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Dover Motorsports Inc. Reports Operating Results (10-K)

March 15, 2011 | About:

Dover Motorsports Inc. (NYSE:DVD) filed Annual Report for the period ended 2010-12-31.

Dover Motorsports has a market cap of $74.5 million; its shares were traded at around $2.03 with and P/S ratio of 1.2.

Highlight of Business Operations:

We closed our Memphis Motorsports Park facility in October 2009 and executed an agreement to sell it in December 2010. The real estate sale closed on January 31, 2011. After closing costs and including the proceeds from the separate sale of all personal property at the facility, our net proceeds were approximately $2,000,000, all of which was used to pay down indebtedness of the Memphis facility. Since the carrying amount of the long-lived assets of the Memphis facility exceeded the sales price, we recognized a non-cash impairment charge of $809,000 in the fourth quarter of 2010.

In November 2010, we announced the closing of our Gateway facility. The Gateway facility is located on approximately 290 acres of land in Madison, Illinois and the racetrack is primarily on leased property. We had long-term leases for approximately 150 acres with four landlords. We also own approximately 140 acres near the Gateway facility. In February 2011, three of the four landlords agreed to terminate the land leases in exchange for 18.5 acres of owned real estate and our agreement to abandon all improvements and certain personal property (including the racetrack) on the leased land. As a result, we recorded an expense for facility exit costs of $324,000 at December 31, 2010 primarily to record a liability for the value of the real property we conveyed to the landlords in connection with terminating the leases. As part of the lease termination agreement with one of the landlords, we provided a six month purchase option on the remaining approximately 120 acres of owned land at $10,000 per acre, which approximates our carrying value.

Dover International Speedway, Inc. has entered into two sanction agreements with NASCAR pursuant to which it will organize and promote two NASCAR Sprint Cup Series events in 2011. Our business is substantially dependent on these two agreements. The economic terms of the two sanction agreements between NASCAR and Dover International Speedway relative to its 2011 NASCAR Sprint Cup Series competitions are as follows: Total purse and sanction fee to be paid by Dover International Speedway is $6,097,000 for the May event and $5,450,000 for the October event. Estimated live broadcast revenue to be received by Dover International Speedway is $13,109,000 for the May event and $10,857,000 for the October event. Live broadcast revenue figures are based on the assumption that all events on the 2011 NASCAR Sprint Cup Series schedule take place and that all promoters will be entitled to their respective percentage allocations as set by NASCAR. Dover International Speedway is also entitled to share, along with other promoters, in income which NASCAR derives from exploiting certain broadcast and intellectual property rights. Revenue for such rights attributable to Dover International Speedways 2010 NASCAR Sprint Cup Series competitions amounted to approximately $600,000 and we reasonably anticipate that this will approximate the amount for its 2011 NASCAR Sprint Cup Series competitions.

In September 1999, the Sports Authority of the County of Wilson (Tennessee) issued $25,900,000 in revenue bonds to build local infrastructure improvements which benefit the operation of Nashville Superspeedway, of which $21,000,000 was outstanding on December 31, 2010. Debt service on the bonds is payable solely from sales taxes and incremental property taxes generated from the facility. As of December 31, 2010 and 2009, $1,200,000 and $915,000, 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 2010, we paid $1,038,000 into the sales and incremental property tax fund and $753,000 was deducted from the fund for principal and interest payments. These bonds are direct obligations of the Sports Authority and are therefore not recorded on our consolidated balance sheet. In the event the sales taxes and incremental property taxes are insufficient to cover the payment of principal and interest on the bonds, we would become responsible for the difference. We are exposed to fluctuations in interest rates for these bonds. A significant increase in interest rates could result in us being responsible for debt service payments not covered by the sales and incremental property taxes generated from the facility. In the event we were unable to make the payments, they would be made under a $21,352,000 irrevocable direct-pay letter of credit issued by our bank group. We would be responsible to reimburse the banks for any drawings made under the letter of credit. Such an event could have a material adverse effect on our business, financial condition and results of operations and compliance with debt covenants.

Read the The complete Report

About the author:

Charlie Tian, Ph.D. - Founder of GuruFocus. You can now order his book Invest Like a Guru on Amazon.

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