The Notes to the Consolidated Financial
Statements are an integral part of these consolidated financial statements.
The Notes to the Consolidated Financial
Statements are an integral part of these consolidated financial statements.
The Notes to the Consolidated Financial
Statements are an integral part of these consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – Basis of Presentation
References in this document
to “we,” “us” and “our” mean Dover Motorsports, 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 5, 2020. 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 and six-month
periods ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31,
2020 due to the seasonal nature of our business.
NOTE 2 – Business Operations
Dover Motorsports,
Inc. is a public holding company that is a marketer and promoter of motorsports entertainment in the United States. Through our
subsidiaries, we own and operate Dover International Speedway® in Dover, Delaware and Nashville Superspeedway®
near Nashville, Tennessee. Our Dover facility was scheduled to promote the following six events during 2020, all of which would
be under the auspices of the premier sanctioning body in motorsports - the National Association for Stock Car Auto Racing (“NASCAR”):
|
·
|
2 NASCAR Cup Series events (May and August);
|
|
·
|
2 NASCAR Xfinity Series events (May and August);
|
|
·
|
1 NASCAR Gander RV & Outdoors Truck Series event (May); and
|
|
·
|
1 NASCAR ARCA Menards Series East event (August).
|
Due to the impacts of the COVID-19
pandemic, our May NASCAR weekend was postponed and the three events originally scheduled for that weekend are now expected
to be held in combination with our already scheduled August NASCAR weekend events. Although NASCAR has announced this schedule
of events, the uncertainties surrounding the pandemic, including the scale and timing of any additional waves of coronavirus disease
as restrictions on community movement are relaxed, as well as the implementation of new or renewed restrictions based on additional
surges of COVID-19 cases or limited public adherence with suggested safety measures, make it possible that some or all of these
events may be cancelled. On July 25, 2020 Delaware state officials notified us that due to public safety and health concerns, they
would not approve our request to host a limited number of fans at our August NASCAR Weekend. As a result, our remaining events
in 2020 will be held with no fans in attendance. There are no reliable estimates of how long the pandemic will last or how many
people are likely to be affected by it. For that reason, we are unable to predict the long-term impact of the pandemic on our business
at this time. The extent to which COVID-19 impacts our results will depend on future developments, but the continued spread
of COVID-19 and associated economic impacts could have a material adverse effect on our future financial condition, liquidity,
results of operations and cash flows.
We have hosted the Firefly
Music Festival (“Firefly”) on our property in Dover, Delaware for eight consecutive years and it was scheduled to return
on June 18-21, 2020. Due to the COVID-19 pandemic, this year’s event was cancelled. The inaugural three day festival with
40 musical acts was held in July 2012 and the 2019 event was held on June 21-23, 2019 with approximately 120 musical acts. In September
2014, Red Frog Events LLC formed RFGV Festivals LLC - a joint venture with Goldenvoice that promotes Firefly. Goldenvoice
is a company of AEG Presents, LLC, a subsidiary of Anschutz Entertainment Group, Inc. AEG Presents, one of the world’s
largest presenters of live music and entertainment events, announced on July 18, 2018 that it had acquired the remainder of RFGV
Festivals LLC from Red Frog. Our amended agreement with RFGV Festivals LLC grants them two 5 year options to extend our facility
rental agreement through 2032 in exchange for a rental commitment to secure our property. In addition to the facility
rental fee, we also receive a percentage of the concession sales we manage at the events.
We have not promoted
a major motorsports event at our Nashville Superspeedway since 2011. We lease the facility on a short term basis to third parties
from time to time. On June 3, 2020, we announced that we would be moving one of our NASCAR Cup Series events historically
held at Dover International Speedway to Nashville Superspeedway beginning in 2021. We entered into a four year sanction agreement
to promote a NASCAR Cup Series event in Nashville for the 2021 to 2024 racing seasons. We also entered into a one year sanction
agreement to promote a NASCAR Cup Series event at Dover International Speedway for the 2021 season.
On August 17, 2017,
we entered into an agreement with an entity owned by Panattoni Development Company (“buyer”) relative to the sale of
approximately 147 acres of land at our Nashville property at a purchase price of $35,000 per acre. On March 2, 2018, we closed
on the sale of the property with proceeds, less closing costs, of $4,945,000. Net proceeds after taxes were approximately $4,150,000
resulting in a gain of $2,512,000. On September 1, 2017, we also awarded to the buyer a three year option for 88.03 additional
acres at a purchase price of $55,000 per acre. That option agreement has been amended twice since: first, on February 9, 2018,
to extend its term and to add additional acreage; and second, on June 25, 2019, in connection with the buyer’s exercise of
its option on two parcels, we adjusted the acreage and further extended the term of the option on a third parcel. On July
26, 2019, the buyer closed on the sale of the first two parcels, comprising approximately 133 acres, which yielded to us proceeds,
less closing costs, of $6,397,000. Net proceeds after taxes were approximately $5,314,000 resulting in a gain of $4,186,000.
On July 29, 2020, the buyer closed on the sale of the third parcel of approximately 97 acres at our Nashville property. Proceeds
from the sale, less closing costs, were approximately $6,460,000. Net proceeds after taxes were approximately $5,285,000
resulting in a gain of approximately $4,840,000. The buyer had previously paid to us a $500,000 deposit that was credited
to the purchase price. None of the acreage sold extends to the land on which our superspeedway is sited and we continue to
hold approximately 1,000 acres of commercial real estate in Nashville, including the superspeedway. The 97 acre parcel is reported
as assets held for sale in our consolidated balance sheet at June 30, 2020 as it met the held for sale criteria at the balance
sheet date.
On February 28, 2019,
we entered into an agreement to sell 7.63 acres of land at our Nashville facility for proceeds, less closing costs, of $267,000.
The sale closed in the first quarter of 2019 and resulted in a gain of $139,000, which we reported as gain on sale of land in our
consolidated statements of operations and comprehensive loss for that period.
During September 2018,
we entered into negotiations to sell a parcel of land we owned near St. Louis. The sale closed in the first quarter of 2019 with
proceeds, less closing costs, of $531,000.
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 $68,861,000 and $67,328,000 as of June 30, 2020 and December
31, 2019, respectively.
Revenue recognition—We
classify our revenues as admissions, event-related, broadcasting and other. “Admissions” revenue includes ticket sales
for our events. “Event-related” revenue includes amounts received from sponsorship fees; luxury suite rentals; hospitality
tent rentals and catering; concessions and vendor commissions for the right to sell concessions and souvenirs at our events; sales
of programs; track rentals; broadcasting rights other than domestic television broadcasting revenue, and other event-related revenues.
Additionally, event related revenue includes amounts received for the use of our property and a portion of the concession sales
we manage from the Firefly Music Festival. “Broadcasting” revenue includes rights fees obtained for domestic television
broadcasts of events held at our speedway.
All of our
revenues are typically based on contracts with customers and, with the exception of certain track rentals, relate to two
NASCAR event weekends and the Firefly Music Festival held at our Dover facility. However, due to the COVID-19 pandemic, this
year our revenues are expected to primarily relate to one combined NASCAR event weekend. Our contracts are typically for
specific events or a racing season. We have several multi-year sponsorship contracts for our racing events and our contract
with the promoter of the Firefly Music Festival is multi-year. Revenues pertaining to specific events are deferred and
recorded as contract liabilities in our consolidated balance sheets until the event is held. As of June 30, 2020 and December
31, 2019, contract liabilities in our consolidated balance sheets relate to 2020 events. NASCAR has recently announced that
all of our 2020 racing events are expected to be held on the same weekend from August 21-23. Although NASCAR has announced
this schedule of events, the uncertainties surrounding the COVID-19 pandemic, including the scale and timing of any
additional waves of coronavirus disease as restrictions on community movement are relaxed, as well as the implementation of
new or renewed restrictions based on additional surges in COVID-19 cases or limited public adherence with suggested safety
measures, make it possible that some or all of these events may be cancelled. On July 25, 2020 Delaware state officials
notified us that due to public safety and health concerns, they would not approve our request to host a limited number of
fans at our August NASCAR weekend. As a result, our remaining events in 2020 will be held with no fans in attendance.
As of June 30, 2020, we have issued approximately $300,000 in refunds to our patrons for our event weekends. Patrons
who have previously purchased tickets will be given a full refund or be able to apply their funds to Dover International
Speedway’s 2021 NASCAR weekend, with a 20% bonus value. Ticket sales proceeds received as of June 30, 2020 were
approximately $1.7 million. Concession and souvenir revenues are recorded at the time of sale. Revenues and related expenses
from barter transactions in which we provide sponsorship packages in exchange for goods or services are recorded at fair
value. Barter transactions accounted for $261,000 of total revenues for the three and six-month periods ended June 30,
2019.
The following table
summarizes the liability activity related to contracts with customers for the three and six-month periods ended June 30, 2020 and
2019 (in thousands):
|
|
Three Months
Ended
June 30
|
|
|
Six Months
Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Balance, beginning of period
|
|
$
|
2,909
|
|
|
$
|
4,496
|
|
|
$
|
976
|
|
|
$
|
1,140
|
|
Reductions from beginning balance
|
|
|
(263
|
)
|
|
|
(3,345
|
)
|
|
|
(263
|
)
|
|
|
(739
|
)
|
Additional liabilities recorded during the period
|
|
|
1,030
|
|
|
|
1,841
|
|
|
|
3,004
|
|
|
|
5,197
|
|
Reduction of additional liabilities recorded during
the period, not from beginning balance
|
|
|
—
|
|
|
|
(984
|
)
|
|
|
(41
|
)
|
|
|
(3,590
|
)
|
Balance, end of period
|
|
$
|
3,676
|
|
|
$
|
2,008
|
|
|
$
|
3,676
|
|
|
$
|
2,008
|
|
We have contracted future
revenues representing unsatisfied performance obligations. These contracts contain initial terms typically ranging from one to three years,
with some for longer periods, excluding renewal options. We have excluded unsatisfied performance obligations for future NASCAR
broadcasting revenue with contract terms through 2024. As of June 30, 2020, we anticipate recognizing unsatisfied
performance obligations for the calendar year ending 2021 and beyond of approximately $3,170,000.
Under the terms of our
sanction agreements with NASCAR, we receive a portion of the broadcast revenue NASCAR negotiates with various television networks.
NASCAR typically remits payment to us for the broadcast revenue within 30 days after the event being held. NASCAR retains 10% of
the gross broadcast rights fees allocated to each NASCAR-sanctioned event as a component of its sanction fee. The remaining 90%
is recorded as revenue. The event promoter is required to pay 25% of the gross broadcast rights fees to the event as part of the
awards to the competitors, which we record as operating expenses.
Expense recognition—The
cost of advertising is expensed as incurred. Advertising expenses were $(2,000) and $50,000 and $482,000 and $546,000 for the three
and six-month periods ended June 30, 2020 and 2019, respectively. Certain direct expenses pertaining to specific events, including
prize and point fund monies and sanction fees paid to NASCAR, and other expenses associated with our racing events are deferred
until the event is held, at which point they are expensed.
Net (loss) earnings
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) earnings
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
June
30,
|
|
|
Six Months Ended
June
30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Net (loss) earnings per common share – basic and diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) earnings
|
|
$
|
(689
|
)
|
|
$
|
5,501
|
|
|
$
|
(3,829
|
)
|
|
$
|
3,011
|
|
Allocation to nonvested restricted stock awards
|
|
|
—
|
|
|
|
89
|
|
|
|
—
|
|
|
|
49
|
|
Net (loss) earnings available to common stockholders
|
|
$
|
(689
|
)
|
|
$
|
5,412
|
|
|
$
|
(3,829
|
)
|
|
$
|
2,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding – basic and diluted
|
|
|
35,836
|
|
|
|
36,010
|
|
|
|
35,835
|
|
|
|
36,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) earnings per common share – basic and diluted
|
|
$
|
(0.02
|
)
|
|
$
|
0.15
|
|
|
$
|
(0.11
|
)
|
|
$
|
0.08
|
|
There were no options
outstanding and we paid no dividends during the six months ended June 30, 2020 or 2019.
Accounting for stock-based
compensation—We recorded total stock-based compensation expense for our restricted stock awards of $126,000 and $218,000
and $68,000 and $176,000 as general and administrative expenses for the three and six-month periods ended June 30, 2020 and 2019,
respectively. We recorded income tax benefits of $35,000 and $43,000 and $19,000 and $38,000 for the three and six-month periods
ended June 30, 2020 and 2019, respectively, related to vesting of our restricted stock awards.
Recent accounting
pronouncements— In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards
Update (“ASU”) No. 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General.
This new standard makes changes to the disclosure requirements for sponsors of defined benefit pension and/or other postretirement
benefit plans to improve effectiveness of notes to the financial statements. ASU 2018-14 is effective for fiscal years ending after
December 15, 2020, and requires retrospective adoption. The adoption of this ASU did not have a material impact on our financial
statement disclosures.
In August 2018, the
FASB issued ASU No. 2018-13, Fair Value Measurement. This new standard makes changes to the disclosure requirements for
fair value measurements to improve effectiveness of notes to the financial statements. ASU 2018-14 is effective for fiscal years
beginning after December 15, 2019, and generally requires retrospective adoption. The adoption of this ASU did not have a material
impact on our financial statement disclosures.
Reclassifications
– Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation.
As a result of the announcement that we will be moving one of our NASCAR Cup Series events historically held at Dover International
Speedway to Nashville Superspeedway pursuant to a four year sanction agreement with NASCAR, long-term assets that were historically
shown separately on the consolidated balance sheet have been included in property and equipment, net. The impact of the reclassification
made to prior year amounts is not material and did not affect net earnings or cash flows.
NOTE
4 – Long-Term Debt
At June 30, 2020,
Dover Motorsports, Inc. and its wholly owned subsidiaries Dover International Speedway, Inc. and Nashville Speedway, USA, Inc.,
as co-borrowers had a $30,000,000 credit agreement with a bank group. The credit facility expires on January 1, 2022. Interest
is based upon LIBOR plus a margin that varies between 125 and 175 basis points depending on the leverage ratio. At June 30,
2020, there were no borrowings outstanding under the credit facility. The credit facility contains certain covenants including
maximum funded debt to earnings before interest, taxes, depreciation and amortization (“leverage ratio”) and a minimum
fixed charge coverage ratio. Material adverse changes in our results of operations could impact our ability to maintain financial
ratios necessary to satisfy these requirements. In addition, the credit agreement includes a material adverse change clause. The
credit facility also provides that if we default under any other loan agreement, that would be a default under this facility. At
June 30, 2020, we were in compliance with the terms of the credit facility. The credit facility provides for seasonal funding needs,
capital improvements, letter of credit requirements and other general corporate purposes. After consideration of stand-by letters
of credit outstanding, the remaining maximum borrowings available pursuant to the credit facility were $16,375,000 at June 30,
2020. Assuming the 2020 NASCAR race schedule is not cancelled due to the COVID-19 pandemic, we expect to be in compliance with
the financial covenants, and all other covenants, for all measurement periods during the next twelve months.
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 the qualified plan. Benefits provided by our qualified pension plan were based on years of service and employees'
remuneration over their employment period. 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 similar actuarial methods as those used for
our qualified pension plan. The assets for the excess plan aggregate $1,141,000 and $1,182,000 as of June 30, 2020 and December
31, 2019, 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
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Interest cost
|
|
$
|
109,000
|
|
|
$
|
128,000
|
|
|
$
|
217,000
|
|
|
$
|
257,000
|
|
Expected return on plan assets
|
|
|
(186,000
|
)
|
|
|
(182,000
|
)
|
|
|
(371,000
|
)
|
|
|
(363,000
|
)
|
Recognized net actuarial loss
|
|
|
40,000
|
|
|
|
36,000
|
|
|
|
81,000
|
|
|
|
71,000
|
|
|
|
$
|
(37,000
|
)
|
|
$
|
(18,000
|
)
|
|
$
|
(73,000
|
)
|
|
$
|
(35,000
|
)
|
The net periodic pension
benefit is included in other income, net in our consolidated statements of operations and comprehensive (loss) income.
We have no minimum
required pension contributions for 2020.
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 contributions 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. In the three and six-month periods ended June 30, 2020 and 2019, we recorded expenses of $30,000
and $60,000 and $27,000 and $54,000, respectively, related to the SERP. During the three and six-month periods ended June 30, 2020
and 2019, we contributed $0 and $120,000 and $0 and $108,000 to the plan, respectively. The liability for SERP pension benefits
was $60,000 and $120,000 as of June 30, 2020 and December 31, 2019, respectively, and is included in accrued liabilities in our
consolidated balance sheets.
We maintain a defined
contribution 401(k) plan that permits participation by substantially all employees. Our matching contributions to the 401(k) plan
were $29,000 and $65,000 and $27,000 and $59,000 in the three and six-month periods ended June 30, 2020 and 2019, respectively.
NOTE 6 – Stockholders’
Equity
Changes in the components
of stockholders’ equity for the three and six-month periods ending June 30, 2020 are as follows (in thousands):
|
|
Common
Stock
|
|
|
Class
A
Common
Stock
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Balance
at December 31, 2019
|
|
$
|
1,782
|
|
|
$
|
1,851
|
|
|
$
|
100,994
|
|
|
$
|
(36,968
|
)
|
|
$
|
(3,691
|
)
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,140
|
)
|
|
|
—
|
|
Issuance
of restricted stock awards, net of forfeitures
|
|
|
13
|
|
|
|
—
|
|
|
|
(13
|
)
|
|
|
—
|
|
|
|
—
|
|
Stock-based
compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
92
|
|
|
|
—
|
|
|
|
—
|
|
Repurchase
and retirement of common stock
|
|
|
(5
|
)
|
|
|
—
|
|
|
|
(89
|
)
|
|
|
—
|
|
|
|
—
|
|
Change
in net actuarial loss and prior service cost, net of income tax expense of $11
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
29
|
|
Balance
at March 31, 2020
|
|
$
|
1,790
|
|
|
$
|
1,851
|
|
|
$
|
100,984
|
|
|
$
|
(40,108
|
)
|
|
$
|
(3,662
|
)
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(689
|
)
|
|
|
—
|
|
Issuance
of restricted stock awards, net of forfeitures
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
2
|
|
|
|
—
|
|
|
|
—
|
|
Stock-based
compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
126
|
|
|
|
—
|
|
|
|
—
|
|
Change
in net actuarial loss and prior service cost, net of income tax expense of $12
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
29
|
|
Balance
at June 30, 2020
|
|
$
|
1,788
|
|
|
$
|
1,851
|
|
|
$
|
101,112
|
|
|
$
|
(40,797
|
)
|
|
$
|
(3,633
|
)
|
Changes in the components
of stockholders’ equity for the three and six-month periods ending June 30, 2019 are as follows (in thousands):
|
|
Common
Stock
|
|
|
Class
A
Common
Stock
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Balance
at December 31, 2018
|
|
$
|
1,805
|
|
|
$
|
1,851
|
|
|
$
|
101,416
|
|
|
$
|
(38,826
|
)
|
|
$
|
(3,358
|
)
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,490
|
)
|
|
|
—
|
|
Issuance
of restricted stock awards, net of forfeitures
|
|
|
14
|
|
|
|
—
|
|
|
|
(14
|
)
|
|
|
—
|
|
|
|
—
|
|
Stock-based
compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
108
|
|
|
|
—
|
|
|
|
—
|
|
Repurchase
and retirement of common stock
|
|
|
(10
|
)
|
|
|
—
|
|
|
|
(190
|
)
|
|
|
—
|
|
|
|
—
|
|
Change
in net actuarial loss and prior service cost, net of income tax expense of $10
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
25
|
|
Balance
at March 31, 2019
|
|
$
|
1,809
|
|
|
$
|
1,851
|
|
|
$
|
101,320
|
|
|
$
|
(41,316
|
)
|
|
$
|
(3,333
|
)
|
Net
earnings
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,501
|
|
|
|
—
|
|
Stock-based
compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
68
|
|
|
|
—
|
|
|
|
—
|
|
Change
in net actuarial loss and prior service cost, net of income tax expense of $10
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
26
|
|
Balance
at June 30, 2019
|
|
$
|
1,809
|
|
|
$
|
1,851
|
|
|
$
|
101,388
|
|
|
$
|
(35,815
|
)
|
|
$
|
(3,307
|
)
|
As of June 30, 2020
and December 31, 2019, accumulated other comprehensive loss, net of income taxes, consists of the following:
|
|
June 30, 2020
|
|
|
December 31, 2019
|
|
Net actuarial loss and prior service cost not yet recognized in net periodic benefit cost, net of income tax benefit of $2,462,000 and $2,485,000, respectively
|
|
$
|
(3,633,000
|
)
|
|
$
|
(3,691,000
|
)
|
As of June 30, 2019
and December 31, 2018, accumulated other comprehensive loss, net of income taxes, consists of the following:
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
Net actuarial loss and prior service cost not yet recognized in net periodic benefit cost, net of income tax benefit of $2,330,000 and $2,350,000, respectively
|
|
$
|
(3,307,000
|
)
|
|
$
|
(3,358,000
|
)
|
On July 28, 2004, our
Board of Directors authorized the repurchase of up to 2,000,000 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. We made no purchases during
the first six months of 2020. During the first six months of 2019, we purchased and retired 50,220 shares of our outstanding common
stock at an average purchase price of $2.02 per share, not including nominal brokerage commissions. At June 30, 2020, we had remaining
repurchase authority of 384,809 shares.
We have a stock
incentive plan, adopted in 2014, 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 158,000 and 143,000 stock awards under this plan during the six months
ended June 30, 2020 and 2019. As of June 30, 2020, there were 1,156,000 shares available for granting options or stock awards.
During the six months
ended June 30, 2020 and 2019, we purchased and retired 50,572 and 48,457 shares of our outstanding common stock at an average purchase
price of $1.86 and $1.99 per share, 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 transferred to the employee in satisfaction of their tax liability.
The surrender of these shares is treated by us as a purchase of the shares.
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 June 30, 2020 and December 31, 2019:
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity investments
|
|
$
|
1,141,000
|
|
|
$
|
1,141,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity investments
|
|
$
|
1,182,000
|
|
|
$
|
1,182,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Our equity investments
consist of mutual funds. These investments are included in other assets in our consolidated balance sheets. Gains and losses on
our equity investments for the three and six-month periods ended June 30, 2020 and 2019, respectively, are as follows:
|
|
Three
Months Ended
June 30,
|
|
|
Six
Months Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Net gains (losses) gains recognized during the period on equity investments
|
|
$
|
126,000
|
|
|
$
|
26,000
|
|
|
$
|
(50,000
|
)
|
|
$
|
113,000
|
|
Less: net (losses) gains recognized during the period on equity investments sold during the period
|
|
|
(2,000
|
)
|
|
|
—
|
|
|
$
|
23,000
|
|
|
|
—
|
|
Unrealized gains (losses) gains recognized during the period on equity investments still held at period end
|
|
$
|
128,000
|
|
|
$
|
26,000
|
|
|
$
|
(73,000
|
)
|
|
$
|
113,000
|
|
The carrying amounts
of other financial instruments reported in our consolidated balance sheets for current assets and current liabilities approximate
their fair values because of the short maturity of these instruments.
NOTE 8 – Related Party Transactions
During the six months
ended June 30, 2019, Dover Downs Gaming & Entertainment, Inc. (“Gaming”), a company previously related through
common ownership, allocated costs of $430,000 to us for certain administrative and operating services, including leased space.
We allocated certain administrative and operating service costs of $110,000 to Gaming for the six months ended June 30, 2019. The
allocations were based on an analysis of each company’s share of the costs. In connection with our 2019 spring NASCAR event
weekend at Dover International Speedway, we invoiced Gaming $15,000 during the six months ended June 30, 2019 for tickets to the
NASCAR event. Effective March 28, 2019, Gaming became part of Twin River Worldwide Holdings, Inc. as a result of a merger and therefore
was no longer related through common ownership. 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 the spin-off
of Gaming from our company 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 Gaming to ensure that the real property holdings of each company was aligned with
its past uses and future business needs. During its harness racing season, Gaming has historically used the 5/8-mile harness racing
track that is located on our property and is on the inside of our one-mile motorsports superspeedway. In order to continue this
historic use, we granted a perpetual easement to the harness track to Gaming at the time of the spin-off. This perpetual easement
allows Gaming 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 Gaming 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 Gaming relative to our respective
Dover, Delaware facilities. We pay rent to Gaming for the lease of our principal executive office space.
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 and from his status as a trustee of the RMT Trust, our largest
stockholder. This means that Mr. Tippie has the ability to determine the outcome of the 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.
NOTE 9 – Commitments and Contingencies
In September 1999,
the Sports Authority of the County of Wilson (Tennessee) issued $25,900,000 in Variable Rate Tax Exempt Infrastructure
Revenue Bonds, Series 1999, to acquire, construct and develop certain public infrastructure improvements which benefit
Nashville Superspeedway, of which $13,400,000 was outstanding at June 30, 2020. Annual principal payments range from
$1,100,000 in September 2020 to $1,600,000 in 2029 and are payable solely from sales taxes and incremental property taxes
generated from the facility. These bonds are direct obligations of the Sports Authority and therefore have historically not
been required to be recorded on our consolidated balance sheets. If the sales taxes and incremental property taxes
(“applicable taxes”) are insufficient for the payment of principal and interest on the bonds, we would become
responsible for the difference. In the event we were unable to make the payments, they would be made pursuant to a
$13,625,000 irrevocable direct-pay letter of credit issued by our bank group. We are exposed to fluctuations in interest
rates for these bonds.
As of June 30, 2020
and December 31, 2019, $1,411,000 and $637,000, respectively, was available in the sales and incremental property tax fund maintained
by the Sports Authority to pay the remaining principal and interest due under the bonds. During 2019, we paid $983,000 into the
sales and incremental property tax fund and $1,398,000 was deducted from the fund for debt service. If we fail to maintain the
letter of credit that secures the bonds or we allow an uncured event of default to exist under our reimbursement agreement relative
to the letter of credit, the bonds would be immediately redeemable.
We have not promoted
major motorsports event at our Nashville Superspeedway since 2011. We lease the facility on a short term basis to third parties
from time to time. In 2011, we recorded a $2,250,000 provision for contingent obligation reflecting the present value of the estimated
portion of the revenue bonds debt service that may not be covered by the projected sales and incremental property taxes from the
facility. Given our recent decision to reopen the facility to major events in 2021, we now expect to have sales taxes available
to be used towards repayment of debt service. As a result, the provision for contingent obligation decreased by $353,000 during
the second quarter of 2020, and is $3,404,000 at June 30, 2020. An increase in the bonds’ interest rates would result in
an increase in the portion of debt service not covered by applicable taxes and therefore an increase in our liability.
We are also 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.
NOTE 10 – Income Taxes
Deferred income taxes
relate to the temporary differences between financial accounting income and taxable income and are primarily attributable to differences
between the book and tax basis of property and equipment and net operating loss carryforwards (expiring through 2032). At
June 30, 2020, we have available state net operating loss carryforwards of $50,726,000. Valuation allowances which reserve
a portion of the state net operating loss carryforwards, net of federal tax benefit, decreased in the second quarter of 2020 by
$1,240,000 from reassessing the realizability of the deferred tax assets for projected future taxable income related to the reopening
of Nashville Superspeedway.
NOTE 11 – Subsequent Events
As referenced in NOTE
2 - Business Operations, on July 29, 2020 we closed on the sale of approximately 97 acres of land at our Nashville property.