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 May 31, 1996.
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:
Common Stock, $0.10 Par Value - 2,294,926 shares as of June 30, 1996.
PART I. - FINANCIAL INFORMATION
Item 1. - Financial Statements
INTERNATIONAL SPEEDWAY CORPORATION
Condensed Consolidated Balance Sheets
May 31, August 31,
1996 1995
(Unaudited)
_______________________
(In Thousands)
ASSETS
Current Assets:
Cash and cash equivalents........................... $ 7,316 $ 7,871
Short-term investments.............................. 17,386 30,950
Receivables, less allowance of $35.................. 4,611 1,794
Inventories......................................... 1,349 1,158
Prepaid expenses and other current assets........... 1,181 3,122
___________ __________
Total Current Assets.................................. 31,843 44,895
Property and Equipment - at cost - less accumulated
depreciation of $34,795 ($30,692 at August 31)....... 92,182 70,299
Other Assets:
Cash surrender value of life insurance (Note 3)..... 1,229 489
Equity investments (Note 6)......................... 24,557 2,913
Long-term investments............................... 500 747
Other............................................... 214 228
___________ __________
26,500 4,377
___________ __________
Total Assets.......................................... $150,525 $119,571
=========== ==========
See accompanying notes and accountants' review report.
May 31, August 31,
1996 1995
(Unaudited)
_______________________
(In Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable..................................... $ 4,308 $ 2,619
Income taxes payable................................. 647 324
Deferred income...................................... 27,478 19,852
Other current liabilities............................ 2,220 1,279
__________ __________
Total Current Liabilities.............................. 34,653 24,074
Deferred income taxes.................................. 14,188 10,250
Shareholders' Equity:
Common stock, $.10 par value, 5,000,000 shares
authorized; 3,504,446 and 3,502,585 issued at
May 31 and August 31, respectively................. 350 350
Capital in excess of par value....................... 8,624 2,350
Retained earnings.................................... 100,286 88,942
__________ __________
109,260 91,642
Less: Treasury stock - at cost, 1,209,520 shares..... 5,599 5,599
Unearned compensation - restricted stock
(Note 5)...................................... 1,977 796
__________ __________
Total Shareholders' Equity............................. 101,684 85,247
__________ __________
Total Liabilities and Shareholders' Equity............. $150,525 $119,571
========== ==========
See accompanying notes and accountants' review report.
INTERNATIONAL SPEEDWAY CORPORATION
Condensed Consolidated Statements of Operations
Three Months ended
May 31,
1996 1995
(Unaudited) (Unaudited)
_________________________
(In Thousands, Except
for Per Share Amounts)
REVENUES:
Admissions, net.................................... $12,105 $10,912
Motorsports related income......................... 6,776 6,503
Food, beverage and souvenir income................. 5,008 3,969
Other income....................................... 287 247
___________ ___________
24,176 21,631
EXPENSES:
Direct expenses:
Prize and point fund monies
and NASCAR sanction fees....................... 3,092 2,672
Motorsports related expenses..................... 4,964 4,578
Food, beverage and souvenir expenses............. 3,114 2,212
___________ ___________
11,170 9,462
General and administrative expenses................ 5,298 4,895
Depreciation....................................... 1,478 1,174
___________ ___________
17,946 15,531
___________ ___________
Operating Income..................................... 6,230 6,100
Interest income...................................... 279 432
Equity in net loss from equity investments (Note 6).. (138) (321)
___________ ___________
Income before income taxes........................... 6,371 6,211
Income taxes......................................... 2,554 2,558
___________ ___________
Net Income........................................... $ 3,817 $ 3,653
=========== ===========
Earnings per share (Note 2).......................... $ 1.66 $ 1.59
=========== ===========
Dividends per share.................................. $ .80 $ .70
=========== ===========
See accompanying notes and accountants' review report.
INTERNATIONAL SPEEDWAY CORPORATION
Condensed Consolidated Statements of Operations
Nine Months ended
May 31,
1996 1995
(Unaudited) (Unaudited)
_________________________
(In Thousands, Except
for Per Share Amounts)
REVENUES:
Admissions, net.................................... $37,735 $33,014
Motorsports related income......................... 21,060 18,657
Food, beverage and souvenir income................. 13,593 11,165
Other income....................................... 607 501
___________ ___________
72,995 63,337
EXPENSES:
Direct expenses:
Prize and point fund monies
and NASCAR sanction fees....................... 10,157 8,752
Motorsports related expenses..................... 10,649 8,913
Food, beverage and souvenir expenses............. 8,093 6,175
___________ ___________
28,899 23,840
General and administrative expenses................ 14,869 12,635
Depreciation....................................... 4,133 3,436
___________ ___________
47,901 39,911
___________ ___________
Operating Income..................................... 25,094 23,426
Interest income...................................... 754 1,065
Equity in net loss from equity investments (Note 6).. (946) (733)
___________ ___________
Income before income taxes........................... 24,902 23,758
Income taxes......................................... 10,016 9,304
___________ ___________
Net Income........................................... $14,886 $ 14,454
=========== ===========
Earnings per share (Note 2).......................... $ 6.48 $ 6.31
=========== ===========
Dividends per share.................................. $ .80 $ .70
=========== ===========
See accompanying notes and accountants' review report.
International Speedway Corporation
Condensed Consolidated Statements of Shareholders' Equity
Common Unearned
Stock Capital Compen- Total
$.10 In Excess Treas- sation - Share-
Par of Par Retained ury Restricted holders'
Value Value Earnings Stock Stock Equity
___________________________________________________________
(In Thousands)
Balance at
August 31, 1994... $ 350 $1,861 $72,290 $(5,599) $ (625) $68,277
Activity 9/1/94-
5/31/95:
Net Income --
Unaudited...... - - 14,454 - - 14,454
Cash dividends
($.70 per share)
- unaudited... - - (1,605) - - (1,605)
Reacquisition of
previously
issued common
stock
- unaudited.... - - (82) - - (82)
Restricted stock
granted
- unaudited.... - 489 - - (489) -
Amortization of
unearned
compensation
- unaudited.... - - - - 193 193
___________________________________________________________
Balance at
May 31, 1995
- - Unaudited....... 350 2,350 85,057 (5,599) (921) 81,237
Activity 6/1/95-
8/31/95:
Net income -
Unaudited...... - - 3,934 - - 3,934
Reacquisition of
previously
issued common
stock
- unaudited.... - - (49) - - (49)
Amortization of
unearned
compensation -
unaudited...... - - - - 125 125
___________________________________________________________
Balance at
August 31, 1995... 350 2,350 88,942 (5,599) (796) 85,247
Activity 9/1/95-
5/31/96:
Net income --
Unaudited...... - - 14,886 - - 14,886
Dividends declared
($.80 per share)
- unaudited... - - (1,837) - - (1,837)
Reacquisition of
previously
issued common
stock
- unaudited.... (1) (2) (1,705) - - (1,708)
Restricted stock
granted
- unaudited.... 1 1,599 - - (1,600) -
Amortization of
unearned
compensation -
-unaudited..... - - - - 419 419
Recapitalization of
equity investment
-unaudited.... - 4,677 - - - 4,677
___________________________________________________________
Balance at
May 31, 1996
- - Unaudited....... $350 $8,624 $100,286 $(5,599) $(1,977) $101,684
===========================================================
See accompanying notes and accountants' review report.
International Speedway Corporation
Condensed Consolidated Statements of Cash Flows
Nine Months ended
May 31,
1996 1995
(Unaudited) (Unaudited)
______________________________
(In Thousands)
OPERATING ACTIVITIES
Net income...................................... $14,886 $14,454
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation................................ 4,133 3,436
Amortization of unearned compensation....... 419 193
Deferred income taxes....................... 1,000 1,130
Undistributed loss from equity investments.. 946 733
(Gain) Loss on disposition of property and
equipment.................................. (11) 7
Changes in operating assets and liabilities:
Receivables................................. (2,817) (2,394)
Inventories................................. (191) (65)
Prepaid expenses and other current assets... 1,941 571
Cash surrender value of life insurance...... (740) (22)
Other assets................................ - (43)
Accounts payable............................ 1,689 414
Income taxes payable........................ 323 1,310
Deferred income............................. 7,626 6,179
Other current liabilities................... (896) (615)
____________ ____________
Net cash provided by operating activities....... 28,308 25,288
INVESTING ACTIVITIES
Acquisition of investments.................... (62,803) (64,735)
Proceeds from maturities of investments....... 76,614 55,716
Capital expenditures.......................... (26,009) (11,352)
Investment in PSH Corp........................ (14,975) -
Proceeds from sale of assets.................. 18 21
____________ ____________
Net cash used in investing activities........... (27,155) (20,350)
FINANCING ACTIVITIES
Reacquisition of previously issued
common stock................................ (1,708) (82)
____________ ____________
Net cash used in financing activities........... (1,708) (82)
____________ ____________
Net (decrease) increase in cash and
cash equivalents............................ (555) 4,856
Cash and cash equivalents at
beginning of period........................... 7,871 5,227
____________ ____________
Cash and cash equivalents at end of period...... $ 7,316 $10,083
============ ============
See accompanying notes and accountants' review report.
International Speedway Corporation
Notes to Condensed Consolidated Financial Statements
May 31, 1996 and August 31, 1995
(Unaudited - See Accountants' Review Report)
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 Company's latest annual report on Form 10-K. The
statements have been reviewed by the Company's independent accountants. 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 May 31, 1996.
Because of the seasonal concentration of racing events, the results of
operations for the three-month and nine-month periods ended May 31, 1996
and 1995 are not indicative of the results to be expected for the
year.
2. Earnings Per Share
Earnings per share have been computed on the weighted average total number of
common shares outstanding during the respective periods. Weighted average
shares outstanding for the three-month and nine-month periods ended May 31,
1996 were 2,298,654 and 2,296,407, respectively. Weighted average shares
outstanding for the three-month and nine-month periods ended May 31, 1995
were 2,293,365 and 2,291,510, respectively.
3. 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 Sports Car Club of
America (SCCA), Automobile Racing Club of America (ARCA), American
Motorcyclist Association (AMA), the Championship Cup Series (CCS),
International Motor Sports Association (IMSA), World Karting Association
(WKA), Federation Internationale de l'Automobile (FIA), Federation
Internationale Motorcycliste (FIM), and the National Association for Stock Car
Auto Racing, Inc. (NASCAR). 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 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 $8.3 million and $2.4 million for the nine-month and three-month
periods ended May 31, 1996, respectively, and approximately $7.4 million
and $2.2 million for the nine-month and three-month periods ended May 31,
1995, respectively.
In October 1995 the Company entered into collateral assignment split-dollar
insurance agreements covering the lives of William C. France and James C.
France and their respective spouses. Pursuant to the agreements, the Company
will advance the annual premiums of approximately $1,205,000 each year for a
period of eight years. Upon surrender of the policies or payment of the death
benefits thereunder, the Company is entitled to repayment of an amount equal
to the cumulative premiums previously paid by the Company. The Company may
cause the agreements to be terminated and the policies surrendered at any time
after the cash surrender value of the policies equals the cumulative premiums
advanced under the agreements. During the nine-month and three-month periods
ended May 31, 1996, the Company recorded a net insurance expense of
approximately $250,000 and $63,000, respectively, representing the excess of
the premiums paid over the increase in cash surrender value of the policies
associated with these agreements.
Poe & Brown, Inc., the servicing agent for the split-dollar insurance
agreements, received a commission for its participation in the transactions.
J. Hyatt Brown, President and Chief Executive Officer of Poe & Brown, Inc., is
a Director of the Company.
4. Supplemental Disclosures of Cash Flow Information
Cash paid for income taxes for the nine months ended May 31, 1996 and
1995 is as follows:
1996 1995
______________________________
(Thousands of Dollars)
Income taxes paid $ 8,347 $ 6,856
==============================
See Note 6 for discussion of non-cash equity investment transaction.
5. Long-Term Incentive Restricted Stock
On January 1, 1996 and 1995, a total of 6,805 and 4,694 restricted shares of
the Company's common stock, respectively, were awarded to certain officers and
managers under the Company's Long Term Incentive Plan. The market value of
shares awarded on January 1, 1996 and 1995 amounted to approximately
$1,600,000 and $489,000, respectively, and has been recorded as unearned
compensation - restricted stock, which is shown as a separate component of
shareholders' equity in the accompanying condensed consolidated balance
sheets. The unearned compensation is being amortized over the vesting period
of the shares. The total expense charged against operations during the nine
months ended May 31, 1996 and 1995 was approximately
$419,000 and $193,000, respectively.
6. Equity Investments
On November 22, 1995, Facility Investments, Inc., a newly formed wholly-owned
subsidiary of the Company, purchased 200 shares of the common stock,
representing 20% of the outstanding shares, of PSH Corp., a newly formed
Delaware corporation, for $14,975,000 in cash. Penske Corporation contributed
100% of the outstanding shares of Penske Speedway, Inc. and its subsidiaries
and the sum of $5,000,000 in cash for an indirect beneficial interest in the
remaining 80% of the outstanding shares of PSH Corp.
Prior to March 22, 1996, PSH Corp. owned 85% of the outstanding shares of
Penske Motorsports, Inc. The remaining 15% of Penske Motorsports, Inc.,
represented by convertible preferred stock, was owned by Kaiser Ventures Inc.,
for which Kaiser contributed all of the issued and outstanding stock of
Speedway Development Corporation, its wholly owned subsidiary, which owned
approximately 460 acres of real property near Ontario, California.
Prior to March 22, 1996, Penske Motorsports, Inc. owned 100% of the
outstanding shares of Penske Speedway, Inc., which owned and operated Michigan
International Speedway, owned approximately 85% of Nazareth Speedway in
Pennsylvania, 2% of North Carolina Motor Speedway (Rockingham), 100% of a
racing souvenir retailer called Motorsports International Corp and 100% of The
California Speedway Corporation, which is constructing the California Speedway
on the land formerly owned by Kaiser.
The Company's investment in PSH Corp. exceeded its share of the underlying net
assets by approximately $7.3 million. The excess is being amortized into
expense by decreasing the equity in income of equity investments using the
straight-line method over twenty years. The amount amortized for the three
and nine months ended May 31, 1996, was approximately $92,000 and $184,000,
respectively.
On March 22, 1996, Penske Motorsports, Inc. (PMI) effected a recapitalization
resulting in PMI ownership of 100% of the outstanding shares of Michigan
International Speedway, Inc. (MIS) (f/k/a Penske Speedway, Inc.),
Pennsylvania International Raceway, Inc., The California Speedway Corporation,
Motorsports International Corp., Competition Tire West, Inc. and Competition
Tire South, Inc. MIS owns 2% of North Carolina Motor Speedway. Also pursuant
to the recapitalization, Kaiser Ventures' preferred stock was automatically
converted into shares of PMI common stock. After giving effect to the
foregoing transactions, but prior to the commencement of the offering
described below, the effective beneficial ownership of the common stock of PMI
by PSH Corp. was 84.1%.
Subsequent to the recapitalization, PMI completed an initial public offering
(IPO) by issuing 3,737,500 shares of common stock at a price to the public of
$24 per share. The proceeds to PMI, after underwriting discounts and
commissions, were approximately $83.1 million. After PMI's IPO, PSH Corp.
owns approximately 59.9% of PMI. As a result of the IPO, in the quarter
ending May 31, 1996 the Company recorded an increase in its equity
investment in PSH Corp. of approximately $7.6 million, and recorded
corresponding increases in deferred income taxes and capital in excess of par
value of approximately $2.9 million and $4.7 million, respectively.
The Company's 20% interest in PSH Corp. is accounted for using the
equity method of accounting and is included in equity investments on the
condensed consolidated balance sheet, along with the Company's equity
investment in Watkins Glen International, Inc. ("WGI"). The Company's share
of the current losses of PSH Corp. and WGI for the nine months ended May 31,
1996, were approximately $23,000 and $739,000, respectively. Because of
the seasonal concentration of racing events, the Company's share of
undistributed equity in the earnings of PSH Corp. and WGI for the period ended
May 31, 1996 is not indicative of the results to be expected for the
year.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Condition
Liquidity
Management believes that a high degree of liquidity is desirable due to the
inherent insurance and weather risks associated with the production of large
outdoor sporting and entertainment events. The trend during the past several
years has been for the Company to have increasing liquidity. This trend has
been due to a general increase in interest in motorsports, reflected in
increased live and broadcast audiences, and generally favorable weather
conditions for the events conducted at the Company's facilities. However, the
Company experienced a decrease in liquidity from August 31, 1995 to May 31,
1996 as it began to utilize its liquid assets for capital projects and
investments as described below under the caption "Capital Resources".
Liquidity is expected to continue to decrease as the Company completes the
capital projects described below.
The Company's combined position in cash and cash equivalents and short- and
long-term investments at May 31, 1996 decreased from August 31, 1995
primarily as a result of payments made for capital projects, the investment
in PSH Corp., as described below, and the reacquisition of previously issued
common stock. The decrease was offset in part by cash flows from operations.
The Company's working capital at May 31, 1996 decreased from August 31,
1995 due primarily to the use of cash for its investment in PSH Corp. and to
finance capital projects. Working capital also decreased due to a decrease in
prepaid expenses and other current assets resulting from recognition of the
August 31, 1995 prepaid expenses related to the September 1995 event held at
Darlington Raceway, an increase in accounts payable related to capital
improvements, an increase in other current liabilities related to dividends
declared but unpaid as of May 31, 1996, and an increase in income taxes
payable as a result of income from operations and the timing of estimated tax
deposits. The decrease in working capital is partially offset by an increase
in receivables related primarily to increases in motorsports related broadcast
rights and promotional fees and the expanded food and beverage operations of
the Company's wholly owned subsidiary, Americrown Service Corporation, as
described under the caption "Revenues".
Receivables increased for the nine months ended May 31, 1996, as compared
to the nine months ended May 31, 1995, primarily due to increases in
motorsports related advertising and promotional revenues and the expanded food
and beverage operations of Americrown Service Corporation. These increases
were partially offset by the timing of receipts for promotional fees at the
Company's Talladega facility and royalty revenues accrued in the prior year.
Prepaid expenses and other current assets decreased for the nine months ended
May 31, 1996, as compared to the corresponding period of the prior year,
due to the recognition of increased costs of competition prepaid at August 31,
1995 related to the September 1995 Darlington event.
Accounts payable increased for the nine months ended May 31, 1996, as
compared to the nine months ended May 31, 1995, primarily due to payables
related to capital projects.
Deferred revenue increased for the nine months ended May 31, 1996, as
compared to the same period of 1995, primarily due to an increase in seating
capacity and certain ticket prices for future motorsports events and
sponsorship of Daytona USA (R).
The increase in cash surrender value of life insurance for the nine months
ended May 31, 1996, as compared to the nine months ended May 31,
1995, is due to collateral assignment split-dollar insurance agreements
entered into by the Company during the first quarter of fiscal 1996. These
agreements cover the lives of the Company's Chief Executive Officer and
President, and their respective spouses. Pursuant to the agreements, the
Company will advance the annual premiums of approximately $1,205,000 each year
for a period of eight years. Upon surrender of the policies or payment of the
death benefits thereunder, the Company is entitled to repayment of an amount
equal to the cumulative premiums previously paid by the Company. The Company
may cause the agreements to be terminated and the policies surrendered at any
time after the cash surrender value of the policies equals the cumulative
premiums advanced under the agreements.
The increase in proceeds from maturities of investments during the nine months
ended May 31, 1996, as compared to the corresponding period of 1995, is
the result of the shift in the Company's investment portfolio to short-term,
highly liquid investments. Rather than being reinvested, a significant
portion of the proceeds from maturities of these investments were used to
finance capital projects and the investment in PSH Corp.
The Company intends to continue to maintain the policy of investing excess
cash primarily in short-term investments. The staggered maturities of these
short-term investments would provide the Company with sufficient cash to cover
the expenses arising from a delay, postponement or cancellation of an event
due to poor weather conditions or other contingencies.
Management believes that the Company has the ability to generate adequate
amounts of cash through operations and outside financing, if necessary, to
meet the Company's operational needs on both a long- and short-term basis.
Capital Resources
The Company continues to invest in the expansion and general improvement of
its facilities. The amount of capital expenditures, however, can
materially change from year to year based on approved projects and the
availability of working capital resources.
In addition to the Winston Tower and "Daytona USA"(R) projects described
below, the Company's Board of Directors has approved expansion projects and
general improvements with an estimated cost to complete of approximately $26.3
million at May 31, 1996. These projects consist primarily of additions
and renovations to spectator capacity, administrative facilities, concession
facilities and equipment. Management anticipates the completion of these
projects within the next 24 months based on the availability of working
capital resources.
In addition to the capital projects described above, the Company's Board of
Directors approved two significant new capital expenditures in fiscal 1994 -
an addition to the Winston Tower at the Daytona International Speedway and the
development of a motorsports themed amusement complex at the Daytona facility
to be called "Daytona USA"(R).
The Winston Tower addition will encompass additional grandstands and suites,
as well as catering and concession facilities. Construction began in July
1995. The project is expected to be completed in the fall of 1996. The total
estimated cost to complete this project is approximately $4.7 million.
"Daytona USA"(R) combines interactive mediums, theaters, historical
memorabilia and exhibits to form a motorsports themed amusement complex. The
complex opened to the public on July 5, 1996, and is located adjacent to the
existing Visitors Center at Daytona International Speedway. As of May 31,
1996, remaining costs related to this project were approximately $3.0 million.
Total capital expenditures during the first nine months of fiscal 1996
increased approximately $14.7 million over the amount spent in the
corresponding period of the prior year, primarily due to the Daytona USA (R)
and Winston Tower projects, as described above.
Based on the Company's current liquidity, cash and investment positions, as
well as the Company's unused lines of credit of approximately $16 million,
management believes that its present capital resources are sufficient to meet
anticipated financing requirements in fiscal 1996. In management's
opinion, financing resources are available to provide sufficient liquidity
for continuing operations.
Equity investments increased from August 31, 1995 as a result of the purchase
by Facilities Investments, Inc., a newly formed wholly-owned subsidiary of the
Company, of 200 shares of the common stock, representing 20% of the
outstanding shares, of PSH Corp. for $14,975,000 in cash. Prior to March,
1996, PSH Corp. owned 85% of the outstanding shares of Penske Motorsports,
Inc. Penske Motorsports, Inc. then owned 100% of the outstanding
shares of Penske Speedway, Inc., which owned and operated Michigan
International Speedway, owned approximately 85% of Nazareth Speedway in
Pennsylvania, 2% of North Carolina Motor Speedway (Rockingham), 100% of a
racing souvenir retailer called Motorsports International Corp., and 100% of
The California Speedway Corporation, which is constructing the California
Speedway on 460 acres of land near Ontario, California.
The Company's investment in PSH Corp. exceeded its share of the underlying net
assets of PSH Corp. by approximately $7.3 million. The excess is being
amortized into expense by decreasing the equity in income of equity
investments using the straight-line method over twenty years. The amount
amortized for the three months and nine months ended May 31, 1996, was
approximately $92,000 and $184,000 respectively.
In March 1996, Penske Motorsports, Inc. (PMI) effected a recapitalization
resulting in PMI ownership of 100% of the outstanding shares of Michigan
International Speedway, Inc. (MIS) (f/k/a Penske Speedway, Inc.),
Pennsylvania International Raceway, Inc., The California Speedway Corporation,
Motorsports International Corp., Competition Tire West, Inc. and Competition
Tire South, Inc. MIS owns 2% of North Carolina Motor Speedway. Also pursuant
to the recapitalization, Kaiser Ventures' preferred stock was automatically
converted into shares of PMI common stock. After giving effect to the
foregoing transactions, but prior to the commencement of the offering
described below, the effective beneficial ownership of the common stock of PMI
by PSH Corp. was 84.1%.
Subsequent to the recapitalization, PMI completed an initial public offering
(IPO) by issuing 3,737,500 shares of common stock at a price to the public of
$24 per share. The proceeds to PMI, after underwriting discounts and
commissions, were approximately $83.1 million. After PMI's IPO, PSH Corp.
owns approximately 59.9% of PMI. As a result of the IPO, in the quarter
ending May 31, 1996 the Company recorded an increase in its investment in
PSH Corp. of approximately $7.6 million, and recorded corresponding increases
in deferred income taxes and capital in excess of par value of approximately
$2.9 million and $4.7 million, respectively.
The increase in equity investments from August 31, 1995 was partially offset
by the recognition of the Company's share of the current losses from
operations of PSH Corp. and Watkins Glen International. The Company uses the
equity method to account for its investments in PSH Corp. and Watkins Glen.
Due to the seasonal concentration of racing events at the subsidiaries of PSH
Corp. and at Watkins Glen, the results at May 31, 1996 are not indicative
of the results to be expected for the year.
Income Taxes
The change in income taxes payable at May 31, 1996 as compared to August 31
and May 31, 1995, is due to the seasonal nature of the Company's business and
the timing of estimated tax deposits.
The deferred income tax liability at May 31, 1996, increased from August 31,
1995 primarily as a result of differences between financial and tax accounting
treatments relating to depreciation expense and the Company's equity
investments.
Inflation
Management does not believe that inflation has had a material impact on
operating costs and earnings of the Company. The Company has demonstrated the
ability to appropriately adjust prices in reaction to changing costs and has
aggressively pursued an ongoing cost improvement effort.
Results of Operations
Revenues
Admission income increased during the three months and nine months ended
May 31, 1996, as compared to the corresponding period of the prior year,
primarily due to increased attendance and increases in certain ticket prices.
Third quarter increases in attendance and related admissions income for events
conducted at the Company's Darlington and Talladega facilities were partially
offset by the rescheduling of a major motorcycle event at the Company's
Daytona facility due to inclement weather.
Increased interest in motorsports is reflected in both live and broadcast
audiences. This continued interest has enabled the Company to successfully
negotiate favorable current year contracts for broadcast rights, promotional
fees and advertising. The combined effect of these contracts accounted for
over three-quarters of the increase in motorsports related income for
both the three months and nine months ended May 31, 1996, as compared to
the same periods of the preceding year. The remaining increase in motorsports
related income for the three months and nine months ended May 31, 1996, as
compared to the prior year, is due primarily to increases in parking and
rentals of the Company's hospitality facilities in the current year and is
partially offset by a decline in royalty revenues from the Company's trademark
license to a single licensee whose home entertainment products are in the
later stages of the product life cycle.
During the three months and nine months ended May 31, 1996, Americrown Service
Corporation continued to expand its operations by providing food and beverage
services at outdoor sporting events and entertainment activities unrelated to
motorsports events conducted by International Speedway Corporation. The
revenue generated by these new business opportunities accounted for over
two-thirds of the increase in food, beverage and souvenir income for the
three-month and nine-month periods ended May 31, 1996, respectively, as
compared to the corresponding periods of the prior year. The remaining
increase in food, beverage and souvenir income for the three months and nine
months ended May 31, 1996, as compared to the three months and nine months
ended May 31, 1995, is attributed to increased attendance at motorsports
events conducted by International Speedway Corporation and increases in
certain prices.
The motorsports industry generates significant revenue each year from the
promotion, sponsorship and advertising of various companies and their
products. General economic conditions and government regulation can adversely
impact the availability to motorsports of promotion, sponsorship and
advertising revenue. In August 1995, the U. S. Food and Drug Administration
("FDA") announced proposed regulations that, if implemented, could potentially
restrict tobacco industry sponsorship of sporting events. Revenue generated by
tobacco industry sponsorship of the Company's events accounted for less than
3% and 5% of motorsports related income for the three-month and nine-month
periods ended May 31, 1996 and 1995, respectively.
The lengthy regulatory rulemaking process related to the FDA's proposed
regulations encompasses several phases. The first phase of the process, which
entailed an opportunity for official comment, closed on January 2, 1996.
There are several pending legal challenges by third parties which, the Company
believes, are likely to extend the process. The final outcome of this
regulatory process is uncertain, and the impact on International Speedway
Corporation, if any, is unclear.
Expenses
Standard NASCAR sanction agreements require a percentage of broadcast revenues
be paid as prize money to participants in the events. As a result of increased
broadcast revenues, the Company experienced a corresponding increase in prize
money. This increased prize money, combined with increased point fund money,
accounted for approximately three-quarters of the increase in prize and point
fund monies and NASCAR sanction fees for the three-month and nine-month
periods ended May 31, 1996, respectively, as compared to the corresponding
periods of the prior year.
Motorsports related expenses, as a percentage of combined admissions and
motorsports related income, remained relatively constant for the three months
and nine months ended May 31, 1996 and 1995, respectively.
As food, beverage and souvenir income increases, the Company experiences
increases in related expenses. Personnel related expenses, product costs and
other fees associated with the expanded operations of Americrown Service
Corporation accounted for approximately one-half of the increase in food,
beverage and souvenir expenses for the three-month and nine-month periods
ended May 31, 1996, as compared with the corresponding periods of the prior
year. Personnel related expenses and product costs associated with the
Company's ongoing food, beverage and souvenir operations accounted for the
majority of the remaining increases during both of these periods.
General and administrative expenses, as a percentage of total operating
revenues, remained relatively constant for the three months and nine months
ended May 31, 1996 and 1995.
Because of the seasonal concentration of racing events, the results of
operations for the three-month and nine-month periods ended May 31, 1996
and 1995 are not indicative of the results to be expected for the
year.
Private Securities Litigation Reform Act of 1995 - Safe Harbor Statement
The Company makes "forward-looking statements" from time to time and desires
to take advantage of the "safe harbor" which is afforded such statements under
the Private Securities Litigation Reform Act of 1995 when they are accompanied
by meaningful cautionary statements identifying important factors that could
cause actual results to differ materially from those in the forward-looking
statements.
The statements contained in this report which are not historical facts are
forward looking statements that involve various important risks and
uncertainties, including but not limited to the Company's ability to maintain
good working relationships with the sanctioning bodies for its events,
corporate sponsorship and promotion, competition, governmental agencies and
proposed regulations, the financial impact of poor weather conditions at the
Company's events and those other risks and factors disclosed in the Company's
securities filings.
Review Report of Independent Certified Public Accountants
The Board of Directors
International Speedway Corporation
We have reviewed the accompanying condensed consolidated balance sheet of
International Speedway Corporation as of May 31, 1996, and the related
condensed consolidated statements of operations for the three-month and
nine-month periods ended May 31, 1996 and 1995, and the condensed consolidated
statements of shareholders' equity and cash flows for the nine-month periods
ended May 31, 1996 and 1995. These financial statements are the responsibility
of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, which
will be performed for the full year with the objective of expressing an
opinion regarding the financial statements taken as a whole. Accordingly, we
do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial
statements referred to above for them to be in conformity with generally
accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of International Speedway
Corporation as of August 31, 1995, and the related consolidated statements of
income, shareholders' equity and cash flows for the year then ended (not
presented separately herein) and in our report dated October 20, 1995, we
expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of August 31, 1995, is fairly stated in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
/s/ Ernst & Young, LLP
Jacksonville, Florida
July 5, 1996
PART II - OTHER INFORMATION
Item #6 Exhibits and Reports on Form 8-K
a. Exhibits
I. (27) - Article 5 Fin. Data Schedule for 3rd Qtr 10-Q
B. Reports on Form 8-K
No reports have been filed on Form 8-K during this quarter.
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 July 11, 1996 /s/ James C. France
_____________________________________
James C. France, President
Date July 11, 1996 /s/ Susan G. Schandel
_____________________________________
Susan G. Schandel,
Chief Financial Officer