October 25, 2012 at 08:15 AM EDT
Dover Downs Gaming & Entertainment, Inc. Reports Results for the Third Quarter Ended September 30, 2012

Dover Downs Gaming & Entertainment, Inc. (NYSE-DDE) today reported results for the three months ended September 30, 2012.

Gaming revenues of $49,001,000 were down 10.8 % compared to the third quarter of 2011. The revenue decline was primarily attributable to increased competition in the region.

Other operating revenues of $5,913,000 were up 14.4% compared to the third quarter of 2011. The improvement was from increased food and beverage revenue related to catering services for the NASCAR weekend in Dover which was held in the third quarter of this year compared to the fourth quarter of last year. Rooms revenue also improved as occupancy levels in the Dover Downs Hotel were approximately 94% for the third quarter.

General and administrative costs of $1,464,000 for the third quarter were almost identical to last year.

Interest expense decreased $241,000 during the quarter as a result of lower average outstanding borrowings and lower interest rates.

Net earnings were $1,147,000, or $.04 per diluted share compared with $2,039,000 or $.06 per diluted share for the third quarter of 2011.

Denis McGlynn, the Company's President and Chief Executive Officer, stated: "Gaming expansion in Maryland is having a significant impact on us – but it is simply part of a new reality that we need to address head on. Earlier in the year, we worked with the Administration and the Legislature to pass the only comprehensive internet gaming legislation on the East Coast. Our goal is to stay one step ahead of the competition and to continue offering our patrons the region’s finest amenities and richest gaming experiences. We look forward to continued cooperation with the State as we roll out our internet gaming offerings early next year and make our case for a review of revenue distribution when the legislature reconvenes in January.”

The Company announced yesterday that its Board of Directors declared a reduced regular quarterly dividend of $.02 per share. The dividend is payable on December 10, 2012 to shareholders of record at the close of business on November 10, 2012.

This release contains or may contain forward-looking statements based on management’s beliefs and assumptions. Such statements are subject to various risks and uncertainties that could cause results to vary materially. Please refer to the Company’s SEC filings for a discussion of such factors.

Owned by Dover Downs Gaming & Entertainment, Inc. (NYSE: DDE), Dover Downs Hotel & Casino® is a premier gaming and entertainment resort destination in the Mid-Atlantic region. Gaming operations consist of approximately 2,500 slots and a full complement of table games including poker. The AAA-rated Four Diamond hotel is Delaware’s largest with 500 luxurious rooms/suites and amenities including a full-service spa/salon, concert hall and 41,500 sq. ft. of multi-use event space. Live, world-class harness racing is featured November through April, and horse racing is simulcast year-round. Professional football parlay betting is accepted during the season. Additional property amenities include multiple restaurants from fine dining to casual fare, bars/lounges and retail shops. For more information, please visit www.doverdowns.com.

DOVER DOWNS GAMING & ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
In Thousands, Except Per Share Amounts
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
Revenues:
Gaming (1) $ 49,001 $ 54,935 $ 159,806 $ 162,396
Other operating (2)5,9135,16717,54715,927
54,91460,102177,353178,323
Expenses:
Gaming 44,508 48,218 141,951 144,924
Other operating 4,111 3,676 12,350 11,725
General and administrative 1,464 1,461 4,528 4,854
Depreciation 2,5232,8237,7698,868
52,60656,178166,598170,371
Operating earnings 2,308 3,924 10,755 7,952
Loss on extinguishment of debt - - - 45
Interest expense 4056461,4172,247
Earnings before income taxes 1,903 3,278 9,338 5,660
Income taxes 7561,2394,0032,421
Net earnings $1,147$2,039$5,335$3,239
Net earnings per common share:
- Basic $0.04$0.06$0.16$0.10
- Diluted $0.04$0.06$0.16$0.10
Weighted average shares outstanding:
- Basic 31,745 31,646 31,744 31,645
- Diluted 31,745 31,646 31,744 31,645

_________________________

(1)

Gaming revenues from the Company’s slot machine and table game operations include the total win from such operations. The Delaware State Lottery Office collects the win and remits a portion thereof to the Company as its commission for acting as a Licensed Agent. The difference between total win and the amount remitted to the Company is reflected in gaming expenses.

(2)

Other operating revenues do not include the retail amount of promotional allowances which are provided to customers on a complimentary basis.

DOVER DOWNS GAMING & ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
In Thousands
(Unaudited)
September 30, December 31,
2012 2011
ASSETS
Current assets:
Cash $ 15,828 $ 18,634
Accounts receivable 3,133 3,982
Due from State of Delaware 11,134 9,440
Inventories 2,084 1,860
Prepaid expenses and other 4,612 3,659
Deferred income taxes 1,3191,317
Total current assets 38,110 38,892
Property and equipment, net 170,804 176,415
Other assets 785877
Total assets $209,699$216,184
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 2,536 $ 4,035
Purses due horsemen 11,140 9,004
Accrued liabilities 10,129 11,912
Payable to Dover Motorsports, Inc. - 11
Income taxes payable 445 444
Deferred revenue 331254
Total current liabilities 24,581 25,660
Revolving line of credit 61,500 69,000
Liability for pension benefits 5,152 5,570
Other liabilities - 147
Deferred income taxes 2,9373,301
Total liabilities 94,170103,678
Stockholders’ equity:
Common stock 1,590 1,576
Class A common stock 1,660 1,660
Additional paid-in capital 3,943 3,464
Retained earnings 110,500 108,090
Accumulated other comprehensive loss (2,164)(2,284)
Total stockholders’ equity 115,529112,506
Total liabilities and stockholders’ equity $209,699$216,184
DOVER DOWNS GAMING & ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
In Thousands
(Unaudited)
Nine Months Ended
September 30,
2012 2011
Operating activities:
Net earnings $ 5,335 $ 3,239

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation 7,769 8,868
Amortization of credit facility origination fees 74 67
Stock-based compensation 600 745
Deferred income taxes (126 ) 320
Loss on extinguishment of debt - 45
Changes in assets and liabilities:
Accounts receivable 849 1,114
Due from State of Delaware (1,694 ) (423 )
Inventories (224 ) (215 )
Prepaid expenses and other (917 ) (1,865 )
Accounts payable (1,499 ) 1,083
Purses due horsemen 2,136 431
Accrued liabilities (1,783 ) (3,976 )
Payable to/receivable from Dover Motorsports, Inc. (11 ) 14
Income taxes payable/receivable (327 ) 146
Deferred revenue 77 (42 )
Other liabilities (375)(412)
Net cash provided by operating activities 9,8849,139
Investing activities:
Capital expenditures (2,158 ) (1,438 )
Proceeds from sale of available-for-sale securities - 127
Purchase of available-for-sale securities -(202)
Net cash used in investing activities (2,158)(1,513)
Financing activities:
Borrowings from revolving line of credit 12,910 168,943
Repayments of revolving line of credit (20,410 ) (176,028 )
Dividends paid (2,925 ) (2,916 )
Repurchase of common stock (107 ) (150 )
Credit facility fees -(268)
Net cash used in financing activities (10,532)(10,419)
Net decrease in cash (2,806 ) (2,793 )
Cash, beginning of period 18,63418,819
Cash, end of period $15,828$16,026

Contacts:

Dover Downs Gaming & Entertainment, Inc.
Timothy R. Horne - Sr. Vice President-Finance
302-857-3292
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