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United States

Securities and Exchange Commission

Washington, D.C. 20549

Form 10-K

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2003

Commission file number 1-11929

Dover Motorsports, Inc.

(Exact name of registrant as specified in its charter)

1131 North DuPont Highway, Dover, Delaware 19901

(Address of principal executive offices)

(302) 674-4600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).     Yes  x    No  ¨

The aggregate market value of common stock held by non-affiliates of the registrant was $59,477,540 as of June 30, 2003 (the last day of our most recently completed second quarter).

As of February 29, 2004, the number of shares of each class of the registrant’s common stock outstanding is as follows:

Documents Incorporated by Reference

Portions of the registrant’s Proxy Statement in connection with the Annual Meeting of Stockholders to be held April 28, 2004 are incorporated by reference into Part III, Items 10 through 14 of this report.

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Part I

References in this document to “the Company,” “DVD,” “we,” “us,” and “our” mean Dover Motorsports, Inc. and its wholly owned subsidiaries.

Item 1. Business

Overview

Dover Motorsports, Inc. is a leading promoter of motorsports events in the United States. Its motorsports subsidiaries operate five motorsports tracks (four permanent facilities and one temporary circuit) in four states and promoted 19 major events during 2003 under the auspices of four of the premier sanctioning bodies in motorsports - the National Association for Stock Car Auto Racing (“NASCAR”), Championship Auto Racing Teams (“CART”), the Indy Racing League (“IRL”) and the National Hot Rod Association (“NHRA”). The Company owns and operates Dover International Speedway in Dover, Delaware; Nashville Superspeedway near Nashville, Tennessee; Gateway International Raceway near St. Louis, Missouri; and Memphis Motorsports Park near Memphis, Tennessee. The Company also organizes and promotes the Toyota Grand Prix of Long Beach in California. In 2003, the Company promoted the following major events:

The Company generates revenues from the following four sources: (1) admissions, which include all ticket sales to our events; (2) broadcasting fees, which include rights paid by TV networks to broadcast our events as well as radio and ancillary rights fees; (3) sponsor, hospitality and other revenue, which include sponsor and promotion fees, luxury suite rentals, hospitality tent and expo rentals and other related revenue; and (4) food, beverage and merchandise revenue.

Dover Downs, Inc. was incorporated in 1967 and began motorsports and harness horse racing operations in 1969. As a result of several restructurings, Dover Downs, Inc. became a wholly owned subsidiary of the Company and transferred all of its motorsports operations to another wholly owned subsidiary of ours, Dover International Speedway, Inc. Consequently, Dover Downs, Inc. became the operating entity for what previously comprised our gaming operations.

Effective March 31, 2002, the Company completed the tax-free spin-off of Dover Downs, Inc., its gaming business. To accomplish the spin-off, the Company contributed 100 percent of the issued and outstanding common stock of Dover Downs, Inc. to Dover Downs Gaming & Entertainment, Inc. (“Gaming”), a newly formed wholly owned subsidiary of the Company. On the effective date of the spin-off, the Company distributed all of the capital stock of Gaming to the Company’s stockholders on a pro-rata basis. Holders of the Company’s common stock or Class A common stock received 0.7 shares of Gaming common stock or Class A common stock for each share of the Company’s common stock or Class A common stock owned at the close of business on March 18, 2002, the record date for the spin-off. Each share of common stock or Class A common stock distributed was accompanied by one stock purchase right. Accordingly, the operations of the gaming business have been reflected as a discontinued operation in the Company’s consolidated financial statements included elsewhere in this Annual Report on Form 10-K. No gain or loss was recognized as a result of the spin-off due to the pro-rata nature of the distribution. The Company’s continuing operations subsequent to the spin-off consist solely of its motorsports activities. Based on an Internal Revenue Service Private Letter Ruling, the spin-off was tax-free to the Company and its stockholders, except for cash received for any fractional shares. Immediately following the spin-off, the Company owned no shares of Gaming, and Gaming became an independent public company. A total of 9,998,976 shares of Gaming common stock and 16,638,359 shares of Gaming Class A common stock were distributed in connection with the spin-off. Also as part of the spin-off, a $9.5 million receivable from Gaming was cancelled.

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Dover International Speedway

We have promoted NASCAR-sanctioned racing events for 35 consecutive years at Dover International Speedway and currently promote five major NASCAR-sanctioned events at the facility annually. Two races are in the NASCAR NEXTEL Cup Series (f/k/a Winston Cup) professional stock car racing circuit, two races are in the Busch Series racing circuit and one race is in the Craftsman Truck Series racing circuit.

Each of the Busch Series events and the Craftsman Truck Series event at Dover International Speedway are conducted on the days before a NASCAR NEXTEL Cup Series event. Dover International Speedway is one of only seven speedways in the country that presents two NASCAR NEXTEL Cup Series events and two Busch Series events each year. Additionally, the Company is one of only seven tracks to host three major NASCAR events at one facility on the same weekend. The June and September dates have historically allowed Dover International Speedway to hold the first and last NASCAR NEXTEL Cup Series events in the Maryland to Maine region each year.

Dover International Speedway is a high-banked, one-mile, concrete superspeedway with a seating capacity of approximately 140,000. Unlike some superspeedways, substantially all grandstand and skybox seats offer an unobstructed view of the entire track. The concrete racing surface makes Dover International Speedway the only concrete superspeedway (one mile or greater in length) that conducts NASCAR NEXTEL Cup Series events.

Nashville Superspeedway

The Company acquired Nashville Speedway, USA, Inc. on January 2, 1998. To accommodate the demand for major motorsports events in the Nashville area, the Company constructed a new superspeedway and motorsports complex in Wilson County, Tennessee, that opened in April 2001. The 1.33-mile concrete superspeedway has 25,000 permanent grandstand seats with an infrastructure in place to expand to 150,000 seats as demand requires. Additionally, the first phase of construction included lights at the superspeedway to allow for nighttime racing and the foundation work for a dirt track, short track and drag strip, which may be completed in the future. Nashville Superspeedway promoted two NASCAR Busch Series events, a NASCAR Craftsman Truck Series event, an IRL event and other regional and national touring events during the 2003 season.

Grand Prix Association of Long Beach

The Company acquired Grand Prix Association of Long Beach, Inc. (“Grand Prix”) on July 1, 1998. For the past 29 years, Grand Prix has organized and promoted the Grand Prix of Long Beach, an annual temporary circuit professional motorsports event run on the streets of Long Beach, California. The Grand Prix of Long Beach is a CART-sanctioned event and has the second highest paid attendance of any Indy-style car race promoted in the United States of America, second only to the Indianapolis 500.

Grand Prix also organizes and promotes the CART-sanctioned Grand Prix of Denver in Colorado. In the fourth quarter of 2003, the Company recognized an impairment loss of $4,309,000 related to the write-down of assets used to promote the Grand Prix of Denver event. After analyzing the financial and operational difficulties of CART, and noting the bankruptcy filing by CART in December 2003, the Company concluded from its impairment review that the carrying value of assets associated with the Grand Prix of Denver was zero. On March 4, 2004, the Company announced that Grand Prix had reached an agreement with Centrix Financial LLC to assign its rights relative to the organization and promotion of the Grand Prix of Denver event to Centrix Financial LLC.

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Grand Prix organized and promoted the inaugural Grand Prix of St. Petersburg in Florida in February 2003. The financial results of the event were significantly lower than expected, and as a result of uncertainties surrounding CART advance ticket and sponsorship sales for the February 2004 event indicated that the event would not generate an operating profit in 2004. In the fourth quarter of 2003, the Company recognized an impairment loss of $2,867,000 which represented the carrying value of all assets used to run the St. Petersburg event. On December 1, 2003, the Company announced that Grand Prix had reached an agreement with CART to terminate its agreement with CART relative to the organization and promotion of the St. Petersburg event. In December 2003, Grand Prix provided refunds to patrons who purchased tickets in advance for the February 2004 event since the 2004 event was cancelled. Efforts by Grand Prix to transfer certain assets and rights relative to the St. Petersburg event, first to CART and then to Open Wheel Racing Series LLC (“OWRS”), the entity which in 2004 purchased most of CART’s assets in connection with CART’s 2003 bankruptcy proceedings, proved unsuccessful.

Gateway International Raceway

Gateway International Raceway (“Gateway”), acquired in the Grand Prix acquisition, promoted four major events in 2003. These events were sanctioned by NASCAR, IRL and NHRA. The facility also hosts a number of regional and national touring events. Beginning in 2004, Gateway will no longer promote its annual IRL sanctioned event.

The auto racing facility includes a 1.25-mile paved oval track with 55,000 permanent seats, a nationally renowned drag strip capable of seating approximately 30,000 people and a road course. The facility, which is equipped with lights for nighttime racing, is located in Madison, Illinois, approximately five miles from the Gateway Arch in St. Louis.

Memphis Motorsports Park

Memphis Motorsports Park (“Memphis”), also acquired in the Grand Prix acquisition, promoted three major events in 2003. These events were sanctioned by NASCAR and NHRA. The facility also hosts a number of regional and national touring events.

The auto racing facility includes a 0.75-mile paved tri-oval track with approximately 16,000 permanent seats, a nationally renowned drag strip capable of seating approximately 25,000 people, a 0.25-mile dirt track and a road course. The facility is located in Millington, Tennessee, approximately 10 miles from Memphis, Tennessee.

Competition

The Company’s racing events compete with other racing events sanctioned by various racing bodies and with other sports and recreational events scheduled on the same dates. Racing events sanctioned by different organizations are often held on the same dates at different tracks. The quality of the competition, type of racing event, caliber of the event, sight lines, ticket pricing, location and customer conveniences, among other things, differentiate the motorsports facilities.

Seasonality

DVD derives a substantial portion of its total revenues from admissions, television broadcast rights and other event-related revenue attributable to its major motorsports events held from February through October (beginning in 2004, major motorsports events will be held from April through October). As a result, DVD’s business is highly seasonal.

Employees

As of December 31, 2003, DVD had approximately 156 full-time employees and 28 part-time employees. We engage temporary personnel to assist during our motorsports racing season, many of whom are volunteers. We believe that we enjoy a good relationship with our employees.

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Available Information

We file annual, quarterly and current reports, information statements and other information with the United States Securities and Exchange Commission (the “SEC”). The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is http://www.sec.gov.

Internet Address

We maintain a website where additional information concerning our business and various upcoming events can be found. The address of our Internet website is http://www.dovermotorsportsinc.com. We provide a link on our website, under Investor Relations, to our filings with the SEC, including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports.

Item 2. Properties

Dover International Speedway

Dover International Speedway is located in Dover, Delaware, on approximately 747 acres of land owned by the Company. Use by Gaming of the Company’s 5/8-mile harness racing track is under an easement granted by the Company which does not require the payment of any rent. Under the terms of the easement, Gaming has exclusive use of the harness track during the period beginning November 1 of each year and ending April 30 of the following year, together with set up and tear down rights for the two weeks before and after such period. The harness track is located on property owned by the Company and is on the inside of its one-mile motorsports superspeedway. Gaming’s indoor grandstands are used by the Company at no charge in connection with its motorsports events. The Company also leases its principal executive office space from Gaming. Various easements and agreements relative to access, utilities and parking have also been entered into between the Company and Gaming relative to their respective Dover, Delaware facilities.

Nashville Superspeedway

Nashville Superspeedway is located on approximately 1,465 acres of land owned by the Company in Wilson County and Rutherford County, Tennessee, approximately 30 miles from downtown Nashville, Tennessee.

Long Beach

Grand Prix owns its office at 3000 Pacific Avenue, Long Beach, California, which consists of approximately 82,000 square feet of land and a building with approximately 50,000 square feet of office and warehouse space. Grand Prix leases a 750-square foot ticket office in downtown Long Beach for the sale of tickets and leases storage facilities in Long Beach for its equipment and structures.

Denver

The Company’s Grand Prix subsidiary leases 4 acres of land in Denver, Colorado for the purpose of storing its equipment and structures used in the Grand Prix of Denver event. A portion of the Grand Prix of Denver was run on property leased to us by the Pepsi Center. In addition, office space is provided to us by the Pepsi Center.

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Gateway International Raceway

Gateway International Raceway is located on approximately 416 acres of land in Madison, Illinois, five miles from the Gateway Arch in St. Louis. The Company owns approximately 123 acres and has three long-term leases with purchase options (expiring in 2011, 2025 and 2070) for an additional 259 acres. The Company is also a party to a ten-year lease (with four five-year renewals) for 20 acres for the purpose of providing overflow parking for major events on a neighboring golf course, and a five-year lease for approximately 14 acres for major event parking. The Company has granted a first mortgage lien on all the real property owned and a security interest in all property leased by the Company at Gateway to Southwestern Illinois Development Authority (“SWIDA”) as security for the repayment of principal and interest on its remaining $19.2 million loan from SWIDA.

Memphis Motorsports Park

Memphis Motorsports Park is located on approximately 350 acres of land owned by the Company approximately ten miles northeast of downtown Memphis, Tennessee. The facility is encumbered by a first trust deed to First Tennessee Bank for the purpose of securing a stand-by letter of credit issued by First Tennessee Bank to Gateway International Motorsports Corporation to satisfy its debt service reserve fund obligation to SWIDA.

Other

As of December 31, 2003, all real property owned by Dover International Speedway and Nashville Speedway, USA, Inc. was encumbered by a first mortgage lien to PNC Bank, Delaware, as security for the repayment of principal outstanding under the Company’s revolving credit facility. Effective February 19, 2004, the Company and all of its wholly owned subsidiaries, as co-borrowers, entered into a new revolving credit facility with a different bank group and granted a first priority perfected security interest and lien on all available assets of the Company and its subsidiaries.

Item 3. Legal Proceedings

The Company is a party to ordinary routine litigation incidental to its business. Management does not believe that the resolution of any of these matters is likely to have a serious adverse effect on our results of operations, financial condition or cash flows.

Item 4. Submission Of Matters To A Vote Of Security Holders

No matters were submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders.

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Part II

Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities

The Company’s common stock is listed on the New York Stock Exchange under the ticker symbol “DVD.” There is no public trading market for DVD Class A common stock. However, Class A common stock is freely convertible at any time into shares of common stock on a one-for-one basis at the option of the stockholder. As of February 29, 2004, there were 16,617,898 shares of common stock and 23,376,185 shares of Class A common stock outstanding. There were 1,270 holders of record for common stock and 16 holders of record for Class A common stock.

The high and low sales prices for the Company’s common stock on the New York Stock Exchange and the dividends declared per share for the years ended December 31, 2003 and 2002 are detailed in the following table:

For comparison purposes, the historical market value of the Company’s common stock prior to the March 31, 2002 tax-free spin-off of Gaming to the Company’s stockholders is not meaningful since the historical values included Gaming. Similarly, a comparison of the historical dividend payout prior to the spin-off should factor in the effect of the spin-off.

Our revolving credit agreement allows us to pay dividends in the ordinary course of business consistent with past practices as long as we are not in default under the agreement.

Equity Compensation Plan Information

Securities authorized for issuance under equity compensation plans at December 31, 2003 are as follows:

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Item 6. Selected Financial Data

The following table summarizes certain selected historical financial data and should be read in conjunction with management’s discussion and analysis of financial condition and results of operations and the consolidated financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K. The historical financial information presented below is not necessarily indicative of the results of operations or financial position that DVD would have reported if it had operated exclusive of its discontinued gaming operation during the periods presented or in the future. See NOTE 2–Discontinued Operation appearing in the Notes to the Consolidated Financial Statements on page 34 of this Annual Report on Form 10-K.

Five Year Selected Financial Data

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Item 7. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

The following discussion is based upon and should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K.

On March 31, 2002, DVD completed the tax-free spin-off of Dover Downs Gaming & Entertainment, Inc. (“Gaming”), its gaming business. Accordingly, the operations of this business have been reflected as a discontinued operation and excluded from consolidated revenues and expenses in the consolidated financial statements included elsewhere in this Annual Report on Form 10-K and our discussions herein.

Revenues

Revenues pertaining to specific events are deferred until the event is held. Concessions and souvenir sales are recorded at the time of sale. Revenue is recorded from the following four sources: (1) admissions, which include all ticket sales to our events; (2) broadcasting fees, which include rights paid by TV networks to broadcast our events as well as radio and ancillary rights fees; (3) sponsor, hospitality and other revenue, which include sponsor and promotion fees, luxury suite rentals, hospitality tent and expo rentals and other related revenue; and (4) food, beverage and merchandise revenue. The contribution to overall revenue from each of these sources for the last three years was as follows:

The change in composition of revenue during the last three years is expected to continue in 2004. Broadcasting rights fees under the current National Association for Stock Car Auto Racing (“NASCAR”) contract will be approximately 20.0% ($3,000,000) higher in 2004. The other sources of revenue are expected to increase at a pace similar to overall economic activity in the United States.

Expenses

Expenses that are not directly related to a specific event are recorded as incurred. Expenses that specifically relate to an event are deferred until the event is held, at which time they are expensed. Expenses to promote and operate our events are categorized as follows: (1) sanction fees and purses, which include payments made to sanctioning bodies for prize and point fund monies as well as fees to the sanctioning body; (2) sales, marketing and promotion expenses, which include all costs to advertise and promote our events together with the overhead costs of the sales and marketing organization; and (3) other operating expenses, which include all direct costs associated with running events, such as hospitality, equipment, supplies, security, traffic control and labor as well as all facility-related costs such as real estate taxes, utilities and insurance. The distribution of these expenses for the last three years was as follows:

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Results of Operations

Year Ended December 31, 2003 vs. Year Ended December 31, 2002

For the year ended December 31, 2003, revenues declined by less than 1.0% to $93,626,000 as compared to 2002. We reported a loss from continuing operations before cumulative effect of accounting change of $22,138,000 in 2003 as compared to earnings from continuing operations before cumulative effect of accounting change of $1,411,000 in 2002, as follows:

The change from 2002 to 2003 resulted primarily for two reasons: (1) non-cash impairment charges; and (2) lower results from our Championship Auto Racing Teams’ (“CART”) events. The components of the change in (loss) earnings from continuing operations before cumulative effect of accounting change and (loss) earnings per common share from continuing operations before cumulative effect of accounting change are as follows (net of income tax benefits):

Impairment

In accordance with the provisions of Financial Accounting Standards Board (“FASB”) Statement No. 142, Goodwill and Other Intangible Assets, we are required to test our goodwill for impairment at least annually. As a result of our November 2003 annual assessment, it was determined that goodwill associated with our 1998 acquisition of the Grand Prix Association of Long Beach, Inc. (“Grand Prix”) was impaired. Therefore, an impairment charge of $13,362,000 was recorded in the fourth quarter and full year results to adjust goodwill to its fair value. After recording this charge, the amount of goodwill remaining is $8,521,000, which represents 3.3% of total assets and 6.2% of stockholders’ equity at December 31, 2003.

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The Company’s investment in CART-sanctioned street venues relating to its grand prix events was $11,722,000 as of December 31, 2003. In accordance with the provisions of FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets other than goodwill are assessed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. To analyze recoverability for assets to be held and used, the Company projects undiscounted net future cash flows expected to be generated by the asset over the remaining life of such assets. If these projected cash flows are less than the carrying value, an impairment loss would be recognized equal to the difference between the carrying value and the fair value of the assets. As a result of this assessment, it was concluded that assets related to the St. Petersburg and Denver events were impaired. Therefore, a non-cash charge of $7,176,000 was recorded in the fourth quarter to reflect the diminution in value of these assets. The uncertainty concerning the future of CART and CART’s bankruptcy filing on December 16, 2003 contributed substantially to the loss of value. In addition, the Company also recorded an impairment charge of $793,000 in the fourth quarter related to equipment that will no longer be used in the normal course of business and is being disposed of.

Impact of CART

For the year ended December 31, 2003, revenue was $93,626,000 compared with $93,731,000 in 2002. The following table displays revenue from CART-sanctioned events and all other Company events for the last two years:

Two of the three CART events in 2003 were held early in the year prior to the start of the Iraqi war. We believe that the uncertainty caused by this geopolitical turmoil, together with lower consumer spending and confidence from the effects of the slow economy and the much-publicized worsening financial situation at CART, caused a decline in admissions revenue at the Long Beach event and lower than expected admissions at the inaugural St. Petersburg event. The continuing uncertainty as to the ongoing viability of CART during 2003 also contributed to a significant decline in revenue at our Denver event in August 2003.

The impact of lower revenue at the two existing CART events together with the substantial operating loss at the inaugural St. Petersburg event decreased the operating profit of the Company by $5,382,000 from the previous year. Further, the Company’s $808,000 increase in depreciation in 2003 was almost exclusively the result of its investments in CART-sanctioned events. The decline in operating results, plus additional depreciation related to our CART-sanctioned events, represented $4,607,000 of the Company’s decrease in earnings in 2003. The Company is not running events in St. Petersburg or Denver in 2004, which had revenue of $2,947,000 and $3,421,000, respectively, in 2003.

Refer to NOTE 7 – Impairment Charges of the consolidated financial statements included elsewhere in this Form 10-K for additional discussion related to our CART-sanctioned events.

All Other Operations

The Company’s other events recorded a 1.2% increase in revenues in 2003, which resulted from higher broadcasting fees, partially offset by lower admissions and other revenue. Due to the significant lead time in the industry for sponsors’ commitments and fans’ desire to purchase tickets in advance, the sluggish economy in 2002 and early 2003 negatively affected our 2003 sponsorship and admissions revenue. Poor weather on or near the dates of one-half of our major events in 2003 also impacted admissions, concessions and merchandise sales.

Operating and marketing expenses increased by 7.8% to $65,824,000 in 2003, but actually increased by less than 1% when excluding $4,316,000 of costs associated with the 2003 St. Petersburg event which will not occur in 2004.

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Sanction fees and purses increased by $2,122,000 in 2003 over 2002 and was the Company’s largest cost increase in absolute and relative terms. NASCAR’s current TV broadcast rights contracts have been reported to contain approximately 20% annual increases in revenue through 2006. A portion of the purses related to the events broadcast under this contract also contain similar percentage increases and represented $1.3 million of the Company’s year-over-year change in sanction fees and purses.

Sales, marketing and promotion expenses increased by $1,060,000, primarily due to the 2003 inaugural St. Petersburg event. Other operating expenses increased by $1,580,000 due to the St. Petersburg event, offset by savings at other major events. Other operating expenses at the St. Petersburg event were $2,579,000. Lower labor, hospitality, taxes and other operating expenses at several other major events produced approximately $1,000,000 of savings compared with the prior year.

General and administrative expenses in 2003 were 6.0% lower than in the previous year, principally due to lower wages, utilities, legal claims and other expenses. Wages reflected fewer people than a year earlier and lower commissions. Also, there were no management incentive compensation payments in 2003. A decrease in utilities cost reflected internal efficiencies and tighter scrutiny of demand and usage. Legal claims in 2003 were generally at a normal level considering the risks and business issues of the Company, whereas the prior year’s legal costs were above historical levels. Legal costs were approximately $700,000 lower in 2003 than in 2002. Offsetting administrative savings in 2003 were two areas of expense increases. A full year of overhead costs at Denver and St. Petersburg increased administrative expenses by $200,000 and fringe benefits, particularly from our medical program, also increased administrative expenses by $200,000 in 2003.

Depreciation and amortization expense increased by $808,000 primarily due to an increase in depreciation related to assets acquired for the inaugural Grand Prix of Denver event that occurred in September 2002 and the Grand Prix of St. Petersburg event that occurred in February 2003.

Net interest expense increased by $582,000 in 2003 due to higher amortization and write-off of credit facility fees of $936,000, partially offset by less interest expense due to lower outstanding balances under the Company’s bank credit facility. Although overall short-term interest rates declined during the year, the Company’s effective cost did not decrease at the same rate, as pricing under the former bank facility was increased during the year as a result of amendments to the facility. Interest expense related to the SWIDA bonds was essentially the same in 2003 and 2002 at $1,761,000 and $1,818,000, respectively. These bonds contain a fixed rate of interest and the amount outstanding decreased by 3.4% during the year.

The effective income tax rate was 9.1% in 2003 compared with 37.6% in 2002. The 2003 rate was affected principally by the non-deductibility of the impairment of goodwill and also by the establishment of a valuation allowance recorded against certain state net operating loss carryforwards. The rate was also affected by other permanent book vs. tax differences and the fact that the Company paid state income taxes to Delaware because of the profitability at Dover International Speedway.

Year Ended December 31, 2002 vs. Year Ended December 31, 2001

Revenues increased by $7,180,000, or 8.3%, to $93,731,000, primarily the result of increased admissions, broadcast revenue and other event related revenue at Dover International Speedway’s spring and fall NASCAR weekends, the inaugural Grand Prix of Denver event and the addition of a second Busch Series event at Nashville Superspeedway. The increases in revenues were partially offset by a decline in admissions and other event related revenue at the Company’s Grand Prix of Long Beach event, at the IRL and NASCAR Craftsman Truck and April Busch Series events at Nashville Superspeedway and at the NASCAR Busch Series events at Gateway and Memphis.

Operating and marketing expenses increased by $10,180,000, or 20.0%, in 2002 compared with 2001, primarily due to increased purse and sanction fee expenses related to Dover International Speedway’s spring and fall NASCAR weekends, as well as at the Company’s other facilities, the Nashville Superspeedway being operational for all of 2002 compared with only nine months for the comparable period of 2001, the addition of a second Busch Series event at Nashville Superspeedway in 2002 and the inaugural Grand Prix of Denver event in September 2002.

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Depreciation and amortization expense decreased by $237,000 primarily due to the adoption of FASB Statement No. 142 which reduced the Company’s goodwill amortization expense by $1,454,000 in 2002 as compared to 2001. This decrease in amortization expense was partially offset by depreciation related to the opening of Nashville Superspeedway in April 2001, the addition of grandstand seats at Dover International Speedway in June 2001, depreciation associated with assets acquired for the inaugural Grand Prix of Denver event, and improvements at Dover International Speedway and Nashville Superspeedway in June 2002.

General and administrative expenses increased by $4,705,000 to $16,113,000 from $11,408,000 in 2001, primarily due to the Nashville Superspeedway being operational for all of 2002 compared with only nine months for the comparable period of 2001 and an increase in wages and related employee benefits, insurance, non-income taxes and pre-opening expenses related to the inaugural Grand Prix of Denver event and the inaugural Grand Prix of St. Petersburg event which occurred in February 2003. Additionally, the Company wrote-off $243,000 of costs related to the attempted acquisition of additional land for parking facilities at Gateway. On April 4, 2002, the Illinois Supreme Court ruled that Southwestern Illinois Development Authority (“SWIDA”) exceeded its constitutional authority in its acquisition of a 148.5 acre tract of land in a quick take eminent domain proceeding. The land was subsequently conveyed to Gateway in 1998. SWIDA filed a petition for writ of certiorari with the United States Supreme Court, but the writ was denied on October 7, 2002. Since all appeal rights were exhausted, capitalized costs of $243,000 associated with acquiring the land were charged to expense in 2002. The owner of the condemned land indicated that he intended to make a claim for attorney’s fees alleged to approximate $1,200,000. In 2002, the Company expensed and accrued $820,000 for resolution of this matter and for the settlement of another unrelated claim. The Company settled the latter claim in January 2003, and the former claim in June 2003.

Net interest expense increased by $2,893,000 primarily the result of the Company capitalizing $1,531,000 of interest related to the construction of major facilities in 2001 and the amortization of origination fees related to the Company’s credit facility entered into in February 2002. No interest was capitalized in 2002. Capitalization of interest on Nashville Superspeedway ceased when the facility opened in April 2001. Additionally, the 2001 pre-spin-off capital structure did not include as much indebtedness.

The Company’s effective income tax rates for 2002 and 2001 were 37.6% and 45.6%, respectively. The decrease in 2002 resulted primarily from net operating losses for state income tax purposes and the adoption of FASB Statement No. 142 which requires that goodwill and intangible assets with indefinite useful lives no longer be amortized. In 2001, the Company amortized $1,454,000 of goodwill for financial reporting purposes that was not deductible for income tax purposes resulting in a permanent difference that increased the effective tax rate. These decreases in the effective tax rate were partially offset by the recording of a valuation allowance of $163,000, net of federal tax benefit, relating to state net operating loss carry-forwards that may expire prior to being realized.

Earnings from continuing operations before cumulative effect of accounting change decreased by $5,460,000, primarily the result of the lower revenues at the Company’s Grand Prix of Long Beach event, at the IRL and NASCAR Craftsman Truck and April Busch Series events at Nashville Superspeedway and the NASCAR Busch Series events at Gateway and Memphis, the increased general and administrative expenses and increased interest expense discussed above. Earnings from continuing operations were also negatively impacted by the $243,000 write-off of deferred costs and an $820,000 accrual related to the resolution of the SWIDA matter discussed above and the settlement of another unrelated claim. The decreases in earnings from continuing operations were offset by an increase in profitability at Dover International Speedway’s spring and fall NASCAR weekends, the addition of a second Busch Series event at Nashville Superspeedway and a decrease in amortization expense of $1,454,000 due to the adoption of FASB Statement No. 142.

Earnings from discontinued operation (net of income taxes) were $4,477,000 in 2002 compared to $21,095,000 in 2001. The Company’s tax-free spin-off of its gaming business became effective March 31, 2002 and as a result, earnings from discontinued operation were no longer recognized by the Company subsequent to that date.

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The Company recorded a non-cash charge of $28,606,000 as a cumulative effect of an accounting change for the write-off of goodwill associated with Grand Prix, a wholly owned subsidiary, in 2002. The charge resulted from the adoption of FASB Statement No. 142 which requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be tested at least annually for impairment. Goodwill associated with Grand Prix, which was acquired through a tax-free merger, is not deductible for income tax purposes and represents a permanent difference for which no current or deferred income tax liabilities are recorded. As such, no income tax benefit was recognized from the impairment write-off.

Liquidity and Capital Resources

Cash flow from continuing operations was positive in 2003 despite significant losses because a large proportion of 2003’s expenses were non-cash, as shown below:

After reflecting all other changes in working capital and deferred taxes, net cash provided by continuing operations was $15,620,000 in 2003 compared with $22,809,000 in the prior year. The decrease relates primarily to the decrease in earnings from continuing operations before deferred income taxes, cumulative effect of accounting change, impairment charges and depreciation and amortization from $18,693,000 in 2002 to $13,201,000 in 2003.

Capital expenditures were $3,117,000 in 2003, down substantially from the $9,167,000 in 2002. No major projects are currently under construction; however, various capital improvements and replacements are expected to be completed in 2004 with an expected cost of between $3,000,000-$4,000,000. Additionally, the Company expects to contribute approximately $490,000 to its pension plans in 2004.

Net cash used in financing activities was $11,173,000 for the year ended December 31, 2003 compared to $12,853,000 for the year ended December 31, 2002. Net cash used in 2003 primarily related to repayments of borrowings under the Company’s revolving credit agreement and long-term debt and the payment of fees to amend the Company’s credit facility. The Company paid $1,598,000 in regular quarterly cash dividends in 2003 as compared to $3,631,000 in 2002 when the Company’s operations included the spun-off gaming business through March 31, 2002. The quarterly cash dividend payment decreased from $0.02 per share to $0.01 per share effective in the third quarter of 2002.

Barring unforeseen economic or industry issues, the Company expects to return to profitability in 2004 and, therefore, it expects to generate additional excess cash from its operations in 2004. Cash from improved operations less a known range of spending for capital expenditures and maintenance of a dividend is expected to generate between $8,000,000-$12,000,000 in excess cash, which we expect to use to reduce indebtedness. We expect cash flows from operating activities and funds available from our credit agreement to also provide for long-term liquidity.

As of December 31, 2003, the Company had a $75,000,000 revolving credit facility that expired on February 19, 2004. Interest was based, at the Company’s option, upon LIBOR plus 3.75% or the base rate (the greater of the prime rate or the federal funds rate plus 0.5%) plus 1.50%. The terms of the credit facility contained certain covenants including minimum tangible net worth, fixed charge coverage, minimum consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”) and maximum leverage ratio requirements. The Company was in compliance with all covenants at December 31, 2003. There was $43,045,000 outstanding under the facility at a weighted average interest rate of 4.95%. After consideration of stand-by letters of credit outstanding, borrowings of $6,544,000 were available pursuant to the facility at December 31, 2003.

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Effective February 19, 2004, the Company and all of its wholly owned subsidiaries, as co-borrowers, and a group of banks entered into a new three-year, $70,000,000 credit facility. Interest is based upon LIBOR or the base rate (the greater of the prime rate or the federal funds rate plus 0.5%) plus a margin determined by the Company’s funded debt to EBITDA ratio. The terms of the facility contain certain covenants beginning June 30, 2004 that are similar to the former facility, but with different strike points. The Company expects to be in compliance with all covenants through the end of 2004. Material adverse changes in the Company’s results of operation would impact its ability to maintain financial ratios necessary to satisfy these requirements. The facility is for seasonal funding needs, capital improvements and other general corporate purposes, and is guaranteed by all of the Company’s subsidiaries. It is secured by all available assets of the Company and its subsidiaries.

On January 28, 2004, the Board of Directors of the Company declared a quarterly cash dividend on both classes of common stock of $0.01 per share. The dividend was paid on March 10, 2004 to shareholders of record at the close of business on February 10, 2004.

Contractual Obligations

At December 31, 2003, the Company had the following contractual obligations and other commercial commitments (adjusted to reflect our new credit facility in February 2004):

In September 1999, the Sports Authority of the County of Wilson (Tennessee) issued $25,900,000 in Variable Rate Tax Exempt Infrastructure Revenue Bonds, Series 1999, of which $25,000,000 was outstanding at December 31, 2003, to acquire, construct and develop certain public infrastructure improvements which benefit the operation of Nashville Superspeedway. Principal payments range from $400,000 in September 2002 to $1,600,000 in 2029 and are payable solely from sales taxes and incremental property taxes generated from the facility. These bonds are direct obligations of the Sports Authority and are therefore not recorded on our consolidated balance sheet. If the sales taxes and incremental property taxes are insufficient for the payment of principal and interest on the bonds, payments would become the responsibility of the Company. In the event the Company was unable to make the payments, they would be made pursuant to a $25,419,000 irrevocable direct-pay letter of credit issued as part of our bank facility.

The Company believes that the sales taxes and incremental property taxes generated from the facility will satisfy the necessary debt service requirements of the bonds. As of December 31, 2003 and 2002, $1,135,000 and $1,145,000, respectively, was available in the sales and incremental property tax fund maintained by Wilson County to pay the remaining principal and interest due under the bonds. During 2003, $1,593,000 was paid by the Company into the sales and incremental property tax fund and $1,603,000 was deducted from the fund for debt and interest service. If the debt service is not satisfied from the sales and incremental property taxes generated from the facility, the bonds would become a liability of the Company. If we fail to maintain the letter of credit that secures the bonds or we allow an uncured event of default to exist under our reimbursement agreement relative to the letter of credit, the bonds would be immediately redeemable.

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The Company’s wholly owned subsidiary, Grand Prix, entered into an agreement (the “SWIDA loan”) with SWIDA to receive the proceeds from the “Taxable Sports Facility Revenue Bonds, Series 1996 (Gateway International Motorsports Corporation Project),” a Municipal Bond Offering, in the aggregate principal amount of $21,500,000, of which $19,232,000 was outstanding at December 31, 2003. SWIDA loaned all of the proceeds from the Municipal Bond Offering to Grand Prix for the purpose of the redevelopment, construction and expansion of Gateway International Raceway (“Gateway”), and the proceeds of the SWIDA loan were irrevocably committed to complete construction of Gateway, to fund interest, to create a debt service reserve fund and to pay for the cost of issuance of the bonds. The repayment terms and debt service reserve requirements of the bonds issued in the Municipal Bond Offering correspond to the terms of the SWIDA loan.

The Company has established certain restricted cash funds to meet debt service as required by the SWIDA loan, which are held by the trustee (BNY Trust Company of Missouri). At December 31, 2003, $3,433,000 of the Company’s cash balance was restricted by the SWIDA loan and is appropriately classified as a non-current asset in our consolidated balance sheet included elsewhere in this Annual Report on Form 10-K. The SWIDA loan is secured by a first mortgage lien on all the real property owned and a security interest in all property leased by Gateway. Also, the SWIDA loan is unconditionally guaranteed by Grand Prix. The SWIDA loan bears interest at varying rates ranging from 8.75% to 9.25% with an effective rate of approximately 8.91%. The structure of the bonds permits amortization from February 1997 through February 2017 with debt service beginning in 2000 following interest only payments from February 1997 through August 1999. A stand-by letter of credit for $2,502,000, which is secured by a trust deed on the Company’s facilities in Memphis, Tennessee, also was obtained to satisfy debt service reserve fund obligations. In addition, a portion of the property taxes to be paid by Gateway (if any) to the City of Madison Tax Incremental Fund have been pledged to the annual retirement of debt and payment of interest.

Related Party Transactions

During the years ended December 31, 2003, 2002 and 2001, Gaming allocated corporate costs of $1,969,000, $495,000 and $2,307,000, respectively, to DVD for certain administrative and operations services, including DVD’s use of office space. The allocation was based on both an allocation to the business that directly incurred the costs and an analysis of each company’s share of the costs. In connection with the Company’s 2003 NASCAR event weekends, Gaming provided certain catering services for which the Company was invoiced $443,000. The Company invoiced Gaming $206,000 for tickets purchased to the 2003 events and other event related items. As of December 31, 2003 and 2002, DVD’s consolidated balance sheet includes a $96,000 receivable from and a $793,000 payable to Gaming for these costs and for other payments made by Gaming on DVD’s behalf. The Company received payment for the $96,000 receivable in the first quarter of 2004. The net costs incurred by each company for these services are not necessarily indicative of the costs that would have been incurred if the companies had been separate, independent entities and/or had otherwise independently managed these functions; however, management believes that these allocations are reasonable.

During the year ended December 31, 2003, the Company purchased certain paving, site work and construction services involving total payments of $413,000 from a company wholly owned by Melvin Joseph, a director.

For the year ended December 31, 2003, the Company reported a net operating loss for federal income tax purposes. The loss was carried back to 2001, a period prior to the spin-off, which generated an alternative minimum tax credit carryforward, a portion of which is required to be paid by Gaming under the Tax Sharing Agreement (see below); therefore, during the fourth quarter of 2003 the Company recorded a $330,000 receivable from Gaming for its portion of the carryforward. We received payment of the amount in the first quarter of 2004.

During the third quarter of 2002, under the Tax Sharing Agreement, Gaming paid the Company $2,700,000 for its portion of the 2002 consolidated federal income tax liability. Since the spin-off was effective on March 31, 2002, the Company’s 2002 federal income tax return included the operations of Gaming for the first quarter of the year.

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Use by Gaming of the Company’s 5/8-mile harness racing track is under an easement granted by the Company which does not require the payment of any rent. Under the terms of the easement, Gaming has exclusive use of the harness track during the period beginning November 1 of each year and ending April 30 of the following year, together with set up and tear down rights for the two weeks before and after such period. The harness track is located on property owned by the Company and is on the inside of its one-mile motorsports superspeedway. Gaming’s indoor grandstands are used by the Company at no charge in connection with its motorsports events. The Company also leases its principal executive office space from Gaming. Various easements and agreements relative to access, utilities and parking have also been entered into between the Company and Gaming relative to their respective Dover, Delaware facilities.

In conjunction with the spin-off of Gaming by the Company, the two companies entered into various agreements that addressed the allocation of assets and liabilities between the companies and that define the companies’ relationship after the separation. These are the Agreement Regarding Distribution and Plan of Reorganization, the Real Property Agreement, the Employee Benefits Agreement, the Transition Support Services Agreement and the Tax Sharing Agreement. The companies have several common directors and officers. Refer to NOTE 2 – Discontinued Operation of the consolidated financial statements included elsewhere in this Form 10-K for further discussion.

In August 2002, certain existing shareholders of the Company, including two directors, acquired from the Company 1,453,500 shares of its common stock for net proceeds of $6,203,000. The shares of common stock were sold in an unregistered private offering to accredited investors at fair value based on the closing market price of the Company’s common stock on the day preceding the sale which was $4.30 per share.

At the date of the acquisition of Grand Prix, $299,000 was due to Grand Prix from certain shareholders/officers for outstanding loans made for the purpose of purchasing Grand Prix common stock. As of December 31, 2001, $92,000 was outstanding from a director of the Company. This remaining balance was repaid in full in January 2002.

Critical Accounting Policies

The accounting policies described below are those the Company considers critical in preparing its consolidated financial statements. These policies include significant estimates made by management using information available at the time the estimates are made. However, as described below, these estimates could change materially if different information or assumptions were used. The descriptions below are summarized and have been simplified for clarity.

Goodwill

The Company has made acquisitions in the past that included goodwill. Under accounting principles generally accepted in the United States of America in effect through December 31, 2001, these assets were amortized over their estimated useful lives, and were tested periodically to determine if they were recoverable from operating earnings on an undiscounted basis over their useful lives.

Effective January 1, 2002, goodwill is no longer amortized but is subject to an annual (or under certain circumstances more frequent) impairment test based on its estimated fair value. Estimated fair value is typically less than values based on undiscounted operating earnings because fair value estimates include a discount factor in valuing future cash flows. We completed our analysis of impairment of our goodwill during the second quarter of 2002, as a result of adopting the transitional provisions of Statement No. 142, and recorded a non-cash charge of $28,606,000 which was recognized as a cumulative effect of an accounting change in the first quarter of 2002.

The Company completed its 2003 annual assessment of goodwill in November 2003 which resulted in the impairment of $13,362,000 of additional goodwill. Additional impairment losses could be recorded in the future. There are many assumptions and estimates underlying the determination of this impairment loss. Another estimate using different, but still reasonable, assumptions could produce a significantly different result. At December 31, 2003, the remaining balance of goodwill is $8,521,000. Since the majority of our goodwill is associated with Grand Prix, which promotes CART-sanctioned events, any material adverse events impacting CART could cause additional impairment losses to be recorded in the future.

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Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating losses. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. Currently, the Company maintains a valuation allowance on deferred tax assets related to certain state net operating loss carry-forwards which increased $2,667,000 in 2003. The Company has considered ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance. In the event the Company were to determine that it would be able to realize all or a portion of these deferred tax assets, an adjustment to the deferred tax asset would increase earnings in the period such determination was made. Likewise, should the Company determine that it would not be able to realize all or a portion of its remaining deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to earnings in the period such determination was made.

Accrued Pension Cost

The benefits provided by the Company’s defined benefit pension plans are based on years of service and employee’s remuneration over their employment with the Company. The Company establishes accrued pension costs in accordance with the provisions of FASB Statement No. 87, Employers’ Accounting for Pensions. Accrued pension costs are developed using actuarial principles and assumptions which consider a number of factors, including estimates for the discount rate, assumed rate of compensation increase, and expected long-term rate of return on assets. Changes in these estimates would impact the amounts that the Company records in its consolidated financial statements.

Accounts Receivable Reserves

The Company provides for losses on accounts receivable based upon their current status, historical experience and management’s evaluation of existing economic conditions. Significant changes in customer profitability or general economic conditions may have a significant effect on the Company’s allowance for doubtful accounts.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is provided for financial reporting purposes using the straight-line method over estimated useful lives ranging from 5 to 10 years for furniture, fixtures and equipment and up to 40 years for facilities. These estimates require assumptions that are believed to be reasonable. Long-lived assets are evaluated for impairment annually and when an event occurs that indicates an impairment may exist. See NOTE 7 – Impairment Charges of the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further discussion.

Recent Accounting Pronouncements

See NOTE 3—Summary of Significant Accounting Policies of the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a full description of recent accounting pronouncements including the respective expected dates of adoption and effects on results of operations and financial condition.

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Factors That May Affect Operating Results; Forward-Looking Statements

In addition to historical information, this Annual Report on Form 10-K includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, relating to our financial condition, profitability, liquidity, resources, business outlook, proposed acquisitions, market forces, corporate strategies, consumer preferences, contractual commitments, legal matters, capital requirements and other matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. To comply with the terms of the safe harbor, we note that a variety of factors could cause our actual results and experience to differ substantially from the anticipated results or other expectations expressed in our forward-looking statements. When words and expressions such as: “believes,” “expects,” “anticipates,” “estimates,” “plans,” “intends,” “objectives,” “goals,” “aims,” “projects,” “forecasts,” “possible,” “seeks,” “may,” “could,” “should,” “might,” “likely,” “enable” or similar words or expressions are used in this document, as well as statements containing phrases such as “in our view,” “there can be no assurance,” “although no assurance can be given” or “there is no way to anticipate with certainty,” forward-looking statements are being made.

Various risks and uncertainties may affect the operation, performance, development and results of our business and could cause future outcomes to differ materially from those set forth in our forward-looking statements, including the following factors:

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We undertake no obligation to publicly update or revise any forward-looking statements as a result of future developments, events or conditions. New risk factors emerge from time to time and it is not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ significantly from those forecast in any forward-looking statements. Given these risks and uncertainties, stockholders should not overly rely or attach undue weight to our forward-looking statements as an indication of our actual future results.

Our Relationships With and the Success of Various Sanctioning Bodies Is Vital To Our Success In Motorsports

Our continued success in motorsports is dependent upon the success of various governing bodies of motorsports that sanction national racing events and our ability to maintain a good working relationship with these sanctioning bodies, including NASCAR, CART, IRL and NHRA. Sanctioning bodies regularly issue and award sanctioned events and their issuance depends, in large part, on maintaining good working relationships with the sanctioning bodies. Many events are sanctioned on an annual basis with no obligation to renew, including our agreements with NASCAR. By awarding a sanctioned event or a series of sanctioned events, the sanctioning bodies do not warrant, nor are they responsible for, the financial success of any sanctioned event. Our inability to obtain additional sanctioned events in the future and to maintain sanction agreements at current levels would likely result in lower than anticipated revenues from admissions, sponsorships, hospitality, concessions and merchandise, which could have a material adverse effect on our business, financial condition and results of operations. In addition, the success of a particular sanctioning body in attracting drivers and teams, signing series sponsors and negotiating favorable television and/or radio broadcast rights is largely outside of our control. As our success depends on the success of each event or series that we are promoting, a material adverse effect on a sanctioning body, such as the loss or defection of top drivers, the loss of significant series sponsors, or the failure to obtain broadcast coverage or to properly advertise the event or series could result in a reduction in our revenues from admissions, sponsorships, hospitality, concessions and merchandise, which could have a material adverse effect on our business, financial condition and results of operations.

During 2003, the Company’s operating results and cash flows were negatively impacted by the uncertainties surrounding CART. CART filed for bankruptcy in 2003 and in early 2004, various assets of CART were transferred to OWRS, including our sanction agreement with CART relative to the Grand Prix of Long Beach event. OWRS is a newly formed private entity and its ability to successfully continue the Champ Car series cannot be predicted at this time.

We Rely On Sponsorship Contracts To Generate Revenues

We receive a substantial portion of our annual revenues from sponsorship agreements, including the sponsorship of our various events and our permanent venues, such as “title,” “official product” and “promotional partner” sponsorships, billboards, signage and skyboxes. Loss of our title sponsors or other major sponsorship agreements or failure to secure such sponsorship agreements in the future could have a material adverse effect on our business, financial condition and results of operations.

Our Motorsports Events Face Intense Competition For Attendance, Television Viewership And Sponsorship

We compete with other auto speedways for the patronage of motor racing spectators as well as for promotions and sponsorships. Moreover, racing events sanctioned by different organizations are often held on the same dates at different tracks. The quality of the competition, type of racing event, caliber of the event, sight lines, ticket pricing, location and customer conveniences, among other things, distinguish the motorsports facilities. In addition, all of our events compete with other sports and recreational events scheduled on the same dates. As a result, our revenues and operations are affected not only by our ability to compete in the motorsports promotion market, but also by the availability of alternative spectator sports events, forms of entertainment and changing consumer preferences.

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Our Long Beach Event Depends On City Permits And Good Relationships With City Officials

In order to conduct the Grand Prix of Long Beach, we must obtain an annual permit from the City of Long Beach to hold the race on city streets. Although Grand Prix has operated a racing event on the streets of Long Beach for twenty-nine years, there can be no assurance that this event will continue to be held or be successful. Our ability to conduct the Grand Prix of Long Beach requires that we maintain excellent relationships with the host city and its officials.

Grand Prix’s Ability To Meet Payment Obligations Under A Loan Agreement With An Illinois Government Agency Depends On Revenues From Gateway

In order to finance the redevelopment of Gateway International Raceway, Grand Prix entered into a loan agreement with the Southwest Illinois Development Authority, which agreed to fund a loan to Grand Prix by issuing municipal bonds in the aggregate principal amount of $21,500,000. The bonds are unconditionally guaranteed by Grand Prix. Grand Prix issued a 20-year $21,500,000 promissory note to SWIDA which bears interest at an effective rate of approximately 8.91% per annum. Payments on the SWIDA loan are intended to be made primarily from the revenues from the operations of Gateway. Although Grand Prix is current on its obligation and expects to meet its future debt payment obligations out of the revenues from Gateway, and although Grand Prix will receive certain assistance from the City of Madison, Illinois in the form of a tax increment finance fund which should assist it in meeting its debt burdens, there can be no assurance that earnings from the future operations of Gateway will be sufficient to meet Grand Prix’s debt service obligations. A default under the SWIDA loan could have a material adverse effect on our business, financial condition and results of operations.

The Sales Tax And Property Tax Revenues To Service The Revenue Bonds For Infrastructure Improvements At Nashville May Be Inadequate

In September 1999, the Sports Authority of the County of Wilson (Tennessee) issued $25,900,000 in revenue bonds, of which $25,000,000 was outstanding on December 31, 2003, to build local infrastructure improvements which benefit the operation of Nashville Superspeedway. Debt service on the bonds is payable solely from sales taxes and incremental property taxes generated from the facility. As of December 31, 2003 and 2002, $1,135,000 and $1,145,000, respectively, was available in the sales and incremental property tax fund maintained by Wilson County to pay the remaining principal and interest due under the bonds. During 2003, $1,593,000 was paid by the Company into the sales and incremental property tax fund and $1,603,000 was deducted from the fund for debt and interest service. These bonds are direct obligations of the Sports Authority and are therefore not recorded on our consolidated balance sheet. In the event the sales taxes and incremental property taxes are insufficient to cover the payment of principal and interest on the bonds, payments would become the responsibility of the Company. In the event the Company was unable to make the payments, they would be made under a $25,419,000 irrevocable direct-pay letter of credit issued by several banks pursuant to a reimbursement and security agreement under which we have agreed to reimburse the banks for drawings made under the letter of credit. Such an event could have a material adverse effect on our business, financial condition and results of operations.

The Seasonality Of Our Motorsports Events Increases The Variability Of Quarterly Earnings

Our business has been, and is expected to remain, seasonal given that it depends on our outdoor events for a substantial portion of revenues. We derive a substantial portion of our motorsports revenues from admissions and event-related revenue attributable to six NASCAR-sanctioned events at Dover, Delaware which are currently held in June and September. This has been offset to some degree by our other motorsports events, but quarterly earnings will vary.

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Our Insurance May Not Be Adequate To Cover Catastrophic Incidents

We maintain insurance policies that provide coverage within limits that are sufficient, in the opinion of management, to protect us from material financial loss incurred in the ordinary course of business. We also purchase special event insurance for motorsports events to protect against race-related liability. However, there can be no assurance that this insurance will be adequate at all times and in all circumstances. If we are held liable for damages beyond the scope of our insurance coverage, including punitive damages, our business, financial condition and results of operations could be materially and adversely affected.

Bad Weather Can Have An Adverse Financial Impact On Our Motorsports Events

We sponsor and promote outdoor motorsports events. Weather conditions affect sales of tickets, concessions and souvenirs, among other things at these events. Although we sell many tickets well in advance of the outdoor events and these tickets are issued on a non-refundable basis, poor weather conditions may adversely affect additional ticket sales and concessions and souvenir sales, which could have an adverse effect on our business, financial condition and results of operations.

We do not currently maintain weather-related insurance for major events. Due to the importance of clear visibility and safe driving conditions to motorsports racing events, outdoor racing events may be significantly affected by weather patterns and seasonal weather changes. Any unanticipated weather changes could impact our ability to stage events. This could have a material adverse effect on our business, financial condition and results of operations.

Postponement And/Or Cancellation Of Major Motorsports Events Could Adversely Affect Us

If one of our events is postponed because of weather or other reasons such as, for example, the general postponement of all major sporting events in this country following the September 11, 2001, terrorism attacks, we could incur increased expenses associated with conducting the rescheduled event, as well as possible decreased revenues from tickets, food, drinks and merchandise at the rescheduled event. If such an event is cancelled, we could incur the expenses associated with preparing to conduct the event as well as losing the revenues, including live broadcast revenues associated with the event.

If a cancelled event is part of the NASCAR NEXTEL Cup Series or NASCAR Busch Series, we could experience a reduction in the amount of money received from television revenues for all of our NASCAR-sanctioned events in the series that experienced the cancellation. This would occur if, as a result of the cancellation, and without regard to whether the cancelled event was scheduled for one of our facilities, NASCAR experienced a reduction in television revenues greater than the amount scheduled to be paid to the promoter of the cancelled event.

Our Goodwill May Become Further Impaired In The Future And Require A Write Down To Comply With Accounting Standards

In June 2001, the FASB issued Statement No. 142, Goodwill and Other Intangible Assets. Statement No. 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be tested for impairment at least annually in accordance with the provisions of Statement No. 142. We adopted the provisions of Statement No. 142 effective January 1, 2002 and as a result recorded a non-cash charge of $28,606,000 associated with the goodwill of Grand Prix as a cumulative effect of accounting change in 2002. Additionally, the Company completed its 2003 annual assessment of goodwill in November 2003 which resulted in the impairment of $13,362,000 of additional goodwill. Even after these charges, $8,521,000, or 3.3%, of our total assets as of December 31, 2003, consists of goodwill. If in the future the application of the test for impairment of goodwill results in a reduction in the carrying value of the goodwill, we will be required to record the amount of the reduction in goodwill as a non-cash charge against operating earnings which would also reduce our stockholders’ equity.

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Item 7A. Quantitative And Qualitative Disclosure About Market Risk

The Company does not utilize financial instruments for trading purposes and holds no derivative financial instruments which could expose it to market risk. The carrying values of DVD’s long-term debt approximates its fair value at December 31, 2003 and 2002. DVD is exposed to market risks related to fluctuations in interest rates for its variable rate borrowings of $43,045,000 at December 31, 2003 under its revolving credit facility. A change in interest rates of one percent on the balance outstanding at December 31, 2003 would cause a change in total annual interest costs of $430,000.

In September 1999, the Sports Authority of the County of Wilson, Tennessee issued its Variable Rate Tax Exempt Infrastructure Revenue Bonds, Series 1999, in the amount of $25,900,000. These bonds are direct obligations of the Sports Authority and are therefore not recorded on the Company’s consolidated balance sheet; however, DVD is exposed to market risks related to fluctuations in interest rates for these bonds. A significant change in interest rates could result in the Company being responsible for debt service payments not covered by the sales and incremental property taxes generated from the facility.

Item 8. Financial Statements And Supplementary Data

DVD’s consolidated financial statements and the Independent Auditors’ Report included in this report are shown on the Index to Consolidated Financial Statements on page 29.

Item 9. Changes In And Disagreements With Accountants On Accounting And Financial Disclosure

None.

Item 9A. Controls and Procedures

(a) Disclosure Controls and Procedures.

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), the Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based upon their evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective to ensure that material information relating to the Company required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. In designing and evaluating the disclosure controls and procedures, the Company’s management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurances of achieving the desired control objectives, and management necessarily was required to apply its judgment in designing and evaluating the controls and procedures. The Company currently is in the process of further reviewing and documenting its disclosure controls and procedures, and its internal control over financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.

(b) Changes in Internal Control Over Financial Reporting.

There were no changes in our internal control over financial reporting during the fourth quarter of fiscal year 2003 that have materially affected, or that are reasonably likely to materially affect our internal controls over financial reporting.

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Part III

Item 10. Directors And Executive Officers Of The Registrant

Except as presented below, biographical information relating to the Company’s directors and executive officers, information regarding the Company’s audit committee financial experts and information on Section 16(a) Beneficial Ownership Reporting Compliance called for by this Item 10 are incorporated by reference to the DVD Proxy Statement to be filed pursuant to Regulation 14A for the Annual Meeting of Stockholders to be held on April 28, 2004.

The Company has adopted a Code of Ethics applicable to the Chief Executive Officer, Chief Financial Officer, Controller and other employees performing similar functions as designated by the Company’s Chief Executive Officer. A copy of the Code of Ethics is available on the Company’s website at http://www.dovermotorsportsinc.com. The Company will post on its website any amendments to, or waivers from, its Code of Ethics as required by law.

Executive Officers of the Registrant. As of December 31, 2003, the executive officers of the registrant were:

The Company’s Chairman of the Board, Henry B. Tippie, is a non-employee director and, therefore, not an executive officer of the Company. Mr. Tippie has served DVD in that capacity, or as Vice Chairman of the Board, for over 5 years. Mr. Tippie also serves as Chairman of the Board to Gaming as a non-employee director.

Denis McGlynn has served as the Company’s President and Chief Executive Officer for 24 years. Mr. McGlynn also serves as President and Chief Executive Officer to Gaming.

Jerome Miraglia joined DVD as Executive Vice President in January 2002. Prior to joining the Company, Mr. Miraglia was the Executive Vice President of Mariah Vision 3, Inc. From 1991 to 1996, Mr. Miraglia was a partner in the law firm of Miles & Stockbridge in Baltimore, MD.

Partrick J. Bagley joined DVD as Vice President-Finance and Chief Financial Officer in May 2002. Prior to joining the Company, Mr. Bagley was the Vice President-Finance, Treasurer and CFO of Rollins Truck Leasing Corp. Mr. Bagley has been a director of the Company since 1996 and prior to that had provided consulting services since 1994.

Klaus M. Belohoubek has been Vice President-General Counsel and Secretary since 1999 and has provided legal representation to the Company in various capacities since 1990. Mr. Belohoubek also serves as Senior Vice President-General Counsel and Secretary of Gaming and previously served as Vice President-General Counsel and Secretary to Rollins Truck Leasing Corp.

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Thomas Wintermantel joined DVD as Treasurer and Assistant Secretary in July 2002. For more than five years prior to joining the Company, Mr. Wintermantel was the Financial Vice President and Treasurer of John W. Rollins & Associates, Financial Vice President of Rollins Jamaica, Ltd. and President and Director of the John W. Rollins Foundation.

Item 11. Executive Compensation

The information called for by this Item 11 is incorporated by reference to the DVD Proxy Statement to be filed pursuant to Regulation 14A for the Annual Meeting of Stockholders to be held on April 28, 2004.

Item 12. Security Ownership Of Certain Beneficial Owners And Management And Related Stockholder Matters

The information called for by this Item 12 is incorporated by reference to the DVD Proxy Statement to be filed pursuant to Regulation 14A for the Annual Meeting of Stockholders to be held on April 28, 2004.

Item 13. Certain Relationships and Related Transactions

The information called for by this Item 13 is incorporated by reference to the DVD Proxy Statement to be filed pursuant to Regulation 14A for the Annual Meeting of Stockholders to be held on April 28, 2004.

Item 14. Principal Accountant Fees And Services

The information called for by this Item 14 is incorporated by reference to the DVD Proxy Statement to be filed pursuant to Regulation 14A for the Annual Meeting of Stockholders to be held on April 28, 2004.

Item 15. Exhibits, Financial Statement Schedules And Reports On Form 8-K

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(b) Reports on Form 8-K

The Company furnished a Form 8-K on October 30, 2003 announcing that it had issued a press release on the same date regarding its third quarter financial results.

The Company filed a Form 8-K on December 4, 2003 announcing that its wholly owned subsidiary, Grand Prix Association of Long Beach, Inc. (“Grand Prix”), had reached an agreement with CART, Inc. to transfer to CART certain assets and rights that Grand Prix had relative to the organization and promotion of the Grand Prix of St. Petersburg.

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Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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INDEPENDENT AUDITORS’ REPORT

The Stockholders and Board of Directors,

    Dover Motorsports, Inc.:

We have audited the accompanying consolidated balance sheet of Dover Motorsports, Inc. and subsidiaries (the Company) as of December 31, 2003 and 2002, and the related consolidated statements of earnings and comprehensive earnings and cash flows for each of the years in the three-year period ended December 31, 2003. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Dover Motorsports, Inc. and subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 3 to the consolidated financial statements, effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.”

KPMG LLP

Philadelphia, Pennsylvania

January 28, 2004, except

    as to the second paragraph

    of Note 6 and the third

    paragraph of Note 7, which

    is as of March 4, 2004

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DOVER MOTORSPORTS, INC.

CONSOLIDATED STATEMENT OF EARNINGS AND COMPREHENSIVE EARNINGS