Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
__________________________________
 
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2018
OR
 
[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ________ to ________
 
Commission File Number 1-13582
 
SPEEDWAY MOTORSPORTS, INC.
(Exact name of registrant as specified in its charter)
 
Delaware	51-0363307	
(State or other jurisdiction of	(I.R.S. Employer	
incorporation or organization)	Identification No.)	
 	 	
5555 Concord Parkway South, Concord, North Carolina	28027	
(Address of principal executive offices)	(Zip Code)	
                                                         
(704) 455-3239
(Registrant's telephone number, including area code)
__________________________________

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. [X] Yes [  ] No
 
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 and post such files). [X] Yes [  ] No
 
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. (Check one):
 
Large accelerated filer [  ]           Accelerated filer [X]           Non-accelerated filer [  ]           Smaller reporting company [  ]          Emerging growth company [  ]
 
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. [  ]
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [  ] Yes [X] No
 
SMI’s common stock is traded on the NYSE under the symbol “TRK.” As of November 5, 2018, there were 40,832,440 shares of the registrant’s common stock outstanding.

 
1

Table of Contents

 INDEX TO FORM 10-Q
  PAGE
PART I - FINANCIAL INFORMATION	
Item 1.    Financial Statements	3	
Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations	20	
Item 3.   Quantitative and Qualitative Disclosures About Market Risk	30	
Item 4.   Controls and Procedures	30	
 	 	
PART II - OTHER INFORMATION	 	
Item 1.  Legal Proceedings	30	
Item 1A. Risk Factors	 	
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds	30	
Item 6.   Exhibits	31	
Signatures	32	
 
Cautionary Note Regarding Forward-looking Statements – This Quarterly Report on Form 10-Q contains “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Such forward-looking statements may include (i) statements that reflect projections or expectations of the Company’s future financial or economic performance; (ii) statements that are not historical information; (iii) statements of the Company’s beliefs, intentions, objectives, plans, and strategies for future operations, including, but not limited to, those contained in “Legal Proceedings”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and “Quantitative and Qualitative Disclosures About Market Risk”; (iv) statements relating to the Company’s operations or activities, including revenues, costs and margins for 2018 and beyond; and (v) statements relating to the Company’s future capital expenditures, hosting of races, broadcasting rights, dividends, common stock repurchases, investments, seating, suite and other asset reduction or removal, income taxes, sponsorships, financing needs and costs, and legal proceedings and other contingencies. Words such as “anticipates”, “approximates”, “believes”, “could”, “estimates”, “expects”, “hopes”, “intends”, “likely”, “may”, “objectives”, “plans”, “possible”, “projects”, “seeks”, “should” and variations of such words and similar expressions are intended to identify such forward-looking statements. Forward-looking statements are based on our current plans and expectations and are subject to a number of risks and uncertainties that could cause our plans and expectations, including actual results, to differ materially from the forward-looking statements. Many of these risks and uncertainties are beyond our control. No assurance can be given that actual results or events will not differ materially from those projected, estimated, assumed or anticipated in any such forward-looking statements. Important factors that could result in such differences, in addition to other factors noted with such forward-looking statements, include those discussed in our Annual Report on Form 10-K, Item 1A “Risk Factors” and any subsequent Quarterly Reports on Form 10-Q or other forms we may file with the Securities and Exchange Commission (“SEC”). Forward-looking statements included in this report are based on information available as of the date filed, and we assume no obligation to update any such forward-looking information contained in this report.
 
Certain Information – Our Company website where you can find additional information is located at www.speedwaymotorsports.com . We make available free of charge, through our website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and other reports filed or furnished pursuant to Section 13(a) or 15(d) under the Exchange Act. These reports are available as soon as reasonably practicable after those materials are electronically filed with the SEC. Our SEC filings are publicly available at the SEC’s website at www.sec.gov . We post on our website the charters of our Audit, Compensation and Nominating/Corporate Governance Committees; Corporate Governance Guidelines, Code of Business Conduct and Ethics, and any amendments or waivers thereto; and certain corporate governance materials stipulated by SEC or New York Stock Exchange (“NYSE”) regulations. Please note that our website is provided as an inactive textual reference only. Information provided on our website is not part of this report, and is not incorporated by reference unless otherwise specifically referenced as such in this report. The documents are also available in print, free of charge, to any requesting stockholder by contacting our corporate secretary at our company offices.
 
2

Table of Contents
 
 FINANCIAL INFORMATION
 Item 1. Financial Statements

SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
 
 	 	September 30,	 	 	December 31,	 	
 	 	2018	 	 	2017	 	
 	 	 	 	 	 	 	 	 	
Assets	 	 	 	 	 	 	 	 	
Current Assets:	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	80,501	 	 	$	81,924	 	
Accounts receivable, net	 	 	43,852	 	 	 	28,459	 	
Prepaid and refundable income taxes	 	 	7	 	 	 	2,135	 	
Inventories, net	 	 	8,689	 	 	 	7,283	 	
Prepaid expenses	 	 	2,727	 	 	 	3,533	 	
Total Current Assets	 	 	135,776	 	 	 	123,334	 	
Notes Receivable	 	 	661	 	 	 	799	 	
Other Assets	 	 	23,982	 	 	 	23,724	 	
Property and Equipment, Net (Note 2)	 	 	947,866	 	 	 	958,215	 	
Other Intangible Assets, Net	 	 	298,383	 	 	 	298,383	 	
Goodwill	 	 	46,225	 	 	 	46,225	 	
Total	 	$	1,452,893	 	 	$	1,450,680	 	
 	 	 	 	 	 	 	 	 	
Liabilities and Stockholders’ Equity	 	 	 	 	 	 	 	 	
Current Liabilities:	 	 	 	 	 	 	 	 	
Current maturities of long-term debt	 	$	3,167	 	 	$	7,662	 	
Accounts payable	 	 	23,315	 	 	 	12,017	 	
Deferred race event and other income, net	 	 	24,228	 	 	 	40,779	 	
Accrued income taxes	 	 	1,731	 	 	 	383	 	
Accrued interest	 	 	1,727	 	 	 	4,307	 	
Accrued expenses and other current liabilities	 	 	24,533	 	 	 	23,585	 	
Total Current Liabilities	 	 	78,701	 	 	 	88,733	 	
Long-term Debt	 	 	197,697	 	 	 	219,452	 	
Deferred Income (Note 2)	 	 	2,501	 	 	 	3,054	 	
Deferred Income Taxes, Net	 	 	202,330	 	 	 	201,760	 	
Other Liabilities	 	 	19,017	 	 	 	18,458	 	
Total Liabilities	 	 	500,246	 	 	 	531,457	 	
Commitments and Contingencies	 	 	 	 	 	 	 	 	
Stockholders’ Equity:	 	 	 	 	 	 	 	 	
Preferred Stock, $.10 par value, shares authorized – 3,000,000, no shares issued	 	 	–	 	 	 	–	 	
Common Stock, $.01 par value, shares authorized – 200,000,000, issued and outstanding – 40,856,000 in 2018 and 40,992,000 in 2017	 	 	462	 	 	 	461	 	
Additional Paid-in Capital	 	 	265,477	 	 	 	262,885	 	
Retained Earnings	 	 	802,602	 	 	 	767,859	 	
Treasury Stock at cost, shares – 5,350,000 in 2018 and 5,137,000 in 2017	 	 	(115,894	)	 	 	(111,982	)	
Total Stockholders’ Equity	 	 	952,647	 	 	 	919,223	 	
Total	 	$	1,452,893	 	 	$	1,450,680	 	
 
The accompanying notes are an integral part of these consolidated financial statements.
 
3

Table of Contents

SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
 	 	Three Months Ended
September 30:	 	
 	 	2018	 	 	2017	 	
Revenues:	 	 	 	 	 	 	 	 	
Admissions	 	$	30,536	 	 	$	27,641	 	
Event related revenue	 	 	45,099	 	 	 	34,452	 	
NASCAR broadcasting revenue	 	 	78,374	 	 	 	61,962	 	
Other operating revenue	 	 	6,076	 	 	 	6,668	 	
Total Revenues	 	 	160,085	 	 	 	130,723	 	
 	 	 	 	 	 	 	 	 	
Expenses and Other:	 	 	 	 	 	 	 	 	
Direct expense of events	 	 	35,597	 	 	 	32,732	 	
NASCAR event management fees	 	 	45,731	 	 	 	36,453	 	
Other direct operating expense	 	 	4,235	 	 	 	4,363	 	
General and administrative	 	 	26,277	 	 	 	25,793	 	
Depreciation and amortization	 	 	13,252	 	 	 	13,834	 	
Interest expense, net	 	 	2,771	 	 	 	3,054	 	
Other expense (income), net	 	 	60	 	 	 	(157	)	
Total Expenses and Other	 	 	127,923	 	 	 	116,072	 	
 	 	 	 	 	 	 	 	 	
Income Before Income Taxes	 	 	32,162	 	 	 	14,651	 	
Provision for Income Taxes	 	 	(8,089	)	 	 	(5,440	)	
Net Income	 	$	24,073	 	 	$	9,211	 	
 	 	 	 	 	 	 	 	 	
Basic Earnings Per Share	 	$	0.59	 	 	$	0.22	 	
Weighted Average Shares Outstanding	 	 	40,882	 	 	 	41,004	 	
 	 	 	 	 	 	 	 	 	
Diluted Earnings Per Share	 	$	0.59	 	 	$	0.22	 	
Weighted Average Shares Outstanding	 	 	40,895	 	 	 	41,022	 	
 
The accompanying notes are an integral part of these consolidated financial statements.
 
4

Table of Contents

SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
 	 	Nine Months Ended
September 30:	 	
 	 	2018	 	 	2017	 	
Revenues:	 	 	 	 	 	 	 	 	
Admissions	 	$	66,811	 	 	$	71,532	 	
Event related revenue	 	 	112,082	 	 	 	103,491	 	
NASCAR broadcasting revenue	 	 	201,246	 	 	 	180,065	 	
Other operating revenue	 	 	20,158	 	 	 	22,090	 	
Total Revenues	 	 	400,297	 	 	 	377,178	 	
 	 	 	 	 	 	 	 	 	
Expenses and Other:	 	 	 	 	 	 	 	 	
Direct expense of events	 	 	80,864	 	 	 	78,420	 	
NASCAR event management fees	 	 	112,559	 	 	 	100,540	 	
Other direct operating expense	 	 	13,673	 	 	 	14,534	 	
General and administrative	 	 	77,925	 	 	 	75,323	 	
Depreciation and amortization (Note 2)	 	 	39,480	 	 	 	44,808	 	
Interest expense, net	 	 	8,681	 	 	 	9,222	 	
Impairment of goodwill (Note 4)	 	 	–	 	 	 	1,117	 	
Other (income) expense, net	 	 	(2,186	)	 	 	45	 	
Total Expenses and Other	 	 	330,996	 	 	 	324,009	 	
 	 	 	 	 	 	 	 	 	
Income Before Income Taxes	 	 	69,301	 	 	 	53,169	 	
Provision for Income Taxes	 	 	(16,059	)	 	 	(18,587	)	
Net Income	 	$	53,242	 	 	$	34,582	 	
 	 	 	 	 	 	 	 	 	
Basic Earnings Per Share	 	$	1.30	 	 	$	0.84	 	
Weighted Average Shares Outstanding	 	 	40,936	 	 	 	41,046	 	
 	 	 	 	 	 	 	 	 	
Diluted Earnings Per Share	 	$	1.30	 	 	$	0.84	 	
Weighted Average Shares Outstanding	 	 	40,951	 	 	 	41,062	 	
 
The accompanying notes are an integral part of these consolidated financial statements.
 
5

Table of Contents

SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited)
 
 	 	Outstanding
Common Stock	 	 	Additional	 	 	 	 	 	 	 	 	 	 	Total	 	
 	 	Shares	 	 	Amount	 	 	Paid-In
Capital	 	 	Retained
Earnings	 	 	Treasury
Stock	 	 	Stockholders’
Equity	 	
Balance, January 1, 2018	 	 	40,992	 	 	$	461	 	 	$	262,885	 	 	$	767,859	 	 	$	(111,982	)	 	$	919,223	 	
Net income	 	 	—	 	 	 	—	 	 	 	—	 	 	 	53,242	 	 	 	—	 	 	 	53,242	 	
Share-based compensation	 	 	77	 	 	 	1	 	 	 	2,592	 	 	 	—	 	 	 	—	 	 	 	2,593	 	
Quarterly cash dividends of $0.15 per share of common stock	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(18,499	)	 	 	—	 	 	 	(18,499	)	
Repurchases of common stock	 	 	(213	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(3,912	)	 	 	(3,912	)	
Balance, September 30, 2018	 	 	40,856	 	 	$	462	 	 	$	265,477	 	 	$	802,602	 	 	$	(115,894	)	 	$	952,647	 	

 
 	 	Outstanding
Common Stock	 	 	Additional	 	 	 	 	 	 	 	 	 	 	Total	 	
 	 	Shares	 	 	Amount	 	 	Paid-In
Capital	 	 	Retained
Earnings	 	 	Treasury
Stock	 	 	Stockholders’
Equity	 	
Balance, January 1, 2017	 	 	41,098	 	 	$	459	 	 	$	258,880	 	 	$	644,308	 	 	$	(105,864	)	 	$	797,783	 	
Net income	 	 	—	 	 	 	—	 	 	 	—	 	 	 	34,582	 	 	 	—	 	 	 	34,582	 	
Share-based compensation	 	 	76	 	 	 	1	 	 	 	2,532	 	 	 	—	 	 	 	—	 	 	 	2,533	 	
Exercise of stock options	 	 	31	 	 	 	—	 	 	 	482	 	 	 	—	 	 	 	—	 	 	 	482	 	
Quarterly cash dividends of $0.15 per share of common stock	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(18,551	)	 	 	—	 	 	 	(18,551	)	
Repurchases of common stock	 	 	(220	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(4,348	)	 	 	(4,348	)	
Balance, September 30, 2017	 	 	40,985	 	 	$	460	 	 	$	261,894	 	 	$	660,339	 	 	$	(110,212	)	 	$	812,481	 	
 
The accompanying notes are an integral part of these consolidated financial statements.
 
6

Table of Contents

SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In thousands)
 
 	 	Nine Months Ended
September 30:	 	
 	 	2018	 	 	2017	 	
Cash Flows from Operating Activities:	 	 	 	 	 	 	 	 	
Net income	 	$	53,242	 	 	$	34,582	 	
Adjustments to reconcile net income to net cash provided by operating activities:	 	 	 	 	 	 	 	 	
Impairment of goodwill	 	 	-	 	 	 	1,117	 	
Deferred loan cost amortization	 	 	1,132	 	 	 	1,155	 	
Gain on disposals of property and equipment and other assets	 	 	(2,260	)	 	 	(308	)	
Depreciation and amortization	 	 	39,480	 	 	 	44,808	 	
Amortization of deferred income	 	 	(615	)	 	 	(700	)	
Deferred income tax provision	 	 	989	 	 	 	(6,265	)	
Share-based compensation	 	 	2,593	 	 	 	2,533	 	
Changes in operating assets and liabilities:	 	 	 	 	 	 	 	 	
Accounts receivable	 	 	(15,387	)	 	 	(4,902	)	
Prepaid, refundable and accrued income taxes	 	 	3,476	 	 	 	11,572	 	
Inventories	 	 	(1,406	)	 	 	683	 	
Prepaid expenses	 	 	806	 	 	 	1,162	 	
Accounts payable	 	 	7,395	 	 	 	3,762	 	
Deferred race event and other income	 	 	(16,567	)	 	 	(10,606	)	
Accrued interest	 	 	(2,580	)	 	 	(2,577	)	
Accrued expenses and other liabilities	 	 	1,641	 	 	 	2,510	 	
Deferred income	 	 	78	 	 	 	189	 	
Other assets and liabilities	 	 	(420	)	 	 	(155	)	
Net Cash Provided By Operating Activities	 	 	71,597	 	 	 	78,560	 	
 	 	 	 	 	 	 	 	 	
Cash Flows from Financing Activities:	 	 	 	 	 	 	 	 	
Principal payments on long-term debt	 	 	(27,162	)	 	 	(31,157	)	
Exercise of common stock options	 	 	-	 	 	 	482	 	
Dividend payments on common stock	 	 	(18,499	)	 	 	(18,551	)	
Repurchases of common stock	 	 	(3,912	)	 	 	(4,348	)	
Net Cash Used By Financing Activities	 	 	(49,573	)	 	 	(53,574	)	
 	 	 	 	 	 	 	 	 	
Cash Flows from Investing Activities:	 	 	 	 	 	 	 	 	
Payments for capital expenditures	 	$	(25,025	)	 	$	(21,960	)	
Proceeds from sales, net of payments for disposals, of property and equipment and other assets	 	 	1,422	 	 	 	3,027	 	
Repayment of note receivable	 	 	132	 	 	 	405	 	
Net Cash Used By Investing Activities	 	 	(23,471	)	 	 	(18,528	)	
 	 	 	 	 	 	 	 	 	
Net (Decrease) Increase in Cash and Cash Equivalents	 	 	(1,447	)	 	 	6,458	 	
Cash and Cash Equivalents at Beginning of Period	 	 	82,200	 	 	 	79,568	 	
Cash and Cash Equivalents at End of Period	 	$	80,753	 	 	$	86,026	 	
 	 	 	 	 	 	 	 	 	
Supplemental Cash Flow Information:	 	 	 	 	 	 	 	 	
Cash paid for interest, net of amounts capitalized	 	$	11,615	 	 	$	12,220	 	
Supplemental Non-Cash Investing and Financing Activities Information:	 	 	 	 	 	 	 	 	
   Increase (decrease) in accounts payable for capital expenditures	 	 	4,153	 	 	 	(526	)	
 
The accompanying notes are an integral part of these consolidated financial statements.
 
7

Table of Contents
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS
 
Basis of Presentation – The consolidated financial statements include the accounts of Speedway Motorsports, Inc. and all of its wholly-owned and operating subsidiaries: Atlanta Motor Speedway LLC (AMS), Bristol Motor Speedway LLC (BMS), Charlotte Motor Speedway LLC (CMS), Kentucky Raceway LLC d/b/a Kentucky Speedway (KyS), Nevada Speedway LLC d/b/a Las Vegas Motor Speedway (LVMS), New Hampshire Motor Speedway, Inc. (NHMS), North Wilkesboro Speedway, Inc. (NWS), Speedway Sonoma LLC (Sonoma Raceway or SR), Texas Motor Speedway, Inc. (TMS), SMISC Holdings LLC d/b/a SMI Properties (SMI Properties or SMIP), US Legend Cars International, Inc. (Legend Cars), Oil-Chem Research Corporation (Oil-Chem), SMI Trackside LLC (SMI Trackside), Speedway Funding LLC, Speedway Properties Company LLC a/k/a Performance Racing Network (PRN), Speedway Media LLC a/k/a Racing Country USA (RCU), and TSI Management Company LLC d/b/a The Source International LLC (TSI) (collectively, the Company, SMI, we, our or us). Hereafter, references to “the Company’s” or “eight” speedways exclude NWS, which presently has no significant operations and assets consist primarily of real estate which has no significant fair value. See Notes 1 and 2 to the Consolidated Financial Statements in our 2017 Annual Report on Form 10-K (2017 Annual Report) for further description of our business operations, properties and scheduled events.
 
Racing Events – In 2018, we are holding 24 major annual racing events sanctioned by the National Association for Stock Car Auto Racing, Inc. (NASCAR), including 13 Monster Energy Cup and 11 Xfinity Series racing events. We also are holding eight NASCAR Camping World Truck Series, five NASCAR K&N Pro Series, three NASCAR Whelen Modified Tour, two IndyCar Series, six major National Hot Rod Association (NHRA), one Automobile Racing Club of America (ARCA) and three World of Outlaws (WOO) racing events. In 2017, we held 24 major annual racing events sanctioned by NASCAR, including 13 Monster Energy Cup and 11 Xfinity Series racing events. We also held eight NASCAR Camping World Truck Series, three NASCAR K&N Pro Series, four NASCAR Whelen Modified Tour, two IndyCar Series, six major NHRA, one ARCA and three WOO racing events.
 
2018 Monster Energy NASCAR Cup, Xfinity and Camping World Truck Series Race Date Realignments to Las Vegas Motor Speedway  – We realigned one annual Monster Energy Cup Series and one annual Camping World Truck Series racing event from NHMS, and an annual Xfinity Series racing event from KyS, to LVMS beginning in September 2018. We considered many factors, including the popularity, demand, alternative uses and revenues, and potential net increase in long-term future profitability from conducting additional annual NASCAR racing events in the LVMS market. 

2. SIGNIFICANT ACCOUNTING POLICIES AND OTHER DISCLOSURES
 
These unaudited consolidated financial statements should be read in conjunction with our consolidated financial statements included in our 2017 Annual Report. In management's opinion, these unaudited consolidated financial statements contain all adjustments necessary for their fair statement at interim periods in accordance with accounting principles generally accepted in the United States. All such adjustments are of a normal recurring nature unless otherwise noted. The results of operations for interim periods are not necessarily indicative of operating results that may be expected for the entire year due to the seasonal nature of the Company's motorsports business. See Note 2 to the Consolidated Financial Statements in our 2017 Annual Report for further discussion of significant accounting policies.
 
NASCAR Broadcasting Revenues and NASCAR Event Management (formerly purse and sanction) Fees – Under event management agreements, NASCAR typically retains 10% of gross broadcasting revenues as a component of their event management fees. We recognize 90% of gross broadcasting revenues as revenue, and 25% of gross revenues for purses awarded to race participants for each race. The remainder represents additional annually negotiated event management fees paid to NASCAR by the Company for each race. We historically presented the 10% portion of broadcast rights fees retained by NASCAR as both broadcasting revenues and related event management fees. We have determined that such amounts should be presented net, and have revised the presentation of our previously issued financial statements. We concluded the effect on our previously reported interim financial statements was not material. In addition, management believes the revised presentation provides consistency with that used by other companies that promote NASCAR racing events. We revised NASCAR broadcasting revenue and NASCAR event management fees by $6,885,000 and $20,008,000 in the three and nine months ended September 30, 2017 (comparable amounts were $8,709,000 and $22,361,000 for the three and nine months ended September 30, 2018). The revision had no impact on our net income or loss, earnings or loss per share, balance sheet or cash flows.
 
Quarterly Reporting – We recognize revenues and operating expenses for all events in the calendar quarter in which conducted. Changes in race schedules at our speedways from time to time, including speedway acquisitions, can lessen the comparability of operating results between quarterly financial statements of successive years and increase or decrease the seasonal nature of our motorsports business. The more significant races affected by poor weather and other racing schedule changes for the three and nine months ended September 30, 2018 as compared to 2017 include:
 
•	Poor weather or excessive heat surrounded Monster Energy NASCAR Cup race weekends at AMS and LVMS in the first quarter 2018, at BMS, CMS, SR and TMS in the second quarter 2018, and at BMS, LVMS and NHMS in the third quarter 2018	
•	One NASCAR Monster Energy Cup and one annual Camping World Truck Series racing event from NHMS, and one Xfinity Series racing event from KyS, were realigned to LVMS in the third quarter 2018 (all were held in the third quarter 2017)	
•	CMS held one NASCAR Monster Energy and one Xfinity Series race in the third quarter 2018 that were held in the fourth quarter 2017	
•	CMS held one major NHRA racing event in the third quarter 2017 that is being held in the fourth quarter 2018	
•	Poor weather also surrounded certain smaller non-NASCAR events at CMS and TMS in the second quarter 2018	
•	LVMS held one NASCAR Camping World Truck Series race in the first quarter 2018 that was held in the third quarter 2017	
 
8

Table of Contents
 
Consolidated Statements of Cash Flows – Under Accounting Standards Update No. 2016-15 adopted as of January 1, 2018 (see “Recently Issued Accounting Standards” below), we now include restricted cash balances in Cash and Cash Equivalents on our Consolidated Statements of Cash Flows for all periods presented. Restricted cash balances are insignificant and included in Other Assets on our Consolidated Balance Sheets.
 
Income Taxes – We provide for income taxes at the end of each interim period based on management’s best estimate of the annual estimated effective income tax rate. Cumulative adjustments to our annual estimated effective income tax rate are recorded in the interim period in which a change in the annual estimated effective income tax rate is determined. Cash paid for income taxes excludes any previous overpayments the Company may have elected to apply to income tax liabilities. The Company has no undistributed foreign earnings or cash or cash equivalents held outside of the US. See Notes 2 and 8 to the Consolidated Financial Statements in our 2017 Annual Report for additional information on our accounting for income taxes.
 
Our effective income tax rate for the three months ended September 30, 2018 and 2017 was 25.2% and 37.1%, and for the nine months ended September 30, 2018 and 2017 was 23.2% and 35.0%, respectively. The 2018 tax rates reflect the lower US corporate federal tax rate under the Tax Cuts and Jobs Act further described below, and a second quarter 2018 non-recurring tax benefit of $1,110,000 resulting from certain state income tax law changes. Our tax rates for the nine months ended September 30, 2017 reflect reduced net deferred income tax liabilities of $1,791,000 for anticipated lower state income tax rates associated with race date realignments, and other lower effective state income tax rates. The tax rate for the nine months ended September 30, 2017 was partially offset by reduced deferred tax assets associated with certain state net operating loss carryforwards of $515,000. We paid cash of $11,625,000 and $12,855,000 for income taxes in the nine months ended September 30, 2018 and 2017.
 
Accounting for Uncertainty in Income Taxes – Income tax liabilities for unrecognized tax benefits approximate $11,711,000 at both September 30, 2018 and December 31, 2017, all of which relates to our previously discontinued operation. Of those amounts, $11,534,000 is included in noncurrent other liabilities, all of which would favorably impact our effective tax rate if recognized, and $177,000 is included in deferred tax liabilities at both September 30, 2018 and December 31, 2017. As of September 30, 2018 and December 31, 2017, management believes $823,000 of unrecognized tax benefits will be recognized within the next twelve months. Interest and penalties associated with unrecognized tax benefits were insignificant for the three and nine months ended September 30, 2018 and 2017. As of September 30, 2018 and December 31, 2017, we had $660,000 and $241,000 accrued for the payment of interest and penalties on uncertain tax positions, which is included in other noncurrent liabilities. The tax years that remain open to examination include 2015 through 2017 by the Internal Revenue Service, and 2013 through 2017 by other state taxing jurisdictions to which we are subject. 
 
December 2017 Tax Cuts and Jobs Act Enactment – On December 22, 2017, the Tax Cuts and Jobs Act (the Tax Act) was enacted and substantially amended the Internal Revenue Code. Effective January 1, 2018, the Act reduces US corporate federal tax rates from 35% to 21%, provides for 100% expensing of certain qualified capital investments through 2022, repeals the corporate Alternative Minimum Tax, eliminates loss carrybacks, limits using future losses, and further limits the deductibility of certain executive compensation, among other provisions. Current accounting guidance provides for a provisional one-year measurement period for entities to finalize their accounting for certain income tax effects of the Tax Act.
 
As of December 31, 2017, we recognized provisional tax expense related to non-deductible executive compensation as we anticipated that performance-based compensation would no longer be tax deductible. During the three and nine months ended September 30, 2018, we recognized $56,000 of tax benefit related to changes made to the provisional amounts, primarily related to the revaluation of deferred tax assets and liabilities. We expect to continue to refine the calculations as additional analysis is completed and as the Internal Revenue Service issues additional guidance. We plan to finalize the accounting for those provisional amounts in the fourth quarter 2018 upon filing our corporate income tax returns. Final amounts may differ from provisional amounts after further analysis, changes in interpretation and assumptions, or additional regulatory guidance that may be issued, among other things.
 
Income Tax Benefits – Applicable accounting guidance may require establishing valuation allowances for certain deferred tax assets or income tax liabilities for unrecognized tax benefits, notwithstanding management believes associated tax filing positions are sustainable and are or will be reflected in its tax filings. At September 30, 2018 and December 31, 2017, liabilities for unrecognized tax benefits totaled $11.7 million. Should those tax positions not be fully sustained if examined, an acceleration of material income taxes payable could occur. Where no net income tax benefit had been previously reflected because of providing a valuation allowance on related deferred tax assets, our future results of operations might not be significantly impacted. However, resulting cash required for payments of income taxes could be material in the period in which such determination is made.
 
Advertising Expenses – Event specific advertising costs are expensed when an associated event is held and included principally in direct expense of events. Non-event related advertising costs are expensed as incurred and included principally in other direct operating expense. Advertising expense amounted to $4,449,000 and $3,831,000 for the three months ended September 30, 2018 and 2017, and $10,879,000 and $10,854,000 for the nine months ended September 30, 2018 and 2017. There were no deferred direct-response advertising costs at September 30, 2018 or December 31, 2017.
 
9

Table of Contents
 
TMS Mineral Rights Lease Receipts – We recognized royalty revenue of $334,000 and $508,000 in the three months ended September 30, 2018 and 2017, and $1,077,000 and $1,486,000 in the nine months ended September 30, 2018 and 2017 under a natural gas mineral rights lease agreement and a joint exploration agreement entitling TMS to stipulated stand-alone and shared royalties. Such revenues can vary due to associated volatility in natural gas price levels and common diminishing well production, as well as other factors outside of TMS’s control. At this time, while extraction activities continue, no new wells are being explored, and management is unable to determine ongoing volumes of production if any or for how long (including common diminishing well production over time), or if natural gas price levels will further decline, remain steady or adequate. The agreements stipulate that TMS distribute 25% of production royalty revenues to the lessee, and obligate TMS to spend amounts equal to royalties received on TMS facility and road infrastructure improvements beginning in 2017, up to specified cumulative amounts. At this time, management believes 2018 revenues will not differ significantly from 2017, and that our infrastructure spending will continue to exceed anticipated future royalties similar to 2017. As of September 30, 2018 and December 31, 2017, there was no deferred income associated with these agreements.
 
Fair Value of Financial Instruments – We follow applicable authoritative guidance which requires that financial and non-financial assets and liabilities measured and reported on a fair value basis be classified, disclosed and categorized as further described below. Fair value estimates are based on relevant market information and single broker quoted market prices where available at a specific point in time, and changes in assumptions or market conditions could significantly affect estimates. The carrying values of cash and cash equivalents, accounts receivable, certain other assets and accounts payable approximate fair value because of the short maturity of these financial instruments. Cash surrender values are carried at fair value based on binding broker quoted market prices. Notes receivable and bank revolving credit facility and term loan borrowings are variable interest rate financial instruments and, therefore, carrying values approximate fair value. The fixed rate senior notes payable are publicly traded and estimated fair values are based on single broker quoted market prices. Other long-term debt bears interest approximating market rates; therefore, carrying values approximate market value. There have been no changes or transfers between category levels or classes.
 
The following table presents estimated fair values and categorization levels of our financial instruments as of September 30, 2018 and December 31, 2017 (in thousands):
 
 	 	 	 	 	 	 	2018	 	 	2017	 	
 	 	Level	 	Class	 	Carrying
Value	 	 	Fair Value	 	 	Carrying
Value	 	 	Fair Value	 	
Assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 	1	 	R	 	$	80,501	 	 	$	80,501	 	 	$	81,924	 	 	$	81,924	 	
Note receivable	 	 	2	 	NR	 	 	661	 	 	 	661	 	 	 	799	 	 	 	799	 	
Cash surrender values	 	 	2	 	NR	 	 	10,369	 	 	 	10,369	 	 	 	9,822	 	 	 	9,822	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Liabilities (principal)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Floating rate revolving Credit Facility, including Term Loan	 	 	2	 	NR	 	 	3,000	 	 	 	3,000	 	 	 	30,000	 	 	 	30,000	 	
5.125% Senior Notes due 2023	 	 	2	 	NR	 	 	200,000	 	 	 	198,000	 	 	 	200,000	 	 	 	205,000	 	
Other long-term debt	 	 	2	 	NR	 	 	887	 	 	 	887	 	 	 	1,049	 	 	 	1,049	 	
 
Level 1  :	Quoted market prices in active markets for identical assets or liabilities.	
Level 2:	Observable market-based inputs or unobservable inputs that are corroborated by market data.	
Level 3:	Unobservable inputs that are not corroborated by market data.	
Class R:	Measured at fair value on recurring basis, subsequent to initial recognition.	
Class NR:	Measured at fair value on nonrecurring basis, subsequent to initial recognition.	
 
Property and Equipment – From time to time, we renovate various seating, suite and other areas at our speedways for modernizing our facilities, alternative marketing or development purposes such as offering unique fan zones, expanded premium hospitality and RV camping areas, or wider seating and improved sight lines. When management decides on renovation and removal, accelerated depreciation is recorded prospectively over shortened estimated remaining useful lives of the assets, and accounted for as a change in estimate, beginning when management contracts and begins removal. In the first quarter 2017, we contracted and began removing certain seating at CMS, KyS and NHMS. As such, we recorded pre-tax charges for accelerated depreciation and costs of removal (included in other expense, net) aggregating $4,597,000, before income tax benefits of $1,700,000, in the first quarter 2017. These charges are included in our "motorsports event related" reporting segment (see Note 10).
 
Recently Issued Accounting Standards – The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-15 “Statement of Cash Flows (Topic 23) - Classification of Certain Cash Receipts and Cash Payments” which provides specific guidance on eight cash flow classification issues. The guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, and was applied using a retrospective transition method to each period presented. Our adoption of this new guidance as of January 1, 2018 had an immaterial impact on our financial statements.
 
10

Table of Contents
 
The FASB issued ASU No. 2016-02 “Leases (Subtopic 842)” which replaces all current US GAAP guidance on this topic, and requires lessees to recognize assets and liabilities arising from leases as well as extensive quantitative and qualitative disclosures. The FASB issued ASU No. 2018-10 “Codification Improvements to Topic 842, Leases” which clarifies certain transitional and application guidance. Lessees will need to recognize on their balance sheets right-of-use assets and lease liabilities for the majority of their leases (other than leases meeting the definition of a short-term lease). Right-of-use assets will be measured at lease liability amounts, adjusted for lease prepayments, lease incentives received and lessee’s initial direct costs. Lease liabilities will equal the present value of lease payments. Assets will be based on the liability, subject to adjustment, such as for initial direct costs. Operating leases may typically result in straight-line expense, while finance leases similar to front-loaded expense pattern. Classification will be based on criteria largely similar to those applied in current lease accounting. The FASB also issued ASU No. 2018-11 “Leases (Topic 842), Targeted Improvements” which provides entities with an optional cumulative-effect adjustment transition method for adopting the new leases standard, and a practical expedient related to accounting for separate leasing and non-leasing components of a contract. Entities also have the option of applying the guidance using the modified retrospective approach for all leases existing as of the effective date, which requires application at the beginning of the earliest comparative period presented. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the adoption alternatives and potential impact that adoption may have on our financial statements, including ongoing analysis of transactional data, underlying contracts and associated accounting policies, and continue to gather information for required presentation and disclosures. Also, we are implementing processes, internal controls and technology solutions to help enable timely and accurate reporting.
 
The FASB issued ASU No. 2018–01 "Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842" which provides an optional transition practical expedient to not evaluate existing or expired land easements that were not previously accounted for as leases under current lease guidance. Entities that elect this practical expedient should evaluate new or modified land easements at the date of adoption, which should be applied consistently to all existing or expired land easements not previously accounted for as leases. Entities that do not elect this practical expedient should evaluate all existing or expired land easements to assess whether they meet the definition of a lease. This Update affects entities with land easements that existed or expired before adoption, provided the entity does not account for those land easements as leases under current guidance. Once adopted, this Update should be applied prospectively to all new or modified land easements to determine whether any arrangements should be accounted for as a lease. Entities should continue to apply its current accounting policy for accounting for land easements that existed before adoption of this Update. This guidance is effective beginning in the same periods as Update No. 2016-02 described above. We are currently evaluating the potential impact that adoption may have on our financial statements.
 
Revenue from Contracts with Customers – As of January 1, 2018, we adopted Accounting Standards Update No. 2014-09 "Revenue from Contracts with Customers (Topic 606)” and associated amendments, using the modified retrospective method of adoption (ASC 606). We applied, and are continuing to apply, the five-step model provided in this new standard. The guidance includes the core principle that entities recognize revenue to depict transfers of promised goods or services to customers in amounts that reflect the consideration entities expect to be entitled in exchange for those goods or services, and expands required financial statement disclosures regarding revenue recognition. Adoption did not result in an initial cumulative adjustment that impacted our retained earnings. There was no impact on the measurement or recognition of revenue of prior periods, and management believes adoption will not materially impact our future timing or classification of revenue recognition. Management believes no unusual or significant estimation was necessary to apply the new revenue guidance to existing customer contracts. Our main types of revenue contracts and performance obligations are further described below. Our evaluation under ASC 606 determined that certain accounts receivable should be classified as contract assets, and corresponding deferred revenues should be classified as contract liabilities. These future contracted revenues, as further described below, include various event related marketing agreements, and event tickets purchased under extended payment terms that have not yet been paid in full, and related performance obligations have not been satisfied. Under ASC 606, contract assets and contract liabilities in a contract are reportable on a net basis.
 
Disaggregated Revenues – Based on economic factors, including their nature, timing and certainty as further described below, we have disaggregated the composition of our revenues in the following table. The table includes our admissions, NASCAR broadcasting, and sponsorships and other event related revenues that are reported in our Motorsports Event Related segment, and souvenir and other merchandise and other revenues that are reported in that segment and our All Other segment (see Note 10). This disaggregation corresponds with our segment reporting except as described below. Management believes there are no unusual or significant uncertainties or conditions regarding our revenues or cash flows, except should uncontrollable circumstances such as poor weather, adverse incidents or geopolitical events involving large gatherings of people prevent a major NASCAR race from being held during the racing season. All such races have been held within their scheduled calendar year over the years.
 
 	 	Three Months Ended
September 30:	 	 	Nine Months Ended
September 30:	 	
 	 	2018	 	 	2017	 	 	2018	 	 	2017	 	
Admissions	 	$	30,536	 	 	$	27,641	 	 	$	66,811	 	 	$	71,532	 	
NASCAR broadcasting	 	 	78,374	 	 	 	61,962	 	 	 	201,246	 	 	 	180,065	 	
Sponsorships and other event related	 	 	42,092	 	 	 	31,965	 	 	 	105,038	 	 	 	96,786	 	
Souvenir and other merchandise	 	 	5,368	 	 	 	4,958	 	 	 	14,671	 	 	 	14,673	 	
Other	 	 	3,715	 	 	 	4,197	 	 	 	12,531	 	 	 	14,122	 	
Total Revenue	 	$	160,085	 	 	$	130,723	 	 	$	400,297	 	 	$	377,178	 	
 
11

Table of Contents
 
The following describes the composition of our disaggregated revenues and associated performance obligations:
 
Admissions – We sell tickets to individuals, corporate customers and other groups, including contracted admissions and other access, to our motorsport and non-motorsports events.
 
NASCAR Broadcasting – NASCAR contracts directly with certain television networks on broadcasting rights for all NASCAR-sanctioned racing events. We receive television broadcasting revenues under contractual sanction agreements for each such race. SMI has separate five-year Event Management Agreements (formerly purse and sanction) with NASCAR under which our speedways will conduct such racing events through 2020.
 
Sponsorships and Other Event Related – Sponsorships generally consist of event and official sponsorship agreements. These various marketing agreements can be event, speedway or period specific, or pertain to multiple events, speedways or years. Marketing agreements that are not event specific typically contain stated fiscal year periods. We receive payments based on contracted terms. Our marketing agreements sometimes include multiple specified elements such as sponsorships, tickets, hospitality, suites or on-site advertising in varying combinations for one or more events or contract periods, although there is typically a predominant element. Contracted revenues are allocated between admissions and event related revenue financial statement categories based on relative fair or stand-alone selling price of the respective multiple elements as such events or activities are conducted each year in accordance with underlying agreement terms.
 
We derive other event related revenue from various marketing agreements for on-site advertising, hospitality and other promotion related activities. We derive revenue based commissioned payments from a long-term contracted third party for food and beverage sales during motorsports and non-motorsports events, speedway catered “hospitality” receptions and private parties. We also derive revenue from luxury suite rentals, parking and other event and speedway related activities. Our speedways and related facilities are frequently leased to others for use in driving schools, testing, research and development of race cars and racing products, concerts, settings for commercials and motion pictures, and other outdoor events. We derive event related revenue from the sale of commercial time and other radio broadcast programming on PRN, and from ancillary broadcasting rights other than NASCAR broadcasting revenue.
 
Souvenir and Other Merchandise – We derive event related revenue from sales of owned motorsports related souvenir merchandise and commissioned souvenir merchandise sales during racing and non-racing events and in our speedway gift shops throughout the year. Souvenir merchandise is sold in concession areas to individual, group, corporate and other customers. Fees and sales based commissions are paid to us by third-party vendors to allow on-site selling of merchandise and promotional items during our events and activities. We also derive other operating revenue from our Legend Cars and from Oil-Chem operations, and sales of souvenir merchandising, including screen-printing, embroidery, services and products to third parties that typically are not event specific.
 
Other – We derive other operating revenue from dining and entertainment facilities at The Speedway Clubs at CMS and TMS. We also derive other operating revenue from leasing of SR’s industrial park to individuals, corporate and other customers, including race teams and driving schools, from leasing of office towers located at several of our speedways, TMS natural gas mineral rights, and from sanctioning US Legend Cars circuit races.
 
Accounting Recognition for Event Related Revenues and Associated Net Deferred Event Income – We recognize admissions, NASCAR broadcasting and event related revenues when an event is held. Deferred race event income, and associated direct event expenses, pertain to scheduled events to be held in upcoming periods, are recognized when an event is held, and are reflected net as current liabilities in deferred race event and other income. We recognize contracted sponsorship and other marketing arrangement fee revenues, and associated expenses, as events or activities are conducted each year in accordance with the respective agreement terms. Event souvenir merchandise sales and commission based net revenues from food and beverage sales are recognized at time of sale. Advance revenues and associated direct expenses pertaining to specific events are deferred until the event is held. Deferred expenses often include NASCAR Event Management Fees, race purses and sanction fees for other racing events, sales commissions, event specific advertising, signage and other marketing costs, sales and admission taxes, and credit card processing fees on advance revenues associated with our upcoming events.
 
If circumstances prevent a race from being held during the racing season: (i) generally advance revenue is refundable, (ii) all deferred direct event expenses would be immediately recognized except for race event management fees which would be refundable from NASCAR or other sanctioning bodies, and (iii) sales and admission taxes would be refundable from taxing authorities. Management believes this accounting policy results in appropriate matching of revenues and expenses associated with our racing events and helps ensure comparability and consistency between our financial statements. Advance revenues, and associated direct expenses, if any, for track rentals, driving schools and similar activities are deferred and recognized when the activities take place.
 
Accounting Recognition for Non-Event Souvenir Merchandise and Other Revenues – We recognize revenue (including associated shipping and handling which is insignificant) when products are shipped, title transfers to customers, right of return or cancellation provisions expire, sales prices are final and collection is probable. Product sold on consignment with right of return or cancellation provisions has not been significant.
 
12

Table of Contents
 
Accounting Recognition for Noncurrent Net Deferred Income – We recognize revenue associated with Preferred Seat License (PSL) agreements whereby licensees are entitled to purchase annual season ticket packages for sanctioned racing events under specified terms and conditions. Among other items, licensees are required to purchase all season ticket packages as offered each year. License agreements automatically terminate without refund should licensees not purchase any offered ticket and are transferable once each year subject to certain terms and conditions. Licensees are not entitled to refunds for postponement or cancellation of events due to weather or certain other conditions. Net PSL fees are deferred when received and amortized into income over the estimated useful life of those facilities or recognized upon license agreement termination.
 
Performance Obligations – A performance obligation is defined as a contracted promise to transfer a distinct good or service to the customer. Our performance obligations and associated accounting recognition are described above. Significantly, we are obligated to conduct events in the manner stipulated under terms and conditions of our sanctioning agreements. We typically require payment of event specific related contracts before associated events are held. Management believes we recognize revenues, and associated costs, when or as distinct and multiple performance obligations are satisfied. For non-event merchandise sales, we transfer control and recognize revenue when products are shipped and customers have accepted and obtained control of the goods. At that time, our obligations under customer contract terms have been satisfied and transfer of control of associated goods and services has occurred. Our contracts typically do not contain financing components, or variable consideration except for net commission based revenues for food and beverage sales described above. Our contracts are typically not modified, and returns, refunds and warranty costs for goods or services are not significant. Management believes there are no partially satisfied obligations based on the nature of our operations and contract terms.
 
We have contracted future revenues representing unsatisfied performance obligations, and the estimated revenue expected to be recognized in the future related to these performance obligations. These contracts contain initial terms typically ranging from one to five years, with some for ten-year periods, excluding renewal options. We have elected to use the following practical expedients under ASC 606 for disclosures related to unsatisfied performance obligations: (i) associated future costs to obtain or fulfill unrecorded performance obligations were not estimated, (ii) unsatisfied performance obligations expected to be satisfied within the next twelve months were excluded, and (iii) time bands, reflecting management’s best estimate of when we will transfer control to customers, are based on calendar years to comport with our seasonal business. We also excluded unsatisfied performance obligations for future NASCAR broadcasting revenue terms through 2024. We anticipate recognizing unsatisfied performance obligations for the calendar year ending 2019 and beyond of approximately $150,150,000 at September 30, 2018. 
 
Contract Balances – Our contract assets are comprised of accounts receivable and deferred event expenses (described above), and our contract liabilities are comprised of deferred event income and noncurrent deferred income (both described above). Costs to obtain and fulfill contracts (performance obligations) are comprised principally of such deferred event expenses. Significantly, such costs include NASCAR Event Management Fees which must be incurred enabling us to hold associated racing events and receive NASCAR broadcasting revenues. Our policy for expense recognition of contract assets associated with deferred event expenses is further described above. 
 
Changes in contract assets and liabilities during the nine months ended September 30, 2018 result principally from recognition upon holding associated motorsport and non-motorsports events during the period. At September 30, 2018 and December 31, 2017, contract assets aggregated $5,686,000 and $7,511,000, and contract liabilities aggregated $32,415,000 and $51,344,000. For the nine months ended September 30, 2018, we recognized revenue associated with contract liabilities amounting to $42,413,000. Our contract liabilities consist of current and noncurrent deferred revenue of $29,914,000 and $2,501,000 at September 30, 2018, and we anticipate recognizing current amounts in the upcoming twelve-month period and noncurrent amounts thereafter.
 
Taxes Collected from Customers – We have elected to report sales, admission and other taxes collected from customers based on our applicable jurisdiction tax reporting requirements. As such, taxes are reported on both a gross and net basis in our operations, and those reported on a gross basis amounted to $1,579,000 and $1,386,000 in the three months ended September 30, 2018 and 2017, and $3,967,000 and $4,115,000 in the nine months ended September 30, 2018 and 2017.

3. INVENTORIES
 
Inventories, net consist of the following components (in thousands):
 
 	 	September 30,	 	 	December 31,	 	
 	 	2018	 	 	2017	 	
Finished race cars, parts and accessories	 	$	6,174	 	 	$	4,507	 	
Souvenirs and apparel	 	 	1,982	 	 	 	2,014	 	
Micro-lubricant ® and other	 	 	533	 	 	 	762	 	
Total	 	$	8,689	 	 	$	7,283	 	

4. GOODWILL AND OTHER INTANGIBLE ASSETS
 
Annual Impairment Assessment – We evaluate goodwill and other intangible assets for possible impairment annually in the second quarter, or when events or circumstances indicate possible impairment may have occurred. Other intangible assets are comprised of nonamortizable race event sanctioning and renewal agreements. See Notes 2 and 5 to the Consolidated Financial Statements in our 2017 Annual Report for additional information on our goodwill and other intangible assets, and the methods, assumptions and business factors used in our annual impairment assessment.
 
13

Table of Contents
 
Management's latest annual assessment in the second quarter 2018 was based predominately on management's best estimate of future discounted operating cash flows and profitability attributable to such assets for all individual reporting units. The impairment evaluation considered NASCAR’s approved realignment of one annual Monster Energy Cup Series and one annual Camping World Truck Series racing event from NHMS, and an annual Xfinity Series racing event from KyS, to LVMS beginning in September 2018, and anticipated associated net increases in future long-term cash flows and operating profits. Management also considered that the estimated market value for comparable NASCAR race event sanction and renewal agreements (we had agreements with NASCAR to annually conduct thirteen Monster Energy Cup, eleven Xfinity and eight Camping World Truck Series races as of the evaluation date), combined with the estimated fair value for all other Company net assets, substantially exceeds its current market capitalization. Among other factors, the latest assessment assumes projected cash flow and profitability using minimal or modest annual growth rates for projected revenue streams and operating costs (other than NASCAR broadcasting revenues and event management fees), and strategic amounts of planned capital expenditures. The assessment also reflects anticipated lower cash federal income taxes under the Tax Cuts and Jobs Act. Management projected annual increases in contracted NASCAR broadcasting rights revenues, and associated NASCAR event management fees, based on historical and anticipated rates which are supported by recently negotiated multi-year contracts. NASCAR event management fees for years after 2020 have not been negotiated, and future annual fees could differ substantially from those assumed in management’s impairment assessment. Management also considered control premiums and other market information related to our common stock from historical and forward-looking perspectives. Management believes the methods used to determine fair value and evaluate impairment were appropriate, relevant, and represent methods customarily available and used for such purposes and are the best available estimate of fair value.
 
Management's assessment found the estimated fair value of each reporting unit and each indefinite-lived race date intangible asset substantially exceeded its associated carrying value except for three race date agreements. We recorded sizable impairment charges in 2015 and earlier years to reduce the carrying values for two of those race date agreements to estimated fair values. As such, their adjusted carrying values approximated estimated fair values as of evaluation dates, and which are reflected in our current evaluation. As of September 30, 2018 and December 31, 2017, the aggregate carrying value for those non-amortizable race date event sanctioning and renewal agreements was approximately $298.4 million. The estimated excess of fair value of these identified intangible assets is relatively nominal at this time, heightening sensitivity to management’s assumptions used in estimating future discounted cash flows and profitability and associated risk of failing impairment testing. The evaluation reflects, similar to challenges faced by many major sports, reduced visibility on profit recovery due to factors such as changing demographics, evolving entertainment choices for fans, appealing “at-home viewing” experiences and retirement of popular long-standing “megastars”. We have lowered our expectations for forecasted growth rates for certain revenues and profit recovery. However, those expectations and forecasts are based on many factors out of our control, and could be found unachievable. Such ultimate outcome could adversely impact our estimates of fair values, particularly for those three race date intangible assets.
 
There have been no triggering events that indicate possible impairment, and management believes our operational and cash flow forecasts support our conclusions that no unrecognized impairment exists as of September 30, 2018. Our future profitability or success associated with any current or future NASCAR race realignments could significantly differ from management expectations and estimates, and are subject to numerous factors, conditions and assumptions, many of which are beyond our control. Different economic or industry conditions or assumptions, and changes in projected cash flows or profitability, if significantly negative or unfavorable, could have a material adverse effect on the impairment evaluation and our future financial condition or results of operations. The evaluations are subjective and based on conditions, trends and assumptions existing at the time of evaluation.
 
2017 Impairment of Goodwill – Our 2017 annual assessment indicated that the carrying value of goodwill associated with SMIP, which conducts event and non-event souvenir merchandising, exceeded its estimated fair value because of potentially unfavorable merchandising business model developments. As such, a non-cash impairment charge of $1,117,000, before income tax benefits of $419,000, was reflected in the second quarter 2017 to reduce associated goodwill to $0. The 2017 impairment charge pertains to our “motorsports event related” reporting segment (see Note 10).
   
Other Information – There were no changes in the gross carrying value of other intangible assets or goodwill during the nine months ended September 30, 2018. Those carrying amounts include accumulated impairments of $100.0 million for other intangible assets and $149.7 million for goodwill at both September 30, 2018 and December 31, 2017. There is no accumulated amortization for either asset class.

5. LONG-TERM DEBT
 
Bank Credit Facility – Our Credit Facility, among other things: (i) provides for a five-year $100,000,000 senior secured revolving credit facility, with separate sub-limits of $50,000,000 for standby letters of credit and $10,000,000 for swing line loans; (ii) provides for a five-year $150,000,000 senior secured term loan (which was fully drawn) and a five-year delayed draw term loan of up to $50,000,000 (which was fully drawn and repaid in 2015) (the Term Loan); (iii) matures in December 2019; (iv) contains an accordion feature allowing the Company to increase revolving commitments or establish a term loan up to an aggregate additional $100,000,000 or $200,000,000, respectively (or a combined aggregate additional amount of up to $250,000,000) with certain lender commitment conditions; (v) allows for annual aggregate payments of dividends and repurchases of SMI securities of up to $50,000,000, increasing up to $75,000,000 subject to maintaining certain financial covenants; and (vi) limits annual capital expenditures to $75,000,000 and provides for motor speedway acquisitions and related businesses. Term Loans require equal minimum quarterly principal payments of at least 5% of initial amounts drawn on an annualized basis.
 
Interest is based, at the Company’s option, upon the Eurodollar Rate plus 1.25% to 2.00% or a base rate defined as the higher of Bank of America’s prime rate, the Federal Funds Rate plus 0.5% or the Eurodollar Rate plus 1%, plus 0.25% to 1.00%. The Credit Facility also contains a commitment fee ranging from 0.25% to 0.40% of unused amounts available for borrowing. The interest rate margins on borrowings and the commitment fee are adjustable periodically based upon certain consolidated total leverage ratios. The Credit Facility contains a number of affirmative and negative financial covenants, including requirements that we maintain certain consolidated total leverage ratios and consolidated interest coverage ratios.
 
14

Table of Contents
 
We repaid Term Loan borrowings of $4,000,000 and $27,000,000 during the three and nine months ended September 30, 2018, and $5,000,000 and $31,000,000 during the three and nine months ended September 30, 2017, and there were no new borrowings under the Credit Facility. At September 30, 2018 and December 31, 2017, outstanding borrowings under the Credit Facility were $3,000,000 and $30,000,000 (all Term Loan borrowings), and outstanding letters of credit amounted to $662,000 and $698,000. As of September 30, 2018, we had availability for borrowing up to an additional $99,338,000, including up to an additional $49,338,000 in letters of credit, under the revolving Credit Facility, and $50,000,000 under the delayed draw term loan provision.
 
2023 Senior Notes – We completed a private placement of 5.125% Senior Notes due 2023 in aggregate principal amount of $200.0 million in January 2015 (the 2023 Senior Notes), and an exchange offer for substantially identical 2023 Senior Notes registered under the Securities Act in the second quarter 2015. The 2023 Senior Notes were issued at par, and net proceeds were used to redeem a portion of our former 2019 Senior Notes as further described in Note 6 to the Consolidated Financial Statements in our 2017 Annual Report. The 2023 Senior Notes mature in February 2023 and interest payments are due semi-annually on February 1 and August 1.
 
Other Notes Payable – At September 30, 2018 and December 31, 2017, long-term debt includes a 3% interest bearing debt obligation of $887,000 and $1,049,000 associated with the purchase of real property at BMS, payable in eight annual installments of $194,000 beginning January 2016.
 
Deferred Financing Costs – Deferred financing costs associated with our revolving Credit Facility are reported in other noncurrent assets, and those associated with our 2023 Senior Notes and bank Term Loan are reflected as a reduction of long-term debt. As of September 30, 2018 and December 31, 2017, long-term debt reflects deferred financing costs, net of accumulated amortization, of $3,023,000 and $3,935,000.  
 
Other General Terms and Conditions – The Credit Facility and 2023 Senior Notes contain specific requirements and restrictive financial covenants and limits or prohibits various financial and transactional activities, and also contain cross-default and change of control provisions. We were in compliance with all applicable covenants under these debt agreements as of September 30, 2018. See Note 6 to the Consolidated Financial Statements included in our 2017 Annual Report for additional information on these debt agreements, including dividend, redemption, and right of payment provisions, pledged security and financial and restrictive covenants.
 
Subsidiary Guarantees – Amounts outstanding under our Credit Facility and 2023 Senior Notes are guaranteed by all of SMI’s material operative subsidiaries except for Oil-Chem and its subsidiaries (which are presently minor). These guarantees are full and unconditional, and joint and several with the 2023 Senior Notes on a senior unsecured basis. The parent company has no significant independent assets or operations. There are no restrictions on our subsidiaries’ ability to pay dividends or advance funds to the parent company.
 
Interest Expense, Net – Interest expense, interest income and capitalized interest costs are summarized as follows (in thousands):
 
 	 	Three Months Ended
September 30:	 	 	Nine Months Ended
September 30:	 	
 	 	2018	 	 	2017	 	 	2018	 	 	2017	 	
Gross interest costs	 	$	3,021	 	 	$	3,217	 	 	$	9,383	 	 	$	9,861	 	
Less: capitalized interest costs	 	 	(100	)	 	 	(65	)	 	 	(348	)	 	 	(218	)	
Interest expense	 	 	2,921	 	 	 	3,152	 	 	 	9,035	 	 	 	9,643	 	
Interest income	 	 	(150	)	 	 	(98	)	 	 	(354	)	 	 	(421	)	
Interest expense, net	 	$	2,771	 	 	$	3,054	 	 	$	8,681	 	 	$	9,222	 	
Weighted-average interest rate on Credit Facility borrowings	 	 	3.3	%	 	 	2.5	%	 	 	3.0	%	 	 	2.3	%	

6. PER SHARE AND OTHER EQUITY INFORMATION 
 
The following schedule reconciles basic and diluted earnings per share (where computations are anti-dilutive, reported basic and diluted per share amounts are the same) (in thousands except per share amounts):
 
 	 	Three Months Ended
September 30:	 	 	Nine Months Ended
September 30:	 	
 	 	2018	 	 	2017	 	 	2018	 	 	2017	 	
Net income applicable to common stockholders and assumed conversions	 	$	24,073	 	 	$	9,211	 	 	$	53,242	 	 	$	34,582	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average common shares outstanding	 	 	40,882	 	 	 	41,004	 	 	 	40,936	 	 	 	41,046	 	
Dilution effect of assumed conversions:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common stock equivalents—stock awards	 	 	13	 	 	 	18	 	 	 	15	 	 	 	16	 	
Weighted average common shares outstanding and assumed conversions	 	 	40,895	 	 	 	41,022	 	 	 	40,951	 	 	 	41,062	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic earnings per share	 	$	0.59	 	 	$	0.22	 	 	$	1.30	 	 	$	0.84	 	
Diluted earnings per share	 	$	0.59	 	 	$	0.22	 	 	$	1.30	 	 	$	0.84	 	
Anti-dilutive common stock equivalents excluded in computing diluted earnings per share	 	 	12	 	 	 	9	 	 	 	12	 	 	 	10	 	
 
15

Table of Contents
 
Stock Repurchase Program – Our Board of Directors has approved a stock repurchase program authorizing SMI to repurchase up to an aggregate of 6,000,000 shares (increased from 5,000,000 shares with Board of Director approval on February 12, 2018) of our outstanding common stock from time to time, depending on market conditions, share price, applicable limitations under our debt agreements, and other factors the Board of Directors or its designees, in their sole discretion, may consider relevant. The purchases can be in the open market or private transactions. The stock repurchase program is presently funded using available cash and cash equivalents and may be suspended or discontinued at any time.
 
During the three and nine months ended September 30, 2018, we repurchased 63,000 and 185,000 shares of common stock for $1,114,000 and $3,371,000. As of September 30, 2018, we could repurchase up to an additional 1,006,000 shares under the current authorization. During the nine months ended September 30, 2018, we repurchased approximately 28,000 shares of common stock for $540,000 from management employees to settle income taxes on 62,000 restricted shares that vested during the period. As of and through September 30, 2018, treasury stock includes 356,000 shares of common stock delivered to the Company for such purposes.
 
Declaration of Cash Dividends – To date in 2018, our Board of Directors has approved the following quarterly cash dividends on common stock, which are being paid using available cash and cash equivalents on hand (in thousands except per share amounts):
 
Declaration date	 	February 12, 2018	 	 	April 23, 2018	 	 	July 25, 2018	 	 	October 22, 2018	 	
Record date	 	March 1, 2018	 	 	May 15, 2018	 	 	August 15, 2018	 	 	November 12, 2018	 	
Paid or payable to shareholders	 	March 15, 2018	 	 	June 5, 2018	 	 	September 5, 2018	 	 	December 3, 2018	 	
Aggregate quarterly cash dividend	 	$	6,224	 	 	$	6,142	 	 	$	6,133	 	 	Approximately $6,150	 	
Dividend per common share	 	$	0.15	 	 	$	0.15	 	 	$	0.15	 	 	$	0.15	 	

7. RELATED PARTY TRANSACTIONS
 
The Company and Sonic Financial Corporation (Sonic Financial), a Company affiliate through common ownership by our Executive Chairman and our Chief Executive Officer, and by a member of our Board of Directors, share various expenses in the ordinary course of business under a shared services agreement. The Company incurred expenses of $301,000 and $280,000 in the three months ended September 30, 2018 and 2017, and $1,036,000 and $686,000 in the nine months ended September 30, 2018 and 2017 under the shared services agreement. No amounts were due from or payable to Sonic Financial at September 30, 2018 and December 31, 2017.
 
The Company and certain SMI subsidiaries lease office and warehouse facilities from companies affiliated through common ownership by our Executive Chairman and Chief Executive Officer, and by a member of our Board of Directors, under annually renewable lease agreements. Rent expense amounted to $182,000 in both the three months ended September 30, 2018 and 2017, and $544,000 in both the nine months ended September 30, 2018 and 2017. Amounts owed to these affiliated companies at September 30, 2018 or December 31, 2017 were not significant.
 
Various SMI subsidiaries purchased new and used vehicles for operations and employee use from certain subsidiary dealerships of Sonic Automotive, Inc. (SAI), an entity in which our Executive Chairman is a controlling stockholder, for an aggregate of $8,000 and $28,000 in the three months ended September 30, 2018 and 2017, and $189,000 and $172,000 in the nine months ended September 30, 2018 and 2017. There were no vehicles sold to SAI in the three or nine months ended September 30, 2018 and 2017. Also, SMI sold through certain speedways and its SMIP merchandising subsidiary various event related inventory and merchandise to SAI totaling $210,000 and $203,000 in the three months ended September 30, 2018 and 2017, and $662,000 and $679,000 in the nine months ended September 30, 2018 and 2017. At September 30, 2018 and December 31, 2017, approximately $159,000 and $70,000 was due from SAI and is reflected in current assets.
 
Oil-Chem sold zMAX micro-lubricant ® product to certain SAI dealerships for resale to service customers of the dealerships in the ordinary course of business. Total purchases from Oil-Chem by SAI dealerships were $432,000 and $449,000 in the three months ended September 30, 2018 and 2017, and $1,262,000 and $1,507,000 in the nine months ended September 30, 2018 and 2017. At September 30, 2018 and December 31, 2017, approximately $191,000 and $148,000 was due from SAI and is reflected in current assets.
 
16

Table of Contents
 
The foregoing related party balances as of September 30, 2018 and December 31, 2017, and transactions for the three and nine months ended September 30, 2018 and 2017, are summarized below (in thousands):
 
 	 	September 30,
2018	 	 	December 31,
2017	 	
Accounts receivable	 	$	350	 	 	$	218	 	
 
 	 	Three Months Ended
September 30:	 	 	Nine Months Ended
September 30:	 	
 	 	2018	 	 	2017	 	 	2018	 	 	2017	 	
Merchandise and vehicle purchases	 	$	8	 	 	$	28	 	 	$	189	 	 	$	172	 	
Shared services expense	 	 	301	 	 	 	280	 	 	 	1,036	 	 	 	686	 	
Merchandise sales	 	 	642	 	 	 	652	 	 	 	1,924	 	 	 	2,186	 	
Rent expense	 	 	182	 	 	 	182	 	 	 	544	 	 	 	544	 	

8. LEGAL PROCEEDINGS AND CONTINGENCIES
 
From time to time, we are party to routine litigation incidental to our business. We believe that the resolution of any or all of such litigation will not have a material effect on our financial condition, results of operations or cash flows.

9. STOCK COMPENSATION PLANS    
 
See Note 11 to the Consolidated Financial Statements in our 2017 Annual Report for additional information and terms of the Company’s stock compensation plans.
 
2013 Stock Incentive Plan, Amended and Restated as of April 19, 2017 – The Compensation Committee of the Company’s Board of Directors approved grants of 35,000 restricted stock units to the Company’s Chief Executive Officer and President and 35,000 shares of restricted stock to the Company’s Vice Chairman and Chief Financial Officer in each of the nine months ended September 30, 2018 and 2017. These grants are to be settled in shares of common stock, vest in equal installments over three years and are subject to reaching certain defined full year earnings targets established at the beginning of each year by the Compensation Committee. Forfeitures in any given year result from differences between the Company’s actual results for the previous year as compared to the defined full year earnings target.
 
The following is a summary of restricted stock and restricted stock units granted, vested and forfeited under the 2013 Stock Incentive Plan for the indicated periods (shares in thousands):
 
 	 	Nine Months Ended September 30:	 	
  	 	2018	 	 	2017	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Restricted
Stock	 	 	Restricted
Stock
Units	 	 	Restricted
Stock	 	 	Restricted
Stock
Units	 	
Outstanding, beginning of period	 	 	66	 	 	 	127	 	 	 	68	 	 	 	129	 	
Granted	 	 	35	 	 	 	35	 	 	 	35	 	 	 	35	 	
Vested	 	 	(31	)	 	 	(31	)	 	 	(32	)	 	 	(32	)	
Forfeited	 	 	(5	)	 	 	(5	)	 	 	(5	)	 	 	(5	)	
Outstanding, end of period	 	 	65	 	 	 	126	 	 	 	66	 	 	 	127	 	

During the nine months ended September 30, 2018 and 2017, the Company repurchased 28,000 and 31,000 shares of common stock for $540,000 and $597,000 from executive management employees to settle income taxes on 62,000 and 64,000 shares that vested in each respective period.
 
2008 Formula Restricted Stock Plan, Amended and Restated as of April 17, 2012 – The 2008 Formula Restricted Stock Plan (the 2008 Formula Plan) expired by its terms in February 2018 (see the 2018 Formula Restricted Stock Plan below). The 2008 Formula Plan constituted a “formula plan” within the meaning of SEC Rule 16b-3 of the Exchange Act and was administered by the Board of Directors, excluding non-employee directors. An aggregate of 15,572 shares granted under this plan in April 2017 vested in April 2018, and 15,976 shares granted in April 2016 vested in April 2017. No further shares can be granted under this plan.
 
2018 Formula Restricted Stock Plan – In March 2018, our Board of Directors adopted the 2018 Formula Restricted Stock Plan (the 2018 Formula Plan) which was approved by our stockholders at the 2018 Annual Meeting. The 2018 Formula Plan is intended to promote the interests of the Company and its stockholders by providing non-employee directors with Company ownership interests to more closely align their interests with our stockholders and enhance our ability to attract and retain highly qualified non-employee directors. The 2018 Formula Plan constitutes a “formula plan” within the meaning of SEC Rule 16b-3 of the Exchange Act. Approval of the 2018 Formula Plan, and expiration of the 2008 Formula Plan, did not adversely affect the rights of any outstanding awards previously granted under the 2008 Formula Plan. The 2018 Formula Plan is administered by the Board of Directors, excluding non-employee directors, who can amend, suspend or terminate the plan in whole or in part, provided that no such amendment, suspension or termination adversely affects previously granted awards without the consent of the award recipient. Any such amendment, suspension or termination may be subject to stockholder approval.
 
17

Table of Contents
 
Under the 2018 Formula Plan, 250,000 shares of SMI’s common stock are reserved for issuance and awards will be in the form of restricted stock. On the first business day following each annual meeting, each standing non-employee director will receive a grant of restricted stock consisting of the number of shares equaling $75,000 divided by the average closing sale price for the twenty days immediately preceding the grant date. These grants of restricted stock fully vest on the earlier of (i) the first grant date anniversary or (ii) the day before our next annual meeting following the grant date. Non-employees appointed as a member of the Board of Directors after the annual meeting will receive a restricted stock grant effective as of the date of appointment. The number of shares granted are calculated in the same manner as previously described and fully vest on the first anniversary of the grant date. Vesting is subject to continued service as a director through scheduled vesting dates. These terms and conditions are similar to those of the expired 2008 Formula Plan. The Company awarded 4,226 shares of restricted stock to each of the Company’s four non-employee directors in April 2018, and 4,459 shares of restricted stock to a non-employee director appointed to the Board of Directors in October 2018, under this plan.
Share-Based Payments – There were no significant changes in the characteristics of restricted stock or restricted stock units granted in 2018 or 2017 as compared to prior grants and no modifications of the terms of any share-based payment arrangements. There were no significant changes in estimates, assumptions or valuation methods used to estimate the fair value of share-based payment awards. No stock options were granted under any of the Company’s stock compensation plans during the nine months ended September 30, 2018 or 2017. No stock options were exercised in the nine months ended September 30, 2018. A total of 30,500 stock options previously granted under the 2004 Plan were exercised in the nine months ended September 30, 2017 at an exercise price of $15.83.
Share-based compensation cost for the three months ended September 30, 2018 and 2017 totaled $881,000 and $868,000, before income taxes of $222,000 and $322,000, and for the nine months ended September 30, 2018 and 2017 totaled $2,593,000 and $2,533,000, before income taxes of $602,000 and $887,000, respectively, and is included in general and administrative expense. There were no capitalized share-based compensation costs at September 30, 2018 or December 31, 2017. As of September 30, 2018, there was approximately $2,920,000 of total unrecognized compensation cost related to non-vested restricted stock and restricted stock units granted under the Company's stock compensation plans that is expected to be recognized over a weighted average period of 0.8 year. As of September 30, 2018, all stock options were vested and there was no unrecognized compensation cost related to stock options granted under any of the Company’s stock compensation plans.

10. SEGMENT DISCLOSURES
 
Our operations are predominately comprised of promoting, marketing and sponsoring motorsports racing events, merchandising and other related activities conducted at our various major speedway facilities located in the United States. Our business activities, including those of our subsidiaries, are further described in Note 1 to this Quarterly Report on Form 10-Q and in Notes 1 and 2 to the Consolidated Financial Statements in our 2017 Annual Report. All Company assets are located in the United States, and our speedway names denote their respective geographical areas. Our “motorsports event related” segment consists of revenues and expenses associated with all admissions, event related, NASCAR broadcasting and event motorsports merchandising activities. The segment includes motorsports related events and operations for all Company speedways, NASCAR broadcasting and ancillary media rights, PRN and RCU motorsports radio programming, and SMI Properties and SMI Trackside motorsports merchandising at Company and non-Company speedways. These operating segments have been aggregated into the motorsports related reportable segment as each share similar types and classes of customers, similar methods for providing or distributing motorsports related services, souvenirs and other merchandise, and other similar economic characteristics. Our “all other” operations consist of SMIP subsidiary non-event motorsports and non-motorsports merchandising, Legend Cars non-event merchandising and sanctioning body activities, Oil-Chem micro-lubricant activities, TMS natural gas mineral rights lease and related revenues, and office rentals at certain Company speedways.
 
Segment information as presented below comports with information our chief operating decision maker and management use and focus on when assessing segment performance and allocating resources. Segment operating income or loss excludes interest, income taxes, other income or expense and specified non-recurring items, if any, and corporate general and administrative and depreciation costs are allocated to operating segments based on their respective revenues relative to consolidated revenues. The following tables present our segment information (in thousands):
 
 	 	Three Months Ended September 30:	 	
  	 	2018	 	 	2017	 	
 	 	Motorsports
Event
Related	 	 	 
All
Other	 	 	 
Consolidated	 	 	Motorsports
Event
Related	 	 	All
Other	 	 	 
Consolidated	 	
Revenues	 	$	156,203	 	 	$	3,882	 	 	$	160,085	 	 	$	126,156	 	 	$	4,567	 	 	$	130,723	 	
Depreciation and amortization	 	 	13,217	 	 	 	35	 	 	 	13,252	 	 	 	13,799	 	 	 	35	 	 	 	13,834	 	
Segment operating income	 	 	34,496	 	 	 	497	 	 	 	34,993	 	 	 	16,609	 	 	 	939	 	 	 	17,548	 	
 
 	 	Nine Months Ended September 30:	 	
  	 	2018	 	 	2017	 	
 	 	Motorsports
Event
Related	 	 	 
All
Other	 	 	 
Consolidated	 	 	Motorsports
Event
Related	 	 	All
Other	 	 	 
Consolidated	 	
Revenues	 	$	387,807	 	 	$	12,490	 	 	$	400,297	 	 	$	362,275	 	 	$	14,903	 	 	$	377,178	 	
Depreciation and amortization (Note 2)	 	 	39,374	 	 	 	106	 	 	 	39,480	 	 	 	44,700	 	 	 	108	 	 	 	44,808	 	
Impairment of goodwill (Note 4)	 	 	–	 	 	 	–	 	 	 	–	 	 	 	1,117	 	 	 	–	 	 	 	1,117	 	
Segment operating income	 	 	73,921	 	 	 	1,875	 	 	 	75,796	 	 	 	59,037	 	 	 	3,399	 	 	 	62,436	 	
Capital expenditures	 	 	24,628	 	 	 	397	 	 	 	25,025	 	 	 	21,931	 	 	 	29	 	 	 	21,960	 	
 
18

Table of Contents
 
 	 	September 30, 2018	 	 	December 31, 2017	 	
Other intangibles	 	$	298,383	 	 	 	–	 	 	$	298,383	 	 	$	298,383	 	 	 	–	 	 	$	298,383	 	
Goodwill	 	 	46,225	 	 	 	–	 	 	 	46,225	 	 	 	46,225	 	 	 	–	 	 	 	46,225	 	
Total assets	 	 	1,427,661	 	 	$	25,232	 	 	 	1,452,893	 	 	 	1,427,557	 	 	$	23,123	 	 	 	1,450,680	 	
 
The following table reconciles segment operating income above to consolidated income before income taxes for the periods indicated (in thousands):
 
 	 	Three Months Ended
September 30:	 	 	Nine Months Ended
September 30:	 	
 	 	2018	 	 	2017	 	 	2018	 	 	2017	 	
Total segment operating income	 	$	34,993	 	 	$	17,548	 	 	$	75,796	 	 	$	62,436	 	
Adjusted for:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense, net	 	 	(2,771	)	 	 	(3,054	)	 	 	(8,681	)	 	 	(9,222	)	
Other (expense) income, net	 	 	(60	)	 	 	157	 	 	 	2,186	 	 	 	(45	)	
Consolidated income before income taxes	 	$	32,162	 	 	$	14,651	 	 	$	69,301	 	 	$	53,169	 	
 
19

Table of Contents

 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
 
The following discussion and analysis should be read along with the accompanying unaudited Consolidated Financial Statements and Notes.
 
OVERVIEW
 
Our core business is promoting, marketing and sponsoring motorsports events and activities. We derive a substantial portion of our total revenues from admissions, event related and NASCAR broadcasting revenue. Our revenues and expenses are classified in the following categories because they are important to, and used by, management in assessing operations:
 
•	Admissions – includes ticket sales for all of our events	
•	Event related revenue – includes amounts received from sponsorship, luxury suite rentals, event souvenir merchandise sales, commissions from food and beverage sales, advertising and other promotional revenues, radio programming, hospitality revenues, track rentals, driving school and karting revenues, camping and other non-admission access revenues, broadcasting rights other than NASCAR broadcasting revenue, and other event and speedway related revenues	
•	NASCAR broadcasting revenue – includes rights fees obtained for domestic television broadcasts of NASCAR-sanctioned events held at our speedways	
•	Other operating revenue – includes certain merchandising, including screen-printing and embroidery, revenues of SMI Properties and subsidiaries; car and part sales of US Legend Cars; restaurant, catering and membership income from the Speedway Clubs at CMS and TMS; revenues of Oil-Chem, which produces an environmentally-friendly micro-lubricant®; TMS natural gas mineral rights lease and related revenues; and industrial park and office rentals	
 
We classify our expenses, among other categories, as follows:
 
•	Direct expense of events – principally includes cost of souvenir sales, non-NASCAR race purses and sanctioning fees, property and event insurance, compensation of event related employees, advertising, sales and admission taxes, sales commissions, credit card processing fees, cost of driving school and karting revenues, event settlement payments to non-NASCAR sanctioning bodies and outside event support services	
•	NASCAR event management (formerly purse and sanction) fees – includes payments to, and portions of broadcasting revenues retained by, NASCAR for associated events held at our speedways	
•	Other direct operating expense – includes the cost of certain SMI Properties and subsidiaries merchandising, screen-printing and embroidery, US Legend Cars, Speedway Clubs, Oil-Chem and industrial park and office rental revenues	
 
See Note 10 to the Consolidated Financial Statements for operating and other financial information on our reporting segments.
 
Seasonality and Quarterly Results  – In 2018, we are holding 24 major annual racing events sanctioned by NASCAR, including 13 Monster Energy Cup and 11 Xfinity Series racing events. We also are holding eight NASCAR Camping World Truck Series, five NASCAR K&N Pro Series, three NASCAR Whelen Modified Tour, two IndyCar Series, six major NHRA, one ARCA and three WOO racing events. In 2017, we held 24 major annual racing events sanctioned by NASCAR, including 13 Monster Energy Cup and 11 Xfinity Series racing events. We also held eight NASCAR Camping World Truck Series, three NASCAR K&N Pro Series, four NASCAR Whelen Modified Tour, two IndyCar Series, six major NHRA, one ARCA and three WOO racing events.
 
Our business has been, and is expected to remain, somewhat seasonal. We recognize revenues and operating expenses for all events in the calendar quarter in which conducted. Realignment or concentration of racing or other events in any particular future quarter, particularly NASCAR Cup racing events, may tend to minimize or concentrate operating income in respective future quarters, corresponding with the move of race dates between quarters. Racing schedule changes can lessen the comparability of operating results between quarters of successive years and increase or decrease the seasonal nature of our motorsports business. For example, we realigned one annual Monster Energy NASCAR Cup race and one annual NASCAR Camping World Truck race from NHMS, and one annual NASCAR Xfinity race from KyS, to LVMS in September 2018. Also, we moved one annual Monster Energy NASCAR Cup race and one annual NASCAR Xfinity race at CMS to the third quarter 2018 from the fourth quarter 2017. Such changes can significantly impact our annual cash flow cycles because we sell many tickets and event related revenues in advance and certain NASCAR broadcasting revenue payments are received after events are held.
 
The profitability of similar series events, particularly Monster Energy NASCAR Cup events, can vary substantially because of differences in broadcasting revenues, seating capacity and demand, media markets and popularity, and weather conditions surrounding our events among other factors. The operating results for the nine months ended September 30, 2018 and 2017 are not indicative of results that may be expected for future periods because of such seasonality.
 
20

Table of Contents
 
Set forth below is certain comparative summary information with respect to our scheduled major NASCAR-sanctioned racing events (Monster Energy Cup and Xfinity Series) for 2018 and 2017:
 
 	 	Number of scheduled major
NASCAR-sanctioned events	 	
  	 	2018	 	 	2017	 	
1 st Quarter	 	 	4	 	 	 	4	 	
2 nd Quarter	 	 	8	 	 	 	8	 	
3 rd Quarter	 	 	10	 	 	 	8	 	
4 th Quarter	 	 	2	 	 	 	4	 	
Total	 	 	24	 	 	 	24	 	
 
NEAR-TERM OPERATING FACTORS
 
There are many factors that affect our growth potential, future operations and financial results. A brief overview of certain significant and relevant factors is provided below to help understand our various operating factors, but are further discussed throughout this report where indicated.
 
Significant Items Discussed Elsewhere in Indicated Sections of this Report :
•	Unusually high number of our event weekends have experienced poor weather (in “Results of Operations – Impact of Poor Weather” below)	
•	Multi-year, multi-platform NASCAR Broadcasting Rights Agreement through 2024 - broadcasting revenues expected to approximate $217 million in 2018 (in “Liquidity” below)	
•	Our aggregate other long-term, multi-year contracted revenues are significant (in “Liquidity” below)	
•	2018 Realignment of one NASCAR Monster Energy Cup Series, one Xfinity Series and one Camping World Truck Series racing event to Las Vegas Motor Speedway (in "Liquidity" below)	
•	Charlotte Motor Speedway conducted NASCAR Monster Energy Cup and Xfinity Series racing events on its new 2.28-mile ROVAL™ infield road course in September 2018	
•	Annual impairment assessment of Other Intangible Assets and Goodwill (in Note 2 to the Consolidated Financial Statements)	
•	Ongoing reduced interest costs from debt reduction (in “Liquidity” below)	
•	Income tax benefits from the Tax Cuts and Jobs Act tax law (in Note 2 to the Consolidated Financial Statements)	
•	Repurchases of common stock, authorization increased by 1,000,000 shares in February 2018 (in “Liquidity and Capital Resources – Stock Repurchase Program” below)	
•	Unrecognized compensation cost for non-vested share-based payments (in Note 9 to the Consolidated Financial Statements)	
 
Significant Items Discussed in Indicated Sections of Our 2017 Annual Report (and not repeated in this Quarterly Report):
•	NASCAR’s ongoing changes and improvements in our sport (in “Business – Industry Overview”)	
•	Significant investments in leading-edge technology – appealing to younger fans (in “Business – Operating Strategy”)	
•	Modern, innovative and entertaining facilities (in “Business – Operating Strategy”)	
•	Our numerous marketing and promotional efforts (in “Business – Operating Strategy”)	
 
General Factors and Current Operating Trends – Our third quarter and year-to-date 2018 results reflect an increase in admissions and event related revenues and associated expenses related to realignment of: (i) NASCAR Monster Energy Cup and Camping World Truck Series racing events from NHMS, and an Xfinity Series racing event from KyS, to LVMS in the third quarter 2018, and (ii) NASCAR Monster Energy Cup and Xfinity Series races at CMS in the third quarter 2018 that were held in the fourth quarter 2017. However, our year-to-date 2018 race season results also reflect lower admission and certain event related revenues, although higher ancillary broadcasting revenues, on a comparable year-over-year event basis. As further discussed in “Results of Operations” and “Impact of Poor Weather” below, our admissions and certain event related revenues and operating expenses reflect the negative impact of poor weather surrounding NASCAR and other racing events at AMS, BMS, CMS, LVMS, NHMS, SR and TMS (7 of our 8 speedways) in 2018. Several of our events also experienced poor weather last year. Consumer demand for successive events in future periods can be negatively impacted by the success or experience of past events.
 
As further discussed below, many entertainment companies, including most sporting venues, are facing challenging admissions, event related revenue and viewership trends similar to SMI and motorsports in general. Management believes many of our revenue categories continue to be negatively impacted by changing demographics and evolving media content consumption, as well as the lingering effects of lower consumer and corporate spending, and underemployment in certain demographic groups. Those and other factors such as high local lodging prices and minimum stay requirements, increasing highway congestion, and high food and health-care costs, are believed to be resulting in less travel and spending by certain fans and customers. At this time, we are unable to determine if those trends will reverse in 2019 or beyond.
 
Competing with Evolving Media and Content Consumption – Similar to most sports, the motorsports industry is experiencing an evolving media and entertainment consumption transformation. Changing demographics, new technology and expanding online viewing options are dramatically changing how all media content is consumed, and not just that of motorsports. New and expanding entertainment options are continually being developed and marketed to attract the changing demographics, particularly outside of motorsports. We are increasingly competing with improving and expanding motorsports and non-motorsports related media coverage and content by network and cable broadcasters. Also, the ongoing improvements in high-definition television technology and increasing digital video recorder (“DVR”) use and expanding media, internet and on-demand content, particularly for Monster Energy Cup and Xfinity Series racing events, are increasingly influenced and used by changing demographics and are significantly impacting how content is consumed. NASCAR delivers content through multiple platforms. As such, we, NASCAR and the broadcasters continue to increase and expand our promotional efforts and initiatives as further discussed in “Business – Operating Strategy, Our Numerous Promotional and Marketing Efforts” in our 2017 Annual Report. Although these changes will likely continue, we believe the desire and demand for motorsports racing content, particularly for NASCAR racing, has been and will remain strong regardless of how such media content is consumed.
 
21

Table of Contents
 
Changing Demographics – In response to lower attendance and certain event related revenues, along with changing demographics, we continue to increase and expand our promotional efforts and initiatives. Much of the success of the sport of NASCAR racing has long been attributed to the enduring and unsurpassed loyalty of our fans and customer base. Similar to what other motorsports competitors and many other sporting venues are experiencing, we believe that a portion of the decline in attendance over the past few years can be attributed to changing demographics. While those long-time fans are more important to us than ever, we recognize the importance of capturing the next generation of race fans as the average age of the general population and our traditional fan base are increasing, as well as multicultural consumer groups are growing.
 
We continually search for new and innovative promotional campaigns to foster attendance by families, particularly those with younger children and teenagers. We offer many family-friendly and first-time fan programs to help educate and engage patrons who are new to the sport. We are attempting to capture the interest of the next generation of race fans through kid-friendly entertainment options, free tickets to kids under 12 for families attending NASCAR Xfinity and Camping World Truck Series races, family camping, kids’ zone play areas and kids’ clubs, as well as offering kid-sized headsets for scanners so the entire family can enjoy the race experience.
 
Industry and Broadcaster Focus – We believe expanding marketing demographics, intense media coverage, as well as the industry’s ongoing focus on enhancing NASCAR racing competition and the sport’s appeal to younger fans and families, provide us and NASCAR with many long-term marketing and future growth opportunities. We, NASCAR and the television broadcasters continue to make sizable investments in new and expanding marketing initiatives, leading-edge facility improvements and technology that appeals to younger fans, families, and the changing demographics. The ten-year, multi-platform and media partnership broadcasting and digital rights agreements between NASCAR and media powerhouses FOX Sports Media Group and NBC Sports Group through 2024 are expected to help increase long-term fan and corporate marketing appeal and interest in all three NASCAR racing series. We believe these media powerhouses are providing broad marketing continuity and exposure to widening demographic audiences through their Spanish-language broadcasts, website content and other ancillary programming such as nightly and weekly NASCAR-branded programming. These promotions benefit motorsports in general, similar to that provided for other major sports.
 
Other Market and Economic Considerations – From time-to-time, extremely popular and long-standing successful race car drivers (“megastars”) such as Dale Earnhardt Jr, Jeff Gordon, Tony Stewart, Carl Edwards, Matt Kenseth and Danica Patrick announce their retirement or reduced motorsports racing due to age, health or other considerations. Race car driver popularity and performance abilities can affect on-track competition, the closeness of championship points racing, attendance, corporate interest, media attention and the appeal and success of racing in general.
 
Although improving, some uncertainty exists as to the strength and duration of the US economic recovery. The President and his administration, and the outcome of upcoming political elections, could further change governmental policies, regulatory environments, and spending sentiment. Various factors can affect consumer and corporate spending, including hurricanes, flooding, and high temperatures as recently experienced in various parts of the United States. Heightened concerns over terrorism alerts, fear of violence, or geopolitical events can affect public concerns regarding air and other travel and large gatherings of people. The impact of new tariffs, higher interest rates, possible changes in governmental state and local taxing, regulatory, spending and other policies could also significantly impact consumer and corporate spending, economic recovery and our future results.
 
These and other factors, particularly as related to the success of the Monster Energy NASCAR Cup Series, race car driver popularity, and the success of NASCAR racing in general, can significantly impact attendance at our events and our operating results. We continue to commit substantial resources to expanding and enhancing our promotional activities to help offset the ongoing impact of these economic and market factors and conditions. Management believes our strong operating cash flow will continue, and that ticket demand and corporate marketing and promotional spending will increase as the ongoing racing changes and improvements by NASCAR are successful. See our “Business – Industry Overview”, “Business – Operating Strategy”, “Business – Competition” and “Risk Factors” in our 2017 Annual Report for additional information on the impact that competition, popularity, ongoing NASCAR improvements and other changes, the success of NASCAR racing in general, and ongoing economic conditions and geopolitical risks, can have on our operating results.
 
RESULTS OF OPERATIONS
 
Management believes the comparative financial information below, along with the “Near-term Operating Factors” described above, help in understanding and comparing our results of operations. These results reflect the negative impact of poor weather surrounding NASCAR and other racing events at AMS, BMS, CMS, LVMS, NHMS, SR and TMS (7 of our 8 speedways) in 2018 as further described below. Several of our events also experienced poor weather last year.
 
22

Table of Contents
 
As further described in “Liquidity” below, beginning in September 2018, we held a second annual NASCAR Monster Energy Cup race weekend at LVMS. As expected, revenues from NASCAR events held at LVMS in our first quarter 2018 were lower on a comparable year-over-year basis. While net increases in current full year and long-term future profitability are expected from realignment of these additional annual racing events, the Company believes the initial strong appeal of these new major races in the LVMS market reduced the demand for their first quarter NASCAR events. 
 
Impact of Poor Weather  – As indicated above, an unusually high number of our major racing events, including certain smaller events contended with significant poor weather in 2018. Management believes poor weather negatively impacted our operating results, including admissions and certain event related revenues and operating expenses. The impact of poor weather on the profitability of similar series events, particularly Monster Energy NASCAR Cup events, can vary substantially because of differences in seating capacity and demand, media markets and popularity, among other factors.
 
Weather conditions surrounding these events can significantly affect sales of tickets, concessions and souvenirs, among other things. Although we sell many tickets in advance of our events, poor weather conditions can have a material effect on our results of operations. Poor weather leading up to, or forecast for a weekend that surrounds, a race can negatively impact our advance sales and walk-up admissions and food, beverage and souvenir sales. Due to inclement weather conditions, we may be required to reschedule a race event to the next or another raceable day. When events are delayed, postponed or rescheduled because of poor weather, we typically incur additional operating expenses associated with conducting the rescheduled event, as well as generate lower admissions, food, beverage, and souvenir revenues. If an event is cancelled, we would incur additional expenses associated with preparing to conduct the event, as well as losing certain associated event revenues. Admissions and event related revenues directly impact many event expenses such as sales and admission taxes, costs of merchandise sales, credit card processing fees, sales commissions and other operating costs.
 
The more significant races affected by poor weather and other racing schedule changes in the three and nine months ended September 30, 2018 as compared to 2017 include:
 
•	Poor weather or excessive heat surrounded Monster Energy NASCAR Cup race weekends at AMS and LVMS in the first quarter 2018, at BMS, CMS, SR and TMS in the second quarter 2018, and at BMS, LVMS and NHMS in the third quarter 2018	
•	One NASCAR Monster Energy Cup and one annual Camping World Truck Series racing event from NHMS, and one Xfinity Series racing event from KyS, were realigned to LVMS in the third quarter 2018 - all were held in the third quarter 2017 (the 2018 LVMS Race Date Realignment)	
•	CMS held one NASCAR Monster Energy and one Xfinity Series race in the third quarter 2018 that were held in the fourth quarter 2017 (the 2018 CMS Race Date Realignment)	
•	CMS held one major NHRA racing event in the third quarter 2017 that is being held in the fourth quarter 2018	
•	Poor weather also surrounded certain smaller non-NASCAR events at CMS and TMS in the second quarter 2018	
•	LVMS held one NASCAR Camping World Truck Series race in the first quarter 2018 that was held in the third quarter 2017	
 
Non-GAAP Financial Information and Reconciliation – Net income and diluted earnings per share as adjusted and set forth below are non-GAAP (other than generally accepted accounting principles) financial measures presented as supplemental disclosures to their individual corresponding GAAP basis amounts. Non-GAAP income and diluted earnings per share are derived by adjusting GAAP basis amounts as indicated below. The following schedule reconciles those non-GAAP financial measures to their most directly comparable information presented using GAAP. Management believes such non-GAAP information is useful and meaningful to investors because it identifies and separately adjusts for and presents transactions that are not reflective of ongoing operating results, and helps in understanding, using and comparing our results of operations for the periods presented. See the indicated Notes to the Consolidated Financial Statements for additional information on these non-GAAP adjustments.
 
Management uses the non-GAAP information to assess our operations for the periods presented, analyze performance trends and make decisions regarding future operations because it believes this separate information better reflects ongoing operating results. This non-GAAP financial information is not intended to be considered independent of or a substitute for results prepared in accordance with GAAP, does not have standard meaning and may differ from information or measures used by other entities. This non-GAAP financial information may not be comparable to similarly titled measures used by other entities and should not be considered as alternatives to net income or diluted earnings per share determined in accordance with GAAP. Individual quarterly amounts may not be additive due to rounding. Amounts below are in thousands except per share amounts.
 
 	 	Three Months Ended
September 30:	 	 	Nine Months Ended
September 30:	 	
 	 	2018	 	 	2017	 	 	2018	 	 	2017	 	
Net income using GAAP	 	$	24,073	 	 	$	9,211	 	 	$	53,242	 	 	$	34,582	 	
Non-recurring benefit of state income tax law change (Note 2)	 	 	–	 	 	 	–	 	 	 	(1,110	)	 	 	–	 	
Impairment of goodwill, pre-tax (Note 4)	 	 	–	 	 	 	–	 	 	 	–	 	 	 	1,117	 	
Accelerated depreciation on retired assets and costs of removal, pre-tax (Note 2)	 	 	–	 	 	 	–	 	 	 	–	 	 	 	4,597	 	
Aggregate income tax effect of non-GAAP adjustments	 	 	–	 	 	 	–	 	 	 	–	 	 	 	(2,119	)	
Non-GAAP net income	 	$	24,073	 	 	$	9,211	 	 	$	52,132	 	 	$	38,177	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted earnings per share using GAAP	 	$	0.59	 	 	$	0.22	 	 	$	1.30	 	 	$	0.84	 	
Non-recurring benefit of state income tax law change	 	 	–	 	 	 	–	 	 	 	(0.03	)	 	 	–	 	
Impairment of goodwill, pre-tax	 	 	–	 	 	 	–	 	 	 	–	 	 	 	0.03	 	
Accelerated depreciation on retired assets and costs of removal, pre-tax	 	 	–	 	 	 	–	 	 	 	–	 	 	 	0.11	 	
Aggregate income tax effect of non-GAAP adjustments	 	 	–	 	 	 	–	 	 	 	–	 	 	 	(0.05	)	
Non-GAAP diluted earnings per share	 	$	0.59	 	 	$	0.22	 	 	$	1.27	 	 	$	0.93	 	
 
23

Table of Contents
 
Three Months Ended September 30, 2018 Compared to Three Months Ended September 30, 2017
 
Total Revenues for the three months ended September 30, 2018 increased by $29.4 million, or 22.5%, over such revenues for the same period last year due to the factors discussed below.
 
Admissions for the three months ended September 30, 2018 increased by $2.9 million, or 10.5%, over such revenue for the same period last year. This increase is due primarily to the 2018 CMS and LVMS Race Date Realignments described above. The overall increase was partially offset by lower overall admissions revenue at NASCAR racing events held on a comparable year-over-year basis, including generally poor weather or excessive heat surrounding NASCAR racing events at BMS, LVMS and NHMS in the current period, by a major NHRA racing event held at CMS in the third quarter 2017 that is being held in the fourth quarter 2018, and by a NASCAR Truck Series race held at LVMS in the first quarter 2018 that was held in the third quarter 2017.
 
Event Related Revenue for the three months ended September 30, 2018 increased by $10.6 million, or 30.9%, over such revenue for the same period last year. This increase is due primarily to the 2018 CMS and LVMS Race Date Realignments. The overall increase was partially offset by certain lower event related revenues associated with reduced attendance at NASCAR racing events on a comparable year-over-year basis, by the major NHRA racing event held at CMS in the third quarter 2017 that is being held in the fourth quarter 2018, and by the NASCAR Truck Series race held at LVMS in the first quarter 2018 that was held in the third quarter 2017.
 
NASCAR Broadcasting Revenue for the three months ended September 30, 2018 increased by $16.4 million, or 26.5%, over such revenue for the same period last year. This increase reflects the 2018 CMS Race Date Realignment (the LVMS Race Date Realignment had no net impact), and higher contractual broadcast rights fees for NASCAR-sanctioned racing events on a comparable year-over-year event basis. The overall increase was partially offset by the NASCAR Camping World Truck Series race at LVMS in the first quarter 2018 that was held in third quarter 2017. 
 
Other Operating Revenue for the three months ended September 30, 2018 decreased by $592,000, or 8.9%, from such revenue for the same period last year. This decrease is due primarily to lower Legend Cars and, to a lesser extent, Oil-Chem revenues in the current period as compared to last year.
 
Direct Expense of Events for the three months ended September 30, 2018 increased by $2.9 million, or 8.8%, over such expense for the same period last year. This increase is due primarily to the 2018 CMS and LVMS Race Date Realignments. The overall increase was partially offset by lower advertising and other operating costs associated with lower attendance and certain event related revenues for NASCAR racing events on a comparable year-over-year basis, by the major NHRA racing event held at CMS in the third quarter 2017 that is being held in the fourth quarter 2018, and by the NASCAR Truck Series race held at LVMS in the first quarter 2018 that was held in the third quarter 2017.
 
NASCAR Event Management Fees for the three months ended September 30, 2018 increased by $9.3 million, or 25.5%, over such expense for the same period last year. This increase reflects the 2018 CMS Race Date Realignment (the LVMS Race Date Realignment had no net impact), and higher contractual race event management (purse and sanction) fees for NASCAR-sanctioned racing events on a comparable year-over-year event basis. The overall increase was partially offset by the NASCAR Camping World Truck Series race at LVMS in the first quarter 2018 that was held in third quarter 2017. 
 
Other Direct Operating Expense for the three months ended September 30, 2018 decreased by $128,000, or 2.9%, from such expense for the same period last year. This decrease is due primarily to decreased operating costs associated with lower Legend Cars revenues in the current period as compared to last year.
 
General and Administrative Expense for the three months ended September 30, 2018 increased by $484,000, or 1.9%, over such expense for the same period last year. This increase is due primarily to higher compensation costs associated with the 2018 CMS and LVMS Race Date Realignments, which were partially offset by a combination of individually insignificant items in the current period as compared to last year.
 
Depreciation and Amortization Expense for the three months ended September 30, 2018 decreased by $582,000, or 4.2%, from such expense for the same period last year. This decrease is due primarily to lower depreciation on certain assets now fully depreciated, partially offset by depreciation on capital expenditures placed into service.
 
Interest Expense, Net for the three months ended September 30, 2018 was $2.8 million compared to $3.1 million for the same period last year. The year-over-year amounts reflect lower total outstanding debt, partially offset by higher interest rates on Credit Facility borrowings, in the current period as compared to last year.
 
Other Expense , Net for the three months ended September 30, 2018 was $60,000 compared to other income, net of $157,000 for the same period last year. This change reflects gains on disposals of certain property and an estimated loss associated with storm damage to certain AMS facilities in the same period last year, and a combination of individually insignificant items in the current period.
 
24

Table of Contents
 
Income Tax Provision . Our effective income tax rate for the three months ended September 30, 2018 and 2017 was 25.2% and 37.1%. The 2018 tax rate reflects the lower US corporate federal tax rate under the Tax Cuts and Jobs Act. The 2017 tax rate reflects adjustments to reduce net deferred income tax liabilities for then anticipated lower state income tax rates associated with race date realignments and other lower effective state income tax rates.
 
Net Income for the three months ended September 30, 2018 was $24.1 million compared to $9.2 million for the same period last year. This change is due to the factors discussed above.
 
Nine Months Ended September 30, 2018 Compared to Nine Months Ended September 30, 2017
 
Total Revenues for the nine months ended September 30, 2018 increased by $23.1 million, or 6.1%, over such revenues for the same period last year due to the factors discussed below.
 
Admissions for the nine months ended September 30, 2018 decreased by $4.7 million, or 6.6%, from such revenue for the same period last year. This decrease is due primarily to lower overall admissions revenue at NASCAR racing events on a comparable year-over-year basis, including generally poor weather or excessive heat surrounding NASCAR racing events at AMS, BMS, CMS, LVMS, NHMS, SR and TMS in the current period. The decrease also reflects a major NHRA racing event held at CMS in the third quarter 2017 that is being held in the fourth quarter 2018, and TMS honoring IndyCar race tickets in 2017 pertaining to its postponed and rescheduled race from 2016 due to poor weather. The overall decrease was partially offset by admissions associated with the 2018 CMS and LVMS Race Date Realignments, and to a lesser degree, higher admissions revenue at LVMS’s major NHRA racing event on a comparable year-over-year basis.
 
Event Related Revenue for the nine months ended September 30, 2018 increased by $8.6 million, or 8.3%, over such revenue for the same period last year. This increase is due primarily to the 2018 CMS and LVMS Race Date Realignments. The increase also reflects higher ancillary broadcasting revenues on a comparable year-over-year basis. The overall increase was partially offset by lower overall track rentals, certain lower event related revenues associated with reduced attendance at NASCAR racing events on a comparable year-over-year basis, and a major NHRA racing event held at CMS in the third quarter 2017 that is being held in the fourth quarter 2018.
 
NASCAR Broadcasting Revenue for the nine months ended September 30, 2018 increased by $21.2 million, or 11.8%, over such revenue for the same period last year. This increase reflects the 2018 CMS Race Date Realignment (the LVMS Race Date Realignment had no net impact), and higher contractual broadcast rights fees for NASCAR-sanctioned racing events on a comparable year-over-year event basis.
 
Other Operating Revenue for the nine months ended September 30, 2018 decreased by $1.9 million, or 8.7%, from such revenue for the same period last year. This decrease is due primarily to lower Legend Cars and Oil-Chem revenues, partially offset by higher non-event souvenir merchandise sales, in the current period as compared to last year.
 
Direct Expense of Events for the nine months ended September 30, 2018 increased by $2.4 million, or 3.1%, over such expense for the same period last year. This increase is due primarily to the 2018 CMS and LVMS Race Date Realignments. The increase was also due to additional operating costs associated with conducting delayed or postponed racing events due to poor weather on a comparable year-over-year basis. The overall increase was partially offset by lower advertising and other operating costs associated with lower attendance and certain event related revenues for NASCAR racing events on a comparable year-over-year basis, and by a major NHRA racing event held at CMS in the third quarter 2017 that is being held in the fourth quarter 2018.
 
NASCAR Event Management Fees for the nine months ended September 30, 2018 increased by $12.0 million, or 12.0%, over such expense for the same period last year. This increase reflects the 2018 CMS Race Date Realignment (the LVMS Race Date Realignment had no net impact), and higher contractual race event management fees for NASCAR-sanctioned racing events on a comparable year-over-year event basis. 
 
Other Direct Operating Expense for the nine months ended September 30, 2018 decreased by $861,000, or 5.9%, from such expense for the same period last year. This decrease is due primarily to decreased operating costs associated with lower Legend Cars and Oil-Chem revenues in the current period as compared to last year, and to a combination of individually insignificant items.
 
General and Administrative Expense for the nine months ended September 30, 2018 increased by $2.6 million, or 3.5%, over such expense for the same period last year. This increase is due to lower property taxes in the same period last year and higher compensation costs associated with the 2018 CMS and LVMS Race Date Realignments. The increase is also due, to a lesser extent, to wage cost inflation, higher utility costs associated with poor weather in the current period, and a combination of individually insignificant items.
 
Depreciation and Amortization Expense for the nine months ended September 30, 2018 decreased by $5.3 million, or 11.9%, from such expense for the same period last year. This decrease is due primarily to recording accelerated depreciation on retired assets in the same period last year as further described in Note 2 to the Consolidated Financial Statements. The decrease also reflects, to a much lesser extent, lower depreciation on certain assets now fully depreciated, partially offset by depreciation on capital expenditures placed into service.
 
25

Table of Contents
 
Interest Expense, Net for the nine months ended September 30, 2018 was $8.7 million compared to $9.2 million for the same period last year. This change reflects lower total outstanding debt and higher capitalized interest costs in the current period as compared to last year, partially offset by higher interest rates on Credit Facility borrowings in the current period, and interest income associated with property tax settlements last year.
 
Impairment of Goodwill for the nine months ended September 30, 2017 represents a non-cash impairment charge of $1.1 million, before income tax benefits of $419,000, to eliminate goodwill associated with certain souvenir merchandising activities as further described in Note 4 to the Consolidated Financial Statements.
 
Other Income, Net for the nine months ended September 30, 2018 was $2.2 million compared to other expense, net of $45,000 for the same period last year. This change is due primarily to higher gains on disposals of certain property in the current period as compared to last year. The change also reflects removal costs associated with retired assets last year as further described in Note 2 to the Consolidated Financial Statements, an estimated loss associated with storm damage to certain AMS facilities last year, and a combination of individually insignificant items.
 
Income Tax Provision . Our effective income tax rate for the nine months ended September 30, 2018 and 2017 was 23.2% and 35.0%. The 2018 tax rate reflects the lower US corporate federal tax rate under the Tax Cuts and Jobs Act, and a non-recurring tax benefit of $1.1 million resulting from certain state income tax law changes. The 2017 tax rate reflects reduced deferred income tax liabilities of $1.8 million for anticipated lower state income tax rates associated with race date realignments and other lower effective state income tax rates, partially offset by reduced deferred tax assets associated with certain state net operating loss carryforwards of $515,000. 
 
Net Income for the nine months ended September 30, 2018 was $53.2 million compared to $34.6 million for the same period last year. This change is due to the factors discussed above.
 
LIQUIDITY AND CAPITAL RESOURCES
 
We have historically met our working capital and capital expenditure requirements through a combination of cash flows from operations, bank borrowings and other debt and equity offerings. Significant changes in our financial condition and liquidity during the nine months ended September 30, 2018 and 2017 resulted primarily from:
 
 	(1)	net cash provided by operations amounting to $71.6 million in 2018 ($78.6 million in 2017)	
 	(2)	repayments of long-term debt amounting to $27.2 million in 2018 ($31.2 million in 2017)	
 	(3)	payment of quarterly cash dividends amounting to $18.5 million in 2018 ($18.6 million in 2017) 	
 	(4)	repurchases of common stock amounting to $3.9 million in 2018 ($4.3 million in 2017)	
 	(5)	cash outlays for capital expenditures amounting to $25.0 million in 2018 ($22.0 million in 2017)	
 
The following is additional information on net cash provided by operating activities as reflected in our accompanying Consolidated Statements of Cash Flows: The 2018 changes in cash flows from operating activities, as compared to the same period last year, reflect changes in accounts receivable and deferred race event and other income associated with the 2018 CMS and LVMS Race Date Realignments further described above in “Results of Operations”.
 
We had the following contractual obligations as of September 30, 2018 (in thousands):
 
 	 	Payments Due By Period	 	
 	 	Total	 	 	Less than
1 Year	 	 	1-3
Years	 	 	3-5
Years	 	 	More than
5 Years	 	
Contractual Obligations: (1)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current liabilities, excluding deferred race event and other income and current portion of long-term debt	 	$	51,306	 	 	$	51,306	 	 	 	–	 	 	 	–	 	 	 	–	 	
Long-term debt, bank credit facility and senior notes (2)	 	 	203,887	 	 	 	3,167	 	 	$	349	 	 	$	200,371	 	 	 	–	 	
Other liabilities	 	 	6,822	 	 	 	–	 	 	 	–	 	 	 	6,822	 	 	 	–	 	
Interest on fixed rate debt obligations (3)	 	 	44,480	 	 	 	10,273	 	 	 	20,531	 	 	 	13,676	 	 	 	–	 	
Deferred income taxes (4)	 	 	202,330	 	 	 	–	 	 	 	–	 	 	 	–	 	 	$	202,330	 	
Interest on floating rate credit facility debt (3)	 	 	31	 	 	 	31	 	 	 	–	 	 	 	–	 	 	 	–	 	
NASCAR event management fees (5)	 	 	269,529	 	 	 	127,335	 	 	 	142,194	 	 	 	–	 	 	 	–	 	
Contracted capital expenditures (1)	 	 	924	 	 	 	924	 	 	 	–	 	 	 	–	 	 	 	–	 	
Declared dividends on common stock (6)	 	 	6,150	 	 	 	6,150	 	 	 	–	 	 	 	–	 	 	 	–	 	
Operating leases	 	 	3,224	 	 	 	1,045	 	 	 	1,561	 	 	 	310	 	 	 	308	 	
Total Contractual Cash Obligations	 	$	788,683	 	 	$	200,231	 	 	$	164,635	 	 	$	221,179	 	 	$	202,638	 	
 
26

Table of Contents
 
 	 	Total	 	 	Less than
1 Year	 	 	1-3
Years	 	 	3-5
Years	 	 	More than
5 Years	 	
Other Commercial Commitments, Letters of Credit (2)	 	$	662	 	 	$	662	 	 	 	–	 	 	 	–	 	 	 	–	 	
 
(1)	Contractual cash obligations above exclude: (a) income taxes that may be paid in future periods and not reflected in accrued income taxes or deferred income taxes (cash paid for income taxes was $11.6 million in the nine months ended September 30, 2018 and $19.0 million in the full year 2017); and (b) capital expenditures that may be made although not under contract (cash paid for total capital expenditures in the nine months ended September 30, 2018 was approximately $25.0 million).	
(2)	Long-term debt reflects principal payments under the 2023 Senior Notes and other long-term debt, and associated minimum required quarterly principal payments for Term Loan borrowings. As of September 30, 2018, there were no outstanding revolving Credit Facility borrowings, and we had availability for borrowing up to an additional $99.3 million, including up to an additional $49.3 million in letters of credit. 	
(3)	Interest payments for fixed rate debt pertain to the 2023 Senior Notes and other long-term debt through maturity. Interest payments for the floating rate Term Loan are estimated based on outstanding borrowings of $3.0 million at September 30, 2018 and a weighted average interest rate of 3.0% in the nine months ended September 30, 2018. 	
(4)	All deferred income taxes are reflected as due in “more than 5 years” because timing of annual future reversal and payment is not readily determinable at this time, primarily because of the following factors. We have material deferred tax liabilities associated with our property and equipment. Future capital expenditures and changes in federal and state income tax regulations can significantly impact the amount and timing of our future cash paid for income taxes. Contractual cash obligations above exclude income tax liabilities for unrecognized tax benefits due to uncertainty on the timing of related payments, if any.	
(5)	Reflects SMI’s separate five-year Event Management Agreements with NASCAR for racing events through 2020 using an average annual increase of 3.5%. Fees for years after 2020 have not yet been negotiated and could increase or decrease or change substantially should future race schedules change.	
(6)	Dividends on common stock reflect estimated amounts payable for declarations after September 30, 2018. In October 2018, our Board of Directors approved a quarterly cash dividend of $0.15 per share of common stock payable in December 2018. Quarterly cash dividends paid in 2017 totaled approximately $24.7 million. 	
 
LIQUIDITY
 
As of September 30, 2018, our cash and cash equivalents totaled $80.5 million, outstanding borrowings under the Credit Facility totaled $3.0 million (all Term Loan), outstanding letters of credit amounted to $662,000, and we had availability for borrowing up to an additional $99.3 million, including $49.3 million in letters of credit, under the revolving Credit Facility. We anticipate that cash from operations and funds available through our Credit Facility will be sufficient to meet our operating needs through at least the next twelve months, including estimated planned capital expenditures, income tax liabilities, and repurchases of common stock or payment of future declared dividends, if any.
 
Our Long-term, Multi-year Contracted Revenues Are Significant – Many of our future revenues are already contracted, including the ten-year NASCAR television broadcast agreements through 2024. As further described below, these ten-year broadcasting agreements are anticipated to provide us contracted revenue increases of almost four percent annually, and our total contracted NASCAR broadcasting revenues are expected to approximate $217 million in 2018. Many of our sponsorships and corporate marketing contracts are for multiple years. Most of our NASCAR Monster Energy Cup, Xfinity and Camping World Truck Series event sponsorships for the 2019 racing season, and many for years beyond 2019, are already sold. We also have significant contracted revenues under long-term operating leases for various office, warehouse and industrial park space, track rentals and driving school activities with entities largely involved in motorsports. We believe the substantial revenue generated under such long-term contracts helps significantly solidify our financial strength, earnings and cash flows and stabilize our financial resilience and profitability during difficult economic conditions.
 
Multi-year, Multi-platform NASCAR Broadcasting Rights Agreements – Broadcasting revenues continue to be a significant long-term revenue source for our core business. A substantial portion of our profits in recent years has resulted from revenues received under broadcasting rights contracts between NASCAR and various television networks (46% of our total revenues in 2017). The ten-year television broadcasting agreements for 2015 through 2024 were negotiated and contracted by NASCAR. We participate in these multi-platform and media partnership agreements with NASCAR, FOX Sports Media Group and NBC Sports Group for the broadcasting and digital rights to all (on a combined basis) Monster Energy NASCAR Cup, Xfinity and Camping World Truck Series racing events, as well as certain NASCAR K&N Pro Series and Whelen Modified Tour events. NASCAR announcements have valued the industry broadcasting contracts at more than $8.2 billion over ten years, representing approximately $820 million in gross average annual rights fees for the industry and an approximate 46% increase over the previous contract annual average of $560 million. These ten-year broadcasting agreements are anticipated to provide us contracted revenue increases of almost four percent annually. Our total contracted NASCAR broadcasting revenues are expected to approximate $217 million in 2018. SMI has separate five-year Event Management Agreements (purse and sanction agreements) with NASCAR under which our speedways conduct Monster Energy NASCAR Cup, Xfinity and Camping World Truck Series and the All-Star Race events through 2020. These agreements contain annual increases in event management fees of three to four percent.
 
27

Table of Contents
 
These broadcasting agreements include various “TV Everywhere” rights that allow 24-hour video-on-demand, expanded live-streaming and re-telecasting of certain races, in-progress and finished race highlights, replays of FOX-televised races to a Fox Sports-affiliated website, broadcasting rights for Spanish-language broadcasts, website content and other ancillary programming, as well as nightly and weekend NASCAR news and information shows. These rights are important to the broadcasters, and in turn industry stakeholders, for monetizing alternative digital delivery methods of NASCAR content and the evolving ways live sports content is consumed. NASCAR announced that "secondary ancillary rights" fees will be distributed 60% to teams, 30% to promoters (such as the Company) and 10% to NASCAR. These are non-live broadcast rights for highlights and other digital content, including licensing to fantasy games for use of driver and team images. We believe there is increasing long-term value to those ancillary rights; however, we do not control the annual profitability shared with industry-wide participants. We believe this expanding market exposure to younger and widening demographics provides long-term marketing opportunities for our advertisers and other customers, reflecting the increasing value of our premium media content and venues.
 
2018 Monster Energy NASCAR Cup, Xfinity and Camping World Truck Series Race Date Realignments to Las Vegas Motor Speedway  –  We realigned one annual Monster Energy Cup Series and one annual Camping World Truck Series racing event from NHMS, and an annual Xfinity Series racing event from KyS, to LVMS beginning in September 2018. We considered many factors, including the popularity, demand, alternative uses and revenues, and potential net increase in long-term future profitability from conducting additional annual NASCAR racing events in the LVMS market. Our future profitability or success from this realignment could significantly differ from management expectations and estimates, and are subject to numerous factors, conditions and assumptions, many of which are beyond our control. Those factors and other considerations are further described in the “Risk Factors” in our 2017 Annual Report, and are not repeated here.
 
Income Taxes – At September 30, 2018, we had net deferred tax liabilities of approximately $202.3 million and liabilities for uncertain tax benefits of $11.7 million as further described in Note 8 to the Consolidated Financial Statements in our 2017 Annual Report. While primarily representing the tax effects of temporary differences between financial and income tax bases of assets and liabilities, our net deferred tax liabilities remain material after significant reduction under the Tax Act. The likely future reversal and payment of net deferred income tax liabilities could negatively impact cash flows from operations in years in which reversal occurs. Such reversal resulted in higher cash paid for income taxes in 2017 as compared to recent years ($19.0 million in 2017 compared to $867,000 in 2016). While we anticipate our future cash outlays for income taxes under the Tax Act will be relatively lower than under previous tax law, such 2018 and future payments are expected to remain substantial. See our "Risk Factors" in our 2017 Annual Report for additional information on our income taxes.
 
General Debt Overview – We have reduced total long-term debt by approximately $258 million in 2014 through September 30, 2018 and reduced interest costs through principal repayment and various financing transactions. Interest costs under our Credit Facility have been, and will likely continue to be, lower subject to future increases in market interest rates. The structured repayment of Term Loan borrowings over five years and lower interest costs under the 2023 Senior Notes continue to reduce our indebtedness levels, leverage and future interest costs earlier than under our previous debt structure. Our operating results have benefited from relatively lower interest rates under our Credit Facility. Future economic and financial market conditions could result in increases in interest rates and other borrowing costs. See our "Risk Factors" in our 2017 Annual Report for other factors related to our debt and general economic conditions.
 
Bank Credit Facility – Our Credit Facility, among other things: (i) provides for a five-year $100.0 million senior secured revolving credit facility, (ii) provides for a five-year $150.0 million senior secured term loan (which was fully drawn) and a five-year delayed draw term loan of up to $50.0 million (which was fully drawn and repaid in 2015); (iii) matures in December 2019; and (iv) contains an accordion feature with specified limits and conditions. Term Loans require equal minimum quarterly principal payments of at least 5% of initial amounts drawn on an annualized basis (or $7.5 million for fiscal 2018). Under the Credit Facility, interest is based, at the Company’s option, upon the Eurodollar Rate plus 1.25% to 2.00% or a base rate defined as the higher of Bank of America’s prime rate, the Federal Funds Rate plus 0.5% or the Eurodollar Rate plus 1%, plus 0.25% to 1.00%. The interest rate margins on borrowings are adjustable periodically based upon certain consolidated total leverage ratios.
 
2023 Senior Notes – We completed a private placement of new 5.125% Senior Notes due 2023 in aggregate principal amount of $200.0 million in January 2015 (the 2023 Senior Notes), and an exchange offer for substantially identical 2023 Senior Notes registered under the Securities Act in the second quarter 2015. The 2023 Senior Notes were issued at par, and net proceeds were used to redeem a portion of our former 2019 Senior Notes as further described in Note 6 to the Consolidated Financial Statements in our 2017 Annual Report. The 2023 Senior Notes mature in February 2023 and interest payments are due semi-annually on February 1 and August 1.
 
Other General Debt Agreement Terms and Conditions – Our Credit Facility and 2023 Senior Notes contain specific requirements and restrictive financial covenants, and limit or prohibit various financial and transactional activities. These debt agreements also contain cross-default provisions. Our Credit Facility contains a number of affirmative and negative financial covenants, including requirements that we maintain certain defined consolidated total leverage ratios and consolidated interest coverage ratios. Our debt agreements do not restrict the ability of our subsidiaries to transfer, advance or dividend funds to the parent company, SMI, or other subsidiaries. The terms and conditions of our debt agreements, including dividend, redemption, right of payment, cross-default acceleration and other provisions, and security pledges are further described in Note 6 to the Consolidated Financial Statements in our 2017 Annual Report. We were in compliance with all debt covenants as of September 30, 2018.
 
Management believes the most restrictive financial covenant is the amended Credit Facility requirement for maintaining a consolidated interest coverage ratio of no less than 3.25 to 1.0. Management actively monitors compliance with this and all other financial covenants. If future operating results or events result in ratios below the required minimum, management is prepared to take certain actions to remain compliant. Such actions could include, for example, loan repayments or refinancing, reducing capital expenditures or operating expenses where practical, or obtaining loan compliance waivers. Any non-compliance could have a material adverse effect on our future financial condition, operating results or cash flows, and our ability to maintain compliance can be affected by events beyond our control.
 
28

Table of Contents
 
Stock Repurchase Program – Our stock repurchase program authorizes SMI to repurchase up to an aggregate of 6.0 million shares (increased from 5.0 million shares with Board of Director approval on February 12, 2018) of our outstanding common stock, depending on market conditions, share price, applicable limitations under our various debt agreements, and other factors the Board of Directors or their designees, in their sole discretion, may consider relevant. The stock repurchase program is presently funded using available cash and cash equivalents. During the nine months ended September 30, 2018, we repurchased 185,000 shares of common stock for approximately $3.4 million. As of September 30, 2018, we could repurchase up to an additional 1,006,000 shares under the current authorization.
 
CAPITAL EXPENDITURES
 
We continually evaluate new opportunities that may increase stockholder value. Our capital expenditures amounted to $25.0 million in the nine months ended September 30, 2018, and $25.7 million in 2017 as further described in our 2017 Annual Report. At this time, aggregate payments for capital expenditures in 2018 are estimated to approximate $27.5 to $35.0 million. As of September 30, 2018, we had contractual obligations for capital expenditures of approximately $924,000. Management plans to fund these capital expenditures with available cash, working capital or borrowings under our Credit Facility as needed.
 
At September 30, 2018, we had various construction projects underway. In 2018 (similar to 2017), we continue to modernize various speedway seating and other areas into unique fan-zone entertainment and premium hospitality areas. These include a new high-end clubhouse at LVMS, and areas similar to high end sports bars and close to our restart zones at certain speedways. We finalized enhancement of CMS’s new ROVAL™ road course, and expansion of “The Strip at Las Vegas Motor Speedway” into a distinctive, lighted “four lane” racing configuration. We also continue to install “SAFER” crash walls or similar barriers at certain speedways to help improve the safety of race drivers and others using our facilities, invest in social media and web application technology to attract and enhance the entertainment experience of our race fans, and upgrade media centers and restroom facilities at certain speedways.
 
DIVIDENDS
 
Any decision concerning the payment of quarterly or annual common stock dividends depends upon our results of operations, financial condition and capital expenditure plans, and applicable limitations under our various debt agreements, and other factors our Board of Directors, in its sole discretion, may consider relevant. As further described in “Liquidity” above, our Credit Facility allows aggregate payments of dividends and repurchases of SMI securities of up to $50.0 million each year, increasable up to $75.0 million, subject to maintaining certain financial covenants. The 2023 Senior Notes Indenture permits dividend payments each year of up to $0.80 per share of common stock, increasable subject to meeting certain financial covenants.
 
To date in 2018, our Board of Directors has approved the following quarterly cash dividends on common stock. These 2018 quarterly cash dividends are being paid using available cash, which would otherwise be available for repurchases of common stock or other general corporate purposes.
 
Declaration date	 	February 12, 2018	 	 	April 23, 2018	 	 	July 25, 2018	 	 	October 22, 2018	 	
Record date	 	March 1, 2018	 	 	May 15, 2018	 	 	August 15, 2018	 	 	November 12, 2018	 	
Paid or payable to shareholders	 	March 15, 2018	 	 	June 5, 2018	 	 	September 5, 2018	 	 	December 3, 2018	 	
Aggregate quarterly cash dividend	 	$	6,224	 	 	$	6,142	 	 	$	6,133	 	 	Approximately $6,150	 	
Dividend per common share	 	$	0.15	 	 	$	0.15	 	 	$	0.15	 	 	$	0.15	 	
 
OFF-BALANCE SHEET ARRANGEMENTS
 
As further described in “Liquidity and Capital Resources” above, our Credit Facility provides for a separate sub-limit for letters of credit of up to $50.0 million. As of September 30, 2018, we had aggregate outstanding letters of credit of $662,000. We presently do not have any other off-balance sheet arrangements (including off-balance sheet obligations, guarantees, commitments, or other contractual cash obligations, other commercial commitments or contingent obligations) that have, or are reasonably likely to have, a current or future material effect on our financial condition, results of operations or cash flows.
 
RECENTLY ISSUED ACCOUNTING STANDARDS 
 
See Note 2 to the Consolidated Financial Statements “Recently Issued Accounting Standards” for information on recently issued accounting pronouncements, their applicable adoption dates and possible effects, if any, on our financial statements and disclosures.
 
29

Table of Contents
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 
Interest Rate Risk – Our financial instruments with interest rate risk exposure consist of cash and cash equivalents and our Credit Facility. As of September 30, 2018, there were $3.0 million in outstanding borrowings under our floating interest rate Credit Facility term loan. A change in interest rates of one percent on our floating rate debt at September 30, 2018 would cause an approximate change in annual interest expense of $30,000. Fair value estimates are based on relevant market information at a specific point in time, and changes in assumptions or market conditions could significantly affect estimates. There were no interest rate or other swaps at September 30, 2018 or December 31, 2017. As of September 30, 2018, we had availability for borrowing up to an additional $99.3 million, including $49.3 million in letters of credit, under the revolving Credit Facility as further described in Note 5 to the Consolidated Financial Statements.
 
The table below presents floating rate principal debt balances outstanding, fair values, interest rates and maturity dates as of September 30, 2018 and December 31, 2017 (in thousands):
 
 	 	Carrying Value	 	 	Fair Value	 	 	
 	 	2018	 	 	2017	 	 	2018	 	 	2017	 	  Maturity Dates	
Floating rate revolving Credit Facility, all Term Loan (1)	 	$	3,000	 	 	$	30,000	 	 	$	3,000	 	 	$	30,000	 	  December 2019	
5.125% Senior Notes	 	 	200,000	 	 	 	200,000	 	 	 	198,000	 	 	 	205,000	 	  February 2023	
 
(1)	The weighted average interest rate on Credit Facility borrowings in the nine months ended September 30, 2018 and 2017 was 3.0% and 2.3%.	
  
Other Market Risk – As described in “Off-Balance Sheet Arrangements” above, we had aggregate outstanding standby letters of credit of $662,000 and $698,000, and no instruments or securities with equity price risk, as of September 30, 2018 and December 31, 2017.
 
 Item 4. Controls and Procedures
 
Management's Evaluation of Disclosure Controls and Procedures - Management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer (its principal executive officer and principal financial officer, respectively), have concluded, based on their evaluation as of the end of the period covered by this Quarterly Report, that our disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) of the Exchange Act) were effective as of September 30, 2018 to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, or that such information is accumulated and communicated to our management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
 
Changes in Internal Control Over Financial Reporting - There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) or Rule 15d-15(f) of the Exchange Act) in the third quarter of 2018 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
 
From time to time, we are party to routine litigation incidental to our business. We believe the resolution of any or all of such litigation will not have a material effect on our financial condition, results of operations or cash flows. New or material developments on our more significant lawsuits, if any, are described in Note 8 to the Consolidated Financial Statements. See Item 1A “Risk Factors” of our 2017 Annual Report for additional information on our liability insurance program and self-insured retention.
 
Item 1A. Risk Factors

Because the Smith Family owns a majority of our common stock, it is able to control matters submitted to a vote of our stockholders and the Company is eligible for the “controlled company” exemption to the corporate governance rules for New York Stock Exchange listed companies.
 
As of November 5, 2018, Mr. O. Bruton Smith, our Executive Chairman, Mr. Marcus G. Smith, our Chief Executive Officer, Mr. B. Scott Smith, a director of the Company, and their families beneficially owned, directly and indirectly, an aggregate of approximately 29 million shares or approximately 71% of our common stock. As a result, the Smith Family will continue to control the outcome of issues submitted to our stockholders, including the election of all directors.
 
Furthermore, NYSE rules exempt “controlled companies” from certain corporate governance rules otherwise applicable to NYSE listed companies, including the requirement to have a majority of the board of directors be independent, as defined by NYSE rules. Because we qualify as a “controlled company” under NYSE rules, we are not required to comply with this board independence rule. Nevertheless, we previously elected to voluntarily comply with this and other NYSE independence requirements, including the requirement that we have a nominating and corporate governance committee and a compensation committee composed entirely of independent directors.
 
With the appointment on October 22, 2018 of Mr. Scott Smith to our board of directors, our board is now comprised of four independent directors and four directors that do not qualify as independent under our Categorical Standards for Director Independence and applicable NYSE rules. Mr. Scott Smith is the son of Mr. O. Bruton Smith and the brother of Mr. Marcus Smith. In addition, Mr. Scott Smith is Co-Founder of Sonic Automotive, Inc.  and has held various executive positions with SAI in the past. Mr. O. Bruton Smith is the Executive Chairman of SAI, and SAI is an affiliate of the Company because members of the Smith Family and Sonic Financial Corporation, an entity jointly controlled by members of the Smith Family, maintain voting control over SAI.
 
Effective with the recent appointment of Mr. Scott Smith as a director, the Company no longer has a majority of independent directors on its board as described above, and as such the Company is relying upon the “controlled company” exemption to the NYSE rule requiring that a majority of the board be independent, unless and until our board of directors determines otherwise in its discretion. The Company currently continues to voluntarily comply with NYSE rules requiring that nominating and corporate governance and compensation committees be composed entirely of independent directors, although it is not obligated to continue to do so.
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 
We had no unregistered sales of equity securities during the nine months ended September 30, 2018.
 
In April 2005, our Board of Directors approved and publicly announced a stock repurchase program authorizing the repurchase of up to one million shares of SMI outstanding common stock in open market or private transactions, depending on market conditions, share price, applicable limitations under our debt agreements, and other factors the Board of Directors or its designees, in their sole discretion, may consider relevant. The amount of repurchases made under the program in any given month or quarter may vary as a result of changes in our business, operating results, working capital or other factors, and may be suspended or discontinued at any time. In each of February 2007, December 2008, December 2009, February 2014, and February 2018, our Board of Directors increased the authorized total number of shares that can be repurchased under this program by one million, for a present approved program aggregate of 6,000,000 shares. All approved increases contain the same terms and conditions as previous share repurchase authorizations. The program currently has no scheduled expiration date. As of September 30, 2018, we could repurchase up to an additional 1,006,000 shares under the current authorization.
 
30

Table of Contents
 
During the nine months ended September 30, 2018, we repurchased 185,000 shares of common stock on the open market for approximately $3.4 million, and 28,000 shares of our common stock were delivered to us at an average price per share of $19.42 in satisfaction of tax withholding obligations of holders of restricted shares issued under our equity compensation plans that vested during the period. These shares are reflected in the following table.
 
 	 	Issuer Purchases of Equity Securities as of September 30, 2018	 	
Period	 	Total Number of
Shares
Purchased	 	 	Average
Price
Paid per
Share	 	 	Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs	 	 	Maximum Number
of Shares that
May Yet Be
Purchased Under the
Plans or Programs	 	
January 2018	 	 	21,000	 	 	$	19.46	 	 	 	21,000	 	 	 	170,000	 	
February 2018	 	 	19,000	 	 	 	20.12	 	 	 	19,000	 	 	 	1,151,000	 	
March 2018	 	 	47,000	 	 	 	19.18	 	 	 	19,000	 	 	 	1,132,000	 	
First Quarter 2018	 	 	87,000	 	 	 	19.45	 	 	 	59,000	 	 	 	1,132,000	 	
April 2018	 	 	20,000	 	 	 	17.84	 	 	 	20,000	 	 	 	1,112,000	 	
May 2018	 	 	22,000	 	 	 	17.50	 	 	 	22,000	 	 	 	1,090,000	 	
June 2018	 	 	21,000	 	 	 	17.46	 	 	 	21,000	 	 	 	1,069,000	 	
Second Quarter 2018	 	 	63,000	 	 	 	17.59	 	 	 	63,000	 	 	 	1,069,000	 	
July 2018	 	 	21,000	 	 	 	17.63	 	 	 	21,000	 	 	 	1,048,000	 	
August 2018	 	 	23,000	 	 	 	17.77	 	 	 	23,000	 	 	 	1,025,000	 	
September 2018	 	 	19,000	 	 	 	17.65	 	 	 	19,000	 	 	 	1,006,000	 	
Third Quarter 2018	 	 	63,000	 	 	 	17.69	 	 	 	63,000	 	 	 	1,006,000	 	
Total 2018	 	 	213,000	 	 	$	18.38	 	 	 	185,000	 	 	 	1,006,000	 	
 
 Item 6. Exhibits
 
Exhibits filed with this Form 10-Q are as follows:
 
Exhibit
Number	Description	
31.1	Certification of Mr. Marcus G. Smith pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
31.2	Certification of Mr. William R. Brooks pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
32.1	Certification of Mr. Marcus G. Smith pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
32.2	Certification of Mr. William R. Brooks pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
101	Financial Statements in XBRL format.	
 
31

Table of Contents
 
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.
 
 	 	SPEEDWAY MOTORSPORTS, INC.	

Date: November 7, 2018	 	By:	/s/ Marcus G. Smith        	
 	 	 	Marcus G. Smith	
 	 	 	Chief Executive Officer (Principal Executive Officer)
and President	
       
Date: November 7, 2018	 	By:	/s/ William R. Brooks        	
 	 	 	William R. Brooks	
 	 	 	Vice Chairman, Chief Financial Officer
and Treasurer (Principal Financial and Accounting Officer)	
 
32

Exhibit 31.1
 
SPEEDWAY MOTORSPORTS, INC.
PRINCIPAL EXECUTIVE OFFICER CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
I, Marcus G. Smith, certify that:
 
1.	I have reviewed this Quarterly Report on Form 10-Q of Speedway Motorsports, Inc.;	
 
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
 
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
 
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
 	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
 	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
 	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
 	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	
 
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	
 	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
 	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

Date: November 7, 2018	 	 	By:	/s/ Marcus G. Smith	
 	 	 	 	Marcus G. Smith	
 	 	 	 	Chief Executive Officer and President	

Exhibit 31.2
 
SPEEDWAY MOTORSPORTS, INC.
PRINCIPAL FINANCIAL OFFICER CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
I, William R. Brooks, certify that:
 
1.	I have reviewed this Quarterly Report on Form 10-Q of Speedway Motorsports, Inc.;	
 
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
 
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
 
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
 	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
 	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
 	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
 	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	
 
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	
 	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
 	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

Date: November 7, 2018	 	By:	 	/s/ William R. Brooks	
 	 	 	 	William R. Brooks	
 	 	 	 	Vice Chairman, Chief Financial Officer and Treasurer	

Exhibit 32.1
 
SPEEDWAY MOTORSPORTS, INC.
 
PRINCIPAL EXECUTIVE OFFICER CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
In connection with the Quarterly Report on Form 10-Q of Speedway Motorsports, Inc. (the “Company”) for the period ended September 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Marcus G. Smith, Chief Executive Officer and President of the Company, does hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
 
 	(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and	
 	 	 	
 	(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	

Date: November 7, 2018	By:	/s/ Marcus G. Smith	
 	 	Marcus G. Smith
Chief Executive Officer and President	
 
A signed original of this written statement required by Section 906 has been provided to, and will be retained by, Speedway Motorsports, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2
 
SPEEDWAY MOTORSPORTS, INC.
 
PRINCIPAL FINANCIAL OFFICER CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
In connection with the Quarterly Report on Form 10-Q of Speedway Motorsports, Inc. (the “Company”) for the period ended September 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, William R. Brooks, Vice Chairman, Chief Financial Officer and Treasurer of the Company, does hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
 
 	(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and	
 	 	 	
 	(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	

Date: November 7, 2018	By:	/s/ William R. Brooks	
 	 	William R. Brooks
Vice Chairman, Chief Financial Officer and Treasurer	
 
A signed original of this written statement required by Section 906 has been provided to, and will be retained by, Speedway Motorsports, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.