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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
July 26, 1999
International Speedway Corporation
(Exact name of Registrant as specified in its charter)
Florida 0-2384 59-0709342
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
1801 W. International Speedway Blvd.
Daytona Beach, Florida 32114
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (904) 254-2700
(Former name or address, if changed since last report): No Change
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Item 2. Acquisition or Disposition of Assets.
On July 26, 1999, pursuant to an Agreement and Plan of Merger, dated as
of May 10, 1999, as amended by Amendment No. 1 thereto dated as of June 21, 1999
(the "Merger Agreement"), among International Speedway Corporation, a Florida
corporation (the "Registrant"), 88 Corp., a Delaware corporation and wholly
owned subsidiary of the Registrant ("88 Corp."), and Penske Motorsports, Inc., a
Delaware corporation ("Penske Motorsports"), Penske Motosports merged with and
into 88 Corp. (the "Merger"). 88 Corp. was the surviving corporation in the
Merger. In the Merger, each outstanding share of common stock, par value $0.01
per share, of Penske Motorsports, other than shares held in Penske Motorsports'
treasury or owned by the Registrant or any wholly owned subsidiary of the
Registrant or of Penske Motorsports, was converted into the right to receive, at
the election of each former Penske Motorsports stockholder, either $15.00 in
cash and 0.729 shares of the Registrant's class A common stock, or 1.042 shares
of the Registrant's class A common stock.
On July 26, 1999, pursuant to an Agreement and Plan of Merger, dated as
of May 10, 1999 (the "PSH Merger Agreement"), among the Registrant, Penske
Performance, Inc., a Delaware corporation ("Performance"), Penske Corporation, a
Delaware corporation and sole stockholder of Performance, and PSH Corp., a
Delaware corporation ("PSH"), PSH merged with and into the Registrant (the "PSH
Merger"). The Registrant was the surviving corporation in the PSH Merger. In the
PSH Merger, each outstanding share of common stock, par value $0.01 per share,
of PSH, other than shares held in the Registrant's treasury or owned by PSH or
any wholly owned subsidiary of the Registrant or PSH, was converted into the
right to receive $116,156.95 in cash and 5,648.413 shares of the Registrant's
class A common stock.
As a consequence of the Merger and the PSH Merger, Penske Motorsports
is now a wholly owned subsidiary of the Registrant.
The source of funds for the cash portion of the consideration paid to
stockholders of Penske Motorsports is comprised of a combination of the
Registrant's existing cash and available borrowings under the Registrant's five
year, $300 million revolving credit facility.
The foregoing descriptions of the Merger and the PSH Merger do not
purport to be complete and are qualified by reference to the Merger Agreement
and the PSH Merger Agreement incorporated herein by reference to Annex A and B,
respectively, to the Joint Proxy Statement/Prospectus included in the
Registrant's Registration Statement on Form S-4 (File No. 333-81165).
A copy of the press release, dated July 26, 1999, issued by the
Registrant relating to the above described transactions is attached as an
exhibit to this report and is incorporated
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herein by reference.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of Business Acquired
The audited consolidated balance sheet of Penske Motorsports as of
December 31, 1998 and the related consolidated statements of income and cash
flows for the fiscal year ended December 31, 1998 and the related notes to the
financial statements are hereby incorporated by reference to the Annual Report
of Penske Motorsports on Form 10-K for the year ended December 31, 1998.
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PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
1998 1997
---- ----
(IN THOUSANDS)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 1,311 $ 249
Receivables............................................... 4,398 4,787
Inventories............................................... 3,085 2,433
Prepaid expenses.......................................... 1,246 1,769
Deferred taxes............................................ 368 313
-------- --------
TOTAL CURRENT ASSETS................................... 10,408 9,551
PROPERTY AND EQUIPMENT, NET................................. 247,421 224,666
INVESTMENTS................................................. 12,679 15,366
GOODWILL, NET............................................... 39,497 40,112
OTHER ASSETS................................................ 529 2,077
-------- --------
TOTAL....................................................... $310,534 $291,772
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt......................... $ 512 $ 1,017
Accounts payable.......................................... 3,915 3,868
Accrued expenses.......................................... 2,933 2,343
Other payables (Note 3)................................... 9,956
Deferred revenues, net.................................... 19,204 22,529
-------- --------
TOTAL CURRENT LIABILITIES.............................. 26,564 39,713
LONG-TERM DEBT, LESS CURRENT PORTION........................ 61,442 47,278
DEFERRED TAXES.............................................. 22,413 13,349
DEFERRED REVENUES........................................... 369 738
COMMITMENTS AND CONTINGENCIES (NOTE 12)
STOCKHOLDERS' EQUITY:
Common stock, par value $ .01 share:
Authorized 50,000,000 shares
Issued and outstanding 14,208,898 shares in 1998 and
1997.................................................. 142 142
Additional paid-in-capital................................ 159,371 159,371
Retained earnings......................................... 47,768 31,181
-------- --------
207,281 190,694
Treasury stock, at cost, 353,900 shares (Note 11)......... (7,535)
-------- --------
TOTAL STOCKHOLDERS' EQUITY............................. 199,746 190,694
-------- --------
TOTAL....................................................... $310,534 $291,772
======== ========
See Notes to Consolidated Financial Statements.
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PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996
---- ---- ----
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
REVENUES:
Speedway admissions.................................... $ 51,335 $ 45,550 $20,248
Other speedway revenues................................ 41,811 33,926 13,041
Merchandise, tires and accessories..................... 23,712 30,340 21,886
-------- -------- -------
TOTAL REVENUES......................................... 116,858 109,816 55,175
EXPENSES:
Operating expenses..................................... 46,151 40,399 18,067
Cost of sales.......................................... 13,972 16,954 12,834
Depreciation and amortization.......................... 11,189 7,212 3,167
Selling, general and administrative.................... 14,465 16,379 6,185
-------- -------- -------
TOTAL EXPENSES......................................... 85,777 80,944 40,253
OPERATING INCOME............................................ 31,081 28,872 14,922
EQUITY IN LOSS OF AFFILIATES................................ (1,382) (860)
GAIN ON SALE OF INVESTMENT.................................. 1,108
INTEREST INCOME (EXPENSE), NET.............................. (3,523) (1,558) 1,950
-------- -------- -------
INCOME BEFORE INCOME TAXES.................................. 27,284 26,454 16,872
INCOME TAXES................................................ 10,697 10,009 5,992
-------- -------- -------
NET INCOME.................................................. $ 16,587 $ 16,445 $10,880
======== ======== =======
BASIC NET INCOME PER SHARE.................................. $ 1.17 $ 1.19
======== ========
PRO FORMA BASIC NET INCOME PER SHARE........................ $ .90
=======
DILUTED NET INCOME PER SHARE................................ $ 1.17 $ 1.19
======== ========
PRO FORMA DILUTED NET INCOME PER SHARE...................... $ .90
=======
See Notes to Consolidated Financial Statements.
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PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
ADDITIONAL RETAINED TREASURY
COMMON STOCK PAID-IN CAPITAL EARNINGS STOCK TOTAL
------------ --------------- -------- -------- -----
(IN THOUSANDS)
BALANCE, JANUARY 1, 1996.............. $ 93 $ 37,446 $ 8,273 $ 45,812
Net income.......................... 10,880 10,880
Sale of common stock................ 37 82,703 82,740
Competition Tire West, Inc.
transaction (Note 4)............. (28) (4,417) (4,445)
Acquisition of minority interest
(Note 4)......................... 2,063 2,063
Stock issuance (Note 5)............. 2 8,350 8,352
---- -------- ------- ------- --------
BALANCE, DECEMBER 31, 1996............ 132 130,534 14,736 145,402
Net income.......................... 16,445 16,445
North Carolina Speedway, Inc.
acquisition (Note 3)............. 10 28,837 28,847
---- -------- ------- ------- --------
BALANCE, DECEMBER 31, 1997............ 142 159,371 31,181 190,694
Net income.......................... 16,587 16,587
Purchase of common stock (Note
11).............................. $(7,535) (7,535)
---- -------- ------- ------- --------
BALANCE, DECEMBER 31, 1998............ $142 $159,371 $47,768 $(7,535) $199,746
==== ======== ======= ======= ========
See Notes to Consolidated Financial Statements.
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PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996
---- ---- ----
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................. $ 16,587 $ 16,445 $ 10,880
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization....................... 11,189 7,212 3,167
Equity in loss of affiliates........................ 1,382 860
Gain on sale of investment.......................... (1,108)
Deferred taxes...................................... 9,009 3,750 (146)
Changes in assets and liabilities which provided
(used) cash:
Receivables......................................... 389 (2,110) (431)
Inventories, prepaid expenses and other assets...... 1,412 (821) (2,784)
Accounts payable and accrued liabilities............ 637 (5,082) 2,668
Deferred revenues................................... (3,694) 5,952 5,259
-------- -------- --------
Net cash provided by operating activities...... 35,803 26,206 18,613
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions of property and equipment.................... (32,893) (73,349) (73,812)
Proceeds from sale of investment (Note 3).............. 5,270
Acquisition of Competition Tire South, Inc. (Note 4)... (758)
Competition Tire West, Inc. transaction (Note 4)....... (3,326)
Acquisitions of equity interest in subsidiaries and
affiliates.......................................... (10,392) (19,050) (622)
-------- -------- --------
Net cash used in investing activities.......... (38,015) (92,399) (78,518)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock..................... 82,740
Purchase of common stock (Note 11)..................... (7,535)
Proceeds from issuance of debt......................... 11,900 45,400 14,016
Principal payments on long-term debt................... (433) (5,000) (12,540)
Repayment of related party debt........................ (658) (1,820) (1,254)
-------- -------- --------
Net cash provided by financing activities...... 3,274 38,580 82,962
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..... 1,062 (27,613) 23,057
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR........... 249 27,862 4,805
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR................. $ 1,311 $ 249 $ 27,862
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for interest................. $ 4,088 $ 1,834 $ 133
======== ======== ========
Cash paid during the year for taxes, net............... $ 380 $ 8,089 $ 9,279
======== ======== ========
See Notes to Consolidated Financial Statements.
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PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
The consolidated financial statements include the accounts of Penske
Motorsports, Inc. (the "Company") and its wholly-owned subsidiaries Michigan
International Speedway, Inc., Pennsylvania International Raceway, Inc. ("PIR"),
California Speedway Corporation, North Carolina Speedway, Inc. ("NCS"),
Motorsports International Corp., Competition Tire West, Inc. ("CTW") and
Competition Tire South, Inc. ("CTS"). The Company also owns 45% of
Homestead-Miami Speedway, LLC ("HMS"), which is recorded using the equity
method. The Company is an indirect subsidiary of Penske Corporation (the
"Parent"). All material intercompany balances and transactions have been
eliminated.
Nature of Operations -- The Company generates a predominant portion of its
earnings from operating Michigan Speedway in Brooklyn, Michigan, Nazareth
Speedway in Nazareth, Pennsylvania (operated by PIR), California Speedway in
Fontana, California, and North Carolina Speedway in Rockingham, North Carolina.
HMS operates Miami-Dade Homestead Motorsports Complex in Homestead, Florida. The
Company also sells motorsports-related merchandise and apparel and racing tires
and accessories.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents -- The Company considers all short-term
investments with a maturity of three months or less, at purchase, as cash
equivalents.
Inventories -- Inventories are stated at the lower of cost or market, with
cost determined by the first in, first out method.
Property and Equipment and Goodwill -- Property and equipment is carried at
cost less accumulated depreciation. Depreciation is calculated using the
straight-line method over the estimated useful lives of the respective assets as
follows:
YEARS
-----
Buildings and improvements.................................. 10 - 40
Equipment................................................... 2 - 15
Goodwill represents the excess of the purchase price over the fair value of
net assets acquired and is being amortized primarily over a period of 40 years.
Accumulated amortization was $1,921,000 and $872,000 at December 31, 1998 and
1997, respectively.
The carrying values of property and equipment and goodwill are evaluated
for impairment based upon expected future undiscounted cash flows. If events or
circumstances indicate that the carrying value of an asset may not be
recoverable, an impairment loss would be recognized equal to the difference
between the carrying value of the asset and its fair value.
Revenue Recognition -- Race-related revenues and expenses are recognized
upon completion of an event. Deferred revenues represent advance race-related
revenues, net of expenses, on future races. Revenues from the sale of
merchandise, tires and accessories are recognized at the time of sale. Operating
expenses include race-related expenses and other operating costs. Cost of sales
relates entirely to merchandise, tires and accessories sales.
Income Taxes -- Deferred taxes reflect the impact of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets
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PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
and liabilities and disclosures of contingent liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results will likely differ from those which are
estimated, however, such differences are not expected to be material.
3. ACQUISITIONS AND INVESTMENTS
North Carolina Speedway Acquisition -- During 1997, the Company acquired
the outstanding shares of NCS, which owns and operates North Carolina Speedway
in Rockingham, North Carolina. On May 19, 1997, the Company purchased the shares
of NCS held by its former majority shareholder in exchange for 906,542 shares of
the Company's stock. On December 2, 1997, the shareholders of NCS approved a
merger with the Company, whereby shareholders of NCS would receive cash of
$19.61 per share or an equivalent amount of the Company's stock. In connection
with the merger, 60,558 shares of the Company's stock were issued. The merger
was completed December 2, 1997.
Certain NCS shareholders dissented to the merger of the Company and NCS.
These shareholders were paid $16.77 per share, the median fair value of NCS
shares as determined by an independent investment banking firm retained by NCS
to evaluate the Company's merger offer. These dissenters have requested
additional compensation and, if they are successful in court, the cost of the
NCS acquisition may increase (see Note 12).
The acquisition, which approximated $42.0 million, was accounted for using
the purchase method and resulted in goodwill of $34.2 million and an increase in
stockholders' equity of $28.8 million. The fair market value of the assets
acquired and liabilities assumed was as follows: current assets of $507,000,
fixed assets of $17.6 million, current liabilities of $5.1 million and debt of
$4.2 million. As of December 31, 1997, the Company recorded a liability of $10.0
million to recognize amounts due to the former NCS shareholders. NCS has been
included in the consolidated financial statements since the date of acquisition
of the controlling interest. The pro forma effect of the acquisition for the
years ended December 31, 1997 and 1996, assuming the transactions occurred at
the beginning of each year, would be to increase revenues by $4.8 million and
$9.6 million, respectively, with no material impact on net income or net income
per share.
Investments -- In July 1997, the Company acquired 40% of the ownership
interests of HMS for $11.8 million. In March 1998, the Company acquired an
additional 5% of the ownership interests of HMS for $2.85 million, payable on
December 31, 2001. This investment is accounted for using the equity method. The
Company has joint right of first refusal agreements with the other investors in
HMS for each to acquire additional shares of HMS proportionate to their current
ownership interest should a sale occur.
During 1998, the Company sold its investment in the common stock of Grand
Prix Association of Long Beach, Inc. for $5.3 million. This investment was
acquired in a series of transactions in 1997 for $4.2 million.
4. INITIAL PUBLIC OFFERING AND RELATED ACQUISITIONS
Initial Public Offering -- On March 27, 1996, the Company completed its
initial public offering ("IPO") of 3,737,500 shares of common stock. The initial
offering price was $24.00 per share. The net proceeds to the Company of $82.7
million were used to repay outstanding debt of $10.6 million and to fund
construction of California Speedway.
Acquisition of Minority Interest in PIR -- Immediately prior to the
effective date of the IPO, an investor in PIR exchanged 2,557 shares of PIR for
92,500 shares of common stock of the Company. This transaction resulted in
goodwill of approximately $2.0 million and reduced the minority interest in PIR
by $1.2 million.
Acquisition of Minority Interest in CTW and Capital Distribution -- On
March 21, 1996, the Company acquired CTW for $7.4 million, of which $4.3 million
was paid to the two selling shareholders in cash with the balance of $3.1
million payable over five years with interest at 8% per annum. The acquisition
of the shares of
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PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
the former 40% CTW shareholder was accounted for as an acquisition of a minority
interest and resulted in recording goodwill of approximately $1.9 million. The
former controlling shareholder of CTW (60%) is also the controlling shareholder
of the Company. Therefore, the excess of the amount paid for such shares over
the net book value of assets acquired (approximately $2.9 million) was recorded
as a capital distribution. The note payable to the former controlling
shareholder of CTW, which had a balance of $1.8 million, was repaid in April
1997.
Acquisition of CTS Common Stock -- On March 21, 1996, the Company acquired
the common shares of CTS not owned by CTW (approximately 67%) for cash and notes
totaling approximately $2.2 million. The notes had an original balance of
$830,000 and a term of five years with interest at 8%. This acquisition was
accounted for using the purchase method and resulted in recording $1.7 million
of goodwill. CTS has been included in the consolidated financial statements from
the date acquired.
5. PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of December 31:
1998 1997
---- ----
(IN THOUSANDS)
Land and improvements.................................... $ 96,635 $ 95,758
Buildings and improvements............................... 158,644 129,031
Equipment................................................ 23,677 21,846
-------- --------
278,956 246,635
Less accumulated depreciation............................ 31,535 21,969
-------- --------
$247,421 $224,666
======== ========
In December 1996, the Company acquired 54 acres of commercial property
located adjacent to California Speedway from a noncontrolling shareholder of the
Company for $13.4 million, which the Company paid in cash of $5 million and by
the issuance of 254,298 shares of the Company's common stock. The issuance of
stock was recorded as an $8.4 million increase in stockholders' equity.
6. LONG-TERM DEBT
Long-term debt consists of the following as of December 31:
1998 1997
---- ----
(IN THOUSANDS)
$100 million unsecured revolving line of credit, bearing
interest at LIBOR plus 0.5% (6.29%) due in 2002.......... $57,300 $45,400
Notes payable through 2006, bearing interest at fixed rates
ranging from 7.5% to 8.0%................................ 4,654 2,895
------- -------
61,954 48,295
Less current portion....................................... 512 1,017
------- -------
$61,442 $47,278
======= =======
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PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The following table presents the expected repayment of long-term debt as of
December 31, 1998 (in thousands):
1999........................................................ $ 512
2000........................................................ 520
2001........................................................ 2,892
2002........................................................ 57,426
2003........................................................ 137
2004 and thereafter......................................... 467
-------
$61,954
=======
Long-term debt at December 31, 1998 and 1997 includes $.7 million and $1.3
million, respectively, which are due to related parties as a result of the
purchase of CTW and CTS in March 1996 and $1.1 million and $1.2 million,
respectively, which are secured by certain parcels of land.
At December 31, 1998 and 1997 the carrying value of the debt approximated
fair value.
7. EMPLOYEE BENEFIT PLANS
The Company participates in a non-contributory profit-sharing plan which
covers employees who meet certain length of service requirements. Contributions
of approximately $235,000, $185,000 and $100,000 were made to the plan in 1998,
1997 and 1996, respectively.
The Company also sponsors a defined contribution plan under Section 401(k)
of the Internal Revenue Code. The Company's expense related to this plan was
$209,000, $150,000 and $80,000 in 1998, 1997 and 1996, respectively.
8. TAXES
The provision for income taxes consists of the following for the years
ended December 31:
1998 1997 1996
---- ---- ----
(IN THOUSANDS)
Current............................................. $ 1,878 $ 6,259 $5,753
Deferred............................................ 8,819 3,750 239
------- ------- ------
Total............................................... $10,697 $10,009 $5,992
======= ======= ======
A reconciliation of taxes computed at the federal statutory rate and the
consolidated effective rate is as follows for the years ended December 31:
1998 1997 1996
---- ---- ----
(IN THOUSANDS)
Income before income taxes......................... $27,284 $26,454 $16,872
------- ------- -------
Taxes computed at statutory rate................... $ 9,549 $ 9,259 $ 5,905
State and local taxes, net of federal benefit...... 684 616 37
Amortization of goodwill........................... 368 190 60
Other.............................................. 96 (56) (10)
------- ------- -------
Total income tax expense........................... $10,697 $10,009 $ 5,992
======= ======= =======
Effective tax rate................................. 39.2% 37.8% 35.5%
======= ======= =======
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PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Temporary differences which give rise to deferred tax (assets) and
liabilities are as follows as of December 31:
1998 1997
---- ----
(IN THOUSANDS)
Property, non-current...................................... $22,413 $13,349
Other, current............................................. (368) (313)
------- -------
Total...................................................... $22,045 $13,036
======= =======
9. RELATED PARTY TRANSACTIONS
The following is a summary of significant related party balances and
transactions as of and for the years ended December 31:
1998 1997 1996
---- ---- ----
(IN THOUSANDS)
Balances included in assets and liabilities:
Accounts receivable -- affiliates......................... $ 681 $ 388 $ 339
====== ====== ======
Accounts payable -- affiliates............................ $ 879 $1,038 $1,702
====== ====== ======
Accrued expenses payable to affiliates.................... $ 376 $ 424 $ 405
====== ====== ======
Other transactions:
Sales to affiliates....................................... $3,434 $3,149 $2,005
====== ====== ======
Purchases from affiliates................................. $ 623 $1,078 $ 587
====== ====== ======
In addition, the Parent bills the Company for services rendered and
expenses incurred by the Parent for the benefit of the Company. During the years
ended December 31, 1998, 1997 and 1996, the Company paid the Parent $570,000,
$511,000 and $478,000, respectively, for general and operating expenses. Prior
to the IPO, the Company was charged for its allocated share of income taxes on
the basis of the Company as a separate tax group. The Company paid the Parent
$1.5 million for its portion of taxes relating to the period in 1996 prior to
the IPO.
The Company has a five-year agreement with a shareholder of the Company to
provide sanitary wastewater treatment services to California Speedway, for which
the Company paid $92,000 during the years ended December 31, 1998 and 1997 and
$89,000 during the year ended December 31, 1996. The agreement, which is
adjusted annually by increases in the Consumer Price Index, also grants an
option to the Company to purchase such shareholder's wastewater treatment
facility.
The Company pays fees to the sanctioning bodies which conduct racing events
at its speedways, including the National Association for Stock Car Auto Racing,
Inc. ("NASCAR"). NASCAR is an affiliate of a significant shareholder. The
Company, through its subsidiaries, paid NASCAR sanction fees, prize money and
point funds of $13.6 million, $9.9 million and $3.8 million for the years ended
December 31, 1998, 1997 and 1996, respectively.
10. SEGMENT REPORTING
Effective December 31, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, Disclosures about Segments of an Enterprise and
Related Information. This statement establishes standards for the way in which
public business enterprises report information about operating segments in
annual financial statements.
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PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The Company's reportable segments are business units that offer different
products and services. The Company classifies its business interests into two
fundamental areas: admissions and other track-related activities, which consists
principally of race-related revenues and expenses from promoting motorsports
events, and merchandise, tires and accessories ("MTA"), consisting principally
of the revenues and expenses from the sale of race-related apparel, tires and
accessories items.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies.
Revenues relating to the Company's track operations totaled $93.1 million,
$79.5 million and $33.3 million in 1998, 1997 and 1996, respectively, with
expenses (operating, depreciation and amortization, and selling, general and
administrative) of approximately $64.6 million, $54.0 million and $20.4 million,
respectively, for the same periods.
Revenues relating to the Company's MTA business totaled $23.7 million,
$30.3 million and $21.9 million in 1998, 1997 and 1996, respectively. The MTA
business segment had cost of sales of $14.0 million, $17.0 million and $12.8
million, respectively, and operating, depreciation and amortization, and
selling, general and administrative expenses of approximately $7.2 million,
$10.0 million and $7.0 million, respectively, in 1998, 1997 and 1996 relating to
such operations.
Substantially all of the Company's capital expenditures, property, plant
and equipment, equity investments and goodwill, as well as depreciation and
amortization expenses, are related to track operations. Substantially all of the
Company's inventory is related to its MTA businesses.
11. COMMON STOCK AND STOCK OPTIONS
Prior to the completion of the IPO in March 1996, the Company effected a
recapitalization pursuant to which the Company (i) increased its authorized
shares of common stock to 50,000,000 shares, (ii) effected a 91.575-to-one share
split, and (iii) converted 15,000 shares of outstanding preferred stock to
1,373,625 shares of common stock.
The basic net income per share for the years ended December 31, 1998 and
1997 reflects the weighted average number of shares outstanding of 14,117,993
and 13,810,570. The pro forma basic net income per share for the year ended
December 31, 1996 reflects the weighted average number of post-split shares
outstanding of 12,128,920, including the dilutive effect of the number of shares
issued equivalent to the $2.9 million capital distribution of 121,667 shares,
based on the offering price of $24.00 per share, from the March 1996 acquisition
of CTW.
The diluted net income per share for the years ended December 31, 1998 and
1997 and the pro forma diluted net income per share for the year ended December
31,1996 reflect the weighted average number of shares outstanding plus the
dilutive effect of outstanding stock options of 16,048, 19,534 and 12,621,
respectively. The dilutive effect was calculated using the treasury stock
method.
In September 1998, the Company announced plans to repurchase, from time to
time, up to $10 million of the Company's common stock in open market
transactions, depending on market conditions. As of December 31, 1998, the
Company had repurchased 353,900 shares at prices ranging from $19.875 to $23.25
per share.
In March 1996, the stockholders of the Company approved a stock incentive
plan whereby key employees and certain outside consultants and advisors of the
Company and its subsidiaries may receive awards of stock options, stock
appreciation rights or restricted stock up to a maximum of 400,000 shares of
common stock. In May 1998, the stockholders of the Company approved an increase
in the number of shares authorized
13
14
PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
pursuant to this plan to 720,000. The following table summarizes stock option
activity during the years ended December 31, 1998, 1997 and 1996.
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------
1998 1997 1996
--------------------- --------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- -------- --------- -------- --------- --------
Options, Beginning of Year......... 155,000 $26.06 75,000 $24.00
Granted............................ 165,000 26.38 115,000 27.75 75,000 $24.00
Forfeited.......................... (35,000) 27.75
------- ------ ------- ------ ------ ------
Options, End of Year............... 320,000 $26.22 155,000 $26.06 75,000 $24.00
======= ====== ======= ====== ====== ======
Options Exercisable at End of
Year............................. 76,534 $25.70 34,100 $25.26 7,500 $24.00
======= ====== ======= ====== ====== ======
Weighted Average Fair Value of
Options Granted During the
Year............................. $ 9.27 $10.91 $ 9.90
====== ====== ======
The 320,000 stock options outstanding as of December 31, 1998 had exercise
prices ranging from $24.00 to $27.75 per share and a weighted average remaining
contractual life of 7.9 years.
The Company applies APB Opinion 25 and related Interpretations in
accounting for stock options. Accordingly, no compensation cost has been
recognized in the consolidated statements of income. If the Company had
recognized compensation cost, the Company would have reported net income of
$16.2 million, $16.2 million and $10.8 million and basic net income per share of
$1.15, $1.17 and $.89 for the years ended December 31, 1998, 1997 and 1996,
respectively. The Black-Sholes valuation model was used, assuming an average
life of the options of five years, a discount rate of 4.53%, 5.53% and 6.15% in
1998, 1997 and 1996, respectively, no dividend payout and a volatility of 30% in
1998 and 35% in 1997 and 1996.
12. COMMITMENTS AND CONTINGENCIES
The Company is party to certain claims and contingencies arising in the
normal course of business. In the opinion of management, the Company has
meritorious defenses on all such claims, or they are of such kind, or involve
such amounts, as would not have a materially adverse effect on the financial
position or results of operations of the Company if disposed of unfavorably.
13. SELECTED QUARTERLY DATA (UNAUDITED)
The following table presents the Company's quarterly results for the most
recent eight quarters (in thousands, except per share amounts).
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
----------------- ----------------- ----------------- -----------------
1998 1997 1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ---- ---- ----
Revenues................ $10,137 $ 5,375 $46,087 $46,296 $35,218 $43,974 $25,416 $14,171
Operating income
(loss)................ (3,442) (2,606) 19,606 17,965 7,749 15,295 7,168 (1,782)
Net income (loss)....... (1,648) (1,511) 10,892 10,929 3,510 8,845 3,833 (1,818)
Basic Net income (loss)
per share............. $ (.12) $ (.11) $ .77 $ .80 $ .25 $ .63 $ .28 $ (.13)
14
15
PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
REPORT OF MANAGEMENT
The consolidated financial statements of Penske Motorsports, Inc. and
subsidiaries (the "Company") have been prepared by management and have been
audited by the Company's independent auditors, Deloitte & Touche LLP. Management
is responsible for the consolidated financial statements, which have been
prepared in conformity with generally accepted accounting principles and include
amounts based on management's judgments.
Management is also responsible for maintaining internal accounting control
systems designed to provide reasonable assurance, at appropriate cost, that
assets are recorded in accordance with established policies and procedures. The
Company's systems are under continuing review and are supported by, among other
things, business conduct and other written guidelines and the selection and
training of qualified personnel.
The Board of Directors is responsible for the Company's financial and
accounting policies, practices and reports. Its Audit Committee meets annually
with the independent auditors and representatives of management to discuss and
make inquiries into their activities. The independent auditors have free access
to the Audit Committee, with and without management representatives in
attendance, to discuss the results of the audit, the adequacy of internal
accounting controls, and the quality of the financial reporting.
It is management's conclusion that the system of internal accounting
controls at December 31, 1998 provides reasonable assurance that the books and
records reflect the transactions of the Company and that the Company has
complied with its established policies and procedures.
/s/ ROGER S. PENSKE
- ------------------------------------------
Roger S. Penske
Chairman
/s/ GREGORY W. PENSKE
- ------------------------------------------
Gregory W. Penske
President and Chief Executive Officer
February 1, 1999
15
16
INDEPENDENT AUDITORS' REPORT
Stockholders and Board of Directors
Penske Motorsports, Inc.
We have audited the accompanying consolidated balance sheets of Penske
Motorsports, Inc. and subsidiaries (the "Company") as of December 31, 1998 and
1997, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1998. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of December 31,
1998 and 1997, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
Detroit, Michigan
February 1, 1999
16
17
The unaudited interim balance sheet, statements of income and cash
flows of Penske Motorsports for the interim period ended March 31, 1999, are
hereby incorporated by reference to the Quarterly Report of Penske Motorsports
on Form 10-Q for the quarter ended March 31, 1999.
PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
MARCH 31, DECEMBER 31,
1999 1998
-------------------- --------------------
ASSETS (UNAUDITED)
------
CURRENT ASSETS:
Cash and cash equivalents $ 1,368 $ 1,311
Receivables 14,552 4,398
Inventories 3,217 3,085
Prepaid expenses and other assets 2,756 1,614
------------------- -------------------
TOTAL CURRENT ASSETS 21,893 10,408
PROPERTY AND EQUIPMENT, net 248,582 247,421
INVESTMENTS 13,021 12,679
GOODWILL, net 39,345 39,497
OTHER ASSETS 983 529
------------------- -------------------
TOTAL $ 323,824 $ 310,534
=================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt $ 514 $ 512
Accounts payable 3,695 3,915
Accrued expenses 1,566 2,933
Deferred revenues, net 47,544 19,573
------------------- -------------------
TOTAL CURRENT LIABILITIES 53,319 26,933
LONG-TERM DEBT, less current portion 49,916 61,442
DEFERRED TAXES 23,763 22,413
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY: Common stock, par value $ .01 share:
Authorized 50,000,000 shares
Issued and outstanding 14,208,898
shares in 1999 and 1998 142 142
Additional paid-in-capital 159,371 159,371
Retained earnings 44,848 47,768
------------------- -------------------
204,361 207,281
Treasury stock, at cost, 353,900 shares (7,535) (7,535)
------------------- -------------------
TOTAL STOCKHOLDERS' EQUITY 196,826 199,746
------------------- -------------------
TOTAL $ 323,824 $ 310,534
=================== ===================
See accompanying notes to consolidated financial statements.
17
18
PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
THREE MONTHS ENDED MARCH 31,
-------------------------------------------------
1999 1998
--------------------- --------------------
REVENUES:
Speedway admissions $ 3,243 $ 3,238
Other speedway revenues 4,754 2,953
Merchandise, tires and accessories 4,856 3,946
--------------------- --------------------
TOTAL REVENUES 12,853 10,137
EXPENSES:
Operating 7,749 6,190
Cost of sales 3,145 2,462
Depreciation and amortization 3,039 2,675
Selling, general and administrative 3,042 2,252
--------------------- --------------------
OPERATING EXPENSES 16,975 13,579
--------------------- --------------------
OPERATING LOSS (4,122) (3,442)
EQUITY IN INCOME OF AFFILIATES 356 512
GAIN ON SALE OF INVESTMENT 1,108
INTEREST EXPENSE (1,039) (859)
--------------------- --------------------
LOSS BEFORE INCOME TAXES (4,805) (2,681)
INCOME TAX BENEFIT 1,884 1,033
--------------------- --------------------
NET LOSS $ (2,921) $ (1,648)
BASIC NET LOSS PER SHARE $ (.21) $ (.12)
DILUTED NET LOSS PER SHARE $ (.21) $ (.12)
BASIC WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 13,854,998 14,208,898
DILUTED WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 13,909,117 14,216,214
See accompanying notes to consolidated financial statements
18
19
PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
---------------------------------------
1999 1998
----------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,921) $ (1,648)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 3,039 2,675
Equity in income of affiliates (356) (512)
Gain on sale of investment (1,108)
Changes in assets and liabilities which provided (used) cash:
Receivables (10,154) (8,746)
Inventories, prepaid expenses and other assets (1,826) (1,351)
Accounts payable and accrued liabilities (1,586) (7,609)
Deferred taxes 1,350 2,459
Deferred revenues 27,971 20,556
----------------- ----------------
Net cash provided by operating activities 15,517 4,716
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions of property and equipment, net (3,936) (8,567)
Acquisitions of equity interests in affiliates and subsidiaries (241)
Proceeds from sale of investment 5,270
----------------- ----------------
Net cash used in investing activities (3,936) (3,538)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt (11,524) (409)
----------------- ----------------
Net cash used in financing activities (11,524) (409)
----------------- ----------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 57 769
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,311 249
----------------- ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,368 $ 1,018
================= ================
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for interest $ 1,059 $ 932
Cash paid (refunded) during the period for taxes, net $ (751) $ (1,971)
See accompanying notes to consolidated financial statements
19
20
PENSKE MOTORSPORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - FINANCIAL STATEMENTS. The consolidated financial statements include the
accounts of Penske Motorsports, Inc. (the "Company") and its wholly-owned
subsidiaries, Michigan International Speedway, Inc., Pennsylvania International
Raceway, Inc., California Speedway Corporation, North Carolina Speedway, Inc.,
Motorsports International Corp., Competition Tire West, Inc. and Competition
Tire South, Inc. The Company also owns 45% of the ownership interests of
Homestead-Miami Speedway, LLC, which is recorded using the equity method.
All material intercompany balances and transactions have been eliminated.
The financial statements have been prepared by management and, in the opinion of
management, contain all adjustments, consisting of normal recurring adjustments,
necessary to present fairly the financial position of the Company as of March
31, 1999 and December 31, 1998, and the results of operations and cash flows of
the Company for the three months ended March 31, 1999 and 1998. The consolidated
financial statements should be read in conjunction with the consolidated
financial statements included in the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission.
Because of the seasonal concentration of racing events, the results of
operations for the three months ended March 31, 1999 and 1998 are not indicative
of the results to be expected for the year.
NOTE 2 - PROPERTY AND EQUIPMENT, NET. Property and equipment consists of the
following:
MARCH 31, DECEMBER 31,
1999 1998
-------------------- -------------------
(In thousands)
Land and land improvements $ 96,641 $ 96,635
Buildings and improvements 162,253 158,644
Equipment 23,845 23,677
-------------------- -------------------
282,739 278,956
Less accumulated depreciation 34,157 31,535
-------------------- -------------------
$ 248,582 $ 247,421
==================== ===================
NOTE 3 - SEGMENT INFORMATION. The Company's reportable segments are business
units that offer different products and services. The Company classifies its
business interests into two fundamental areas: admissions and other
track-related activities, which consists principally of race-related revenues
and expenses from promoting motorsports events, and merchandise, tires and
accessories ("MTA"), consisting principally of the revenues and expenses from
the sale of race-related apparel, tires and accessories items.
Revenues relating to the Company's track operations totaled $8.0 million and
$6.2 million for the three months ended March 31, 1999 and 1998, respectively,
with expenses (operating, depreciation and amortization, and selling, general
and administrative) of approximately $12.0 million and $9.7 million,
respectively, for the same periods.
20
21
Revenues for the first quarter relating to the Company's MTA business totaled
$4.9 million and $3.9 million in 1999 and 1998, respectively. The MTA business
segment had cost of sales of $3.1 million and $2.5 million, respectively, and
operating, depreciation and amortization, and selling, general and
administrative expenses of approximately $1.8 million and $1.4 million,
respectively, in the first quarter of 1999 and 1998 relating to such operations.
Substantially all of the Company's capital expenditures, property, plant and
equipment, equity investments and goodwill, as well as depreciation and
amortization expenses, are related to track operations. Substantially all of the
Company's inventory is related to its MTA businesses.
NOTE 4 - COMMITMENTS AND CONTINGENCIES. The Company is party to certain claims
and contingencies arising in the normal course of business. In the opinion of
management, the Company has meritorious defenses on all such claims, or they are
of such kind, are adequately covered by insurance, or involve such amounts, as
would not have a materially adverse effect on the financial position or results
of operations of the Company if disposed of unfavorably.
NOTE 5 - SUBSEQUENT EVENT. On May 10, 1999, the Company entered into a
definitive Merger Agreement among the Company, International Speedway
Corporation ("ISC") and 88 Corp., a wholly-owned subsidiary of ISC. Pursuant to
the Merger Agreement, ISC will acquire the approximately 12.2 million
outstanding common shares of the Company which it does not already own for $50
per share, subject to a collar provision. The Company's stockholders will be
able to elect to receive this consideration as either (i) $15.00 in cash and
$35.00 in Class A Common Stock of ISC or (ii) $50.00 of Class A Common Stock of
ISC. The Merger Agreement is subject to customary conditions, including the
approval of the transaction by the Company's stockholders and the approval of
the ISC stock issuance by the stockholders of ISC.
21
22
INDEPENDENT ACCOUNTANTS' REPORT
Stockholders and Board of Directors
Penske Motorsports, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of Penske
Motorsports, Inc. and subsidiaries (the "Company") as of March 31, 1999 and the
related condensed consolidated statements of operations and cash flows for the
three month periods ended March 31, 1999 and 1998. These consolidated financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is an
expression of an opinion regarding the consolidated financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of the Company as of December 31,
1998, and the related consolidated statements of income, changes in
stockholders' equity and cash flow for the year then ended (not presented
herein); and in our report dated February 1, 1999, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
at December 31, 1998 is fairly stated, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.
/s/ Deloitte & Touche LLP
- -------------------------
Detroit, Michigan
May 13, 1999
22
23
(b) Pro Forma Financial Information
The unaudited pro forma condensed consolidated financial information
and related notes presented herein is related to the Merger and is hereby
incorporated by reference to the Registration Statement on Form S-4 of the
Registrant, filed with Securities and Exchange Commission on June 21, 1999 (File
No. 333-81165).
INTERNATIONAL SPEEDWAY UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following International Speedway unaudited pro forma condensed
consolidated financial statements reflect adjustments to the historical
consolidated balance sheets and statements of income of International Speedway
and Penske Motorsports to give effect to the merger, using the purchase method
of accounting for a business combination. The International Speedway unaudited
pro forma condensed consolidated balance sheet as of February 28, 1999, assumes
the merger was effected as of February 28, 1999. The International Speedway
unaudited pro forma condensed consolidated statements of income for the three
months ended February 28, 1999 and for the year ended November 30, 1998 assume
the merger was effected as of the beginning of each period presented.
The fiscal year-ends of International Speedway and Penske Motorsports occur
at different dates. International Speedway's fiscal year-end is November 30 and
Penske Motorsports' fiscal year-end is December 31. The International Speedway
unaudited pro forma condensed consolidated balance sheet and statements of
income have been prepared by combining the following periods of operations of
International Speedway and Penske Motorsports:
PRO FORMA PERIOD INTERNATIONAL SPEEDWAY PENSKE MOTORSPORTS
- ---------------- ---------------------- ------------------
February 28, 1999 February 28, 1999 March 31, 1999
Three months ended Three months ended Three months ended
February 28, 1999 February 28, 1999 March 31, 1999
Year ended Year ended Year ended
November 30, 1998 November 30, 1998 December 31, 1998
International Speedway and Penske Motorsports each owns 45% of
Miami-Homestead and each entity records its respective investment using the
equity method of accounting. For purposes of pro forma presentations,
Miami-Homestead's March 31, 1999 historical consolidated balance sheet and its
historical statements of income for the three months ended March 31, 1999, and
the year ended December 31, 1998, have been combined with Penske Motorsports
historical financial information.
The following International Speedway unaudited pro forma condensed
consolidated financial statements have been prepared from, and should be read in
conjunction with, the historical consolidated financial statements and notes of
International Speedway, incorporated by reference into this Joint Proxy
Statement/Prospectus, and the historical consolidated financial statements and
notes of Penske Motorsports incorporated by reference into this Joint Proxy
Statement/Prospectus. See "Where You Can Find More Information" on page 74. The
following International Speedway unaudited pro forma condensed consolidated
statements of income are not necessarily indicative of the results of operations
that would have occurred had the merger occurred at the dates indicated, nor are
they necessarily indicative of future operating results of the combined company.
23
24
INTERNATIONAL SPEEDWAY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
FEBRUARY 28, 1999
PENSKE
MOTORSPORTS
INTERNATIONAL AND MIAMI- PRO FORMA PRO FORMA
SPEEDWAY HOMESTEAD ADJUSTMENTS CONSOLIDATED
------------- ----------- ----------- ------------
(IN THOUSANDS)
ASSETS
Current Assets:
Cash and cash equivalents.................... $ 24,887 $ 1,461 $(12,375)(3)(7) $ 13,973
Short-term investments....................... 87,171 0 0 87,171
Receivables.................................. 12,960 17,183 0 30,143
Inventories.................................. 1,736 3,217 0 4,953
Prepaid expenses and other current assets.... 2,878 7,636 0 10,514
-------- -------- -------- ----------
Total Current Assets....................... 129,632 29,497 (12,375) 146,754
Property and equipment, net.................... 241,759 278,904 26,500(1) 547,163
Other Assets:
Equity investments........................... 44,650 13,021 (57,546)(6) 125
Goodwill, net................................ 38,675 72,040 445,768(1)(2) 556,483
Restricted investments....................... 112,713 0 0 112,713
Other........................................ 11,102 983 900(1) 12,985
-------- -------- -------- ----------
207,140 86,044 389,122 682,306
-------- -------- -------- ----------
Total Assets............................... $578,531 $394,445 $403,247 $1,376,223
======== ======== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable............................. $ 10,551 $ 4,672 $ 0 $ 15,223
Income taxes payable......................... 11,286 0 (4,677)(3) 6,609
Deferred income.............................. 55,536 55,337 0 110,873
Current portion of long-term debt............ 685 3,014 0 3,699
Other current liabilities.................... 5,457 5,134 0 10,591
-------- -------- -------- ----------
Total Current Liabilities.................. 83,515 68,157 (4,677) 146,995
Long-term debt................................. 71,725 79,916 190,338(4) 341,979
Deferred income taxes.......................... 30,287 23,763 10,375(1)(7) 64,425
Minority interest.............................. 0 0 2,578(6) 2,578
Stockholders' Equity
Class A common stock......................... 119 142 (52)(5) 209
Class B common stock......................... 312 0 0 312
Additional paid-in capital................... 205,851 159,371 268,265(5)(7) 633,487
Members' capital............................. 0 25,783 (25,783)(6) 0
Retained earnings............................ 188,344 44,848 (45,332)(3)(5) 187,860
-------- -------- -------- ----------
394,626 230,144 197,098 821,868
Less unearned compensation-restricted
stock...................................... 1,622 0 0 1,622
Less treasury stock.......................... 0 7,535 (7,535)(5)(7) 0
-------- -------- -------- ----------
Total Stockholders' Equity................. 393,004 222,609 204,633 820,246
Total Liabilities and Stockholders'
Equity.................................. $578,531 $394,445 $403,247 $1,376,223
======== ======== ======== ==========
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
24
25
INTERNATIONAL SPEEDWAY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED FEBRUARY 28, 1999
PENSKE
MOTORSPORTS
INTERNATIONAL AND MIAMI- PRO FORMA PRO FORMA
SPEEDWAY HOMESTEAD ADJUSTMENTS TOTAL
------------- ----------- ----------- ---------
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
REVENUES
Admissions, net......................... $ 37,614 $ 5,730 $ 0 $ 43,344
Motorsports related income.............. 34,444 8,257 0 42,701
Food, beverage and merchandise income... 10,834 5,677 0 16,511
Other income............................ 344 0 0 344
----------- ------- ---------- -----------
83,236 19,664 0 102,900
EXPENSES
Direct expenses:
Prize and point fund monies
and NASCAR sanction fees........... 12,804 3,143 0 15,947
Motorsports related expenses.......... 11,080 4,040 0 15,120
Food, beverage and merchandise
expenses........................... 5,239 4,638 0 9,877
General and administrative expenses..... 10,254 6,931 0 17,185
Depreciation and amortization........... 3,626 3,709 2,994(8)(9) 10,329
----------- ------- ---------- -----------
43,003 22,461 2,994 68,458
Operating income (loss)................. 40,233 (2,797) (2,994) 34,442
Interest income......................... 2,086 51 0 2,137
Interest expense........................ (297) (1,623) (3,569)(10) (5,489)
Equity in net income (loss) from equity
investments........................... 25 356 (881)(6) (500)
Minority interest....................... 0 0 (79)(6) (79)
----------- ------- ---------- -----------
Income (loss) before income taxes....... 42,047 (4,013) (7,523) 30,511
Income tax expense (benefit)............ 16,108 (1,884) (1,711)(11) 12,513
----------- ------- ---------- -----------
Net income (loss)....................... $ 25,939 $(2,129) $ (5,812) $ 17,998
=========== ======= ========== ===========
Basic earnings (loss) per share......... $0.61 $0.35
Diluted earnings (loss) per share....... $0.60 $0.35
Basic weighted average shares........... 42,858,839 9,006,036(12) 51,864,875
Diluted weighted average shares......... 42,994,673 9,006,036(12) 52,000,709
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
25
26
INTERNATIONAL SPEEDWAY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED NOVEMBER 30, 1998
PENSKE
MOTORSPORTS
INTERNATIONAL AND MIAMI- PRO FORMA PRO FORMA
SPEEDWAY HOMESTEAD ADJUSTMENTS TOTAL
------------- ----------- ----------- ---------
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
REVENUES
Admissions, net......................... $ 86,946 $ 55,609 $ 0 $ 142,555
Motorsports related income.............. 71,793 46,064 0 117,857
Food, beverage and merchandise income... 28,597 29,571 0 58,168
Other income............................ 1,632 0 0 1,632
----------- -------- ---------- -----------
Total revenues..................... 188,968 131,244 0 320,212
EXPENSES
Direct expenses:
Prize and point fund monies
and NASCAR sanction fees........... 28,767 15,520 0 44,287
Motorsports related expenses.......... 33,283 28,122 0 61,405
Food, beverage and merchandise
expenses........................... 15,025 20,917 0 35,942
General and administrative expenses..... 37,842 22,700 0 60,542
Depreciation and amortization........... 13,137 13,766 11,974(8)(9) 38,877
----------- -------- ---------- -----------
Total expenses..................... 128,054 101,025 11,974 241,053
Operating income (loss)................. 60,914 30,219 (11,974) 79,159
Interest income......................... 4,414 246 0 4,660
Interest expense........................ (582) (6,111) (14,275)(10) (20,968)
Equity in net income (loss) from equity
investments........................... (905) (1,382) 2,163(6) (124)
Minority interest....................... 0 0 320(6) 320
Gain on sale of equity investment....... 1,245 1,108 0 2,353
----------- -------- ---------- -----------
Income (loss) before income taxes....... 65,086 24,080 (23,766) 65,400
Income tax expense (benefit)............ 24,894 10,697 (4,572)(11) 31,019
----------- -------- ---------- -----------
Net income (loss)....................... $ 40,192 $ 13,383 $ (19,194) $ 34,381
=========== ======== ========== ===========
Basic earnings (loss) per share......... $1.00 $0.70
Diluted earnings (loss) per share....... $1.00 $0.70
Basic weighted average shares........... 40,025,463 9,006,036(12) 49,031,679
Diluted weighted average shares......... 40,188,800 9,006,036(12) 49,194,836
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (IN
THOUSANDS EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
Basis of Presentation. Under the terms of the merger, each outstanding
share of Penske Motorsports common stock, other than shares held directly or
indirectly by International Speedway, will be converted into the right to
receive at the election of each Penske Motorsports stockholder, subject to the
transaction's collar provision described below, (a) $15.00 in cash and $35.00
worth of International Speedway class A common stock or (b) $50.00 worth of
International Speedway class A common stock. In accordance with the collar
provision, if the volume-weighted average price for International Speedway class
A common stock during the 20-day trading period ending two trading days before
the merger is no higher than $53.44 and no lower than $41.56, International
Speedway will issue the necessary number of shares to provide the $35.00 (plus
$15 in cash) or $50.00, as applicable, of value for each share of Penske
Motorsports common stock. If the volume-weighted average price is outside this
range, for each share of Penske Motorsports common stock International Speedway
would issue (a) no less than 0.655 and no more than 0.842 shares of
International Speedway class A common stock, plus $15 cash, for those who choose
cash and stock and (b) no less than 0.936 and no more than 1.203 shares of
International Speedway class A common stock for those who elect to receive
entirely stock.
For purposes of pro forma presentation, it is assumed (a) that all
stockholders will elect to receive their consideration as 70% stock and 30% cash
and (b) the volume-weighted average price for International Speedway class A
common stock during the 20-day trading period ending two trading days before the
merger is $47.50, which results in an exchange ratio of 0.73684 shares of
International Speedway class A common stock, plus $15.00 in cash, for each share
of Penske Motorsports common stock. Further, it is assumed that 12,222,477
Penske Motorsports common stock are subject to the transaction (total shares
outstanding of 14,208,898, less treasury shares of 377,400 less 1,609,021 shares
of Penske Motorsports common stock owned directly and indirectly by
International Speedway). The pro forma financial statements assume receipt of
100% of the outstanding Penske Motorsports common stock. Based on the assumed
exchange factor, International Speedway would issue 9,006,036 shares of class A
common stock in the proposed merger. Had holders of Penske Motorsports common
stock elected to receive all stock consideration, the resulting pro forma net
income, basic earnings per share and diluted earnings per share would have been
$20,175, $0.36 and $0.36, and $43,089, $0.81 and $0.81 for the three months
ended February 28, 1999 and the year ended November 30, 1998, respectively.
(1) The estimated costs of the acquisition are as follows:
Cash consideration (assumes 30% of the 12,222,477 shares of
Penske Motorsports common stock at $50.00 per share)...... $183,337
Stock consideration (assumes 70% of the 12,222,477 shares of
Penske Motorsports common stock at $50.00 per share)...... 427,787
Transaction costs........................................... 7,001
--------
Total acquisition cost...................................... $618,125
========
Under purchase accounting, Penske Motorsports' assets and liabilities are
required to be adjusted to their estimated fair values. The estimated fair value
adjustments have been determined by International Speedway based upon a
preliminary valuation and are subject to adjustments based on a final valuation.
These estimated fair values may not be the fair values that will ultimately be
determined after the
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completion of the proposed merger. The following are the pro forma adjustments
made to reflect Penske Motorsports' estimated fair values assuming the merger
was completed on February 28, 1999:
Net Assets Acquired......................................... $155,369
ADJUSTMENT
---------
Fixed assets................................................ $ 26,500
Intangibles................................................. 900
Deferred taxes.............................................. (10,412)
--------
16,988
Goodwill.................................................... 438,767
Transaction costs........................................... 7,001
--------
Total acquisition cost...................................... $618,125
========
(2) To reflect the excess purchase price over the fair value of the net assets
acquired, goodwill of $510,807 plus transaction costs of $7,001, less the
elimination of historical goodwill recorded by Penske Motorsports and
Miami-Homestead of $72,040.
(3) To reflect the accelerated vesting of 464,000 Penske Motorsports employee
stock options and the cancellation of those options in an amount equal to
the excess of the merger cash/stock consideration over the per share
exercise price of the Penske Motorsports stock option, $11,200 in cash, and
the associated equity adjustment to retained earnings of $6,832, net of
income tax benefit of $4,368. In addition, to reflect International
Speedway's decrease to retained earnings of $484 related to its pro rata
share of the adjustment by Penske Motorsports under the equity method of
accounting, net of income tax benefit of $309.
(4) To record long term debt incurred related to the 30% of the total
consideration of the merger of $183,337 in cash and the transaction costs
of $7,001.
(5) To record the issuance of 9,006,036 shares of International Speedway class
A common stock for 70% of the total consideration, which increases common
stock $90 and additional paid-in capital $427,697. Also, to record the
elimination of Penske Motorsports common stock of $142, additional paid-in
capital of $159,371, retained earnings of $38,016 (after option
adjustment -- note 3), and treasury stock of $8,710 (after treasury stock
adjustment -- note 7).
(6) To eliminate (a) International Speedway's investment in Penske Motorsports
of $31,729 (including adjustments for stock options and treasury
stock -- notes 3 and 7), (b) International Speedway's and Penske
Motorsports' investment in Miami-Homestead of $25,817, (c)
Miami-Homestead's members capital of $25,783, and (d) to record the 10%
minority interest on Miami-Homestead's members capital for $2,578. In
addition, to reflect the elimination of equity earnings (losses) and record
minority interest for those investments in the pro forma statements of
income for the three months ended February 28, 1999, and the year ended
November 30, 1998.
(7) To reflect the repurchase of 23,500 shares of Penske Motorsports common
stock subsequent to March 31, 1999, which increased treasury stock and
decreased cash by $1,175. In addition, to reflect International Speedway's
related change in equity investment, which is subsequently eliminated, and
the decrease in additional paid-in capital of $61 and deferred taxes of
$37.
(8) Amortization expense of $2,831 and $11,324 for the three months ended
February 28, 1999 and year ended November 30, 1998, respectively,
representing amortization of the excess purchase price over the fair value
of the net assets acquired (including transaction costs) of $445,768, over
a period of 40 years and amortization of other intangibles of $900 over a
period of 5 years.
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(9) Depreciation expense of $163 and $650 for the three months ended February
28, 1999, and the year ended November 30, 1998, respectively, representing
additional depreciation expense that would have been recorded if the
transaction had occurred on December 1, 1997 assuming current fair
adjustments and a depreciable life of 30 years.
(10) Interest expense recorded on the long term debt to be borrowed for the cash
consideration of $183,337 and transaction costs of $7,001, assuming a
borrowing rate of 7.5%. If the borrowing rate were to fluctuate by
approximately 1/8%, interest expense would fluctuate by $59 and $238 for
the three months ended February 28, 1999, and the year ended November 30,
1998, respectively.
(11) Reduction in income taxes as a result of pro forma adjustments, primarily
interest expense.
(12) Reflects International Speedway's historical basic weighted-average shares
outstanding and diluted weighted average shares outstanding plus the
assumed 9,006,036 shares issued by International Speedway for the proposed
merger.
(c) Exhibits
See the Index to Exhibits attached hereto.
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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 hereunto duly authorized.
INTERNATIONAL SPEEDWAY
CORPORATION
Date: July 28, 1999 /s/ W. Garrett Crotty
-----------------------------------
Name: W. Garrett Crotty
Title: Secretary
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EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
2.1 Agreement and Plan of Merger, dated as of May 10, 1999, among
International Speedway Corporation, 88 Corp. and Penske
Motorsports, Inc., as amended by Amendment No. 1 thereto,
dated as of June 21, 1999 (attached as Annex A to the Joint
Proxy Statement/Prospectus included in the Registrant's
Registration Statement on Form S-4 File No. 333-81165).
2.2 Agreement and Plan of Merger, dated as of May 10, 1999, by and
among International Speedway Corporation, Penske Performance,
Inc., PSH Corp. and Penske Corporation (attached as Annex B to
the Joint Proxy Statement/Prospectus included in the
Registrant's Registration Statement on Form S-4 File No.
333-81165).
3.1 Articles of Amendment of the Restated and Amended Articles of
Incorporation of the Registrant, filed with the Department of
State of the State of Florida on July 26, 1999.
3.2 Conformed copy of Amended and Restated Articles of
Incorporation of the Registrant, as amended as of July 26,
1999.
99.1 Press release of the Registrant, issued on July 26, 1999,
regarding the Merger.