SPEEDWAY MOTORSPORTS INC, 10-K filed on 3/15/2019
Annual Report
v3.19.1
Document And Entity Information - USD ($)
12 Months Ended
Dec. 31, 2018
Mar. 12, 2019
Jun. 30, 2018
Document Information [Line Items]      
Entity Registrant Name SPEEDWAY MOTORSPORTS INC    
Entity Central Index Key 0000934648    
Trading Symbol trk    
Current Fiscal Year End Date --12-31    
Entity Filer Category Accelerated Filer    
Entity Current Reporting Status Yes    
Entity Voluntary Filers No    
Entity Well-known Seasoned Issuer No    
Entity Emerging Growth Company false    
Entity Small Business false    
Entity Common Stock, Shares Outstanding (in shares)   40,809,370  
Entity Public Float     $ 194,425,490
Entity Shell Company false    
Document Type 10-K    
Document Period End Date Dec. 31, 2018    
Document Fiscal Year Focus 2018    
Document Fiscal Period Focus FY    
Amendment Flag false    
v3.19.1
Consolidated Balance Sheets - USD ($)
Dec. 31, 2018
Dec. 31, 2017
Current Assets:    
Cash and cash equivalents $ 80,568,000 $ 81,924,000
Accounts receivable, net (Note 2) 19,497,000 28,459,000
Prepaid and refundable income taxes 960,000 2,135,000
Inventories, net 8,018,000 7,283,000
Prepaid expenses and other current assets (Note 2) 11,911,000 11,044,000
Total Current Assets 120,954,000 130,845,000
Note Receivable 613,000 799,000
Other Assets 23,634,000 23,724,000
Property and Equipment, Net (Note 4) 936,551,000 958,215,000
Other Intangible Assets 298,383,000 298,383,000
Goodwill 46,225,000 46,225,000
Total 1,426,360,000 1,458,191,000
Current Liabilities:    
Current maturities of long-term debt 167,000 7,662,000
Accounts payable 10,376,000 12,017,000
Deferred race event and other income (Note 2) 33,868,000 48,290,000
Accrued income taxes 689,000 383,000
Accrued interest 4,295,000 4,307,000
Accrued expenses and other current liabilities 21,601,000 23,585,000
Total Current Liabilities 70,996,000 96,244,000
Long-term Debt 198,002,000 219,452,000
Deferred Income 2,357,000 3,054,000
Deferred Income Taxes, Net 201,486,000 201,760,000
Other Liabilities 18,764,000 18,458,000
Total Liabilities 491,605,000 538,968,000
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 – 40,854,000 in 2018 and 40,992,000 in 2017 463,000 461,000
Additional Paid-in Capital 266,366,000 262,885,000
Retained Earnings 785,251,000 767,859,000
Treasury Stock at cost, shares – 5,436,000 in 2018 and 5,137,000 in 2017 (117,325,000) (111,982,000)
Total Stockholders’ Equity 934,755,000 919,223,000
Total $ 1,426,360,000 $ 1,458,191,000
v3.19.1
Consolidated Balance Sheets (Parentheticals) - $ / shares
Dec. 31, 2018
Dec. 31, 2017
Preferred stock par value (in dollars per share) $ 0.10 $ 0.10
Preferred stock, shares authorized (in shares) 3,000,000 3,000,000
Preferred stock, shares issued (in shares) 0 0
Common Stock, par value (in dollars per share) $ 0.01 $ 0.01
Common Stock, shares authorized (in shares) 200,000,000 200,000,000
Common Stock, shares issued (in shares) 40,854,000 40,992,000
Common Stock, shares outstanding (in shares) 40,854,000 40,992,000
Treasury Stock at cost, shares (in shares) 5,436,000 5,137,000
v3.19.1
Consolidated Statements of Operations - USD ($)
shares in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Revenues:      
Revenues $ 461,914 $ 458,358 $ 495,407
Expenses and Other:      
General and administrative 100,900 97,602 100,144
Depreciation and amortization (Note 4) 54,506 64,831 54,368
Interest expense, net 11,449 12,241 13,148
Impairment of goodwill (Note 2) 1,117
Other (income) expense, net (1,906) 1,341 (997)
Total Expenses and Other 408,539 413,988 434,211
Income Before Income Taxes 53,375 44,370 61,196
Income Tax (Provision) Benefit (Note 8) (12,926) 103,875 (21,651)
Net Income $ 40,449 $ 148,245 $ 39,545
Basic Earnings Per Share (in dollars per share) $ 0.99 $ 3.61 $ 0.96
Weighted Average Shares Outstanding (in shares) 40,910 41,025 41,152
Diluted Earnings Per Share (in dollars per share) $ 0.99 $ 3.61 $ 0.96
Weighted Average Shares Outstanding (in shares) 40,922 41,041 41,167
Admissions [Member]      
Revenues:      
Revenues $ 78,332 $ 86,949 $ 90,639
Event Related [Member]      
Revenues:      
Revenues 140,210 133,632 142,574
NASCAR Broadcasting Revenue [Member]      
Revenues:      
Revenues 216,592 209,155 201,804
Other Operating Revneues [Member]      
Revenues:      
Revenues 26,780 28,622 60,390
Direct Expense of Events [Member]      
Expenses and Other:      
Cost of goods and services sold 101,876 98,973 108,460
NASCAR Event Management Fees [Member]      
Expenses and Other:      
Cost of goods and services sold 123,212 119,101 115,304
Other Direct Operating Expense [Member]      
Expenses and Other:      
Cost of goods and services sold $ 18,502 $ 18,782 $ 43,784
v3.19.1
Consolidated Statements of Stockholders' Equity - USD ($)
$ in Thousands
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Treasury Stock [Member]
Total
Balance (in shares) at Dec. 31, 2015 41,235,000        
Balance at Dec. 31, 2015 $ 458 $ 255,294 $ 629,115 $ (100,027) $ 784,840
Net income 39,545 39,545
Share-based compensation, net of windfall tax benefits adjustment (in shares) 162,000        
Share-based compensation, net of windfall tax benefits adjustment $ 1 3,404 407 $ 3,812
Exercise of stock options (in shares) 11,000       11,500
Exercise of stock options 182 $ 182
Cash dividends of $0.60 per share of common stock (24,759) (24,759)
Repurchases of common stock at cost (in shares) (310,000)        
Repurchases of common stock at cost (5,837) (5,837)
Balance (in shares) at Dec. 31, 2016 41,098,000        
Balance at Dec. 31, 2016 $ 459 258,880 644,308 (105,864) 797,783
Net income 148,245 $ 148,245
Share-based compensation, net of windfall tax benefits adjustment (in shares) 160,000        
Exercise of stock options (in shares) 41,000       40,500
Exercise of stock options 641 $ 641
Cash dividends of $0.60 per share of common stock (24,694) (24,694)
Repurchases of common stock at cost (in shares) (307,000)        
Repurchases of common stock at cost (6,118) (6,118)
Share-based compensation $ 2 3,364     3,366
Balance (in shares) at Dec. 31, 2017 40,992,000        
Balance at Dec. 31, 2017 $ 461 262,885 767,859 (111,982) 919,223
Net income 40,449 40,449
Share-based compensation, net of windfall tax benefits adjustment (in shares) 161,000        
Share-based compensation, net of windfall tax benefits adjustment $ 2 3,481 $ 3,483
Exercise of stock options (in shares)         0
Cash dividends of $0.60 per share of common stock (24,624) $ (24,624)
Repurchases of common stock at cost (in shares) (299,000)        
Repurchases of common stock at cost (5,343) (5,343)
Adjustment for adoption of revenue recognition standards using modified retrospective method (Note 2) 1,567 1,567
Balance (in shares) at Dec. 31, 2018 40,854,000        
Balance at Dec. 31, 2018 $ 463 $ 266,366 $ 785,251 $ (117,325) $ 934,755
v3.19.1
Consolidated Statements of Stockholders' Equity (Parentheticals) - $ / shares
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Cash dividends, per share of common stock (in dollars per share) $ 0.60 $ 0.60 $ 0.60
v3.19.1
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Cash Flows from Operating Activities:      
Net income $ 40,449 $ 148,245 $ 39,545
Adjustments to reconcile net income to net cash provided by operating activities:      
Impairment of goodwill 1,117
Gain on disposals of property and equipment and other assets (2,286) (944) (1,412)
Deferred loan cost amortization 1,525 1,540 1,520
Depreciation and amortization 54,506 64,831 54,368
Amortization of deferred income (798) (905) (944)
Deferred income tax provision (Note 8) (124) (127,722) 19,543
Share-based compensation 3,483 3,366 3,405
Changes in operating assets and liabilities:      
Accounts receivable (Note 2) 11,053 881 10,256
Prepaid, refundable and accrued income taxes 1,365 4,597 1,543
Inventories (735) 929 499
Prepaid expenses and other current assets (867) 774 2,426
Accounts payable (382) (1,256) 101
Deferred race event and other income (Note 2) (14,430) (4,261) (14,891)
Accrued interest (12) (4) 20
Accrued expenses and other liabilities (1,984) (326) (2,316)
Deferred income 109 217 138
Other assets and liabilities (463) (519) (281)
Net Cash Provided By Operating Activities 90,409 90,560 113,520
Cash Flows from Financing Activities:      
Principal payments on long-term debt (30,162) (36,157) (54,177)
Exercise of common stock options 641 182
Dividend payments on common stock (24,624) (24,694) (24,759)
Repurchases of common stock (5,343) (6,118) (5,837)
Net Cash Used By Financing Activities (60,129) (66,328) (84,591)
Cash Flows from Investing Activities:      
Payments for capital expenditures (34,147) (25,668) (34,635)
Proceeds from sales of property and equipment and other assets 2,394 3,620 2,742
Repayment of note receivable 176 448 243
Net Cash Used By Investing Activities (31,577) (21,600) (31,650)
Net (Decrease) Increase In Cash and Cash Equivalents (1,297) 2,632 (2,721)
Cash and Cash Equivalents at Beginning of Year 82,200 79,568 82,289
Cash and Cash Equivalents at End of Year 80,903 82,200 79,568
Supplemental Cash Flow Information:      
Cash paid for interest, net of amounts capitalized 11,995 12,773 13,322
Cash paid for income taxes 11,750 18,957 867
Supplemental Non-cash Investing and Financing Activities Information:      
(Decrease) increase in accounts payable for capital expenditures $ (1,259) $ (224) $ 1,284
v3.19.1
Note 1 - Basis of Presentation and Description of Business
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Nature of Operations [Text Block]
1.
BASIS OF PRESENTATION AND 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.
 
Description of Business
– We are a promoter, marketer and sponsor of motorsports activities in the United States. We principally own and operate the following motorsports facilities: Atlanta Motor Speedway, Bristol Motor Speedway, Charlotte Motor Speedway, Kentucky Speedway, Las Vegas Motor Speedway, New Hampshire Motor Speedway, Sonoma Raceway, and Texas Motor Speedway. We also provide event and non-event souvenir merchandising and distribution services, and food, beverage and hospitality catering services under an outside management contract through our SMI Properties subsidiaries; provide radio programming, production and distribution through PRN and RCU; manufacture and distribute smaller-scale, modified racing cars and parts through Legend Cars, and sell an environmentally-friendly micro-lubricant® through Oil-Chem.
 
In early
2019,
the NASCAR Camping World Truck Series became the NASCAR Gander Outdoors Truck Series and that naming convention is used throughout this document.
 
2018
Monster Energy NASCAR Cup, Xfinity and
Gander Outdoors
Truck Series Race Date Realignments to Las Vegas Motor Speedway 
– We realigned
one
annual Monster Energy Cup Series and
one
annual Gander Outdoors 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. 
 
Racing Events
– As further described in Note
2,
we derive a substantial portion of our total revenues from admissions, event related and NASCAR broadcasting revenue. In
2018,
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 Gander Outdoors Truck Series,
five
NASCAR K&N Pro Series,
three
NASCAR Whelen Modified Tour,
two
IndyCar Series,
six
major National Hot Rod Association,
one
Automobile Racing Club of America and
three
World of Outlaws 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 Gander Outdoors 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. In
2016,
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 Gander Outdoors 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
2018
race season, as well as
2017
and
2016,
experienced a high number of event weekends with significant poor weather. Our admissions and certain event related revenues and operating expenses reflect the negative impact of poor weather surrounding NASCAR and other racing events. The more significant races affected by poor weather and other racing schedule changes during the last
three
years include:
 
In
2018:
 
Poor weather or excessive heat surrounded Monster Energy NASCAR Cup race weekends at AMS and LVMS in the
first
quarter, at BMS, CMS, SR and TMS in the
second
quarter, and at BMS, LVMS and NHMS in the
third
quarter (
7
of our
8
speedways)
 
One NASCAR Monster Energy Cup and
one
annual Gander Outdoors Truck Series racing event from NHMS, and
one
Xfinity Series racing event from KyS, were realigned to LVMS in
2018
 
TMS held
one
Red Bull Air Race in
2018
that was
not
held in
2017
or
2016
 
In
2017
and
2016:
 
Poor weather surrounded Monster Energy NASCAR Cup race weekends at BMS and CMS in the
second
quarter, at BMS and NHMS in the
third
quarter, and at CMS in the
fourth
quarter
2017
 
Poor weather surrounded Monster Energy NASCAR Cup race weekends at LVMS in the
first
quarter, at CMS and TMS in the
second
quarter, at BMS in the
third
quarter, and at CMS and TMS in the
fourth
quarter
2016
 
Effective
August 2018,
we announced “The SMI Weather Guarantee” for all NASCAR-sanctioned races held at our
eight
speedways. If inclement weather postpones a NASCAR race, and ticketholders are unable to attend on a rescheduled date, fans can obtain a credit toward future NASCAR races held at any SMI speedway. Unused paid race tickets
may
be exchanged for tickets of equal or lesser value within
one
calendar year of the original event date or for the same race in the following year, subject to certain restrictions and requirements. Cash refunds are
not
available and the guarantee does
not
apply to delayed or shortened races. Tickets honored under this program were
not
significant in
2018.
 
In
2016,
poor weather resulted in postponing and rescheduling an IndyCar race at TMS and we honored unused tickets through exchange for race tickets to TMS’s Monster Energy NASCAR Cup or IndyCar race in
2017.
Cash refunds were
not
offered and tickets exchanged for
2017
race events were
not
significant. At
December 31, 2016,
we had deferred race event income of
$524,000
for unredeemed tickets associated with TMS’s
2016
IndyCar race, all of which was recognized in
2017.
 
Seasonality
– 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. 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.
 
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 Gander Outdoors Truck race from NHMS, and
one
 annual NASCAR Xfinity race from KyS, to LVMS in
September 2018.
We also 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.
In
2019,
we are moving TMS’s spring Monster Energy NASCAR Cup weekend races previously held in the
second
quarter to the
first
quarter
2019.
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 Battle at Bristol in
201
6
– In
2016,
BMS hosted
two
collegiate football games,
one
of which (the “Battle at Bristol”) included a large preceding concert. These events had a material positive effect on our
2016
operating results, and associated revenues and direct expenses are reflected in “other operating revenue” and “other direct operating expense”, and our “all other” reporting segment (see Note
13
). Management believes reporting these results separate from our core business of motorsports operations is appropriate as we do
not
have additional football games scheduled at this time (nor were any held before). Those results are
not
indicative of future results that can be expected or forecast. 
v3.19.1
Note 2 - Significant Accounting Policies
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Significant Accounting Policies [Text Block]
2.
SIGNIFICANT ACCOUNTING POLICIES
 
Use of Estimates
– The preparation of financial statements in conformity with generally accepted accounting principles requires extensive use of management estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at financial statement dates, and reported amounts of revenues and expenses. Actual future results could differ from those estimates. Such significant estimates include (i) recoverability of property and equipment, goodwill and other intangible assets, (ii) depreciable lives for property and equipment and amortization periods for intangible assets, (iii) accounting for income taxes, (iv) realization of receivables and inventories, (v) accruals for certain business taxes, uninsured business risks, litigation, and other contingencies, and (vi) deferred compensation obligations and accounting and disclosures of stock-based compensation.
 
Principles of Consolidation
– All significant intercompany accounts and transactions have been eliminated in consolidation.
 
Revenue and Expense Classification
– We classify our revenues, among other categories, as follows:
 
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, industrial park and office rentals, and revenues associated with the
2016
“Battle at Bristol” (Note
1
)
 
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, industrial park and office rental revenues, and expenses associated with the
2016
“Battle at Bristol” (Note
1
)
 
We determined that contracted direct expenses for track rentals and certain other events that are rebilled to customers should be presented gross rather than netted against revenues. We revised our previously issued financial statements to increase event related revenues and direct expense of events by
$4,769,000
in
2017
and
$5,674,000
in
2016
(comparable amounts were
$7,729,000
for
2018
). These revisions were
not
material to any of the prior annual financial statements, and had
no
impact on net income, earnings per share or cash flows.
 
Accounting Recognition for Event Related Revenues and Associated Deferred Event Income and Deferred Event Expenses
– We recognize admissions, NASCAR broadcasting and event related revenues when an event is held. Deferred race event income, and associated deferred direct event expenses, pertain to scheduled events to be held in upcoming periods and are recognized when an event is held. Deferred revenues recognizable in each upcoming fiscal year are reflected as current liabilities in deferred race event and other income. Deferred race event income, and associated deferred direct event expenses, pertain to scheduled events to be held in upcoming periods and are recognized when an event is held. Deferred revenues recognizable in each upcoming fiscal year are reflected 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. While preparing our annual financial statements, we determined that deferred direct event expense should be presented gross rather than netted against deferred race event income. We revised our previously issued financial statements to reflect deferred event expenses in other current assets and increase deferred race event and other income by
$7,511,000
as of
December 31, 2017 (
comparable amounts were
$6,978,000
as of
December 31, 2018).
These revisions were
not
material to any of the prior annual or interim financial statements, and had
no
impact on net income, earnings per share or cash flows.
 
NASCAR Broadcasting Revenues and NASCAR Event Management
Fees
– 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. The Company periodically negotiates its sanction fees for individual races with NASCAR. SMI has separate
five
-year Event Management Agreements with NASCAR under which our speedways will conduct Monster Energy NASCAR Cup, Xfinity and Gander Outdoors Truck Series and the All-Star Race events through
2020.
Annual increases in broadcast rights revenue and event management fees range from
three
to
four
percent annually. 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. The
10%
portion of broadcast rights fees retained by NASCAR is netted against broadcasting revenues for presentation purposes. 
Food and Beverage
Services
– Levy Premium Foodservice Limited Partnership, wholly-owned by Compass Group USA, Inc., has exclusive rights to provide on-site food, beverage and hospitality catering services for essentially all Company speedway motorsports and non-motorsports events, catered “hospitality” receptions and private parties under an amended long-term food and beverage management contract through
2028.
The long-term agreement provides for, among other items, specified annual fixed and periodic gross revenue based commission payments to the Company over the contract period. Our commission-based net revenues associated with activities provided by Levy are recognized at time of sale, and reported in event related revenue and at times, to a lesser extent, other operating revenue depending on the venue.
Customer Revenues
– As further described below in “Recently Issued Accounting Standards”, we adopted Accounting Standards Update
No.
2014
-
09
"Revenue from Contracts with Customers (Topic
606
)” and associated amendments as of
January 1, 2018 (
ASC
606
). 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. Those items include contracted revenues for 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. As of
January 1, 2018,
such contract assets and contract liabilities are reportable on a net basis under ASC
606,
decreasing accounts receivable and deferred revenue balances from that presented under previous accounting guidance. Our main types of revenue contracts and performance obligations are described below.
 
Disaggregated Revenues
– We have disaggregated the composition of our revenues based on economic factors, including their nature, timing and certainty as further described below. The following table presents our disaggregated admissions, NASCAR broadcasting, and sponsorships and other event related revenues which are reported in our Motorsports Event Related segment, and souvenir and other merchandise and other revenues which are reported in that segment and our All Other segment (see Note
13
). 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, geopolitical or other adverse 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.
 
Our disaggregated revenues and associated performance obligations are comprised of the following (in thousands):
 
   
2018
   
2017
   
2016
 
Admissions
  $
78,332
    $
86,949
    $
90,639
 
NASCAR broadcasting
   
216,592
     
209,155
     
201,804
 
Sponsorships and other event related
   
131,951
     
125,457
     
131,720
 
Souvenir and other merchandise
   
23,970
     
24,831
     
27,742
 
Other (Note 1)
   
11,069
     
11,966
     
43,502
 
Total revenue
  $
461,914
    $
458,358
    $
495,407
 
 
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
– see above for related discussion.
 
Sponsorships
and
Other Event Related
– We have various marketing agreements for sponsorships, on-site advertising, hospitality and other promotional activities. 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. Sponsors and the terms of sponsorships change from time to time. We have sponsorship contracts with many major manufacturing and consumer products companies and brands, and many include official sponsorship designations at our speedways and exclusive advertising and promotional rights in various sponsor product categories. 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 also derive event related revenue from commissioned food and beverage sales during racing and non-racing events, speedway catered “hospitality” receptions and private parties. Food and beverages are also sold to individual, group, corporate and other customers primarily in concession areas located on or near speedway concourses, other areas surrounding our speedway facilities, and in luxury suites, club-style seating and food court areas located within the speedway facilities. 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.
 
Accounting Recognition for Non-Event Souvenir Merchandise and Other Revenues
– We recognize revenue when associated performance obligations are satisfied (including associated shipping and handling which is insignificant), which includes 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.
 
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. 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.
 
Other
– We derive other operating revenue from dining and entertainment facilities at The Speedway Clubs at CMS and TMS. These Speedway Clubs sell memberships that entitle members to certain dining, other club and racing event seating privileges, and require upfront fees and monthly assessments. Net membership revenues are deferred when billed and amortized into income over an estimated average membership term of
ten
years.
 
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. Other revenue also includes all revenues associated with the
2016
“Battle at Bristol”.
 
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
$155,759,000
at
December 31, 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 result principally from recognition upon holding associated motorsport and non-motorsports events during the period. At
December 31, 2018
and
2017,
contract assets aggregated
$6,978,000
and
$7,511,000,
and contract liabilities aggregated
$36,225,000
and
$51,344,000.
For the year ended
December 31, 2018,
we recognized revenue associated with contract liabilities amounting to
$47,855,000.
Our contract liabilities consist of current and noncurrent deferred revenue of
$33,868,000
and
$2,357,000
at
December 31, 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
$4,942,000
in
2018,
$5,372,000
in
2017
and
$7,642,000
in
2016.
 
Consolidated Statements of Cash Flows –
We classify as cash equivalents all highly liquid investments with original maturities of
three
months or less. Cash equivalents principally consist of variable rate, overnight sweep accounts of commercial paper, repurchase agreements, municipal bond and United States Treasury securities.
 
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.
 
We have revised the consolidated statements of cash flows to correctly classify certain activities which resulted in a decrease in net cash provided by operating activities, and a corresponding decrease in net cash used by investing activities, of
$1,093,000
in
2017
and
$200,000
in
2016.
These revisions were
not
material to any of the prior annual or interim financial statements. 
 
Accounts Receivable
are reported net of allowance for doubtful accounts summarized as follows (in thousands):
 
   
2018
   
2017
   
2016
 
Balance, beginning of year
  $
1,070
    $
1,178
    $
1,287
 
Bad debt expense
   
155
     
258
     
126
 
Actual write-offs, net of specific accounts recovered
   
(226
)
   
(366
)
   
(235
)
Balance, end of year
  $
999
    $
1,070
    $
1,178
 
 
Deferred Financing Costs
are amortized into interest expense over the associated debt terms or remaining terms for loan amendment costs. Deferred financing costs reflected in other noncurrent assets below are associated with our revolving Credit Facility, and are reported net of accumulated amortization of
$3,882,000
and
$3,525,000
at
December 31, 2018
and
2017.
Deferred financing costs associated with our
2023
Senior Notes and bank Term Loan are reflected as a reduction of long-term debt, and are reported net of accumulated amortization of
$9,708,000
and
$8,491,000
at
December 31, 2018
and
2017.
 
 
Other Noncurrent Assets
as of
December 31, 2018
and
2017
consist of (in thousands):
 
   
2018
   
2017
 
Deferred financing costs, net (Note 6)
  $
368
    $
726
 
Land held for development
   
12,265
     
12,265
 
Cash surrender values of life insurance and other
   
11,001
     
10,733
 
Total
  $
23,634
    $
23,724
 
 
Noncurrent assets are generally reported at cost except for cash surrender values of life insurance policies which are reported at fair value (see Note
12
). Management evaluates these assets for recovery when events or circumstances indicate possible impairment
may
have occurred. As of
December 31, 2018,
there have been
no
events or circumstances which might indicate possible recoverability concerns or impairment.
 
Land Held for Development
represents property adjacent to a regional outlet mall in the Charlotte metropolitan area which management plans to develop and market or possibly sell in suitable market conditions.
 
Property and Equipment (Note
4
)
are recorded at cost less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful lives of the respective assets. Leasehold improvements pertain primarily to industrial park, office and warehouse facilities, and are amortized using the straight-line method over the lesser of associated lease terms or estimated useful lives. Constructed assets, including construction in progress, include all direct costs and capitalized interest until placed into service. Expenditures for repairs and maintenance are charged to expense when incurred, unless useful asset lives are extended or assets improved. Associated cost and accumulated depreciation of fully depreciated repurposed or removed assets are eliminated.
 
When events or circumstances indicate possible impairment
may
have occurred, we evaluate long-lived assets, including tangible assets and intangible assets subject to amortization, for possible impairment based on expected future undiscounted operating cash flows attributable to such assets using applicable authoritative guidance. Assets are grouped at the lowest level for which identifiable cash flows are largely independent of other assets and liabilities when assessing impairment. Gains or losses on property and equipment disposals are recognized when disposed. Recording accelerated depreciation, gain or loss on disposal or impairment losses related to property and equipment is based on assessment of the associated facts and circumstances. Management believes there have since been
no
events or circumstances which indicate possible impairment, and that
no
unrecognized impairment of property and equipment exists as of
December 31, 2018.
 
From time to time, we
may
decide to repurpose various seating, suites and other areas at our speedways for modernizing our facilities, alternative marketing or development purposes such as offering expanded premium hospitality, RV camping and advertising 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. Associated estimated costs of removal and disposal are also recorded at that time in “other expense”. 
 
In connection with the development and completed construction of TMS in
1997,
the Company entered into arrangements with the Fort Worth Sports Authority (FWSA), a non-profit corporate instrumentality of the City of Fort Worth, Texas, whereby the Company conveyed the speedway facility, excluding its on-site condominiums and office and entertainment complex, to the FWSA. The Company, which has the right to reacquire the facility, operates the speedway facility under a
30
-year arrangement with the FWSA. Because of the Company’s responsibilities, including associated risks, rewards and obligations, under these arrangements, the speedway facility and related liabilities are included in the accompanying consolidated balance sheets.
 
Other Intangible Assets
and
Goodwill (Note
5
)
represent the excess of business acquisition costs over the fair value of net assets acquired, and are all associated with our motorsports related activities and reporting units. Intangible assets consist predominately of goodwill and nonamortizable intangible assets for NASCAR race event sanctioning and renewal agreements (Event Management Agreements) and, to a lesser extent, goodwill associated with event related motorsports activities. Acquired intangible assets are valued using the direct value method. We have evaluated each of our intangible assets for these agreements and determined that each will extend into the foreseeable future. We have never been unable to renew these race date agreements for any subsequent year and
no
such agreement has ever been cancelled. Based on these and other factors, such race date agreements are expected to be awarded to the Company in perpetuity. As such, these nonamortizable intangible assets for race event sanctioning and renewal agreements are considered to have indefinite useful lives because their renewal and cash flow generation are expected to continue indefinitely.
No
direct costs for agreement renewal or extension have been incurred or capitalized. However, we are obligated to conduct events in the manner stipulated under the terms and conditions of the annual sanctioning agreements. We follow applicable authoritative guidance on accounting for goodwill and other intangible assets, which specifies among other things, nonamortization of goodwill and requires testing of intangible assets with indefinite useful lives for possible impairment at least annually.
 
Impairment Assessment Methodology.
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. Management considers each speedway and motorsports and non-motorsports merchandising subsidiary a separate reporting unit principally because that is the lowest level for which discrete financial information is available to our managers and chief operating decision maker.
No
reporting units are aggregated, and
no
intangible assets are allocated or transferred between reporting units, for purposes of evaluating intangible assets for possible impairment. We evaluate intangible assets for possible impairment based predominately on management’s best estimate of future discounted operating cash flows for all individual reporting units and identified intangible assets (using the fair value assessment provisions of applicable authoritative guidance). The inputs for measuring fair value are considered "Level
3"
or unobservable inputs that are
not
corroborated by market data under applicable fair value authoritative guidance, as quoted market prices are
not
available.
 
Except for the
2018
realignment described below, our annual impairment assessment did
not
consider the possibility that management
may
realign
one
or more other Monster Energy NASCAR Cup Series racing events among its speedway facilities, which could result in net higher or improved future projected cash flows. Such information was also compared to available market information for certain motorsports industry peers. Management considered recent market trading ranges of price to earnings and sales multiples, cash flow and other traditional valuation methods, control premiums, and other market information related to our common stock from historical and forward-looking perspectives.
No
weighting of evaluation results was believed necessary. 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. Impairment charges and associated operations are included in our "motorsports event related" reportable segment (see Note
13
).
 
Annual Impairment Assessment
. Management's latest annual assessment in the
second
quarter
2018
considered NASCAR’s approved realignment of
one
annual Monster Energy Cup Series and
one
annual Gander Outdoors Truck Series racing event from NHMS, and an annual Xfinity Series racing event from KyS, to LVMS beginning in
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
Gander Outdoors 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 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'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, resulting in nominal excess fair value for future impairment assessments. As such, their adjusted carrying values approximated estimated fair values as of evaluation dates, and which are reflected in our current evaluation. As of
December 31, 2018
and
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.
 
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
2017
to reduce associated goodwill to
$0.
 
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
December 31, 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.
 
Deferred Income 
(noncurrent) as of
December 31, 2018
and
2017
consists of (in thousands):
 
   
2018
   
2017
 
Preferred seat license fees
  $
1,928
    $
2,185
 
Multi-year marketing and other arrangements, and deferred membership income
   
429
     
869
 
Total
  $
2,357
    $
3,054
 
 
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
$12,522,000
in
2018,
$13,324,000
in
2017
and
$17,321,000
in
2016
(includes “the Battle at Bristol”). There were
no
deferred direct-response advertising costs at
December 31, 2018
or
2017.
 
Operating Leases
– The following disclosures are based on accounting guidance in effect prior to our
January 1, 2019
adoption of the new lease accounting standards as further discussed in “Recently Issued Accounting Standards” below.
 
We have various operating leases principally for office and warehouse space and for equipment used in conducting racing events and other operations. Rent expense for operating leases amounted to
$5,978,000
in
2018,
$6,411,000
in
2017
and
$8,730,000
in
2016.
We lease various office, warehouse and industrial park space under operating leases to various entities largely involved in motorsports. These operating leases typically have initial terms of
one
year or more and are noncancelable. Lease revenue for operating leases, excluding the TMS oil and gas mineral rights lease receipts discussed below, amounted to
$5,642,000
in
2018,
$5,676,000
in
2017
and
$5,625,000
in
2016.
Future annual minimum lease payments (where initial terms are
one
year or more and assuming renewal through contracted periods), and contracted future annual minimum lease revenues, under operating leases at
December 31, 2018
are as follows (in thousands):
 
   
Lease
Payments
   
Lease
Revenues
 
2019
  $
1,152
    $
5,142
 
2020
   
855
     
2,561
 
2021
   
504
     
1,778
 
2022
   
156
     
1,250
 
2023
   
145
     
888
 
Thereafter
   
200
     
37
 
Total
  $
3,012
    $
11,656
 
 
Other
(Income)
Expense
, Net
consists of (in thousands):
 
 
 
2018
 
 
2017
 
 
2016
 
Removal costs for retired assets (Note 4)
 
$
338
 
 
$
1,350
 
 
$
59
 
Net gain on disposals of property and equipment and other assets
 
 
(2,286
)
 
 
(944
)
 
 
(1,412
)
Write-off of certain development costs and other
 
 
42
 
 
 
935
 
 
 
356
 
Total
 
$
(1,906
 
$
1,341
 
 
$
(997
)
 
We recorded gains from disposal of certain TMS property in
2017
and AMS property in
2016,
and losses on the write-off of certain development costs in
2017
and
2016.
 
Income Taxes (Note
8
)
– We recognize deferred tax assets and liabilities for the future income tax effect of temporary differences between financial and income tax bases of assets and liabilities. Income taxes are provided using the liability method whereby estimated deferred income taxes, and significant items giving rise to deferred tax assets and liabilities, reflect management’s assessment of future taxes likely to be paid, including timing, probability of realization and other relevant factors. Our accounting for income taxes reflects management’s assessment of future tax liabilities based on assumptions and estimates for timing, likelihood of realization, and tax laws existing at the time of evaluation. We assess the need for valuation allowances for deferred tax assets based on the sufficiency of estimated future taxable income and other relevant factors. We report interest expense and penalties related to income tax liabilities, when applicable, in income tax expense. 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.
 
We follow applicable authoritative guidance on accounting for uncertainty in income taxes which, among other things, prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return, and provides guidance on derecognition, classification, interest and penalties, and disclosures. Evaluation of a tax position includes determining whether it is more likely than
not
a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position meets the more-likely-than-
not
recognition threshold, it is presumed the position will be examined by appropriate taxing authorities having full knowledge of all relevant information. A tax position that meets the more-likely-than-
not
recognition threshold is measured to determine the amount of benefit to be recognized in the financial statements. The tax position is measured at the largest amount of benefit that is greater than
50
percent likely of being realized upon ultimate settlement.
 
TMS Mineral Rights Lease Receipts
– TMS, in conjunction with the Fort Worth Sports Authority, has a natural gas mineral rights lease agreement and a joint exploration agreement which, among other things, entitles TMS to stipulated stand-alone and shared royalties and provides the lessee various defined property access and right-of-ways, exclusive exploration and extraction rights, and non-interference by TMS in extraction and operating activities. TMS is required to coordinate directly with the lessee on roadway and pipeline logistics to prevent interference of TMS or lessee activities, and monitor regulatory and other contract compliance. The long-term lease remains enforceable as long as drilling or extraction related activities continue or certain price levels are met. Under the lease agreement, TMS recognized royalty revenue of
$1,385,000
in
2018,
$1,916,000
in
2017
and
$2,139,000
in
2016.
 
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
2019
revenues will
not
differ significantly from
2018,
and that our infrastructure spending will continue to exceed anticipated future royalties similar to
2018.
As of
December 31, 2018
and
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
December 31, 2018
and
2017
(in thousands):
 
             
2018
   
2017
 
   
Level
 
Class
 
Carrying
Value
   
Fair Value
   
Carrying
Value
   
Fair Value
 
Assets
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
   
1
 
R
  $
80,568
    $
80,568
    $
81,924
    $
81,924
 
Note receivable
   
2
 
NR
   
613
     
613
     
799
     
799
 
Cash surrender values
   
2
 
NR
   
10,061
     
10,061
     
9,822
     
9,822
 
                                           
Liabilities
(principal)
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Floating rate revolving Credit Facility, including Term Loan
   
2
 
NR
   
     
     
30,000
     
30,000
 
5.125% Senior Notes Payable due 2023
   
2
 
NR
   
200,000
     
195,000
     
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.
 
Concentrations of Credit Risk
– Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, accounts and notes receivable, and cash surrender values. Concentration of credit risk with respect to cash and cash equivalents and cash surrender values is limited through placement with major high-credit qualified financial institutions and insurance carriers, respectively. However, amounts placed often significantly exceed available insured limits. Concentrations of credit risk with respect to accounts receivable are limited due to the large numbers and wide variety of customers and customer industries and their broad geographical dispersion. Also, a significant portion of our accounts receivable typically pertain to advance revenues for specific events which are deferred until the event is held. As such, exposure to credit risk on such receivables that could adversely affect operating results is limited until recognition of the associated deferred race event income. We generally require sufficient collateral equal to or exceeding note amounts, or accept notes from high-credit quality entities or high net-worth individuals, limiting our exposure to credit risk. Amounts due from affiliates typically can be offset to the extent of amounts payable to affiliates, limiting our exposure to credit risk.
 
Loss and Other Contingencies and Financial Guarantees
– We accrue a liability for contingencies if the likelihood of an adverse outcome is probable and the amount is estimable. Legal and other costs associated with loss contingencies are expensed as incurred. We account for financial guarantees using applicable authoritative guidance which requires, among other things, that guarantors recognize a liability for the fair value of obligations undertaken by issuing a guarantee.
 
CMS’s property includes areas used as solid waste landfills for many years. Landfilling of general categories of municipal solid waste on the CMS property ceased in
1992,
but CMS currently allows certain property to be used for land clearing and inert debris landfilling. Landfilling for construction and demolition debris has ceased on the CMS property. Management believes the Company’s operations, including the landfills on its property, comply with all applicable federal, state and local environmental laws and regulations. Management is
not
aware of any situation related to landfill operations which would have a material adverse effect on our financial position, future results of operations or cash flows.
 
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.
 
The FASB issued ASU
No.
2016
-
02
“Leases (Subtopic
842
)” which replaces all current US GAAP guidance on this topic, and ASU
No.
2018
-
10
“Codification Improvements to Topic
842,
Leases” which clarifies certain transitional and application guidance. Leases are to be recognized on an entity’s balance sheet as right-of-use assets and lease liabilities for the majority of their leases (other than leases meeting the definition of a short-term lease), and expanded disclosures are required. Operating leases
may
typically result in straight-line expense, with finance leases following a front-loaded expense pattern. The accounting to be applied by lessors is largely unchanged from previous guidance. The FASB also issued ASU
No.
2018
-
20
“Narrow-Scope Improvements for Lessors - Leases (Topic
842
)” which, among other things, requires lessors to exclude certain lessor costs paid by lessees directly to
third
parties from revenue and variable payments in lease contract consideration. Costs paid by lessors and reimbursed by lessees will be recorded as costs and revenue, respectively.
 
The lease guidance is effective for fiscal years beginning after
December 15, 2018,
and interim periods within those fiscal years. We plan to adopt this new guidance as of
January 1, 2019
using the modified retrospective transition method, which includes a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. We are finalizing ongoing analysis of transactional data, underlying contracts and associated accounting policies, and gathering information for required presentation and disclosures. We continue to implement processes, internal controls and technology solutions to help enable timely and accurate reporting. Also, we are finalizing the amounts for right-of-use assets and related lease liabilities to be reflected on our consolidated balance sheet. However, at this time, we believe adoption will
not
have a significant impact on our consolidated financial statements.
 
Our lease agreements are principally for office and warehouse space used in operations and equipment used in conducting racing and other events. We plan to use the following practical expedients and other considerations in applying the new lease accounting guidance:
 
Because our operations consist largely of weekend, single day or other short-period seasonal events, most equipment and other personal property lease agreements typically have initial terms of
one
year or less, involve right-to-use assets with actual use of less than
30
consecutive days or are cancelable with minimal notice, and have lessor substitution and control rights throughout periods of use.
Most of our various office and warehouse facilities are leased from an affiliate (as further described in Note
9
) that are cancelable with minimal notice, although likely to be renewed annually through specific contract periods.
Actual use, right-to-use or ability to cancel with minimal notice was considered, notwithstanding likelihood of renewal or general lease terms. Such considerations under the new lease guidance resulted in significantly reducing the impact of adoption.
No
reassessment of whether any expired or existing contracts are or contain leases or their previous classification.
Our initial direct costs are immaterial for all leases.
Continue to apply previous accounting and disclosure guidance for comparative periods presented in the year of adoption.
 
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 their 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.
 
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. 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. Under the newly adopted guidance, certain event related revenue under contract should be recognized quarterly as performance obligations are satisfied, whereas under prior guidance revenue was recognized when fixed and determinable. While preparing our
2018
annual financial statements, we determined that the impact of adoption should have increased accounts receivable by
$2,081,000
and retained earnings by
$1,567,000
and increased deferred taxes by
$398,000
and taxes payable by
$116,000,
as of
January 1, 2018.
These revisions were
not
material to any of the prior interim financial statements, and had
no
impact on annual net income, earnings per share or cash flows. There was
no
other impact on the measurement or recognition of revenue of prior periods, and 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 evaluation under ASC
606
and associated required disclosures are set forth above in “Customer Revenues” and are
not
repeated here.
v3.19.1
Note 3 - Inventories
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Inventory Disclosure [Text Block]
3.
INVENTORIES
 
Inventory costs consist of: (i) souvenirs and apparel,
5/8
-scale and similar small-scale finished race cars and parts and accessories determined on a
first
-in,
first
-out basis; and (ii) micro-lubricant® product costs determined on an average current cost basis.
No
general and administrative costs are included in inventory costs. Cost of sales are charged using the same inventory cost bases. Inventories as of
December 31, 2018
and
2017
consist of (in thousands):
 
   
2018
   
2017
 
Finished race cars, parts and accessories
  $
5,162
    $
4,507
 
Souvenirs and apparel
   
2,319
     
2,014
 
Micro-lubricant® and other
   
537
     
762
 
Total
  $
8,018
    $
7,283
 
 
All inventories are stated at the lower of cost or realizable value with provisions for differences between cost and estimated market value based on assumptions about current and future demand, market conditions and trends that might adversely impact realization. Inventories are reflected net of lower of cost or realizable value provisions summarized as follows (in thousands):
 
   
2018
   
2017
   
2016
 
Balance, beginning of year
  $
2,377
    $
3,076
    $
2,756
 
Current year provision
   
60
     
48
     
1,024
 
Current year sales and write-offs
   
(922
)
   
(747
)
   
(704
)
Balance, end of year
  $
1,515
    $
2,377
    $
3,076
 
v3.19.1
Note 4 - Property and Equipment
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Property, Plant and Equipment Disclosure [Text Block]
4.
PROPERTY AND EQUIPMENT
 
Property and equipment as of
December 31, 2018
and
2017
is summarized as follows (dollars in thousands):
 
 
 
Estimated
Useful Lives
 
 
2018
 
 
2017
 
Land and land improvements
 
 5
-
25
 
 
$
465,083
 
 
$
463,031
 
Racetracks and grandstands
 
 5
-
45
 
 
 
733,082
 
 
 
720,989
 
Buildings and luxury suites
 
 5
-
40
 
 
 
470,731
 
 
 
463,942
 
Machinery and equipment
 
 3
-
20
 
 
 
45,433
 
 
 
43,628
 
Furniture and fixtures
 
 5
-
20
 
 
 
42,175
 
 
 
39,842
 
Autos and trucks
 
 3
-
10
 
 
 
13,171
 
 
 
12,755
 
Construction in progress
 
 
 
 
 
 
 
7,253
 
 
 
3,915
 
Total
 
 
 
 
 
 
 
1,776,928
 
 
 
1,748,102
 
Less accumulated depreciation
 
 
 
 
 
 
 
(840,377
)
 
 
(789,887
)
Net
 
 
 
 
 
 
$
936,551
 
 
$
958,215
 
 
Other Information
(Note
2
)
– Depreciation expense amounted to
$54,494,000
in
2018,
$64,817,000
in
2017
and
$54,344,000
in
2016.
 
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. We recorded non-cash pre-tax accelerated depreciation aggregating
$1,750,000
in
2018
and
$11,055,000
in
2017
associated with removal of certain seating at various speedways and expansion of LVMS’s dragway in
2017.
We recorded non-cash pre-tax accelerated depreciation aggregating
$313,000
associated with removal of certain TMS assets in
2016.
Costs of removal are included in “other expense, net” (see Note
2
). These charges are included in our "motorsports event related" reporting segment (see Note
13
).
v3.19.1
Note 5 - Other Intangible Assets and Goodwill
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Goodwill and Intangible Assets Disclosure [Text Block]
5.
OTHER INTANGIBLE ASSETS AND GOODWILL
 
The composition and accounting for intangible assets are further described in Note
2.
Changes in the carrying value of other intangible assets and goodwill are as follows (in thousands):
 
   
Other Intangible Assets
   
Goodwill
 
   
2018
   
2017
   
2018
   
2017
 
Balance, beginning of year
 
$
298,383
   
$
298,383
    $
46,225
    $
47,342
 
Decrease from impairment charges (Note 2)
   
     
     
     
(1,117
)
Balance, end of period
  $
298,383
    $
298,383
    $
46,225
    $
46,225
 
 
The
2017
decrease reflects an impairment charge to reduce goodwill associated with certain SMIP merchandising to estimated fair value because of potentially unfavorable merchandising business model developments. These carrying amounts include accumulated impairments of
$
100.0
million for other intangible assets and
$
149.7
million for goodwill at
December 31, 2018
and
2017.
There is
no
accumulated amortization for either asset class. 
v3.19.1
Note 6 - Long-term Debt
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Long-term Debt [Text Block]
6.
LONG-TERM DEBT
 
Long-term debt at
December 31, 2018
and
2017
consists of (in thousands):
 
   
2018
   
2017
 
Credit Facility, all Term Loan
  $
    $
30,000
 
2023 Senior Notes
   
200,000
     
200,000
 
Other notes payable
   
887
     
1,049
 
Total
   
200,887
     
231,049
 
Less current maturities
   
(167
)
   
(7,662
)
Less deferred financing costs, net of accumulated amortization (Note 2)
   
(2,718
)
   
(3,935
)
Long-term debt, excluding current maturities
  $
198,002
    $
219,452
 
 
Annual principal maturities of long-term debt at
December 31, 2018
are as follows (in thousands):
 
2019
  $
167
 
2020
   
172
 
2021
   
177
 
2022
   
183
 
2023
   
200,188
 
Thereafter
   
 
Total
  $
200,887
 
 
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) (the Term Loan or Term Loans); (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.
 
We repaid Term Loan borrowings of
$30,000,000
in
2018,
$36,000,000
in
2017
and
$54,000,000
in
2016.
There were
no
borrowings under the Credit Facility during those periods. At
December 31, 2018
and
2017,
outstanding letters of credit amounted to
$587,000
and
$698,000.
As of
December 31, 2018,
we had availability for borrowing up to an additional
$99,413,000,
including up to an additional
$49,413,000
in letters of credit, under the revolving 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 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.
 
2023
Senior Notes
– We completed a private placement of
5.125%
Senior Notes due
2023
in aggregate principal amount of
$200,000,000
in
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 after commissions and fees of approximately
$196,816,000
were used to partly fund the redemption of previously issued senior notes. The
2023
Senior Notes mature in
February 2023
and interest payments are due semi-annually on
February 
1
and
August 
1.
The
2023
Senior Notes rank equally in right of payment with all other Company existing and future unsubordinated debt, are senior in right of payment to any future subordinated debt and are effectively subordinated to all existing and future secured debt, including the Credit Facility. The Indenture governing the
2023
Senior Notes permits dividend payments each year of up to approximately
$0.80
per share of common stock, increasable subject to meeting certain financial covenants.
 
Other Notes Payable
– At
December 31, 2018
and
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.
 
Other General Terms and Conditions
– The Credit Facility and
2023
Senior Notes contain specific requirements and restrictive financial covenants and limitations on capital expenditures, speedway or other acquisitions, dividends, repurchase or issuance of SMI securities, restricted payments, equity and debt security repurchases, limitations or prohibitions on incurring other indebtedness, liens or pledging assets to
third
parties, consolidation, mergers, transactions with affiliates, guarantees, asset sales, specific types of investments, distributions, disposition of property, entering into new lines of business, and contain redemption and change of control provisions and premiums. The Credit Facility and
2023
Senior Notes Indenture also contain cross-default provisions. We were in compliance with all applicable financial covenants under these debt agreements as of
December 31, 2018.
 
Subsidiary Guarantees
Amounts outstanding under the 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
independent assets or operations. SMI depends on cash flows and other payments from our speedways and other subsidiaries to pay cash dividends to stockholders, as well as meet debt service and working capital requirements. There are
no
restrictions on our subsidiaries’ ability to pay dividends, transfer or advance funds to the parent company, SMI or other subsidiaries.
 
Interest Expense, Net
– Interest expense, interest income and capitalized interest costs are summarized as follows (in thousands): 
 
   
2018
   
2017
   
2016
 
Gross interest costs
  $
12,372
    $
13,050
    $
13,818
 
Less capitalized interest costs
   
(389
)
   
(281
)
   
(476
)
Interest expense
   
11,983
     
12,769
     
13,342
 
Interest income
   
(534
)
   
(528
)
   
(194
)
Interest expense, net
  $
11,449
    $
12,241
    $
13,148
 
                         
Weighted average interest rate on Credit Facility borrowings
   
3.1
%
   
2.3
%
   
1.9
%
v3.19.1
Note 7 - Capital Structure, Per Share Data and Other Equity Information
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Stockholders Equity and Earnings Per Share [Text Block]
7.
CAPITAL STRUCTURE, PER SHARE DATA AND OTHER EQUITY INFORMATION
 
Preferred Stock
– At
December 31, 2018,
SMI has authorized
3,000,000
shares of preferred stock with a par value of
$.10
per share. Shares of preferred stock
may
be issued in
one
or more series with rights and restrictions as
may
be determined by our Board of Directors.
No
preferred shares were issued or outstanding at
December 31, 2018
or
2017.
 
Per Share Data
– 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):
 
   
2018
   
2017
   
2016
 
Net income applicable to common stockholders and assumed conversions
  $
40,449
    $
148,245
    $
39,545
 
                         
Weighted average common shares outstanding
   
40,910
     
41,025
     
41,152
 
Dilution effect of assumed conversions, common stock equivalents – stock awards
   
12
     
16
     
15
 
Weighted average common shares outstanding and assumed conversions
   
40,922
     
41,041
     
41,167
 
                         
Basic earnings per share
  $
0.99
    $
3.61
    $
0.96
 
Diluted earnings per share
  $
0.99
    $
3.61
    $
0.96
 
Anti-dilutive common stock equivalents excluded in computing diluted earnings per share
   
10
     
7
     
120
 
 
Declaration of Cash Dividends
– Our Board of Directors approved aggregate dividends on common stock as follows (in thousands except per share amounts):
 
   
2018
   
2017
   
2016
 
Cash dividends paid
  $
24,624
    $
24,694
    $
24,759
 
Dividends per common share
  $
0.60
    $
0.60
    $
0.60
 
 
Quarterly dividends were declared in each period and all declaration, record and payment dates were in the same fiscal periods. See Note
6
for annual limitations on dividend payments under our debt agreements. On
February 
12,
2019,
our Board of Directors declared a quarterly cash dividend of
$0.15
per share of common stock aggregating approximately
$6.1
million payable on
March 
15,
2019
to shareholders of record as of
March 1, 2019.
These quarterly cash dividends are being paid using available cash and cash equivalents on hand.
 
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.
 
We repurchased
246,000,
251,000
and
252,000
shares of common stock for
$4,395,000
in
2018,
$5,015,000
in
2017
and
$4,667,000
in
2016,
respectively. As of
December 31, 2018,
we could repurchase up to an additional
945,000
shares under the current authorization. In
2018,
2017
and
2016,
we repurchased approximately
53,000,
56,000
and
58,000
shares of common stock for
$948,000,
$1,103,000
and
$1,169,000
from management employees to settle income taxes on
140,000,
139,000
and
136,000
restricted shares that vested during the periods, respectively. As of
December 31, 2018
and
2017,
treasury stock includes
381,000
and
328,000
shares of common stock delivered to the Company for such purposes.
v3.19.1
Note 8 - Income Taxes
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Income Tax Disclosure [Text Block]
8.
INCOME TAXES
   
Components of the provision (benefit) for income taxes are as follows (in thousands):
 
   
2018
   
2017
   
2016
 
Current:
                       
Federal
  $
12,679
    $
23,327
    $
12,630
 
State
   
1,035
     
436
     
262
 
     
13,714
     
23,763
     
12,892
 
Deferred:
                       
Federal
   
(637
)
   
(127,310
)
   
8,604
 
State
   
(151
)
   
(328
)
   
155
 
     
(788
)
   
(127,638
)
   
8,759
 
Total
  $
12,926
    $
(103,875
)
  $
21,651
 
   
The reconciliation of statutory federal and effective income tax rates is as follows:
 
   
2018
   
2017
   
2016
 
Statutory federal tax rate
   
21.0
%
   
35.0
%
   
35.0
%
State and local income taxes, net of federal income tax effect
   
2.4
     
2.2
     
1.8
 
Non-deductible executive compensation
   
1.3
     
1.6
     
 
Change in valuation allowances
   
     
0.1
     
0.6
 
Change in uncertain tax positions, including income tax liabilities for settlements with taxing authorities
   
0.8
     
0.1
     
(0.2
)
Change in federal tax rate
   
(0.4
)
   
(270.8
)
   
 
Change in state tax rates
   
(1.3
)
   
(3.7
)
   
(0.9
)
Other, net
   
0.4
     
1.4
     
(0.9
)
Total
   
24.2
%
   
(234.1
%)
   
35.4
%
 
Tax effects of temporary differences resulting in deferred income taxes are as follows (in thousands):
 
   
2018
   
2017
 
Deferred tax liabilities:
               
Property and equipment
  $
136,221
    $
140,463
 
Goodwill and other intangible assets
   
70,775
     
68,752
 
Expenses deducted for tax purposes and other
   
2,287
     
1,707
 
Subtotal
   
209,283
     
210,922
 
Deferred tax assets:
               
Income previously recognized for tax purposes
   
2,189
     
2,449
 
Stock option and other deferred compensation expense
   
1,732
     
1,838
 
PSL and other deferred income recognized for tax purposes
   
506
     
627
 
State and federal net operating loss carryforwards
   
5,167
     
6,188
 
Subtotal
   
9,594
     
11,102
 
Less: valuation allowance
   
(1,797
)
   
(1,940
)
Net deferred tax assets
   
7,797
     
9,162
 
Total net deferred tax liabilities
  $
201,486
    $
201,760
 
 
December
201
7
Tax Cuts and Jobs Act Enactment (Note
2
)
On
December 22, 2017,
the Tax Cuts and Jobs Act was enacted which substantially amended the Internal Revenue Code. Effective
January 1, 2018,
the Tax 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. Accounting guidance provided for a provisional
one
-year measurement period for entities to finalize their accounting for certain income tax effects of the Tax Act.
 
As such, we recorded a provisional
one
-time material reduction of our net deferred income tax liabilities, and corresponding income tax benefit, of
$119,449,000
in the
fourth
quarter
2017.
The reduction resulted from re-measuring our deferred tax assets and liabilities using the new lower tax rates and certain tax expense, and the associated effects on gross deferred tax assets, deferred tax liabilities and valuation allowances, including changes in timing differences, are reflected in the above disclosures. The
2017
reduction consists of: (i) tax benefits of
$120,172,000
using the new lower federal tax rates and (ii) provisional tax expense of
$723,000
related to non-deductible executive compensation as we anticipated that performance-based compensation would
no
longer be tax deductible. We finalized the accounting for those provisional amounts in the
fourth
quarter
2018
upon filing our corporate income tax returns, and recognized
$233,000
of additional tax benefit primarily related to the revaluation of deferred tax assets and liabilities.
No
adjustment was made to our provisional estimate for non-deductible executive compensation.
 
Effective Tax Rate Comparison for
2016
through
2018
– Our effective income tax rate for
2018
was
24.2%,
for
2017
was
234.1%
(benefit) and for
2016
was
35.4%.
Our
2018
tax rate reflects the lower US corporate federal tax rate under the Tax Act, and a non-recurring tax benefit of
$908,000
resulting from certain state and federal income tax law changes. Our
2017
effective tax rate reflects the
one
-time material tax benefit associated with re-measuring our deferred tax assets and liabilities using the new lower US corporate federal tax rate of
21%,
and tax expense related to non-deductible executive compensation as further described above. The
2017
rate also reflects non-recurring tax benefits of
$575,000
resulting from certain state income tax law changes, and non-recurring tax benefits of
$1,070,000
for lower state income tax rates associated with
2017
race date realignments. Our
2016
effective tax rate reflects non-recurring tax benefits of
$546,000
resulting from certain state income tax law changes. Our
2016
tax rate reflects reductions of valuation allowances on deferred tax assets associated with our discontinued operation.
 
At
December 31, 2018,
the Company has approximately
$168,914,000
of state net operating loss carryforwards expiring in
2018
through
2037.
At
December 31, 2018
and
2017,
valuation allowances of
$1,797,000
and
$1,940,000
have been provided against deferred tax assets because management has determined that ultimate realization is
not
more likely than
not
for certain deferred tax assets and state net operating loss carryforwards. The valuation allowances for deferred tax assets decreased by
$143,000
in
2018,
increased by
$192,000
in
2017,
and increased by
$326,000
in
2016.
 
Accounting for Uncertainty in Income Taxes
– Income tax liabilities for unrecognized tax benefits approximate
$11,711,000
at both
December 31, 2018
and
2017,
all of which relates to our previously discontinued operat
ion. 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
December 31, 2018
and
2017.
As of
December 31, 2018
and
2017,
management believes
$201,000
and
$0
of unrecognized tax benefits will be recognized within the next
twelve
months. Interest and penalties associated with uncertain tax benefits amounted to
$548,000
in
2018,
$188,000
in
2017
and
$61,000
in
2016,
and derecognized amounts were
$0
in
2018,
$86,000
in
2017
and
$90,000
in
2016.
As of
December 31
,
2018
and
2017,
we had
$789,000
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
2014
 through
2017
by other state taxing jurisdictions to which we are subject. 
 
A reconciliation of the change in the total unrecognized tax benefits and other information for the
three
years ended
December 31, 2018
is as follows (in thousands):
 
   
2018
   
2017
   
2016
 
Beginning of period
  $
11,711
    $
12,006
    $
12,280
 
Increases or decreases for tax positions of current year
   
     
     
 
Increases for tax positions of prior years
   
     
     
 
Decreases for tax positions of prior years
   
     
(295
)
   
(274
)
Reductions for lapse of applicable statute of limitations
   
     
     
 
Increases or decreases for settlements with taxing authorities
   
     
     
 
End of period
  $
11,711
    $
11,711
    $
12,006
 
 
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
December 31, 2018
and
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.
v3.19.1
Note 9 - Related Party Transactions
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Related Party Transactions Disclosure [Text Block]
9.
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. We incurred expenses under the shared services agreement of
$1,523,000
in
2018,
$845,000
in
2017
and
$930,000
in
2016.
No
amounts were due from or payable to Sonic Financial at
December 31, 2018
and
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
$725,000
in
2018,
$721,000
in
2017
and
$721,000
in
2016.
Amounts owed to these affiliated companies at
December 
31,
2018
and
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., an entity in which our Executive Chairman is a controlling stockholder, and our Chief Executive Officer and a member of our Board of Directors are affiliated through common ownership, for an aggregate of approximately
$217,000
in
2018,
$238,000
in
2017
and
$162,000
in
2016.
Vehicles sold to SAI in
2018,
2017
or
2016
were
not
significant. Also, SMI sold through certain speedways and its SMIP merchandising subsidiary various event related inventory and merchandise to SAI totaling approximately
$929,000
in
2018,
$866,000
in
2017
and
$937,000
in
2016.
At
December 31, 2018
and
2017,
$142,000
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 approximated
$1,621,000
in
2018,
$1,940,000
in
2017
and
$2,054,000
in
2016.
At
December 
31,
2018
and
2017,
$217,000
and
$148,000
was due from SAI and is reflected in current assets.
 
The foregoing related party balances as of
December 31, 2018
and
2017,
and transactions for the
three
years ended
December 31, 2018
are summarized below (in thousands):
 
   
December 31,
2018
   
December 31,
2017
 
Accounts receivable
  $
359
    $
218
 
 
   
2018
   
2017
   
2016
 
Merchandise and vehicle purchases
  $
217
    $
238
    $
162
 
Shared services expense, net of accrued interest
   
1,523
     
845
     
930
 
Merchandise and vehicle sales and event related commissions
   
2,550
     
2,806
     
2,991
 
Rent expense
   
725
     
721
     
721
 
v3.19.1
Note 10 - Legal Proceedings and Contingencies
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Commitments and Contingencies Disclosure [Text Block]
10.
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.
v3.19.1
Note 11 - Stock Compensation Plans
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
11.
STOCK COMPENSATION PLANS
 
2013
Stock Incentive Plan, Amended and Restated as of
April 19, 2017
– The
2013
Stock Incentive Plan (the
2013
Plan) allows the Company, among other things, to provide equity-based incentives to, and continue to attract and retain, key employees, directors and other individuals providing services to the Company. Awards under the
2013
Plan
may
be in the form of incentive stock options, nonqualified stock options, stock appreciation rights (SARs), restricted stock, restricted stock units or stock awards. In
February 2017,
our Board of Directors adopted an amended and restated
2013
Stock Incentive Plan which was approved by the stockholders at the
2017
Annual Meeting. The amendment and restatement did
not
increase the number of shares reserved for issuance or any of the award limits under the
2013
Plan. The primary changes included: (i) additions to the permissible criteria upon which performance goals for performance-based compensation can be based; and (ii) revisions and additions to the types of items and events that
may
be used for adjustments in determining whether an objective performance goal for performance-based compensation has been met. To date, we have awarded restricted stock and restricted stock units under the
2013
Plan.
 
The
2013
Plan is administered by the Compensation Committee of the Board of Directors who has full authority to determine recipients, types, purchase prices, and amounts of awards granted and amend the terms, restrictions and conditions of awards. Factors considered, among others, include achievement of financial, business and performance objectives, the occurrence of specific events, time periods of continued service or other time-based restrictions. Under the
2013
Plan,
3,500,000
shares of SMI’s common stock are reserved for issuance, subject to various restrictions and adjustments including the following: (i) if shares subject to award under the
2013
Plan are forfeited, or the award otherwise terminates or is canceled for any reason without the issuance of such shares, those shares will be available for future awards; (ii) 
no
individual
may
be granted options or SARs aggregating more than
300,000
shares of common stock during any calendar year; (iii) in the case of awards other than options or SARs that are intended to be “performance-based compensation”,
no
individual
may
be granted an aggregate of more than
100,000
shares of common stock during any calendar year; and (iv) with respect to any cash-based stock award that is intended to be a performance award, the maximum cash payment that
may
be paid during any
one
calendar year to an individual is
$10,000,000.
Exercise prices for awarded stock options generally
may
not
be less than the fair or trading value of the Company’s common stock at, and exercise periods
may
not
exceed
ten
years from, the option grant date. At
December 31, 2018,
approximately
2,728,000
shares were available for future grant.
 
All restricted stock and restricted stock units issued to date vest in equal installments over
three
years or cliff vest after
five
years. Once applicable restrictions lapse or have been satisfied, restricted stock units
may
be payable in cash, shares of common stock or a combination, as specified in the award agreement. Awards of restricted stock or restricted stock units are generally subject to forfeiture and restrictions on transferability until vested. If restricted stock and restricted stock unit award recipients cease to perform services for the Company, all shares of common stock and restricted stock units still subject to restrictions generally will be forfeited unless waived by the Compensation Committee. Recipients of restricted stock generally will have certain rights and privileges of a stockholder, including the right to vote such shares and receive dividends, if any. Recipients of restricted stock units generally will
not
have the rights and privileges of a stockholder, except they
may
be entitled to receive dividend equivalents, if so specified in the award agreements and dividends are declared.
 
The Compensation Committee of our Board of Directors approved grants of
35,000
restricted stock units to our Chief Executive Officer and President and
35,000
shares of restricted stock to our Vice Chairman and Chief Financial Officer in
2018.
Both grants are under the
2013
Plan, 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. In
2018,
30,864
shares of both performance-based restricted stock and restricted stock units vested, and
5,727
of both restricted stock shares and restricted stock units were forfeited. Forfeitures in any given year result from differences between our actual results for the previous year as compared to the defined full year earnings target. Once the vesting period expires, common stock is issued in settlement of the restricted stock units and all vested shares are
no
longer subject to forfeiture or restrictions on transferability. As of
December 31, 2018,
64,697
restricted stock shares and
125,561
restricted stock units (both performance-based) were outstanding.
 
In
2018,
we also granted to non-executive management employees
83,300
shares of restricted stock that vest in equal installments over
three
years, and repurchased
24,994
shares of common stock from such employees for
$408,000
related to settlement of income taxes on
78,369
shares that vested under the
2013
Plan. In
2018,
we also repurchased
27,815
shares of common stock for
$540,000
from executive management employees to settle income taxes on
61,728
performance-based shares that vested under the 
2013
Plan
.
Repurchases of common stock related to settlement of income taxes upon restricted stock vesting are reflected as financing activities in the statement of cash flows.
 
2018
Formula Restricted Stock Plan
– The
2008
Formula Plan described below expired by its terms in
February 2018.
In
March 2018,
our Board of Directors adopted the
2018
Formula Restricted Stock Plan (the
2018
Formula Plan) which was approved by stockholders at our
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 is intended to constitute a “formula plan” within the meaning of SEC Rule
16b
-
3
of the Exchange Act. 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.
 
Under the
2018
Formula Plan,
250,000
shares of SMI’s common stock are reserved for issuance and awards are 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. 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 is determined in the same manner as previously described and shares 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. At
December 31, 2018,
approximately
229,000
shares were available for future grant.
 
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
and
no
further awards can be granted under the plan (see the
2018
Formula Restricted Stock Plan above). The
2008
Formula Plan constituted 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
2008
Formula Plan was administered by the Board of Directors, excluding non-employee directors. At
December 31, 2018,
all restricted stock awards previously granted under the
2008
Formula Plan had vested.
 
2004
Stock Incentive Plan, Amended and Restated as of
February 10, 2009
The
2004
Stock Incentive Plan (the
2004
Plan), which provided equity-based incentives for attracting and retaining key employees, directors and others providing services to the Company, terminated by its terms in
February 2014
and
no
further awards can be granted under the plan. Previously granted awards under the
2004
Plan consisted of incentive stock options, non-statutory stock options, restricted stock units or restricted stock. All stock options granted under the
2004
Plan had an exercise price equal to the market value of the underlying common stock at grant date, expire
ten
years from grant date and vested immediately or in equal installments over
three
years, and restricted stock and restricted stock units vested
three
years from grant date or in equal installments over
three
years. Once applicable restrictions lapsed or were satisfied, restricted stock units were payable in cash, shares of common stock or a combination, as specified in the award agreement. Termination of the
2004
Plan did
not
adversely affect rights under any outstanding awards previously granted under the plan and all awards granted under the
2004
Plan have now vested.
 
Employee Stock Purchase Plan
– The SMI Employee Stock Purchase Plan (the ESPP) is intended to provide employees the opportunity to acquire stock ownership in the Company. The authorized number of shares of common stock issuable under the ESPP is
800,000.
At
December 31, 2018,
approximately
439,000
shares were available for future grant. Prior to each
January 
1,
the Compensation Committee of the Board of Directors determines whether participating eligible employees will be granted the right to purchase shares of common stock for the upcoming calendar year and the number of shares available for purchase. All employee grants contain the same number of shares and grant date.
No
participant can be granted the right to purchase more than
500
shares in any calendar year. The stock purchase price is
90%
of the lesser of fair market value at grant date or exercise date. Unexercised grants expire at each calendar year end.
No
shares were granted to employees under the ESPP for calendar years
2018,
2017
or
2016.
 
Share-Based Payment
– We follow applicable authoritative guidance which generally requires recognizing compensation cost for the estimated grant-date fair value of stock options and other equity-based compensation over the requisite service period, and applies to all awards granted, modified, vesting, repurchased or cancelled after
January 
1,
2006.
We generally record share-based compensation cost for stock option, restricted stock and restricted stock unit awards on either the accelerated method using a graded vesting schedule or the straight-line method over the requisite service period, depending on the vesting schedule of the awards. Our practice has been to issue new shares upon option exercise; however, repurchases of shares in the open market are permitted.
   
Share-based compensation cost totaled
$3,483,000
in
2018,
$3,366,000
in
2017
and
$3,405,000
in
2016,
before income taxes of
$843,000,
$1,251,000
and
$1,205,000,
respectively, and is included in general and administrative expense. There were
no
capitalized share-based compensation costs at
December 31, 2018
or
2017.
As of
December 31, 2018,
there was approximately
$3,423,000
of total unrecognized compensation cost related to non-vested restricted stock and restricted stock units granted under the
2013
Plan and the
2018
Formula Plan that is expected to be recognized over a weighted average period of
0.9
year.
 
No
stock options were granted under any of our stock compensation plans in
2018,
2017
or
2016.
When stock options are granted, we estimate the fair value of stock option grants on grant date using the Black-Scholes option-pricing model based on the following factors and assumptions. Expected volatility is based on implied volatilities from historical volatility of our stock and other factors. We use historical data to estimate option exercises, forfeitures and employee terminations within the pricing model. Employee groups have similar historical exercise experience and are combined for valuation purposes. The expected term of granted options is estimated based on historical exercise experience and represents the time period that granted options are expected to be outstanding. Risk-free interest rates for periods within the expected life of options are based on the US Treasury yield curve in effect at the time of grant.
   
There were
no
significant changes in the characteristics of restricted stock or restricted stock units granted during
2016
through
2018
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. We believe the pricing model and approach utilized to develop the underlying assumptions are appropriate for estimating the fair values of share-based awards. These fair value and other estimates are
not
intended to predict future events or value ultimately realizable by employees who receive equity awards, and subsequent events are
not
indicative of the reasonableness of original estimates.
 
No
stock options have been granted under the
2013
Plan. The following is a summary of stock option activity regarding the
2004
Plan (shares and aggregate intrinsic value in thousands):
 
   
2004 Stock Incentive Plan
 
Stock Options
 
Shares
   
Weighted
Average
Exercise
Price Per
Share
   
Weighted
Average
Remaining
Contractual
Term (Yrs)
   
Aggregate
Intrinsic
Value
 
Outstanding, January 1, 2018
   
97
    $
15.31
     
 
     
 
 
Granted
   
     
     
 
     
 
 
Exercised
   
     
     
 
     
 
 
Forfeited
   
     
     
 
     
 
 
Expired
   
     
     
 
     
 
 
Outstanding, December 31, 2018
   
97
    $
15.31
     
0.6
    $
93
 
Exercisable, December 31, 2018
   
97
    $
15.31
     
0.6
    $
93
 
 
As of
December 31, 2018,
all stock options were vested and there was
no
unrecognized compensation cost related to non-vested stock options granted under any of our stock compensation plans.
No
stock options vested in
2018,
2017
or
2016
and
no
stock options were exercised in
2018.
In
2017
and
2016,
40,500
and
11,500
stock options were exercised with an intrinsic value of
$199,000
and
$48,000,
respectively.
 
The following is a summary of non-vested restricted stock and restricted stock unit activity regarding the
2013
Plan,
2018
Formula Plan and
2008
Formula Plan for
2018,
and grant activity for
2017
and
2016
(shares and aggregate intrinsic value in thousands):
 
   
2013 Stock Incentive Plan
           
2018 Formula Restricted Stock Plan
   
2008 Formula Restricted Stock Plan
 
Non-vested
Restricted Stock and
Restricted Stock Units
 
Shares
   
Weighted
Average
Grant -
date Fair
Value
Per Share
   
Weighted
Average
Remaining
Contractual
Term (Yrs)
   
Aggregate
Intrinsic
Value
   
 
 
 
 
 
Shares
   
Weighted
Average
Grant -
date Fair
Value
Per Share
   
 
Weighted
Average
Remaining
Contractual
Term (Yrs)
   
 
 
 
Aggregate
Intrinsic
Value
   
Shares
   
Weighted
Average
Grant -
date Fair
Value
Per Share
   
Weighted
Average
Remaining
Contractual
Term (Yrs)
   
Aggregate
Intrinsic
Value