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DOVER DOWNS ENTERTAINMENT: SPEED DEMONDover Downs Entertainment Inc. (DVD) wasn't exactly fast out of the gate. The privately held company opened its horse-and-motor racetrack in Dover, Del., back in 1969. But sports fans in the mid-Atlantic region weren't clamoring for auto racing back then. And within a few years, the energy crisis hit, curtailing visits from many out-of-staters. ''It was a tough go,'' recalls Dover CEO Denis McGlynn, who joined the company's promotion department in 1972. These days, however, Dover is setting land speed records. Thanks to the booming gaming and motor-sports business at its Dover Downs complex, it has racked up average annual revenue and earnings growth of 99.8% and 70.9%, respectively, over the past three years. Along with a 31.6% return on invested capital, that was enough to earn Dover the No.20 spot on the BUSINESS WEEK Hot Growth list. And since going public in October, 1996, at 17 a share, the stock has soared 85%. ''They've evolved from an undervalued little company into a real growth story,'' says Kevin C. Holt, a research analyst at Strong Capital Management Inc., which holds nearly 130,000 Dover shares. Dover Downs, founded by private investors including trucking titan John W. Rollins Sr., can thank the state of Delaware for some of its good fortune. In 1994, the state passed a law allowing its horse-racing tracks to put in slot machines. That law--which Rollins, a former Delaware lieutenant governor, actively supported--was a boon to Dover Downs. The company's gaming revenues jumped from less than $1 million in 1994 to $81 million in the fiscal year ended last June. And there's no sign the party will end: In March, Delaware passed a law doubling, to 2,000, the number of slot machines permitted at any one location. While he is overseeing breakneck growth at Dover Downs, McGlynn himself doesn't race cars or horses. A former lieutenant in the Air Force, he wasn't even a flyboy. Instead, he spent three years overseeing the maintenance of cargo planes. McGlynn came to Dover Downs on the recommendation of a retired lieutenant colonel and was promoted to president in 1979. He became CEO in 1996. The 81-year-old Rollins, who serves as chairman of the board, still holds 39% of the company's shares, with family members holding a further 17.5%. He also remains heavily involved in dealmaking, advertising, and setting promotions strategy with McGlynn, whom he speaks with seven days a week. McGlynn, a sports buff--he played basketball and baseball in his youth--says he can't believe his luck in building a career in the sports business. ''Coming to the office has never been like going to work for me,'' he says. ''It was always something I couldn't wait to do.'' Now, McGlynn is using cash flow from gaming to fund an aggressive expansion. Last fall, Dover agreed to buy auto track operator Nashville Speedway USA for $3 million. With Gaylord Entertainment Co., it is building a $40 million racing complex outside Nashville. And in March, Dover struck a deal to merge with Grand Prix Association of Long Beach, which runs the popular road race in Long Beach, Calif., and owns tracks in St. Louis and Memphis. Those deals give Dover a coast-to-coast presence, vaulting it into the auto racing big leagues. Today, it's nipping at the heels of better-known operators such as International Speedway Corp. and Penske Motorsports Inc. ''We are keeping our eye open for other opportunities,'' says McGlynn. There are plenty of potential roadblocks, however. For one thing, neighboring Maryland and Pennsylvania may allow gambling. If that happens, Dover's Delaware operations, which gets about 40% of its gaming traffic from those states, could take a big hit. That's one reason McGlynn wants to pump money back into the Dover site, in hopes of making it a full-scale entertainment complex. One idea being considered: building a hotel at the raceway. ''We want to make Dover Downs a destination, not just a day trip,'' says McGlynn. If he can make that happen, maybe Dover Downs can keep up its torrid pace.
By Amy Barrett in Philadelphia RELATED ITEMS
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Updated May 21, 1998 by bwwebmaster
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