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 August 31, 1999.
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, - 22,830,080 shares as of September 30, 1999.
Class B Common Stock, - 30,294,633 shares as of September 30, 1999.
PART I. - FINANCIAL INFORMATION
Item 1. - Financial Statements
INTERNATIONAL SPEEDWAY CORPORATION
Condensed Consolidated Balance Sheets
November 30, August 31,
1998 1999
(Unaudited)
-------------- -------------
(IN THOUSANDS)
ASSETS
Current Assets:
Cash and cash equivalents ................................... $ 38,676 $ 59,110
Short-term investments ...................................... 54,127 681
Receivables, less allowances of $100 and $650, respectively . 9,445 27,722
Inventories ................................................. 953 3,882
Prepaid expenses and other current assets ................... 5,243 15,080
---------- -----------
Total Current Assets ......................................... 108,444 106,475
Property and Equipment - at cost - less accumulated
depreciation of $65,529 and $77,491, respectively ........... 225,831 614,040
Other Assets:
Equity investments (Note 3) ................................. 44,087 11,083
Goodwill, less accumulated amortization of $1,386 and
$3,267, respectively ....................................... 38,927 546,865
Restricted investments (Note 4).............................. 53,500 96,246
Other ....................................................... 6,029 13,877
----------- -----------
142,543 668,071
----------- -----------
Total Assets ................................................. $476,818 $1,388,586
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable ............................................ $ 10,367 $ 17,068
Deferred income ............................................. 62,253 114,656
Current portion of long-term debt ........................... 598 3,185
Other current liabilities ................................... 7,736 14,521
----------- -----------
Total Current Liabilities .................................... 80,954 149,430
Long-term debt (Note 4) ...................................... 2,775 282,540
Deferred income taxes ........................................ 26,234 66,452
Minority interest ............................................ - 2,178
Commitments and contingencies
Shareholders' Equity
Class A Common Stock, $.01 par value, 80,000,000 shares
authorized; 11,529,590 and 22,774,872 issued at November 30
and August 31, respectively................................. 115 228
Class B Common Stock, $.01 par value, 40,000,000 shares
authorized; 31,573,043 and 30,349,841 issued at November 30
and August 31, respectively.................................. 316 303
Additional paid-in capital .................................. 205,089 687,321
Retained earnings ........................................... 163,201 202,237
----------- -----------
368,721 890,089
Less unearned compensation-restricted stock ................. 1,866 2,103
----------- -----------
Total Shareholders' Equity ................................... 366,855 887,986
----------- -----------
Total Liabilities and Shareholders' Equity ................... $476,818 $1,388,586
=========== ===========
See accompanying notes.
INTERNATIONAL SPEEDWAY CORPORATION
Condensed Consolidated Statements of Operations
Three Months Ended
August 31, August 31,
1998 1999
(Unaudited) (Unaudited)
_________________________
(In Thousands, Except
Per Share Data)
REVENUES:
Admissions, net.................................... $ 5,184 $ 31,857
Motorsports related income......................... 9,187 22,356
Food, beverage and merchandise income ............. 3,054 11,600
Other income....................................... 397 413
___________ ___________
17,822 66,226
EXPENSES:
Direct expenses:
Prize and point fund monies
and NASCAR sanction fees....................... 2,443 8,803
Motorsports related expenses..................... 5,449 10,958
Food, beverage and merchandise expenses ......... 2,288 6,630
General and administrative expenses................ 9,020 16,608
Depreciation and amortization ..................... 3,309 6,405
___________ ___________
22,509 49,404
___________ ___________
Operating income (loss) ............................. (4,687) 16,822
Interest income ..................................... 1,462 2,070
Interest expense .................................... (77) (1,586)
Equity in net income (loss) from equity investments.. 131 (1,006)
Minority interest ................................... - 77
___________ ___________
Income (loss) before income taxes.................... (3,171) 16,377
Income taxes (benefit) .............................. (1,227) 6,742
___________ ___________
Net Income (loss) ................................... $(1,944) $ 9,635
=========== ===========
Basic earnings (loss) per share ...................... $(0.05) $ 0.21
=========== ===========
Diluted earnings (loss) per share .................... $(0.05) $ 0.20
=========== ===========
Dividends per share.................................. $ 0.00 $ 0.00
=========== ===========
Basic weighted average shares outstanding ...........40,864,391 46,917,080
=========== ===========
Diluted weighted average shares outstanding .........40,864,391 47,040,272
=========== ===========
See accompanying notes.
INTERNATIONAL SPEEDWAY CORPORATION
Condensed Consolidated Statements of Income
Nine Months Ended
August 31, August 31,
1998 1999
(Unaudited) (Unaudited)
_________________________
(In Thousands, Except
Per Share Data)
REVENUES:
Admissions, net................................. $ 54,432 $ 90,136
Motorsports related income...................... 50,104 72,805
Food, beverage and merchandise income .......... 18,666 29,913
Other income.................................... 1,095 1,243
___________ __________
124,297 194,097
EXPENSES:
Direct expenses:
Prize and point fund monies
and NASCAR sanction fees.................... 19,727 28,252
Motorsports related expenses.................. 22,119 32,458
Food, beverage and merchandise expenses ...... 10,396 15,995
General and administrative expenses............. 26,365 36,814
Depreciation and amortization .................. 9,593 13,936
___________ __________
88,200 127,455
___________ __________
Operating Income.................................. 36,097 66,642
Interest income .................................. 2,531 6,783
Interest expense ................................. (518) (2,511)
Equity in net loss from equity investments ....... (111) (1,472)
Minority interest ................................ - 77
Gain on sale of equity investment ................ 1,245 --
___________ __________
Income before income taxes........................ 39,244 69,519
Income taxes...................................... 14,993 27,101
___________ __________
Net Income........................................ $24,251 $ 42,418
=========== ==========
Basic earnings per share ......................... $ 0.62 $ 0.96
=========== ==========
Diluted earnings per share ....................... $ 0.62 $ 0.96
=========== ==========
Dividends per share............................... $ 0.06 $ 0.06
=========== ==========
Basic weighted average shares outstanding ........ 39,100,175 44,229,684
=========== ==========
Diluted weighted average shares outstanding ...... 39,259,164 44,355,217
=========== ==========
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, 1997 $ 53 $332 $ 86,437 $125,457 $(2,372) $209,907
Activity 12/1/97 - 8/31/98 - unaudited:
Net Income ........................... - -- -- 24,251 -- 24,251
Public offering - Class A Common Stock 46 - 117,654 -- -- 117,700
Cash dividends ($.06 per share) ...... -- -- -- (2,310) -- (2,310)
Change in equity investment .......... - -- 115 -- -- 115
Restricted stock granted ............. - - 680 -- (680) --
Reacquisition of previously issued
common stock ....................... - -- (57) (138) -- (195)
Conversion of Class B Common Stock to
Class A Common Stock ............... 6 (6) -- -- -- --
Forfeiture of restricted shares ...... - -- (110) -- 110 --
Income tax benefit related to restricted
stock plan ......................... - -- 492 -- -- 492
Amortization of unearned compensation. - -- -- -- 781 781
----- ----- --------- --------- -------- ---------
BALANCE AT AUGUST 31, 1998 - unaudited 105 326 205,211 147,260 (2,161) 350,741
Activity 9/1/98 - 11/30/98 - unaudited:
Net income ........................... - - -- 15,941 -- 15,941
Change in equity investment .......... - -- (122) -- -- (122)
Conversion of Class B Common Stock to
Class A Common Stock ............... 10 (10) -- -- -- --
Amortization of unearned compensation. - -- -- -- 295 295
----- ----- --------- --------- -------- ---------
BALANCE AT NOVEMBER 30, 1998 115 316 205,089 163,201 (1,866) 366,855
Activity 12/1/98 - 8/31/99 - unaudited:
Net income ........................... -- -- -- 42,418 -- 42,418
Issuance of common stock for acquisition 100 -- 480,472 -- -- 480,572
Cash dividends ($.06 per share) ...... - - -- (2,586) -- (2,586)
Restricted stock granted ............. - -- 1,035 -- (1,035) --
Change in equity investment .......... - -- (90) -- -- (90)
Reacquisition of previously issued
common stock ....................... -- -- (314) (796) -- (1,110)
Conversion of Class B Common Stock to
Class A Common Stock ............... 13 (13) -- -- -- --
Income tax benefit related to restricted
stock plan ......................... - -- 1,129 -- -- 1,129
Amortization of unearned compensation. - -- -- -- 798 798
----- ----- --------- --------- -------- ---------
BALANCE AT AUGUST 31, 1999 - unaudited $228 $303 $687,321 $202,237 $(2,103) $887,986
===== ===== ========= ========= ======== =========
See accompanying notes.
International Speedway Corporation
Condensed Consolidated Statements of Cash Flows
Nine Months Ended
August 31, August 31,
1998 1999
(Unaudited) (Unaudited)
______________________________
(In Thousands)
OPERATING ACTIVITIES
Net income...................................... $ 24,251 $ 42,418
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization .............. 9,593 13,936
Amortization of unearned compensation....... 781 798
Deferred income taxes....................... 4,138 5,070
Undistributed loss from equity investments . 111 1,472
Minority interest .......................... - (77)
Gain on sale of equity investment .......... (1,245) --
Changes in operating assets and liabilities:
Receivables................................. (6,107) (5,997)
Inventories, prepaid expenses and other
current assets ........................... (9,119) (1,496)
Other assets................................ (351) (1,372)
Accounts payable, and other current liabilities 1,571 1,492
Deferred income............................. 32,715 12,372
__________________________
Net cash provided by operating activities....... 56,338 68,616
INVESTING ACTIVITIES
Change in short-term investments, net ........ 15,863 53,946
Capital expenditures.......................... (37,667) (75,387)
Acquisition, net of cash acquired ............ - (134,274)
Equity investments ........................... (410) (11,038)
Increase in restricted investments, net ...... - (42,746)
Proceeds from sale of equity investment ...... 5,270 --
Other, net ................................... (142) (285)
__________________________
Net cash used in investing activities........... (17,086) (209,784)
FINANCING ACTIVITIES
Payment of long-term debt .................... (13,057) (74,876)
Reacquisition of previously issued
common stock................................. (195) (1,110)
Issuance of Class A Common Stock ............. 117,700 -
Proceeds from long-term debt ................. - 240,174
Cash dividends paid .......................... (2,310) (2,586)
__________________________
Net cash provided by financing activities ...... 102,138 161,602
__________________________
Net increase in cash and cash equivalents ...... 141,390 20,434
Cash and cash equivalents at beginning of period 9,974 38,676
__________________________
Cash and cash equivalents at end of period ..... $151,364 $ 59,110
==========================
See accompanying notes.
International Speedway Corporation
Notes to Condensed Consolidated Financial Statements
November 30, 1998 and August 31, 1999
(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 wholly-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 August 31, 1999.
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income", became effective for the Company during the first
quarter of fiscal year 1999. The Company has no items of other comprehensive
income and therefore no additional disclosure requirements.
Because of the seasonal concentration of racing events and the acquisition in
July 1999 (Note 2), the results of operations for the three-month and nine-
month periods ended August 31, 1998 and 1999 are not indicative of the results
to be expected for the year.
2. Acquisition
On July 26, 1999, the Company, 88 Corp., (a merger subsidiary wholly-owned by
the Company), and Penske Motorsports, Inc. ("PMI") consummated an Agreement
and Plan of Merger (the "PMI Merger Agreement"). Pursuant to the PMI Merger
Agreement, PMI merged into 88 Corp. ("the PMI Merger") and became a wholly-
owned subsidiary of the Company.
In connection with and immediately preceding the PMI Merger, the Company,
Penske Performance, Inc., Penske Corporation, (the sole shareholder of Penske
Performance, Inc.), and PSH Corp., (which owned approximately 56% of the issued
and outstanding shares of PMI), consummated a separate Agreement and Plan of
Merger which resulted in the merger of PSH Corp. into the Company.
Pursuant to the Merger Agreements, the Company acquired the approximately 88%,
or 12.2 million outstanding common shares, of 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 $4.5 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. As a
result of the transaction, the Company operates 10 major motorsports facilities
across the United States.
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 valuation will differ materially from the
preliminary valuation. The excess of the purchase price over the fair value of
the net assets acquired of approximately $105.9, has been allocated, based upon
the preliminary valuation, as goodwill of approximately $508.8 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 and six months ended August 31, 1999 was approximately $1.1
million.
The following unaudited pro forma financial information presents a summary of
consolidated results of operations as if the Penske merger had occurred as of
December 1, 1997 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)
Nine Months Ended Nine Months Ended
August 31, 1998 August 31, 1999
Total Revenues $ 223,912 $ 278,182
Net Income 23,787 35,920
Basic income per share 0.48 0.66
Diluted income per share 0.48 0.66
3. Equity Investments
On May 5, 1999, the Motorsports Alliance, LLC ("MSA") (owned 50% by the Company
and 50% by Indianapolis Motor Speedway) and the owners of Route 66 Raceway,
LLC, formed a new company, Raceway Associates, LLC, ("Raceway Associates")
which is owned 75% by MSA and 25% by the former owners of the Route 66 Raceway,
LLC. 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 has also purchased 930
acres adjacent to the existing Route 66 complex for the proposed construction
of a 1.5 mile oval motor speedway, which will initially accommodate
approximately 75,000 spectators. The current estimate for the proposed new
superspeedway development is $125 to $130 million, $100 million of which will
be financed through equity of approximately $50 million from MSA and a
borrowing of approximately $50 million by Raceway Associates. The members of
MSA will guarantee up to $50 million in borrowings of Raceway Associates on a
pro rata basis until such time as the operations of Raceway Associates meet
certain financial criteria. Raceway Associates is currently working with local
government authorities to identify potential funding mechanisms to fund
anticipated project costs in excess of $100 million. In addition, the Company
(through MSA) may commit additional equity to fund a portion of these
additional project costs. During the nine months ended August 31, 1999, the
Company contributed approximately $11 million to MSA, approximately $9 million
of which has been applied towards the Company's portion of the capital
commitment for the acquisition of land and development of the new facility.
As a result of the PMI merger on July 26, 1999 (Note 2), the investments in PMI
and Miami are no longer equity investments, as they are included in
consolidated operations.
4. Long-Term Debt
Long-term debt consists of the following (in thousands):
November 30, August 31,
1998 1999
_____________________________________
Credit facilities $ 0 $180,500
TIF bond debt service funding
commitment, net of discount of $1,665 0 69,675
Term debt 0 30,000
Notes payable 3,373 5,550
_______ ________
3,373 285,725
Less current portion 598 3,185
________ ________
$ 2,775 $282,540
======== ========
Schedule of Payments:
1999 $ 685
2000 2,655
2001 5,165
2002 9,225
2003 5,775
Thereafter 263,885
_______
287,390
Discount 1,665
_______
$285,725
========
The Company has two Credit Facilities with financial institutions, consisting
of a $300 million Credit Facility and a $20 million Credit Facility (discussed
below). In July 1999, the Company entered into a $300 million fully-
underwritten five-year revolving Credit Facility in order to finance a portion
of the PMI acquisition (Note 2) and to refinance PMI's outstanding
indebtedness. The $300 million Credit Facility matures on March 31, 2004, and
pays interest monthly at LIBOR plus 50 to 100 basis points. At August 31,
1999, the Company had $124 million available under this Credit Facility.
The Company has an agreement with a group of banks for a $20 million Credit
Facility, letter of credit and a $30 million term loan. The Credit Facility
and term loan are collateralized by all of the assets of the Company's Miami
subsidiary. The $20 million Credit Facility, which is automatically reduced to
$15 million on December 31, 2002, matures on December 31, 2004. At August 31,
1999, the Company had $15.5 million available under this Credit Facility. The
term loan is payable in 6 annual installments, which range from $2.5 million on
December 31, 1999 to $7.0 million on December 31, 2004. Interest on the Credit
Facility and term loan is paid quarterly and accrues at LIBOR plus 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 6.0% through December 31, 1999, 6.6% through December 31, 2000 and 7.1%
for the remainder of the loan period.
The Credit Facilities and 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 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. Principal (mandatory redemption)
payments per the Funding Commitment are payable by the Company on October 1 of
each year beginning in 1999. The semi-annual interest component of the Funding
Commitment is payable on each April 1 and October 1, beginning on April 1,
1999.
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 $77.9
million equity commitment to the Kansas project. Prior to the issuance of the
STAR and TIF bonds, the Company had spent approximately $29.9 million related
to the construction of the speedway in Kansas.
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.
The Company has granted a mortgage and security interest in the Kansas project
for its Funding Commitment obligation.
Total interest incurred by the Company was approximately $77,000 and $1,586,000
for the three months ended August 31, 1998 and 1999, respectively, and $518,000
and $2,511,000, for the nine months ended August 31, 1998 and 1999,
respectively. Total interest capitalized for the three months and nine months
ended August 31, 1999 was approximately $858,000 and $1,750,000, respectively.
Financing costs of approximately $7.3 million have been deferred and are
included in other assets at August 31, 1999. These costs are being amortized
on an effective yield method over the life of the related financing.
5. 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 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"), the United States Road Racing Championship ("USRRC"), 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 $1.9 million and $15.8
million for the three and nine-month periods ended August 31, 1998,
respectively, and approximately $8.8 million and $24.2 million for the three-
month and nine-month periods ended August 31, 1999, respectively.
6. Supplemental Disclosures of Cash Flow Information
Cash paid for income taxes and interest for the nine months ended August 31,
1998 and 1999 is as follows:
1998 1999
________________________________
(Thousands of Dollars)
Income taxes paid $ 12,385 $ 24,486
==================================
Interest paid $ 926 $ 2,583
==================================
See Note 2 for discussion of non-cash acquisition transaction.
7. 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 Corporation, previously a subsidiary of Penske Motorsports, Inc.
which was acquired by the Company in the Penske Mergers). 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.
The financial statements for the 1999 third quarter include an accrual of
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 Penske Motorsports' acquisition of North Carolina Speedway
in 1997, certain 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 Penske Motorsports, Penske Acquisition, Inc. and
North Carolina Speedway in North Carolina Superior Court, Mecklenburg County,
North Carolina. Under Penske Motorsports' 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 Penske
Motorsports paid in connection with the acquisition of North Carolina Speedway,
all stockholders of North Carolina Speedway at the time of the acquisition,
other than Penske Motorsports 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 Penske Motorsports 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. A negative decision with
respect to the dissenters' proceeding could materially increase the purchase
price paid for North Carolina Speedway by Penske Motorsports, which the Company
would have to pay.
Management is presently unable to further predict or quantify the outcome of
these matters.
8. Long-Term Incentive Plans
On April 1, 1998 and 1999, a total of 22,236 and 19,633 restricted shares of
the Company's Class A Common Stock, respectively, were awarded to certain
officers and managers under the Company's Long-term Incentive Plan (the "1996
Plan"). The market value of shares awarded amounted to approximately $680,000
and $1,035,000 respectively, which has been recorded as unearned compensation -
- - restricted stock, and 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 for restricted stock awards charged against operations during the
nine months ended August 31, 1998 and August 31, 1999 was approximately
$781,000 and $798,000, respectively.
9. Subsequent Event
On October 6, 1999, the Company sold $225 million principal amount of Senior
Notes due October 15, 2004 in a private placement. The unsecured Senior Notes
will bear interest at 7.875% and will 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
outstanding borrowings under its $300 million Credit Facility. Pursuant to the
Credit Facility Agreement, the size of the Credit Facility automatically
reduces from $300 million to $200 million upon the Company's receipt of the
proceeds from the private placement.
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 made during or as a
result of such events and activities.
"Admissions" revenue includes ticket sales from all of the Company's events and
DAYTONA USA's Track Tours and Velocitorium. 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 currently negotiates directly with television and
cable networks for coverage of substantially all of its NASCAR televised
motorsports events. NASCAR has announced it will retain these rights and
negotiate television and ancillary media rights contracts beginning with the
2001 racing season as a result of its recent agreement with all of the
television broadcasters of these events to release their contractual rights
beginning with such racing season. The Company expects that the percentage of
television broadcast rights fees that the Company currently retains from each
contract will be the same under the future arrangement. 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.
"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 Good Year brand racing tires 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 Nine Months Ended
August 31, August 31,
1998 1999 1998 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
_________________________ _________________________
Revenues:
Admissions, net............................. 29.1% 48.1% 43.8% 46.4%
Motorsports related income.................. 51.6 33.8 40.3 37.5
Food, beverage and merchandise income....... 17.1 17.5 15.0 15.4
Other income................................ 2.2 0.6 0.9 0.7
________ ________ ________ _______
Total revenues ........................... 100.0% 100.0% 100.0% 100.0%
Expenses:
Direct expenses:
Prize and point fund monies
and NASCAR sanction fees................ 13.7 13.3 15.9 14.6
Motorsports related expenses.............. 30.6 16.5 17.8 16.7
Food, beverage and merchandise expenses... 12.8 10.0 8.4 8.2
General and administrative expenses......... 50.6 25.1 21.2 19.0
Depreciation and amortization .............. 18.6 9.7 7.7 7.2
________ ________ ________ _______
Total expenses ........................... 126.3 74.6 71.0 65.7
________ ________ ________ _______
Operating income (loss) ...................... (26.3) 25.4 29.0 34.3
Interest income .............................. 8.2 3.1 2.1 3.5
Interest expense ............................. (0.4) (2.4) (0.4) (1.3)
Equity in net loss from equity investments.... 0.7 (1.5) (0.1) (.8)
Gain on sale of equity investment ............ -- -- 1.0 -
Minority interest ............................ - 0.1 -- 0.1
________ ________ ________ _______
Income (loss) before income taxes............. (17.8) 24.7 31.6 35.8
Income tax expense (benefit) ................. (6.9) 10.1 12.1 13.9
________ ________ ________ _______
Net income (loss) ............................ (10.9%) 14.6% 19.5% 21.9%
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. Further, in July 1998 the Company
announced the postponement of the NASCAR Winston Cup Series Pepsi 400 at
Daytona from July 4, 1998 to October 17, 1998 as a result of the nationally
publicized forest fire emergency throughout the state of Florida. This event,
historically conducted in the Company's third quarter, was conducted in July in
1999.
On July 26, 1999, the Company acquired the 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 that facility to 90%, as well as
other PMI merchandising subsidiaries. As a result of the transaction, the
Company operates 10 major motorsports facilities across the United States with
more than 800,000 seats and 400 suites (See "Acquisition"). The Company has
recognized revenues and expenses associated with acquired operations on a
consolidated basis subsequent to July 26, 1999, including a major event weekend
consisting of a NASCAR Winston Cup Series event and NASCAR Busch Series, Grand
National Division event conducted at the Michigan Speedway ("Michigan") in
August of 1999.
As a result of the prior year postponement of the Pepsi 400 at Daytona and the
acquisition of PMI, the Company conducted three Winston Cup Series races and
two Busch Series, Grand National Division races during the third quarter of
1999 compared to one Winston Cup Series race and one Busch Series, Grand
National Division race during the third quarter of 1998. 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 and Nine Months Ended August 31, 1999 to
the Results for the Three and Nine Months Ended August 31, 1998
Admissions revenue increased approximately $26.7 million, or 514.5%, for the
three months ended August 31, 1999 as compared to the three months ended August
31, 1998. The increase in admissions income was primarily attributable to the
Pepsi 400 at Daytona and the NASCAR events held at the newly acquired Michigan
facility, both of which were not included in the Company's results during the
three months ended August 31, 1998. The aforementioned events hosted record
attendance in 1999.
Admissions revenue increased approximately $35.7 million, or 65.6%, for the nine
months ended August 31, 1999, as compared to the nine months ended August 31,
1998. This increase was primarily related to increases discussed above during
the three months ended August 31, 1999, as well as the increase in the weighted
average price of tickets sold and increased seating capacity and attendance at
the Speedweeks events held at Daytona International Speedway ("Daytona"), and,
to a lesser extent, events conducted at Talladega Superspeedway ("Talladega").
Motorsports related income increased approximately $13.2 million , or 143.3%,
during the three months ended August 31, 1999 as compared to the three months
ended August 31, 1998. This increase, primarily related to television broadcast
rights fees, luxury suite and hospitality rentals and sponsorship revenues, was
attributable to the timing of the Pepsi 400 at Daytona, Michigan's NASCAR events
and, to a lesser extent, the NASCAR events held at Watkins Glen.
Motorsports related income increased approximately $22.7 million, or 45.3%, for
the nine months ended August 31, 1999 as compared to the nine months ended
August 31, 1998. Over one-half of this increase was attributable to the
increases discussed above during the third quarter of 1999, with the remaining
increase primarily attributable to growth in television broadcast rights fees,
expanded luxury suite and hospitality facilities and increased sponsorship
revenues for the Speedweeks events at Daytona and, to a lesser extent, events at
the Company's other facilities.
Food, beverage and merchandise income increased approximately $8.5 million, or
279.8%, during the three months ended August 31, 1999 as compared to the three
months ended August 31, 1998. This increase was attributable to the timing of
the Pepsi 400 at Daytona, the merchandising activities of certain subsidiaries
acquired from PMI, which included sales of Goodyear brand racing tires, and fees
paid by third party vendors related to souvenir, concessions and catering
operations for Michigan's NASCAR events.
Food, beverage and merchandise income increased approximately $11.2 million, or
60.3%, for the nine months ended August 31, 1999 as compared to the nine months
ended August 31, 1998. The majority of the increase related to the increases
discussed above during the three months ended August 31,1999, with the remaining
increase primarily attributable to increased catering revenues from expanded
luxury suite and hospitality facilities at Daytona's Speedweeks events, and, to
a lesser extent, increased attendance and seating capacity for NASCAR events
conducted at the Company's other facilities.
Prize and point fund monies and NASCAR sanction fees increased by approximately
$6.4 million, or 260.3%, and $8.5 million, or 43.2%, for the three months and
nine months ended August 31, 1999, respectively, as compared to the same periods
of the prior year, primarily as a result of the timing of the Pepsi 400 at
Daytona and Michigan's NASCAR events. Over three-quarters of the increase for
both the three months and nine months ended August 31,1999 was due to increased
prize and point fund monies paid by NASCAR to participants in NASCAR events.
Growth in television broadcast rights fees contributed significantly to these
increases 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 $5.5 million, or 101.1%,
and $10.3 million, or 46.7%, for the three months and nine months ended August
31, 1999, respectively, as compared to the same periods of the prior year. The
increase during the three months ended August 31, 1999, was primarily related to
the timing of operating expenses for the Pepsi 400 at Daytona and Michigan's
NASCAR events. The increases during the three months ended August 31,1999
accounted for over one-half of the increase during the nine months ended August
31,1999. The remaining increase was primarily attributable to personnel costs,
hospitality services and supplies and a variety of other fan amenities and
operating expenses for Daytona's Speedweeks events and, to a lesser extent,
events conducted at the Company's other facilities.
Food, beverage and merchandise expenses increased approximately $4.3 million, or
189.8%, and $5.6 million, or 53.9%, for the three months and nine months ended
August 31, 1999, respectively, as compared to the same periods of the prior year
primarily due to increased product and personnel costs associated with
increased revenues. The increases are primarily attributable to costs
associated with the sale of Goodyear brand racing tires and the timing of costs
associated with the Pepsi 400 at Daytona.
General and administrative expenses increased approximately $7.6 million, or
84.1%, and $10.4 million, or 39.6%, for the three and nine months ended August
31, 1999 as compared to the same periods of the prior year. During the three
months ended August 31,1999, the Company recorded a charge of approximately $2.8
million related to the cash portion of a proposed settlement in the Americrown
souvenir litigation (See "Legal Proceedings"). The increase for the three months
ended August 31, 1999, as compared to the three months ended August 31, 1998, is
primarily related to the charge for the proposed settlement, general and
administrative expenses associated with the operations acquired from PMI and the
consolidation of Miami and, to a lesser extent, increases in personnel and a
variety of other general and administrative expenses. Over one-half of the
increase for the nine months ended August 31, 1999, compared to the nine months
ended August 31,1998, was related to the proposed settlement and the acquired
operations noted above. The remaining increase in expenses was primarily
attributable to personnel costs and a variety of other expenses, as well as a
bad debt reserve primarily related to a single customer incurred during the
first quarter of fiscal 1999.
Depreciation and amortization expense increased approximately $3.1 million, or
93.6%, and $4.3 million, or 45.3%, for the three months and nine months ended
August 31, 1999, respectively, as compared to the same periods of the prior
year. The depreciation of assets acquired and amortization of goodwill recorded
as a result of the PMI merger accounted for approximately three-quarters and
one-half of the increase for the three months and nine months ended August 31,
1999, respectively. The remaining increase was a result of the ongoing
expansion of the Company's facilities.
Interest income for the three months and nine months ended August 31, 1999,
increased by approximately $600,000 and $4.3 million, respectively, as compared
to the same periods of the prior year. This increase was primarily due to the
investment of the remaining proceeds of the July 1998 Class A Common Stock
Offering, including the Company's investments restricted to the funding of the
speedway in Kansas, and investment of the proceeds from the sale of taxable
special obligation revenue ("TIF") bonds issued in January 1999 by the Unified
Government of Wyandotte County/Kansas City, Kansas ("Unified Government"), to
partially fund the Kansas project (See "Future Liquidity").
Interest expense for the three months and nine months ended August 31, 1999,
increased by approximately $1.5 million and $2.0 million, respectively, as
compared to the same periods of the prior year. Interest expense in fiscal 1999
consists primarily of the interest on $176 million borrowed under the Company's
new $300 million five-year revolving Credit Facility (See "Acquisition" and
"Future Liquidity"), incurred during the three months ended August 31,1999, and
interest expense on the TIF bond debt service funding commitment, net of
capitalized interest. Interest expense in fiscal 1998 was primarily related to
the note payable associated with the acquisition of Phoenix.
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 and the
amortization of the Company's investment in excess of its share of the
investee's underlying net assets. During the three months and nine months ended
August 31, 1999, this included the Company's approximately 12% indirect
investment in PMI and its 45% investment in Miami through July 26, 1999, and its
50% investment in Motorsports Alliance, LLC, which is pursuing development of a
major motorsports facility in the Chicago area (See "Future Liquidity"). For
the three months and nine months ended August 31, 1998, this included the
Company's approximately 11% indirect investment in PMI, its 40% investment in
Miami, which increased to 45% in March of 1998, and its 7% investment in Grand
Prix Association of Long Beach ("Long Beach"), which was sold in March of 1998.
In March of 1998 the Company recorded an approximately $1.2 million gain on the
sale of its equity investment in Long Beach. The Company sold its investment in
conjunction with Dover Downs Entertainment, Inc.'s announced plans to merge with
Long Beach. The after tax impact of this transaction was approximately
$850,000.
Income taxes increased $8.0 million and $12.1 million for the three months and
nine months ended August 31, 1999, respectively. The Company's effective tax
rate has, and is expected to continue to, increase compared to its historical
levels primarily due to the amortization of non-deductible goodwill created in
the PMI merger.
As a result of the foregoing, the Company's net income increased approximately
$11.6 million, or 595.6%, and $18.2 million, or 74.9%, for the three months and
nine months ended August 31, 1999 as compared to the same periods in the prior
year.
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, most recently,
borrowings available under its Credit Facility to fund development projects and
acquisitions. The Company had borrowings of $176 million on its new $300
million Credit Facility and a working capital deficit of $43.0 million at August
31, 1999, compared to working capital of $27.5 million at November 30, 1998,
primarily due to the acquisition of the approximately 88% interest the Company
did not already own in PMI. See "Acquisition" and "Future Liquidity".
Cash Flows
Net cash provided by operating activities was approximately $68.6 million for
the nine months ended August 31, 1999, compared to $56.3 million for the nine
months ended August 31, 1998. The difference between the Company's net income
of $42.4 million and the $68.6 million of operating cash flow was primarily
attributable to depreciation and amortization of $13.9 million, an increase in
deferred revenue of $12.4 million, and an increase in deferred income taxes of
$5.1 million, partially offset by an increase in accounts receivable of $6.0
million.
Net cash used in investing activities was $209.8 million for the nine months
ended August 31, 1999, compared to $17.1 million for the nine months ended
August 31, 1998. The Company's use of cash for investing activities reflects
$134.3 million for the cash portion of the purchase price of PMI, $75.4 million
in capital expenditures, the $42.7 million net increase in restricted
investments for the project in Kansas and $11.0 million for the Company's
investment year to date in the Chicago project, partially offset by the net
proceeds from the sale of short-term investments of $53.9 million. See "Capital
Expenditures".
Net cash provided by financing activities of $161.6 million for the nine months
ended August 31, 1999, compared to $102.1 million for the nine months ended
August 31, 1998, is related primarily to net proceeds from borrowings under the
Company's new $300 million five-year revolving Credit Facility (See
"Acquisition") and the issuance of the TIF bonds, partially offset by the
payment of a portion of the long-term debt acquired in the PMI merger
transaction.
Capital Expenditures
Capital expenditures totaled approximately $75.4 million for the nine months
ended August 31, 1999 as compared to $37.7 million for the nine months ended
August 31, 1998. Almost two-thirds of these expenditures were related to
expenditures at the Company's existing facilities, including increased seating
capacity at Daytona, Talladega, Phoenix, Darlington, Michigan and Miami, land
purchased for expansion of parking capacity and a variety of other improvements
to the Company's facilities. The remaining capital expenditures were primarily
related to the construction of the speedway in Kansas.
The Company expects to make approximately $66 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, construct luxury suites and for a variety of additional
improvements to the Company's motorsports facilities. The Company also expects
to spend an additional $10.1 million for 36 additional luxury suites at the
Kansas speedway, 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 July 26, 1999, the Company, 88 Corp.(a merger subsidiary wholly-owned by the
Company), and PMI consummated an Agreement and Plan of Merger. Pursuant to the
PMI Merger Agreement, PMI merged into 88 Corp. ("the PMI Merger") and became a
wholly-owned subsidiary of the Company.
In connection with and immediately preceding the PMI Merger, the Company, Penske
Performance, Inc., Penske Corporation, (the sole shareholder of Penske
Performance, Inc.), and PSH Corp., (which owned approximately 56% of the issued
and outstanding shares of PMI), consummated a separate Agreement and Plan of
Merger which resulted in the merger of PSH Corp. into the Company.
Pursuant to the Merger Agreements, the Company acquired the approximately 88%,
or 12.2 million outstanding common shares, of 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 $4.5 million. The total cash and stock
consideration issued in the transaction was approximately $611.1 million.
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 since 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 valuation will differ materially from the
preliminary valuation. The excess of the purchase price over the fair value of
the net assets acquired of approximately $105.9, has been allocated, based upon
the preliminary valuation, as goodwill of approximately $508.8 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 and six months ended August 31, 1999 was approximately $1.1
million.
The Company financed a portion of the Mergers and refinanced PMI's outstanding
indebtedness through a new $300 million fully-underwritten five-year revolving
Credit Facility ("Credit Facility") syndicated to a select group of lenders.
This Credit Facility replaced the Company's existing $100 million facility.
Borrowings under the Credit Facility bear interest at the applicable LIBOR rate
plus 50-100 basis points depending on certain financial criteria. At August 31,
1999, the Company's outstanding borrowings on this Credit Facility were $176
million. In addition, at August 31, 1999, the Company had a $20 million Credit
Facility, with outstanding borrowings of $4.5 million, and a $30 million term
loan outstanding which are both collateralized by the assets of the Company's
Miami subsidiary.
Future Liquidity
On October 6, 1999, the Company sold $225 million principal amount of Senior
Notes due 2004 in a private placement. The unsecured Senior Notes will bear
interest at 7.875%. The Company used approximately $176 million of the net
proceeds from the transaction to repay the outstanding borrowings under the
Credit Facility. The Company intends to use the remaining net proceeds of
approximately $47 million to partially fund the completion of certain additions
and improvements to Company's motorsports facilities and for working capital and
other general corporate purposes. Pending such uses, the Company intends to
invest the remaining proceeds in money market funds or other interest-bearing
obligations. Pursuant to the Credit Facility agreement, the size of the Credit
Facility automatically reduces from $300 million to $200 million upon the
Company's receipt of the proceeds from the private placement.
During the first quarter of 1999, the financing for the first phase of the
development of the Kansas facility, which is currently estimated to cost in
excess of $224 million, was substantially completed. 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. The STAR bonds are retired with state and local taxes generated within
the project's boundaries, and are not an obligation of the Company. The TIF
bonds will be 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 by 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 of which $24.4 was funded during
fiscal 1998, with the remaining $53.5 million funded in the first quarter of
fiscal 1999. The net TIF and STAR bond proceeds and the Company's equity
contribution 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 August 31, 1999, the Company's $96.2 million of restricted
investments includes the funds remaining from the Company's equity contribution
and the TIF bond proceeds.
On May 5, 1999, the Motorsports Alliance, LLC ("MSA") (owned 50% by the Company
and 50% by Indianapolis Motor Speedway) and the owners of Route 66 Raceway, LLC,
formed a new company, Raceway Associates, LLC, ("Raceway Associates") which is
owned 75% by MSA and 25% by the former owners of the Route 66 Raceway. 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 has also purchased 930 acres adjacent
to the existing Route 66 complex for the proposed construction of a 1.5 mile
oval motor speedway, which will initially accommodate approximately 75,000
spectators. The current estimate for the proposed new superspeedway development
is $125 to $130 million, $100 million of which will be financed through equity
of approximately $50 million from MSA and a borrowing of approximately $50
million by Raceway Associates. The members of MSA will guarantee up to $50
million in borrowings of Raceway Associates on a pro rata basis until such time
as the operations of Raceway Associates meet certain financial criteria.
Raceway Associates is currently working with local government authorities to
identify potential funding mechanisms to fund anticipated project costs in
excess of $100 million. In addition, the Company (through MSA) may commit
additional equity to fund a portion of these additional project costs. During
the nine months ended August 31, 1999, the Company contributed approximately $11
million to MSA, approximately $9 million of which has been applied towards the
Company's portion of the capital commitment for the acquisition of land and
development of the new facility.
The Company believes that cash flow from operations, along with existing cash
and short-term investment balances, 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
described above prior to commencement of racing at the Speedway in Kansas, iii)
payments related to other currently existing debt service requirements, and iv)
the Company's expected equity funding requirements for the Chicago project. The
Company intends to pursue further developments 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 or
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.
Impact of the Year 2000
The Year 2000 issue is the result of computer programs and other business
systems being written using two digits rather than four to represent the year.
Many of our time sensitive applications and business systems and those of our
business partners may recognize a date using "00" as the year 1900 rather than
the year 2000, which could result in system failure or disruption of operations.
The Year 2000 problem will impact us and our business partners.
An assessment of our Year 2000 exposure related to our information technology
systems has been made and the plans to resolve the related issues are being
implemented. Most of our major information technology systems have already been
updated or replaced with applications that are Year 2000 compliant in the normal
course of business. We believe we will be able to achieve Year 2000 readiness
with regard to the remainder of our information technology systems during the
fourth quarter of fiscal 1999.
We suspect that some of our non-information technology systems, such as
elevators, heating and air-conditioning systems, etc., with date sensitive
software and embedded microprocessors may be affected by the Year 2000 issue,
and evaluation of such systems is approaching completion. Current estimates
of the costs of correcting or replacing critical non-information technology
systems indicate that these costs will not be material to us.
We have also developed and implemented a plan of communication with significant
business partners in an attempt to identify and minimize disruptions to our
operations resulting from the Year 2000 issue. There can be no certainty that
the computer programs and business systems of third parties on which we rely
will not have an adverse effect on our operation . However, because of the
nature of our business, we believe at this time that a failure of our vendors,
sponsors or customers to resolve issues involving the Year 2000 problem will not
be material to us.
We anticipate completing substantially all of our Year 2000 preparation during
fiscal 1999. In the event we fall behind on our timetable for achieving Year
2000 compliance, we will need to focus additional internal resources on
completing critical projects and implementing contingency plans. We at this
time believe that we will satisfactorily resolve all significant Year 2000
problems. Current estimates of costs to correct the identified potential
problems related to the Year 2000 indicate that these costs will not exceed
$600,000. Estimates of Year 2000 related costs are based on numerous
assumptions, including the continued availability of certain resources, the
ability to correct all relevant information and non-information technology
systems and third party modification plans. There is no assurance that the
estimates will be achieved and actual costs could differ materially from
those anticipated.
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.
Our Inability to Integrate Successfully the Operations of Penske Motorsports
with Our Business Could Negatively Impact Us.
There can be no assurance that we will integrate successfully the operations of
Penske Motorsports with our business. The full benefits of our business
combination with Penske Motorsports will require the integration of
administrative, finance, sales and marketing organizations, and the
implementation of appropriate operational, financial, and management systems and
controls. The integration of different businesses is a detailed and time-
consuming process and we have no experience in integrating an acquisition on the
scale of the Penske Acquisition. Our inability to achieve expected cost savings
and synergies or to otherwise integrate successfully the operations of Penske
Motorsports could have a material adverse effect on us. The Penske acquisition
involves other special risks, including:
diversion of management attention;
the incurrence of significant non-recurring expenses related to the
transaction;
difficulties in improving the operations, technologies and services
of Penske Motorsports; and
the risk of entering into markets or services where we have limited
direct prior experience.
Our Success Depends on Our Relationship with NASCAR and CART.
Our success has been and will remain dependent on maintaining a good working
relationship with NASCAR, the sanctioning body for NASCAR's Winston Cup Series,
Busch Grand National Series and Craftsman Truck Series, and CART, the
sanctioning body for the FedEx Championship Series. For the 1999 racing season,
we have sanctioning agreements to promote and market:
16 NASCAR Winston Cup Series events;
12 NASCAR Busch Grand National Series events;
6 NASCAR Craftsman Truck Series events; and
4 CART FedEx Championship Series events.
Neither NASCAR nor CART is required to continue to enter into, renew or extend
sanctioning agreements with us to promote any existing event. Moreover,
although our general growth strategy includes the possible development and/or
acquisition of additional motorsports facilities, it cannot be assured that any
sanctioning body, including NASCAR or CART, will enter into sanctioning
agreements with us to promote races at our new facilities. Failure to obtain a
sanctioning agreement for a major NASCAR or CART event could negatively affect
us. Similarly, neither NASCAR nor CART is obligated to modify their race
schedules to allow us to more efficiently schedule our races. In addition, by
sanctioning an event, neither NASCAR nor CART warrants, either expressly or by
implication, nor are they responsible for, the financial or other success of the
sanctioned event or the number or identity of vehicles or competitors
participating in the event.
We Are Dependent on Key Personnel
Our continued success will depend upon the availability and
performance of our 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 we
believe that our senior management team has significant depth, the
loss of any of our key personnel or our 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
Our growth strategy includes the potential acquisition and/or
development of new motorsports facilities, including the proposed Kansas
International Speedway, the proposed motorsports facility near Chicago,
Illinois. and the possible development of a motorsports facility
near New York City. Our ability to implement successfully this
element of our growth strategy will depend on a number of factors, including
(i) our 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) our capital resources, (iv) our ability to control
construction and operating costs, and (v) our ability to hire and retain
qualified personnel. Our inability to implement our expansion plans for any
reason could adversely affect our business prospects. In addition, expenses
associated with developing, constructing and opening a new facility may have a
negative effect on our 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 our
ownership interest and the degree of any municipal or other public support.
Moreover, although we believe that we will be able to obtain financing to fund
the acquisition, development and/or construction of additional motorsports
facilities should we implement this element of our growth strategy, there can be
no assurance that adequate debt or equity financing will be available on
satisfactory terms.
Government Regulation May Adversely Affect the Availability of Sponsorships and
Advertising.
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 negatively impact the availability
to the motorsports industry 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 our events. In the past few years there have been several
unsuccessful governmental attempts to impose restrictions on the advertising and
promotion of cigarettes and smokeless tobacco, including sponsorship of
motorsports activities. If successfully implemented, these regulatory efforts
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 or us
is unclear. Major United States companies in the tobacco industry have 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 us has not yet been determined. We
are 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 less than 2% of our pro forma fiscal 1998 revenues. 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 and Busch Grand National Series.
Legal Proceedings
We are parties to certain legal proceedings as described in "Part II - Other
Information". We are 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.
Certain of Our Senior Executives May Have Potential Conflicts of Interest.
William C. France and James C. France own NASCAR, and each of them, as well as
our General Counsel, spend part of their time on NASCAR's business. Similarly,
Gregory W. Penske, our new Senior Vice President - Western Operations, will not
devote all his time to our affairs. Each of these individuals spends
substantial time on our business and all of our other executive officers are
available to us on a substantially full-time basis. In addition, we strive to
ensure, and our management believes, that the terms of our transactions with
NASCAR are no less favorable to us than those which could be obtained in arms-
length negotiations. Nevertheless, certain potential conflicts of interest
between us and NASCAR exist with respect to, among other things:
the terms of any sanctioning agreements that may be awarded to us by
NASCAR;
the amount of time devoted by the employees mentioned above and
certain other of our employees to NASCAR's affairs; and
the amounts charged or paid to NASCAR for office rental,
transportation costs, shared executives, administrative expenses and
similar items.
We Operate in a Highly Competitive Environment.
As an entertainment company, our racing events face competition from other
spectator-oriented sporting events and other leisure, entertainment and
recreational activities, including professional football, basketball and
baseball. As a result, our revenues will be affected by the general popularity
of motorsports, the availability of alternative forms of recreation and changing
consumer preferences. 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 ours.
Impact of Consumer Spending on Results
The success of our 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 our 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 our growth, revenue
and profitability.
Bad Weather Could Adversely Affect Us.
We promote outdoor motorsports events. Weather conditions affect sales of,
among other things, tickets, food, drinks and souvenirs at these events. Poor
weather conditions could have a material negative effect on us.
We May Be Held Liable for Personal Injuries.
Motorsports can be dangerous to participants and to spectators. We maintain
insurance policies that provide coverage within limits that we believe should
generally be sufficient to protect us from a large financial loss due to
liability for personal injuries sustained by persons on our property in the
ordinary course of our business. There can be no assurance, however, that the
insurance will be adequate or available at all times and in all circumstances.
Our financial condition and results of operations could be negatively affected
to the extent claims and expenses in connection with these injuries are greater
than the amount of money that can be recovered from insurance.
We Are Subject to Environmental and Land Use Laws.
We believe that our 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 our business or by
pollutants, substances, contaminants or wastes used, generated or disposed of by
us, we 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 we are self-insured could be material.
State and local laws relating to the protection of the environment can also
include noise abatement laws that may be applicable to our 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 us.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company's interest income and expense are most sensitive to changes in the
general level of U.S. interest rates. In this regard, changes in U. S. interest
rates affect the interest earned on the Company's cash equivalents, short term
investments and restricted investments, as well as interest paid on its debt.
The objective of the Company's asset management activities is to provide an
adequate level of interest income and liquidity to fund operations and capital
expansion, while minimizing market risk. The Company utilizes short term
investments consisting of certificates of deposit and obligations of U.S.
Government agencies and municipal securities to minimize the interest rate risk.
The Company does not believe that its interest rate risk related to its cash
equivalents and short term investments is material due to the short term nature
of the investments.
Additionally, the Company maintains significant certificates of deposit with one
financial institution. The Company believes that it is not exposed to any
significant credit risk on its certificates of deposit due to the strength of
the financial institution and the short term nature of the certificates of
deposit.
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 in connection with the financing of the
construction of the speedway in Kansas. 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. The TIF bonds
are comprised of a $21.6 million, fixed rate (6.15%) term bond due December 1,
2017 and a $49.7 million fixed rate (6.75%) term bond due December 1, 2027. The
proceeds from the TIF bonds, along with the Company's equity commitment to the
Kansas City track were deposited in a trust account and are classified as
restricted investments on the Company's balance sheet. The trust account has
invested the funds in a guaranteed investment contract earning an interest rate
of approximately 4.75%.
The Company is exposed to market risks related to fluctuations in interest rates
on its variable rate debt, which consists of borrowings of $210.5 million at
August 31, 1999 under the Company's $300.0 million and $20.0 million Credit
Facilities and term debt. The Company utilizes an interest swap agreement
covering the $20.0 million Credit Facility and the $30.0 million term loan to
fix the interest rate through the remainder of the agreement.
Generally, fixed rate debt changes in interest rates affect the fair market
value, but not earnings or cash flows. Conversely, for variable rate debt,
changes in interest rates generally do not influence fair market value, but do
affect future earnings and cash flows. The Company manages its interest
exposure by using a combination of fixed and variable rate debt. The Company
does not expect changes in interest rates to have a material effect on the
Company's results of operations or cash flows, although there can be no
assurances that interest rates will not significantly change.
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 we dispute the allegations, neither the cost of
defending the suits nor the potential damages or other remedies for which we
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
Corporation, previously a subsidiary of Pe nske Motorsports, Inc. which was
acquired by the Company in the Penske Mergers). 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.
The financial statements for the 1999 third quarter include an accrual of
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 Penske Motorsports' 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 Penske Motorsports, Penske Acquisition, Inc. and North
Carolina Speedway in North Carolina Superior Court, Mecklenburg County, North
Carolina. Under Penske Motorsports' 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 Penske Motorsports paid
in connection with the acquisition of North Carolina Speedway, all stockholders
of North Carolina Speedway at the time of the acquisition, other than Penske
Motorsports 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 Penske Motorsports 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. A negative decision with respect to the
dissenters' proceeding could materially increase the purchase price paid for
North Carolina Speedway by Penske Motorsports, which we would have to pay.
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 a special meeting of stockholders on July 26, 1999 the shareholders approved:
1. The issuance of up to 7,755,000 shares of International Speedway
Class A common stock in the merger of Penske Motorsports with and
into 88 Corp., a wholly owned subsidiary of International Speedway.
The number of votes cast for this proposal were 26,940,700.
The number of votes cast against this proposal were 132,614.
The number of votes which abstained on this proposal were 34,141.
2. The issuance of up to 5,260,000 shares of International Speedway
Class A common stock in the merger of PSH Corp., the owner of
approximately 56% of Penske Motorsports, with and into International
Speedway.
The number of votes cast for this proposal were 26,946,767.
The number of votes cast against this proposal were 127,153.
The number of votes which abstained on this proposal were 33,535.
3. An amendment to the International Speedway Amended and Restated
Articles of Incorporation to permit the International Speedway Board
to determine from time to time the number of directors who will
serve on the board.
The number of votes cast for this proposal were 26,850,291.
The number of votes cast against this proposal were 195,981.
The number of votes which abstained on this proposal were 64,933.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description of Exhibit Filing Status
1. (4)(v) $300,000,000 Credit Agreement (as amended) filed herewith
2. (4)(v) Indenture - $225,000,000 Senior Notes filed herewith
3. (27) Article 5 Fin. Data Schedule for 3rd Qtr 10-Q filed herewith
(b) Reports on Form 8-K
On June 2, 1999 the Company filed a report on Form 8-K which reported
under Item 5. that the Company had received notification of early termination of
the Hart-Scott-Rodino Act waiting period in connection with the Penske Mergers
effective June 1, 1999.
On July 1, 1999 the Company filed a report on Form 8-K which reported
under Item 5. the Company's announcement of a definitive commitment to finance
the merger with Penske Motorsports, Inc., through a $300 million fully-
underwritten five-year revolving credit facility.
On July 6, 1999 the Company filed a report on Form 8-K which reported
under Item 5. the issuance of an earnings release for the second quarter and six
months ended May 31, 1999.
On July 26, 1999 the Company filed a report on Form 8-K which reported
under Item 2. the closing of the Penske Mergers and the acquisition of the
Penske Motorsports assets. This 8-K included the following financial
statements:
Audited Year End Financial Statements of PMI (acquired business):
Consolidated Balance Sheets
December 31, 1998 and 1999
Consolidated Statements of Income
Years ended December 31, 1996, 1997 and 1998
Consolidated Statements of Shareholders' Equity
Years ended December 31, 1996, 1997 and 1998
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1997 and 1998
Notes to Consolidated Financial Statements
Interim Financial Statements of PMI (acquired business):
Consolidated Balance Sheets
December 31, 1998 and March 31, 1999
Consolidated Statements of Income
Three months ended March 31, 1998 and 1999
Consolidated Statements of Cash Flows
Three months ended March 31, 1998 and 1999
Notes to Consolidated Financial Statements
Unaudited Pro Forma Condensed Consolidated Financial Statements
Unaudited Pro Forma Condensed Consolidated Balance Sheet
February 28, 1999
Unaudited Pro Forma Condensed Consolidated Statements of Income
Three months ended February 28, 1999
Year ended November 30, 1998
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
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 October 15, 1999 /s/ Susan G. Schandel
_____________________________________
Susan G. Schandel, Vice President &
Chief Financial Officer