Page 1 of 11
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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 or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1131 North DuPont Highway, Dover, Delaware
(Address of principal executive offices)
19901
(Zip Code)
(302) 674-4600
(Registrant's telephone number, including area code)
----------------------------------
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Sections 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 [ ]
As of March 31, 2000, the number of shares of each class of
the registrant's common stock outstanding is as follows:
Common stock - 13,776,676 shares
Class A common stock - 23,650,985 shares
FORM 10-Q Page 2 of 11
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DOVER DOWNS ENTERTAINMENT, INC.
CONSOLIDATED STATEMENT OF EARNINGS
In Thousands, Except Per Share Amounts
(Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
Revenues:
Motorsports $ 1,071 $ 1,271 $ 34,723 $ 29,096
Gaming (including win) 42,718 35,405 124,910 99,885
43,789 36,676 159,633 128,981
Expenses:
Operating 34,177 28,241 115,369 92,210
Depreciation and amortization 2,161 1,584 6,099 5,212
General and administrative 2,972 2,628 9,201 8,219
39,310 32,453 130,669 105,641
Operating earnings 4,479 4,223 28,964 23,340
Interest expense, net 339 344 1,183 1,088
Earnings before income taxes 4,140 3,879 27,781 22,252
Income taxes 1,809 1,672 11,679 9,254
Net earnings $ 2,331 $ 2,207 $ 16,102 $ 12,998
Earnings per common share
- Basic $ .06 $ .06 $ .45 $ .37
- Diluted $ .06 $ .06 $ .44 $ .36
Average shares outstanding
- Basic 36,399 35,558 36,033 35,549
- Diluted 37,156 36,607 36,859 36,578
Dividends declared
per common share $ .045 $ .045 $ .135 $ .13
The Notes to the Consolidated Financial Statements are an integral part
of these statements.
FORM 10-Q Page 3 of 11
DOVER DOWNS ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEET
In Thousands, Except Share and Per Share Amounts
(Unaudited)
March 31, June 30,
ASSETS 2000 1999
Current assets:
Cash and cash equivalents $ 13,615 $ 10,847
Accounts receivable 8,993 6,706
Due from State of Delaware 2,241 2,932
Inventories 553 581
Prepaid income taxes 5,256 -
Prepaid expenses and other 7,295 4,456
Deferred income taxes 405 327
Total current assets 38,358 25,849
Property, plant and equipment, net 215,117 173,913
Other assets, net 1,381 1,453
Goodwill, net 53,034 53,997
Total assets $307,890 $255,212
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,418 $ 4,629
Purses due horsemen 2,972 3,147
Accrued liabilities 9,524 9,407
Income taxes payable - 2,726
Current portion of long-term debt 585 235
Deferred revenue 32,845 15,906
Total current liabilities 50,344 36,050
Notes payable to bank 18,500 15,500
Long-term debt 20,540 21,225
Other liabilities 174 172
Deferred income taxes 14,953 9,607
Commitments and contingencies (see Part II Legal Proceedings)
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: March - 13,776,676;
June - 11,403,684 1,377 1,140
Class A common stock, $.10 par value;
55,000,000 shares authorized; issued
and outstanding: March - 23,650,985;
June - 24,262,510 2,365 2,426
Additional paid-in capital 118,971 99,683
Retained earnings 80,666 69,409
Total shareholders' equity 203,379 172,658
Total liabilities and shareholders' equity $307,890 $255,212
The Notes to the Consolidated Financial Statements are an integral part
of these statements.
FORM 10-Q Page 4 of 11
DOVER DOWNS ENTERTAINMENT, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
In Thousands
(Unaudited)
Nine Months Ended
March 31,
2000 1999
Cash flows from operating activities:
Net earnings $16,102 $12,998
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 6,099 5,212
(Increase) decrease in assets:
Accounts receivable (2,287) (3,226)
Due from State of Delaware 691 715
Inventories 28 34
Prepaid expenses and other (2,839) (3,158)
Increase (decrease) in liabilities:
Accounts payable (211) (1,065)
Purses due horsemen (175) (798)
Accrued liabilities 117 (3,213)
Current and deferred income taxes (2,714) (4,576)
Deferred revenue 16,939 19,241
Net cash provided by operating activities 31,750 22,164
Cash flows from investing activities:
Capital expenditures (46,133) (29,343)
Other (125) -
Cash acquired in business acquisition - 1,490
Net cash used in investing activities (46,258) (27,853)
Cash flows from financing activities:
Proceeds from issuance of common stock, net 19,185 -
Borrowings on revolving debt, net 3,000 10,000
Repayment of long-term debt (335) (3,270)
Dividends paid (4,845) (4,613)
Loan repayments - 207
Proceeds of stock options exercised and other 271 22
Net cash provided by financing activities 17,276 2,346
Net increase (decrease) in cash and cash
equivalents 2,768 (3,343)
Cash and cash equivalents, beginning of period 10,847 18,694
Cash and cash equivalents, end of period $13,615 $15,351
Supplemental information:
Interest paid $ 1,650 $ 2,245
Income taxes paid $14,393 $14,556
Non-cash investing activities:
Stock issued for business acquisition - $80,241
The Notes to the Consolidated Financial Statements are an integral part
of these statements.
FORM 10-Q Page 5 of 11
DOVER DOWNS ENTERTAINMENT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and
generally accepted accounting principles, but do not include all of the
information and footnotes required for complete financial statements.
The statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the latest annual
report on Form 10-K for Dover Downs Entertainment, Inc. and its wholly
owned subsidiaries (the "Company"). In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation of results of operations, financial
position and cash flows have been included. Operating results for the
three months and nine months ended March 31, 2000 are not necessarily
indicative of the results that may be expected for the fiscal year
ending June 30, 2000.
Revenue Recognition
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.
Earnings Per Share
Pursuant to the provisions of Statement of Financial Accounting
Standards No. 128, "Earnings Per Share," the number of weighted average
shares used in computing basic and diluted earnings per share (EPS) are
as follows (in thousands):
Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
Basic EPS 36,399 35,558 36,033 35,549
Effect of Options 757 1,049 826 1,029
Diluted EPS 37,156 36,607 36,859 36,578
No adjustments to net income available to common shareholders were
required during the periods presented.
<PAGE>
FORM 10-Q Page 6 of 11
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
(in thousands):
Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
Revenues:
Motorsports $ 1,071 $ 1,271 $ 34,723 $ 29,096
Gaming 42,718 35,405 124,910 99,885
Consolidated Revenues $43,789 $36,676 $159,633 $128,981
Operating Earnings (Loss):
Motorsports $(4,175) $(3,426) $ 2,686 $ 1,852
Gaming 8,654 7,649 26,278 21,488
Consolidated Operating
Earnings $ 4,479 $ 4,223 $ 28,964 $ 23,340
March 31, 2000 June 30, 1999
Identifiable Assets:
Motorsports $252,645 $209,540
Gaming 55,245 45,672
Consolidated Assets $307,890 $255,212
Item 2.Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations: Three Months Ended March 31, 2000 vs. Three
Months Ended March 31, 1999
Revenues increased by $7,113,000 to $43,789,000 as a result of
growth in the historical business of the Company. Gaming revenues
increased by $7,313,000 or 20.7% to $42,718,000, primarily the result
of expanding the casino facility and increasing the number of video
lottery (slot) machines from an average of 1,133 in the third quarter
of fiscal 1999 to 1,781 during the third quarter of fiscal 2000, and
also from the results of expanded marketing and promotional activities
related to the Company's video lottery casino. Motorsports revenues
decreased by $200,000 due primarily to the expiration of a rental
agreement during the second quarter of fiscal 2000. The Company did
not promote any major motorsports events in the third quarter of fiscal
2000 or 1999.
Operating expenses increased by $5,936,000 reflecting the higher
gaming revenues. Amounts retained by the State of Delaware, fees to
the manager who operates the video lottery (slot) machine casino, 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 $3,269,000 in the
third quarter of fiscal 2000. Amounts allocated from the video lottery
operation for harness horse racing purses were $4,532,000 in the third
FORM 10-Q Page 7 of 11
quarter of fiscal 2000 compared with $3,754,000 in the third quarter of
fiscal 1999. Motorsports operating expenses for the third quarter of
fiscal 2000 remained consistent with the third quarter of fiscal 1999.
Depreciation and amortization increased by $577,000 due to capital
expenditures related to the Company's video lottery casino and
motorsports facilities expansion since the third quarter of fiscal
1999.
General and administrative expenses increased by $344,000 to
$2,972,000 from $2,628,000 in the third quarter of 1999 primarily due
to an increase in wages and related employee benefits.
The Company's effective income tax rates for the three-month periods
ended March 31, 2000 and 1999 were 43.7% and 43.1%, respectively.
Net earnings increased by $124,000 as a result of increased play in
the casino, offset by a slightly higher motorsports operating loss in
the quarter and higher depreciation expense.
Results of Operations: Nine Months Ended March 31, 2000 vs. Nine Months
Ended March 31, 1999
Revenues increased by $30,652,000 to $159,633,000 for the nine
months ended March 31, 2000. Gaming revenues increased by $25,025,000
or 25.1%, the result of having an average of 1,631 machines in the
first nine months of fiscal 2000 compared with an average of 1,086
machines in the first nine months of fiscal 1999, and also from the
results of expanded marketing and promotional activities related to the
Company's video lottery casino. Motorsports revenues increased by
$5,627,000 to $34,723,000. Approximately $1,280,000 of the increase
resulted from increased attendance, $573,000 from increased ticket
prices, and $3,021,000 from increased sponsorship, concession and
broadcast revenues for the Company's fall NASCAR weekend at Dover Downs
International Speedway. The remainder of the revenue increase is
primarily due to the addition of a Busch Grand National Division event
at Memphis Motorsports Park and an increase in admissions revenues for
the Busch Grand National Division event at Gateway International
Raceway. The aforementioned increases in motorsports revenues were
offset somewhat by a decrease in revenues related to the Indy Racing
League event at Dover Downs International Speedway in the first fiscal
quarter.
Operating expenses increased by $23,159,000 reflecting the higher
revenues. Amounts retained by the State of Delaware, fees to the
manager who operates the video lottery (slot) machine casino, 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 $11,733,000 in the first
nine months of fiscal 2000. Amounts allocated from the video lottery
operation for harness horse racing purses were $13,568,000 in the first
nine months of fiscal 2000 compared with $10,848,000 in the first nine
months of fiscal 1999. Motorsports operating expenses increased
primarily due to a $1,069,000 increase in the purse obligation expenses
related to the Fall NASCAR weekend at Dover Downs International
Speedway, the addition of a Busch Grand National Division event at
FORM 10-Q Page 8 of 11
Memphis Motorsports Park in October 1999 and advertising earlier in
fiscal 2000 for events in the Company's fourth fiscal quarter.
Depreciation and amortization increased by $887,000 due to capital
expenditures related to the Company's video lottery casino and
motorsports facilities expansion since the third quarter of fiscal
1999.
General and administrative expenses increased by $982,000 to
$9,201,000 from $8,219,000 in the first nine months of 1999 primarily
due to an increase in wages and related employee benefits.
The Company's effective income tax rates for the nine-month periods
ended March 31, 2000 and 1999 were 42.0% and 41.6%, respectively.
Net earnings increased by $3,104,000 primarily as a result of
increased play in the casino, higher attendance and related revenues as
well as an increase in the broadcast rights fees for the fall race at
Dover Downs International Speedway, and the addition of a Busch Grand
National Division event at Memphis Motorsports Park in the second
quarter of fiscal 2000.
Liquidity and Capital Resources
Cash flows from operations for the nine months ended March 31, 2000
and 1999 were $31,750,000 and $22,164,000, respectively. The reason
for the increase in operating cash flows was primarily the increase in
earnings before depreciation and amortization and the timing of
construction-related payments and certain tax payments.
Capital expenditures for the nine months ended March 31, 2000 were
$46,133,000. Approximately $18,915,000 related to the expansion of and
improvements to the auto racing facilities in Dover, Delaware;
Millington, Tennessee (near Memphis, Tennessee); and Madison, Illinois
(near St. Louis, Missouri), approximately $8,377,000 to the expansion
of the casino facility and construction of a hotel in Dover, Delaware,
and approximately $17,750,000 for the acquisition of land and other
construction costs related to the Nashville Superspeedway Complex.
On March 3, 2000, the Company completed the issuance of 1,500,000
additional shares of common stock through a public offering, resulting
in net proceeds to the Company of $19,185,000. Management used the
proceeds of the offering to pay down a portion of the Company's
revolving line of credit facility.
On November 1, 1999, the Company closed on a $125,000,000 amended
and restated revolving line of credit agreement with several banks.
The terms of the new agreement are essentially the same as those
contained in the previous agreement. There was $18,500,000 outstanding
under the credit facility at March 31, 2000. During the first nine
months of fiscal 2000, the Company capitalized $1,350,000 of interest
costs related to the construction of major facilities. The capitalized
interest will be amortized over the estimated useful life of the asset
to which it relates.
FORM 10-Q Page 9 of 11
In September of 1999, the Sports Authority of the County of Wilson,
Tennessee issued its Variable Rate Tax Exempt Infrastructure Revenue
Bonds, Series 1999 (the "Bonds") in the aggregate amount of
$25,900,000. The proceeds will be used to acquire, construct and
develop certain public infrastructure improvements in Wilson County,
Tennessee which will be beneficial to the operation of the
Superspeedway Complex the Company is developing through its wholly
owned subsidiary, Nashville Speedway, USA. Interest only payments are
required until September 1, 2002 and will be made from a Capitalized
Interest Fund established from Bond proceeds. Subsequent to the
opening of the Superspeedway Complex, the Bonds will be payable solely
from certain sales and incremental property taxes generated from the
Superspeedway Complex (the "Revenues"). In the event the Revenues are
insufficient to cover the payment of principal and interest on the
Bonds, payments will be made under a $26,326,000 irrevocable direct-pay
letter of credit issued by several banks (the "Banks") pursuant to a
Reimbursement and Security Agreement between Dover Downs Entertainment,
Inc. (the "Company") and the Banks whereby the Company has agreed to
reimburse the Banks for drawings made under the letter of credit.
Management believes that the net proceeds of the public offering
together with cash flows from operations and funds expected to be
available under its bank credit facility will satisfy the Company's
cash requirements for the remainder of fiscal 2000.
Year 2000 Issues
As of the filing date of this Form 10-Q, the Company's business
operations have not been materially impacted by Year 2000 ("Y2K")
matters. The Company will continue to monitor its operations for
possible Y2K information technology programming issues.
Forward-Looking Statements
The Company may make certain forward-looking statements in this Form
10-Q within the meaning of Section 21E of the Securities Exchange Act
of 1934, as amended, relating to the Company's financial condition,
profitability, liquidity, resources, business outlook, proposed
acquisitions, market forces, corporate strategies, consumer
preferences, contractual commitments, capital requirements and other
matters. The Private Securities Litigation Reform Act of 1995 provides
a safe harbor for forward-looking statements. 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
substantially from the anticipated results or other expectations
expressed in the Company's forward-looking statements. When words and
expressions such as: "believes," "expects," "anticipates," "estimates,"
"plans," "intends," "objectives," "goals," "aims," "projects,"
"forecasts," "possible," "seeks," "may," "could," "should," "might,"
"likely," "enable," or similar words or expressions are used in this
Form 10-Q, as well as statements containing phrases such as "in the
Company's view," "there can be no assurance," "although no assurance
can be given," or "there is no way to anticipate with certainty,"
forward-looking statements are being made in all of these instances.
FORM 10-Q Page 10 of 11
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 the Company's forward-looking statements, including the following
factors: the Company's growth strategies; the Company's development
and potential acquisition of new facilities; anticipated trends in the
motorsports and gaming industries; patron demographics; the Company's
ability to enter into additional contracts with sponsors, broadcast
media and race event sanctioning bodies; the Company's relationships
with sponsors; general market and economic conditions; the Company's
ability to finance future business requirements; the availability of
adequate levels of insurance; the ability to successfully integrate
acquired companies and businesses; management retention and
development; changes in Federal, state, and local laws and regulations,
including environmental and gaming license regulations; the affect of
weather conditions on outdoor event attendance; as well as the risks,
uncertainties and other factors described from time to time in the
Company's SEC filings and reports.
The Company undertakes no obligation to publicly update or revise
any forward-looking statements as a result of future developments,
events or conditions. New risk factors emerge from time to time and it
is not possible for the Company to predict all such risk factors, nor
can the Company assess the impact of all such risk factors on its
business or the extent to which any factor, or combination of factors,
may cause actual results to differ significantly from those forecast in
any forward-looking statements. Given these risks and uncertainties,
investors should not overly rely or attach undue weight to the
Company's forward-looking statements as an indication of its actual
future results.
PART II - OTHER INFORMATION
Item 1. 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 and is vigorously contesting the litigation. Based on
the advice of counsel, management believes that the litigation is
unlikely to succeed on its merits.
The Company is involved in other litigation incidental to the
ordinary operation of its business. Management is of the opinion,
based on the advice of counsel, that the litigation in which the
Company is involved will not have a material effect upon its results of
operations or financial position.
FORM 10-Q Page 11 of 11
Item 2. Changes in Securities and Use of Proceeds
During the third quarter of fiscal 2000, the Company sold 1,500,000
additional shares of common stock through a public offering, resulting
in net proceeds to the Company of $19,185,000. A Form S-3 Registration
Statement (No. 333-30060), as amended, was filed with the Securities
and Exchange Commission and became effective on March 3, 2000.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 3(i) - Restated Certificate of Incorporation of Dover
Downs Entertainment, Inc. dated March 10, 2000.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements 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.
DATE: April 28, 2000 Dover Downs Entertainment, Inc.
(Registrant)
/s/ Denis McGlynn
Denis McGlynn
President and Chief Executive Officer
/s/ Timothy R. Horne
Timothy R. Horne
Vice President-Finance
Chief Financial Officer
(Principal Financial and Accounting Officer)
RESTATED CERTIFICATE OF INCORPORATION
OF
DOVER DOWNS ENTERTAINMENT, INC.
It is hereby certified that:
1. (a) The present name of the corporation (hereinafter
called the "Corporation") is Dover Downs Entertainment, Inc.
(b) The name under which the Corporation was originally
incorporated is Dover Downs Investors, Inc.; and the date of filing the
original certificate of incorporation of the Corporation with the
Secretary of State of the State of Delaware is August 1, 1994.
2. The provisions of the certificate of incorporation of
the Corporation as heretofore amended and/or supplemented, are hereby
restated and integrated into the single instrument which is hereinafter
set forth, and which is entitled Restated Certificate of Incorporation
of Dover Downs Entertainment, Inc., without further amendment and
without any discrepancy between the provisions of the certificate of
incorporation as heretofore amended and supplemented and the provisions
of the said single instrument hereinafter set forth.
3. The Board of Directors of the Corporation has duly
adopted this Restated Certificate of Incorporation pursuant to the
provisions of Section 245 of the General Corporation Law of the State
of Delaware in the form set forth as follows:
"RESTATED CERTIFICATE OF INCORPORATION
OF
DOVER DOWNS ENTERTAINMENT, INC.
FIRST: The name of the Corporation is DOVER DOWNS
ENTERTAINMENT, INC.
SECOND: The registered office of the Corporation within the
State of Delaware remains 2200 Concord Pike, City of Wilmington, 19803,
County of New Castle.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a Corporation may be organized under
the General Corporation Law of Delaware.
FOURTH: (a) Authorized Capital Stock. The total number of
shares of stock which the Corporation shall have the authority to issue
is 131,000,000 shares, consisting of: 75,000,000 shares of Common
Stock, which shares shall have a par value of $.10 per share;
55,000,000 shares of Class A Common Stock, which shares shall have a
par value of $.10 per share; and 1,000,000 shares of Preferred Stock,
which shares shall have a par value of $.10 per share.
(b) Common Stock. The designations, preferences,
privileges, and voting powers of the shares of each class of common
stock and the restrictions or qualifications thereof are as follows:
(i) Voting. The Common Stock and
the Class A Common Stock shall have the
right to vote upon all matters which may
come before the stockholders, except
that the holders of Class A Common Stock
shall have ten (10) votes per share and
the holders of Common Stock shall have
one (1) vote per share, provided further
that the holders of Common Stock and
Class A Common Stock shall be entitled
to vote as separate classes on all
matters as to which a class vote is
required by law.
(ii) Dividends. Each share of
Common Stock and Class A Common Stock
shall be entitled to participate equally
in any dividends (other than dividends
of common stock) which may be declared
upon common stock; provided that the
Board of Directors of the Corporation
shall have discretionary authority to
declare greater cash dividends on the
Common Stock; and provided further, that
in the case of all dividends in common
stock of this Corporation or stock
split-ups, the Common Stock shall be
entitled only to receive Common Stock
and the Class A Common Stock shall be
entitled only to receive Class A Common
Stock.
(iii) Conversion. Shares of
Class A Common Stock shall be
convertible at any time and from time to
time at the option of the holder thereof
into shares of Common Stock at the rate
of one share of Class A Common Stock for
one share of Common Stock. In order to
exercise the conversion privilege, the
holder of any shares of Class A Common
Stock shall surrender the certificate or
certificates for such shares accompanied
by proper instrument of surrender to the
Corporation at its principal office.
The certificate or certificates for such
shares of Class A Common Stock shall
also be accompanied by written notice to
the effect that the holder elects to
convert such shares of Class A Common
Stock and stating the name or names to
which the certificate or certificates
for shares of Common Stock which shall
be issuable on such conversion shall be
issued. As promptly as practicable
after the receipt of such notice and the
surrender of such shares of Class A
Common Stock, the Corporation's Transfer
Agent shall issue and deliver to such
holder or to the written order of such
holder a certificate or certificates for
the number of shares of Common Stock
issuable upon conversion of such shares
of Class A Common Stock. Such
conversion shall be deemed to have been
effected on the date on which such
notice shall have been received by the
Corporation and such Class A Common
Stock shall have been surrendered as
hereinbefore provided. The shares of
Class A Common Stock so converted shall
not be reissued and shall be retired and
cancelled as provided by law. All
shares of Common Stock which may be
issued upon conversion of the Class A
Common Stock shall, upon issuance, be
validly issued, fully paid, and non-
assessable by the Corporation.
(iv) Certain Changes. In case of
the issuance of any shares of stock as a
dividend upon the shares of Common Stock
or the shares of Class A Common Stock or
in the case of any subdivision, split-
up, combination, or change of the shares
of Common Stock or shares of Class A
Common Stock into a different number of
shares of the same or any other class or
classes of stock, the conversion rate in
clause (iii) above shall be
appropriately adjusted so that the
rights of the holders of Common Stock
and of Class A Common Stock shall not be
diluted as a result of such stock
dividend, subdivision, split-up,
combination, or change. Adjustments in
the rate of conversion shall be
calculated to the nearest 1/10 of a
share. The Corporation shall not be
required to issue fractions of shares of
Common Stock upon conversion of Class A
Common Stock. If any fractional
interest in a share of Common Stock
shall be deliverable upon the conversion
of any shares of Class A Common Stock,
the Corporation may purchase such
fractional interest for an amount in
cash equal to the current market value
of such fractional interest.
(v) Common Stock Protection in the
Event of Merger or Consolidation. In
the event of a merger or consolidation
of the Corporation, with or into another
entity (whether or not the Corporation
is the surviving entity), the holders of
Common Stock and Class A Common Stock
shall be entitled to receive the same
per share consideration in such merger
or consolidation.
(vi) Distributions. In the event
the Corporation shall be liquidated
(either partial or complete), dissolved
or wound up, whether voluntarily or
involuntarily, the holders of the Common
Stock and the Class A Common Stock shall
be entitled to share ratably, as a
single class, in the remaining net
assets of the Corporation.
(vii) Preemptive Rights Denied.
No holder of shares of any class of
common stock of the Corporation shall
possess any preemptive right to acquire
additional shares of any class or
treasury shares of the Corporation, or
obligations of the Corporation
convertible into such shares, whether
now or hereafter authorized.
(viii) Purchase of Shares. The
Corporation shall have the authority to
purchase any amount of Common Stock or
Class A Common Stock upon such terms and
conditions as the Board of Directors
shall from time to time, in its
discretion, determine, without regard to
any differences in price or other terms
under which such shares may be
purchased.
(ix) Sufficient Shares Reserved. So
long as any shares of Class A Common
Stock are outstanding, the Corporation
shall reserve and keep available out of
its duly authorized but unissued stock,
for the purpose of effecting the
conversion of the Class A Common Stock
as hereinabove provided, such number of
its duly authorized shares of Common
Stock and other securities as shall from
time to time be sufficient to effect the
conversion of all outstanding shares of
Class A Common Stock.
(c) Preferred Stock. All preferred stock authorized
for issuance by the Corporation may be issued in series or without
series from time to time with the designations, preferences, and
relative, participating, optional or other special rights of the class
or series of the class fixed by resolution or resolutions of the Board
of Directors. Such resolutions may also provide for the convertibility
of the preferred stock or any series thereof into any other classes of
stock of the Corporation, including the common stock, upon such terms
and ratios as shall be determined by the Board of Directors.
FIFTH: Special meetings of the stockholders may be called at
any time by the Chairman of the Board of Directors, the Vice Chairman
of the Board of Directors, the President or the Chairman of the
Executive Committee of the Board of Directors and not by any other
person.
SIXTH: The following provisions are inserted for the management
of the business and for the conduct of the affairs of the Corporation,
and for further definition, limitation and regulation of the powers of
the Corporation and of its directors and stockholders:
(1) Election of directors need not be by ballot unless
the by-laws so provide.
(2) The Board of Directors shall have power without the
assent or vote of the stockholders to make, alter, amend, change, add
to or repeal the by-laws of the Corporation; to fix and vary the amount
to be reserved for any proper purpose; to authorize and cause to be
executed mortgages and liens upon all or any part of the property of
the Corporation; to determine the use and disposition of any surplus or
net profits; and to fix the times for the declaration and payment of
dividends. The stockholders may make, alter or repeal any by-law
whether or not adopted by them, provided however, that any such
additional by-laws, alterations or repeal may be adopted only by the
affirmative vote of the holders of 75% or more of the outstanding
shares of capital stock of the Corporation entitled to vote generally
in the election of directors (considered for this purpose as one
class), unless such additional by-laws, alterations or repeal shall
have been recommended to the stockholders for adoption by a majority of
the Board of Directors, in which event such additional by-laws,
alterations or repeal may be adopted by the affirmative vote of the
holders of a majority of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class).
(3) The directors in their discretion may submit any
contract or act for approval or ratification at any annual meeting of
the stockholders or at any meeting of the stockholders called for the
purpose of considering any such act or contract, and any contract or
act that shall be approved or be ratified by the vote of the holders of
a majority of the stock of the Corporation which is represented in
person or by proxy at such meeting and entitled to vote thereat
(provided that a lawful quorum of stockholders be there represented in
person or by proxy) shall be as valid and as binding upon the
Corporation and upon all the stockholders as though it had been
approved or ratified by every stockholder of the Corporation, whether
or not the contract or act would otherwise be open to legal attack
because of directors' interest, or for any other reason.
(4) In addition to the powers and authorities
hereinbefore or by statute expressly conferred upon them, the directors
are hereby empowered to exercise all such powers and do all such acts
and things as may be exercised, or done by the Corporation; subject,
nevertheless, to the provisions of the statutes of Delaware, of this
Certificate, and to any by-laws from time to time made by the
stockholders; provided, however, that no by-laws so made shall
invalidate any prior act of the directors which would have been valid
if such by-laws had not been made.
SEVENTH: The property and business of the Corporation shall be
managed by a Board of up to ten directors. The directors shall be
divided into three classes. The first class (Class I) shall consist of
four (4) directors and the term of office of such class shall expire at
the Annual Meeting of Stockholders in 2000. The second class (Class
II) shall consist of three (3) directors and the term of office of such
class shall expire at the Annual Meeting of Stockholders in 1998. The
third class (Class III) shall consist of three (3) directors and the
term of office of such class shall expire at the Annual Meeting of
Stockholders in 1999. At each annual election, commencing at the next
Annual Meeting of Stockholders in 1998, the successors of the class of
directors whose term expires at that time shall be elected to hold
office for the term of three years to succeed those whose term expires,
so that the term of office of one class of directors shall expire in
each year. Each director shall hold office for the term for which he
is elected or appointed or until his successor shall be elected and
qualified, or until his death or until he shall resign. Directors need
not be stockholders nor residents of the State of Delaware.
Notwithstanding any of the provisions of this
Certificate of Incorporation or the by-laws of the Corporation (and
notwithstanding the fact that some lesser percentage may be specified
by law, this Certificate of Incorporation or the by-laws of the
Corporation), any director or the entire Board of Directors of the
Corporation may be removed at any time, but only for cause, and only at
a meeting of the stockholders called for that purpose by the
affirmative vote of the holders of 75% or more of the shares of the
Corporation entitled to vote at an election of directors.
Nominations for the election of directors may be made by
the Board of Directors or by any stockholder entitled to vote for the
election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail, postage
prepaid, to the secretary of the Corporation not less than 14 days nor
more than 60 days prior to any meeting of the stockholders called for
the election of directors; provided, however, that if less than 21
days' notice of the meeting is given to stockholders, such written
notice shall be delivered or mailed, as prescribed, to the Secretary of
the Corporation not later than the close of business on the seventh day
following the day on which notice of the meeting was mailed to
stockholders. Notice of nominations which are proposed by the Board of
Directors shall be given by the Chairman on behalf of the Board.
Each such notice shall set forth (i) the name, age,
business address and, if known, residence address of each nominee
proposed in such notice, (ii) the principal occupation or employment of
each such nominee and (iii) the number of shares of stock of the
Corporation which are beneficially owned by each such nominee.
The Chairman of the meeting may, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and, if he should so
determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
EIGHTH: (a) (1) In addition to any affirmative vote required
by law, and except as otherwise expressly provided in sections (b) and
(c) of this Article EIGHTH:
(A) any merger or consolidation of the Corporation
or any Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any other
corporation (whether or not itself an Interested Stockholder) which,
after such merger or consolidation, would be an Affiliate (as
hereinafter defined) of an Interested Stockholder; or
(B) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a series of
related transactions) to or with an Interested Stockholder, or an
Affiliate of any Interested Stockholder, of any assets of the
Corporation or any Subsidiary having an aggregate fair market value of
$5,000,000 or more; or
(C) the issuance or transfer by the Corporation or
any Subsidiary (in one transaction or a series of related transactions)
of any securities of the Corporation to any Interested Stockholder, or
any Affiliate of any Interested Stockholder, in exchange of cash,
securities or other property (or a combination thereof) having an
aggregate fair market value of $5,000,000 or more; or
(D) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation; or
(E) any reclassification of securities (including
any reverse stock split), or recapitalization of the Corporation, or
any merger or consolidation of the Corporation with any of its
Subsidiaries or any similar transaction (whether or not with or into or
otherwise involving an Interested Stockholder) which has the effect,
directly or indirectly, of increasing the proportionate share of the
outstanding shares of any class of equity or convertible securities of
the
<PAGE>
Corporation or any Subsidiary which is directly or indirectly owned by
any Interested Stockholder, or any Affiliate of any Interested
Stockholder;
shall require the affirmative vote of the
holders of at least 75% of the outstanding shares of capital stock of
the Corporation entitled to vote generally in the election of
directors, considered for the purpose of this Article EIGHTH as one
class ("Voting Shares"). Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any
national securities exchange or otherwise.
(2) The term "business combination" as used in this
Article EIGHTH shall mean any transaction which is referred to in any
one or more of clauses (A) through (E) of paragraph (1) of this section
(a).
(b) The provisions of section (a) of this Article EIGHTH
shall not be applicable to any particular business combination and such
business combination shall require only such affirmative vote as is
required by law and any other provisions of the Certificate of
Incorporation or by-laws if such business combination has been approved
by a majority of the whole Board.
(c) For the purposes of this Article EIGHTH:
(1) A "person" shall mean any individual, firm,
corporation or other entity.
(2) "Interested Stockholder" shall mean, in respect of
any business combination, any person (other than the Corporation or any
Subsidiary) who or which, as of the record date for the determination
of stockholders entitled to notice of and to vote on such business
combination, or immediately prior to the consummation of any such
transaction:
(A) is the beneficial owner, directly or
indirectly, of more than 20% of the Voting Shares; or
(B) is an Affiliate of the Corporation and at any
time within two years prior thereto was the beneficial owner, directly
or indirectly, of not less than 20% of the then outstanding Voting
Shares; or
(C) is an assignee of or has otherwise succeeded
to any shares of capital stock of the Corporation which were at any
time within two years prior thereto beneficially owned by any
Interested Stockholder, and such assignment or succession shall have
occurred in the course of a transaction or series of transactions not
involving a public offering within the meaning of the Securities Act of
1933.
Provided, however, that no person who on the date of the adoption of
this Article EIGHTH would otherwise be an "Interested Stockholder" as
defined in this subsection 2 shall be deemed to be an "Interested Stockholder".
(3) A person shall be the "beneficial owner" of any
Voting Shares:
(A) which such person or any of its Affiliates and
Associates (as hereinafter defined) beneficially own, directly or
indirectly, or
(B) which such person or any of its Affiliates or
Associates has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time), pursuant to
any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise,
or (ii) the right to vote pursuant to any agreement, arrangement or
understanding, or
(C) which are beneficially owned, directly or
indirectly, by any other person with which such first mentioned person
or any or its Affiliates or Associates has any agreement, arrangement
or understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares
deemed owned through application of paragraph (3) above but shall not
include any other Voting Shares which may be issuable pursuant to any
agreement, or upon exercise of conversion rights, warrants or options
or otherwise.
(5) "Affiliate" and "Associate" shall have the
respective meanings given those terms in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of 1934 as in
effect on the date of the adoption of this provision.
(6) "Subsidiary" shall mean any corporation of which a
majority of any class of equity security (as defined in Rule 3a11-1 of
the General Rules and Regulations under the Securities Exchange Act of
1934 as in effect on the date of the adoption of this provision), is
owned, directly or indirectly, by the Corporation; provided, however,
that for the purposes of the definition of Interested Stockholder set
forth in paragraph (2) of this section (c), the term "Subsidiary" shall
mean only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) A majority of the directors shall have the power and
duty to determine for the purposes of this Article EIGHTH on the basis
of information known to them, (1) the number of Voting Shares
beneficially owned by any person, (2) whether a person is an Affiliate
or Associate of another, (3) whether a person has an agreement,
arrangement or understanding with another as to the matters referred to
in paragraph (3) of section (c), or (4) whether the assets subject to
any business combination or the consideration received for the issuance
or transfer of securities by the Corporation or any Subsidiary has an
aggregate fair market value of $5,000,000 or more.
(e) Nothing contained in this Article EIGHTH shall be
construed to relieve any Interested Stockholder from any fiduciary
obligation imposed by law.
NINTH: Notwithstanding anything contained in this Certificate
of Incorporation to the contrary, the affirmative vote of the holders
of at least 75% of the shares of the Corporation then entitled to be
voted in an election of directors shall be required to amend or repeal,
or to adopt any provision inconsistent with Articles FIFTH, SIXTH,
SEVENTH, EIGHTH, or NINTH of this Certificate of Incorporation, except
that only the affirmative vote of the holders of a simple majority of
the shares of the Corporation then entitled to be voted in an election
of directors shall be required to amend or repeal, or to adopt any
provision inconsistent with Articles FIFTH, SIXTH, or SEVENTH of this
Certificate of Incorporation if such amendment, repeal or adoption
shall have been approved by a majority of the members of the Board of
Directors.
TENTH: No director of the Corporation shall be personally
liable to the Corporation or its shareholders for monetary damages for
breach of fiduciary duty as a director; provided, however, that the
foregoing clause shall not apply to any liability of a director (i) for
any breach of the director's duty of loyalty to the Corporation or its
shareholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which the director derived
an improper personal benefit. This Article Tenth shall not eliminate
or limit the liability of a director for any act or omission occurring
prior to the time this Article Tenth became effective."
IN WITNESS WHEREOF, this Restated Certificate of Incorporation is
executed this 10th day of March, 2000.
Dover Downs Entertainment, Inc.
By: /s/ Klaus M. Belohoubek
Klaus M. Belohoubek
Vice President - General Counsel
and Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DOVER
DOWNS ENTERTAINMENT, INC. CONSOLIDATED STATEMENT OF EARNINGS FOR THE NINE MONTHS
ENDED MARCH 31, 2000, AND THE DOVER DOWNS ENTERTAINMENT, INC. CONSOLIDATED
BALANCE SHEET AS OF MARCH 31, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 13,615
<SECURITIES> 0
<RECEIVABLES> 11,234
<ALLOWANCES> 0
<INVENTORY> 553
<CURRENT-ASSETS> 38,358
<PP&E> 243,411
<DEPRECIATION> 28,294
<TOTAL-ASSETS> 307,890
<CURRENT-LIABILITIES> 50,344
<BONDS> 39,040
0
0
<COMMON> 3,742
<OTHER-SE> 199,637
<TOTAL-LIABILITY-AND-EQUITY> 307,890
<SALES> 159,633
<TOTAL-REVENUES> 159,633
<CGS> 0
<TOTAL-COSTS> 121,468
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,183
<INCOME-PRETAX> 27,781
<INCOME-TAX> 11,679
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
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<NET-INCOME> 16,102
<EPS-BASIC> .45
<EPS-DILUTED> .44
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