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
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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
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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
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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
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No adjustments to net income available to common shareholders were required during the periods presented.
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
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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
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(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)
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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
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
|
| ARTICLE 5 |
| 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. |
| 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 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 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 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 16,102 |
| EPS BASIC | .45 |
| EPS DILUTED | .44 |