Company Quick10K Filing
Quick10K
Dover Motorsports
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-09-24 Enter Agreement, Exhibits
8-K 2019-07-26 Regulation FD, Exhibits
8-K 2019-07-25 Earnings, Regulation FD, Exhibits
8-K 2019-06-25 Enter Agreement, Exhibits
8-K 2019-04-25 Earnings, Regulation FD, Exhibits
8-K 2019-04-24 Shareholder Vote
8-K 2019-04-23 Officers, Exhibits
8-K 2019-01-24 Earnings, Regulation FD, Exhibits
8-K 2019-01-24 Earnings, Regulation FD, Exhibits
8-K 2018-10-25 Earnings, Regulation FD, Exhibits
8-K 2018-10-24 Regulation FD, Exhibits
8-K 2018-07-26 Earnings, Regulation FD, Exhibits
8-K 2018-04-25 Shareholder Vote
8-K 2018-03-02 Regulation FD, Exhibits
8-K 2018-02-09 Enter Agreement, Regulation FD
8-K 2018-01-25 Earnings, Officers, Exhibits
8-K 2018-01-22 Enter Agreement, Exhibits
MTN Vail Resorts 9,524
CHDN Churchill Downs 5,028
WBAI 500.com 3,984
FUN Cedar Fair 3,104
ISCA International Speedway 1,959
EVRI Everi Holdings 642
GDEN Golden Entertainment 352
UWN Nevada Gold & Casinos 38
VTSI VirTra 20
AMMA Alliance Mma 2
DVD 2019-06-30
Part I - Financial Information
Item 1. Financial Statements
Note 1 - Basis of Presentation
Note 2 - Business Operations
Note 3 - Summary of Significant Accounting Policies
Note 4 - Long-Term Debt
Note 5 - Pension Plans
Note 6 - Stockholders' Equity
Note 7 - Fair Value Measurements
Note 8 - Related Party Transactions
Note 9 - Commitments and Contingencies
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 a19-10335_1ex31d1.htm
EX-31.2 a19-10335_1ex31d2.htm
EX-32.1 a19-10335_1ex32d1.htm
EX-32.2 a19-10335_1ex32d2.htm

Dover Motorsports Earnings 2019-06-30

DVD 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 a19-10335_110q.htm 10-Q

 

 

United States

Securities and Exchange Commission

Washington, D.C.  20549

 

Form 10-Q

 

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended June 30, 2019

 

Commission file number    1-11929

 

Dover Motorsports, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

 

51-0357525

(State or Other Jurisdiction of Incorporation)

 

(I.R.S. Employer Identification No.)

 

1131 North DuPont Highway, Dover, Delaware  19901

(Address of principal executive offices)

 

(302) 883-6500

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Class

 

Trading Symbol(s)

 

Name of Exchange on Which Registered

Common Stock, $.10 Par Value

 

DVD

 

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes x   No o

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes x   No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,”  “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o

Smaller reporting company x

Emerging growth company o

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o   No x

 

As of July 29, 2019, the number of shares of each class of the registrant’s common stock outstanding is as follows:

 

Common Stock -

 

18,089,599 shares

 

Class A Common Stock -

 

18,509,975 shares

 

 

 

 


 

Part I — Financial Information

Item 1. Financial Statements

 

DOVER MOTORSPORTS, INC.

CONSOLIDATED STATEMENTS OF EARNINGS

AND COMPREHENSIVE INCOME

In Thousands, Except Per Share Amounts

(Unaudited)

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2019

 

2018

 

2019

 

2018

 

Revenues:

 

 

 

 

 

 

 

 

 

Admissions

 

$

2,502

 

$

2,853

 

$

2,502

 

$

2,853

 

Event-related

 

3,453

 

4,830

 

3,582

 

5,056

 

Broadcasting

 

18,878

 

18,128

 

18,878

 

18,128

 

Other

 

5

 

1

 

5

 

1

 

 

 

24,838

 

25,812

 

24,967

 

26,038

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

Operating and marketing

 

14,584

 

14,234

 

15,639

 

15,385

 

General and administrative

 

1,826

 

1,799

 

3,742

 

3,754

 

Depreciation

 

794

 

825

 

1,587

 

1,703

 

 

 

17,204

 

16,858

 

20,968

 

20,842

 

 

 

 

 

 

 

 

 

 

 

Gain on sale of land

 

 

 

139

 

2,512

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

 

7,634

 

8,954

 

4,138

 

7,708

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

(10

)

(33

)

(16

)

(73

)

Provision for contingent obligation

 

(135

)

(69

)

(246

)

(136

)

Other income

 

57

 

27

 

189

 

31

 

 

 

 

 

 

 

 

 

 

 

Earnings before income taxes

 

7,546

 

8,879

 

4,065

 

7,530

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

(2,045

)

(2,371

)

(1,054

)

(2,014

)

 

 

 

 

 

 

 

 

 

 

Net earnings

 

5,501

 

6,508

 

3,011

 

5,516

 

 

 

 

 

 

 

 

 

 

 

Change in net actuarial loss and prior service cost, net of income taxes

 

26

 

26

 

51

 

53

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

$

5,527

 

$

 6,534

 

$

3,062

 

$

 5,569

 

 

 

 

 

 

 

 

 

 

 

Net earnings per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.15

 

$

0.18

 

$

0.08

 

$

0.15

 

Diluted

 

$

0.15

 

$

0.18

 

$

0.08

 

$

0.15

 

 

The Notes to the Consolidated Financial Statements are an integral part of these consolidated financial statements.

 

2


 

DOVER MOTORSPORTS, INC.

CONSOLIDATED BALANCE SHEETS

In Thousands, Except Share and Per Share Amounts

(Unaudited)

 

 

 

June 30,

 

December 31,

 

 

 

2019

 

2018

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash

 

$

8,989

 

$

3,951

 

Accounts receivable

 

1,449

 

676

 

Inventories

 

20

 

21

 

Prepaid expenses and other

 

933

 

1,055

 

Assets held for sale

 

2,203

 

531

 

Total current assets

 

13,594

 

6,234

 

 

 

 

 

 

 

Property and equipment, net

 

48,559

 

48,137

 

Nashville Superspeedway facility

 

21,322

 

23,567

 

Right of use asset

 

231

 

 

Other assets

 

1,169

 

1,015

 

Total assets

 

$

84,875

 

$

78,953

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

712

 

$

187

 

Accrued liabilities

 

3,053

 

3,083

 

Payable to Dover Downs Gaming & Entertainment, Inc.

 

 

9

 

Income taxes payable

 

1,149

 

118

 

Contract liabilities

 

2,008

 

1,140

 

Total current liabilities

 

6,922

 

4,537

 

 

 

 

 

 

 

Liability for pension benefits

 

666

 

773

 

Lease liability

 

157

 

 

Non-refundable deposit

 

500

 

 

Provision for contingent obligation

 

2,630

 

2,384

 

Deferred income taxes

 

8,074

 

8,371

 

Total liabilities

 

18,949

 

16,065

 

 

 

 

 

 

 

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

 

 

 

Common stock, $0.10 par value; 75,000,000 shares authorized; shares issued and outstanding: 18,089,599 and 18,045,276, respectively

 

1,809

 

1,805

 

Class A common stock, $0.10 par value; 55,000,000 shares authorized; shares issued and outstanding: 18,509,975 and 18,509,975, respectively

 

1,851

 

1,851

 

Additional paid-in capital

 

101,388

 

101,416

 

Accumulated deficit

 

(35,815

)

(38,826

)

Accumulated other comprehensive loss

 

(3,307

)

(3,358

)

Total stockholders’ equity

 

65,926

 

62,888

 

Total liabilities and stockholders’ equity

 

$

84,875

 

$

78,953

 

 

The Notes to the Consolidated Financial Statements are an integral part of these consolidated financial statements.

 

3


 

DOVER MOTORSPORTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

In Thousands

(Unaudited)

 

 

 

Six Months Ended
June 30,

 

 

 

2019

 

2018

 

Operating activities:

 

 

 

 

 

Net earnings

 

$

3,011

 

$

5,516

 

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

 

 

 

 

 

Depreciation

 

1,587

 

1,703

 

Amortization of credit facility fees

 

31

 

32

 

Stock-based compensation

 

176

 

171

 

Deferred income taxes

 

(317

)

(160

)

Provision for contingent obligation

 

246

 

136

 

(Gains) losses on equity investments

 

(113

)

6

 

Gain on sale of land

 

(139

)

(2,512

)

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(773

)

(1,701

)

Inventories

 

1

 

(4

)

Prepaid expenses and other

 

58

 

182

 

Accounts payable

 

555

 

178

 

Accrued liabilities

 

(104

)

(227

)

Payable to Dover Downs Gaming & Entertainment, Inc.

 

(9

)

12

 

Income taxes payable

 

1,031

 

1,748

 

Contract liabilities

 

868

 

451

 

Liability for pension benefits

 

(36

)

(1,038

)

Net cash provided by operating activities

 

6,073

 

4,493

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

Capital expenditures

 

(2,154

)

(530

)

Proceeds from sale of land and equipment, net

 

827

 

4,945

 

Non-refundable deposit

 

500

 

 

Purchases of equity investments

 

(9

)

(62

)

Proceeds from sale of equity investments

 

1

 

56

 

Net cash (used in) provided by investing activities

 

(835

)

4,409

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

Borrowings from revolving line of credit

 

4,060

 

9,400

 

Repayments on revolving line of credit

 

(4,060

)

(12,640

)

Repurchase of common stock

 

(200

)

(406

)

Net cash used in financing activities

 

(200

)

(3,646

)

 

 

 

 

 

 

Net increase in cash

 

5,038

 

5,256

 

Cash, beginning of period

 

3,951

 

1

 

Cash, end of period

 

$

8,989

 

$

5,257

 

 

 

 

 

 

 

Supplemental information:

 

 

 

 

 

Interest (received) paid

 

$

(20

)

$

55

 

Income tax payments

 

$

340

 

$

427

 

Change in accounts payable for capital expenditures

 

$

(30

)

$

 

 

The Notes to the Consolidated Financial Statements are an integral part of these consolidated financial statements.

 

4


 

DOVER MOTORSPORTS, INC.

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 1, 2019.  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, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019 due to the seasonal nature of our business.

 

NOTE 2 — Business Operations

 

Dover Motorsports, Inc. is a public holding company that is a leading 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.  In 2019, we celebrate our 50th anniversary of racing and our Dover facility is scheduled to promote the following six events during 2019, all of which will be under the auspices of the premier sanctioning body in motorsports - the National Association for Stock Car Auto Racing (“NASCAR”):

 

·                  2 NASCAR Monster Energy Cup Series events (May and October);

·                  2 NASCAR Xfinity Series events (May and October);

·                  1 NASCAR Gander Outdoors Truck Series event (May); and

·                  1 NASCAR K&N Pro Series East event (October).

 

A NASCAR Monster Energy Cup Series event, a NASCAR Xfinity Series event and a NASCAR Gander Outdoors Truck Series event were held at Dover International Speedway during the second quarter of 2019 and 2018.

 

We have hosted the Firefly Music Festival (“Firefly”) on our property in Dover, Delaware for eight consecutive years.  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 over 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 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.

 

Nashville Superspeedway no longer promotes motorsports events and has not entered into sanction agreements with NASCAR since 2011.  We lease the facility on a short term basis to third parties from time to time.    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 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

 

5


 

approximately $4,150,000.  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 purchaser’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 purchaser closed on the first two parcels, comprising approximately 133 acres, which yielded to us proceeds, less closing costs, of $6,397,000.  Net proceeds after taxes are estimated to be approximately $5,314,000.  At June 30, 2019, $2,203,000 was reported as assets held for sale in our consolidated balance sheet.  One parcel of 97.17 acres remains under the option agreement with a purchase price of $66,685 per acre.  The purchaser paid to us $500,000 for the extension of this option until March 1, 2022, and this non-refundable payment would be credited to the purchase price at the closing of that option parcel.  While management remains committed to selling the remaining Nashville Superspeedway property which consists of approximately 1,000 acres, we do not believe it is probable that the remaining property will be sold within the next twelve months.  At June 30, 2019 and December 31, 2018, $21,322,000 and $23,567,000 was reported as long term assets in our consolidated balance sheets, respectively.

 

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 have reported as gain on sale of land in our consolidated statements of earnings.

 

During September 2018, we entered into negotiations to sell the last remaining 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.  At December 31, 2018, the fair value of the land was reported as assets held for sale in our consolidated balance sheets.

 

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 $64,563,000 and $63,042,000 as of June 30, 2019 and December 31, 2018, respectively.

 

Leases—Effective January 1, 2019, we account for leases under Accounting Standards Codification 842, Leases.  Under this guidance, arrangements meeting the definition of a lease are recorded on the consolidated balance sheet as both a right of use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or our incremental borrowing rate.

 

During the second quarter of 2019, we entered into certain operating leases with 36 month terms.  At June 30, 2019, our consolidated balance sheet included a right of use asset of $231,000, a long-term lease liability of $157,000, and a short-term lease liability, which is included in accrued liabilities, of $74,000.

 

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 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.  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, 2019, contract liabilities in our consolidated balance sheets of $1,997,000 and $11,000 relate to 2019 and 2020 events, respectively.  As of December 31, 2018, contract liabilities in our consolidated balance sheets relate to 2019 events.  Concession and souvenir revenues are recorded at the time of sale.  Revenues and related

 

6


 

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 and $239,000 of total revenues for the three and six-month periods ended June 30, 2019 and 2018, respectively.

 

The following table summarizes the liability activity related to contracts with customers for the three and six-month periods ended June 30, 2019 and 2018:

 

 

 

Three Months
Ended June 30,

 

Six Months
Ended June 30,

 

 

 

2019

 

2018

 

2019

 

2018

 

Balance, beginning of period

 

$

4,496

 

$

5,298

 

$

1,140

 

$

1,249

 

Reductions from beginning balance

 

(3,345

)

(4,000

)

(739

)

(778

)

Additional liabilities recorded during the period

 

1,841

 

1,648

 

5,197

 

5,697

 

Reduction of additional liabilities recorded during the period, not from beginning balance

 

(984

)

(1,246

)

(3,590

)

(4,468

)

Balance, end of period

 

$

2,008

 

$

1,700

 

$

 2,008

 

$

1,700

 

 

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. We anticipate recognizing unsatisfied performance obligations for the calendar year ending 2020 and beyond of approximately $3,272,000 at June 30, 2019.

 

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 of 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.  We are required to pay 25% of the gross broadcast rights fees to the event as part of the awards to the competitors, which are recorded as operating expenses.

 

Expense recognition—The cost of advertising is expensed as incurred.  Advertising expenses were $482,000 and $546,000, and $469,000 and $605,000 for the three and six-month periods ended June 30, 2019 and 2018, 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 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 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,

 

 

 

2019

 

2018

 

2019

 

2018

 

Net earnings per common share — basic and diluted:

 

 

 

 

 

 

 

 

 

Net earnings

 

$

5,501

 

$

6,508

 

$

3,011

 

$

5,516

 

Allocation to nonvested restricted stock awards

 

89

 

104

 

49

 

89

 

Net earnings available to common stockholders

 

$

5,412

 

$

6,404

 

$

2,962

 

$

5,427

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding — basic and diluted

 

36,010

 

36,160

 

36,021

 

36,196

 

 

 

 

 

 

 

 

 

 

 

Net earnings per common share — basic and diluted

 

$

0.15

 

$

0.18

 

$

0.08

 

$

0.15

 

 

There were no options outstanding and we paid no dividends during the six months ended June 30, 2019 or 2018.

 

7


 

Accounting for stock-based compensation—We recorded total stock-based compensation expense for our restricted stock awards of $68,000 and $176,000, and $66,000 and $171,000 as general and administrative expenses for the three and six-month periods ended June 30, 2019 and 2018, respectively.  We recorded income tax benefits of $19,000 and $38,000, and $18,000 and $46,000 for the three and six-month periods ended June 30, 2019 and 2018, 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.  Early adoption is permitted.  We are currently analyzing the impact of this ASU and we do not expect it to have a significant impact on our financial statement disclosures.

 

NOTE 4 — Long-Term Debt

 

At June 30, 2019, Dover Motorsports, Inc. and its wholly owned subsidiaries Dover International Speedway, Inc. and Nashville Speedway, USA, Inc., as co-borrowers had a $35,000,000 credit agreement with a bank group.  The credit facility expires on July 31, 2020.  We will seek to extend the maturity of this obligation prior to its expiration date.  Interest is based upon LIBOR plus a margin that varies between 125 and 175 basis points depending on the leverage ratio.  At June 30, 2019, 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, 2019, 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 $20,358,000 at June 30, 2019.  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 and assumptions as those used for our qualified pension plan.  The assets for the excess plan aggregate $1,118,000 and $995,000 as of June 30, 2019 and December 31, 2018, 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,

 

 

 

2019

 

2018

 

2019

 

2018

 

Interest cost

 

$

128,000

 

$

115,000

 

$

257,000

 

$

230,000

 

Expected return on plan assets

 

(182,000

)

(170,000

)

(363,000

)

(340,000

)

Recognized net actuarial loss

 

36,000

 

36,000

 

71,000

 

72,000

 

 

 

$

(18,000

)

$

(19,000

)

$

(35,000

)

$

(38,000

)

 

8


 

The net periodic pension benefit is included in other income in our consolidated statements of earnings.

 

While we have no minimum required pension contributions for 2019, we will consider making contributions during the remainder of the year.  We contributed $500,000 and $1,000,000 to our defined benefit pension plans during the three and six-month periods ended June 30, 2018, respectively.

 

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, 2019 and 2018, we recorded expenses of $27,000 and $54,000, and $22,000 and $47,000, respectively, related to the SERP.  During the three and six-month periods ended June 30, 2019 and 2018, we contributed $0 and $108,000, and $0 and $85,000 to the plan, respectively.  The liability for SERP pension benefits was $54,000 and $108,000 as of June 30, 2019 and December 31, 2018, 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 $27,000 and $59,000, and $30,000 and $66,000 in the three and six-month periods ended June 30, 2019 and 2018, respectively.

 

NOTE 6 — Stockholders’ Equity

 

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

)

 

9


 

Changes in the components of stockholders’ equity for the three and six month periods ending June 30, 2018 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, 2017

 

$

1,825

 

$

1,851

 

$

101,844

 

$

(42,858

)

$

(3,440

)

Adoption of ASU 2016-01

 

 

 

 

73

 

(73

)

Net loss

 

 

 

 

(992

)

 

Issuance of restricted stock awards, net of forfeitures

 

15

 

 

(15

)

 

 

Stock-based compensation

 

 

 

105

 

 

 

Repurchase and retirement of common stock

 

(14

)

 

(275

)

 

 

Change in net actuarial loss and prior service cost, net of income tax expense of $10

 

 

 

 

 

27

 

Balance at March 31, 2018

 

1,826

 

1,851

 

101,659

 

(43,777

)

(3,486

)

Net earnings

 

 

 

 

6,508

 

 

Stock-based compensation

 

 

 

66

 

 

 

Repurchase and retirement of common stock

 

(5

)

 

(112

)

 

 

Change in net actuarial loss and prior service cost, net of income tax expense of $10

 

 

 

 

 

26

 

Balance at June 30, 2018

 

$

1,821

 

$

1,851

 

$

101,613

 

$

(37,269

)

$

(3,460

)

 

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.  During the first six months of 2019 and 2018, we purchased and retired 50,220 and 147,044 shares of our outstanding common stock at an average purchase price of $2.02 and $2.08 per share, respectively, not including nominal brokerage commissions.  At June 30, 2019, we had remaining repurchase authority of 650,429 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 143,000 and 151,000 stock awards under this plan during the six months ended June 30, 2019 and 2018.  As of June 30, 2019, there were 1,327,473 shares available for granting options or stock awards.

 

During the six months ended June 30, 2019 and 2018, we purchased and retired 48,457 and 47,236 shares of our outstanding common stock at an average purchase price of $1.99 and $2.00 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.

 

10


 

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, 2019 and December 31, 2018:

 

 

 

Total

 

Level 1

 

Level 2

 

Level 3

 

June 30, 2019

 

 

 

 

 

 

 

 

 

Equity investments

 

$

1,118,000

 

$

1,118,000

 

$

 

$

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

 

 

 

 

 

 

 

 

Equity investments

 

$

995,000

 

$

995,000

 

$

 

$

 

 

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, 2019 and 2018, respectively, are as follows:

 

 

 

Three Months
Ended June 30,

 

Six Months
Ended June 30,

 

 

 

2019

 

2018

 

2019

 

2018

 

Net gains (losses) recognized during the period on equity investments

 

$

26,000

 

$

10,000

 

$

113,000

 

$

(6,000

)

Less: net gains recognized during the period on equity investments sold during the period

 

 

(5,000

)

 

(13,000

)

Unrealized gains (losses) recognized during the period on equity investments still held at period end

 

$

26,000

 

$

5,000 

 

$

113,000

 

$

(19,000

)

 

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-month period ended June 30, 2019 and the three and six-month periods ended June 30, 2018, Dover Downs Gaming & Entertainment, Inc. (“Gaming”), a company previously related through common ownership, allocated costs of $430,000, and $471,000 and $885,000, respectively, to us for certain administrative and operating services, including leased space.  We allocated certain administrative and operating service costs of $110,000, and $34,000 and $140,000, respectively, to Gaming for the six-month period ended June 30, 2019 and the three and six-month periods ended June 30, 2018.  The allocations were based on an analysis of each company’s share of the costs.  In connection with our 2018 spring NASCAR event weekend at Dover International Speedway, Gaming provided certain services, primarily catering, for which we were invoiced $391,000 during the three and six-month periods ended June 30, 2018.  Additionally, we invoiced Gaming $15,000, and $115,000 and $115,000, respectively, during the six-month period ended June 30, 2019 and the three and six-month periods ended June 30, 2018 for tickets, our commission for suite catering and other services to the NASCAR events.  As of December 31, 2018, our consolidated balance sheets included $9,000 of payables to Gaming for the aforementioned items.  We settled this item in January of 2019.  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

 

11


 

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 $14,400,000 was outstanding at June 30, 2019.  Annual principal payments range from $1,000,000 in September 2019 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 $14,642,000 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, 2019 and December 31, 2018, $1,817,000 and $1,052,000, 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 2018, we paid $984,000 into the sales and incremental property tax fund and $1,411,000 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.

 

Nashville Superspeedway no longer promotes motorsports events and has not entered into sanction agreements with NASCAR 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.  Due to changing interest rates, the provision for contingent obligation increased by $135,000 and $246,000, and $69,000 and $136,000 in the three and six-month periods ended June 30, 2019 and 2018, respectively, and is $2,630,000 at June 30, 2019.  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.

 

12


 

Item 2.                                 Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion is based upon and should be read together with the consolidated financial statements and notes thereto included elsewhere in this document.

 

Results of Operations

 

Three Months Ended June 30, 2019 vs. Three Months Ended June 30, 2018

 

Admissions revenue was $2,502,000 in the second quarter of 2019 as compared to $2,853,000 in the second quarter of 2018.  The $351,000 decrease was related to lower attendance at our 2019 spring NASCAR event weekend at Dover International Speedway.  Inclement weather negatively impacted our Sunday Cup series event causing us to hold it on Monday.

 

Event-related revenue was $3,453,000 in the second quarter of 2019 as compared to $4,830,000 in the second quarter of 2018.  The $1,377,000 decrease was primarily due to lower sponsorship revenues, the hiring of a company to manage our concession sales so that we now receive a percentage of the sales, and lower luxury suite rentals and hospitality at our 2019 spring NASCAR event weekend and lower revenues from the 2019 Firefly Music Festival.  We believe the inclement weather negatively impacted our event-related revenue.

 

Broadcasting revenue increased to $18,878,000 in the second quarter of 2019 as compared to $18,128,000 in the second quarter of 2018 due to contractual increases in NASCAR’s broadcasting rights agreement.

 

Operating and marketing expenses were $14,584,000 in the second quarter of 2019 as compared to $14,234,000 in the second quarter of 2018.  The increase was related to higher purse and sanction fees and advertising expenses for our 2019 NASCAR event weekend, partially offset by lower concessions expenses as a result of us hiring a company to manage our concession sales.

 

General and administrative expenses increased slightly to $1,826,000 in the second quarter of 2019 from $1,799,000 in the second quarter of 2018.

 

Depreciation expense decreased to $794,000 in the second quarter of 2019 from $825,000 in the second quarter of 2018.

 

Net interest expense decreased to $10,000 in the second quarter of 2019 from $33,000 in the second quarter of 2018 due to lower average outstanding borrowings and interest income on invested cash in 2019.

 

Provision for contingent obligation increased to $135,000 in the second quarter of 2019 from $69,000 in the second quarter of 2018 primarily as a result of a decrease in the discount rate.

 

Other income of $57,000 in the second quarter of 2019 primarily represents gains on equity investments of $26,000 and pension benefits of $18,000.  Other income of $27,000 in the second quarter of 2018 primarily represents pension benefits of $19,000 and gains on equity investments of $10,000.

 

Our effective income tax rates for the second quarter of 2019 and 2018 were 27.1% and 26.7%, respectively.

 

Six Months Ended June 30, 2019 vs. Six Months Ended June 30, 2018

 

Admissions revenue was $2,502,000 in the first six months of 2019 as compared to $2,853,000 in the first six months of 2018.  The $351,000 decrease was related to lower attendance at our 2019 spring NASCAR event weekend at Dover International Speedway.  Inclement weather negatively impacted our Sunday Cup series event causing us to hold it on Monday.

 

13


 

Event-related revenue was $3,582,000 in the first six months of 2019 as compared to $5,056,000 in the first six months of 2018.  The $1,474,000 decrease was primarily due to lower sponsorship revenues, the hiring of a company to manage our concession sales so that we now receive a percentage of the sales, and lower luxury suite rentals and hospitality at our 2019 spring NASCAR event weekend and lower revenues from the 2019 Firefly Music Festival.  We believe the inclement weather negatively impacted our event-related revenue.

 

Broadcasting revenue increased to $18,878,000 in the first six months of 2019 as compared to $18,128,000 in the first six months of 2018 due to contractual increases in NASCAR’s broadcasting rights agreement.

 

Operating and marketing expenses were $15,639,000 in the first six months of 2019 as compared to $15,385,000 in the first six months of 2018.  The increase was related to higher purse and sanction fees and advertising expenses for our 2019 NASCAR event weekend, partially offset by lower concessions expenses as a result of us hiring a company to manage our concession sales.

 

General and administrative expenses remained consistent at $3,742,000 in the first six months of 2019 as compared to $3,754,000 in the first six months of 2018.

 

Depreciation expense decreased to $1,587,000 in the first six months of 2019 from $1,703,000 in the first six months of 2018, primarily as a result of assets becoming fully depreciated.

 

Gain on sale of land in the first six months of 2019 and 2018 relates to the sales of approximately 8 and 147 acres of land at our Nashville facility, respectively.

 

Net interest expense decreased to $16,000 in the first six months of 2019 from $73,000 in the first six months of 2018 due to lower average outstanding borrowings and interest income on invested cash in 2019.

 

Provision for contingent obligation increased to $246,000 in the first six months of 2019 from $136,000 in the first six months of 2018 primarily as a result of a decrease in the discount rate.

 

Other income of $189,000 in the first six months of 2019 primarily represents gains on equity investments of $113,000 and pension benefits of $35,000.  Other income of $31,000 in the first six months of 2018 primarily represents pension benefits of $38,000 partially offset by losses on equity investments of $6,000.

 

Our effective income tax rates for the first six months of 2019 and 2018 were 25.9% and 26.7%, respectively.

 

Liquidity and Capital Resources

 

Our operations and cash flows from operating activities are seasonal in nature.

 

Net cash provided by operating activities was $6,073,000 for the first six months of 2019 as compared to $4,493,000 for the first six months of 2018.  The increase was primarily due to lower pension contributions, the amount and timing of invoicing to customers, and the timing of payments to vendors.  We contributed $1,000,000 to our defined benefit pension plan in the first six months of 2018.  We made no pension contributions during the first six months of 2019.

 

Net cash used in investing activities was $835,000 for the first six months of 2019 as compared to net cash provided by investing activities of $4,409,000 for the first six months of 2018.  Capital expenditures of $2,154,000 in the first six months of 2019 related primarily to costs associated with replacing our Monster Energy NASCAR Cup Series garage and improvements to our skybox suites at our Dover facility.  Capital expenditures of $530,000 in the first six months of 2018 related primarily to improvements at our Dover facility and equipment purchases.  In March 2019, we closed on the sale of approximately 8 acres of land at our Nashville Superspeedway facility for proceeds of $267,000, net of closing costs.  Also in the first quarter of 2019, we closed on the sale of a parcel of land we owned near St. Louis for proceeds of $531,000, net of closing costs.  Additionally, we sold equipment in the first quarter of 2019 for proceeds of $29,000.  In March 2018, we closed on the sale of approximately 147 acres of land at our Nashville Superspeedway facility for proceeds of $4,945,000, net of closing costs.  In June 2019, we extended an

 

14


 

option to purchase land at our Nashville facility and received a $500,000 non-refundable deposit in return — see further discussion below.

 

Net cash used in financing activities was $200,000 for the first six months of 2019 as compared to $3,646,000 for the first six months of 2018.  During the first six months of 2019, we borrowed $4,060,000 from our revolving line of credit all of which was repaid during the same period.  We had net repayments on our outstanding line of credit of $3,240,000 in the first six months of 2018.  During the first six months of 2019 and 2018, we purchased and retired 50,220 and 147,044 shares of our outstanding common stock for $104,000 and $312,000 from the open market, respectively.  Additionally, we purchased and retired 48,457 and 47,236 shares of our outstanding common stock for $96,000 and $94,000 during the first six months of 2019 and 2018, respectively, from employees in connection with the vesting of restricted stock awards under our stock incentive plan.

 

At June 30, 2019, Dover Motorsports, Inc. and its wholly owned subsidiaries Dover International Speedway, Inc. and Nashville Speedway, USA, Inc., as co-borrowers had a $35,000,000 credit agreement with a bank group.  The credit facility expires on July 31, 2020.  We will seek to extend the maturity of this obligation prior to its expiration date.  Interest is based upon LIBOR plus a margin that varies between 125 and 175 basis points depending on the leverage ratio.  At June 30, 2019, 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, 2019, 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 $20,358,000 at June 30, 2019.  We expect to be in compliance with the financial covenants, and all other covenants, for all measurement periods during the next twelve months.

 

Nashville Superspeedway no longer promotes motorsports events and has not entered into sanction agreements with NASCAR since 2011.  We lease the facility on a short term basis to third parties from time to time.    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 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.  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 purchaser’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 purchaser closed on the first two parcels, comprising approximately 133 acres, which yielded to us proceeds, less closing costs, of $6,397,000.  Net proceeds after taxes are estimated to be approximately $5,314,000.  At June 30, 2019, $2,203,000 was reported as assets held for sale in our consolidated balance sheet.  One parcel of 97.17 acres remains under the option agreement with a purchase price of $66,685 per acre.  The purchaser paid to us $500,000 for the extension of this option until March 1, 2022, and this non-refundable payment would be credited to the purchase price at the closing of that option parcel.  While management remains committed to selling the remaining Nashville Superspeedway property which consists of approximately 1,000 acres, we do not believe it is probable that the remaining property will be sold within the next twelve months.  At June 30, 2019 and December 31, 2018, $21,322,000 and $23,567,000 was reported as long term assets in our consolidated balance sheets, respectively.

 

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 have reported as gain on sale of land in our consolidated statements of earnings.

 

During September 2018, we entered into negotiations to sell the last remaining 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.  At December 31, 2018, the fair value of the land was reported as assets held for sale in our consolidated balance sheets.

 

15


 

We promoted three racing events in the first six months of 2019 and we are scheduled to promote three more during the remainder of the year.  We promoted six racing events in 2018 (five national series events and one regional series event), all of which were sanctioned by NASCAR and held at our Dover International Speedway facility.  We have entered into five year sanction agreements with NASCAR for each of the five national series events for 2016-2020.  NASCAR’s regional series events are sanctioned on an annual basis.

 

Broadcasting revenues continue to be a significant long-term revenue source for our business.  Management believes this long-term contracted revenue helps stabilize our financial strength, earnings and cash flows. Also, NASCAR ratings can impact attendance at our events and sponsorship opportunities. A substantial portion of our profits in recent years has resulted from television revenues received from NASCAR under its agreements with various television networks, which is expected to continue for the foreseeable future.  Our share of these television broadcast revenues and purse and sanction fees are fixed under our NASCAR sanction agreements through the year 2020.  We are obligated to conduct events in the manner stipulated under the terms and conditions of these sanctioning agreements.

 

NASCAR is operating under a ten-year, multi-platform agreement with FOX Sports Media Group (“FOX”) for the broadcasting and digital rights to 16 NASCAR Cup Series races, 14 Xfinity Series races and the entire Gander Outdoors Truck Series (along with practice and qualifying) from 2015 through 2024. The agreement includes “TV Everywhere” rights that allow live-streaming of all FOX races, before and after race coverage, in-progress and finished race highlights, and replays of FOX-televised races to a Fox Sports-affiliated website which began in 2013. The agreement also allows re-telecast of races on a FOX network and via video-on-demand for 24 hours and other ancillary programming, including a nightly NASCAR news and information show and weekend at-track shows. NASCAR and FOX Deportes, the number one US Latino sports network, have teamed up to provide our sport’s most expansive Spanish-language broadcast offering ever with coverage of 15 NASCAR Cup Series races which started in 2013.

 

NASCAR also operates under a ten-year comprehensive agreement with NBC Sports Group granting NBCUniversal (“NBC”) exclusive rights to 20 NASCAR Cup Series races, 19 NASCAR Xfinity Series events, select NASCAR Regional & Touring Series events and other live content which began in 2015.  Further, NBC has been granted Spanish-language rights, certain video-on-demand rights and exclusive ‘TV Everywhere’ rights for its NASCAR Cup Series and NASCAR Xfinity Series events.

 

Looking forward, our sanction agreements with NASCAR contain annual increases of between 3 and 4 percent in media rights fees for each sanctioned event conducted, and provide a specific percentage of media rights fees to be paid to competitors. The sanction agreements also provide for annual increases in sanction fees and non-media rights related prize and point fund monies (to be paid to competitors) of between 4 and 4.5 percent annually over the term of the agreements.

 

We have hosted the Firefly Music Festival (“Firefly”) on our property in Dover, Delaware for eight consecutive years.  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 over 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 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.

 

While we believe that our net cash flows from operating activities and funds available from our credit facility will be sufficient to provide for our working capital needs, capital spending requirements, stock repurchases, as well as any cash dividends our Board of Directors may declare at least through the next twelve months and also provide for our long-term liquidity, we will need to extend the maturity of our outstanding credit facility prior to its expiration on July 31, 2020.  Based on current business conditions, we expect to spend approximately $2,800,000 - $3,800,000 on capital expenditures during the remainder of 2019.  While we have no minimum required pension contributions for 2019, we will consider making contributions during the remainder of 2019.

 

16


 

Contractual Obligations

 

At June 30, 2019, we had the following contractual obligations and other commercial commitments:

 

 

 

 

 

Payments Due by Period

 

 

 

Total

 

2019

 

2020 – 2021

 

2022 – 2023

 

Thereafter

 

Contingent obligation(a)

 

$

2,630,000

 

$

 

$

 

$

 

$

2,630,000

 

Total contractual cash obligations

 

$

2,630,000

 

$

 

$

 

$

 

$

2,630,000

 

 


(a) 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 $14,400,000 was outstanding at June 30, 2019.  Annual principal payments range from $1,000,000 in September 2019 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 sheet.  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 $14,642,000 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, 2019 and December 31, 2018, $1,817,000 and $1,052,000, 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 2018, we paid $984,000 into the sales and incremental property tax fund and $1,411,000 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.

 

Nashville Superspeedway no longer promotes motorsports events and has not entered into sanction agreements with NASCAR 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.  Due to changing interest rates, the provision for contingent obligation increased by $135,000 and $246,000, and $69,000 and $136,000 in the three and six-month periods ended June 30, 2019 and 2018, respectively, and is $2,630,000 at June 30, 2019.  See NOTE 9 — Commitments and Contingencies of the consolidated financial statements included elsewhere in this document for further discussion.

 

Related Party Transactions

 

See NOTE 8 — Related Party Transactions of the consolidated financial statements included elsewhere in this document.

 

Critical Accounting Policies

 

For a summary of our critical accounting policies and the means by which we develop estimates thereon, see “Part II - Item 7. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations” in our 2018 Annual Report on Form 10-K. There have been no material changes to our critical accounting policies from those included in our 2018 Annual Report on Form 10-K.

 

Recent Accounting Pronouncements

 

See NOTE 3 — Summary of Significant Accounting Policies to our consolidated financial statements included elsewhere in this document for a full description of recent accounting pronouncements that affect us.

 

17


 

Factors That May Affect Operating Results; Forward-Looking Statements

 

This report and the documents incorporated by reference may contain forward-looking statements.  In Item 1A. Risk Factors of our 2018 Annual Report on Form 10-K, we disclose the important factors that could cause our actual results to differ from our expectations.  There have been no material changes to our risk factors from those included in our 2018 Annual Report on Form 10-K.

 

Item 3.                                 Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable.

 

Item 4.                                 Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

We have established disclosure controls and procedures to ensure that relevant, material information is made known to the officers who certify our financial reports and to other members of senior management and the Board of Directors.

 

Based on their evaluation as of June 30, 2019, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective to ensure that the information we are required to disclose in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

 

Changes in Internal Control Over Financial Reporting

 

There have been no changes in our internal control over financial reporting during the fiscal quarter ended June 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Part II — Other Information

 

Item 1.                                 Legal Proceedings

 

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 condition or cash flows.

 

Item 1A.                        Risk Factors

 

Not applicable.

 

Item 2.                                 Unregistered Sales of Equity Securities and Use of Proceeds

 

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.  During the second quarter of 2018, we purchased 54,565 shares of our outstanding common stock at an average purchase price of $2.10 per share, not including nominal brokerage commissions.  We made no repurchases of our outstanding common stock during the second quarter of 2019.  At June 30, 2019, we had remaining repurchase authority of 650,429 shares.

 

18


 

Item 3.                                 Defaults Upon Senior Securities

 

None.

 

Item 4.                                 Mine Safety Disclosures

 

Not applicable.

 

Item 5.                                 Other Information

 

None.

 

Item 6.                                 Exhibits

 

31.1            Certification of Chief Executive Officer pursuant to Rule 13a-14(a)

 

31.2            Certification of Chief Financial Officer pursuant to Rule 13a-14(a)

 

32.1            Certification of Chief Executive Officer Pursuant to 18 U.S.C. Sec. 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

32.2            Certification of Chief Financial Officer Pursuant to 18 U.S.C. Sec. 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

101               The following materials from the Dover Motorsports, Inc. quarterly report on Form 10-Q for the quarter ended June 30, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Earnings and Comprehensive Income for the three and six months ended June 30, 2019 and 2018; (ii) Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018; (iii) Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018; and (iv)  Notes to the Consolidated Financial Statements.

 

Signatures

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

DATED:

August 6, 2019

 

Dover Motorsports, Inc.

 

 

 

Registrant

 

 

 

 

 

/s/ Denis McGlynn

 

 

Denis McGlynn

 

 

President, Chief Executive Officer

 

 

and Director

 

 

(Principal Executive Officer)

 

 

 

 

 

/s/ Timothy R. Horne

 

 

Timothy R. Horne

 

 

Senior Vice President-Finance,

 

 

Chief Financial Officer

 

 

and Director

 

 

(Principal Financial and Accounting Officer)

 

19