Dover Downs Gaming & Entertainment 10-Q 4 May 17 2017 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2017	Apr. 24, 2017
Entity Registrant Name	DOVER DOWNS GAMING & ENTERTAINMENT INC
Entity Central Index Key	1,162,556
Document Type	10-Q
Document Period End Date	Mar. 31, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Document Fiscal Year Focus	2,017
Document Fiscal Period Focus	Q1
Common Stock | Common Stock
Entity Common Stock, Shares Outstanding		18,283,009
Common Stock | Class A Common Stock
Entity Common Stock, Shares Outstanding		14,869,623

CONSOLIDATED STATEMENTS OF OPER

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Revenues:
Gaming	$ 38,647	$ 39,358
Other operating	5,501	5,359
Total revenues	44,148	44,717
Expenses:
Gaming	36,869	37,495
Other operating	3,950	3,973
General and administrative	1,331	1,328
Depreciation	1,946	1,887
Total expenses	44,096	44,683
Operating earnings	52	34
Interest expense	(209)	(229)
Loss before income taxes	(157)	(195)
Income tax expense	(27)	(44)
Net loss	(184)	(239)
Change in pension net actuarial loss and prior service cost, net of income taxes	31	20
Unrealized (loss) gain on available-for-sale securities, net of income taxes	(2)	2
Comprehensive loss	$ (155)	$ (217)
Net loss per common share:
Basic (in dollars per share)	$ (0.01)	$ (0.01)
Diluted (in dollars per share)	$ (0.01)	$ (0.01)

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Current assets:
Cash	$ 10,802	$ 11,677
Accounts receivable	2,815	3,507
Due from State of Delaware	1,889	7,285
Inventories	2,107	1,910
Prepaid expenses and other	2,134	2,365
Receivable from Dover Motorsports, Inc.	8	7
Income taxes receivable	242	221
Total current assets	19,997	26,972
Property and equipment, net	139,155	140,714
Other assets	584	594
Deferred income taxes	2,004	2,020
Total assets	161,740	170,300
Current liabilities:
Accounts payable	3,932	3,749
Purses due horsemen	2,084	7,649
Accrued liabilities	8,018	9,732
Deferred revenue	485	361
Revolving line of credit	24,000	25,250
Total current liabilities	38,519	46,741
Liability for pension benefits	7,660	7,897
Total liabilities	46,179	54,638
Commitments and contingencies (see Notes to the Consolidated Financial Statements)
Stockholders' equity:
Preferred stock, $0.10 par value; 1,000,000 shares authorized; shares issued and outstanding: none
Additional paid-in capital	5,709	5,669
Retained earnings	111,104	111,288
Accumulated other comprehensive loss	(4,567)	(4,596)
Total stockholders' equity	115,561	115,662
Total liabilities and stockholders' equity	161,740	170,300
Common Stock | Common Stock
Stockholders' equity:
Common stock	1,828	1,814
Total stockholders' equity	1,828	1,814
Common Stock | Class A Common Stock
Stockholders' equity:
Common stock	1,487	1,487
Total stockholders' equity	$ 1,487	$ 1,487

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Mar. 31, 2017	Dec. 31, 2016
Preferred stock, par value (in dollars per share)	$ 0.10	$ 0.10
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common Stock | Common Stock
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10
Common stock, shares authorized	74,000,000	74,000,000
Common stock, shares issued	18,283,009	18,144,992
Common stock, shares outstanding	18,283,009	18,144,992
Common Stock | Class A Common Stock
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	14,869,623	14,869,623
Common stock, shares outstanding	14,869,623	14,869,623

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Operating activities:
Net loss	$ (184)	$ (239)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation	1,946	1,887
Amortization of credit facility origination fees	13	26
Stock-based compensation	128	103
Deferred income taxes	(3)	46
Changes in assets and liabilities:
Accounts receivable	692	(129)
Due from State of Delaware	5,396	5,289
Inventories	(197)	(26)
Prepaid expenses and other	226	559
Receivable from/payable to Dover Motorsports, Inc.	(1)	(54)
Income taxes receivable	(21)	28
Accounts payable	370	562
Purses due horsemen	(5,565)	(4,723)
Accrued liabilities	(1,714)	(848)
Deferred revenue	124	95
Liability for pension benefits	(186)	(149)
Net cash provided by operating activities	1,024	2,427
Investing activities:
Capital expenditures	(574)	(1,279)
Purchase of available-for-sale securities	(31)	(1)
Proceeds from sale of available-for-sale securities	30
Net cash used in investing activities	(575)	(1,280)
Financing activities:
Borrowings from revolving line of credit	29,730	15,450
Repayments of revolving line of credit	(30,980)	(15,950)
Repurchase of common stock	(74)	(66)
Net cash used in financing activities	(1,324)	(566)
Net (decrease) increase in cash	(875)	581
Cash, beginning of period	11,677	10,496
Cash, end of period	10,802	11,077
Supplemental information:
Interest paid	192	203
Income tax payments/(refunds received)	51	(31)
Change in accounts payable for capital expenditures	$ (187)	$ (67)

Basis of Presentation

Basis of Presentation	3 Months Ended
	Mar. 31, 2017
Basis of Presentation
Basis of Presentation	NOTE 1 — Basis of Presentation References in this document to “we,” “us” and “our” mean Dover Downs Gaming & Entertainment, Inc. and/or its wholly owned subsidiaries, as appropriate. The accompanying consolidated financial statements have been prepared in compliance with Rule 10-01 of Regulation S-X and U.S. generally accepted accounting principles, and accordingly do not include all of the information and disclosures required for audited financial statements. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our latest Annual Report on Form 10-K filed on March 1, 2017. In the opinion of management, these consolidated financial statements include all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results of operations, financial position and cash flows for the interim periods presented. Operating results for the three months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

Business Operations

Business Operations	3 Months Ended
	Mar. 31, 2017
Business Operations
Business Operations	NOTE 2 - Business Operations We are a premier gaming and entertainment resort destination whose operations consist of:  Dover Downs Casino — a 165,000-square foot casino complex featuring popular table games, including craps, roulette and card games such as blackjack, Spanish 21, baccarat, 3-card and pai gow poker, the latest in slot machine offerings, multi-player electronic table games, a poker room, a Race & Sports Book operation, the Dover Downs’ Fire & Ice Lounge, the Festival Buffet, Doc Magrogan’s Oyster House, Frankie’s Italian restaurant, as well as several bars, restaurants and six retail outlets;  Dover Downs Hotel and Conference Center — a 500 room AAA Four Diamond hotel with a fine dining restaurant, full-service spa/salon, conference, banquet, ballroom and concert hall facilities; and  Dover Downs Raceway — a harness racing track with pari-mutuel wagering on live and simulcast horse races. All of our gaming operations are located at our entertainment complex in Dover, the capital of the State of Delaware. Dover Downs, Inc. is authorized to conduct video lottery, sports wagering, table game and internet gaming operations as one of three “Licensed Agents” under the Delaware State Lottery Code. Licensing, administration and control of gaming operations in Delaware is under the Delaware State Lottery Office and Delaware’s Department of Safety and Homeland Security, Division of Gaming Enforcement. Our license from the Delaware Harness Racing Commission (the “Commission”) to hold harness race meetings on our premises and to offer pari-mutuel wagering on live and simulcast horse races must be renewed on an annual basis. In order to maintain our gaming license, we are required to maintain our harness horse racing license. We have received an annual license from the Commission for the past 48 consecutive years and management believes that our relationship with the Commission remains good. Due to the nature of our business activities, we are subject to various federal, state and local regulations. As part of our license arrangements, we are subject to various taxes and fees which are subject to change by the Delaware legislature. In recent years, the mid-Atlantic region has experienced an unprecedented expansion in gaming venues and gaming offerings. This has had a significant adverse effect on our visitation numbers, our revenues and our profitability. Management has estimated that approximately 29% of our gaming win comes from Maryland patrons and approximately 61% of our Capital Club® member gaming win comes from out of state patrons. For the past several years, we have been engaged with the Delaware legislature, seeking to change the cost sharing structure that exists between video lottery agents, video lottery vendors, horsemen and the State, all in an effort to make the Delaware gaming industry more competitive in the regional marketplace. Several bills have been introduced to implement one or more of the recommendations of the gaming industry and the legislatively created Lottery & Gaming Study Commission, but not enacted. Without legislative relief, we may be unable to refinance or extend the maturity of our credit facility on favorable terms or may default on our obligations, we may be unable to allocate sufficient resources to marketing and promotions in order to compete effectively in the regional marketplace, we may be unable to allocate sufficient resources to maintain our facility, and we may be required to take other actions in order to manage expenses - especially with respect to operations that have operated at a loss, such as table games. Such actions could adversely affect our business, financial condition, operating results and cash flow.

Summary of Significant Accounti

Summary of Significant Accounting Policies	3 Months Ended
	Mar. 31, 2017
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies	NOTE 3 - Summary of Significant Accounting Policies Property and equipment— Property and equipment is stated at cost. Depreciation is provided using the straight-line method over the asset’s estimated useful life. Accumulated depreciation was $139,362,000 and $137,791,000 as of March 31, 2017 and December 31, 2016, respectively. We perform reviews for impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its fair value. Generally, fair value will be determined using valuation techniques such as the present value of future cash flows. Point loyalty program— We currently have a point loyalty program for our customers which allows them to earn points based on the volume of their gaming activity. All reward points earned by customers are expensed in the period they are earned. The estimated amount of points redeemable for cash is recorded as a reduction of gaming revenue and the estimated amount of points redeemable for services and merchandise is recorded as gaming expense. In determining the amount of the liability, which was $1,673,000 and $1,652,000, respectively, at March 31, 2017 and December 31, 2016, we estimate a redemption rate, a cost of rewards to be offered and the mix of cash, goods and services for which reward points will be redeemed. We use historical data to estimate those amounts. Revenue and expense recognition— Gaming revenues represent (i) the net win from slot machine, table games, internet gaming and sports wagering and (ii) commissions from pari-mutuel wagering. Other operating revenues consist of hotel rooms revenue, food and beverage sales and other miscellaneous income. Revenues do not include the retail amount of hotel rooms, food and beverage and other miscellaneous goods and services provided without charge to customers as promotional items of $4,512,000 and $4,576,000 for the three months ended March 31, 2017 and 2016, respectively. The estimated direct cost of providing these items has been charged to the casino through interdepartmental allocations and is included in gaming expenses in the consolidated statements of operations. For the casino 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 our consolidated financial statements as gaming revenue. The Delaware State Lottery Office sweeps the win from the casino operations, collects the State’s share of the win and the amount due to the vendors under contract with the State who provide the slot machines and associated computer systems, collects the amount allocable to purses for harness horse racing and remits the remainder to us as our commission for acting as a Licensed Agent. Gaming expenses include the amounts collected by the State (i) for the State’s share of the win, (ii) for remittance to the providers of the slot machines and associated computer systems, and (iii) for harness horse racing purses. We recognize revenues from sports wagering commissions when the event occurs. We recognize revenues from pari-mutuel commissions earned from live harness horse racing and importing of simulcast signals from other race tracks when the race occurs. Revenues from hotel rooms, food and beverage sales and other miscellaneous income are recognized at the time the service is provided. Amounts received in advance for hotel rooms, convention bookings and advance ticket sales are recorded as deferred revenue until the services are provided to the customer, at which point revenue is recognized. Advertising costs— Advertising costs are charged to operations as incurred. Advertising expenses were $449,000 and $498,000 for the three months ended March 31, 2017 and 2016, respectively. Net loss per common share— Nonvested share-based payment awards that include rights to dividends or dividend equivalents, whether paid or unpaid, are considered participating securities, and the two-class method of computing basic and diluted net loss per common share (“EPS”) is applied for all periods presented. The following table sets forth the computation of EPS (in thousands, except per share amounts): Three Months Ended 2017 2016 Net loss per common share — basic and diluted: Net loss $ ) $ ) Allocation to nonvested restricted stock awards — — Net loss available to common stockholders $ ) $ ) Weighted-average shares outstanding — basic and diluted Net loss per common share — basic and diluted $ ) $ ) There were no options outstanding and we paid no dividends during the three months ended March 31, 2017 or 2016. Accounting for stock-based compensation— We recorded total stock-based compensation expense for our restricted stock awards of $128,000 and $103,000 as general and administrative expenses for the three months ended March 31, 2017 and 2016, respectively. We recorded income tax expense of $20,000 and $77,000 for the three months ended March 31, 2017 and 2016, respectively, related to vesting of our restricted stock awards. Recent accounting pronouncements —In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting , which is intended to simplify various aspects of the accounting for share-based payments, including treatment of excess tax benefits, forfeitures, consideration of minimum statutory tax withholding requirements and classification on the statement of cash flows. The update was effective for annual periods beginning after December 15, 2016, including interim periods within those annual periods. We adopted this ASU in the first quarter of 2017, which did not have an impact to our consolidated financial statements. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers , which supersedes nearly all existing revenue recognition guidance under accounting principles generally accepted in the United States of America. The new standard requires a company to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. Additionally, the guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted for reporting periods beginning after December 15, 2016. We are currently analyzing the impact of this ASU on our results of operations and, at this time, we are unable to determine the impact of the new standard, if any, on our consolidated financial statements.

Credit Facility

Credit Facility	3 Months Ended
	Mar. 31, 2017
Credit Facility
Credit Facility	NOTE 4 — Credit Facility At March 31, 2017, we had a $35,000,000 secured credit agreement with a bank group. The credit facility expires on September 30, 2017. Interest is based upon LIBOR plus a margin that varies between 150 and 350 basis points (200 basis points at March 31, 2017) depending on the leverage ratio. The credit facility is secured by a mortgage on and security interest in all real and personal property owned by our wholly owned subsidiary Dover Downs, Inc. The credit facility contains certain covenants including maximum ratio of funded debt to earnings before interest, taxes, depreciation and amortization (the “leverage ratio”), and a minimum fixed charge coverage ratio. Material adverse changes in our results of operations could impact our ability to satisfy these requirements. In addition, the credit agreement includes a material adverse change clause and prohibits the payment of dividends. The credit facility provides for seasonal funding needs, capital improvements and other general corporate purposes. At March 31, 2017, there was $24,000,000 outstanding at an interest rate of 2.98% and $11,000,000 was available pursuant to the facility. Additionally, we were in compliance with all terms of the facility at March 31, 2017 and we expect to be in compliance with the financial covenants, and all other covenants, for all measurement periods through September 30, 2017, the expiration date of the facility. The credit facility is classified as a current liability as of March 31, 2017 in our consolidated balance sheets as the facility expires on September 30, 2017. We will seek to refinance or extend the maturity of this obligation prior to its expiration date; however, there is no assurance that we will be able to execute this refinancing or extension or, if we are able to refinance or extend this obligation, that the terms of such refinancing or extension would be as favorable as the terms of our existing credit facility. These factors raise substantial doubt about our ability to continue as a going concern. The accompanying financial statements have been prepared assuming that we will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty.

Pension Plans

Pension Plans	3 Months Ended
	Mar. 31, 2017
Pension Plans
Pension Plans	NOTE 5 — Pension Plans We maintain a non-contributory, tax qualified defined benefit pension plan that has been frozen since July 2011. All of our full time employees were eligible to participate in this qualified pension plan. Benefits provided by our qualified pension plan were based on years of service and employees’ remuneration over their term of employment. Compensation earned by employees up to July 31, 2011 is used for purposes of calculating benefits under our pension plan with no future benefit accruals after this date. We also maintain a non-qualified, non-contributory defined benefit pension plan, the excess plan, for certain employees that has been frozen since July 2011. This excess plan provided benefits that would otherwise be provided under the qualified pension plan but for maximum benefit and compensation limits applicable under federal tax law. The cost associated with the excess plan is determined using the same actuarial methods and assumptions as those used for our qualified pension plan. The assets for the excess plan aggregate $316,000 and $304,000 as of March 31, 2017 and December 31, 2016, respectively, and are recorded in other assets in our consolidated balance sheets (see NOTE 7 — Fair Value Measurements). The components of net periodic pension benefit for our defined benefit pension plans are as follows: Three Months Ended 2017 2016 Interest cost $ $ Expected return on plan assets ) ) Recognized net actuarial loss $ ) $ ) We contributed $50,000 and $40,000 to our defined benefit pension plans during the three months ended March 31, 2017 and 2016, respectively. We expect to contribute approximately $240,000 to our defined benefit pension plans during the remainder of 2017. We also maintain a non-elective, non-qualified supplemental executive retirement plan (“SERP”) which provides deferred compensation to certain highly compensated employees that approximates the value of benefits lost by the freezing of the pension plan which are not offset by our enhanced matching contribution in our 401(k) plan. The SERP is a discretionary defined contribution plan and contributions made to the SERP in any given year are not guaranteed and will be at the sole discretion of our Compensation and Stock Incentive Committee. During the three months ended March 31, 2017 and 2016, we recorded expenses of $30,000 and $24,000, respectively, related to the SERP. During the three months ended March 31, 2017 and 2016, we contributed $122,000 and $99,000 to the plan, respectively. The liability for SERP pension benefits was $30,000 and $122,000 as of March 31, 2017 and December 31, 2016, respectively. We maintain a defined contribution 401(k) plan which permits participation by substantially all employees. Our matching contributions to the 401(k) plan were $209,000 and $202,000 for the three months ended March 31, 2017 and 2016, respectively.

Stockholders' Equity

Stockholders' Equity	3 Months Ended
	Mar. 31, 2017
Stockholders' Equity
Stockholders' Equity	NOTE 6 — Stockholders’ Equity Changes in the components of stockholders’ equity are as follows (in thousands, except per share amounts): Common Class A Additional Retained Accumulated Balance at December 31, 2016 $ $ $ $ $ ) Net loss — — — ) — Issuance of nonvested stock awards, net of forfeitures — ) — — Stock-based compensation — — — — Change in net actuarial loss and prior service cost, net of income tax expense of $20 — — — — Unrealized loss on available-for-sale securities, net of income tax benefit of $1 — — — — ) Repurchase and retirement of common stock ) — ) — — Balance at March 31, 2017 $ $ $ $ $ ) As of March 31, 2017 and December 31, 2016, accumulated other comprehensive loss consists of the following: March 31, 2017 December 31, 2016 Net actuarial loss and prior service cost not yet recognized in net periodic benefit cost, net of income tax benefit of $3,060,000 and $3,080,000, respectively $ ) $ ) Accumulated unrealized gain on available- for-sale securities, net of income tax expense of $18,000 and $19,000, respectively Accumulated other comprehensive loss $ ) $ ) On January 23, 2013, our Board of Directors suspended the quarterly dividend. In addition, our credit facility prohibits the payment of dividends. See NOTE 4 — Credit Facility. On October 23, 2002, our Board of Directors authorized the repurchase of up to 3,000,000 shares of our outstanding common stock. The purchases may be made in the open market or in privately negotiated transactions as conditions warrant. The repurchase authorization has no expiration date, does not obligate us to acquire any specific number of shares and may be suspended at any time. No purchases of our equity securities were made pursuant to this authorization during the first three months of 2017 or 2016. At March 31, 2017, we had remaining repurchase authority of 1,653,333 shares. At present we are not permitted to make such purchases under our credit facility. We have a stock incentive plan which provides for the grant of up to 2,000,000 shares of common stock to our officers and key employees through stock options and/or awards valued in whole or in part by reference to our common stock, such as nonvested restricted stock awards. Under the plan, nonvested restricted stock vests an aggregate of twenty percent each year beginning on the second anniversary date of the grant. The aggregate market value of the nonvested restricted stock at the date of issuance is being amortized on a straight-line basis over the six-year period. We granted 208,500 and 220,500 stock awards under this plan during the three months ended March 31, 2017 and 2016, respectively. As of March 31, 2017, there were 1,120,448 shares available for granting options or stock awards. During the three months ended March 31, 2017 and 2016, we purchased and retired 70,483 and 67,555 shares of our outstanding common stock for $74,000 and $66,000, respectively. These purchases were made from employees in connection with the vesting of restricted stock awards under our stock incentive plan and were not pursuant to the aforementioned repurchase authorization. Since the vesting of a restricted stock award is a taxable event to our employees for which income tax withholding is required, the plan allows employees to surrender to us some of the shares that would otherwise have vested in satisfaction of their tax liability. The surrender of these shares is treated by us as a purchase of the shares.

Fair Value Measurements

Fair Value Measurements	3 Months Ended
	Mar. 31, 2017
Fair Value Measurements
Fair Value Measurements	NOTE 7 — Fair Value Measurements Our financial instruments are classified and disclosed in one of the following three categories: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). The following table summarizes the valuation of our financial instrument pricing levels as of March 31, 2017 and December 31, 2016: Total Level 1 Level 2 Level 3 March 31, 2017 Available-for-sale securities $ 316,000 $ 316,000 $ — $ — December 31, 2016 Available-for-sale securities $ 304,000 $ 304,000 $ — $ — Our investments in available-for-sale securities consist of mutual funds. These investments are included in other assets on our consolidated balance sheets. The carrying amounts of other financial instruments reported in our consolidated balance sheets for current assets and current liabilities approximates their fair values because of the short maturity of these instruments. At March 31, 2017 and December 31, 2016, there was $24,000,000 and $25,250,000, respectively, outstanding under our revolving credit agreement. The borrowings under our revolving credit agreement bear interest at the variable rate described in NOTE 4 — Credit Facility and therefore we believe approximate fair value.

Related Party Transactions

Related Party Transactions	3 Months Ended
	Mar. 31, 2017
Related Party Transactions
Related Party Transactions	NOTE 8 - Related Party Transactions During the three months ended March 31, 2017 and 2016, we allocated costs of $453,000 and $475,000, respectively to Dover Motorsports, Inc. (“DVD”), a company related through common ownership, for certain administrative and operating services, including leased space. DVD allocated certain administrative and operating service costs of $31,000 and $83,000, respectively, to us for the three months ended March 31, 2017 and 2016. The allocations were based on an analysis of each company’s share of the costs. As of March 31, 2017 and December 31, 2016, our consolidated balance sheets included an $8,000 and $7,000 receivable from DVD for the aforementioned items. These items were settled in April and January of 2017, respectively. The net costs incurred by each company for these services are not necessarily indicative of the costs that would have been incurred if the companies had been unrelated entities and/or had otherwise independently managed these functions; however, management believes that these costs are reasonable. Prior to our spin-off from DVD in 2002, both companies shared certain real property in Dover, Delaware. At the time of the spin-off, some of this real property was transferred to us to ensure that the real property holdings of each company was aligned with its past uses and future business needs. During our harness racing season, we have historically used the 5/8-mile harness racing track that is located on DVD’s property and is on the inside of its one-mile motorsports superspeedway. In order to continue this historic use, DVD granted a perpetual easement to the harness track to us at the time of the spin-off. This perpetual easement allows us to have exclusive use of the harness track during the period beginning November 1 of each year and ending April 30 of the following year, together with set up and tear down rights for the two weeks before and after such period. The easement requires that we maintain the harness track but does not require the payment of any rent. Various easements and agreements relative to access, utilities and parking have also been entered into between us and DVD relative to our respective Dover, Delaware facilities. DVD pays rent to us for the lease of its principal executive office space. We also allow DVD to use our indoor grandstands in connection with DVD’s two annual motorsports weekends. We do not assess rent for this nominal use and may discontinue the use at our discretion. Henry B. Tippie, Chairman of our Board of Directors, controls in excess of fifty percent of our voting power. Mr. Tippie’s voting control emanates from his direct and indirect holdings of common stock and Class A common stock, from his status as trustee of the RMT Trust, our largest stockholder, and from certain shares as to which he has voting rights pursuant to a voting agreement with R. Randall Rollins, one of our directors. This means that Mr. Tippie has the ability to determine the outcome of our election of directors and to determine the outcome of many significant corporate transactions, many of which only require the approval of a majority of our voting power. Patrick J. Bagley, Timothy R. Horne, Denis McGlynn, Jeffrey W. Rollins, R. Randall Rollins, Richard K. Struthers and Henry B. Tippie are all Directors of ours and DVD. Denis McGlynn is the President and Chief Executive Officer of both companies, Klaus M. Belohoubek is the Senior Vice President — General Counsel and Secretary of both companies and Timothy R. Horne is the Senior Vice President — Finance and Chief Financial Officer of both companies. Mr. Tippie controls in excess of fifty percent of the voting power of DVD.

Commitments and Contingencies

Commitments and Contingencies	3 Months Ended
	Mar. 31, 2017
Commitments and Contingencies
Commitments and Contingencies	NOTE 9 — Commitments and Contingencies We are a party to ordinary routine litigation incidental to our business. Management does not believe that the resolution of any of these matters is likely to have a material adverse effect on our results of operations, financial position or cash flows.

Summary of Significant Accoun15

Summary of Significant Accounting Policies (Policies)	3 Months Ended
	Mar. 31, 2017
Summary of Significant Accounting Policies
Property and equipment	Property and equipment— Property and equipment is stated at cost. Depreciation is provided using the straight-line method over the asset’s estimated useful life. Accumulated depreciation was $139,362,000 and $137,791,000 as of March 31, 2017 and December 31, 2016, respectively. We perform reviews for impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its fair value. Generally, fair value will be determined using valuation techniques such as the present value of future cash flows.
Point loyalty program	Point loyalty program— We currently have a point loyalty program for our customers which allows them to earn points based on the volume of their gaming activity. All reward points earned by customers are expensed in the period they are earned. The estimated amount of points redeemable for cash is recorded as a reduction of gaming revenue and the estimated amount of points redeemable for services and merchandise is recorded as gaming expense. In determining the amount of the liability, which was $1,673,000 and $1,652,000, respectively, at March 31, 2017 and December 31, 2016, we estimate a redemption rate, a cost of rewards to be offered and the mix of cash, goods and services for which reward points will be redeemed. We use historical data to estimate those amounts.
Revenue and expense recognition	Revenue and expense recognition— Gaming revenues represent (i) the net win from slot machine, table games, internet gaming and sports wagering and (ii) commissions from pari-mutuel wagering. Other operating revenues consist of hotel rooms revenue, food and beverage sales and other miscellaneous income. Revenues do not include the retail amount of hotel rooms, food and beverage and other miscellaneous goods and services provided without charge to customers as promotional items of $4,512,000 and $4,576,000 for the three months ended March 31, 2017 and 2016, respectively. The estimated direct cost of providing these items has been charged to the casino through interdepartmental allocations and is included in gaming expenses in the consolidated statements of operations. For the casino 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 our consolidated financial statements as gaming revenue. The Delaware State Lottery Office sweeps the win from the casino operations, collects the State’s share of the win and the amount due to the vendors under contract with the State who provide the slot machines and associated computer systems, collects the amount allocable to purses for harness horse racing and remits the remainder to us as our commission for acting as a Licensed Agent. Gaming expenses include the amounts collected by the State (i) for the State’s share of the win, (ii) for remittance to the providers of the slot machines and associated computer systems, and (iii) for harness horse racing purses. We recognize revenues from sports wagering commissions when the event occurs. We recognize revenues from pari-mutuel commissions earned from live harness horse racing and importing of simulcast signals from other race tracks when the race occurs. Revenues from hotel rooms, food and beverage sales and other miscellaneous income are recognized at the time the service is provided. Amounts received in advance for hotel rooms, convention bookings and advance ticket sales are recorded as deferred revenue until the services are provided to the customer, at which point revenue is recognized.
Advertising costs	Advertising costs— Advertising costs are charged to operations as incurred. Advertising expenses were $449,000 and $498,000 for the three months ended March 31, 2017 and 2016, respectively.
Net loss per common share	Net loss per common share— Nonvested share-based payment awards that include rights to dividends or dividend equivalents, whether paid or unpaid, are considered participating securities, and the two-class method of computing basic and diluted net loss per common share (“EPS”) is applied for all periods presented. The following table sets forth the computation of EPS (in thousands, except per share amounts): Three Months Ended 2017 2016 Net loss per common share — basic and diluted: Net loss $ ) $ ) Allocation to nonvested restricted stock awards — — Net loss available to common stockholders $ ) $ ) Weighted-average shares outstanding — basic and diluted Net loss per common share — basic and diluted $ ) $ ) There were no options outstanding and we paid no dividends during the three months ended March 31, 2017 or 2016.
Accounting for stock-based compensation	Accounting for stock-based compensation— We recorded total stock-based compensation expense for our restricted stock awards of $128,000 and $103,000 as general and administrative expenses for the three months ended March 31, 2017 and 2016, respectively. We recorded income tax expense of $20,000 and $77,000 for the three months ended March 31, 2017 and 2016, respectively, related to vesting of our restricted stock awards.
Recent accounting pronouncements	Recent accounting pronouncements —In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting , which is intended to simplify various aspects of the accounting for share-based payments, including treatment of excess tax benefits, forfeitures, consideration of minimum statutory tax withholding requirements and classification on the statement of cash flows. The update was effective for annual periods beginning after December 15, 2016, including interim periods within those annual periods. We adopted this ASU in the first quarter of 2017, which did not have an impact to our consolidated financial statements. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers , which supersedes nearly all existing revenue recognition guidance under accounting principles generally accepted in the United States of America. The new standard requires a company to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. Additionally, the guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted for reporting periods beginning after December 15, 2016. We are currently analyzing the impact of this ASU on our results of operations and, at this time, we are unable to determine the impact of the new standard, if any, on our consolidated financial statements.

Summary of Significant Accoun16

Summary of Significant Accounting Policies (Tables)	3 Months Ended
	Mar. 31, 2017
Summary of Significant Accounting Policies
Schedule of the computation of EPS	The following table sets forth the computation of EPS (in thousands, except per share amounts): Three Months Ended 2017 2016 Net loss per common share — basic and diluted: Net loss $ ) $ ) Allocation to nonvested restricted stock awards — — Net loss available to common stockholders $ ) $ ) Weighted-average shares outstanding — basic and diluted Net loss per common share — basic and diluted $ ) $ )

Pension Plans (Tables)

Pension Plans (Tables)	3 Months Ended
	Mar. 31, 2017
Pension Plans
Schedule of components of net periodic pension benefit	Three Months Ended 2017 2016 Interest cost $ $ Expected return on plan assets ) ) Recognized net actuarial loss $ ) $ )

Stockholders' Equity (Tables)

Stockholders' Equity (Tables)	3 Months Ended
	Mar. 31, 2017
Stockholders' Equity
Schedule of changes in the components of stockholders' equity	Changes in the components of stockholders’ equity are as follows (in thousands, except per share amounts): Common Class A Additional Retained Accumulated Balance at December 31, 2016 $ $ $ $ $ ) Net loss — — — ) — Issuance of nonvested stock awards, net of forfeitures — ) — — Stock-based compensation — — — — Change in net actuarial loss and prior service cost, net of income tax expense of $20 — — — — Unrealized loss on available-for-sale securities, net of income tax benefit of $1 — — — — ) Repurchase and retirement of common stock ) — ) — — Balance at March 31, 2017 $ $ $ $ $ )
Schedule of accumulated other comprehensive loss	March 31, 2017 December 31, 2016 Net actuarial loss and prior service cost not yet recognized in net periodic benefit cost, net of income tax benefit of $3,060,000 and $3,080,000, respectively $ ) $ ) Accumulated unrealized gain on available- for-sale securities, net of income tax expense of $18,000 and $19,000, respectively Accumulated other comprehensive loss $ ) $ )

Fair Value Measurements (Tables

Fair Value Measurements (Tables)	3 Months Ended
	Mar. 31, 2017
Fair Value Measurements
Summary of valuation of financial instrument pricing levels	Total Level 1 Level 2 Level 3 March 31, 2017 Available-for-sale securities $ 316,000 $ 316,000 $ — $ — December 31, 2016 Available-for-sale securities $ 304,000 $ 304,000 $ — $ —

Business Operations (Details)

Business Operations (Details)	3 Months Ended
	Mar. 31, 2017ft²roomitem
Business Operations
Area of casino (in square feet) | ft²	165,000
Number of retail outlets	6
Number of rooms in AAA Four Diamond hotel | room	500
Number of Licensed Agents under Delaware State Lottery Code	3
Number of consecutive years for which annual license has been received from the Harness Racing Commission	48 years
Gaming win | Geographic concentration risk | Maryland patrons
Risks and Uncertainties
Estimated percentage of gaming win attributable to patrons	29.00%
Capital Club member gaming win | Geographic concentration risk | Out of state patrons
Risks and Uncertainties
Estimated percentage of gaming win attributable to patrons	61.00%

Summary of Significant Accoun21

Summary of Significant Accounting Policies (Details) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Property and equipment
Accumulated depreciation	$ 139,362,000		$ 137,791,000
Point loyalty program
Amount of points redeemable for services and merchandise	1,673,000		$ 1,652,000
Revenue and expense recognition
Goods and services provided without charge to customers as promotional items	4,512,000	$ 4,576,000
Advertising costs
Advertising expenses	$ 449,000	$ 498,000

Summary of Significant Accoun22

Summary of Significant Accounting Policies - EPS (Details) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Net loss per common share - basic and diluted:
Net loss	$ (184,000)	$ (239,000)
Net loss available to common stockholders	$ (184,000)	$ (239,000)
Weighted-average shares outstanding - basic and diluted	32,319,000	32,199,000
Net loss per common share - basic and diluted	$ (0.01)	$ (0.01)
Options outstanding (in shares)	0	0
Dividends paid	$ 0	$ 0
Accounting for stock-based compensation
Stock-based compensation expense for restricted stock awards	128,000	103,000
Income tax expense related to vesting of restricted stock awards	$ 20,000	$ 77,000

Credit Facility (Details)

Credit Facility (Details) - Credit facility	3 Months Ended
	Mar. 31, 2017USD ($)
Credit Facility
Maximum borrowing capacity	$ 35,000,000
Variable interest rate base	LIBOR
Percentage points added to the reference rate	2.00%
Outstanding borrowings	$ 24,000,000
Interest rate on the amount outstanding (as a percent)	2.98%
Amount available for borrowing pursuant to the facility	$ 11,000,000
Minimum
Credit Facility
Percentage points added to the reference rate	1.50%
Maximum
Credit Facility
Percentage points added to the reference rate	3.50%

Pension Plans (Details)

Pension Plans (Details) - USD ($)	Mar. 31, 2017	Dec. 31, 2016
Excess plan
Pension Plans
Fair values of pension assets	$ 316,000	$ 304,000

Pension Plans - Components of n

Pension Plans - Components of net periodic pension benefit (Details) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Components of net periodic pension benefit
Interest cost	$ 206,000	$ 217,000
Expected return on plan assets	(301,000)	(285,000)
Recognized net actuarial loss	51,000	34,000
Total net periodic pension cost	(44,000)	(34,000)
Employer contribution	50,000	$ 40,000
Expected additional contributions during the remainder of 2017	$ 240,000

Pension Plans - SERP (Details)

Pension Plans - SERP (Details) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
SERP
Defined Contribution Plan Disclosure
Expense recorded	$ 30,000	$ 24,000
Employer contributions	122,000	99,000
Liability for pension benefits	30,000		$ 122,000
401 (k) plan
Defined Contribution Plan Disclosure
Expense recorded	$ 209,000	$ 202,000

Stockholders' Equity (Details)

Stockholders' Equity (Details) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Changes in the components of stockholders' equity
Balance at the beginning of the period	$ 115,662,000
Net loss	(184,000)	$ (239,000)
Unrealized loss on available-for-sale securities, net of income tax benefit of $1	(2,000)	2,000
Repurchase and retirement of common stock	(74,000)	$ (66,000)
Balance at the end of the period	115,561,000
Common Stock | Common Stock
Changes in the components of stockholders' equity
Balance at the beginning of the period	1,814,000
Issuance of nonvested stock awards, net of forfeitures	21,000
Repurchase and retirement of common stock	(7,000)
Balance at the end of the period	1,828,000
Common Stock | Class A Common Stock
Changes in the components of stockholders' equity
Balance at the beginning of the period	1,487,000
Balance at the end of the period	1,487,000
Additional Paid-in Capital
Changes in the components of stockholders' equity
Balance at the beginning of the period	5,669,000
Issuance of nonvested stock awards, net of forfeitures	(21,000)
Stock-based compensation	128,000
Repurchase and retirement of common stock	(67,000)
Balance at the end of the period	5,709,000
Retained Earnings
Changes in the components of stockholders' equity
Balance at the beginning of the period	111,288,000
Net loss	(184,000)
Balance at the end of the period	111,104,000
Accumulated Other Comprehensive Loss
Changes in the components of stockholders' equity
Balance at the beginning of the period	(4,596,000)
Change in net actuarial loss and prior service cost, net of income tax expense of $20	31,000
Unrealized loss on available-for-sale securities, net of income tax benefit of $1	(2,000)
Balance at the end of the period	(4,567,000)
Income tax expense on change in pension net actuarial loss and prior service cost	20,000
Income tax expense on unrealized gain on available-for-sale securities	$ 1,000

Stockholders' Equity - Accumula

Stockholders' Equity - Accumulated other comprehensive loss (Details) - USD ($)	Mar. 31, 2017	Dec. 31, 2016
Accumulated other comprehensive loss
Net actuarial loss and prior service cost not yet recognized in net periodic benefit cost, net of income tax benefit of $3,060,000 and $3,080,000, respectively	$ (4,593,000)	$ (4,624,000)
Accumulated unrealized gain on available-for-sale securities, net of income tax expense of $18,000 and $19,000, respectively	26,000	28,000
Accumulated other comprehensive loss	(4,567,000)	(4,596,000)
Income tax benefit of net actuarial loss and prior service cost not yet recognized in net periodic benefit cost	3,060,000	3,080,000
Income tax expense of accumulated unrealized gain on available-for-sale securities	$ 18,000	$ 19,000

Stockholders' Equity - Repurcha

Stockholders' Equity - Repurchase (Details) - shares	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Oct. 23, 2002
Class of Stock Disclosures
Number of shares of outstanding common stock authorized to be repurchased			3,000,000
Purchases made pursuant to repurchase authorization (in shares)	0	0
Number of remaining shares of common stock authorized to be repurchased	1,653,333

Stockholders' Equity - Stock in

Stockholders' Equity - Stock incentive plan (Details) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Stockholders' Equity
Common stock shares reserved for issuance under the Stock Incentive Plan	2,000,000
Shares granted under the Stock Incentive Plan	208,500	220,500
Shares available for granting options or stock awards	1,120,448
Number of common stock shares purchased and retired	70,483	67,555
Amount of common stock purchased and retired	$ 74,000	$ 66,000
Nonvested restricted stock
Stockholders' Equity
Vesting percentage on each anniversary of the grant date	20.00%
Service period to amortize aggregate market value of the nonvested restricted stock	6 years

Fair Value Measurements (Detail

Fair Value Measurements (Details) - USD ($)	Mar. 31, 2017	Dec. 31, 2016
Fair Value Measurements
Available-for-sale securities	$ 316,000	$ 304,000
Credit facility
Fair Value Measurements
Amount outstanding under revolving credit agreement	24,000,000	25,250,000
Level 1
Fair Value Measurements
Available-for-sale securities	$ 316,000	$ 304,000

Related Party Transactions (Det

Related Party Transactions (Details)	3 Months Ended
	Mar. 31, 2017USD ($)itemmi	Mar. 31, 2016USD ($)	Dec. 31, 2016USD ($)
Related Party Transactions
Receivable from DVD	$ 8,000		$ 7,000
Dover Motorsports, Inc. (DVD)
Related Party Transactions
Harness racing track length (in miles) | mi	0.625
Motorsports superspeedway length (in miles) | mi	1
Period for set up and tear down rights	14 days
Number of annual motorsports weekends | item	2
Dover Motorsports, Inc. (DVD) | Allocation of costs of administrative and operating services
Related Party Transactions
Costs allocated to DVD	$ 453,000	$ 475,000
Costs allocated to the entity by DVD	$ 31,000	$ 83,000
Chairman of board of directors
Related Party Transactions
Minimum percentage of voting power controlled by related party	50.00%