UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended February 29, 2000.
Commission file Number 0-2384
International Speedway Corporation
(Exact name of registrant as specified in its charter.)
Florida, U.S.A. 59-0709342
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1801 West International Speedway Boulevard, Daytona Beach, Florida 32114-1243
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (904) 254-2700
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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date:
Class A Common Stock, - 23,224,125 shares as of March 31, 2000.
Class B Common Stock, - 29,877,028 shares as of March 31, 2000.
PART I. - FINANCIAL INFORMATION
Item 1. - Financial Statements
INTERNATIONAL SPEEDWAY CORPORATION
Condensed Consolidated Balance Sheets
November 30, February 29,
1999 2000
(Unaudited)
-------------- -------------
(In Thousands)
ASSETS
Current Assets:
Cash and cash equivalents ......................... $ 37,811 $ 80,340
Short-term investments ............................ 690 --
Receivables, less allowance of $1,000 ............. 15,312 29,115
Inventories ....................................... 3,466 5,444
Prepaid expenses and other current assets ......... 7,696 10,241
------------ ----------
Total Current Assets ................................ 64,975 125,140
Property and Equipment - at cost - less accumulated
depreciation of $84,909 and $93,066, respectively 657,682 716,619
Other Assets:
Equity investments ................................ 17,423 20,401
Goodwill, less accumulated amortization of $6,753 and
$11,357 respectively ............................ 542,583 707,568
Restricted investments (Note 3) ................... 295,929 76,483
Other ............................................. 20,535 20,130
----------- ------------
876,470 824,582
----------- ------------
Total Assets ........................................ $ 1,599,127 $1,666,341
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable .................................. $ 17,655 $ 21,958
Deferred income ................................... 77,119 113,771
Current portion of long-term debt ................. 2,655 4,155
Income tax payable ................................ -- 6,186
Other current liabilities ......................... 19,443 22,154
------------ ------------
Total Current Liabilities ........................... 116,872 168,224
Long-Term Debt (Note 3) ............................. 496,067 493,604
Deferred Income Taxes ............................... 72,291 73,811
Long-Term Deferred Income ........................... 8,376 9,128
Minority Interest ................................... 3,051 2,788
Commitments and Contingencies ....................... -- --
Shareholders' Equity
Class A Common Stock, $.01 par value, 80,000,000 shares
authorized; 22,876,075 and 23,179,445 issued at November
30 and February 29, respectively ................ 229 232
Class B Common Stock, $.01 par value, 40,000,000 shares
authorized; 30,248,639 and 29,921,708 issued at November 30
and February 29, respectively ................... 302 299
Additional paid-in capital ........................ 687,321 688,136
Retained earnings ................................. 216,432 231,705
------------ ------------
904,284 920,372
Less unearned compensation-restricted stock ....... 1,814 1,586
------------ ------------
Total Shareholders' Equity .......................... 902,470 918,786
------------ ------------
Total Liabilities and Shareholders' Equity .......... $ 1,599,127 $1,666,341
============ ============
See accompanying notes.
INTERNATIONAL SPEEDWAY CORPORATION
Condensed Consolidated Statements of Income
Three Months Ended
February 28, February 29,
1999 2000
(Unaudited)
------------ -----------
(In Thousands, Except
Per Share Data)
REVENUES:
Admissions, net.................................... $37,614 $ 48,594
Motorsports related income......................... 34,444 45,774
Food, beverage and merchandise income ............. 10,834 16,237
Other income....................................... 344 990
----------- -----------
83,236 111,595
EXPENSES:
Direct expenses:
Prize and point fund monies
and NASCAR sanction fees....................... 12,804 18,792
Motorsports related expenses..................... 11,080 17,142
Food, beverage and merchandise expenses ......... 5,239 8,553
General and administrative expenses................ 10,254 19,081
Depreciation and amortization ..................... 3,626 12,840
----------- -----------
43,003 76,408
----------- -----------
Operating income .................................... 40,233 35,187
Interest income ..................................... 2,086 1,549
Interest expense .................................... (297) (8,062)
Equity in net income (loss) from equity investments . 25 (552)
Minority interest ................................... -- 263
----------- -----------
Income before income taxes .......................... 42,047 28,385
Income taxes ........................................ 16,108 12,288
----------- -----------
Net income .......................................... $25,939 $ 16,097
=========== ===========
Basic earnings per share ............................ $ 0.61 $ 0.30
=========== ===========
Diluted earnings per share .......................... $ 0.60 $ 0.30
=========== ===========
Dividends per share.................................. $ 0.00 $ 0.00
=========== ===========
Basic weighted average shares outstanding ...........42,858,839 52,948,817
=========== ===========
Diluted weighted average shares outstanding .........42,994,673 53,040,684
=========== ===========
See accompanying notes.
International Speedway Corporation
Condensed Consolidated Statements of Shareholders' Equity
CLASS A CLASS B
COMMON COMMON UNEARNED
STOCK STOCK ADDITIONAL COMPENSATION- TOTAL
$.01 PAR $.01 PAR PAID-IN RETAINED RESTRICTED SHAREHOLDERS'
VALUE VALUE CAPITAL EARNINGS STOCK EQUITY
-------- --------- --------- --------- ----------- --------------
(In Thousands)
BALANCE AT NOVEMBER 30, 1998 $115 $316 $205,089 $163,201 $(1,866) $366,855
Activity 12/1/98 - 2/28/99 - unaudited:
Net income ........................... -- -- -- 25,939 -- 25,939
Change in equity investment .......... -- -- (53) -- -- (53)
Reacquisition of previously issued
common stock ....................... -- -- (314) (796) -- (1,110)
Conversion of Class B Common Stock to
Class A Common Stock ............... 4 (4) -- -- -- --
Income tax benefit related to restricted
stock plan ......................... -- -- 1,129 -- -- 1,129
Amortization of unearned compensation. -- -- -- -- 244 244
----- ----- --------- --------- -------- ---------
BALANCE AT FEBRUARY 28, 1999 - unaudited 119 312 205,851 188,344 (1,622) 393,004
Activity 3/1/99 - 11/30/99 - unaudited:
Net income ........................... -- -- -- 30,674 -- 30,674
Issuance of common stock for PMI
acquisition ........................ 100 -- 480,472 -- -- 480,572
Cash dividends ($.06 per share) ...... -- -- -- (2,586) -- (2,586)
Change in equity investment .......... -- -- (37) -- -- (37)
Restricted stock grant ............... -- -- 1,035 -- (1,035) --
Conversion of Class B Common Stock to
Class A Common Stock ............... 10 (10) -- -- -- --
Amortization of unearned compensation. -- -- -- -- 843 843
----- ----- --------- --------- -------- ---------
BALANCE AT NOVEMBER 30, 1999 229 302 687,321 216,432 (1,814) 902,470
Activity 12/1/99 - 2/29/00 - unaudited:
Net income ........................... -- -- -- 16,097 -- 16,097
Reacquisition of previously issued
common stock ....................... -- -- (354) (824) -- (1,178)
Conversion of Class B Common Stock to
Class A Common Stock ............... 3 (3) -- -- -- --
Income tax benefit related to restricted
stock plan ......................... -- -- 1,169 -- -- 1,169
Amortization of unearned compensation. -- -- -- -- 228 228
----- ----- --------- --------- -------- ---------
BALANCE AT FEBRUARY 29, 2000 - unaudited $232 $299 $688,136 $231,705 $(1,586) $918,786
===== ===== ========= ========= ======== =========
See accompanying notes.
International Speedway Corporation
Condensed Consolidated Statements of Cash Flows
Three Months Ended
February 28, February 29,
1999 2000
(Unaudited)
------------ ------------
(In Thousands)
OPERATING ACTIVITIES
Net income...................................... $ 25,939 $ 16,097
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization .............. 3,626 12,840
Amortization of unearned compensation....... 244 228
Amortization of financing costs ............ -- 436
Deferred income taxes....................... 4,087 3,204
Undistributed loss (gain) from equity
investments .............................. (25) 552
Minority interest .......................... - (263)
Changes in operating assets and liabilities:
Receivables, net ........................... (3,515) (13,800)
Inventories, prepaid expenses and other
current assets ........................... 1,582 (4,403)
Other assets................................ -- 49
Accounts payable, and other current liabilities 2,925 5,267
Deferred income............................. (6,717) 36,833
Income tax payable ......................... 7,327 7,355
--------- ---------
Net cash provided by operating activities....... 35,473 64,395
INVESTING ACTIVITIES
Change in short-term investments, net ........ (32,544) 690
Capital expenditures.......................... (19,255) (20,286)
Acquisition .................................. -- (215,627)
Equity investments ........................... (250) (3,530)
Change in restricted investments, net ........ (59,213) 219,446
Other, net ................................... (72) (184)
--------- ---------
Net cash used in investing activities........... (111,334) (19,491)
FINANCING ACTIVITIES
Net draws under credit facilities ............ -- 1,500
Payment of long-term debt .................... (530) (2,500)
Proceeds from long-term debt ................. 63,712 --
Reacquisition of previously issued
common stock................................. (1,110) (1,178)
Other ........................................ -- (197)
---------- ---------
Net cash provided by (used in ) financing
activities .................................. 62,072 (2,375)
---------- ---------
Net increase (decrease) in cash and cash
equivalents ................................... (13,789) 42,529
Cash and cash equivalents at beginning of period 38,676 37,811
--------- ---------
Cash and cash equivalents at end of period ..... $ 24,887 $ 80,340
========= =========
See accompanying notes.
International Speedway Corporation
Notes to Condensed Consolidated Financial Statements
November 30, 1999 and February 29, 2000
(Unaudited)
1. Basis of Presentation
The accompanying condensed consolidated financial statements have been
prepared in compliance with Rule 10-01 of Regulation S-X and generally
accepted accounting principles but do not include all of the information and
disclosures required for complete financial statements. The statements should
be read in conjunction with the consolidated financial statements and notes
thereto included in the latest annual report on Form 10-K for International
Speedway Corporation and its majority-owned subsidiaries (the "Company"). In
management's opinion, the statements include all adjustments which are
necessary for a fair presentation of the results for the interim periods. All
such adjustments are of a normal recurring nature. Certain reclassifications
have been made to conform to the financial presentation at February 29, 2000.
Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures about
Segments of an Enterprise and Related Information", became effective for the
Company in 1999. SFAS No. 131 establishes standards for the way that public
business enterprises report information about operating segments in annual
financial statements and reporting selected information about operating
segments in interim financial reports. (See Note 6)
Earnings per share - Basic and diluted earnings per share are calculated in
accordance with Statement of Financial Accounting Standards No. 128, "Earnings
Per Share". The difference between basic weighted average shares and diluted
weighted average shares is related to shares issued under the Company's long-
term incentive stock plans, using the treasury stock method as prescribed by
the standard.
Because of the seasonal concentration of racing events and the acquisitions in
July and December 1999 (Note 2), the results of operations for the three-month
periods ended February 28, 1999 and February 29, 2000 are not indicative of
the results to be expected for the year.
2. Acquisitions
On July 26, 1999, the Company acquired the approximately 88%, or 12.2 million
outstanding common shares, of Penske Motorsports, Inc. ("PMI") stock that it
did not already own for approximately $129.8 million and 10,029,861 shares of
the Company's Class A Common Stock. Transaction costs, net of cash acquired
in the transaction, totaled approximately $3.6 million. The total cash and
stock consideration issued in the transaction was approximately $611.1
million.
Motorsports facilities acquired in the transaction include Michigan Speedway
in Brooklyn, Michigan; Nazareth Speedway in Nazareth, Pennsylvania; California
Speedway in San Bernardino County, California; and North Carolina Speedway in
Rockingham, North Carolina. The Company also acquired PMI's 45% interest in
Homestead-Miami Speedway, LLC ("Miami"), bringing the Company's ownership in
that facility to 90%, as well as other PMI merchandising subsidiaries.
The acquisition has been accounted for under the purchase method of accounting
and, accordingly, the results of operations of the former PMI, as well as
Miami, have been included in the Company's consolidated statements of income
as of the date of acquisition.
The transaction purchase price has been allocated to the assets and
liabilities of PMI and Miami based upon preliminary estimates of their fair
market value. Management does not believe the final allocation will differ
materially from the preliminary allocation. The excess of the purchase price
over the fair value of the net assets acquired of approximately $108.2, has
been allocated, based upon the preliminary allocation, as goodwill of
approximately $507.4 million and assembled workforce of approximately $900,000
amortized on a straight line basis over 40 years and five years, respectively.
The amount amortized during the three months ended February 29, 2000 was
approximately $3.4 million.
On December 1, 1999, the Company acquired Richmond International Raceway
("Richmond") for approximately $215.6 million, including acquisition costs.
The Richmond acquisition has been accounted for under the purchase method of
accounting, and accordingly, the results of operations have been included in
the Company's consolidated statements of income since the date of acquisition.
The purchase price was allocated to the assets and liabilities acquired based
on estimated fair values at the acquisition date. The excess of the purchase
price over the fair value of the net assets acquired was approximately $169.3
million and was recorded as goodwill, which is being amortized on a straight
line basis over 40 years. The amount amortized during the three months ended
February 29, 2000 was approximately $1.1 million.
As a result of the PMI and Richmond acquisitions, the Company operates 11
major motorsports facilities across the United States.
The following unaudited pro forma financial information presents a summary of
consolidated results of operations as if the PMI and Richmond acquisitions had
occurred as of December 1, 1998 after giving effect to certain adjustments,
including depreciation, amortization of goodwill, interest income, interest
expense, equity earnings, minority interest and the related income tax
effects. The pro forma results have been prepared for comparative purposes
only and do not purport to be indicative of what would have occurred had the
acquisition had been made on that date, nor are they necessarily indicative of
results which may occur in the future
.
(Proforma - unaudited)
Three Months Ended
February 28, 1999
-----------------------
(In Thousands, except per share amounts)
Total Revenues $ 95,456
Net Income 14,150
Basic income per share 0.27
Diluted income per share 0.27
3.Long-Term Debt
Long-term debt consists of the following (in thousands):
November 30, February 29,
1999 2000
------------- ------------
Senior Notes, net of discount of
$338 and $321 $224,662 $224,679
Credit facilities 169,500 171,000
TIF bond debt service funding commitment,
net of discount of $1,645 and $1,625 69,010 69,030
Term debt 30,000 27,500
Notes payable 5,550 5,550
--------- ---------
498,722 497,759
Less current portion 2,655 4,155
--------- ---------
$496,067 $493,604
========= =========
On October 6, 1999, the Company completed an offering of $225 million
principal amount of senior notes ("Senior Notes") due October 15, 2004 in a
private placement. The unsecured Senior Notes bear interest at 7.875% and rank
equally with all of the Company's other senior unsecured and unsubordinated
indebtedness. The Senior Notes require semi-annual interest payments beginning
on April 15, 2000 through maturity on October 15, 2004. The Senior Notes may
be redeemed in whole or in part, at the option of the Company, at any time or
from time to time at a redemption price as defined in the indenture. Certain
of the Company's subsidiaries are guarantors of the Senior Notes (See Note 7).
The Senior Notes also contain various restrictive covenants. On March 17,
2000, the Company completed an offer to exchange the Senior Notes issued in
the private placement for registered senior notes ("Registered Senior Notes")
with substantially identical terms.
The total gross proceeds from the sale of the Senior Notes were $225 million,
net of $349,000 discount and approximately $4.7 million of deferred financing
fees. The deferred financing fees will be treated as additional interest
related to the Registered Senior Notes and amortized over the life of the
Registered Senior Notes on an effective yield method.
In December, 1999, the Company's fully-underwritten revolving credit facility
("Credit Facility") was increased from $200 million to $250 million. The
Credit Facility matures on March 31, 2004, and pays interest at LIBOR plus 50-
100 basis points. At February 29, 2000, the Company had borrowings of $160
million under the Credit Facility, all of which related to the financing of
the Company's December 1999 Richmond acquisition (See Note 2). The Credit
Facility contains various restrictive covenants.
In addition, the Company's Miami subsidiary also has an agreement with a group
of banks for a $20 million credit facility ("Miami Credit Facility") and a
$27.5 million term loan. The Miami Credit Facility and term loan are
collateralized by all of the assets of the Company's Miami subsidiary. The
Miami Credit Facility, which is automatically reduced to $15 million on
December 31, 2002, matures on December 31, 2004. At February 29, 2000, the
Company had borrowings of $11 million under the Miami Credit Facility. The
term loan is payable in annual installments, which range from $4.0 million to
$7.0 million on December 31, 2004. Interest on the Miami Credit Facility and
term loan is paid based on calendar quarters and accrues interest at LIBOR
plus 75-150 basis points. The Company has entered into an interest rate swap
agreement that effectively fixes the floating rate on the outstanding balances
under the term loan at 6.6% through December 31, 2000 and 7.1% for the
remainder of the loan period. The Miami Credit Facility and the term loan
contain various restrictive covenants.
In January 1999, the Unified Government of Wyandotte County/Kansas City,
Kansas ("Unified Government"), issued approximately $71.3 million in taxable
special obligation revenue ("TIF") bonds and approximately $24.3 million in
sales tax special obligation revenue ("STAR") bonds, in connection with the
financing of phase I construction of the speedway in Kansas. The net proceeds
were deposited into separate interest-bearing trust accounts. The STAR bonds
will be retired with state and local taxes generated within the project's
boundaries and are not an obligation of the Company. The TIF bonds are
comprised of a $21.6 million, 6.15% term bond due December 1, 2017 and a $49.7
million, 6.75% term bond due December 1, 2027. The TIF bonds are serviced
through payments by the Unified Government, which are funded through payments
made by the Company to the Unified Government in lieu of property taxes
("Funding Commitment"). Principal (mandatory redemption) payments per the
Funding Commitment are payable by the Company on October 1 of each year. The
semi-annual interest component of the Funding Commitment is payable annually
on April 1 and October 1. The Company has granted a mortgage and security
interest in the Kansas project for its Funding Commitment obligation.
Simultaneous with the issuance of the STAR and TIF bonds in January 1999, the
Company deposited into a trust account the unexpended portion of its initial
$77.9 million equity commitment to the Kansas project. The unexpended portion
of the TIF bond proceeds and the Company's equity contribution remaining in
the trust accounts are classified as restricted investments on the Company's
balance sheet. The funds held in trust have been invested in a guaranteed
investment contract earning an interest rate of approximately 4.75% with a
maturity date of April 2001.
Total interest incurred by the Company was approximately $297,000 and $8.1
million for the three months ended February 28, 1999 and February 29, 2000,
respectively. Total interest capitalized for the three months ended February
28, 1999 and February 29, 2000, was approximately $275,000 and $1.6 million,
respectively.
Financing costs of approximately $11.7 million, net of accumulated
amortization, have been deferred and are included in other assets at February
29, 2000. These costs are being amortized on an effective yield method over
the life of the related financing.
4. Related Party Disclosures and Transactions
All of the racing events that take place during the Company's fiscal year are
sanctioned by various racing organizations such as the American Historic
Racing Motorcycle Association ("AHRMA"), the American Motorcyclist Association
("AMA"), the Automobile Racing Club of America ("ARCA"), the Championship Cup
Series ("CCS"), Championship Auto Racing Teams ("CART"), the Federation
Internationale de l'Automobile ("FIA"), the Grand American Road Racing
Association ("GARRA"), the Federation Internationale Motocycliste ("FIM"),
Historic Sportscar Racing ("HSR"), the International Race of Champions
("IROC"), the Indy Racing League ("IRL"), the National Association for Stock
Car Auto Racing, Inc. ("NASCAR"), the Sports Car Club of America ("SCCA"), the
Sportscar Vintage Racing Association ("SVRA"), the United States Auto Club
("USAC"), and the World Karting Association ("WKA"). NASCAR, which sanctions
some of the Company's principal racing events, is a member of the France
Family Group which controls in excess of 60% of the combined voting power of
the outstanding stock of the Company and some members of which serve as
directors and officers. Standard NASCAR sanction agreements require racetrack
operators to pay sanction fees and prize and point fund monies for each
sanctioned event conducted. The prize and point fund monies are distributed by
NASCAR to participants in the events. Prize and point fund monies paid by the
Company to NASCAR for disbursement to competitors totaled approximately $10.2
million and $14.7 million for the three-month periods ended February 28, 1999
and February 29, 2000, respectively.
5. Legal Proceedings
Souvenir Litigation
As described below, the Company and certain subsidiaries are parties to legal
proceedings alleging price-fixing activities in connection with the sale of
souvenirs and merchandise. These matters are collectively referred to as the
Souvenir Litigation. While the Company disputes the allegations, neither the
cost of defending the suits nor the potential damages or other remedies for
which the Company might be liable is insured.
The Company's indirect corporate subsidiary, Americrown Service Corporation
("Americrown"), is the sole defendant in a class action proceeding in the
Circuit Court of Talladega County, Alabama which was filed in October 1996. A
class consisting of persons who purchased racing souvenirs at Talladega
Superspeedway since September 1992 was certified by the court on July 30,
1998. The suit seeks to recover at least $500 for each member of the class
but does not otherwise seek to recover compensatory or punitive damages or
statutory attorneys' fees. Americrown has moved for reconsideration of the
class certification decision. Americrown has disputed the allegations and has
defended the action fully and vigorously.
In March 1997, two purported class action companion lawsuits were filed in the
United States District Court, Northern District of Georgia, against the
Company, Americrown, and a number of other persons (including Motorsports
International Corp. ("Motorsports International"), previously a subsidiary of
PMI which was acquired by the Company in the PMI Acquisition). Both suits
sought damages and injunctive relief on behalf of all persons who purchased
souvenirs or merchandise from certain vendors at any NASCAR Winston Cup race
or supporting event in the United States during the period 1991 to present.
The two suits have been consolidated and class certification has not yet been
decided by the court. Discovery has been concluded. The Company and
Americrown have disputed the allegations and have defended the actions fully
and vigorously.
Recently Americrown, Motorsports International and the Company have entered
into Confidential Memoranda of Understanding ("MOU") to completely settle the
Souvenir Litigation, without any admission of wrongdoing on their part. Under
the terms of the MOU (which have been filed under seal with the respective
courts) the Company, Americrown and Motorsports International have agreed to
pay approximately $4.6 million in cash and to distribute souvenir merchandise
discount coupons to settle with classes which would encompass all purchasers
of souvenirs and merchandise at NASCAR Winston Cup events during the period
from January 1, 1991 to the present. The parties are in the process of
attempting to agree on the terms of formal Settlement Agreements, including
the terms of the coupon program. Such Settlement Agreements will then be
subject to review and approval by both the state and federal courts. If the
Settlement Agreements are not successfully finalized, the Company, Americrown
and Motorsports International intend to resume the vigorous defense of the
actions.
In the third quarter of fiscal year 1999 the Company accrued approximately
$2.8 million representing Americrown's cash portion of the proposed Souvenir
Litigation settlement. The remaining $1.8 million is attributable to
Motorsports International and was recorded as a part of the merger purchase
price. The effects of the discount coupon program will be recognized in
future periods as coupons are redeemed.
North Carolina Speedway Dissenters' Action
In connection with PMI's acquisition of North Carolina Speedway in 1997,
certain of the North Carolina Speedway stockholders (constituting more than 5%
of the North Carolina Speedway shares outstanding prior to the acquisition)
exercised their right under North Carolina law to dissent to the price paid
for the common stock of North Carolina Speedway. These dissenting
shareholders were paid $16.77 per share. These dissenters have requested
$55.00 per share and have sued PMI, Penske Acquisition, Inc. and North
Carolina Speedway in North Carolina Superior Court, Mecklenburg County, North
Carolina. Under PMI's agreement with Mrs. DeWitt (the former majority
stockholder of North Carolina Speedway), if a dissenting stockholder, which
represents more than five percent of the North Carolina Speedway stock,
receives more consideration in a dissenters' action than PMI paid in
connection with the acquisition of North Carolina Speedway, all stockholders
of North Carolina Speedway at the time of the acquisition, other than PMI and
its affiliates, would receive a per share amount equal to the award in
dissenter's court less the per share amount paid in the acquisition ($19.61
per share to stockholders other than the dissenting shareholders). Because
PMI acquired Mrs. DeWitt's shares prior to the completion of this acquisition,
Mrs. DeWitt would not be entitled to receive additional consideration for her
shares. An adverse decision with respect to the dissenters' proceeding could
materially increase the price paid by PMI for the shares of North Carolina
Speedway held by shareholders entitled to additional compensation. The
Company would have to pay any such additional compensation, which it intends
to recognize as a current expense in the event of such a decision.
Management is presently unable to further predict or quantify the outcome of
these matters
6. Segment Reporting
The following table provides segment reporting of the Company for the three
months ended February 28, 1999 and February 29, 2000:
1999 2000
-------- --------
(In thousands)
Net Revenues:
Motorsports Events $ 80,134 $ 105,269
All Other 3,561 8,417
---------- -----------
Total $ 83,695 $ 113,686
========== ===========
Operating Income:
Motorsports Events $ 39,297 $ 33,815
All Other 936 1,372
---------- ------------
Total $ 40,233 $ 35,187
========== ============
Total Assets
Motorsports Events $ 561,033 $ 1,615,423
All Other 17,498 50,918
---------- ------------
Total $ 578,531 $ 1,666,341
========== ============
Intersegment revenues were approximately $459,000 and $2.1 million for the
three months ended February 28, 1999 and February 29, 2000, respectively.
7. Condensed Consolidating Financial Statements
The following table presents the required condensed consolidating financial
information for the Company and its subsidiary guarantors.
Included are condensed consolidating balance sheets as of February 29, 2000
and November 30, 1999 and the condensed consolidating statements of income and
cash flows for the three months ended February 29, 2000 and February 28, 1999,
respectively, of: (a) the Parent; (b) the guarantor subsidiaries; (c) the non-
guarantor subsidiaries; (d) elimination entries necessary to consolidate
Parent with guarantor and non-guarantor subsidiaries; and (e) the Company on a
consolidated basis.
INTERNATIONAL SPEEDWAY CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
February 29, 2000
(Unaudited)
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ------------ ------------ ------------ ------------
(in thousands)
ASSETS
Current Assets:
Cash and cash equivalents ......................... $ 39,550 $ 39,651 $ 1,139 $ - $ 80,340
Receivables, net................................... 25,342 22,315 1,833 (20,375) 29,115
Other current assets .............................. 1,518 10,015 4,152 - 15,685
------------- ------------ ------------ ------------ ------------
Total Current Assets ................................ 66,410 71,981 7,124 (20,375) 125,140
Property and Equipment, net.......................... 177,997 380,705 157,917 - 716,619
Other Assets:
Investment in subsidiaries......................... 1,139,062 2,660 - (1,141,722) -
Equity investments......... ....................... - 20,401 - - 20,401
Goodwill........................................... - 507,592 199,976 - 707,568
Restricted investments............................. - - 76,483 - 76,483
Other ............................................. 12,740 1,088 6,302 - 20,130
------------- ------------ ------------ ------------ ------------
1,151,802 531,741 282,761 (1,141,722) 824,582
------------- ------------ ------------ ------------ ------------
Total Assets ........................................ $ 1,396,209 $ 984,427 $ 447,802 $(1,162,097) $ 1,666,341
============= ============ ============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and other current liabilities..... $ 32,073 $ 34,197 $ 8,558 $ (20,375) $ 54,453
Deferred income ................................... 42,570 56,651 14,550 - 113,771
------------- ------------ ------------ ------------ ------------
Total Current Liabilities ........................... 74,643 90,848 23,108 (20,375) 168,224
Long-Term Debt ...................................... 384,679 90,685 295,925 (277,685) 493,604
Deferred Income Taxes ............................... 33,126 37,642 3,043 - 73,811
Long-Term Deferred Income ........................... - - 9,128 - 9,128
Minority Interest ................................... - - 2,788 - 2,788
Commitments and Contingencies - - - - -
Shareholders' Equity:
Class A Common Stock............................... 232 - - - 232
Class B Common Stock............................... 299 - - - 299
Additional paid-in capital ........................ 688,136 - - - 688,136
Intercompany capital............................... - 745,251 117,969 (863,220) -
Retained earnings ................................. 216,680 20,001 (4,159) (817) 231,705
------------- ------------ ------------ ------------ ------------
905,347 765,252 113,810 (864,037) 920,372
Less unearned compensation......................... 1,586 - - - 1,586
------------- ------------ ------------ ------------ ------------
Total Shareholders' Equity .......................... 903,761 765,252 113,810 (864,037) 918,786
------------- ------------ ------------ ------------ ------------
Total Liabilities and Shareholders' Equity .......... $ 1,396,209 $ 984,427 $ 447,802 $(1,162,097) $ 1,666,341
============= ============ ============ ============ ============
INTERNATIONAL SPEEDWAY CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
November 30, 1999
(Audited)
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ------------ ------------ ------------ ------------
(in thousands)
ASSETS
Current Assets:
Cash and cash equivalents ......................... $ 11,768 $ 25,120 $ 923 $ - $ 37,811
Short-term investments ............................ 690 - - - 690
Receivables, net................................... 17,747 8,075 1,718 (12,228) 15,312
Other current assets .............................. 8,258 857 2,047 - 11,162
------------- ------------ ------------ ------------ ------------
Total Current Assets ................................ 38,463 34,052 4,688 (12,228) 64,975
Property and Equipment, net.......................... 174,726 377,107 105,849 - 657,682
Other Assets:
Investment in Subsidiaries......................... 925,834 2,662 - (928,496) -
Equity investments......... ....................... - 17,423 - - 17,423
Goodwill........................................... - 510,635 31,948 - 542,583
Restricted investments............................. 215,250 - 80,679 - 295,929
Other ............................................. 13,172 1,132 6,231 - 20,535
------------- ------------ ------------ ------------ ------------
1,154,256 531,852 118,858 (928,496) 876,470
------------- ------------ ------------ ------------ ------------
Total Assets ........................................ $ 1,367,445 $ 943,011 $ 229,395 $ (940,724) $ 1,599,127
============= ============ ============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and other current liabilities..... $ 14,102 $ 31,317 $ 6,634 $ (12,300) $ 39,753
Deferred income ................................... 66,068 9,504 1,547 - 77,119
------------- ------------ ------------ ------------ ------------
Total Current Liabilities ........................... 80,170 40,821 8,181 (12,300) 116,872
Long-Term Debt ...................................... 384,662 90,300 157,784 (136,679) 496,067
Deferred Income Taxes ............................... 34,743 38,320 (772) - 72,291
Long-Term Deferred Income ........................... - - 8,376 - 8,376
Minority Interest ................................... - - 3,051 - 3,051
Commitments and Contingencies ....................... - - - - -
Shareholders' Equity:
Class A Common Stock............................... 229 - - - 229
Class B Common Stock............................... 302 - - - 302
Additional paid-in capital ........................ 687,321 - - - 687,321
Intercompany capital............................... - 737,971 46,196 (784,167) -
Retained earnings ................................. 181,832 35,599 6,579 (7,578) 216,432
------------- ------------ ------------ ------------ ------------
869,684 773,570 52,775 (791,745) 904,284
Less unearned compensation......................... 1,814 - - - 1,814
------------- ------------ ------------ ------------ ------------
Total Shareholders' Equity .......................... 867,870 773,570 52,775 (791,745) 902,470
------------- ------------ ------------ ------------ ------------
Total Liabilities and Shareholders' Equity .......... $ 1,367,445 $ 943,011 $ 229,395 $ (940,724) $ 1,599,127
============= ============ ============ ============ ============
INTERNATIONAL SPEEDWAY CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED FEBRUARY 29, 2000
(Unaudited)
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ------------ ------------ ------------ ------------
(in thousands)
Revenues:
Admissions, net.................................... $ 44,622 $ 3,458 $ 514 $ - $ 48,594
Motorsports related income......................... 38,024 8,209 1,217 (1,676) 45,774
Food, beverage and merchandise income.............. 3,233 16,520 146 (3,662) 16,237
Other income....................................... 435 3,949 216 (3,610) 990
------------- ------------ ------------ ------------ ------------
Total revenues................................... 86,314 32,136 2,093 (8,948) 111,595
Expenses:
Direct Expenses:
Prize and point fund monies and NASCAR sanction fees 15,094 3,034 664 - 18,792
Motorsports related expenses....................... 13,186 5,696 1,472 (3,212) 17,142
Food, beverage and merchandise expenses............ - 13,389 - (4,836) 8,553
General and administrative expenses.................. 9,362 8,373 2,246 (900) 19,081
Depreciation and amortization........................ 2,736 7,951 2,153 - 12,840
------------- ------------ ------------ ------------ ------------
Total expenses.................................. 40,378 38,443 6,535 (8,948) 76,408
------------- ------------ ------------ ------------ ------------
Operating income (loss) ............................. 45,936 (6,307) (4,442) - 35,187
Interest income...................................... 4,774 2,622 936 (6,783) 1,549
Interest expense..................................... (7,257) (3,935) (3,653) 6,783 (8,062)
Equity in net income (loss) from equity investments.. - (552) - - (552)
Minority interest.................................... - - 263 - 263
------------- ------------ ------------ ------------ ------------
Income (loss) before income taxes 43,453 (8,172) (6,896) - 28,385
Income taxes 11,469 311 508 - 12,288
------------- ------------ ------------ ------------ ------------
Net income (loss).................................... $ 31,984 $ (8,483) $ (7,404) $ - $ 16,097
============= ============ ============ ============ ============
INTERNATIONAL SPEEDWAY CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED FEBRUARY 28, 1999
(Unaudited)
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ------------ ------------ ------------ ------------
(in thousands)
Revenues:
Admissions, net.................................... $ 37,044 $ 582 $ - $ (12) $ 37,614
Motorsports related income......................... 34,065 1,712 - (1,333) 34,444
Food, beverage and merchandise income.............. 4,118 9,752 - (3,036) 10,834
Other income....................................... 297 1,977 - (1,930) 344
------------- ------------ ------------ ------------ ------------
Total revenues................................... 75,524 14,023 - (6,311) 83,236
Expenses:
Direct Expenses:
Prize and point fund monies and NASCAR sanction fees 12,465 339 - - 12,804
Motorsports related expenses....................... 11,165 1,919 10 (2,014) 11,080
Food, beverage and merchandise expenses............ 1,030 8,138 - (3,929) 5,239
General and administrative expenses.................. 7,540 2,862 220 (368) 10,254
Depreciation and amortization........................ 2,338 1,288 - - 3,626
------------- ------------ ------------ ------------ ------------
Total expenses.................................. 34,538 14,546 230 (6,311) 43,003
------------- ------------ ------------ ------------ ------------
Operating income (loss) ............................. 40,986 (523) (230) - 40,233
Interest income...................................... 2,919 105 520 (1,458) 2,086
Interest expense..................................... - (1,072) (683) 1,458 (297)
Equity in net income from equity investments ........ - 25 - - 25
------------- ------------ ------------ ------------ ------------
Income (loss) before income taxes 43,905 (1,465) (393) - 42,047
Income taxes (benefit) 15,786 394 (72) - 16,108
------------- ------------ ------------ ------------ ------------
Net income (loss).................................... $ 28,119 $ (1,859) $ (321) $ - $ 25,939
============= ============ ============ ============ ============
INTERNATIONAL SPEEDWAY CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED FEBRUARY 29, 2000
(Unaudited)
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ------------ ------------ ------------ ------------
(in thousands)
OPERATING ACTIVITIES
Net income (loss) .................................... $ 31,984 $ (8,483) $ (7,404) $ - $ 16,097
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation and amortization ........................ 3,089 7,951 2,236 - 13,276
Amortization of unearned compensation ................ 228 - - - 228
Deferred income taxes ................................ (1,617) 1,006 3,815 - 3,204
Undistributed loss from equity investment ............ - 552 - - 552
Minority interest..................................... - - (263) - (263)
Changes in Operating Assets and Liabilities:
Receivables net .................................... (7,595) (14,240) (112) 8,147 (13,800)
Inventories, prepaid expenses and other current assets 6,740 (9,158) (1,985) - (4,403)
Other assets ....................................... 211 (31) (131) - 49
Accounts payable and other current liabilities...... 19,140 1,698 (143) (8,073) 12,622
Deferred income .................................... (23,498) 47,147 13,184 - 36,833
------------- ------------ ------------ ------------ ------------
Net cash provided by operating activities ............. 28,682 26,442 9,197 74 64,395
INVESTING ACTIVITIES
Change in short-term investments, net................. 690 - - - 690
Capital expenditures ................................. (4,825) (9,349) (6,112) - (20,286)
Acquisition .......................................... - - (215,627) - (215,627)
Equity investments ................................... - (3,530) - - (3,530)
Change in restricted investments, net ................ 215,250 - 4,196 - 219,446
Intercompany investing, net........................... (210,715) 1,729 209,060 (74) -
Other, net............................................ 75 (259) - - (184)
------------- ------------ ------------ ------------ ------------
Net cash provided by (used in) investing activities ... 475 (11,409) (8,483) (74) (19,491)
FINANCING ACTIVITIES
Net draws under credit facilities .................... - - 1,500 - 1,500
Payment of long term debt............................. - - (2,500) - (2,500)
Reacquisition of previously issued common stock ...... (1,178) - - - (1,178)
Other ................................................ (197) - - - (197)
------------- ------------ ------------ ------------ ------------
Net cash used in financing activities ................. (1,375) - (1,000) - (2,375)
------------- ------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents .. 27,782 15,033 (286) - 42,529
Cash and cash equivalents at beginning of period ...... 11,768 24,618 1,425 - 37,811
------------- ------------ ------------ ------------ ------------
Cash and cash equivalents at end of period ............ $ 39,550 $ 39,651 $ 1,139 $ - $ 80,340
============= ============ ============ ============ ============
INTERNATIONAL SPEEDWAY CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED FEBRUARY 28, 1999
(Unaudited)
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ------------ ------------ ------------ ------------
(in thousands)
OPERATING ACTIVITIES
Net income (loss) .................................... $ 28,119 $ (1,859) $ (321) $ - $ 25,939
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation and amortization ........................ 2,338 1,288 - - 3,626
Amortization of unearned compensation ................ 244 - - - 244
Deferred income taxes ................................ 3,988 171 (72) - 4,087
Undistributed income from equity investment........... - (25) - - (25)
Changes in Operating Assets and Liabilities:
Receivables, net.................................... (2,106) (4,690) (41) 3,322 (3,515)
Inventories, prepaid expenses and other current assets 3,446 (1,198) (666) - 1,582
Accounts payable and other current liabilities...... 10,720 2,345 509 (3,322) 10,252
Deferred income .................................... (17,152) 10,435 - - (6,717)
------------- ------------ ------------ ------------ ------------
Net cash provided by (used in) operating activities .. 29,597 6,467 (591) - 35,473
INVESTING ACTIVITIES
Change in short-term investments, net................. (32,544) - - - (32,544)
Capital expenditures ................................. (9,420) (2,195) (7,640) - (19,255)
Equity investments ................................... - (250) - - (250)
Change in restricted investments, net ................ 53,500 - (112,713) - (59,213)
Intercompany investing, net........................... (59,390) 319 4,719 54,352 -
Other, net............................................ (72) - - - (72)
------------- ------------ ------------ ------------ ------------
Net cash provided by (used in) investing activities.... (47,926) (2,126) (115,634) 54,352 (111,334)
FINANCING ACTIVITIES
Payment of long-term debt............................. (530) - - (530)
Proceeds from long-term debt ......................... - 1,768 116,296 (54,352) 63,712
Reacquisition of previously issued common stock ...... (1,110) - - - (1,110)
------------- ------------ ------------ ------------ ------------
Net cash provided by (used in) financing activities.... (1,110) 1,238 116,296 (54,352) 62,072
------------- ------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents .. (19,439) 5,579 71 - (13,789)
Cash and cash equivalents at beginning of period ...... 27,000 11,543 133 - 38,676
------------- ------------ ------------ ------------ ------------
Cash and cash equivalents at end of period .............$ 7,561 $ 17,122 $ 204 $ - $ 24,887
============= ============ ============ ============ ============
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
General
The Company derives revenues primarily from (i) admissions to racing events
and motorsports activities held at its facilities, (ii) revenue generated in
conjunction with or as a result of motorsports events conducted at its
facilities, and (iii) catering, concession and merchandise services during or
as a result of such events and activities.
"Admissions" revenue includes ticket sales from all of the Company's racing
events and activities at DAYTONA USA. Admissions revenue for racing events is
recorded upon completion of the related motorsports event.
"Motorsports related income" primarily includes television and radio broadcast
rights fees, promotion and sponsorship fees, hospitality rentals (including
luxury suites, chalets and the hospitality portion of club seating),
advertising revenues, royalties from licenses of the Company's trademarks, and
track rentals. The Company's revenues from corporate sponsorships are paid in
accordance with negotiated contracts, with the identities of sponsors and the
terms of sponsorship changing from time to time. The Company has historically
negotiated directly with television and cable networks for coverage of
substantially all of its NASCAR televised motorsports events. NASCAR retained
these television and ancillary media rights in sanction agreements beginning
with the 2000 racing season, but agreed to allow existing agreements with
television and cable networks to be honored. NASCAR recently announced
agreement with all of the television broadcasters of these events to release
their contractual rights beginning with the 2001 racing season. Then, in
November 1999, NASCAR announced that it had reached an agreement on a six-year
television contract with NBC Sports and Turner Sports, with the two media
companies combining to develop a joint venture. In addition, NASCAR announced
that it had reached an agreement on an eight-year television contract with FOX
and its FX cable network. Both agreements relate solely to the domestic
broadcast television rights to NASCAR's Winston Cup Series and Busch Grand
National Series events, and are effective beginning with the 2001 racing
season. In January 2000, NASCAR announced that the total current estimate for
net television revenue in the year 2001 is approximately $244 million with
increases, on average, of approximately 17% per year through the 2006 season.
This net television revenue estimate for 2001 is based on the entire 2000
NASCAR Winston Cup Series and NASCAR Busch Series, Grand National Division
schedules. The percentage of television broadcast rights fees that the Company
currently retains from each contract will be the same under the future
arrangement.
"Food, beverage and merchandise income" includes revenues from concession
stands, hospitality catering and direct sales of souvenirs, programs and other
merchandise, fees paid by third party vendors for the right to sell souvenirs
and concessions at the Company's facilities, and the wholesale and retail sale
of racing tires and accessories for various types of racing events.
Expenses include (i) prize and point fund monies and NASCAR sanction fees,
(ii) motorsports related expenses, which include costs of competition paid to
sanctioning bodies other than NASCAR, labor, advertising and other expenses
associated with the Company's promotion of its racing events, and (iii) food,
beverage and merchandise expenses, consisting primarily of labor and costs of
goods sold.
The following table sets forth, for each of the indicated periods, certain
selected income statement data as a percentage of total revenues:
Three Months ended
February 28, February 29
1999 2000
(Unaudited)
----------- -----------
Revenues:
Admissions, net............................. 45.2% 43.5
Motorsports related income.................. 41.4 41.0
Food, beverage and merchandise income....... 13.0 14.6
Other income................................ 0.4 0.9
------- ------
Total revenues ........................... 100.0% 100.0%
Expenses:
Direct expenses:
Prize and point fund monies
and NASCAR sanction fees................ 15.4 16.8
Motorsports related expenses.............. 13.3 15.4
Food, beverage and merchandise expenses... 6.3 7.7
General and administrative expenses......... 12.3 17.1
Depreciation and amortization .............. 4.4 11.5
------- ------
Total expenses ........................... 51.7 68.5
------- ------
Operating income ............................. 48.3 31.5
Interest income .............................. 2.5 1.4
Interest expense ............................. (0.3) (7.2)
Equity in net loss from equity investments.... -- (0.5)
Minority interest ............................ - 0.2
------- ------
Income before income taxes ................... 50.5 25.4
Income tax expense ........................... 19.3 11.0
------- ------
Net income ................................... 31.2% 14.4%
======= ======
Seasonality and Quarterly Results
The Company's business has been, and is expected to remain, highly seasonal
based on the timing of major events. For example, one of Darlington Raceway's
Winston Cup Series events is traditionally held on the Sunday preceding Labor
Day. Accordingly, the revenue and expenses for that race and/or the related
supporting events may be recognized in either the fiscal quarter ending August
31 or the fiscal quarter ending November 30.
On July 26, 1999, the Company acquired the approximately 88% interest it did
not already own in Penske Motorsports, Inc. ("PMI"). Motorsports facilities
acquired in the transaction include Michigan Speedway in Brooklyn, Michigan;
Nazareth Speedway in Nazareth, Pennsylvania; California Speedway in San
Bernardino County, California; and North Carolina Speedway in Rockingham,
North Carolina. The Company also acquired PMI's 45% interest in Homestead-
Miami Speedway, LLC ("Miami"), bringing the Company's ownership in the
operations of that facility to 90%, as well as other wholly-owned PMI
merchandising subsidiaries. In addition, on December 1, 1999 the Company
acquired Richmond International Raceway ("Richmond") which is located ten
miles from downtown Richmond, Virginia (See "Acquisition"). The Company
currently operates 11 major motorsports facilities across the United States
with more than 900,000 seats and 400 suites.
In addition to the incremental operating expenses and depreciation and
amortization resulting from these transactions, the PMI acquisition resulted
in the inclusion of an additional NASCAR Winston Cup Series event, NASCAR
Busch Series, Grand National Division event and a NASCAR Craftsman Truck
Series event in the first quarter of fiscal 2000.
As a result of the acquisitions of PMI and Richmond, and the addition of a
NASCAR Craftsman Truck Series event to the 2000 race schedule for Speedweeks
at Daytona International Speedway ("Daytona"), the Company conducted two
NASCAR Winston Cup Series events, two non-point NASCAR Winston Cup Series
events, two NASCAR Busch Series, Grand National Division events and two NASCAR
Craftsman Truck Series events during the first quarter of fiscal 2000 compared
to one NASCAR Winston Cup Series event, two non-point NASCAR Winston Cup
Series events, one NASCAR Busch Series, Grand National Division event, and no
NASCAR Craftsman Truck Series events during the first quarter of fiscal 1999.
Accordingly, the Company's results of operations, as well as the margins of
certain expenses in relation to certain revenues, are not necessarily
comparable on a period-to-period basis.
Comparison of the Results for the Three Months Ended February 29, 2000 to the
Results for the Three Months Ended February 28, 1999
Admissions revenue increased approximately $11.0 million, or 29.2%, for the
three months ended February 29, 2000, as compared to the three months ended
February 28, 1999. Over one-half of this increase was a result of increased
seating capacity and increased attendance, as well as an increase in the
weighted average price of tickets sold, for the Speedweeks events at Daytona.
The remaining increase was attributable to the events held at the newly
acquired facilities.
Motorsports related income increased approximately $11.3 million, or 32.9%,
for the three months ended February 29, 2000, as compared to the three months
ended February 28, 1999. Over one-half of this increase was a result of
increased television broadcast rights for the Speedweeks events at Daytona
and, to a lessor extent, the events held at the newly acquired facilities.
The remaining increase is attributable to increases in luxury suite and
hospitality rentals, sponsorship fees and track rentals at the newly acquired
facilities and, to a lessor extent, increased sponsorship fees and luxury
suite and hospitality rentals for the Daytona 500 and other Speedweeks events.
Food, beverage and merchandise income increased approximately $5.4 million, or
49.9%, for the three months ended February 29, 2000, as compared to the three
months ended February 28, 1999. This increase was primarily a result of the
increased attendance and seating capacity for Daytona's Speedweeks events, as
well as events conducted at the newly acquired facilities. Sales of racing
tires, accessories and other merchandise by subsidiaries acquired from PMI
also contributed to the increase.
Prize and point fund monies and NASCAR sanction fees increased approximately
$6.0 million, or 46.8%, for the three months ended February 29, 2000, as
compared to the three months ended February 28, 1999. Approximately three
quarters of the increase was attributable to the events conducted at the newly
acquired facilities and the inaugural NASCAR Craftsman Truck Series event at
Daytona. The remaining increase is primarily attributable to the increased
television broadcast rights fees for the remaining Speedweeks events at
Daytona, as standard NASCAR sanctioning agreements require that a specified
percentage of broadcast rights fees be paid as part of prize money.
Motorsports related expenses increased approximately $6.1 million, or 54.7%,
for the three months ended February 29, 2000, as compared to the three months
ended February 28, 1999. Over two-thirds of the increase is related to the
expenses for the events and operations at the newly acquired facilities. The
remaining increase was primarily attributable to hospitality services and
supplies, personnel costs and a variety of other amenities and operating costs
for the Daytona Speedweeks events. Motorsports related expenses as a
percentage of combined admissions and motorsports related income increased
approximately 2.8% during the three months ended February 29, 2000 as compared
to the three months ended February 28, 1999. This margin decrease was
primarily attributable to the lower margins on certain events as compared to
the Speedweeks events at Daytona and certain incremental operating costs
associated with the newly acquired facilities.
Food, beverage and merchandise expenses increased approximately $3.3 million,
or 63.3%, for the three months ended February 29, 2000, as compared to the
three months ended February 28, 1999. The increase is primarily related to
the product costs associated with the sale of racing tires, accessories and
other merchandise by subsidiaries acquired from PMI. Product and personnel
costs related to increased sales during Speedweeks at Daytona and events
conducted at the recently acquired facilities also contributed to the
increase. Food, beverage and merchandise expenses as a percentage of food,
beverage and merchandise income increased to 52.7% for the three months ended
February 29, 2000 as compared to 48.4% for the three months ended February 28,
1999. This increase is primarily attributable to the lower margin activities
of certain merchandising subsidiaries acquired in the PMI acquisition.
General and administrative expenses increased approximately $8.8 million, or
86.1%, for the three months ended February 29, 2000, as compared to the three
months ended February 28, 1999. Over two-thirds of the increase was due to
the general and administrative expenses associated with newly acquired
operations. The remaining increase is primarily attributable to increased
personnel and other administrative costs associated with the ongoing expansion
of the Company's business, exclusive of such costs associated with the
operations acquired in the PMI and Richmond acquisitions and the consolidation
of Miami. General and administrative expenses as a percentage of total
revenues increased to 17.1% for the three months ended February 29, 2000 as
compared to 12.3% for the three months ended February 28, 1999 primarily as a
result of the general and administrative expenses associated with newly
acquired operations.
Depreciation and amortization expense increased approximately $9.2 million for
the three months ended February 29, 2000, as compared to the three months
ended February 28, 1999. This increase was primarily due to the depreciation
of assets acquired and amortization of goodwill recorded as a result of the
PMI (which included the consolidation of Miami) and Richmond acquisitions.
The remaining increase was a result of the ongoing expansion of the Company's
other facilities.
Interest income decreased by approximately $537,000 for the three months ended
February 29, 2000, as compared to the three months ended February 28, 1999,
primarily due to lower average investment balances in the current period.
Interest expense increased by approximately $7.8 million for the three months
ended February 29, 2000, as compared to the three months ended February 28,
1999. Interest expense in fiscal 2000 was primarily attributable to interest
on the $225 million principal amount of senior notes ("Senior Notes") issued
in October 1999, borrowings under the Company's credit facilities and term
loan arrangements and interest related to the taxable special obligation
revenue ("TIF") bond funding commitment issued in January 1999 by the Unified
Government of Wyandotte County/Kansas City, Kansas ("Unified Government") to
partially fund the Kansas project, net of capitalized interest (See "Future
Liquidity"). Interest expense in fiscal 1999 was primarily attributable to
interest on the Company's TIF bond funding commitment, net of capitalized
interest.
Equity in net income (loss) from equity investments represents the Company's
pro rata share of the current income and losses from its equity investments.
During the three months ended February 29, 2000, this included the Company's
50% investment in Motorsports Alliance, LLC ("MSA"), which is engaged in the
development of a major motorsports facility in the Chicago area (See "Future
Liquidity"). For the three months ended February 28, 1999, this included the
Company's approximately 12% indirect investment in PMI, its 45% investment in
Miami and its 50% investment in MSA.
Minority interest consists of the 10% interest in Miami that is not owned by
the Company. This interest resulted in an approximately $263,000 increase of
pre-tax income for the three months ended February 29, 2000.
Income taxes decreased approximately $3.8 million for the three months ended
February 29, 2000, as compared to the three months ended February 28, 1999.
The Company's effective tax rate has increased compared to historical levels,
and is expected to remain above historical levels, primarily due to the
amortization of non-deductible goodwill created in the PMI acquisition.
As a result of the foregoing, the Company's net income decreased approximately
$9.8 million, or 37.9%, for the three months ended February 29, 2000, as
compared to the three months ended February 28, 1999.
Liquidity and Capital Resources
General
The Company has historically generated sufficient cash flow from operations to
fund its working capital needs and capital expenditures at existing
facilities, as well as to pay an annual cash dividend. In addition, the
Company has used the proceeds from offerings of its Class A Common Stock and,
more recently, the net proceeds from the issuance of Senior Notes, borrowings
under its credit facilities and state and local mechanisms to fund
acquisitions and development projects. At February 29, 2000 the Company had
$225 million principal amount of Senior Notes outstanding, total borrowings of
approximately $198.5 million under its credit facilities and term loan
arrangements, and a debt service funding commitment of approximately $69
million, net of discount, related to the TIF bonds issued by the Unified
Government (See "Future Liquidity"). The Company had working capital deficits
of approximately $43.1 million and $51.9 million at February 29, 2000 and
November 30, 1999, respectively.
Cash Flows
Net cash provided by operating activities was approximately $64.4 million for
the three months ended February 29, 2000, compared to approximately $35.5
million for the three months ended February 28, 1999. The difference between
the Company's net income of approximately $16.1 million and the $64.4 million
of operating cash flow was primarily attributable to an increase in deferred
income of $36.8 million, depreciation and amortization of $13.5 million, an
increase in income tax payable of $7.4 million, an increase in accounts
payable and other current liabilities of $5.3 million and deferred income
taxes of $3.2 million, partially offset by an increase in receivables of $13.8
million, and a combined increase in inventories, prepaid expenses and other
current assets of $4.4 million.
Net cash used in investing activities was approximately $19.5 million for the
three months ended February 29, 2000, compared to $111.3 million for the three
months ended February 28, 1999. The Company's use of cash for investing
activities reflects $215.6 million for the Company's acquisition of Richmond,
$20.3 million in capital expenditures and $3.5 million to increase the
Company's investment in the Chicago project, partially offset by a $219.4
million decrease in restricted investments related to the Richmond acquisition
and the project in Kansas. See "Capital Expenditures".
Net cash used in financing activities was approximately $2.4 million for the
three months ended February 29, 2000, compared to net cash provided of
approximately $62.1 million for the three months ended February 28, 1999. The
Company's use of cash for financing activities reflects $2.5 million in
payments of long-term debt and $1.2 million used in reacquisition of
previously issued common stock, partially offset by net draws under credit
facilities of $1.5 million.
Capital Expenditures
Capital expenditures totaled approximately $20.3 million for the three months
ended February 29, 2000 as compared to $19.3 million for the three months
ended February 28, 1999. Over two-thirds of these expenditures were related
to expenditures at the Company's existing facilities, including increased
seating capacity at Daytona, Talladega, Phoenix and Michigan, land purchased
for expansion of parking capacity and a variety of other improvements. The
remaining capital expenditures were primarily related to the construction of
the speedway in Kansas.
The Company expects to make approximately $96.0 million of additional capital
expenditures for approved projects at existing facilities within the next 24
months to increase grandstand seating capacity, acquire land for expansion of
parking capacity and for a variety of additional improvements. The Company
also expects to spend an additional $10.1 million for 36 additional luxury
suites at the Kansas facility, which is currently under construction. The
balance of the Company's capital expenditures related to the construction of
the Kansas facility will be funded from restricted investments, as discussed
below.
Acquisition
On December 1, 1999, the Company acquired Richmond for approximately $215.6
million, including acquisition costs. Located ten miles from downtown
Richmond, Virginia, the 3/4 mile intermediate speedway seats over 94,000
grandstand spectators and offers luxury accommodations in the facility's 34
suites. Richmond hosts several events annually including two NASCAR Winston
Cup Series points events, two NASCAR Busch Series, Grand National Division
events, and one NASCAR Craftsman Truck Series event.
The acquisition has been accounted for under the purchase method of accounting
and, accordingly, the results of operations have been included in the
Company's consolidated statements of income since the date of acquisition.
The purchase price was allocated to the assets and liabilities acquired based
on estimated fair values at the acquisition date. The excess of the purchase
price over the fair value of the net assets acquired was approximately $169.3
million and was recorded as goodwill, which is being amortized on a straight
line basis over 40 years. The amount amortized during the three months ended
February 29, 2000 was approximately $1.1 million.
Future Liquidity
In December, 1999, the Company's fully-underwritten revolving credit facility
("Credit Facility"), which is syndicated to a select group of lenders, was
increased from $200 million to $250 million. The Credit Facility matures on
March 31, 2004, and pays interest at LIBOR rate plus 50-100 basis points. At
February 29, 2000, the Company had borrowings of $160 million under the Credit
Facility, all of which related to the financing of the Company's December 1999
Richmond acquisition (See "Acquisition").
In addition, the Company's Miami subsidiary also has an agreement with a group
of banks for a $20 million credit facility ("Miami Credit Facility") and a
$27.5 million term loan. The Miami Credit Facility and term loan are
collateralized by all of the assets of the Company's Miami subsidiary. The
Miami Credit Facility, which is automatically reduced to $15 million on
December 31, 2002, matures on December 31, 2004. At February 29, 2000, the
Company had borrowings of $11 million under the Miami Credit Facility. The
term loan is payable in annual installments, which range from $4.0 million to
$7.0 million on December 31, 2004. Interest on the Miami Credit Facility and
term loan is paid based on calendar quarters and accrues interest at LIBOR
plus 75-150 basis points. The Company has entered into an interest rate swap
agreement that effectively fixes the floating rate on the outstanding balance
under the term loan at 6.6% through December 31, 2000 and 7.1% for the
remainder of the loan period.
On October 6, 1999, the Company completed an offering of $225 million
principal amount of Senior Notes due October 15, 2004 in a private placement.
The unsecured Senior Notes bear interest at 7.875% and rank equally with all
of the Company's other senior unsecured and unsubordinated indebtedness. The
Company used approximately $176 million of the net proceeds from the
transaction to repay the then outstanding borrowings under the Credit
Facility, which were related to a portion of the cash consideration paid in
the PMI acquisition. The remaining net proceeds are being used to partially
fund the completion of certain additions and improvements to the Company's
motorsports facilities and for working capital and other general corporate
purposes. On March 17, 2000, the Company completed an offer to exchange the
Senior Notes issued in the private placement for registered senior notes
("Registered Senior Notes") with substantially identical terms.
In January 1999, the Unified Government issued approximately $71.3 million in
TIF bonds and approximately $24.3 million in sales tax special obligation
revenue ("STAR") bonds, in connection with the financing of phase I
construction of the speedway in Kansas. The net proceeds were deposited into
separate interest-bearing trust accounts. The STAR bonds will be retired with
state and local taxes generated within the project's boundaries and are not an
obligation of the Company. The TIF bonds are comprised of a $21.6 million,
6.15% term bond due December 1, 2017 and a $49.7 million, 6.75% term bond due
December 1, 2027. The TIF bonds are serviced through payments by the Unified
Government escalating from an annual rate of approximately $4.8 million to
$7.7 million including interest at 6.15% to 6.75%, which are funded through
payments made by the Company to the Unified Government in lieu of property
taxes. In addition, the Company has committed equity of approximately $77.9
million which, along with the net TIF and STAR bond proceeds, were deposited
into trustee administered accounts for the benefit of the construction of the
Kansas facility which will be owned and operated by the Company. At February
29, 2000, the Company's restricted investments include approximately $76.5
million of the funds remaining from the Company's equity contribution and the
TIF bond proceeds.
On May 5, 1999, MSA (owned 50% by the Company and 50% by Indianapolis Motor
Speedway Corp.) and the owners of Route 66 Raceway, LLC ("Route 66"), formed a
new company, Raceway Associates, LLC, ("Raceway Associates") which is owned
75% by MSA and 25% by the former owners of Route 66. As a result of this
transaction, Raceway Associates owns the 240 acre Route 66 Raceway motorsports
complex located in Joliet, Illinois, approximately 35 miles from downtown
Chicago. Raceway Associates also purchased 930 acres adjacent to the existing
Route 66 complex on which it has commenced construction of a 1.5 mile oval
motor speedway, which will initially accommodate approximately 75,000
spectators. The current estimate for the new superspeedway development is
$125 to $130 million, $100 million of which will be financed through equity of
approximately $50 million from MSA and approximately $50 million in future
borrowings by Raceway Associates. The members of MSA have guaranteed up to
$50 million in future borrowings by Raceway Associates on a pro rata basis
until such time as the operations of Raceway Associates meet certain financial
criteria. Further, in December 1999 the City of Joliet, Illinois sold
approximately $9 million in 6.75% municipal bonds (which are to be repaid by
Raceway Associates through property tax assessments over twelve years) to help
fund a portion of the project costs that relate to public infrastructure for
the speedway development project. It is anticipated that the members of
Raceway Associates will fund the additional project costs in excess of $109
million on a pro rata basis during the construction period. In April 2000,
the Company approved funding up to approximately $6.9 million as its pro-rata
portion of MSA's additional funding commitment to the project. Through
February 29, 2000 the Company has contributed approximately $21.2 million to
MSA, approximately $17.8 million of which has been applied toward the
Company's portion of MSA's $50 million equity commitment.
During fiscal 1999, the Company announced its intention to search for a site
for a major motorsports facility in the New York metro area. In January 2000,
the Company announced that, through its wholly-owned subsidiary, New York
International Speedway Corporation, it had entered into an exclusive agreement
with the New Jersey Sports and Exposition Authority to conduct a feasibility
study on the development of a motorsports facility at the Meadowlands Sports
Complex in New Jersey. The feasibility study covers a period not to exceed
twelve months. The Meadowlands Sports Complex, located five miles west of the
Lincoln Tunnel, is the site of Giants Stadium, Continental Airlines Arena and
Meadowlands Racetrack and is the home of several professional sports
franchises, horse racing, college athletics, concerts and family shows. The
Company has not yet determined the feasibility of the Meadowlands (or any
other) site, formulated an estimate of the costs to construct a major
motorsports facility in the New York metropolitan area, nor established a
timetable for completion, or even commencement, of such a project.
The Company believes that cash flow from operations, along with existing cash,
the remaining proceeds from the Senior Notes and available borrowings under
the Company's credit facilities, will be sufficient to fund i) operations and
approved capital projects at existing facilities for the foreseeable future,
ii) payments required in connection with the funding of the Unified
Government's debt service requirements related to the TIF bonds, iii) payments
related to other currently existing debt service requirements, and iv) the
Company's expected funding requirements for the Chicago project. The Company
intends to pursue further development and/or acquisition opportunities
(including the possible development of new motorsports facilities in Denver
and the New York metropolitan area) the timing, size and success as well as
associated potential capital commitments of which are unpredictable.
Accordingly, a material acceleration in our growth strategy could require the
Company to obtain additional capital through debt and/or equity financings.
Although there can be no assurance, the Company believes that adequate debt
and equity financing will be available on satisfactory terms.
Inflation
Management does not believe that inflation has had a material impact on
operating costs and earnings of the Company.
FACTORS THAT MAY AFFECT OPERATING RESULTS
Statements contained in this document that state the Company's or Management's
anticipations, beliefs, expectations, hopes, intentions, predictions and/or
strategies which are not purely historical fact or which apply prospectively
are "forward-looking" statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21 of the Securities Exchange Act of 1934.
All forward-looking statements contained in this document are based on
information available to the Company on the date hereof, and the Company
assumes no obligation to update any such forward-looking statements. It is
important to note that the Company's actual results could differ materially
from those contained or projected in, or even implied by, such forward-looking
statements. Some of the factors that could cause the actual results to differ
materially are set forth below. Additional information concerning these, or
other, factors which could cause actual results to differ materially from
those in the forward-looking statements is contained from time to time in the
Company's other SEC filings. Copies of those filings are available from the
Company and/or the SEC.
DEPENDENCY UPON NASCAR
The Company's success has been and will remain dependent upon maintaining
a good working relationship with NASCAR, the sanctioning body for NASCAR's
Winston Cup Series, the Busch Series - Grand National Division and certain
other races promoted by the Company. The Company has sanctioning agreements to
promote and market sixteen NASCAR Winston Cup Series championship point races,
two NASCAR Winston Cup Series non-championship point races, fourteen NASCAR
Busch Series - Grand National Division races and a number of other NASCAR
races for the 2000 racing season. Each NASCAR event sanctioning agreement is
awarded on an annual basis. In fiscal 1999, NASCAR-sanctioned races at the
Company's facilities accounted for approximately 79% of the Company's total
revenues. Although William C. France and James C. France presently control
both the Company and NASCAR and management believes that the Company will
continue to maintain an excellent relationship with NASCAR for the foreseeable
future, NASCAR is under no obligation to continue to enter into sanctioning
agreements with the Company to promote any event. Failure to obtain a
sanctioning agreement for a major NASCAR event would have a material adverse
effect on the Company's financial condition and results of operations.
Moreover, although the Company's general growth strategy includes the possible
development and/or acquisition of additional motorsports facilities, there can
be no assurance that NASCAR will enter into sanctioning agreements with the
Company to promote races at such facilities.
DEPENDENCE ON KEY PERSONNEL
The Company's continued success will depend upon the availability and
performance of its senior management team, particularly William C. France, the
Company's Chairman of the Board and Chief Executive Officer, James C. France,
its President and Chief Operating Officer, and Lesa D. Kennedy, its Executive
Vice President (collectively the "France Family Executives"), each of whom
possesses unique and extensive industry knowledge and experience. While the
Company believes that its senior management team has significant depth, the
loss of any of the Company's key personnel or its inability to attract and
retain key employees in the future could have a material adverse effect on the
Company's operations and business plans.
UNCERTAIN PROSPECTS OF NEW MOTORSPORTS FACILITIES
The Company's growth strategy includes the potential acquisition and/or
development of new motorsports facilities, including the Kansas
International Speedway and the development of a motorsports facility
near Chicago, Illinois. The Company's ability to implement successfully this
element of its growth strategy will depend on a number of factors, including
(i) the Company's ability to obtain one or more additional sanctioning
agreements to promote NASCAR Winston Cup, NASCAR Busch Series - Grand National
Division or other major events at these new facilities, (ii) the cooperation
of local government officials, (iii) the Company's capital resources, (iv) the
Company's ability to control construction and operating costs and (v) the
Company's ability to hire and retain qualified personnel. The Company's
inability to implement its expansion plans for any reason could adversely
affect its business prospects. In addition, expenses associated with
developing, constructing and opening a new facility may have an adverse effect
on the Company's financial condition and results of operations in one or more
future reporting periods. The cost of any such transaction will depend on a
number of factors, including the facility's location, the extent of the
Company's ownership interest and the degree of any municipal or other public
support. Moreover, although management believes that it will be able to obtain
financing to fund the acquisition, development and/or construction of
additional motorsports facilities should the Company implement this element of
its growth strategy, there can be no assurance that adequate debt or equity
financing will be available on satisfactory terms.
INDUSTRY SPONSORSHIPS AND GOVERNMENT REGULATION
The motorsports industry generates significant recurring revenue from the
promotion, sponsorship and advertising of various companies and their
products. Actual or proposed government regulation can adversely impact the
availability to motorsports of this promotion, sponsorship and advertising
revenue. Advertising by the tobacco and alcoholic beverage industries is
generally subject to greater governmental regulation than advertising by other
sponsors of the Corporations's events. Since August of 1996 there have been
several thus far unsuccessful governmental attempts to impose restrictions on
the advertising and promotion of cigarettes and smokeless tobacco, including
sponsorship of motorsports activities. These regulatory efforts if
successfully implemented would have prohibited the present practice of tobacco
brand name sponsorship of, or identification with, motorsports events, entries
and teams. At this point the ultimate outcome of these or future government
regulatory and legislative efforts to regulate the advertising and promotion
of cigarettes and smokeless tobacco is uncertain and the impact, if any, on
the motorsports industry is unclear. Recently major United States
companies engaged in the manufacture of cigarettes and smokeless tobacco
(collectively the "tobacco industry") entered into various agreements with the
Attorneys General of all 50 states to settle certain state initiated
litigation against the tobacco industry. These settlement agreements will,
among other things, place limits upon the sponsorship of motorsports
activities by the tobacco industry. The actual impact of these settlement
agreements upon the Company's future revenues has not yet been determined.
Even more recently the executive branch of the United States government has
publicly stated its intention to initiate certain litigation against the
tobacco industry which would be similar to that initiated by the states which
was recently settled. The exact parameters of the proposed litigation and the
impact, if any, of this proposed litigation upon the Company's future revenues
is presently unclear.
The Company is not aware of any proposed governmental regulation which would
materially limit the availability to motorsports of promotion, sponsorship or
advertising revenue from the alcoholic beverage industry. The combined
advertising and sponsorship revenue from the tobacco and alcoholic beverage
industries accounted for approximately 1.5% of the Company's total revenues in
fiscal 1999. In addition, the tobacco and alcoholic beverage industries
provide financial support to the motorsports industry through, among other
things, their purchase of advertising time, their sponsorship of racing teams
and their sponsorship of racing series such as NASCAR's Winston Cup Series and
Busch Series - Grand National Division.
LEGAL PROCEEDINGS
The Company and its indirect subsidiaries, Americrown and Motorsports
International are parties to certain legal proceedings alleging price-fixing
activities in connection with the sale of racing souvenirs and merchandise as
described in "Part II - Other Information". While the Company, Americrown and
Motorsports International are in the process of attempting to agree on the
terms of formal Settlement Agreements which will then be subject to review and
approval by both the state and federal courts, if the Settlement Agreements
are not successfully finalized, the Company, Americrown and Motorsports
International will resume the defense of the actions. In such event while
they will continue to dispute the allegations and intend to defend the actions
fully and vigorously, neither the cost of defending the suits nor the
potential damages or other remedies for which the Company, Americrown and
Motorsports International might be liable is insured.
Subsidiaries of the Company are parties to a dissenters' action in North
Carolina as described in "Part II - Other Information". An adverse decision
in the dissenters proceeding could materially increase the price paid by PMI
for the shares of North Carolina Speedway held by shareholders entitled to
additional compensation.
Management is presently unable to predict or quantify the outcome of these
matters. But, there can be no assurance the defense of the suits, or a
possible adverse resolution, will not require material expenditures by the
Company.
POTENTIAL CONFLICTS OF INTEREST
William C. France and James C. France beneficially own all of NASCAR's
capital stock, and each of the France Family Executives, the Company's Vice
President--Administration, the Company's General Counsel and certain other
non-officer employees (collectively the "Shared Employees") devote portions of
their time to NASCAR's affairs. Each of the Shared Employees devotes
substantial time to the Company's affairs and all of the Company's other
executive officers are available to the Company on a full-time basis. In
addition, the Company strives to ensure, and management believes, that the
terms of the Company's transactions with NASCAR are no less favorable to the
Company than those which could be obtained in arms'-length negotiations.
Nevertheless, certain potential conflicts of interest between the Company and
NASCAR exist with respect to, among other things, (i) the terms of any
sanctioning agreements that may be awarded to the Company by NASCAR, (ii) the
amount of time devoted by the Shared Employees and certain other Company
employees to NASCAR's affairs, and (iii) the amounts charged or paid to NASCAR
for office rental, transportation costs, shared executives, administrative
expenses and similar items.
COMPETITION
The Company's racing events face competition from other spectator-oriented
sporting events and other leisure and recreational activities, including
professional football, basketball and baseball. As a result, the Company's
revenues will be affected by the general popularity of motorsports, the
availability of alternative forms of recreation and changing consumer
preferences. The Company's racing events also compete with other racing events
sanctioned by various racing bodies such as NASCAR, Championship Auto Racing
Teams, Inc. ("CART"), Indy Racing League ("IRL"), the United States Auto Club
("USAC"), the National Hot Rod Association ("NHRA"), the Sports Car Club of
America ("SCCA"), the United States Road Racing Championship ("USRRC"), the
Automobile Racing Club of America ("ARCA") and others. Management believes
that the primary elements of competition in attracting motorsports spectators
and corporate sponsors to a racing event and facility are the type and caliber
of promoted racing events, facility location, sight lines, pricing and
customer conveniences that contribute to a total entertainment experience.
Many sports and entertainment businesses have resources that exceed those of
the Company.
IMPACT OF CONSUMER SPENDING ON RESULTS
The success of the Company's operations depends to a significant extent
upon a number of factors relating to discretionary consumer spending,
including economic conditions affecting disposable consumer income such as
employment, business conditions, interest rates and taxation. These factors
can impact both attendance at the Company's events and the financial results
of the motorsports industry's principal sponsors. There can be no assurance
that consumer spending will not be adversely affected by economic conditions,
thereby impacting the Company's growth, revenue and profitability.
FINANCIAL IMPACT OF BAD WEATHER
The Company promotes outdoor motorsports events. Weather conditions affect
sales of, among other things, tickets, concessions and souvenirs at these
events. Although the Company sells tickets well in advance of its most popular
events, poor weather conditions could have a material adverse effect on the
Company's results of operations, particularly any interruption of the
Company's February "Speedweeks" events.
LIABILITY FOR PERSONAL INJURIES
Motorsports can be dangerous to participants and to spectators. The Company
maintains insurance policies that provide coverage within limits that
management believes should generally be sufficient to protect the Company from
material financial loss due to liability for personal injuries sustained by
persons on the Company's premises in the ordinary course of Company business.
Nevertheless, there can be no assurance that such insurance will be adequate
or available at all times and in all circumstances. The Company's financial
condition and results of operations would be adversely affected to the extent
claims and associated expenses exceed insurance recoveries.
OTHER REGULATORY MATTERS
Management believes that the Company's operations are in substantial
compliance with all applicable federal, state and local environmental laws and
regulations. Nonetheless, if damage to persons or property or contamination of
the environment is determined to have been caused or exacerbated by the
conduct of the Company's business or by pollutants, substances, contaminants
or wastes used, generated or disposed of by the Company, or which may be found
on the property of the Company, the Company may be held liable for such damage
and may be required to pay the cost of investigation and/or remediation of
such contamination or any related damage. The amount of such liability as to
which the Company is self-insured could be material. State and local laws
relating to the protection of the environment also include noise abatement
laws that may be applicable to the Company's racing events. Changes in the
provisions or application of federal, state or local environmental laws,
regulations or requirements, or the discovery of theretofore unknown
conditions, could also require additional material expenditures by the
Company.
In addition, the development of new motorsports facilities (and, to a
lesser extent, the expansion of existing facilities) requires compliance with
applicable federal, state and local land use planning, zoning and
environmental regulations. Regulations governing the use and development of
real estate may prevent the Company from acquiring or developing prime
locations for motorsports facilities, substantially delay or complicate the
process of improving existing facilities, and/or materially increase the costs
of any of such activities.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
During the three-months ended February 29, 2000 there has been no material
changes in the Company's market risk exposures.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is from time to time a party to routine litigation incidental to
its business. Management does not believe that the resolution of any or all
of such litigation is likely to have a material adverse effect on the
Company's financial condition or results of operations. In addition to such
routine litigation incident to its business the Company faces exposure from
other legal proceedings as described below.
Souvenir Litigation
As described below, the Company and certain subsidiaries are parties to legal
proceedings alleging price-fixing activities in connection with the sale of
souvenirs and merchandise. These matters are collectively referred to as the
Souvenir Litigation. While the Company disputes the allegations, neither the
cost of defending the suits nor the potential damages or other remedies for
which the Company might be liable is insured.
The Company's indirect corporate subsidiary, Americrown Service Corporation
("Americrown"), is the sole defendant in a class action proceeding in the
Circuit Court of Talladega County, Alabama which was filed in October 1996. A
class consisting of persons who purchased racing souvenirs at Talladega
Superspeedway since September 1992 was certified by the court on July 30,
1998. The suit seeks to recover at least $500 for each member of the class
but does not otherwise seek to recover compensatory or punitive damages or
statutory attorneys' fees. Americrown has moved for reconsideration of the
class certification decision. Americrown has disputed the allegations and has
defended the action fully and vigorously.
In March 1997, two purported class action companion lawsuits were filed in the
United States District Court, Northern District of Georgia, against the
Company, Americrown, and a number of other persons (including Motorsports
International previously a subsidiary of PMI which was acquired by the Company
in the PMI Acquisition). Both suits sought damages and injunctive relief on
behalf of all persons who purchased souvenirs or merchandise from certain
vendors at any NASCAR Winston Cup race or supporting event in the United
States during the period 1991 to present. The two suits have been
consolidated and class certification has not yet been decided by the court.
Discovery has been concluded. The Company and Americrown have disputed the
allegations and have defended the actions fully and vigorously.
Recently Americrown, Motorsports International and the Company have entered
into Confidential Memoranda of Understanding ("MOU") to completely settle the
Souvenir Litigation, without any admission of wrongdoing on their part. Under
the terms of the MOU (which have been filed under seal with the respective
courts) the Company, Americrown and Motorsports International have agreed to
pay approximately $4.6 million in cash and to distribute souvenir merchandise
discount coupons to settle with classes which would encompass all purchasers
of souvenirs and merchandise at NASCAR Winston Cup events during the period
from January 1, 1991 to the present. The parties are in the process of
attempting to agree on the terms of formal Settlement Agreements, including
the terms of the coupon program. Such Settlement Agreements will then be
subject to review and approval by both the state and federal courts. If the
Settlement Agreements are not successfully finalized, the Company, Americrown
and Motorsports International intend to resume the vigorous defense of the
actions.
In the third quarter of fiscal year 1999 the Company accrued approximately
$2.8 million representing Americrown's cash portion of the proposed Souvenir
Litigation settlement. The remaining $1.8 million is attributable to
Motorsports International and was recorded as a part of the merger purchase
price. The effects of the discount coupon program will be recognized in
future periods as coupons are redeemed.
North Carolina Speedway Dissenters' Action
In connection with PMI's acquisition of North Carolina Speedway in 1997,
certain of the North Carolina Speedway stockholders (constituting more than 5%
of the North Carolina Speedway shares outstanding prior to the acquisition)
exercised their right under North Carolina law to dissent to the price paid
for the common stock of North Carolina Speedway. These dissenting
shareholders were paid $16.77 per share. These dissenters have requested
$55.00 per share and have sued PMI, Penske Acquisition, Inc. and North
Carolina Speedway in North Carolina Superior Court, Mecklenburg County, North
Carolina. Under PMI's agreement with Mrs. DeWitt (the former majority
stockholder of North Carolina Speedway), if a dissenting stockholder, which
represents more than five percent of the North Carolina Speedway stock,
receives more consideration in a dissenters' action than PMI paid in
connection with the acquisition of North Carolina Speedway, all stockholders
of North Carolina Speedway at the time of the acquisition, other than PMI and
its affiliates, would receive a per share amount equal to the award in
dissenter's court less the per share amount paid in the acquisition ($19.61
per share to stockholders other than the dissenting shareholders). Because
PMI acquired Mrs. DeWitt's shares prior to the completion of this acquisition,
Mrs. DeWitt would not be entitled to receive additional consideration for her
shares. An adverse decision with respect to the dissenters' proceeding could
materially increase the price paid by PMI for the shares of North Carolina
Speedway held by shareholders entitled to additional compensation. The
Company would have to pay any such additional compensation, which it intends
to recognize as a current expense in the event of such a decision.
Management is presently unable to further predict or quantify the outcome of
these matters
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of shareholders on April 5, 2000 the shareholders
present unanimously approved The re-election of Ms. Lesa D. Kennedy, and
Messrs. J. Hyatt Brown, Walter P. Czarnecki, Robert R. Dyson, Edward H. Rensi,
and Thomas W. Staed as directors to serve for a three year term and hold
office until the annual meeting of shareholders to be held in 2003. The
number of votes cast in favor of this uncontested election, for which
management did not solicit proxies, were 25,619,877. The number of votes cast
against this proposal were 0. The number of votes which abstained on this
proposal were 0.
The directors whose term of office continued after the meeting are William C.
France, H. Lee Combs, James H. Foster, Christy F. Harris, Gregory W. Penske,
Chapman J. Root, II, James C. France, John R. Cooper, Brian Z. France, Raymond
K. Mason, Jr., Roger S. Penske, and Lloyd E. Reuss.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
none
(b) Reports on Form 8-K
On January 4, 2000 the Company filed a report on Form 8-K which reported
under Item 7. the filing as an exhibit of Condensed Consolidating Financial
Statements of International Speedway Corporation.
On January 13, 2000 the Company filed a report on Form 8-K which
reported under Item 5. the Company's announcement of additional detail on the
impact of NASCAR television agreements in the year 2001 and the Company's
announcement of an agreement with the New Jersey Sports and Exposition
Authority to conduct a feasibility study to potentially develop a motorsports
facility a the Meadowlands Sports Complex in East Rutherford, N.J.
On April 4, 2000 the Company filed a report on Form 8-K which reported
under Item 5. the issuance of an earnings release for the first quarter ended
February 29, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERNATIONAL SPEEDWAY CORPORATION
(Registrant)
Date April 13, 2000 /s/ Susan G. Schandel
_____________________________________
Susan G. Schandel, Vice President &
Chief Financial Officer