Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2020

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 $69,617,000 and $67,328,000 as of September 30, 2020 and December 31, 2019, respectively.

Revenue recognition

Revenue recognition—We classify our revenues as admissions, event-related, broadcasting and other. “Admissions” revenue includes ticket sales for our events. “Event-related” revenue includes amounts received from sponsorship fees; luxury suite rentals; hospitality tent rentals and catering; concessions and vendor commissions for the right to sell concessions and souvenirs at our events; sales of programs; track rentals; broadcasting rights other than domestic television broadcasting revenue, and other event-related revenues. Additionally, event related revenue includes amounts received for the use of our property and a portion of the concession sales we manage from the Firefly Music Festival. “Broadcasting” revenue includes rights fees obtained for domestic television broadcasts of events held at our speedway.

All of our revenues are typically based on contracts with customers and, with the exception of certain track rentals, relate to two NASCAR event weekends and the Firefly Music Festival held at our Dover facility. However, due to the COVID-19 pandemic, this year our revenues are primarily related to one combined NASCAR event weekend. Our contracts are typically for specific events or a racing season. We have several multi-year sponsorship contracts for our racing events and our contract with the promoter of the Firefly Music Festival is multi-year. Revenues pertaining to specific events are deferred and recorded as contract liabilities in our consolidated balance sheets until the event is held. All of our 2020 racing events were held on the same weekend from August 21-23. On July 25, 2020 Delaware state officials notified us that due to public safety and health concerns, they would not approve our request to host a limited number of fans at our August NASCAR weekend. As a result, all of our 2020 events were held with no fans in attendance. As of September 30, 2020, $1,345,000 of contract liabilities on our consolidated balance sheet relate to 2021 events and $80,000 relates to 2022 events. As of December 31, 2019 contract liabilities on our consolidated balance sheet related to 2020 events, although customers have since applied some of these amounts to 2021 events or received a refund due to the events being held without fans. As of September 30, 2020, we have issued approximately $1,383,000 in refunds and credits to our patrons and customers for our event weekends. Patrons who previously purchased tickets were given the option to receive a full refund or to apply their funds to Dover International Speedway’s 2021 NASCAR weekend, with a 20% bonus value. Concession and souvenir revenues are recorded at the time of sale. Revenues and related expenses from barter transactions in which we provide sponsorship packages in exchange for goods or services are recorded at fair value. Barter transactions accounted for $213,000 and $261,000 of total revenues for the nine-month periods ended September 30, 2020 and 2019, respectively.

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


	Three Months				Nine Months
	Ended September 30				Ended September 30,
	2020		2019		2020		2019
Balance, beginning of period	$	3,676	$	2,008	$	976	$	1,140
Reductions from beginning balance		(2,342)		—		(271)		(739)
Additional liabilities recorded during the period		619		2,518		3,623		7,715
Reduction of additional liabilities recorded during the period, not from beginning balance		(528)		—		(2,903)		(3,590)
Balance, end of period	$	1,425	$	4,526	$	1,425	$	4,526

We have contracted future revenues representing unsatisfied performance obligations. These contracts contain initial terms typically ranging from one to three years, with some for longer periods, excluding renewal options. We have excluded unsatisfied performance obligations for future NASCAR broadcasting revenue with contract terms through 2024. As of September 30, 2020, we anticipate recognizing unsatisfied performance obligations for the calendar year ending 2021 and beyond of approximately $3,115,000.

Under the terms of our sanction agreements with NASCAR, we receive a portion of the broadcast revenue NASCAR negotiates with various television networks. NASCAR typically remits payment to us for the broadcast revenue within 30 days after the event being held. NASCAR retains 10% of the gross broadcast rights fees allocated to each NASCAR-sanctioned event as a component of its sanction fee. The remaining 90% is recorded as revenue. The event promoter is required to pay 25% of the gross broadcast rights fees to the event as part of the awards to the competitors, which we record as operating expenses.

Expense recognition

Expense recognition— The cost of advertising is expensed as incurred. Advertising expenses were $4,000 and $54,000 and $465,000 and $1,011,000 for the three and nine-month periods ended September 30, 2020 and 2019, respectively. Certain direct expenses pertaining to specific events, including prize and point fund monies and sanction fees paid to NASCAR, and other expenses associated with our racing events are deferred until the event is held, at which point they are expensed.

Net earnings (loss) per common share

Net earnings (loss) 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 (loss) 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				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Net earnings (loss) per common share – basic and diluted:
Net earnings (loss)	$	13,190	$	(414)	$	9,361	$	2,597
Allocation to nonvested restricted stock awards		199		—		146		42
Net earnings (loss) available to common stockholders	$	12,991	$	(414)	$	9,215	$	2,555

Weighted-average shares outstanding – basic and diluted		35,836		35,952		35,836		35,998

Net earnings (loss) per common share – basic and diluted	$	0.36	$	(0.01)	$	0.26	$	0.07

There were no options outstanding and we paid no dividends during the nine months ended September 30, 2020 or 2019.

On October 28, 2020, our Board of Directors declared an annual cash dividend on both classes of common stock of $.07 per share to be paid on December 10, 2020.

Accounting for stock-based compensation

Accounting for stock-based compensation—We recorded total stock-based compensation expense for our restricted stock awards of $38,000 and $256,000 and $67,000 and $243,000 as general and administrative expenses for the three and nine-month periods ended September 30, 2020 and 2019, respectively. We recorded income tax benefits of $11,000 and $54,000 and $19,000 and $57,000 for the three and nine-month periods ended September 30, 2020 and 2019, respectively, related to vesting of our restricted stock awards.

Recent accounting pronouncements

Recent accounting pronouncements— In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General. This new standard makes changes to the disclosure requirements for sponsors of defined benefit pension and/or other postretirement benefit plans to improve effectiveness of notes to the financial statements. ASU 2018-14 is effective for fiscal years ending after December 15, 2020, and requires retrospective adoption. The adoption of this ASU did not have a material impact on our financial statement disclosures.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement. This new standard makes changes to the disclosure requirements for fair value measurements to improve effectiveness of notes to the financial statements. ASU 2018-14 is effective for fiscal years beginning after December 15, 2019, and generally requires retrospective adoption. The adoption of this ASU did not have a material impact on our financial statement disclosures.

Reclassifications

Reclassifications - Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation. As a result of the announcement that we will be moving one of our NASCAR Cup Series events historically held at Dover International Speedway to Nashville Superspeedway pursuant to a four year sanction agreement with NASCAR, long-term assets that were historically shown separately on the consolidated balance sheet have been included in property and equipment, net. The impact of the reclassification made to prior year amounts is not material and did not affect net earnings or cash flows.