Acquisition of
NHRA Pro Racing
by
HD Partners Acquisition Corporation
Investor Presentation
The attached presentation was filed with the Securities and Exchange Commission as part of the Form 8-K/A filed by HD Partners Acquisition
Corporation (“HD Partners” or “HDP”) on October 5, 2007. HDP is holding presentations for its stockholders regarding its proposed purchase of
certain assets of the National Hot Rod Association (“NHRA”), as described in an earlier Schedule 14A filed by HDP on July 17, 2007 and
subsequently amended on September 11, 2007 which describes the acquisition in more detail.
Morgan Joseph & Co. Inc. (“Morgan Joseph”), the managing underwriter of HDP’s initial public offering (“IPO”) consummated in June 2006, is
assisting HDP in these efforts and will receive an advisory fee equal to $300,000. In addition, Morgan Joseph, as representative of the
underwriters, is entitled to receive deferred underwriting fees of $3 million upon consummation of this transaction. HDP and its directors and
executive officers may be deemed to be participants in the solicitation of proxies for the special meeting of HDP’s stockholders to be held to
approve this transaction. To date, Morgan Joseph’s activities have not included actions that would deem such a firm to be engaged in the
solicitation of proxies for HDP, although the firm may be so engaged in the future.
Stockholders of HDP and other interested persons are advised to read HDP’s preliminary proxy statement, as amended, and definitive proxy
statement, when available, in connection with HDP’s solicitation of proxies for the special meeting to approve the acquisition because these
proxy statements will contain important information. Such persons can also read HDP’s final prospectus, dated June 1, 2006, as well as
periodic reports, for more information about HDP, its officers and directors, and their individual and group security ownership in HDP, and
interest in the successful consummation of this business combination. Stockholders may also refer to the HDP proxy statement for information
about Morgan Joseph’s security holdings in HDP. The definitive proxy statement will be mailed to stockholders as of a record date to be
established for voting on this transaction. Stockholders will also be able to obtain a copy of the definitive proxy statement, the final prospectus
and other periodic reports filed with the Securities and Exchange Commission, without charge, by visiting the Securities and Exchange
Commission’s Internet site at (http://www.sec.gov).
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Safe Harbor
This presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform
Act of 1995, about HDP,NHRA and their combined business after completion of the proposed transaction. Forward-
looking statements are statements that are not historical facts. Such forward-looking statements, based upon the
current beliefs and expectations of HDP’s management, are subject to risks and uncertainties, which could cause actual
results to differ from the forward-looking statements. The following factors, among others, could cause actual results to
differ from those set forth in the forward-looking statements: continued compliance with government regulations;
changing legislation or regulatory environments; requirements or changes affecting the businesses in which NHRA is
engaged; auto racing and sports industry trends, including factors affecting supply and demand; NHRA’s dependence
on attendance and sponsorships; labor and personnel relations; NHRA’s revenue and profitability; changing
interpretations of generally accepted accounting principles; and general economic conditions, as well as other relevant
risks detailed in HDP’s filings with the Securities and Exchange Commission, including its report on form 10-K for the
period ended December 31, 2006. The information set forth herein should be read in light of such risks. Neither HDP,
nor NHRA assumes any obligation to update the information contained in this presentation.
This presentation contains disclosures of EBITDA for certain periods, which is a non-GAAP financial measure within the
meaning of Regulation G promulgated by the Securities and Exchange Commission. Management believes that
EBITDA, or earnings before interest, taxes, depreciation and amortization, is an appropriate measure of evaluating
operating performance and liquidity, because it reflects the resources available for strategic opportunities including,
among others, investments in the business and strategic acquisitions. The disclosure of EBITDA may not be
comparable to similarly titled measures reported by other companies. EBITDA should be considered in addition to, and
not as a substitute for, or superior to, operating income, cash flows, revenue, or other measures of financial
performance prepared in accordance with generally accepted accounting principles.
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Contents
Background and Highlights
NHRA Overview
Growth Opportunities & Strategy
Financial Overview
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Background
In June 2006, HD Partners Acquisition Corporation (HD Partners)
raised gross proceeds of $150M
On May 30, 2007, HD Partners entered into a definitive agreement with
the National Hot Rod Association (NHRA) to purchase substantially all
of the NHRA’s professional drag racing series/assets as well as a
broad set of exclusive commercialization rights
The assets will be held by NHRA Pro Racing, a wholly-owned
subsidiary of HD Partners
The transaction is expected to close in late 2007
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Transaction Highlights
NHRA Pro Racing is a unique entertainment asset with a well
recognized brand
World’s preeminent drag racing series
49% television viewership increase from 2000 to 2006
HD Partners management is uniquely qualified to maximize
NHRA’s potential
Built DIRECTV into the nation’s leading provider of digital television,
with approximately 12.2 million customers and $7.7 billion in revenues
Developed and successfully marketed many innovative sports products,
such as NFL Sunday Ticket and NBA League Pass
HD’s plan projects doubling EBITDA within three years
Significant “low-hanging fruit” to harvest
Excludes expected impact of future acquisitions
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Selectively Acquiring Profitable Assets
with Greatest Growth Potential
Continued
Association
Expertise Will
Benefit Both
Entities
Acquiring
Leaving Behind
POWERade Drag Racing Series
and All NHRA Pro Racing Activities
Exclusive, Worldwide License
To NHRA Brand for Pro Racing Activities,
Licensing and Sponsorships
NHRA Owned Tracks
Gainesville, Atlanta, Columbus, Indianapolis
Approximately $50 million of real estate
Media Exploitation Rights
Broadcast TV/Radio, DVD, Photos,
Internet, Mobile, Gaming, Pro-focused
Publications
Exclusive Merchandise Rights
NHRA Pro and Generic NHRA Products
NHRA.com Website
Association provided shared access
Sportsman/Amateur Racing
National Dragster Magazine
Nostalgia/Reunion Events
Youth/Educational Programs
Racing Operations
Sanctioning
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Transaction Summary
Transaction enterprise value: $121M (1)
$100M cash
$11.5M in assumed debt
$9.5M in HD Partners’ common equity
Includes real estate of approximately $50 million
NHRA Pro Racing Management Structure
Eddy Hartenstein: Chairman
Tom Compton: President and CEO
14 years with NHRA
President and CEO since 2000
Robert Meyers: Chief Financial Officer
Larry Chapman, Steve Cox and Bruce Lederman to provide dedicated
executive support for new initiatives
Consulting contract with NHRA’s current EVP and General Manager
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NHRA Overview
What is the NHRA?
The world’s largest motorsports organization
5,000+ events annually
1.5 million side-by-side races per year
300,000 participants
140 NHRA Member Tracks
# 2 motorsport in the US after NASCAR
ESPN Sports Poll 2006:
What is your favorite type
of racing? (NASCAR 57%)
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NHRA Professional Drag
Racing Series
23 national events per year
Over 80 days of racing
Up to 125,000 spectators per event
35 of top 50 DMAs
One-of-a-kind fan and sponsor access
All national events televised on ESPN2
and in high definition on ESPN2-HD
Over 4 hours of programming every race
weekend
49% viewership increase between 2000
and 2006
Continued significant viewership growth
during 2007
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Large Nationwide Fan Base
National Event
Locations
NATIONAL EVENTS
1.
Los Angeles, CA**
2.
Phoenix, AZ
3.
Gainesville, FL**
4.
Houston, TX*
5.
Las Vegas, NV
6.
Atlanta, GA**
7.
St. Louis, MO*
8.
Topeka, KS
9.
Chicago, IL
10.
Englishtown, NJ
11.
Norwalk, OH
12.
Bristol, TN
13.
Denver, CO*
14.
Seattle, WA*
15.
Sonoma, CA
16.
Minneapolis, MN*
17.
Reading, PA
18.
Indianapolis, IN**
19.
Memphis, TN*
20.
Dallas, TX
21.
Richmond, VA
22.
Las Vegas, NV
23.
Los Angeles, CA**
Not a NASCAR Nextel
Cup market
** NHRA Owned/Leased Track
Balanced and
Diverse Fan
Base
Distribution
Source: Scarborough Research 2006 (Fan = Very or Somewhat interested)
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Energetic and Diverse Racer Community
TONY PEDREGON
Funny Car
JR TODD
Top Fuel
ANTRON BROWN
Pro Stock Motorcycle
ANGELLE SAMPEY
Pro Stock Motorcycle
ASHLEY FORCE
Funny Car
MELANIE TROXEL
Top Fuel
JOHN FORCE
Funny Car
BRANDON BERNSTEIN
Top Fuel
PEGGY LLEWELLYN
Pro Stock Motorcycle
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Increased Presence in
Mainstream Media
Driving Force TV Series on A&E
NHRA Race Day on ESPN2
American Dragster TV Series on ESPN2
Ashley Force on Jay Leno
Good Morning America Segment
AOL’s Hottest Athlete: Ashley Force
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Chicago, IL
Bristol, TN
Las Vegas, NV
Indianapolis, IN
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Powerful Fan and Sponsor
Experience
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Growth Opportunities & Strategy
NHRA’s Past, Present & Future
Past
Grassroots nonprofit
membership organization;
run by and for hardcore
enthusiasts
Present
Utilizing highly profitable
professional race series
to support amateur
events & other non-profit
association activities
Future
Branded multimedia
entertainment platform
that serves established
fan base while attracting
new fans
50+ year ownership by non-profit organization – with non-profit goals
Profit-oriented
public company
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Key Ingredients for NASCAR’s Success:
Example:
NASCAR’s Emergence as Force in
Mainstream Sports and Media
Sponsor Expansion
Tremendous sponsor expansion over the past decade
1995: Winston, Skoal, STP, CITGO and Camel.
Today: AOL, Duracell, Gillette, Home Depot and NEXTEL / Sprint
Mainstream Entertainment Integration
In the past, exposure limited to news and sports television
Over past decade, NASCAR has integrated into mainstream
entertainment as a lifestyle brand
TV (MTV, Saturday Night Live, and reality TV)
Feature films such as Talladega Nights: The Ballad of Ricky Bobby
Competitive Formats / Dramatic Stories
Implementation of Winston / NEXTEL series formats has generated
greater fan interest, led to the addition of new events and tracks and
increased media coverage
NASCAR has successfully marketed the stories behind key drivers –
increasing appeal of the sport to more casual fans
Source: NASCAR Brand and Consumer Marketing Memo (2005)
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Introduce New National Events – increase the current 23 national events by targeting
underserved regions
Reach new fans and expand the overall brand presence
Geographic expansion enhances sponsorship value
Targeted opportunities for international expansion
Plans for a new 24th National Event for 2008 season were announced on September 1, 2007
Expand and leverage fan base
Use increased advertising and sponsor promotions to expand event attendance and viewership
Enhance average revenue per spectator across various customer touch points
Opportunity:
Expand NHRA’s Exposure and
Leverage Fan Base
Significant EBITDA growth can be created through expansion
of National Event-related economics
Initiative EBITDA Contribution
Introduce New National Event $500K per event (average) (1)
Increase Paid Attendance $1M per incremental 5% (2)
Increase Paid Attendee Revenue $500K per incremental $1 spend (3)
(1) Assumes non-owned track (2) Increase against 2006 paid attendance (3) Increase against 2006 paid attendees
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Quality sponsors from outside racing are increasingly attached to the sport
Significant unfilled opportunities in proven auto racing sponsorship categories
Opportunity:
Diversify Sponsors & Fill Key
Sponsorship Categories
Current Unfilled
Categories
Banking
Big Box Electronics
Consumer Electronics
Consumer Packaged Goods
Home Improvement
Information Technology
Internet Services
Pharmaceuticals
Quick Service Restaurants
Satellite Radio
Satellite TV
Wireless Products
Existing Automotive /
Racing Sponsors
Existing Consumer
Products Sponsors
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HDP’s Advantage:
Leverage Management’s Extensive
Contact Network
DIRECTV experience provides high level contacts at many logical NHRA
partners
Consumer electronics retailers
Video and broadband distribution platforms
Television broadcasters and programmers
Emerging distribution platforms
Consumer electronics manufacturers
Auto manufacturers
Additional web of contacts through Board of Directors representation
XM Satellite Radio
Consumer Electronics Association
Thomson Multimedia
SanDisk
HDP Team will exploit an extensive network of
contacts to expand the NHRA reach and visibility
Successful Track Record of Strategic Partnering to Grow
Brand Recognition, Sales, and Customer Enthusiasm
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Opportunity:
Expand Licensing, Merchandising &
Multimedia Revenues
Revamp and re-launch licensing and merchandising initiatives
Exploit NHRA’s potential as a lifestyle brand
Re-launch NHRA.com to enhance multimedia experience, online sales offerings and
advertising potential
Launch new publications and membership programs
License new products and services in proven auto enthusiast categories
NASCAR has licensed over 3,500 products and services
Establish presence in relevant retail venues
Management believes that merchandise spend rates can be significantly increased
NASCAR-branded products generated license fees of over $300M in 2005
Expand multimedia offerings; commercially exploit substantial video and
photo archive
Over 20,000 hours of previously unreleased video
Photo archive covering the entire 50+ year history of the sport
Introduce new DVD series
Other branded entertainment services have demonstrated ability to drive substantial revenue
and EBITDA through targeted DVD sales (e.g. WWE sold 3M video units generating $42.6M in
gross revenue in 2006)
Multiple untapped multimedia platform opportunities available
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HDP’s Advantage:
Pioneers in Developing Multimedia
Revenue Opportunities
Developed and successfully marketed many innovative sports products
Out-of-market sports packages
Unique pay-per-view programming (Behind-the scenes)
Pioneered promotional programs linking key national retailers and special event
programming (e.g., Shania Twain, NFL Sunday Ticket)
Established first-of-a-kind relationships with national telephone operators (AT&T,
Verizon, Bell South) to integrate video offering with communication products
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Growth Momentum is Accelerating
Substantial fan base growth in 2007
Overall growth in paid attendance of 9.5% (1)
Race event television viewership increase of over 8.0% (1)
Transaction is serving as catalyst for new initiatives
Announced new national event for 2008
Major sponsors renewed for 2008; new sponsor deals in process
2007 Year-in-Review DVD to be on sale in Mid-November
Other DVD / Video products in development for 2008 release
(1) Comparison of first 19 events of 2007 to first 19 events of 2006, excluding Brainerd for which numbers are not available.
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Well-Capitalized Platform for Aggressive
Sports Media Expansion Opportunities
NHRA Pro Racing Opportunities
Upgrades to owned and non-owned track facilities
Strategic acquisition of new tracks
Ancillary racing assets
Complimentary media assets (hard and electronic)
Automotive enthusiast assets
Emerging sports media aggregation opportunities
Significant capabilities to expand revenues and leverage cost
efficiencies across multiple event-based businesses
Exploit efficiencies in infrastructure, event co-location and marketing
Enhance value to sponsors
Bundle media exploitation rights
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Financial Overview
NHRA Pro Racing Financial
Overview
2006 Revenue
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NHRA Pro Racing Financial
Overview
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NHRA Acquisition Summary
The table illustrates the NHRA transaction valuation and multiples based on 2006 results:
LTM 6/30/07 Revenue and Adjusted EBITDA numbers only account for 21 events rather than the full
23 events because of schedule differences
The additional 2 events will occur in the third quarter of 2007 and will be reflected in the LTM
numbers at that time
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Comparable Valuation
Overview
The most relevant comparables are multi-media branded entertainment
companies
Characterized by established brand name, brand extension potential and multiple outlets for
distribution and consumption
Few direct comparables to NHRA; reviewed valuation for sports media assets,
racetrack operators and live entertainment companies
Most sports media assets are privately held and command substantial premiums in private
ownership transactions
Racetrack operators lack the substantial growth and brand extension characteristics that the
NHRA commands
The following table presents an overview of comparable transaction valuations:
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Public Comparable Companies
Growth and Valuation Comparison
… and the valuation is substantially lower than most on a free cash flow basis
The acquisition multiple is slightly higher
than most comparables…
Median: 9.9x
… but NHRA has grown faster than most of the
comparables…
Median: 11.8%
Negative Free
Cash Flow
Median: 28.6x
Negative Free
Cash Flow
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Conclusion
Acquisition establishes a compelling
sports media asset foundation with the
capital and expertise to build a unique
entertainment platform
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