NOTE 1 —  Business Operations

 

References in this document to “we,” “us” and “our” mean Dover Motorsports, Inc. and/or its wholly owned subsidiaries, as appropriate.

 

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.  Our Dover facility promoted the following six events during 2016, all of which were under the auspices of the premier sanctioning body in motorsports - the National Association for Stock Car Auto Racing (“NASCAR”):

 

 

In 2017, we are scheduled to promote these same six events at Dover International Speedway.  Total revenues from these events were approximately 97% of total revenues in 2016, 2015 and 2014.

 

We have hosted the Firefly Music Festival (“Firefly”) on our property in Dover, Delaware for five consecutive years and it is scheduled to return on June 15-18, 2017.  The inaugural three day festival with 40 musical acts was held in July 2012 and this year’s event in Dover was held on June 16-19, 2016 with over 110 musical acts.  In September 2014, Red Frog Events LLC formed RFGV Festivals LLC - a joint venture with Goldenvoice that promotes Firefly.  Goldenvoice is owned by AEG Live, one of the world’s largest presenters of live music and entertainment events.  We entered into an amended agreement with RFGV Festivals granting them two 5 year options to extend our facility rental agreement through 2032 (from its original expiration date of 2022) in exchange for a rental commitment to secure our property for up to two festivals per year.  Rent is at differing rates depending on how many events are actually held.  On June 26-28, 2015, the Big Barrel Country Music Festival was held at our facility.  The three day festival was promoted by RFGV Festivals and featured 40 musical acts.  On January 28, 2016, RFGV Festivals announced it would not promote the Big Barrel Country Music Festival in 2016 and there is no plan for a second festival in 2017.  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 NASCAR events and has not entered into sanction agreements with NASCAR since 2011.  We currently use the facility on a limited basis for motorsports track rentals.  On May 29, 2014, we entered into an agreement to sell the facility for $27 million in cash and the assumption by the potential buyer of obligations of ours under certain Variable Rate Tax Exempt Infrastructure Revenue Bonds.  The sales agreement was amended several times extending the closing date.  In consideration for these amendments, during 2014 we received $1,700,000 in non-refundable deposits from the potential buyer which was to be applied against the purchase price at closing.  In 2015, we received $1,200,000 in non-refundable deposits to extend closing under the agreement, a portion of which was to be applied against the purchase price depending on the closing date.  During the first and second quarters of 2015, $427,000 and $606,000, respectively, was recorded as income from assets held for sale in our consolidated statements of operations as those deposit amounts were not to be applied against the purchase price at closing based on the terms of the amendments.  On June 1, 2015, the potential buyer defaulted under the agreement and did not subsequently cure the default.  The amended closing date under the agreement was July 27, 2015; therefore, the agreement expired by its terms.  Accordingly, we recorded as income from assets held for sale the remaining deposits of $1,867,000 in the third quarter of 2015.

 

On August 25, 2016, we entered into a definitive agreement to sell our Nashville facility to an entity owned by Panattoni Development Company for $27.5 million in cash and the assumption by the buyer of obligations of ours under certain Variable Rate Tax Exempt Infrastructure Revenue Bonds.  Under the agreement, as amended on January 22, 2017, the sale is scheduled to close in the second quarter of 2017.  Our gain would be the $27.5 million purchase price less the facility’s $26 million carrying value and less any costs to sell which are expected to be minimal and consist primarily of legal fees.  We also expect to pay income taxes of approximately $5 million as a result of this transaction.   The assets of Nashville Superspeedway are reported as assets held for sale in our consolidated balance sheets at December 31, 2016 and 2015.  Our balance sheet includes a $1,802,000 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.  Upon completion of the sale of the assets of Nashville Superspeedway, we will no longer be responsible for this obligation and will reverse it which will increase our pre-tax earnings by the amount of the obligation at the time it is reversed.  See NOTE 11 — Commitments and Contingencies for further discussion.