our capital expenditures. Based on current business conditions, we expect to spend approximately $2,000,000 on capital expenditures during 2009. These expenditures primarily relate to our Monster Makeover project. On May 24, 2006, we announced plans for a five-year capital improvement project, referred to as the Monster Makeover, that will provide new offerings and upgraded amenities for fans, competitors and the media. The project is expected to take up to five years to complete at an estimated total cost of approximately $25,000,000 to $30,000,000, of which approximately $21,000,000 was spent as of June 30, 2009. We continue to review the amount and timing of capital expenditures in light of our current earnings level. Additionally, we expect to contribute between $300,000 and $650,000 to our pension plans in 2009 in order to satisfy minimum statutory funding requirements, of which $90,000 was contributed during the six months ended June 30, 2009. We expect continued cash flows from operating activities and funds available from our credit agreement to provide for our working capital needs and capital spending requirements at least through the next twelve months, as well as any cash dividends our Board of Directors may declare, and also provide for our long-term liquidity.
In September 1999, the Sports Authority of the County of Wilson (Tennessee) issued $25,900,000 in Variable Rate Tax Exempt Infrastructure Revenue Bonds, Series 1999, to acquire, construct and develop certain public infrastructure improvements which benefit the operation of Nashville Superspeedway, of which $22,300,000 was outstanding at June 30, 2009. Annual principal payments range from $600,000 in September 2009 to $1,600,000 in 2029 and are payable solely from sales taxes and incremental property taxes generated from the facility. These bonds are direct obligations of the Sports Authority and are therefore not recorded on our consolidated balance sheet. If the sales taxes and incremental property taxes are insufficient for the payment of principal and interest on the bonds, we would become responsible for the difference. We are exposed to fluctuations in interest rates for these bonds. A significant increase in interest rates could result in us being responsible for debt service payments not covered by the sales and incremental property taxes generated from the facility. In the event we were unable to make the payments, they would be made pursuant to a $22,674,000 irrevocable direct-pay letter of credit issued by our bank group.
We believe that the sales taxes and incremental property taxes generated from the facility will continue to satisfy the necessary debt service requirements of the bonds through the maturity date in 2029. As of June 30, 2009 and December 31, 2008, $1,446,000 and $549,000, respectively, was available in the sales and incremental property tax fund maintained by the Sports Authority to pay the remaining principal and interest due under the bonds. During the year ended December 31, 2008, we paid $1,165,000 into the sales and incremental property tax fund and $1,151,000 was deducted from the fund for principal and interest payments. If the debt service is not satisfied from the sales and incremental property taxes generated from the facility, a portion of the bonds would become our liability. If we fail to maintain the letter of credit that secures the bonds or we allow an uncured event of default to exist under our reimbursement agreement relative to the letter of credit, the bonds would be immediately redeemable.
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Dover Motorsports Inc. is a leading promoter of motorsports events in the United States. Its motorsports subsidiaries operate motorsports tracks and promote motorsports events under the auspices of four of the premier sanctioning bodies in motorsports-- NASCAR CART IRL and NHRA. The Company owns and operates Dover International Speedway in Dover DE; the new Nashville Superspeedway near Nashville TN; Gateway International Raceway near St. Louis MO; and Memphis Motorsports Park near Memphis TN. Dover Motorsports Inc. has a market cap of $50.2 million; its shares were traded at around $1.37 with a P/E ratio of 137 and P/S ratio of 0.6. Dover Motorsports Inc. had an annual average earning growth of 12.3% over the past 10 years.
Highlight of Business Operations:
Net cash used in investing activities was $490,000 for the six months ended June 30, 2009 as compared to $5,857,000 for the six months ended June 30, 2008. Capital expenditures were $1,817,000 in the first six months of 2009, down from $6,082,000 in the first six months of 2008. The 2009 additions related primarily to the Monster Makeover project, including racetrack improvements at our Dover facility. The 2008 additions also related primarily to the Monster Makeover project, including the construction of a new entranceway, fan zone and medical center placed in service in the second quarter of 2008, and the renovation and construction of other fan amenities at our Dover facility. Changes in our restricted cash accounts were $1,325,000 and $275,000 for the six month periods ended June 30, 2009 and 2008, respectively.Net cash used in financing activities was $9,281,000 for the six months ended June 30, 2009 as compared to net cash provided by financing activities of $2,004,000 for the six months ended June 30, 2008. We had net repayments on our outstanding line of credit of $7,400,000 in the first six months of 2009. We had an increase in borrowings on our line of credit of $3,100,000 in the first six months of 2008. Our ability to repay our line of credit in the second quarter of 2009 was primarily due to the aforementioned timing of the receipt of our broadcast revenue. Repayments of our outstanding SWIDA bonds were $1,129,000 for the first six months of 2009 as compared to $110,000 for the first six months of 2008. We paid $733,000 in cash dividends in the first six months of 2009 as compared to $1,092,000 in the first six months of 2008. During the first six months of 2009 and 2008, we purchased and retired 12,785 and 20,877 shares of our common stock at an average purchase price of $1.51 and $6.56 per share, respectively.
Effective October 21, 2005, we entered into an interest rate swap agreement that effectively converted $37,500,000 of our variable-rate debt to a fixed-rate basis, thereby hedging against the impact of potential interest rate changes. The notional amount of the swap agreement decreased to $30,000,000 on November 1, 2006, to $20,000,000 on November 1, 2007, and to $10,000,000 on November 1, 2008. The agreement terminates on November 1, 2009. Under this agreement, we pay a fixed interest rate of 4.74%. In return, the issuing lender refunds to us the variable-rate interest paid to the bank group under our revolving credit agreement on the same notional principal amount, excluding the margin that varies between 125 and 200 basis points depending on the leverage ratio (200 basis points at June 30, 2009).
Cash provided by operating activities is expected to substantially fund our capital expenditures. Based on current business conditions, we expect to spend approximately $2,000,000 on capital expenditures during 2009. These expenditures primarily relate to our Monster Makeover project. On May 24, 2006, we announced plans for a five-year capital improvement project, referred to as the Monster Makeover, that will provide new offerings and upgraded amenities for fans, competitors and the media. The project is expected to take up to five years to complete at an estimated total cost of approximately $25,000,000 to $30,000,000, of which approximately $21,000,000 was spent as of June 30, 2009. We continue to review the amount and timing of capital expenditures in light of our current earnings level. Additionally, we expect to contribute between $300,000 and $650,000 to our pension plans in 2009 in order to satisfy minimum statutory funding requirements, of which $90,000 was contributed during the six months ended June 30, 2009. We expect continued cash flows from operating activities and funds available from our credit agreement to provide for our working capital needs and capital spending requirements at least through the next twelve months, as well as any cash dividends our Board of Directors may declare, and also provide for our long-term liquidity.
In September 1999, the Sports Authority of the County of Wilson (Tennessee) issued $25,900,000 in Variable Rate Tax Exempt Infrastructure Revenue Bonds, Series 1999, to acquire, construct and develop certain public infrastructure improvements which benefit the operation of Nashville Superspeedway, of which $22,300,000 was outstanding at June 30, 2009. Annual principal payments range from $600,000 in September 2009 to $1,600,000 in 2029 and are payable solely from sales taxes and incremental property taxes generated from the facility. These bonds are direct obligations of the Sports Authority and are therefore not recorded on our consolidated balance sheet. If the sales taxes and incremental property taxes are insufficient for the payment of principal and interest on the bonds, we would become responsible for the difference. We are exposed to fluctuations in interest rates for these bonds. A significant increase in interest rates could result in us being responsible for debt service payments not covered by the sales and incremental property taxes generated from the facility. In the event we were unable to make the payments, they would be made pursuant to a $22,674,000 irrevocable direct-pay letter of credit issued by our bank group.
We believe that the sales taxes and incremental property taxes generated from the facility will continue to satisfy the necessary debt service requirements of the bonds through the maturity date in 2029. As of June 30, 2009 and December 31, 2008, $1,446,000 and $549,000, respectively, was available in the sales and incremental property tax fund maintained by the Sports Authority to pay the remaining principal and interest due under the bonds. During the year ended December 31, 2008, we paid $1,165,000 into the sales and incremental property tax fund and $1,151,000 was deducted from the fund for principal and interest payments. If the debt service is not satisfied from the sales and incremental property taxes generated from the facility, a portion of the bonds would become our liability. If we fail to maintain the letter of credit that secures the bonds or we allow an uncured event of default to exist under our reimbursement agreement relative to the letter of credit, the bonds would be immediately redeemable.
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