1
EXHIBIT 99.1
NORTH CAROLINA MOTOR SPEEDWAY, INC.
BALANCE SHEETS
AUGUST 31,
------------------
1997 1996
---- ----
(IN THOUSANDS)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 2 $ 599
Receivables:
Trade.................................................. 186 383
Related party.......................................... 140
Inventories............................................... 96 57
Prepaid expenses.......................................... 97 15
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Total Current Assets................................... 521 1,054
Property and Equipment, net................................. 15,144 11,019
Deferred Taxes.............................................. 225
Other Assets................................................ 400
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Total....................................................... $15,890 $12,473
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt......................... $ 857 $ 428
Accounts payable and accrued expenses..................... 498 247
Deferred revenues, net.................................... 3,490 2,623
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Total Current Liabilities.............................. 4,845 3,298
Long-Term Debt, less current portion........................ 3,367 3,549
Deferred Revenues........................................... 922
Deferred Taxes.............................................. 228
Commitments and Contingencies
SHAREHOLDERS' EQUITY:
Common stock, par value $ .25 share:
Authorized 8,000,000 shares
Issued and outstanding 2,236,705 shares in 1997 and
1996.................................................. 559 559
Retained earnings......................................... 6,197 4,839
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Total Shareholders' Equity............................. 6,756 5,398
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Total....................................................... $15,890 $12,473
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See accompanying notes to financial statements.
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NORTH CAROLINA MOTOR SPEEDWAY, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
SEVEN
YEAR ENDED MONTHS YEAR ENDED
AUGUST 31, ENDED JANUARY 31,
---------------------- AUGUST 31, -----------
1997 1996 1995 1995
---- ---- ---------- ----
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
REVENUES:
Speedway admissions............................ $5,592 $4,615 $1,996 $4,016
Other speedway revenues........................ 4,504 4,132 1,879 2,801
--------- --------- --------- ---------
Total Revenues................................. 10,096 8,747 3,875 6,817
EXPENSES:
Operating expenses............................. 6,378 5,836 2,722 4,984
Depreciation................................... 424 264 133 256
Selling, general and administrative............ 654 591 421 348
--------- --------- --------- ---------
Total Expenses................................. 7,456 6,691 3,276 5,588
Operating Income................................. 2,640 2,056 599 1,229
Interest Income (Expense), net................... (332) 27 69 53
--------- --------- --------- ---------
Income Before Income Taxes....................... 2,308 2,083 668 1,282
Income Taxes..................................... 905 823 248 481
--------- --------- --------- ---------
Net Income....................................... 1,403 1,260 420 801
Retained Earnings, beginning of period........... 4,839 3,624 3,249 2,560
Dividends Paid................................... (45) (45) (45) (112)
--------- --------- --------- ---------
Retained Earnings, end of period................. $6,197 $4,839 $3,624 $3,249
========= ========= ========= =========
Net Income Per Share............................. $.63 $.56 $.19 $.36
========= ========= ========= =========
Weighted Average Shares Outstanding.............. 2,236,705 2,236,705 2,236,705 2,236,705
========= ========= ========= =========
See accompanying notes to financial statements.
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NORTH CAROLINA MOTOR SPEEDWAY, INC.
STATEMENTS OF CASH FLOWS
YEAR ENDED SEVEN MONTHS YEAR ENDED
AUGUST 31, ENDED JANUARY 31,
----------------- AUGUST 31, -----------
1997 1996 1995 1995
---- ---- ------------ ----
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................... $ 1,403 $ 1,260 $ 420 $ 801
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation.................................. 424 264 133 256
Changes in assets and liabilities which
provided (used) cash:
Receivables................................. 57 (247) (135)
Inventories, prepaid expenses and other
assets................................... (121) 8 (25) 16
Accounts payable and accrued liabilities.... 251 38 143 (89)
Deferred taxes.............................. (453) 57
Deferred revenue............................ 1,789 890 481 607
------- ------- ------- -----
Net cash provided by operating activities..... 3,350 2,270 1,017 1,591
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions of property and equipment, net......... (4,549) (6,480) (1,069) (610)
Payments received on notes receivable............ 400 50 50
------- ------- ------- -----
Net cash used in investing activities......... (4,149) (6,430) (1,019) (610)
CASH FLOWS FROM FINANCING ACTIVITIES:
Loan proceeds.................................... 2,176 3,977
Payments on debt................................. (1,929)
Dividends........................................ (45) (45) (45) (112)
------- ------- ------- -----
Net cash provided by (used in) financing
activities.................................. 202 3,932 (45) (112)
------- ------- ------- -----
Net Increase (Decrease) in Cash and Cash
Equivalents...................................... (597) (228) (47) 869
Cash and Cash Equivalents at Beginning of Period... 599 827 874 5
------- ------- ------- -----
Cash and Cash Equivalents at End of Period......... $ 2 $ 599 $ 827 $ 874
======= ======= ======= =====
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for interest......... $ 357 $ 48 $ 1
======= ======= =====
Cash paid during the period for taxes............ $ 1,361 $ 833 $ 201 $ 482
======= ======= ======= =====
See accompanying notes to financial statements.
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NORTH CAROLINA MOTOR SPEEDWAY, INC.
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
The financial statements include the accounts of NCMS, which owns and
operates North Carolina Motor Speedway near Rockingham, North Carolina. NCMS
promotes race weekends in February and October of each year featuring a NASCAR
Busch Series Grand National Division event and a NASCAR Winston Cup Series
event. NCMS also hosts the annual UNOCAL 76/Rockingham Pit Crew World
Championship during the October event weekend.
The accompanying unaudited 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
results of operations and cash flows of NCMS for the seven months ended August
31, 1995 and for the year ended January 31, 1995.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents -- NCMS considers all 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 value,
with cost determined primarily by the first in, first out (FIFO) method.
Property and Equipment -- Property and equipment is carried at cost less
accumulated depreciation. Depreciation is computed using the straight-line
method over estimated useful lives ranging from three to forty years. The
carrying values of fixed assets are evaluated annually for impairment.
Revenue Recognition -- Race related revenues and expenses are recognized
upon completion of an event. Deferred revenues represents advance race related
revenues, net of expenses, on future races.
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 and liabilities and
disclosure 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.
Reclassifications -- Certain reclassifications have been made to prior
period financial statements to conform with the 1997 presentation.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
AUGUST 31,
-----------------------
1997 1996
---- ----
(IN THOUSANDS)
Land and improvements....................................... $ 209 $ 209
Buildings and improvements.................................. 17,741 13,228
Equipment................................................... 839 803
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18,789 14,240
Less accumulated depreciation............................... 3,645 3,221
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$15,144 $11,019
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NORTH CAROLINA MOTOR SPEEDWAY, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
As of August 31, 1997, NCMS had $1.2 million in construction in progress
relating primarily to the construction of a new grandstand and related
facilities with an estimated total cost of $1.5 million. As of August 31, 1996,
NCMS had $4.0 million in construction in progress relating to the construction
of a multipurpose structure above the main grandstand.
4. LONG-TERM DEBT
Long-term debt at August 31, 1997 and 1996 consists of a note payable
bearing interest at 2.7% over the average 91-day Treasury rate (7.76% and 7.87%
at August 31, 1997 and 1996, respectively) secured by all assets of NCMS and
guaranteed by PMI. The note is to be repaid in fourteen semi-annual payments of
$429,000 with the final payment in 2003. NCMS also has lines of credit of $2.1
million at the same rate as above, of which $1.9 million was available as of
August 31, 1997. As of August 31, 1997, the carrying value of the debt
approximated fair value.
5. EMPLOYEE BENEFIT PLANS
NCMS participates in a non-contributory, discretionary profit-sharing plan
which covers employees who meet certain length of service requirements.
Contributions of approximately $75,000, $57,000, $35,000 (unaudited) and $48,000
(unaudited), respectively were made to the plan during the years ended August
31, 1997 and 1996, the seven months ended August 31, 1995 and the year ended
January 31, 1995.
Employees are also provided a defined contribution retirement plan, whereby
NCMS contributes 10% of each eligible employee's annual salary to the plan. The
expense related to this plan was $50,000, $38,000, $23,000 (unaudited) and
$32,000 (unaudited), respectively during the years ended August 31, 1997 and
1996, the seven months ended August 31, 1995 and the year ended January 31,
1995.
6. TAXES
The provision for income taxes consists of the following:
YEAR ENDED SEVEN MONTHS YEAR
AUGUST 31, ENDED ENDED
------------- AUGUST 31, JANUARY 31,
1997 1996 1995 1995
---- ---- ------------ -----------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
Current................................................ $1,358 $766 $224 $444
Deferred............................................... (453) 57 24 37
------ ---- ---- ----
Total............................................. $ 905 $823 $248 $481
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A reconciliation of taxes computed at the federal statutory rate and the
effective rate is as follows:
YEAR ENDED SEVEN MONTHS YEAR
AUGUST 31, ENDED ENDED
--------------- AUGUST 31, JANUARY 31,
1997 1996 1995 1995
---- ---- ------------ -----------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
Income before income taxes........................... $2,308 $2,083 $668 $1,282
------ ------ ---- ------
Taxes computed at statutory rate..................... 785 $ 708 $227 $ 436
State taxes, net of federal.......................... 120 115 21 45
------ ------ ---- ------
Total income tax expense........................ $ 905 $ 823 $248 $ 481
====== ====== ==== ======
Effective tax rate................................... 39.2% 39.5% 37.1% 37.5%
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NORTH CAROLINA MOTOR SPEEDWAY, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
Temporary differences which give rise to deferred tax assets and
(liabilities) are as follows:
AUGUST 31,
-----------------
1997 1996
---- ----
(IN THOUSANDS)
Depreciation................................................ $(262) $(192)
State taxes................................................. 48 (36)
Deferred revenues........................................... 439
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Total.................................................. $ 225 $(228)
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7. CHANGE IN CONTROL
In May, 1997, PMI purchased the common stock of NCMS held by the majority
shareholder, increasing its ownership interest to approximately 69.9%. A
proposal to merge PMI and NCMS was approved by the NCMS Board of Directors in
August, 1997. This merger proposal, which offers NCMS shareholders cash of
$19.61 per share or an equivalent amount of PMI Stock, will be presented to the
shareholders of NCMS at a meeting to be held in the fourth quarter of 1997.
Subsequent to the approval of the merger by the NCMS Board of Directors, O.
Bruton Smith, a minority shareholder of NCMS, sued NCMS, PMI and certain
directors of NCMS in an effort to enjoin the completion of the merger.
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
North Carolina Motor Speedway
Rockingham, North Carolina
We have audited the accompanying balance sheets of North Carolina Motor
Speedway as of August 31, 1997 and 1996 and the related statements of income and
retained earnings and of cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 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 financial statements present fairly, in all material
respects, the financial position of the Company as of August 31, 1997 and 1996,
and the results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Detroit, Michigan
September 23, 1997