DOVER MOTORSPORTS, INC.

CONSOLIDATED BALANCE SHEETS

In Thousands, Except Share and Per Share Amounts

(Unaudited)

DOVER MOTORSPORTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

In Thousands

(Unaudited)

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, 2019.5, 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 nine-month periodsmonths ended September 30, 2019March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 20192020 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, as of the date of this filing, ourOur Dover facility promotedwas scheduled to promote the following six events during 2019,2020, all of which werewould be under the auspices of the premier sanctioning body in motorsports - the National Association for Stock Car Auto Racing (“NASCAR”):

·                  2

Due to the impacts of the COVID-19 pandemic, our May NASCAR Monster Energyweekend has been postponed and we do not yet have a date for the rescheduling of any of the events that were postponed. It is possible that our May NASCAR Cup Series event will be moved to August and that we will hold a double header with back to back NASCAR Cup Series events (Mayheld on Saturday and October);

·                  2 NASCAR Xfinity SeriesSunday. It is also possible that none of these events (Mayare held or that they are held without fans present in the stands.  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 outbreak and October);

·                  1 NASCAR Gander Outdoors Truck Series event (May);associated economic impacts could have a material adverse effect on our future financial condition, results of operations 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.  A NASCAR Monster Energy Cup Series event, a NASCAR Xfinity Series event and a NASCAR K&N Pro Series East event were held at Dover International Speedway during the fourth quarter of 2019 and 2018. cash flows.

We have hosted the Firefly Music Festival (“Firefly”) on our property in Dover, Delaware for eight consecutive years and it iswas scheduled to return on June 18-21, 2020. Due to the COVID-19 pandemic, this year’s event was canceled. 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 overapproximately 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”)

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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.$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 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 were approximately $5,314,000 resulting in a gain of $4,186,000. 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 sellingAssuming this option is exercised, the remaining Nashville Superspeedway property which consistswill consist of approximately 1,000 acres, we do not believe it is probable that the remaining property will be sold within the next twelve months.  acres.At September 30, 2019March 31, 2020 and December 31, 2018, $21,292,0002019, $21,274,000 and $23,567,000$21,282,000 was reported as long term assets in our consolidated balance sheets, respectively.  At December 31, 2018, $531,000 was reported as assets held for sale in our consolidated balance sheet.

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 (loss) earnings.operations and comprehensive loss.

During September 2018, we entered into negotiations to sell the last remaininga parcel of land we owned near St. Louis.  The sale resulted in a loss of $99,000, which we reported as loss on sale of land in our consolidated statements of (loss) earnings. 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 sheet.

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 $66,232,000$68,030,000 and $63,042,000$67,272,000 as of September 30, 2019March 31, 2020 and December 31, 2018,2019, respectively.

In the third quarter of 2019, management approved plans to remove certain grandstand seating following the completion of our 2019 race season.  As a result, we adjusted the service lives of those assets to properly reflect their shortened estimated useful life.  We recorded accelerated depreciation expense of $879,000 in the three and nine-month periods ended September 30, 2019 related to these assets.  We expect to record additional depreciation expense of approximately $293,000 during the fourth quarter of 2019 related to these assets, at which point the assets will be fully depreciated.

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 September 30, 2019, our consolidated balance sheet included a right of use asset of $206,000, a long-term lease liability of $131,000, and a short-term lease liability, which is included in accrued liabilities, of $75,000.

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

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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 September 30, 2019, contract liabilities in our consolidated balance sheets of $4,279,000March 31, 2020 and $247,000 relate to 2019 and 2020 events, respectively.  As of December 31, 2018,2019, contract liabilities in our consolidated balance sheets relate to 20192020 events. NASCAR has many contingency plans in place that would allow them to run the entire 2020 NASCAR Cup Series schedule, but they are all dependent on how the pandemic evolves. As of the date of this filing, the amount of refunds requested by our patrons for the postponed May events has been minimal. If our events are not held, or if the events were held without fans in attendance, we would offer to refund any ticket sales proceeds received to date, which were approximately $1.8 million at March 31, 2020. 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. BarterThere was no revenue recorded from barter transactions accounted for $261,000 and $239,000 of total revenues for the nine-month periodsthree months ended September 30, 2019 and 2018, respectively.March 31, 2020 or 2019.

The following table summarizes the liability activity related to contracts with customers for the three months ended March 31, 2020 and nine-month periods ended September 30, 2019 and 2018:(in thousands):

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 20202021 and beyond of approximately $3,852,000$2,825,000 at September 30, 2019.March 31, 2020. 

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 areThe 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 are recordedwe record as operating expenses.

Expense recognition—The cost of advertising is expensed as incurred. Advertising expenses were $465,000$52,000 and $1,011,000, and $539,000 and $1,144,000$64,000 for the three months ended March 31, 2020 and nine-month periods ended September 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.

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Net (loss) earningsloss 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) earningsloss 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):

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’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 $1,134,000$1,010,000 and $995,000$1,182,000 as of September 30, 2019March 31, 2020 and December 31, 2018,2019, 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:

NOTE 6 —– Stockholders’ Equity

Changes in the components of stockholders’ equity for the nine-months ending September 30, 2019first quarter of 2020 are as follows (in thousands):

Changes in the components of stockholders’ equity for the nine-months ending September 30, 2018first quarter of 2019 are as follows (in thousands):

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 months ended March 31, 2020 and nine-month periods ended September 30, 2019, and 2018, respectively, are as follows:

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 September 30, 2019.March 31, 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 September, 2019March 31, 2020 and December 31, 2018, $724,0002019, $558,000 and $1,052,000,$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 the first nine months of 2019, we paid $981,000$983,000 into the sales and incremental property tax fund and $1,309,000$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.

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, thea provision forto increase the contingent obligation increased (decreased) by $121,000was recorded in the amount of $369,000 and $367,000, and ($4,000) and $132,000$111,000 in the three months ended March 31, 2020 and nine-month periods ended September 30, 2019, and 2018, respectively, and the contingent obligation is $2,751,000$3,757,000 at September 30, 2019.March 31, 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.

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 September 30, 2019March 31, 2020 vs. Three Months Ended September 30, 2018March 31, 2019

We promoted no events during the thirdfirst quarter of 20192020 or 2018;2019; therefore, revenues were minimal.

Operating and marketing expenses were $1,347,000$988,000 in the thirdfirst quarter of 20192020 as compared to $1,599,000$1,055,000 in the thirdfirst quarter of 2018.2019. The decrease was primarily relateddue to lower wages and benefit expenses and the timing of advertising expenses for our fall race weekend.employee related costs.

General and administrative expenses were $1,888,000increased to $1,987,000 in the thirdfirst quarter of 2020 from $1,916,000 in the first quarter of 2019, as compared to $1,798,000 in the third quarter of 2018.  The increase was primarily due tofrom higher wagescorporate insurance and benefit expenses.real estate taxes.

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Depreciation expense increaseddecreased to $1,669,000$768,000 in the thirdfirst quarter of 20192020 from $793,000 in the thirdfirst quarter of 2018.  The increase was due2019.

Costs to shorteningremove long-lived assets in 2020 related to the completion of the useful lives of certain track related assetsa project that will be retired at the end of thebegan in 2019 racing season as a result of our planned reductionto remove and dispose of grandstand seating.  We recorded $879,000 of accelerated depreciation expense on these assets in the third quarter of 2019 and expect to record an additional $293,000 of depreciation expense in the fourth quarter of 2019.seating at our Dover facility.

Gain on sale of land in the thirdfirst quarter of 2019 relates to the sales of approximately 1338 acres of land at our Nashville facility.  The 2018 loss resulted from the sale of a parcel of land we owned near St. Louis, Missouri.

Net interest income was $20,000 in the third quarter of 2019 as compared to net interest expense of $2,000 in the third quarter of 2018 and resulted from lower average outstanding borrowings and interest income on invested cash in 2019.

Provision for contingent obligation was $121,000$369,000 in the thirdfirst quarter of 2019 as2020 compared to a benefit of $4,000$111,000 in the thirdfirst quarter of 2018 primarily2019 as a result of a decrease in the discount rate.

Other expense of $138,000 in the first quarter of 2020 compared to other income of $29,000$132,000 in the thirdfirst quarter of 2019, is primarily representsthe result of losses on equity investments in the first quarter of 2020 compared with gains on equity investments of $12,000 and pension benefits of $13,000.  Other income of $46,000 in the third quarter of 2018 primarily represents pension benefits of $23,000 and gains on equity investments of $21,000.

Our effective income tax rates for the third quarter of 2019 and 2018 were 29.6% and 32.8%, respectively.  The 2018 rate was impacted by deductions for additional contributions made to our pension plan in 2018.

Nine Months Ended September 30, 2019 vs. Nine Months Ended September 30, 2018

Admissions revenue was $2,502,000 in the first nine months of 2019 as compared to $2,853,000 in the first nine 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.

Event-related revenue was $3,784,000 in the first nine months of 2019 as compared to $5,283,000 in the first nine months of 2018.  The $1,499,000 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 nine months of 2019 as compared to $18,128,000 in the first nine months of 2018 due to contractual increases in NASCAR’s broadcasting rights agreement.

Operating and marketing expenses were $16,986,000 in the first nine months of 2019 as compared to $16,984,000 in the first nine months of 2018.

General and administrative expenses increased to $5,630,000 in the first nine months of 2019 from $5,552,000 in the first nine months of 2018. The increase was primarily due to higher wages and benefit expenses.

Depreciation expense increased to $3,256,000 in the first nine months of 2019 from $2,496,000 in the first nine months of 2018.  The increase was due to shortening of the useful lives of certain track related assets that will be retired at the end of the 2019 racing season as a result of our planned reduction of grandstand seating.  We recorded $879,000 of accelerated depreciation expense on these assets in the third quarter of 2019 and expect to record an additional $293,000 of depreciation expense in the fourth quarter of 2019.

Gain on sale of land in the first nine months of 2019 and 2018 relates to the sales of approximately 141 and 147 acres of land at our Nashville facility, respectively.  The 2018 gain was partially offset by a loss on the sale of a parcel of land we owned near St. Louis, Missouri.

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Net interest income was $4,000 in the first nine months of 2019 as compared to net interest expense of $75,000 in the first nine months of 2018 and resulted from lower average outstanding borrowings and interest income on invested cash in 2019.

Provision for contingent obligation increased to $367,000 in the first nine months of 2019 from $132,000 in the first nine months of 2018 primarily as a result of a decrease in the discount rate.

Other income of $218,000 in the first nine months of 2019 primarily represents gains on equity investments of $125,000 and pension benefits of $48,000.  Other income of $77,000 in the first nine months of 2018 primarily represents pension benefits of $61,000 and gains on equity investments of $15,000.

Our effective income tax rates for the first nine monthsquarter of 2020 and 2019 were 28.4% and 2018 were 25.3% and 19.9%28.5%, respectively.  The 2018 rate was impacted by deductions for additional contributions made to our pension plan in 2018.

Liquidity and Capital Resources

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

Net cash used in operating activities was $1,664,000$2,332,000 for the first nine monthsquarter of 2019 as2020 compared to $800,000$1,625,000 for the first nine monthsquarter of 2018.2019. The increasehigher net cash used in the first quarter of 2020 was primarily related to lower receipts for the upcoming race season due to NASCAR’s postponement of our May race weekend due to the lower earnings, excluding the gain on sale of land, the timing of invoicing to and payments received from customers, and the timing of payments for certain fall race weekend expenses.  Partially offsetting these increases were lower pension contributions.  We contributed $1,750,000 to our defined benefit pension plan in the first nine months of 2018.  We made no pension contributions during the first nine months of 2019.COVID-19 pandemic.

Net cash used in investing activities for the first quarter of 2020 was $119,000 compared to net cash provided by investing activities was $3,060,000of $426,000 for the first nine monthsquarter of 2019 as compared to $4,173,000 for the first nine months of 2018.2019. Capital expenditures of $4,651,000$115,000 in the first nine monthsquarter of 2020 related primarily to equipment purchases. Capital expenditures of $398,000 in the first quarter of 2019 related primarily to engineering costs associated with replacing our Monster Energy NASCAR Cup Series garage and other improvements to our skybox suites at our Dover facility. Capital expenditures of $762,000 in the first nine months of 2018 related primarily to improvements at our Dover facility and equipment purchases.  In 2019, we closed on the sale of approximately 141 acres of land at our Nashville Superspeedway facility for proceeds of $6,664,000, net of closing costs.  Also in the first quarter ofJanuary 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. In March 2018,2019, we closed on the sale of approximately 1478 acres of land at our Nashville Superspeedway facility for proceeds of $4,945,000,$267,000, net of closing costs. In JuneAdditionally, we sold equipment in the first quarter of 2019 we extended an option to purchase land at our Nashville facility and received a $500,000 non-refundable deposit in return — see further discussion below.for proceeds of $29,000.

Net cash used in financing activities was $563,000$94,000 for the first nine monthsquarter of 2019 as2020 compared to $3,187,000$200,000 for the first nine monthsquarter of 2018.2019. During the first ninethree months of 2019, we borrowed $4,120,000 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 $2,640,000 in the first nine months of 2018.  During the first nine months of 2019 and 2018, we purchased and retired 208,416 and 212,08250,220 shares of our outstanding common stock for $432,000 and $453,000$104,000 from the open market, respectively.market. Additionally, we purchased 50,572 and retired 48,457 and 47,236 shares of our outstanding common stock for $96,000$94,000 and $94,000$96,000 during the first ninethree months of 20192020 and 2018,2019, respectively, from employees in connection with the vesting of restricted stock awards under our stock incentive plan.  As a result of amending our credit agreement in September 2019, we paid $35,000 in bank fees.

At September 30, 2019,March 31, 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. On September 24, 2019, we modified theThe credit agreement to: extend the maturity date tofacility expires on January 1, 2022; and reduce the total available borrowings under the facility from $35,000,000 to $30,000,000.2022. Interest is based upon LIBOR plus a margin that varies between 125 and 175 basis points depending on the leverage ratio. At September 30, 2019,March 31, 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

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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 September 30, 2019,March 31, 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 September 30, 2019.  WeMarch 31, 2020. Assuming the 2020 NASCAR race schedule is not canceled 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.

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.$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 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 were approximately $5,314,000 resulting in a gain of $4,186,000. 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 sellingAssuming this option is exercised, the remaining Nashville Superspeedway property which consistswill consist of approximately 1,000 acres, we do not believe it is probable that the remaining property will be sold within the next twelve months.  acres.At September 30, 2019March 31, 2020 and December 31, 2018, $21,292,0002019, $21,274,000 and $23,567,000$21,282,000 was reported as long term assets in our consolidated balance sheets, respectively.  At December 31, 2018, $531,000 was reported as assets held for sale in our consolidated balance sheet.

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 (loss) 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 sheet.

We promoted three racing events in the first nine months of 2019 and three more during the fourth quarter of 2019.  We promoted six racing events in 20182019 (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. See the coronavirus (COVID-19) pandemic discussion below.

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.

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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”("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’'TV Everywhere' rights for its NASCAR Cup Series and NASCAR Xfinity Series events.

Looking forward, our 2020 sanction agreements with NASCAR contain annual increasesan increase of between 3 andapproximately 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 increasesan increase in sanction fees and non-media rights related prize and point fund monies (to be paid to competitors) of between 4approximately 4.3 percent.

COVID -19 Impacts

The United States economy in general and 4.5 percent annually overour business specifically have been dramatically affected by the termCOVID-19 pandemic. While response to the COVID-19 pandemic continues to rapidly evolve, it has led to stay-at-home orders, business closures and social distancing guidelines that have seriously disrupted activities in large segments of the agreements.economy. 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 outbreak and associated economic impacts could have a material adverse effect on our future financial condition, results of operations and cash flows.

Our first priority with regard to the COVID-19 pandemic is to do everything we can to ensure the safety and health of our employees, customers, sponsors, vendors and others with whom we partner in our business activities. Subject to that and through the use of appropriate risk mitigation and safety practices, we are doing everything we can to continue to prepare for future events in what is an unprecedented business environment. We implemented remote work arrangements and restricted business travel in mid-March, and to date, these arrangements have not adversely affected our ability to keep our administrative offices functioning, including the operation of financial reporting systems, internal control over financial reporting, and disclosure controls and procedures. 

A number of states, counties and municipalities have issued orders (1) requiring persons not engaged in essential activities and businesses to remain at home, and (2) requiring non-essential businesses to close. This has affected the entire motorsports industry nationwide as auto racing is not considered an essential business and large outdoor events currently pose a significant risk to the health and safety of participants and customers. It also affects consumer confidence and a multitude of partners, sponsors and patrons that support the motorsports and auto racing industries.

The State of Delaware issued a State of Emergency which currently extends until May 15, 2020 and our facility in Dover is currently closed since it is classified as a non-essential business. Our May NASCAR weekend has been postponed and we do not yet have a date for the rescheduling of any of the events that were postponed. It is possible that our May NASCAR Series Cup event will be moved to August and that we hold a double header with back to back NASCAR Series Cup events held on Saturday and Sunday. It is also possible that none of these events are held or that they are held without fans present in the stands.

We do not have business interruption coverage that will respond to event cancellations or postponements caused by the COVID-19 pandemic. Despite this, and because fans are the lifeblood of our business, we have offered refunds or credits to customers affected by the postponement of our May NASCAR weekend. We may ultimately do the same for our August NASCAR weekend.

If no events are held in 2020, (a) we would not receive any broadcast revenues, admissions revenues, sponsor or hospitality revenues, concessions and reduced event related revenues, and (b) we would be able to avoid a certain amount of event-related expenses (which cannot be estimated at present), but (c) we would continue to have many fixed costs and employee costs.

We have hosted the Firefly Music Festival (“Firefly”) on our property in Dover, Delaware for eight consecutive years and it iswas scheduled to return on June 18-21, 2020. The inaugural three day festival with 40 musical acts was held in July 2012 andDue to the 2019COVID-19 pandemic, this year’s event was heldcanceled. It is expected to return in 2021, but we cannot be assured of this. The cancellation of this festival results in the loss of rental income to us since we lease our property for the event and it also results in the loss of certain concession revenues.

We initiated a limited number of furloughs for employees that are unable to work from home, but are continuing their health care benefits for the time being.  We may need to initiate additional furloughs or reduce staff depending 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, onehow long the pandemic continues. Additionally, we are reviewing all other indirect expenses for possible savings. Based on current business conditions and considering the possible impacts of the world’s largest presenters of live musicCOVID -19 pandemic, we have reduced our planned capital expenditures for the year and entertainment events, announcedexpect to spend approximately $350,000 on July 18, 2018 that it had acquiredcapital expenditures during the remainder of RFGV Festivals LLC2020. We have no minimum required pension contributions for 2020.

NASCAR has many contingency plans in place that would allow them to run the entire NASCAR Cup Series schedule, but they are all dependent on how the pandemic evolves. Our cash flows from Red Frog.  Our amended agreement with RFGV Festivals grants them two 5 year optionsoperating activities will be dependent on whether NASCAR is able to extend our facility rental agreement through 2032 in exchange forreschedule all or a rental commitmentportion of its events and whether fans will be able to secure our property.  In addition to the facility rental fee, we also receive a percentageattend these events. As of the concessiondate of this filing, the amount of refunds requested by our patrons for the postponed May events has been minimal. If our events are not held, or if the events were held without fans in attendance, we would offer to refund any ticket sales proceeds received to date, which were approximately $1.8 million at March 31, 2020. In any case, we manage at the events.

We believeexpect that our net cash flows from operating activities, available cash 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.  On October 23, 2019, our Board of Directors declared an annual cash dividend on both classes of common stock of $.10 per share to be paid on December 10, 2019.  Based on current business conditions, we expect to spend approximately $1,500,000 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.

Contractual Obligations

At September 30, 2019,March 31, 2020, we had the following contractual obligations and other commercial commitments: