AS FILED WITH THEAs filed with the Securities and Exchange Commission on January 24, 2002Registration No. 333-SECURITIES AND EXCHANGE COMMISSION
ON JUNE 1, 1998 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON,Washington, D.C. 20549---------------- FORMForm S-3
REGISTRATION STATEMENTUNDERTHE SECURITIES ACT OF 1933---------------- INTERNATIONAL SPEEDWAY CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)International Speedway Corporation
(Exact name of registrant as specified in its charter)
FLORIDAFlorida 59-0709342 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.(State or other jurisdiction of
incorporation or organization)(I.R.S. Employer
Identification No.)----------------
GLENN1801 West International Speedway Boulevard
Daytona Beach, Florida 32114
(386) 254-2700
(Address, including zip code, and telephone number, including
area code, of registrant’s principal executive offices)Glenn R. PADGETT INTERNATIONAL SPEEDWAY CORPORATIONPadgett
Chief Counsel — Operations
1801WEST INTERNATIONAL 1801 WEST INTERNATIONAL SPEEDWAY BOULEVARD SPEEDWAY BOULEVARD DAYTONA BEACH, FLORIDAWest International Speedway Boulevard
Daytona Beach, Florida 32114DAYTONA BEACH, FLORIDA 32114 (904)
(386) 947-6446(904) 254-2700 FAX: (904) 947-6884 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE) INCLUDING AREA CODE, OF AGENT FOR SERVICE)
(Name, address, including zip code, and telephone number,
including area code, of agent for service)---------------- COPIES OF COMMUNICATIONS TO:Copies to:
BRUCE E. MACDONOUGH GREENBERG TRAURIG HOFFMAN DONN A. BELOFF LIPOFF ROSENJames R. Doty
Baker Botts L.L.P.
The Warner
1299 Pennsylvania Avenue, NW
Washington, D.C. 20004
(202) 639-7792
(202) 639-7890 (Fax)Allan G. Sperling
Cleary, Gottlieb, Steen &QUENTEL, P.A. HOLLAND & KNIGHT LLP 1221 BRICKELL AVENUE ONE EAST BROWARD BOULEVARD MIAMI, FLORIDA 33131 FT. LAUDERDALE, FLORIDA 33302 PHONE: (305) 579-0500 PHONE: (954) 525-1000 FAX: (305) 579-0717 FAX (954) 463-2030Hamilton
One Liberty Plaza
New York, NY 10006
(212) 225-2260
(212) 225-3999 (Fax)---------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. oIf any of the securities being registered on this Form areto bebeing offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box.[ ]oIf this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.[ ]oIf this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.[ ]oIf delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.[ ] ----------------oCALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum Amount of Title of Each Class of Amount to be Offering Price Aggregate Registration Securities to be Registered Registered(1) Per Share Offering Price Fee Class A common stock, par value $.01 per share 2,875,000 $39.55(2) $113,706,250(2) $10,500(2)
| (1) | Represents 2,500,000 shares to be sold by a holder of our class A common stock and includes 375,000 shares subject to the over- allotment option granted to the underwriters. |
| (2) | Estimated solely for the purpose of computing the registration fee pursuant to Rule 457(c). Pursuant to Rule 457(c), the proposed maximum offering price has been calculated based on the average of the high and low prices of the common stock on the NASDAQ National Market on January 17, 2002. |
The registrant hereby amends this registration statement on such date or dates as may be purchased bynecessary to delay its effective date until the Underwriters
pursuant to an over-allotment option.
(2) Estimated solely for the purpose of calculating theregistrant shall file a further amendment which specifically states that this registration feestatement shall thereafter become effective in accordance with Rule 457(c) underSection 8(a) of the Securities Act of 1933, and basedor until the registration statement shall become effective on such date as the average of the high and low sales prices for the Registrant's Class A
Common Stock on May 27, 1998 as reported by the Nasdaq National Market.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A)Commission, acting pursuant to said Section 8(a), MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
may determine.
| The information in this prospectus is not complete and may be changed. The selling stockholder may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. |
SUBJECT TO COMPLETION, DATED JUNE 1, 1998
P R O S P E C T U S
[GRAPHIC OMITTED]
INTERNATIONAL SPEEDWAY CORPORATION
4,000,000JANUARY 24, 2002
PROSPECTUS
2,500,000 Shares
International Speedway Corporation
Class A Common Stock
----------------
All
The selling stockholder named in this prospectus is selling 2,500,000 shares of our class A common stock. We will not receive any proceeds from the sale of the shares by the selling stockholder. The selling stockholder has granted the underwriters an option to purchase up to 375,000 additional shares of Classclass A Common Stock offered hereby (the "Offering")
are being sold by International Speedway Corporation (the "Company").
The Company's Classcommon stock to cover over-allotments.
Our class A Common Stockcommon stock is tradedquoted on the Nasdaq National Market under the symbol "ISCA." On , 1998, the closing“ISCA.” The last reported sale price of the Classour class A Common
Stockcommon stock on the Nasdaq National Market on January 23, 2002, was $ .$40.66 per share.
Investing in our class A common stock involves risks. See "Price Range“Risk Factors” beginning on page 10.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of Common
Stock."
The Company's authorized capital stock includes Class A Common Stock and
Class B Common Stock. The economic rights ofthese securities or determined if this prospectus is truthful or complete. Any representation to the Class A Common Stock and the
Class B Common Stock (collectively the "Common Stock") are identical, except
that each share of Class A Common Stock entitles the holder thereof to
one-fifth (1/5) vote in respect of matters submitted for the vote of holders of
Common Stock, whereas each share of Class B Common Stock entitles the holder
thereof to one (1) vote on such matters. Immediately after this Offering, the
outstanding Class A Common Stock will represent approximately 5.6% of the
combined voting power of both classes of Common Stock. Immediately after this
Offering, William C. France (the Company's Chairman of the Board and Chief
Executive Officer), James C. France (the Company's President and Chief
Operating Officer), members of their families and affiliates (collectively the
"France Family Group") will in the aggregate beneficially own approximately
49.8% of the Company's outstanding Common Stock and approximately 60.9% of the
combined voting power of both classes of Common Stock. Each share of Class B
Common Stockcontrary is convertible on a one-for-one basis at any time at the election
of the holder into one fully paid and nonassessable share of Class A Common
Stock. The Class A Common Stock is not convertible into Class B Common Stock.
See "Description of Capital Stock."
----------------
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE CLASS A COMMON
STOCK OFFERED HEREBY.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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criminal offense.
| Per Share | Total | |||||||
| Public Offering Price | $ | $ | ||||||
| Underwriting Discount | $ | $ | ||||||
| Proceeds to the Selling Stockholder (before expenses) | $ | $ | ||||||
The Company has granted the Underwriters a 30-day optionunderwriters expect to purchase up to
600,000 additional shares of Class A Common Stock solely to cover
over-allotments, if any. See "Underwriting." If such option is exercised,
the total Price to Public, Underwriting Discounts and Commissions and
Proceeds to Company will be $ , $ and $ , respectively.
----------------
The shares of Class A Common Stock are being offered by the several
Underwriters named herein, subject to prior sale, when, as and if accepted by
them and subject to certain conditions. It is expected that certificates fordeliver the shares of Class A Common Stock offered hereby will be available for
deliveryto purchasers on or about , 1998, at the offices of Smith Barney Inc., 333
West 34th Street, New York, New York 10001.
----------------
2002.
Salomon Smith Barney CIBC Oppenheimer
JPMorgan
Wachovia Securities
, 1998
[PHOTOS]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE2002
Inside front cover
Description of photographs:
| Top: | Map of United States indicating geographic locations of ISC owned and/or operated facilities, facilities opened in 2001 and external expansion targets |
| Bottom: | Daytona International Speedway |
You should rely only on the information contained in or incorporated by reference in this prospectus. Neither we nor the selling stockholder has authorized anyone to provide you with different information. The selling stockholder is not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information contained or incorporated by reference in this prospectus is accurate as of any date other than the date on the front of this prospectus.
TABLE OF THE CLASS A COMMON
STOCK, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE COVERING
TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMPANY'S
CLASS A COMMON STOCK ON NASDAQ IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE
"UNDERWRITING."
PROSPECTUS CONTENTS
| Page | ||||
| Forward-Looking Statements | ii | |||
| Industry Data | ii | |||
| Intellectual Property | ii | |||
| Summary | 1 | |||
| Risk Factors | 10 | |||
| Use of Proceeds | 16 | |||
| Price Range of Class A Common Stock and Dividend Policy | 16 | |||
| Capitalization | 17 | |||
| Selected Financial Data | 18 | |||
| Management’s Discussion and Analysis of Financial Condition and Results of Operations | 20 | |||
| Motorsports Industry Overview | 31 | |||
| Business | 36 | |||
| Management | 46 | |||
| Principal Stockholders | 49 | |||
| Selling Stockholder | 52 | |||
| Certain Relationships | 53 | |||
| Certain United States Tax Considerations of Non-U.S. Holders | 55 | |||
| Underwriting | 57 | |||
| Legal Matters | 58 | |||
| Independent Public Accountants | 59 | |||
| Incorporation of Certain Documents by Reference | 59 | |||
| Where You Can Find More Information | 59 | |||
| Other Information | 59 | |||
| Index to Consolidated Financial Statements | F-1 | |||
i
FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated in this prospectus by reference may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You can identify a forward-looking statement by our use of the words “anticipate,” “estimate,” “expect,” “may,” “believe,” “objective,” “projection,” “forecast,” “goal,” and similar expressions. These forward-looking statements include our statements regarding the timing of future events, our anticipated future operations and our anticipated future financial position and cash requirements. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we do not know whether our expectations will prove correct. We disclose the important factors that could cause our actual results to differ from our expectations in cautionary statements made in this prospectus and in other filings we have made with the Securities and Exchange Commission. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors described in this prospectus and other factors set forth in or incorporated by reference in this prospectus.
Many of these factors are beyond our ability to control or predict. We caution you not to put undue reliance on forward-looking statements or to project any future results based on such statements or on present or prior earnings levels. Please see “Risk Factors” for a discussion of some of the factors that may adversely affect an investment in the securities.
INDUSTRY DATA
Market share and industry data disclosed in this prospectus have been obtained from the following sources/ publications: Nielsen Media Research; Goodyear Racing Attendance Reports; Joyce Julius & Associates; Street & Smith’s Sports Business Journal; Major League Baseball; National Football League; National Basketball Association; National Hockey League; National Association for Stock Car Auto Racing; Indy Racing League; Championship Auto Racing Teams; International Race of Champions; Automobile Racing Club of America; Grand American Road Racing Association; National Hot Rod Association; Sports Car Club of America; United States Auto Club; American Motorcyclist Association; Federation Internationale de l’Automobile; and ESPN Sports Polls. We have not independently verified any of the data from these sources/ publications.
INTELLECTUAL PROPERTY
We have various registered and common law trademark rights, including, but not limited to, “California Speedway,” “Darlington Raceway,” “Southern 500,” “Too Tough to Tame,” “Daytona International Speedway,” “DAYTONA USA,” the “Daytona 500,” the “24 Hours of Daytona,” “Acceleration Alley,” “Daytona Dream Laps,” “Speedweeks,” “World Center of Racing,” “Homestead-Miami Speedway,” “Kansas Speedway,” “Michigan International Speedway,” “Nazareth Speedway,” “North Carolina Speedway,” “The Rock,” “Phoenix International Raceway,” “Richmond International Raceway,” “The Action Track,” “Talladega Superspeedway,” “Watkins Glen International,” “The Glen,” “Americrown,” “Motor Racing Network,” “MRN,” “Truxpo Truck Tour” and related logos. This prospectus and the documents incorporated by reference also include trademarks, service marks and trade names of other companies.
ii
SUMMARY
THE FOLLOWING INFORMATION IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE
READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND CONSOLIDATED
FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS
PROSPECTUS. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS
ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION. UNLESS THE
CONTEXT OTHERWISE REQUIRES, REFERENCES HEREIN TO THE "COMPANY" MEAN
INTERNATIONAL SPEEDWAY CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES CONSIDERED
AS ONE ENTERPRISE.
THE COMPANY
The following summary is qualified in its entirety by and should be read together with the more detailed information and audited financial statements, including the related notes, contained or incorporated by reference in this prospectus. Except as expressly indicated or unless the context otherwise requires, “ISC,” “we,” “our” and “us” means International Speedway Corporation, a Florida corporation, and its consolidated subsidiaries.
International Speedway Corporation
We are a leading promoter of motorsports entertainment activities in the United States, ownsStates. We own and/or operates fiveoperate twelve of the nation's
premiernation’s major motorsports facilities--Daytonafacilities:
| • | Daytona International Speedway in Florida; | |
| • | Talladega Superspeedway in Alabama; | |
| • | Michigan International Speedway in Michigan; | |
| • | Richmond International Raceway in Virginia; | |
| • | California Speedway in California; | |
| • | Kansas Speedway in Kansas; | |
| • | Phoenix International Raceway in Arizona; | |
| • | Homestead-Miami Speedway in Florida; | |
| • | North Carolina Speedway in North Carolina; | |
| • | Darlington Raceway in South Carolina; | |
| • | Watkins Glen International in New York; and | |
| • | Nazareth Speedway in Pennsylvania. |
In addition, Raceway Associates, LLC, in Florida;
Talladega Superspeedwaywhich we hold a 37.5% indirect equity interest, owns and operates two nationally recognized major motorsports facilities in Alabama; Phoenix International Raceway in Arizona;
Darlington Raceway in South Carolina; and Watkins Glen International road
course facility in upstate New York. OtherIllinois:
| • | Chicagoland Speedway; and | |
| • | Route 66 Raceway. |
In 2001, these motorsports interests include the
operation of Tucson Raceway Park in Arizona, a 45% indirect interest in the
operations of the Metro--Dade Homestead Motorsports Complex near Miami, Florida
and an approximately 11% indirect interest in Penske Motorsports, Inc. The
Company currently promotesfacilities promoted well over 80100 stock car, open-wheel, sports car, truck, motorcycle and other racing events, annually, including eight NASCAR Winston Cup Series
championship point races, two Winston Cup Series non-championship pointincluding:
| • | 20 NASCAR Winston Cup Series events; | |
| • | 16 NASCAR Busch Series, Grand National Division events; | |
| • | 8 NASCAR Craftsman Truck Series events; | |
| • | 5 Indy Racing League (“IRL”) events; | |
| • | 3 Championship Auto Racing Teams (“CART”) FedEx Championship Series events; | |
| • | 2 National Hot Rod Association national events; | |
| • | the premier sports car endurance event in the United States (the Rolex 24 at Daytona sanctioned by the Grand American Road Racing Association); and | |
| • | a number of prestigious motorcycle races. |
Our business consists principally of racing events five NASCAR Busch Series, Grand National Division ("Busch Grand National
Series") races,at these major motorsports facilities, which, in total, currently have more than 1 million grandstand seats. We generate revenue primarily from admissions, television, radio and ancillary rights fees, promotion and sponsorship fees, hospitality rentals (including luxury suites, chalets and the premier sports car endurance event inhospitality portion of club seating), advertising revenues, royalties from licenses of our trademarks and track rentals, as well as from catering, merchandise and food concession services at most of our facilities. We also own and operate the United States
(the Rolex 24 at Daytona) and a number of prestigious motorcycle races. The
Company also owns and operatesMotor Racing Network, Inc. radio network, or MRN Radio, the nation'snation’s largest independent sports radio network, and DAYTONA USA--TheUSA — The Ultimate Motorsports Attraction, a motorsports-themed entertainment complex that includes interactive media,
theaters, historical memorabilia, exhibits and tours of Daytona International
Speedway. In the year ended November 30, 1997 ("fiscal 1997"),
NASCAR-sanctioned races at the Company's facilities accounted for approximately
78% of the Company's total revenues.
According to THE WALL STREET JOURNAL, stock car racing is the most-watched
professional sport on U.S. television behind the National Football League.
According to Nielsen Media Research ("Nielsen"), more than 175 million people
tuned to NASCAR's televised events in 1997. Moreover, based on statistics
developed by The Goodyear Tire and Rubber Co. ("Goodyear"), attendance at
NASCAR's three major professional circuits, the Winston Cup Series, the Busch
Grand National Series and the Craftsman Truck Series, grew 9.0%Official Attraction of NASCAR.
1
We have grown significantly in recent years through both internal and external initiatives. From fiscal 1997 through fiscal 2001, our revenues increased from $141.4 million to $528.5 million, a compound annual growth rate, or CAGR, of 39%. In particular, our motorsports related income increased from 33.0% of our total revenues in fiscal 1997 to 45.1% in fiscal 2001, or at a CAGR of 50%. Over the same period, our EBITDA increased from $54.8 million to $224.0 million, a CAGR of 42%, 16.6% and 13.5%, respectively,our EBITDA margin increased from 199638.8% in fiscal 1997 to 1997. The Company believes that the
demographic profile of this growing base of spectators42.4% in fiscal 2001. We remain focused on several growth opportunities, including maximizing our media income and viewers has
considerable appealexposure and developing long-term marketing partnerships, which should enable us to sponsors and advertisers, including leading consumer
product and manufacturing companies which have expanded their participationenhance our leadership position in the motorsports industry. Published reports indicate that corporate sponsors
will spend an estimated $1.1 billion on motorsports marketing programs in 1998.
The Company's major sponsors include Pepsi, Coca-Cola, Kmart, Sears, Anheuser
Busch, Rolex, Pontiac, Ford, Chevrolet, Dura-Lube, DuPont, Circuit City,
Goodyear, TranSouth Financial, First Union, NAPA Auto Parts and Gatorade.
The Company attributes its historical increases in revenues and profits to
the increasing popularity of the Winston Cup Series, the Busch Grand National
Series and other motorsports events in the United States, as well as an
operating strategy that emphasizes (i) senior management's long-term
association with the motorsports industry, (ii) capital improvements and other
efforts designed to maximize race spectators' total entertainment experience,
(iii) integrated marketing programs targeting both corporate and individual
customers, (iv) the development of long-term relationships with sponsors, and
(v) the use of media to increase awareness of the Company's major racing events
and the motorsports industry.
3
RECENT DEVELOPMENTS
Following its initial public offering of Class A Common Stock in November
1996, the Company completed several significant projects:
/bullet/ During fiscal 1997, the Company increased combined grandstand
seating capacity at Daytona, Talladega, Darlington and Watkins Glen by
approximately 13%, and increased the total number of luxury suites at
these facilities by approximately 40%.
/bullet/ In April 1997, the Company acquired the 50% interest it did not
own in Watkins Glen International, strengthening the Company's presence in
an important northeast market.
/bullet/ In July 1997, the Company acquired Phoenix International Raceway,
providing a key western presence in one of the nation's largest markets.
/bullet/ In July 1997, the Company also acquired a 40% indirect interest in
the operations of the Metro-Dade Homestead Motorsports Complex located
south of Miami, Florida, and increased this interest to 45% in March 1998.
FUTURE GROWTH STRATEGY
The Company has experienced significant growth in recent years with
revenues and net income increasing from approximately $59.2 million and $12.8
million for the fiscal year ended August 31, 1993 to $141.4 million and $29.8
million for the year ended November 30, 1997, respectively. The Company expects
to continue to increase its revenues and profitability by focusing on the key
elements of its growth strategy, including (i) expanding the Company's existing
track facilities to satisfy existing spectator demand, (ii) developing a unique
brand identity for each of the Company's motorsports facilities, (iii)
increasing television, sponsorship and other motorsports related income, (iv)
maximizing the profitability of existing facilities and events, and (v)
acquiring and/or developing additional motorsports facilities in new markets.
The Company expects to make approximately $56.0 million of capital
expenditures for projects at existing facilities during the 24-month period
ending February 29, 2000 to increase grandstand seating capacity, to construct
luxury suites, and for a number of other improvements, of which approximately
$7.8 million had been spent as of the date hereof. These planned capital
expenditures include a track lighting project at Daytona, which will allow CBS
Sports to broadcast the Pepsi 400 at Daytona on the evening of July 4, 1998,
the first live network broadcast of an automobile race in prime time.
In December 1997, the Company entered into a development agreement for the
construction of the Kansas International Speedway, a 1.5 mile oval motor
speedway near Kansas City, Kansas. The aggregate cost of acquiring and
developing the first phase of the Kansas International Speedway land and
facility (which will accommodate approximately 75,000 spectators) is expected to
be over $200 million, of which the Company's estimated investment of
approximately $58.8 million will be funded with a portion of the proceeds of
this Offering. Ground breaking is scheduled for 1998, with racing expected to
begin in 2000. In addition, the Company and Indianapolis Motor Speedway
Corporation are equal partners in a venture exploring the possible development
of a new motorsports facility near Chicago, Illinois. The Company's ability to
develop the Kansas International Speedway is subject to the resolution of
certain litigation and to a number of other significant conditions, including
the Company's ability to acquire the land and obtain all requisite regulatory
approvals.
4
The Company was
We were incorporated in 1953 under the laws of the State of Florida under the name "Bill“Bill France Racing, Inc."” and changed itsour name to "International“Daytona International Speedway Corporation"Corporation” in 1968. The Company's1955. With the groundbreaking for Talladega Superspeedway in 1968, we changed our name to “International Speedway Corporation.” Our principal executive offices are located at 1801 West International Speedway Boulevard, Daytona Beach, Florida 32114, and itsour telephone number is (904)(386) 254-2700. "DAYTONA USA/registered trademark/",We maintain a website at http://www.iscmotorsports.com. The information on our website is not part of this prospectus.
Industry Overview
Motorsports is among the "Daytona 500/registered
trademark/", "Daytona International Speedway/registered trademark/", "Talladega
Superspeedway/registered trademark/", "Darlington/registered trademark/",
"Phoenix International Raceway/registered trademark/", "Watkins Glen
International/registered trademark/"most popular and "World Centerfastest growing spectator sports in the United States, with annual attendance at all U.S. motorsports events exceeding 17 million people. The NASCAR Winston Cup, NASCAR Busch Grand National and NASCAR Craftsman Truck events, each sanctioned by NASCAR, and the open-wheel events sanctioned by IRL and CART are generally the most popular motorsports events in the United States. The largest auto racing category in the United States, in terms of Racing/registered
trademark/"attendance, media exposure and sponsorships, is stock car racing. The most prominent sanctioning body in stock car racing is NASCAR, based on such factors as geographic presence and number of members, series and sanctioned events. We derived approximately 82% of our 2001 revenues from NASCAR-sanctioned racing events at our wholly-owned facilities.
Evolving from the NASCAR Grand National Series which began in 1950, in the early 1970’s NASCAR created the NASCAR Winston Cup Series. In 2002, this premier series will consist of 39 televised events, including three non-championship point events, at 23 tracks operating in 19 states. Among all major U.S. professional sports, NASCAR Winston Cup events have experienced the greatest increase in spectator attendance, growing at a compound annual rate of 6% from 1990 to 2001. Average household television viewership for the 2001 NASCAR Winston Cup increased more than 36% over the prior year. More than 280 million television viewers watched NASCAR Winston Cup televised events in 2001, up 54% from the previous year. The demographic numbers showed a 29% increase in male viewers ages 18 to 34, and a 34% increase in male viewers ages 18 to 49. In addition, a significant milestone was reached with the airing of Talladega’s EA Sports 500. The race’s 4.8 Nielsen rating, representing 8 million viewers, was the highest national rating ever for an auto race that was broadcast in direct television competition with professional football.
Motorsports events generally are registered trademarksheavily promoted, with a number of supporting events surrounding each main race event. Examples of supporting events include secondary races, qualifying time trials, practice sessions, driver autograph sessions, automobile and service marksproduct expositions, catered parties and other related events, all of which are designed to maximize the spectators’ overall entertainment experience and enhance the value to sponsors. The primary participants in the business of auto racing are sanctioning bodies, spectators, track operators, sponsors, major automobile manufacturers, drivers and crew members, team owners and vendors of officially licensed merchandise.
2
Business Strengths
We have experienced significant growth in recent years, which we believe is attributable to the following strengths of our business:
| A Leader in Motorsports Entertainment and the Largest NASCAR Promoter |
Our main focus has been driving revenue growth by creating a strong network of facilities across the country. We own, operate and/or have a material interest in 14 major motorsports facilities that, in total, have more than 1 million grandstand seats and are located in six of the Company.
"NASCAR/registered trademark/" and "Grand National/registered trademark/" are
registered trademarks and service marksnation’s top ten media markets. Nearly 80% of the country’s population is located within the primary trading areas, a 400-mile radius, of our facilities. We promote major events in every month of the racing season — more than any other motorsports promoter. Collectively, these 14 facilities are scheduled to promote well over 100 motorsports events during the 2002 racing season, including 20 NASCAR Winston Cup races — 51% of the 2002 NASCAR Winston Cup schedule, including non-championship point events.
Long-Term Affiliation with the Motorsports Industry and NASCAR
Members of the France family have been involved in senior management positions with us since our formation in 1953. We believe that the France family’s extensive network of contacts in the motorsports industry, as well as their reputation as a long-term steward of the sport, enhances our ability to pursue new market and other growth opportunities. We also believe that the France family’s long-standing involvement with us has provided us a number of other significant advantages, including a reduced risk of disruption in our operating policies and long-range strategies, which, in turn, provides an assurance of continuity to employees, sponsors, sanctioning bodies and other entities that enter into commitments or relationships with us. Moreover, our experience and expertise extend beyond stock car racing to a wide variety of other motorsports disciplines, including open-wheel, sports cars and motorcycles. In addition, the France family has been instrumental in the development of the nation’s motorsports industry through their organization, continued management and ownership of NASCAR, which, in turn, has been influential in the growth and development of both our operations and professional stock car racing generally.
Proven Ability to Capitalize on Marketing Opportunities
In order to maximize the exposure from advertising and promotions and to increase per capita spending from our customers, we pursue a fully integrated marketing strategy that includes sponsorships, advertising, promotion, licensing and individual consumer initiatives. We believe it is important to market our racing events, facilities and trademarks to both corporate and individual customers. Our leadership position in the motorsports industry enables us to market to a broader base of corporate and individual customers. Our national footprint has enabled us to create multi-track sponsorship opportunities targeting larger corporate customers with higher advertising and marketing budgets. We utilize a centralized corporate marketing structure complemented by strong facility resources to provide enhanced value to our marketing partners and develop and execute consumer marketing programs. In 2001, nearly 80 of our corporate marketing partners capitalized on multi-track positions, and we executed more than a dozen promotions targeting customers in ten markets through e-mail offers, consumer sweepstakes, auctions and other direct marketing campaigns.
Highly Predictable and Recurring Revenue Base
We have strong visibility on our future revenue streams due to long-term media contracts, multi-year sponsorship and luxury suite agreements, and recurring ticket and hospitality sales. NASCAR has signed multi-billion dollar television contracts covering its NASCAR Winston Cup Series and NASCAR Busch Grand National AssociationSeries, which extend through the 2006 season. We will receive a significant portion of the rights fees under these contracts, assuming the number of NASCAR races held at our tracks each year remains stable, consistent with our past experience. We also have a significant number of long-term
3
Proven Ability to Acquire, Develop and Integrate Facilities
We regularly review acquisition and development prospects that would augment or complement our existing operations or otherwise offer significant growth opportunities. As a result, we have successfully completed several acquisitions over the last few years. In 1999, we acquired Richmond, and through our merger with Penske Motorsports, Inc., we acquired California, Michigan, North Carolina and Nazareth and increased to 90% our ownership in Miami, the remaining 10% of which we acquired in October 2001. Each of these businesses was successfully integrated into our operations within twelve months of the transaction. These transactions strategically increased our motorsports presence and were financed through a combination of internal and external financing sources, including investment grade debt.
Recent examples of development include our Kansas facility and the Chicagoland facility, in which we hold a 37.5% interest, each of which opened in mid-2001. Both facilities hosted significant inaugural schedules featuring major NASCAR, IRL and Automobile Racing Club of America events, and received favorable reviews from the fans, drivers, teams and media. In addition, both facilities received significant support from corporate marketing partners and individual consumers. For example, both Kansas and Chicagoland sold all of their grandstand seats as season ticket packages — a first for a major facility in motorsports entertainment.
Highly Experienced and Incentivized Management Team
William H.G. France, the father of both our Chairman and President, founded NASCAR in 1947, and the France family has controlled us since our inception in 1953. The France family has been instrumental in the development of the nation’s motorsports industry through their organization, continued management and ownership of NASCAR. As we derived approximately 82% of our 2001 revenues from NASCAR-sanctioned racing events at our wholly-owned facilities, we are well positioned to benefit from the significant motorsports experience of the France family. In addition, our management team members have on average over 20 years of sports industry experience and collectively have over 400 years of sports industry experience. Management’s interests are aligned with those of our shareholders, as key members of management own shares of our common stock.
Growth Strategy
We use the following key strategies to grow and enhance our leadership position in the motorsports entertainment industry:
Maximize Media Income and Exposure
Our media initiatives are designed to be comprehensive and integrated and include television, radio, newspapers and trade and consumer publications. The most important medium continues to be television, and televised motorsports events continue to experience significant growth in viewership. Since 1997, NASCAR Winston Cup and NASCAR Busch Grand National domestic television rights revenues have grown at a CAGR of 54%, from $46 million in 1997 to $259 million in 2001. During this time, gross television rights revenues attributable to our events, excluding Chicagoland, increased from $13.5 million to $126.5 million, a CAGR of 75%. We expect media rights revenues to continue to increase based on NASCAR’s announcement that the annual increase in the domestic television contracts will range between 15% and 21% from 2001 through 2006, with an average annual increase of 17%. The increase for fiscal 2002 is expected to be approximately 15%.
In addition to generating substantially higher rights fees, these television rights agreements are expected to create significant indirect benefits for the industry that will help drive future growth. For example, network event coverage increased significantly during 2001. In 2001, approximately 70% of the
4
Develop New and Expand Existing Marketing Partnerships
Marketing partners support us and the motorsports industry in several ways. First, they pay fees to track operators for sponsorship, official status benefits and the use of intellectual properties. Second, the promotional and advertising expenditures of marketing partners provide us with indirect marketing benefits by promoting awareness for our events through various distribution channels, including in-store promotions and direct mail campaigns. Third, marketing partners pay fees to track operators for hospitality packages to entertain their customers at events. Finally, marketing partners support racing teams by funding certain operational costs. Accordingly, we devote significant resources to develop new and expand existing relationships with leading companies.
Marketing partners form a variety of different relationships with track operators. Some contracts allow the marketing partner to name a particular racing event, as in the Pepsi 400 at Daytona, the Pontiac Excitement 400 and the EA Sports 500. Other considerations range from official status designation to advertising and promotional rights in the marketing partner’s product category. Our sponsorship portfolio has evolved dramatically over the past few years. We have been successful in attracting new marketing partners by creating additional official status categories, more narrowly defining existing categories, and growing revenues associated with licensing and on-site interactive programs. As a result of these efforts, event title sponsorships, which made up a substantial majority of sponsorship revenue in 1996, represented less than 30% of our sponsorship revenue in 2001. In addition, in 2001, we had over 100 official status categories and approximately 250 marketing partners, including Anheuser Busch, AT&T Broadband, Coors, Dodge, DuPont, Electronic Arts, General Motors, GNC, Home Depot, Mattel, Miller, NAPA Auto Racing, Inc. ("NASCAR").
THE OFFERING
Parts, Pepsi, Rolex, SunTrust Banks, UPS and Valvoline.
Maximize Profitability of Existing Events and Facilities
Spectator demand for our largest events has continued to meet or exceed existing capacity; however, there is often unused capacity for other events. Our efforts to increase attendance at non-sold out events include (i) establishing multiple ticket price points, including the sale of multi-event ticket packages, (ii) strategic marketing of other products and services, including sponsorship promotions and hospitality suites, (iii) continued improvements in the quality and diversity of food and beverage concessions, and (iv) other enhancements and upgrades to the design, presentation and quality of our promoted events, facilities and spectator amenities. While each of our facilities conducts several major events annually, there is significant opportunity to increase the utilization of these facilities. We strive to maximize our profitability by working with various sanctioning bodies to modify event schedules. For example, a NASCAR Busch Grand National event has been added to Daytona’s 2002 schedule, and Watkins Glen was removed from the 2002 NASCAR Busch Grand National schedule. We believe over the long term a NASCAR Busch Grand National event at Daytona will be more profitable than a NASCAR Busch Grand National event at Watkins Glen due to the prestige and size of Daytona, and the ability to hold the event on the evening prior to the NASCAR Winston Cup Pepsi 400 at Daytona.
Expand Existing Facilities
An important component of our strategy has been our long-standing practice of focusing closely on supply and demand regarding additional capacity at our facilities. We continually evaluate the demand for our most popular racing events in order to ensure that additional capacity provides an acceptable rate of return on invested capital. Through prudent expansion, we have historically been able to keep demand at a
5
Acquire and Develop Additional Motorsports Facilities
We regularly review acquisition and development opportunities that would augment or complement our existing operations or otherwise offer growth opportunities. Recent examples of such acquisition and development efforts include Penske Motorsports, Richmond and Kansas, as well as our 37.5% interest in Chicagoland. We are currently exploring developing motorsports facilities in the metropolitan New York and Denver areas. We believe our acquisition and development efforts exemplify our commitment to strategically increase our presence in the motorsports entertainment industry.
6
The Offering
| Class A Common Stock | 2,500,000 shares | |
| Common Stock to be | 24,536,711 shares of class A common stock 28,627,121 shares of class B common stock 53,163,832 total shares of common stock | |
| Use of Proceeds | All of the | |
| Nasdaq National Market Symbol of Class A Common Stock | ISCA | |
| Risk Factors | We urge you to read carefully the risk factors beginning on page 10 for a discussion of factors you should consider before acquiring shares of class A common stock. | |
| Voting, Conversion and Dividend Rights | Our class A common stock and class B common stock are identical in all respects, except for voting rights and certain non-cash dividend and conversion rights. Each share of class A common stock entitles the holder to one-fifth (1/5) of one vote and each share of class B common stock entitles the holder to one vote on each matter submitted to a vote of our stockholders, including the election of directors. Except as required by applicable law, holders of class A common stock and class B common stock vote together on all matters submitted to a vote of stockholders. Holders of class A common stock and class B common stock have identical rights to cash dividends. Class A common stock has no conversion rights. Class B |
The number of shares of class A common stock to be outstanding immediately after this offering is based on 24,536,711 shares outstanding as of December 31, 2001. This number of shares of class A common stock excludes shares issuable upon exercise of outstanding stock options and shares reserved for future grants under our stock incentive plans. As of December 31, 2001, there were:
| • | 45,528 shares of | |
| • | 870,998 shares of class A common stock reserved for future grants under our stock incentive plans. |
Unless otherwise specified, the information contained in this prospectus assumes no exercise of the underwriters’ over-allotment option.
7
Summary Financial Data
The following table sets forth our summary income statement financial data for each of the five fiscal years in the period ended November 30, 2001 and our summary balance sheet data as of November 30, 2001. The income statement data for the three fiscal years in the period ended November 30, 2001, and the balance sheet data as of November 30, 2001, have been derived from our audited historical consolidated financial statements included elsewhere in this prospectus, which financial statements have been audited by Ernst & Young LLP, independent certified public accountants, as indicated in their report thereon. The income statement data for the fiscal years ended November 30, 1998 and 1997 have been derived from our audited historical consolidated financial statements. You should read the selected financial data set forth below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the accompanying notes included elsewhere in this prospectus.
| For the Year Ended November 30, | |||||||||||||||||||||||
| 1997 | 1998 | 1999 | 2000 | 2001 | |||||||||||||||||||
| (in thousands, except per share and selected operating data) | |||||||||||||||||||||||
Income Statement Data: | |||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Admissions, net | $ | 69,487 | $ | 86,946 | $ | 133,897 | $ | 192,789 | $ | 214,494 | |||||||||||||
| Motorsports related income | 46,650 | 71,793 | 115,570 | 175,809 | 238,208 | ||||||||||||||||||
| Food, beverage and merchandise income | 23,408 | 28,597 | 46,668 | 66,880 | 70,575 | ||||||||||||||||||
| Other income | 1,829 | 1,632 | 2,587 | 4,952 | 5,233 | ||||||||||||||||||
| Total revenues | 141,374 | 188,968 | 298,722 | 440,430 | 528,510 | ||||||||||||||||||
| Expenses: | |||||||||||||||||||||||
| Direct expenses: | |||||||||||||||||||||||
| Prize and point fund monies and NASCAR sanction fees | 20,567 | 28,767 | 45,615 | 71,260 | 87,859 | ||||||||||||||||||
| Motorsports related expenses | 23,075 | 33,283 | 51,590 | 82,230 | 98,458 | ||||||||||||||||||
| Food, beverage and merchandise expenses | 13,435 | 15,025 | 25,539 | 38,448 | 38,251 | ||||||||||||||||||
| General and administrative expenses | 29,486 | 37,842 | 54,956 | 75,030 | 79,953 | ||||||||||||||||||
| Depreciation and amortization | 9,910 | 13,137 | 25,066 | 51,150 | 54,544 | ||||||||||||||||||
| Total expenses | 96,473 | 128,054 | 202,766 | 318,118 | 359,065 | ||||||||||||||||||
| Operating income | $ | 44,901 | $ | 60,914 | $ | 95,956 | $ | 122,312 | $ | 169,445 | |||||||||||||
| Net income | $ | 29,796 | $ | 40,192 | $ | 56,613 | $ | 50,426 | $ | 87,633 | |||||||||||||
| Earnings per share(1): | |||||||||||||||||||||||
| Basic | $ | 0.78 | $ | 1.00 | $ | 1.22 | $ | 0.95 | $ | 1.65 | |||||||||||||
| Diluted | $ | 0.78 | $ | 1.00 | $ | 1.22 | $ | 0.95 | $ | 1.65 | |||||||||||||
| Dividends per share | $ | 0.06 | $ | 0.06 | $ | 0.06 | $ | 0.06 | $ | 0.06 | |||||||||||||
| Weighted average shares outstanding(1): | |||||||||||||||||||||||
| Basic | 38,185,473 | 40,025,643 | 46,394,614 | 52,962,646 | 52,996,660 | ||||||||||||||||||
| Diluted | 38,339,978 | 40,188,800 | 46,518,977 | 53,049,293 | 53,076,828 | ||||||||||||||||||
Other Financial Data: | |||||||||||||||||||||||
| EBITDA(2) | $ | 54,811 | $ | 74,051 | $ | 121,022 | $ | 173,462 | $ | 223,989 | |||||||||||||
| EBITDA margin | 38.8 | % | 39.2 | % | 40.5 | % | 39.4 | % | 42.4 | % | |||||||||||||
| Capital expenditures | $ | 38,627 | $ | 71,858 | $ | 126,596 | $ | 132,661 | $ | 98,379 | |||||||||||||
Selected Operating Data: | |||||||||||||||||||||||
| Total admissions | 1,416,600 | 1,730,500 | 2,243,800 | 3,132,600 | 3,550,000 | ||||||||||||||||||
| Number of grandstand seats(3) | 383,000 | 425,000 | 850,000 | 970,000 | 1,058,000 | ||||||||||||||||||
| Number of major motorsports events(4) | 20 | 22 | 31 | 51 | 58 | ||||||||||||||||||
8
| At November 30, 2001 | ||||
| (in thousands) | ||||
Balance Sheet Data: | ||||
| Working capital (deficit) | $ | (28,471 | ) | |
| Total assets(5) | 1,702,146 | |||
| Long-term debt | 402,477 | |||
| Total debt | 411,702 | |||
| Total shareholders’ equity(5) | 1,035,422 | |||
| (1) | Earnings per share and weighted average share amounts prior to |
| (2) | EBITDA means operating income before depreciation and amortization. EBITDA is a measure commonly used by the |
| (3) | Represents number of grandstand seats at our majority-owned and/or operated major motorsports facilities as of November 30. |
| (4) | Major events mean our NASCAR |
| (5) | Does not reflect the adoption of Statement of Financial Accounting Standard No. 142, which is expected to result in a non-cash after-tax charge of approximately $513.8 million in the first quarter of fiscal 2002. To reflect this charge, total assets and |
9
RISK FACTORS
Before you buy any shares of our class A
FEBRUARY 28, 1998
----------------------------
ACTUAL AS ADJUSTED(7)
------------ ---------------
BALANCE SHEET DATA:
Working capital (deficit) .......... $ (9,129) $
Total assets ....................... 337,366
Long-term debt ..................... --
Total shareholders' equity ......... 230,675
- ----------------
(1) The Company changed its fiscal year-end to November 30 effective December
1, 1996. This resulted in a three-month transition period commencing
September 1, 1996 and ending November 30, 1996.
(2) Reflects income of $288,000 ($0.01 per share) attributable to the
cumulative effect of a change in accounting principle.
(3) Earnings per share amounts prior to 1998 have been restated as required to
complycommon stock offered by this prospectus, you should be aware that there are various risks, including those described below. You should consider carefully these risk factors together with Statement of Financial Accounting Standards No. 128. See Note
1 of Notes to the Company's audited financial statements.
(4) Consists of seating in grandstands and luxury suites asall of the end of
period. Excludes infield admission.
(5) Phoenix International Raceway was acquired July 14, 1997.
(6) Thisother information relatescontained in this prospectus and in the documents that are incorporated by reference before you decide to the year which ended December 31 following the
end of the specified fiscal year and was obtained from public information
provided by Goodyear.
(7) Adjusted to give effect to the sale by the Company of 4,000,000acquire any shares of Classour class A Common Stock at an assumed public offering price of $ per
share and the application of the estimated net proceeds therefrom as set
forth in "Use of Proceeds."
6
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE FACTORS SET FORTH
BELOW, AS WELL AS THE OTHER INFORMATION PROVIDED ELSEWHERE IN THIS PROSPECTUS,
IN EVALUATING AN INVESTMENT IN THE COMPANY.
STATEMENTS IN THIS PROSPECTUS TO THE EFFECT OF THE COMPANY'S OR
MANAGEMENT'S ANTICIPATIONS, BELIEFS, EXPECTATIONS, INTENTIONS, STRATEGIES,
SCHEDULES AND/OR WORDS OF SIMILAR IMPORT 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 21E OF THE
SECURITIES EXCHANGE ACT OF 1934. SUCH STATEMENTS RELATE TO, AMONG OTHER ITEMS,
(I) THE COMPANY'S GROWTH STRATEGIES, INCLUDING ITS POTENTIAL ACQUISITION AND/OR
DEVELOPMENT OF NEW MOTORSPORTS FACILITIES, (II) ANTICIPATED TRENDS IN THE
MOTORSPORTS INDUSTRY AND DEMOGRAPHICS, AND (III) THE COMPANY'S ABILITY TO ENTER
INTO CONTRACTS WITH TELEVISION NETWORKS AND SPONSORS. THESE FORWARD-LOOKING
STATEMENTS ARE BASED LARGELY ON THE COMPANY'S EXPECTATIONS AND ARE SUBJECT TO A
NUMBER OF RISKS AND UNCERTAINTIES, CERTAIN OF WHICH ARE BEYOND THE COMPANY'S
CONTROL. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THESE FORWARD-LOOKING
STATEMENTS AS A RESULT OF A NUMBER OF FACTORS, INCLUDING THOSE DESCRIBED BELOW.
IN LIGHT OF THESE RISKS AND UNCERTAINTIES, THERE CAN BE NO ASSURANCE THAT THE
EVENTS THAT ARE SUBJECT TO THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS
PROSPECTUS WILL IN FACT TRANSPIRE.
DEPENDENCY UPON NASCAR
The Company'scommon stock.
Risks Related To Our Business
Our success depends on our relationships with motorsports sanctioning bodies, particularly NASCAR.
Our success has been, and willis expected to remain, dependent uponon maintaining
a good working relationshiprelationships with the organizations that sanction the races we promote at our facilities, particularly NASCAR, the sanctioning body for NASCAR'sNASCAR Winston Cup, Series, theNASCAR Busch Grand National Series and certain otherNASCAR Craftsman Truck events. NASCAR-sanctioned races promotedconducted by the Company. The Company has sanctioning agreements to promote and
market eight Winston Cup Series championship point races, two Winston Cup
Series non-championship point races, five Busch Grand National Series races and
a numberour wholly-owned subsidiaries accounted for approximately 82% of other NASCAR races for the 1998 racing season.our total revenues in fiscal 2001.
Each NASCAR event sanctioning agreement is awarded on an annual basis. In fiscal 1997,
NASCAR-sanctioned races at the Company's facilities accounted for approximately
78% of the Company's total revenues. Although William C. France and James C.
France presently control both the Company and NASCAR and management believes
that the Company will continue to maintain an excellent relationship with
NASCAR for the foreseeable future, NASCAR is under no obligationnot required to continue to enter into, renew or extend sanctioning agreements with the Companyus to promoteconduct any event. Failure to obtain a sanctioning agreement for a major NASCAR event would have a
material adverse effect on the Company's financial condition and results of
operations. Moreover, although the Company'sour general growth strategy includes the possible development and/or acquisition of additional motorsports facilities, there canit cannot be no assuranceassured that any sanctioning body, including NASCAR, will enter into sanctioning agreements with the Companyus to promoteconduct races at any of our newly developed or acquired facilities. Failure to obtain a sanctioning agreement for a major NASCAR event could negatively affect us. Similarly, NASCAR is not obligated to modify its race schedules to allow us to schedule our races more efficiently. By sanctioning an event, NASCAR neither warrants, expressly or by implication, nor takes responsibility for, the success, financial or otherwise, of the sanctioned event or the number or identity of vehicles or competitors participating in the event.
Bad weather could adversely affect us.
We promote outdoor motorsports events. Weather conditions affect sales of, among other things, tickets, food, drinks and merchandise at these events. Poor weather conditions could have a negative effect on us.
Postponement and/or cancellation of major motorsports events could adversely affect us.
If an event scheduled for one of our facilities is postponed because of weather or other reasons such as, for example, the general postponement of all major sporting events in this country following the September 11th terrorist attacks, we could incur increased expenses associated with conducting the rescheduled event, as well as possible decreased revenues from tickets, food, drinks and merchandise at the rescheduled event. If such an event is cancelled, we would incur the expenses associated with preparing to conduct the event, as well as losing the revenues, including live broadcast revenues, associated with the event, to the extent such losses were not covered by insurance.
If a cancelled event is part of the NASCAR Winston Cup Series or NASCAR Busch Grand National Series, we could experience a reduction in the amount of money received from television revenues for all of our NASCAR-sanctioned events in the series that experienced the cancellation. This would occur if, as a result of the cancellation, NASCAR experienced a reduction in television revenues greater than the amount scheduled to be paid to the promoter of the cancelled event, without regard to whether the cancelled event was scheduled for one of our facilities. See "NASCAR."
DEPENDENCE ON KEY PERSONNEL
The Company's continued
10
Our financial results depend significantly on consumer and corporate spending.
Our financial success depends significantly upon a number of factors relating to discretionary consumer and corporate spending, including economic conditions affecting disposable consumer income and corporate budgets such as:
| • | employment; | |
| • | business conditions; | |
| • | interest rates; and | |
| • | taxation rates. |
These factors can impact both attendance at our events and advertising and marketing dollars available from the motorsports industry’s principal sponsors. There can be no assurance that consumer and corporate spending will depend uponnot be affected adversely by economic and other lifestyle conditions, thereby impacting our growth, revenue and profitability. General economic conditions were significantly and negatively impacted by the availabilitySeptember 11th terrorist attacks and performancecould be similarly affected by any future attacks. A weakened economic and business climate, as well as consumer uncertainty created by such a climate, could adversely affect our financial success.
Certain of itsour senior management team, particularlyexecutives may have potential conflicts of interest.
William C. France, the
Company'sour Chairman of the Board and Chief Executive Officer, and James C. France, itsour President, and Chief Operating Officer and one of our directors, control NASCAR. Lesa D. Kennedy, itsour Executive Vice President (collectivelyand one of our directors, is also a Vice President of NASCAR. Each of them, as well as our general counsel, spends part of his or her time on NASCAR’s business. 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. Because of these relationships, 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 the employees mentioned above and certain other of our employees devote to NASCAR’s affairs; and | |
| • | the amounts charged or paid to NASCAR for office rental, transportation costs, shared executives, administrative expenses and similar items. |
Our success depends on the "France Family Executives"), eachavailability and performance of whomkey personnel.
Our continued success depends upon the availability and performance of our senior management team, particularly William C. France, James C. France and Lesa D. Kennedy. Each of these individuals possesses unique and extensive industry knowledge and experience. While the
Company believeswe believe that itsour senior management team has significant depth, the loss of any of the Company's key personnelindividuals mentioned above, or itsour inability to attractretain and retainattract key employees in the future, could have a material adversenegative effect on the
Company'sour operations and business plans. See "NASCAR," "Business--Growth
Strategy"
We are controlled by the France family.
The France family members, together, beneficially own approximately 39.9% of our capital stock and "Management."
UNCERTAIN PROSPECTS OF NEW MOTORSPORTS FACILITIES
The Company's growth strategy includesapproximately 63.1% of the combined voting power of both classes of our common stock. Accordingly, if members of the France family vote their shares of common stock in the same manner, they can (without the approval of our other shareholders) elect our entire Board of Directors and determine the outcome of various matters submitted to shareholders for approval, including fundamental corporate transactions. If holders of class B common stock other than the France family elect to convert their beneficially owned shares of class B common stock into shares of class A common stock and members of the France family do not convert their shares, the relative voting power of the France family will increase. Voting control by
11
We have a material amount of goodwill which, if it becomes further impaired and the possible development of a motorsports facility
near Chicago, Illinois. The Company's abilitywe are required to implement successfully this
element of its growth strategy will depend on a number of factors, including
(i) the
7
Company's abilitywrite it down to obtain one or more additional sanctioning agreements to
promote Winston Cup, Busch Grand National or other major events at these new
facilities, (ii) the cooperation of local government officials, (iii) the
Company's capital resources, (iv) the Company's ability to control construction
and operating costs, (v) the Company's ability to hire and retain qualified
personnel and (vi)comply with respect to the proposed Kansas International Speedway,
the resolution of certain pending litigation. The Company's inability to
implement its expansion plans for any reasonaccounting standards, would adversely affect its
business prospects.our financial results.
In addition, expenses associatedJuly 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (“SFAS”) No. 142, “Goodwill and Other Intangible Assets.” Under SFAS 142, goodwill and other intangible assets with developing,
constructingindefinite useful lives are no longer amortized to earnings but are reviewed at least annually for impairment at the reporting unit level. Goodwill is the amount by which the cost of an acquisition accounted for using the purchase method exceeds the fair market value of the net assets acquired and openingis shown as an asset on our balance sheet. We have elected to early adopt SFAS 142 in the first quarter of fiscal 2002 and expect to record a new facility maynon-cash after-tax charge of approximately $513.8 million as a cumulative effect of change in accounting principle in the first quarter of fiscal 2002. Even after this charge, approximately $92.7 million, or 8.3%, of our total assets as of November 30, 2001, is still represented as goodwill. If in the future the application of the annual test for impairment of goodwill results in a reduction in the carrying value of the goodwill, we will be required to take the amount of the reduction in goodwill as a non-cash charge against operating income, which would also reduce shareholders’ equity.
Our indebtedness could adversely affect our financial condition.
We have a negative effect onsignificant amount of indebtedness. As of and for the Company's financial condition and resultsfiscal year ended November 30, 2001:
| • | our total debt outstanding was approximately $411.7 million; | |
| • | our interest expense was approximately $26.5 million; | |
| • | our total shareholders’ equity was approximately $1.0 billion; and | |
| • | the sufficiency of our earnings available to cover fixed charges was approximately 5.2 to 1. |
As of December 31, 2001, we had approximately $180.0 million of current availability for borrowings under our senior revolving credit facility. This credit facility contains various restrictive covenants. While we believe cash flow from our operations in one or more future
reporting periods. The cost of any such transaction will depend on a number of
factors, including the facility's location, the extent of the Company's
ownership interest and the degree of any municipal or other public support.
Moreover, although management believesbe sufficient to fund payments required to service our outstanding debt, there can be no assurance that itwe will always be able to obtain financing
to fund the acquisition,meet such debt service obligations. Should we pursue further development and/or constructionacquisition opportunities, the timing, size and success, as well as associated potential capital commitments of which are unknown at this time, we may need to raise additional motorsports facilities should the Company implement this element of its growth
strategy, therecapital through debt and/or equity financings. There can be no assurance that adequate debt orand equity financing will be available on satisfactory terms. See "Management's DiscussionAny failure to service our debt or inability to obtain further financing could have a negative effect on our business and Analysisoperations.
Government regulation may adversely affect the availability of Financial Conditionsponsorships and Results of Operations--Liquidity and Capital
Resources," "Business--Growth Strategy" and "Business--Legal Proceedings."
INDUSTRY SPONSORSHIPS AND GOVERNMENT REGULATIONadvertising.
The motorsports industry and the Company generategenerates significant recurring revenue from the promotion, sponsorship and advertising of various companies and their products. GovernmentActual or proposed government regulation can adversely impact negatively the availability to the motorsports industry of this promotion, sponsorship and advertising revenue. Advertising by the tobacco and alcoholic beverage industries generally is generally subject to greater governmental regulation than advertising by other sponsors of the Company'sour events. In August 1996, the U.S. Food and Drug Administration
(the "FDA") issued regulations concerningpast few years there were several unsuccessful regulatory attempts to impose restrictions on the advertising and salespromotion of cigarettes and smokeless tobacco, to minors which would, in part, restrict tobacco industryincluding sponsorship of all sporting events, including motorsports effective August
1998. The FDA regulationsactivities. If successfully implemented, these regulatory efforts would prohibithave prohibited the present practice of tobacco
product brand name sponsorship of, or identification with, motorsports events, entries and teams. If these rules become effective, no assurance can be given
that suitable alternative sponsors forAt this point, the events, entries and teams could be
located.
Management is aware of pending legal challenges, as well as legislative
initiatives, which are expected to delay and could change the scheduled
implementationultimate outcome of these regulations. In June 1997,or future government regulatory and legislative efforts to regulate the major United States
companies engaged in the manufactureadvertising and
12
In 1999, major United States companies in the tobacco industry entered into a memorandum of
understandingvarious agreements with among others, the Attorneys General of sixall 50 states to support the adoption of federal legislation and ancillary undertakings that
would resolve many of the regulatory andsettle certain state-initiated litigation issues affecting the United
States tobacco industry, and which would have had an effect similar to the
pending FDA regulations and thereby settle potential challenges. This proposed
settlement required federal legislative approval and enabling legislation which
was not ultimately obtained in a form satisfactory toagainst the tobacco industry. Accordingly,The settlement agreements place various limits on the sponsorship of sports, including motorsports, by the tobacco industryindustry. Among other things, a tobacco manufacturer is limited to a single brand name sponsorship (such as the NASCAR Winston Cup Series) in any twelve-month period and is prohibited from entering into any agreement for naming a stadium or arena using the brand name of a tobacco product. The ultimate effect of these settlement agreements upon us has recently announced that it is withdrawing
from the proposed settlement. At this point, the final outcome of the
challenges to the FDA regulations is uncertain, and the ultimate impact on the
motorsports industry and the Company, if any, is unclear.
The Company is not awarebeen determined. We are unaware of any proposed governmental regulation whichthat would materially limit the availability to motorsports of promotion, sponsorship or advertising revenue from the alcoholic beverage industry. The combined advertising and sponsorship revenue from the tobacco and alcoholic beverage industries accounted for approximately 1.5%1.3% of the Company'sour total revenues in both the fiscal year ended August 31, 1996 ("fiscal 1996") and
fiscal 1997.2001. 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'sthe NASCAR Winston Cup Series and NASCAR Busch Grand National Series.
8
LEGAL PROCEEDINGS
The Company isNational. Implementation of further restrictions on the advertising or promotion of tobacco or alcoholic beverage products could adversely affect us.
We may be held liable for personal injuries.
Motorsports can be dangerous to participants and spectators. We maintain insurance policies that provide coverage within limits that we believe should generally be sufficient to protect us from a partylarge financial loss due to certain legal proceedings alleging price-fixing
activitiesliability for personal injuries sustained by persons on our property in connection with the saleordinary course of racing souvenirs and merchandise.
While the Company disputes the allegations and intends to defend the actions
fully and vigorously, neither the cost of defending the suits nor the potential
damages or other remedies for which the Company could be liable is insured. In
addition, management is presently unable to predict or quantify the outcome of
these matters. Accordingly, thereour business. There can be no assurance, however, that the defenseinsurance will be adequate or available at all times and in all circumstances. Our financial condition and results of the suits,
or a possible adverse resolution, will not require material expenditures by the
Company. See "Business--Legal Proceedings."
POTENTIAL CONFLICTS OF INTEREST
William C. France and James C. France beneficially own all of NASCAR's
capital stock, and each of the France Family Executives, the Company's Vice
President--Administration, the Company's General Counsel and certain other
non-officer employees (collectively the "Shared Employees") devote portions of
their time to NASCAR's affairs. Each of the Shared Employees devotes
substantial timeoperations could be affected negatively to the Company's affairsextent claims and all of the Company's other
executive officersexpenses in connection with these injuries are available to the Company ongreater than insurance recoveries.
We operate in a full-time basis. In
addition, the Company strives to ensure, and management believes, that the
terms of the Company's transactions with NASCAR are no less favorable to the
Company than those which could be obtained in arms'-length negotiations.
Nevertheless, certain potential conflicts of interest between the Company and
NASCAR exist with respect to, among other things, (i) the terms of any
sanctioning agreements that may be awarded to the Company by NASCAR, (ii) the
amount of time devoted by the Shared Employees and certain other Company
employees to NASCAR's affairs, and (iii) the amounts charged or paid to NASCAR
for office rental, transportation costs, shared executives, administrative
expenses and similar items. See "NASCAR," "Management" and "Certain
Transactions."
COMPETITION
The Company'shighly 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, the Company'sour revenues will beare affected by the general popularity of motorsports, the availability of alternative forms of recreation and changing consumer preferences. The Company'sOur racing events also compete with other racing events sanctioned by various racing bodies such as NASCAR, Championship Auto Racing
Teams, Inc. ("CART"), Indy Racing League ("IRL"), theIRL, CART, United States Auto Club, ("USAC"), the National Hot Rod Association, ("NHRA"), the Sports Car Club of America, ("SCCA"), the United StatesGrand American Road Racing Championship ("USRRC"), theAssociation, Automobile Racing Club of America ("ARCA") and others. Management believesFor example, a promoter is planning to conduct a sports car race in 2002 on a temporary street course in downtown Miami, Florida that will be close in time and place to events conducted at our motorsports facility in the Miami area. We believe that the primary elements of competition in attracting motorsports spectators and corporate sponsors to a racing event and facility are the type and caliber of promoted racing events, facility location, sight lines, pricing and customer conveniences that contribute to a total entertainment experience. Many sports and entertainment businesses have resources that exceed those of the Company.
See "Business--Competition."
IMPACT OF CONSUMER SPENDING ON RESULTS
The success of the Company's operationsours.
We may be unable to acquire or develop new motorsports facilities.
Our ability to acquire or develop motorsports facilities depends to a significant extent
uponon a number of factors, relating to discretionary consumer spending, including economic conditions affecting disposable consumer income such as employment,
business conditions, interest ratesbut not limited to:
| • | our ability to obtain additional sanctioning agreements to promote NASCAR Winston Cup, NASCAR Busch Grand National, or other major events at any new facilities; | |
| • | the cooperation of local government officials; | |
| • | our capital resources; |
13
| • | our ability to control construction and operating costs; and | |
| • | our ability to hire and retain qualified personnel. |
Developing new motorsports facilities is expensive.
Expenses associated with developing and taxation. These factors can impact both
attendance at the Company's events and the financial results of the motorsports
industry's principal sponsors. There can be no assurance that consumer spending
will not be adversely affected by economic conditions, thereby impacting the
Company's growth, revenue and profitability.
FINANCIAL IMPACT OF BAD WEATHER
The Company promotes outdoor motorsports events. Weather conditionsopening a new facility may negatively affect sales of, among other things, tickets, concessions and souvenirs at these
events. Although the Company sells tickets well
9
in advance of its most popular events, poor weather conditions could have a
material adverse effect on the Company's results of operations, particularly
any interruption of the Company's February "Speedweeks" events.
LIABILITY FOR PERSONAL INJURIES
Motorsports can be dangerous to participants and to spectators. The
Company maintains insurance policies that provide coverage within limits that
management believes should generally be sufficient to protect the Company from
material financial loss due to liability for personal injuries sustained by
persons on the Company's premises in the ordinary course of Company business.
Nevertheless, there can be no assurance that such insurance will be adequate or
available at all times and in all circumstances. The Company'sour financial condition and results of operations wouldin one or more future reporting periods. The cost of developing any new facility will depend on a number of factors, including but not limited to:
| • | the facility’s location; | |
| • | the extent of our ownership interest in the facility; and | |
| • | the degree of any municipal or other public support. |
Although we believe that we will be adversely affectedable to obtain financing to fund the extent
claimsdevelopment of additional motorsports facilities, we cannot be sure that adequate debt or equity financing will be available on satisfactory terms.
We are subject to environmental and associated expenses exceed insurance recoveries.
OTHER REGULATORY MATTERS
Management believesland use laws.
We believe that the Company'sour operations are in substantialmaterial compliance with all applicable federal, state and local environmental laws and regulations. Nonetheless, if it is determined that damage to persons or property or contamination of the environment is determined to havehas been caused or exacerbated by the conduct of the Company'sour business or by pollutants, substances, contaminants or wastes used, generated or disposed of by the Company,us, or which may beif pollutants, substances, contaminants or wastes are found on the
property of the Company, the Companycurrently or previously owned or operated 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 the Company iswe are self-insured could be material. State and local laws relating to the protection of the environment also can include noise abatement laws that may be applicable to the Company'sour racing events. Changes in the provisions or application of federal, state or local environmental laws, regulations or requirements, or the discovery of theretoforepreviously unknown conditions, also could also
require us to make additional material expenditures by the Company.
In addition, theexpenditures.
Our development of new motorsports facilities (and, to a lesser extent, the expansion of existing facilities) requires compliance with applicable federal, state and local land use planning, zoning and environmental regulations. Regulations governing the use and development of real estate may prevent the Companyus from acquiring or developing prime locations for motorsports facilities, substantially delay or complicate the process of improving existing facilities, and/or materially increase the costs of any of
such activities.
SEASONALITY AND VARIABILITY OF QUARTERLY RESULTS
The Company derives
Our quarterly results are subject to seasonality and variability.
We derive most of itsour income from event admissions and related
revenue from a limited number of NASCAR-sanctioned races. As a result, the
Company'sour business has been, and is expected to remain, highly seasonal based on the timing of major racing events. For example, one of our NASCAR Winston Cup races is traditionally held on the Sunday preceding Labor Day. Accordingly, the revenues and expenses for that race events. Historically,and/or the Company has achieved its
highest net incomerelated supporting events may be recognized in either the fiscal quarter ending February 28. PartlyAugust 31 or the fiscal quarter ending November 30. Further, schedule changes as determined by NASCAR or other sanctioning bodies as well as the acquisition of additional, or divestiture of existing, motorsports facilities could impact the timing of our major events in responsecomparison to this seasonality and the desire to better conformprior or future periods.
Risks Related to the traditional racing
season, the Company changed its fiscal year-end from August 31 to November 30
effective December 1, 1996. See "Management's DiscussionOffering
Our dual stock structure, Florida law, our charter provisions and Analysis of
Financial Condition and Results of Operations--Seasonality and Quarterly
Results."
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 the time sensitive applications and business systems of the Company and
its 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 the Company and its business
partners. An assessment of the Year 2000 exposure has been made by the Company
and the plans to resolve the related issues are being
10
implemented. Most major systems have already been updated or replaced with
applications that are Year 2000 compliant in the normal course of business. The
Company believes it will be able to achieve Year 2000 compliance by the end of
fiscal 1998. The Company has also developed a plan of communication with
significant business partners to ensure that the Company's operations are not
disrupted through these relationships and that the Year 2000 issues are
resolved in a timely manner. The Company believes that it will satisfactorily
resolve all significant Year 2000 problems and that the related costs will not
be material. Estimates of Year 2000 related costs are based on numerous
assumptions, including the continued availability of certain resources, the
ability to correct all relevant applications and third party modification
plans. There is no guarantee that the estimates will be achieved and actual
costs could differ materially from those anticipated.
BROAD DISCRETION REGARDING PROCEEDS OF THE OFFERING
A substantial portion of the net proceeds of this Offering has been
allocated to working capital and general corporate purposes. Accordingly,
management will have broad discretion as to the application of the Offering
proceeds. Pending the Company'sour use of such proceeds for general corporate
purposes, including improvements to existing facilities and the possible
acquisition and/or developmentpreferred stock may prevent a takeover of new facilities, such proceeds will be placed
in interest-bearing investments. It is possible that the return on such
investments will be less than that which would be realized were the Company
immediately to use such funds for other purposes.
EFFECTIVE VOTING CONTROL BY FRANCE FAMILY GROUP AND ANTI-TAKEOVER EFFECT OF
DUAL CLASSES OF STOCKour company.
Holders of Classour class A Common Stockcommon stock have per share voting rights that areequal to one-fifth (1/5th)5) of the voting rights of holders of Classclass B Common Stock.common stock. One of the principal purposes of havingreasons that we have two classes of Common Stock
14
Certain provisions of Florida law and the Company'sour Amended and Restated Articles of Incorporation ("Articles") may also deter or frustrate a takeover attempt of the Companyour company that a shareholder mightmay consider in its best interest. Among other things, the Company's Articles (i) divide the Company's Board of
Directors into three classes, each of which serves for different three-year
periods, (ii) provide that special meetings of the shareholders may be called
only by the Board of Directors or upon the written demand of the holders of not
less than 50% of the votes entitled to be cast at a special meeting, and (iii)
establish certain advance notice procedures for nomination of candidates for
election as directors and for shareholder proposals to be considered at annual
shareholders'
11
meetings. In addition, the Company isthings:
| • | our Articles divide our Board of Directors into three classes, each of which serves for different three-year periods; | |
| • | our Articles provide that special meetings of the shareholders may be called only by the Board of Directors or upon the written demand of the holders of not less than 50% of the votes entitled to be cast at a special meeting; and | |
| • | our Articles establish certain advance notice procedures for nomination of candidates for election as directors and for shareholder proposals to be considered at annual shareholders’ meetings. |
We are also authorized to issue one1 million shares of preferred stock in one or more series, having terms fixed by theseries. The Board of Directors can fix the terms of such preferred stock without shareholder approval, includingapproval. Such preferred stock can include voting, dividend or liquidation rights that could be greater than or senior to the rights of holders of Common Stock.our common stock. Issuance of shares of Preferred Stockpreferred stock could also be used as an anti-takeover device. The Company has no current intentionsWe currently do not intend or plansplan to issue any such Preferred Stock. See "Descriptionpreferred stock.
Many of Capital Stock."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completionour shares are eligible for future sale, and such sales could cause the market price of this Offering, all ofour class A common stock to decline.
In addition to the shares being sold in this offering, a total of Class A Common
Stock offered hereby will be eligible for public sale without restriction.
Approximately 16.7 million additional shares of Class A Common Stock currently
outstanding or issuable upon conversion of currently26,842,272 outstanding shares of Classour class A and class B Common Stockcommon stock are also eligible for public salefreely tradeable without restriction. The
holders of the approximately 21.8 million remaining outstanding shares of
Common Stock have agreed not to sellrestriction or otherwise dispose of such shares,
without the consent of Smith Barney Inc. until 90 days after this Offering.
After such date, all such shares may be sold subject to the limitations of Rule
144 offurther registration under the Securities Act of 1933, as amended (the "Securities Act").amended. Shares held by persons deemed to be affiliates under the Securities Act, including our officers and directors, as well as our principal stockholders, may not be sold except: (i) pursuant to an effective registration statement under the Securities Act covering the sale of those shares; (ii) in compliance with Rule 144 under the Securities Act; or (iii) pursuant to any other applicable exemption under the Securities Act.
In addition, our directors and officers, our major shareholders and the selling stockholder have agreed that, for a period of 90 days from the date of this prospectus, subject to certain exceptions, they will not, without the consent of Salomon Smith Barney, dispose of or hedge any shares of our common stock or any securities convertible into or exchangeable for our common stock. The aggregate maximum number of such shares of class A common stock and class B common stock that are subject to these lock-up agreements is approximately 22,989,000. Future sales of substantial amounts of Common Stock,common stock, or the potential for such sales, could adversely affect prevailing market prices. See "Shares Eligible for
Future Sale."
POSSIBLE VOLATILITY OF STOCK PRICE
The Company's Class
Our stock price could experience price and volume volatility.
Our class A Common Stockcommon stock is quoted on the Nasdaq National Market, which has experienced and may continue to experience significant price and volume fluctuations which could adversely affect the market price of the Classclass A Common Stockcommon stock, without regard to theour operating performance of the
Company.performance. In addition, the Company believeswe believe that factors such as quarterly
fluctuations in the financial results of the Company, earnings below analyst
estimates, and the financial performance and other activities of the Company's
principal sponsors and other publicly traded motorsports companies could cause the price of the Classclass A Common Stock tocommon stock could fluctuate substantially. See "Price
Range of Common Stock."
12
| • | quarterly fluctuations in our financial results; | |
| • | earnings below analyst estimates; and | |
| • | the financial performance and other activities of our sponsors, other motorsports companies and/or other leisure and entertainment companies. |
15
USE OF PROCEEDS
The net
We will not receive any proceeds to the Company from the sale of class A common stock by the 4,000,000 shares of
Class A Common Stock offered hereby are estimated to be approximately $
million, after deduction of underwriting discounts and commissions and
estimated expenses of the Offering and assuming a per share public offering
price of $ . ($ million if the Underwriters' over-allotment option is
exercised in full). The Company intends to use approximately $58.8 million of
such net proceeds to partially fund the Company's estimated investment in the
proposed Kansas International Speedway. The Company intends to use
approximately $48.2 million of the net proceeds to fund the completion of
certain additions and improvements to the Company's motorsports facilities,
including additional suites and/or grandstand seating at its Daytona, Talladega
and Phoenix facilities. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations-Liquidity and Capital Resources,"
"Business-Growth Strategy" and "Business-Motorsports Facilities."
The approximately $ million of remaining net proceeds will be used
for working capital and other general corporate purposes, including potential
acquisitions and continued improvements to and expansion of the Company's
operations. Except for its proposed development of the Kansas International
Speedway and an additional motorsports facility near Chicago, the Company does
not currently have any agreement regarding any potential acquisition or
development project. Pending such uses, the Company intends to invest the net
proceeds of this Offering in money market funds or other interest-bearing
obligations.
selling stockholder.
PRICE RANGE OF CLASS A COMMON STOCK AND DIVIDEND POLICY
The Classclass A Common Stockcommon stock commenced trading on the Nasdaq National Market under the symbol "ISCA"“ISCA” on November 4, 1996. The Classclass B Common Stockcommon stock is traded on the OTC Bulletin Board under the symbol "ISCB"“ISCB” and, at the option of the holder, is convertible to Classclass A Common Stockcommon stock at any time.
The reported high and low sales prices or high and low bid information as applicable (as adjusted for the Company's November 1996 15-for-1 stock split)
for each quarter indicated are as follows:
| ISCA | ISCB(1) | |||||||||||||||
| High | Low | High | Low | |||||||||||||
Year Ended November 30, 1999 | ||||||||||||||||
| First Quarter | $ | 45.88 | $ | 34.00 | $ | 45.38 | $ | 34.00 | ||||||||
| Second Quarter | 56.38 | 44.00 | 56.00 | 44.00 | ||||||||||||
| Third Quarter | 52.88 | 46.00 | 52.00 | 46.75 | ||||||||||||
| Fourth Quarter | 71.13 | 47.38 | 69.00 | 47.25 | ||||||||||||
Year Ended November 30, 2000 | ||||||||||||||||
| First Quarter | $ | 65.94 | $ | 42.06 | $ | 64.25 | $ | 42.50 | ||||||||
| Second Quarter | 49.50 | 40.50 | 48.00 | 40.50 | ||||||||||||
| Third Quarter | 45.75 | 30.13 | 45.25 | 30.00 | ||||||||||||
| Fourth Quarter | 39.44 | 32.00 | 39.00 | 32.00 | ||||||||||||
Year Ended November 30, 2001 | ||||||||||||||||
| First Quarter | $ | 47.25 | $ | 36.25 | $ | 47.00 | $ | 36.25 | ||||||||
| Second Quarter | 48.00 | 36.00 | 47.75 | 36.00 | ||||||||||||
| Third Quarter | 44.10 | 38.38 | 44.20 | 38.50 | ||||||||||||
| Fourth Quarter | 42.67 | 30.40 | 42.00 | 30.60 | ||||||||||||
Year Ending November 30, 2002 | ||||||||||||||||
| First Quarter (through January 23, 2002) | $ | 41.10 | $ | 38.41 | $ | 41.00 | $ | 38.65 | ||||||||
On May 29, 1998,January 23, 2002, the closing price of the Classclass A Common Stockcommon stock on the Nasdaq National Market was $30.50.$40.66. As of April 30, 1998December 31, 2001, there were a total
ofapproximately 3,400 record holders of both classesclass A common stock and approximately 850 record holders of Common Stock.
13
DIVIDEND POLICY
The Company has historicallyclass B common stock.
Historically, we have paid annual cash dividends on its Common
Stock. See "Selected Financial Data." In addition, in April 1998, the Company
declared an annual dividendour common stock. Our future declaration and payment of $0.06 per share of Common Stock that will be
paid on or about June 30, 1998 to shareholders of record as of May 29, 1998.
Future dividends, if any, will depend upon the Company'sour future earnings, capital requirements and financial condition, as well as such other factors as
the Company'sour Board of Directors may deem relevant. Accordingly, there can be no assurance that future dividends will be declared.
16
CAPITALIZATION
The following table sets forth theour capitalization of the Company as of February 28, 1998,November 30, 2001. This table should be read in conjunction with “Management’s Discussion and as adjusted to give effect to the saleAnalysis of the 4,000,000
sharesFinancial Condition and Results of Class A Common Stock offered by the Company hereby at an assumed
per share public offering price of $Operations” and the application of the estimated
net proceeds therefrom as described under "Use of Proceeds."
our consolidated financial statements and related notes included elsewhere in this prospectus.
| November 30, 2001 | ||||||
| (in thousands, except share data) | ||||||
| Long-term debt | $ | 402,477 | ||||
| Total debt (including current maturities) | $ | 411,702 | ||||
| Shareholders’ equity: | ||||||
| Preferred stock, $.01 par value, 1,000,000 shares authorized, no shares issued and outstanding | — | |||||
| Class A common stock, $.01 par value, 80,000,000 shares authorized, 24,500,608 shares issued and outstanding | 245 | |||||
| Class B common stock, $.01 par value, 40,000,000 shares authorized, 28,663,224 shares issued and outstanding | 287 | |||||
| Additional paid-in capital | 691,670 | |||||
| Retained earnings(1) | 346,844 | |||||
| Accumulated other comprehensive loss | (961 | ) | ||||
| Unearned compensation-restricted stock | (2,663 | ) | ||||
| Total shareholders’ equity(1) | 1,035,422 | |||||
| Total capitalization(1) | $ | 1,447,124 | ||||
| (1) | Balances at November 30, 2001 do not reflect the adoption of Statement of Financial Accounting Standard No. 142, which is expected to result in a non-cash after-tax charge of approximately $513.8 million in the first quarter of fiscal 2002. Had the above table reflected this charge, retained earnings, total shareholders’ equity and |
17
SELECTED FINANCIAL DATA
The following table sets forth our selected historical financial data as of and for each of the five fiscal years ended August 31, 1993 through 1996,in the three monthsperiod ended November 30, 1996, and2001. The income statement data for the three fiscal yearyears in the period ended November 30, 19972001, and the balance sheet data as of November 30, 2001 and November 30, 2000, have been derived from the Company's Consolidated Financial Statementsour audited historical consolidated financial statements included elsewhere in this prospectus, which financial statements have been audited by Ernst & Young LLP, independent certified public accountants.accountants, as indicated in their report thereon. The selected financialbalance sheet data for the twelve months endedas of November 30, 19961999, and the income statement data and the balance sheet data as of and for the three monthsfiscal years ended February 28,November 30, 1998 and 1997, and 1998 have been derived from the unauditedour audited historical consolidated financial statements ofstatements. You should read the Company which, in the opinion of
management, include all adjustments (consisting of only normal recurring
adjustments) necessary for a fair presentation of the information set forth
therein. The results of operations for the three months ended February 28, 1998
are not necessarily indicative of results for the full year. For comparability,
certain prior period results have been reclassified to conform to the
presentation adopted in fiscal 1997. The following selected financial data should be readset forth below in conjunction with the Company's Consolidated Financial
Statements, including the notes thereto, and "Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations"Operations” and our consolidated financial statements and the accompanying notes included elsewhere in this Prospectus.
prospectus.
| For the Year Ended November 30, | |||||||||||||||||||||||
| 1997 | 1998 | 1999 | 2000 | 2001 | |||||||||||||||||||
| (in thousands, except per share and selected operating data) | |||||||||||||||||||||||
Income Statement Data: | |||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Admissions, net | $ | 69,487 | $ | 86,946 | $ | 133,897 | $ | 192,789 | $ | 214,494 | |||||||||||||
| Motorsports related income | 46,650 | 71,793 | 115,570 | 175,809 | 238,208 | ||||||||||||||||||
| Food, beverage and merchandise income | 23,408 | 28,597 | 46,668 | 66,880 | 70,575 | ||||||||||||||||||
| Other income | 1,829 | 1,632 | 2,587 | 4,952 | 5,233 | ||||||||||||||||||
| Total revenues | 141,374 | 188,968 | 298,722 | 440,430 | 528,510 | ||||||||||||||||||
| Expenses: | |||||||||||||||||||||||
| Direct expenses: | |||||||||||||||||||||||
| Prize and point fund monies and NASCAR sanction fees | 20,567 | 28,767 | 45,615 | 71,260 | 87,859 | ||||||||||||||||||
| Motorsports related expenses | 23,075 | 33,283 | 51,590 | 82,230 | 98,458 | ||||||||||||||||||
| Food, beverage and merchandise expenses | 13,435 | 15,025 | 25,539 | 38,448 | 38,251 | ||||||||||||||||||
| General and administrative expenses | 29,486 | 37,842 | 54,956 | 75,030 | 79,953 | ||||||||||||||||||
| Depreciation and amortization | 9,910 | 13,137 | 25,066 | 51,150 | 54,544 | ||||||||||||||||||
| Total expenses | 96,473 | 128,054 | 202,766 | 318,118 | 359,065 | ||||||||||||||||||
| Operating income | 44,901 | 60,914 | 95,956 | 122,312 | 169,445 | ||||||||||||||||||
| Interest income | 3,196 | 4,414 | 8,780 | 6,156 | 3,446 | ||||||||||||||||||
| Interest expense | (509 | ) | (582 | ) | (6,839 | ) | (30,380 | ) | (26,505 | ) | |||||||||||||
| Equity in net income (loss) from equity investments | 366 | (905 | ) | (1,819 | ) | (631 | ) | 2,935 | |||||||||||||||
| Minority interest | — | — | (796 | ) | (100 | ) | 992 | ||||||||||||||||
| Gain on sale of equity investment | — | 1,245 | — | — | — | ||||||||||||||||||
| North Carolina Speedway litigation | — | — | — | (5,523 | ) | — | |||||||||||||||||
| Income before income taxes | 47,954 | 65,086 | 95,282 | 91,834 | 150,313 | ||||||||||||||||||
| Income taxes | 18,158 | 24,894 | 38,669 | 41,408 | 62,680 | ||||||||||||||||||
| Net income | $ | 29,796 | $ | 40,192 | $ | 56,613 | $ | 50,426 | $ | 87,633 | |||||||||||||
| Earnings per share(1): | |||||||||||||||||||||||
| Basic | $ | 0.78 | $ | 1.00 | $ | 1.22 | $ | 0.95 | $ | 1.65 | |||||||||||||
| Diluted | $ | 0.78 | $ | 1.00 | $ | 1.22 | $ | 0.95 | $ | 1.65 | |||||||||||||
| Dividends per share | $ | 0.06 | $ | 0.06 | $ | 0.06 | $ | 0.06 | $ | 0.06 | |||||||||||||
| Weighted average shares outstanding(1): | |||||||||||||||||||||||
| Basic | 38,185,473 | 40,025,643 | 46,394,614 | 52,962,646 | 52,996,660 | ||||||||||||||||||
| Diluted | 38,339,978 | 40,188,800 | 46,518,977 | 53,049,293 | 53,076,828 | ||||||||||||||||||
Other Financial Data: | |||||||||||||||||||||||
| EBITDA(2) | $ | 54,811 | $ | 74,051 | $ | 121,022 | $ | 173,462 | $ | 223,989 | |||||||||||||
| EBITDA margin | 38.8 | % | 39.2 | % | 40.5 | % | 39.4 | % | 42.4% | ||||||||||||||
| Capital expenditures | $ | 38,627 | $ | 71,858 | $ | 126,596 | $ | 132,661 | $ | 98,379 | |||||||||||||
Selected Operating Data: | |||||||||||||||||||||||
| Total admissions | 1,416,600 | 1,730,500 | 2,243,800 | 3,132,600 | 3,550,000 | ||||||||||||||||||
| Number of grandstand seats(3) | 383,000 | 425,000 | 850,000 | 970,000 | 1,058,000 | ||||||||||||||||||
| Number of major motorsports events(4) | 20 | 22 | 31 | 51 | 58 | ||||||||||||||||||
18
| For the Year Ended November 30, | ||||||||||||||||||||
| 1997 | 1998 | 1999 | 2000 | 2001 | ||||||||||||||||
| (in thousands) | ||||||||||||||||||||
Balance Sheet Data (at end of period): | ||||||||||||||||||||
| Working capital (deficit) | $ | (24,976 | ) | $ | 25,514 | $ | (51,897 | ) | $ | (54,041 | ) | $ | (28,471 | ) | ||||||
| Total assets(5) | 302,823 | 476,818 | 1,599,127 | 1,665,438 | 1,702,146 | |||||||||||||||
| Long-term debt | 1,007 | 2,775 | 496,067 | 470,551 | 402,477 | |||||||||||||||
| Total debt | 14,302 | 3,373 | 498,722 | 475,716 | 411,702 | |||||||||||||||
| Total shareholders’ equity(5) | 209,907 | 366,855 | 902,470 | 950,871 | 1,035,422 | |||||||||||||||
| (1) | Earnings per share and weighted average share amounts prior to 1998 have been restated to comply with Statement of Financial Accounting Standard No. 128. See Note 1 to our audited financial statements included in this prospectus. |
| (2) | EBITDA means operating income |
| (3) | Represents number of grandstand seats at our majority-owned and/or operated major motorsports facilities as of November 30. |
| (4) | Major events mean our NASCAR Winston Cup, NASCAR Busch Grand National, NASCAR Craftsman Truck, IRL, CART FedEx Championship Series, International Race of Champions and Automobile Racing Club of America at our majority-owned and/or operated motorsports facilities during the period in which they were included in our consolidated earnings. |
| (5) | Does not reflect the adoption of Statement of Financial Accounting Standard No. 142, which is expected to result in a non-cash after-tax charge of approximately $513.8 million in the first quarter of fiscal 2002. To reflect this charge, total assets and total shareholders’ equity |
19
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
Results Of Operations
General
We derive revenues primarily from (i) admissions to racing events and motorsports activities held at its motorsportsour facilities, (ii) revenue generated in conjunction with or as a result of motorsports events conducted at the
Company'sour facilities, and (iii) catering, concession and souvenir sales mademerchandising services during or as a result of such events.
"Admissions"these events and activities.
“Admissions” revenue includes ticket sales fromfor all of the Company'sour racing events track tours and theactivities at DAYTONA USA Velocitorium.USA. Admissions revenue for racingmotorsports events is recordedrecognized upon completion of the related motorsports event.
"Motorsports
“Motorsports related income"income” primarily includes television, radio and radio broadcastancillary rights fees, promotion and sponsorship fees, hospitality rentals (including luxury suites, chalets and chalets)the hospitality portion of club seating), advertising revenues, royalties from licenses of the Company'sour trademarks and track rentals. The Company negotiates directly
with television and cable networks for coverage of substantially all of its
televised motorsports events. The Company'sOur 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,We historically negotiated directly with television and cable networks for coverage of substantially all of our televised NASCAR-sanctioned events. Under those arrangements, the event promoter received 100% of the broadcast rights fees for each NASCAR Winston Cup and NASCAR Busch Grand National event and paid 10% of those broadcast rights fees as a component of the sanction fee to NASCAR. The event promoter also paid 25% of those broadcast rights fees as part of awards to the competitors. In fiscal 1999 NASCAR announced it would retain television, radio and all other electronic media rights and negotiate such rights other than radio for the NASCAR Winston Cup Series and NASCAR Busch Grand National Series. Currently, the radio rights to the NASCAR events at our facilities are negotiated by us, and we retain 100% of the revenues. In November 1999 NASCAR reached an agreement on a six-year television contract with NBC Sports and Turner Sports, and an eight-year agreement with FOX and its FX cable network, for the domestic television broadcast rights beginning in 2001. The total domestic television broadcast rights fees for the entire 2001 NASCAR Winston Cup and NASCAR Busch Grand National schedules, including the new events at the Kansas and Chicagoland speedways, were approximately $259 million with scheduled future increases, on average, of approximately 17% through the 2006 season. Under the terms of the new arrangement, NASCAR retains 10% of the gross broadcast rights fees allocated to each NASCAR Winston Cup or NASCAR Busch Grand National event as a component of its sanction fees and remits the remaining 90% to the event promoter. The event promoter continues to pay 25% of the gross broadcast rights fees allocated to the event as part of awards to the competitors.
“Food, beverage and souvenir income"merchandise income” includes revenues from concession stands, hospitality catering, and direct sales of souvenirs, programs and other merchandise as well asand fees paid by third party vendors for the right to occupy space to sell souvenirsouvenirs and concessions at the Company'sour facilities.
Expenses
“Direct 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 itsour racing events, and (iii) food, beverage and souvenirmerchandise expenses, consisting primarily of labor and costs of goods sold.
During
Our success has been, and is expected to remain, dependent on maintaining good working relationships with the organizations that sanction events at our facilities, particularly with NASCAR, whose sanctioned events at our wholly-owned facilities accounted for approximately 82% of our revenues in fiscal 1997,2001. Further, our future operating results could be adversely impacted by the Company acquired Phoenix International Raceway
("Phoenix")postponement and/or cancellation of a major motorsports event due to a number of factors, including inclement weather specific to our events or a general postponement and/or cancellation of all major sporting events in this country as occurred following the September 11th terrorist attacks.
20
Our consolidated balance sheets include significant amounts of long lived assets and the 50% interest it did not own in Watkins Glen International
("Watkins Glen"). The consolidation of Watkins Glen, effective April 1, 1997,goodwill. Current accounting standards require testing these assets for impairment based on assumptions regarding our future business outlook. While we continue to review and the July 14, 1997 purchase of Phoenix resultedanalyze many factors that can impact our business prospects in the addition of numerous
eventsfuture, our analyses are subjective and are based on conditions existing at and trends leading up to the Company's fiscal 1997 event schedule, including two Winston Cup
Seriestime the assumptions are made. Actual results could differ materially from these assumptions. Our judgments with regard to our future business prospects could impact whether or not an impairment is deemed to have occurred, as well as the timing of the recognition of such an impairment charge.
Advance tickets sales and event-related revenues for future events a Busch Grand National Series eventare deferred until earned. The recognition of event-related expenses is matched with the recognition of event-related revenues. Revenues and two Craftsman Truck
Series events. These acquisitions resultedrelated expenses from the sale of merchandise to retail customers, catalog and internet sales and direct sales to dealers are recognized at the time of sale. We believe that our revenue recognition policies follow guidance issued by the Securities and Exchange Commission in increasesStaff Accounting Bulletin No. 101, “Revenue Recognition in both revenues and
expenses in fiscal 1997 and the three months ended February 28, 1998 as
compared to the twelve months ended November 30, 1996 and the three months
ended February 28, 1997, respectively. Accordingly, the Company's results of
operations are not necessarily comparable on a period-to-period basis.
16
The following table sets forth, for each of the indicated periods, certain selected income statement data as a percentage of total revenues:
TWELVE MONTHS FISCAL YEAR THREE MONTHS ENDED
ENDED ENDED ------------------------------
NOVEMBER 30, NOVEMBER 30, FEBRUARY 28, FEBRUARY 28,
1996(1) 1997 1997 1998
--------------- ------------- -------------- -------------
Revenues:
Admissions, net ............................... 51.7% 49.1% 50.8% 46.7%
Motorsports related income .................... 29.0 33.0 33.2 39.8
Food, beverage and souvenir income ............ 18.1 16.6 15.6 13.1
Other income .................................. 1.2 1.3 0.4 0.4
----- ----- ----- -----
Total revenues ............................... 100.0% 100.0% 100.0% 100.0%
Expenses:
Direct expenses:
Prize and point fund monies and NASCAR
sanction fees .............................. 14.0 14.5 13.5 16.2
Motorsports related expenses ................. 16.7 16.3 9.9 11.9
Food, beverage and souvenir expenses ......... 10.8 9.5 8.7 6.6
General and administrative expenses ........... 22.2 20.9 11.9 12.5
Depreciation and amortization ................. 7.5 7.0 3.8 4.5
----- ----- ----- -----
Total expenses ............................... 71.2 68.2 47.8 51.7
----- ----- ----- -----
Operating income ............................... 28.8 31.8 52.2 48.3
Interest income, net ........................... 0.9 1.9 1.9 0.2
Equity in net income (loss) from equity
investments ................................... 1.3 0.2 ( 0.8) ( 0.6)
----- ----- ----- -----
Income before income taxes ..................... 31.0 33.9 53.3 47.9
Income taxes ................................... 11.8 12.8 19.6 18.4
----- ----- ----- -----
Net income ..................................... 19.2% 21.1% 33.7% 29.5%
===== ===== ===== =====
- ----------------
(1) The Company changed its fiscal year end
| For the Year Ended November 30, | |||||||||||||||
| 1999 | 2000 | 2001 | |||||||||||||
| Revenues: | |||||||||||||||
| Admissions, net | 44.8 | % | 43.8 | % | 40.6 | % | |||||||||
| Motorsports related income | 38.7 | 39.9 | 45.1 | ||||||||||||
| Food, beverage & merchandise income | 15.6 | 15.2 | 13.3 | ||||||||||||
| Other income | 0.9 | 1.1 | 1.0 | ||||||||||||
| Total revenues | 100.0 | 100.0 | 100.0 | ||||||||||||
| Expenses: | |||||||||||||||
| Direct expenses: | |||||||||||||||
| Prize and point fund monies and NASCAR sanction fees | 15.3 | 16.2 | 16.6 | ||||||||||||
| Motorsports related expenses | 17.3 | 18.7 | 18.6 | ||||||||||||
| Food, beverage and merchandise expenses | 8.5 | 8.7 | 7.3 | ||||||||||||
| General and administrative expenses | 18.4 | 17.0 | 15.1 | ||||||||||||
| Depreciation and amortization | 8.4 | 11.6 | 10.3 | ||||||||||||
| Total expenses | 67.9 | 72.2 | 67.9 | ||||||||||||
| Operating income | 32.1 | 27.8 | 32.1 | ||||||||||||
| Interest income (expense) net | 0.7 | (5.5 | ) | (4.4 | ) | ||||||||||
| Equity in net income (loss) from equity investments | (0.6 | ) | (0.1 | ) | 0.5 | ||||||||||
| Minority interest | (0.3 | ) | — | 0.2 | |||||||||||
| North Carolina Speedway litigation | — | (1.3 | ) | — | |||||||||||
| Income before income taxes | 31.9 | 20.9 | 28.4 | ||||||||||||
| Income taxes | 12.9 | 9.5 | 11.8 | ||||||||||||
| Net income | 19.0 | % | 11.4 | % | 16.6 | % | |||||||||
21
Comparison of Fiscal 2001 to November 30 effective December
1, 1996. Management believes that a comparison of the year ended November
30, 1997Fiscal 2000
Due to the twelve months ended November 30, 1996 is more meaningful
than a comparison of the year ended November 30, 1997 to the year ended
August 31, 1996. Therefore, the discussion and analysis offollowing factors, our fiscal 2001 results of operations, foras well as the margins of certain expenses in relation to certain revenues, are not necessarily comparable to results in fiscal 1997 is compared to the unaudited twelve months
ended November 30, 1996.
COMPARISON OF THREE MONTHS ENDED FEBRUARY 28, 1998 TO THREE MONTHS ENDED
FEBRUARY 28, 19972000:
| • | the increase in television broadcast rights fees, and the related impact on our NASCAR-related direct expenses, as a result of the new television broadcast agreements which began in fiscal 2001 for all NASCAR Winston Cup and NASCAR Busch Grand National events; | |
| • | commencement of motorsports event operations at the Kansas and Chicagoland speedways in fiscal 2001; | |
| • | sale of our Competition Tire subsidiaries in November 2000; | |
| • | the acquisition of the remaining 10% interest we did not already own in Miami in October 2001; and | |
| • | certain schedule changes for motorsports events in fiscal 2001 as compared to fiscal 2000. |
Admissions revenue increased approximately $5.5$21.7 million, or 21%11.3%, for the
three months ended February 28, 1998in fiscal 2001 as compared to the three months ended
February 28, 1997. Mostfiscal 2000. The majority of this increase was related to the Speedweeks events
held at Daytona International Speedway ("Daytona"). Approximately two thirds of
the Speedweeks-related increase wasis attributable to increased seating capacitynew events in 2001, including the inaugural events conducted at Kansas and attendance, with the remaining portion of this increase resulting from an inaugural IRL event at Richmond. An increase in the weighted average price of tickets sold. The remaining increase
was primarily attributable tosold and increased seating capacity at other events conducted at Phoenix.Daytona, Talladega and Richmond also contributed to the increase.
Motorsports related income increased approximately $10.0$62.4 million, or 57.9%35.5%, during the three months ended February 28, 1998in fiscal 2001 as compared to the three
months ended February 28, 1997. Approximately two-thirdsfiscal 2000. Almost three-quarters of this increase wasis a result of increased television broadcast and ancillary rights fees for NASCAR Winston Cup and NASCAR Busch Grand National events conducted during the Speedweeksyear. The remaining increase is primarily attributable to inaugural events at Daytona. Increases in sponsorship fees, luxury suite and hospitality rentals
and advertising revenues for Speedweeks and, to a lesser extent, Phoenix,
accounted for the remainder of this increase.Kansas.
Food, beverage and souvenirmerchandise income increased approximately $900,000,$3.7 million, or 11%5.5%, during the three months ended February 28, 1998in fiscal 2001 as compared to fiscal 2000. The increase is primarily attributable to merchandise sales at the three
months ended February 28, 1997. Increased attendanceinaugural events conducted at Kansas and toChicagoland, as well as food and beverage sales and catering operations at Kansas. To a lesser extent, increases in certain pricescatering, food, beverage and merchandise sales at Daytona's Speedweeksour other events accounted
17
for more than one-half of the increase. The remaining increase was primarily
attributable to increasedand merchandise sales of souvenirs at the gift shop adjacent to DAYTONA USA andalso contributed to the events conducted at Phoenix.increase. These increases are partially offset by a significant decrease in revenues due to the sale of our Competition Tire subsidiaries in November 2000.
Prize and point fund monies and NASCAR sanction fees increased by
approximately $4.1$16.6 million, or 58.8%23.3%, during the three months ended February
28, 1998in fiscal 2001 as compared to the three months ended February 28, 1997. Approximately
80% of thisfiscal 2000. The increase was due to increases in the prize and point fund monies
paid by the Company and distributed by NASCAR to participants in the Speedweeks
events. This increase wasis primarily attributable to the increases in the
Company'sincreased television broadcast rights fees becausefor the NASCAR Winston Cup and NASCAR Busch Grand National events conducted during the year, as standard NASCAR sanctioning agreements require that a specified percentage of television broadcast rights fees be paid to competitors. The inaugural NASCAR events at Kansas also contributed to the increase. These increases were substantially offset by the reduction in NASCAR sanction fees recognized as partexpense in accordance with the new broadcast rights agreements previously discussed. Over three-quarters of the increase in fiscal 2001 as compared to fiscal 2000, after normalizing for the previously discussed fiscal 2001 decrease in NASCAR sanction fees recognized as expense under the new broadcast rights agreements, is due to increased prize money.and point fund monies paid by NASCAR to participants in NASCAR events.
Motorsports related expenses increased approximately $3.0$16.2 million, or 58.3%19.7%, during the three months ended February 28, 1998in fiscal 2001 as compared to the three
months ended February 28, 1997. Approximately two-thirds of thisfiscal 2000. The increase relatedis primarily attributable to an increase in salaries, advertising and other increased operating costs associated with the inaugural events conducted at Kansas and Richmond, which include the sanction fees for the Speedweeksnon-NASCAR sanctioned events, held at Daytona. The operating costs of Phoenix and, to a lesser extent, Watkins Glen, accountedincreases in personnel and other direct operating costs for the remaining increase.other events. Motorsports related expenses as a percentage of combined admissions and motorsports related revenue increasedincome decreased from approximately 22.3% in fiscal 2000 to 13.8%approximately 21.8% in the three months ended
February 28, 1998 from 11.8% in the three months ended February 28, 1997.fiscal 2001. This decreased margin wasdecrease is primarily attributable to increased television broadcast and ancillary rights fees, partially
22
Food, beverage and merchandise expenses decreased approximately $197,000, or 0.5%, in fiscal 2001 as compared to fiscal 2000. A significant decrease in expenses is attributable to the sale of our Competition Tire subsidiaries in November 2000. This decrease is substantially offset by the cost of sales and other merchandising expenses associated with our operations at the inaugural events conducted at Phoenix duringKansas and Chicagoland, as well as the three months ended February 28, 1998.ongoing expansion of the food, beverage and merchandise operations. Food, beverage and souvenir expenses decreased approximately $50,000, or
1%, during the three months ended February 28, 1998 as compared to the three
months ended February 28, 1997. However, food, beverage and souvenirmerchandise expenses as a percentage of food, beverage and souvenir revenuemerchandise income decreased from approximately 57.5% in fiscal 2000 to approximately 49.8%54.2% in the three months ended February 28, 1998 from 55.8% in
the three months ended February 28, 1997.fiscal 2001. This improvement wasdecrease is primarily attributable to the discontinuationsale of certainour lower margin activities at facilities not
operated by the Company, an increase inCompetition Tire operations and favorable margins on souvenir merchandise sales,our inaugural event operations at Kansas. These decreases were partially offset by incremental operating expenses resulting from the ongoing expansion of our food, beverage and fees from third party vendors at Phoenix for which there are no associated
costs.merchandising operations.
General and administrative expenses increased approximately $2.4$4.9 million, or 38.1%6.6%, during the three months ended February 28, 1998in fiscal 2001 as compared to fiscal 2000. The increase is primarily attributable to costs associated with our ongoing business, including the three months ended February 28, 1997.operations of the newly developed Kansas Speedway. This increase is partially offset by lower business expansion and integration expenses associated with previous acquisitions incurred during fiscal 2001 as compared to fiscal 2000, as well as the elimination of expenses related to our Competition Tire subsidiaries, which were sold in November 2000. General and administrative expenses at
Phoenix and Watkins Glen accounted for approximately half of this increase.
Excluding the effects of Watkins Glen and Phoenix, general and administrative
expenses remained relatively constant as a percentage of total revenues for the
three months ended February 28, 1998 as compareddecreased from approximately 17.0% in fiscal 2000 to the same periodapproximately 15.1% in fiscal 2001. This decrease is primarily a result of the
prior year.our revenue growth combined with controlling growth in general and administrative expenses.
Depreciation and amortization expense increased approximately $1.1$3.4 million, or 56.3%6.6%, during the three months ended February 28, 1998in fiscal 2001 as compared to the three months ended February 28, 1997. More than half of thisfiscal 2000. The increase was attributable to Phoenix and Watkins Glen, including the amortization of
goodwill related to the Phoenix acquisition. The remaining increase wasis primarily attributable to the ongoing improvementscompletion of the Kansas facility, which opened in June 2001 and was depreciated over the remainder of the fiscal year.
Interest income decreased by approximately $2.7 million, or 44.0%, in fiscal 2001 as compared to the Company's facilities.fiscal 2000. The approximately $850,000 decrease in net interest income resulted fromis primarily due to lower average investment balances and, to a lesser extent, lower interest rates in fiscal 2001.
Interest expense relateddecreased by approximately $3.9 million, or 12.8%, in fiscal 2001 as compared to fiscal 2000. This decrease is attributable to lower average outstanding balances and lower interest rates on our credit facilities in fiscal 2001 as compared to fiscal 2000. This decrease is partially offset by a decrease in interest capitalized on borrowings for the note
payable associated withKansas and Chicagoland speedways, which began operations in the Phoenix acquisition.third quarter of fiscal 2001.
Equity in net lossincome from equity investments for the three months ended
February 28, 1998 represents the Company'sour pro rata share of lossesthe current income from our 37.5% equity investment in Raceway Associates. Raceway Associates owns and operates Route 66 Raceway as well as Chicagoland, which conducted its inaugural events in fiscal 2001.
The decrease in our effective income tax rate in fiscal 2001, as compared to fiscal 2000, is primarily attributable to the amortizationnon-deductible portion of the Company's investmentNorth Carolina Speedway litigation recorded in excess of its share offiscal 2000 as well as the investee's underlying net assets from its 11% indirect investmentincrease in Penske
Motorsports, Inc. ("PMI"), its then 40% investmentpretax income in the operations of
Homestead-Miami Speedway, LLC ("Homestead") and its then approximately 7%
investment in Grand Prix Association of Long Beach ("Long Beach"). The
comparable period of the prior year included the Company's equity in net losses
from PMI and the Company's 50% interest in Watkins Glen. In March 1998, the
Company purchased an additional 5% interest in Homestead for $2.8 million,
which was substantially financed through a 7.5% interest bearing note, payable
in December 2001, and sold its entire interest in Long Beach for $5.3 million.
18
As a result of the foregoing, the Company'sour net income increased approximately $2.7$37.2 million, or 15.3%73.8%, for the three months ended February 28,
1998in fiscal 2001 as compared to fiscal 2000.
Comparison of Fiscal 2000 to Fiscal 1999
On July 26, 1999, we acquired the comparable periodapproximately 88% interest we did not already own in Penske Motorsports. Motorsports facilities acquired in the transaction include Michigan International Speedway in Brooklyn, Michigan; California Speedway in Fontana, California; North Carolina Speedway in Rockingham, North Carolina; and Nazareth Speedway in Nazareth, Pennsylvania. We also acquired Penske Motorsports’ 45% interest in Homestead-Miami Speedway, bringing our ownership in the operations of
23
In addition to the incremental operating expenses and depreciation and amortization resulting from these transactions, the acquisitions of Penske Motorsports and Richmond resulted in the inclusion of the following additional motorsports events during fiscal 2000 as compared to fiscal 1999:
| • | 5 NASCAR Winston Cup events; | |
| • | 5 NASCAR Busch Grand National events; | |
| • | 4 NASCAR Craftsman Truck events; and | |
| • | 3 CART FedEx Championship Series events. |
Accordingly, our results of operations, as well as the margins of certain expenses in relation to certain revenues, are not comparable on a period-to-period basis.
Admissions revenue increased approximately $18.8$58.9 million, or 37%44.0%, duringin fiscal 19972000 as compared to the twelve months ended November 30, 1996.
Approximately one-thirdfiscal 1999. Over three-quarters of thisthe increase is a result of increasedthe events conducted at our newly acquired facilities during the period in which there were no comparable events in the prior year. The remaining increase is primarily attributable to an increase in seating capacity and attendance, at Daytona, Talladega Superspeedway ("Talladega") and
Darlington Raceway ("Darlington"). Approximately one-quarter of the increase is
attributable toas well as an increase in the weighted average price of tickets sold for certain events at Daytona, Talladega and Darlington.Michigan.
Motorsports related income increased approximately $60.2 million, or 52.1%, in fiscal 2000 as compared to fiscal 1999. Over one-half of the increase is a result of the events conducted at our newly acquired facilities during the period in which there were no comparable events in the prior year. The remainder of theremaining increase is primarily attributable to increased television broadcast rights fees, sponsorships and royalties, advertising, expanded luxury suite and hospitality facilities and other rentals.
Food, beverage and merchandise income increased approximately $20.2 million, or 43.3%, in fiscal 2000 as compared to fiscal 1999. The increase is primarily attributable to the impactsales of admissions revenueracing tires, accessories and other merchandise by subsidiaries acquired in the Penske Motorsports acquisition, as well as food, beverage and merchandise operations for events conducted at Watkins Glenour newly acquired facilities during the period in which there were no comparable events in the prior year. Increases in food, beverage and Phoenix.merchandise revenues also resulted from increased attendance and seating capacity for certain events at Daytona, Michigan and Talladega. These increases are partially offset by a decrease in revenues from the merchandising subsidiaries acquired in the Penske Motorsports related income increased approximately $18.3 million, or
64.4%,acquisition in which there were no comparable operations during fiscal 1997 as compared to the same period of the prior year.
Approximately one-half of this increase is a result of an increaseyear and certain special promotions conducted in broadcast
rights fees, the rentals of hospitality facilities, and promotion and
sponsorship fees related to events conducted at Daytona, Talladega and
Darlington. The remaining increase is attributable to the events conducted at
Watkins Glen and Phoenix, advertising revenue, other promotion and sponsorship
fees and royalties.
Food, beverage and souvenir income increased approximately $5.7 million,
or 32.1%, for fiscal 1997 as compared to the same period of the prior year.
Increased attendance at events conducted at Daytona, Talladega and Darlington,
and, to a lesser extent, increases1999 that were not repeated in certain prices accounted for
approximately one-half of the increase. The remaining increase is a result of
events conducted at Watkins Glen and Phoenix and direct sales of souvenirs at
the gift shop adjacent to DAYTONA USA.fiscal 2000.
Prize and point fund monies and NASCAR sanction fees increased by
approximately $6.8$25.6 million, or 49.9%56.2%, duringin fiscal 19972000 as compared to the
same period of the prior year.fiscal 1999. Over one-halfthree-quarters of this increase is dueattributable to the events conducted at Watkins Glen and Phoenix.our newly acquired facilities during the period in which there were no comparable expenses in the prior year, as well as the addition of a NASCAR Craftsman Truck event at Daytona in fiscal 2000. The remaining increase is primarilylargely attributable to increased television broadcast rights fees for comparable events year-to-year, as standard NASCAR sanctioning agreements require that a specified percentage of broadcast rights fees be paid as part of prize money. Over three-quarters of the result of increasesincrease in thefiscal 2000 as compared to fiscal 1999 was due to increased prize and point fund monies paid by the Company and
distributed by NASCAR to participants in NASCAR events.
Motorsports related expenses increased approximately $30.6 million, or 59.4%, in fiscal 2000 as compared to fiscal 1999. Over three-quarters of the Company's events.increase is attributable to event and operating expenses at our newly acquired facilities during the period in which there were no comparable expenses in the prior year, which include sanction fees for the CART FedEx Championship Series events and other non-NASCAR events at Michigan, Nazareth and Miami. The remaining increase is primarily due to increases in personnel related costs, non-NASCAR sanction fees, and a wide variety of other operating costs and fan amenities for comparable events year-to-year. Motorsports related expenses as a percentage of combined
24
Food, beverage and merchandise expenses increased approximately $6.7$12.9 million, or 40.8%50.5%, forin fiscal 19972000 as compared to the same periodfiscal 1999. Substantially all of the prior year. This
increase is primarily attributable to the product and operating costs related to the events
held at Watkins Glensales of racing tires, accessories and Phoenix, increasesother merchandise by subsidiaries acquired in direct race expenses related to
events conducted at Daytona, Talladega and Darlington, including increases in
operating costs related to the rain out and rescheduling of Talladega's second
quarter NASCAR Winston Cup event and, toPenske Motorsports acquisition. To a lesser extent, the operation of
DAYTONA USA. Motorsports relatedincrease is due to product and personnel costs for events at our newly acquired facilities during the period in which there were no comparable expenses remained relatively constant as a
percentage of combined admissions and motorsports related income during both
periods.in the prior year. Food, beverage and souvenir expenses increased approximately $2.9 million,
or 27.2%, in fiscal 1997 as compared to the same period of the prior year,
primarily due to increases in personnel and product costs. Food, beverage and
souvenirmerchandise expenses as a percentage of food, beverage and souvenirmerchandise income decreasedincreased from approximately 59.6% for the twelve months ended November 30,
1996 to 57.4%54.7% in fiscal 19971999 to 57.5% in fiscal 2000. This margin decrease is primarily due to the uselower margin activities of third party vendors atcertain merchandising subsidiaries acquired in the Company's Phoenix facility.Penske Motorsports acquisition during the period in which there were no comparable operations in the prior year.
General and administrative expenses increased approximately $7.8$20.1 million, or 35.7%36.5%, duringin fiscal 19972000 as compared to fiscal 1999. Fiscal 1999 general and administrative expenses included a charge of approximately $2.8 million related to the samecash portion of the settlement in a certain legal proceeding involving alleged price-fixing activities of ISC and certain subsidiaries in connection with the sale of souvenirs and merchandise. Over three-quarters of the increase, excluding the effects of the prior year charge for the settlement, is due to the general and administrative expenses associated with our newly acquired operations during the period ofin which there were no comparable expenses in the prior year. The increases areremaining increase is primarily due to the acquisition of Phoenix, the consolidation of
Watkins Glen,increased personnel and expenses related toother costs associated with the ongoing expansion of the Company'sour business. General and administrative expenses as a percentage of total revenuerevenues decreased from approximately 22.2% for the twelve months ended November 30,
1996 to 20.9%18.4% in fiscal 1997.
The Company's depreciation1999 to 17.0% in fiscal 2000. This decrease is primarily a result of our revenue growth exceeding general and administrative expense growth combined with the souvenir litigation charge recorded in the prior year.
Depreciation and amortization expense increased approximately $2.5$26.1 million or 34.5%, duringin fiscal 19972000 as compared to fiscal 1999. This increase is primarily due to the same periodfull year’s depreciation of the prior year, primarilyassets acquired and amortization of goodwill recorded as a result of 19
DAYTONA USA,the Penske Motorsports (which included the consolidation of Miami) and Richmond acquisitions. The remaining increase was a result of the ongoing expansion of our facilities.
Interest income decreased by approximately $2.6 million in fiscal 2000 as compared to fiscal 1999. This decrease is primarily due to lower average investment balances in the Company's motorsportscurrent year.
Interest expense increased by approximately $23.5 million in fiscal 2000 as compared to fiscal 1999. Interest expense in fiscal 2000 is attributable to interest on the $225 million principal amount of senior notes (“Senior Notes”) issued in October 1999, borrowings under our credit facilities and amortization of goodwillterm loan arrangements and interest on our funding commitment related to the acquisitiontaxable special obligation revenue, or TIF, bonds issued in January 1999 by the Unified Government of Phoenix. This increase
wasWyandotte County/Kansas City, Kansas (“Unified Government”) to partially mitigated by an approximately $1fund the Kansas project, net of capitalized interest. Interest expense during fiscal 1999 consisted primarily of (i) interest on the $225 million decrease in depreciationprincipal amount of Senior Notes, (ii) borrowings under our revolving credit facility associated with the lengtheningJuly 1999 acquisition of the estimated service livesPenske Motorsports and (iii) interest on our TIF bond funding commitment, net of grandstands
and other significant assets as a result of management's review of actual
service lives of these types of assets conducted at the beginning of fiscal
1997.
The approximately $1.8 million increase in the Company's net interest
income during fiscal 1997 as compared to the same period of the prior year is
attributable primarily to the investment of proceeds, pending their use, from
the Company's initial public offering of Class A Common Stock in November 1996.capitalized interest.
Equity in net incomeloss from equity investments represents the Company'sour pro rata share of the current income and losses from itsour equity investmentsinvestments. During fiscal 2000, this included our 50% investment in Motorsports Alliance, LLC, which owns the Route 66 Raceway and engaged in the development of Chicagoland. During fiscal 1999, this included our approximately 12% indirect investment in Penske Motorsports and our 45% investment in Miami through the date of the Penske Motorsports acquisition, as well as our 50% investment in Motorsports Alliance.
25
Minority interest consists of the 10% interest in Miami that we did not own. On October 1, 2001, we acquired that remaining 10% interest.
The North Carolina Speedway litigation expense represents the final resolution of the North Carolina Speedway dissenter’s action related to Penske Motorsports’ acquisition of North Carolina in 1997 and includes the judgment and related interest, amounts due non-dissenting former shareholders and related legal fees. The after-tax impact of this expense was approximately $5.2 million.
The increase in our effective income tax rate during fiscal 2000 as compared to fiscal 1999 is primarily due to the amortization of non-deductible goodwill created in the Company's investment in excess of its sharePenske Motorsports acquisition and the non-deductible portion of the investee's underlying net assets, accounted for using the equity method of
accounting. In fiscal 1997 this included the Company's 11% indirect interest in
PMI, its 40% investment in Homestead from July 1997, its approximately 7%
investment in Long Beach from August 1997, and its 50% investment in Watkins
Glen through March 31, 1997. The approximately $900,000, or 71.6%North Carolina Speedway litigation, partially offset by a decrease in equity in netour effective rate for certain state income from equity investments during fiscal 1997, as compared to
the same period of the prior year, is due to the changes in the Company's
equity investments and the timing of those changes.taxes.
As a result of the foregoing, the Company'sour net income increaseddecreased approximately $11.0$6.2 million, or 58.2%10.9%, during fiscal 19972000 as compared to the
same period of the prior year.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL
The Company hasfiscal 1999.
Liquidity and Capital Resources
| General |
We have historically generated sufficient cash flow from operations to fund itsour working capital needs and capital expenditures at existing facilities, as well as to pay an annual cash dividend. In addition, we have used the proceeds from offerings of our class A common stock and, more recently, the net proceeds from the issuance of Senior Notes, borrowings under our credit facilities and state and local mechanisms to fund acquisitions and development projects. At February 28,
1998,November 30, 2001, we had $225 million principal amount of Senior Notes outstanding, total borrowings of approximately $113.5 million under our credit facilities and term loan arrangements, and a debt service funding commitment of approximately $68.9 million, net of discount, related to the CompanyTIF bonds issued by the Unified Government. We had a working capital deficitdeficits of $9.1approximately $28.5 million compared to a
working capital deficit of $25.0and $54.0 million at November 30, 1997. There were no
borrowings under the Company's credit facility at February 28, 1998.
CASH FLOWS2001 and 2000, respectively.
| Cash Flows |
Net cash provided by operating activities was approximately $29.5$160.7 million for the three months ended February 28, 1998, asfiscal 2001, compared to $20.6approximately $140.1 million for the three months ended February 28, 1997.fiscal 2000. The difference between the Company'sour net income of $20.1approximately $87.6 million and the $29.5$160.7 million of operating cash flow was primarily attributable to a $7.9 million increase in income taxes payable, a
$4.9 million increase in accounts payable and other current liabilities, a $4.0
million increase in deferred income taxes and depreciation and amortization of
$3.0to:
| • | depreciation and amortization of $54.5 million; | |
| • | deferred income taxes of $27.2 million; | |
| • | a decrease in inventories, prepaid expenses and other current assets of $3.4 million; | |
| • | $3.2 million in amortization of unearned compensation and financing costs; and | |
| • | an increase in accounts payable and other current liabilities of $1.8 million. |
These differences are partially offset by an increase in accounts receivable of $7.3
million, a decrease in deferred revenueincome of $2.7$10.6 million, and an increase in prepaids, inventoryreceivables of $3.2 million and other current assetsundistributed income from equity investments of $1.2$2.9 million.
Net cash used in investing activities was $23.1approximately $72.0 million for the three
months ended February 28, 1998,fiscal 2001, compared to $13.7approximately $99.5 million for the three months
ended February 28, 1997. The Company'sfiscal 2000. Our use of cash for investing activities for
the three months ended February 28, 1998, reflects $10.6$98.4 million in capital expenditures, $3.9 million to acquire the 10% interest in Miami and $1.5 million to increase our investment in and advances to the Chicagoland project. These uses of cash are partially offset by a $33.9 million decrease in restricted investments related to the development of Kansas Speedway.
Net cash used in financing activities was approximately $68.3 million for fiscal 2001, compared to approximately $27.8 million for fiscal 2000. Our use of cash for financing activities reflects net acquisitionpayments under credit facilities of $12.1$59.0 million, $5.2 million in payments of short-term
investments.
CAPITAL EXPENDITURESlong-term debt, $3.2 million in cash dividends paid and $1.0 million used to reacquire previously issued common stock.
26
| Capital Expenditures |
Capital expenditures totaled $10.6approximately $98.4 million for the three months ended
February 28, 1998,fiscal 2001, compared to $10.3$132.7 million for fiscal 2000. Over 45% of these expenditures were related to the three months ended
February 28, 1997. Capitalconstruction of the speedway in Kansas. The remaining capital expenditures during the three months ended February
28, 1998were related primarily to expenditures at our previously existing facilities, including increased seating capacity at Daytona, Darlington
andCalifornia, Talladega and construction in progress related toDaytona, land purchased for expansion of parking capacity and other uses, as well as a variety of additional luxury suites
and track lighting at Daytona.
20
The Company expectsimprovements.
We expect to make approximately $56.0 million of capital expenditures totaling approximately $35.8 million for approved projects at existingour facilities, duringwhich are expected to be completed within the 24-month
period ending February 29, 2000 to increase grandstand seatingnext twelve months. These projects include acquisition of land for expansion of parking capacity to
construct luxury suites,and other uses, paving and for a numbervariety of otheradditional improvements, including the balance of our capital expenditures related to Kansas, which approximately $7.8will be funded from restricted investments, as discussed below. We review the capital expenditure program periodically and modify it as required to meet current business needs.
| Future Liquidity |
Our $250 million had been spent as of the date hereof. See
"Business--Motorsports Facilities" and "Use of Proceeds."
FUTURE LIQUIDITY
In May 1998, the Company entered into a five-year, unsecured, $100 millionsenior revolving line of credit facility with First Union National Bank, N.A. (the
"Credit Facility"). Borrowings under the (“Credit Facility will bearFacility”) matures on March 31, 2004, and accrues interest at the applicable LIBOR rate plus 40-8050-100 basis points, dependingbased on certain financial criteria. At November 30, 2001, we had borrowings of $70 million outstanding under the Credit Facility.
Our Miami subsidiary has a $20 million credit facility (“Miami Credit Facility”) and a $23.5 million term loan (“Term Loan”). The Miami Credit Facility includes customary representations and warranties,Term Loan are guaranteed by us and have the same interest terms and restrictive covenants defaults and conditions.as our Credit Facility. The Miami Credit Facility will be automatically reduced to $15.0 million on December 31, 2002 and will mature on December 31, 2004. At November 30, 2001, we had borrowings of $20 million outstanding under the Miami Credit Facility. The Term Loan is intendedpayable in annual installments, which range from $4.5 million to $7.0 million. We have an interest rate swap agreement that effectively fixes the floating rate on the outstanding balance under the Term Loan at 5.60% plus 50-100 basis points, based on certain consolidated financial criteria, for the remainder of the loan period.
Our $225 million principal amount of unsecured Senior Notes bears interest at 7.875% and ranks equally with all of our other senior unsecured and unsubordinated indebtedness. The Senior Notes require semi-annual interest payments through maturity on October 15, 2004. The Senior Notes may be used for short-term working capital andredeemed in whole or in part, at our option, at any time or from time to financetime at a redemption price as defined in the development and/or
acquisition of additional motorsports facilities.
The Company is currently pursuing the development of new facilities in
several major markets.indenture. In December 1997, the Company2001, we entered into an interest rate swap agreement withto manage interest rate risk exposure on $100 million of the Unified Government$225 million principal amount of Wyandotte County/Kansas City, KansasSenior Notes. Under this agreement, we receive fixed rate amounts in exchange for floating rate interest payments over the life of the agreement without an exchange of the underlying principal amount. The interest rate swap effectively modifies our exposure to interest risk by converting $100 million of the 7.875% fixed-rate Senior Notes to a floating rate based on six-month LIBOR in arrears plus a spread. The agreement is deemed to be a perfectly effective fair value hedge and therefore qualifies for the construction“shortcut” method of accounting under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. As a 1.5-mile oval motor speedway near Kansas City, Kansas. The
aggregate cost of acquiring and developing the first phase of the Kansas
International Speedway land and facility (which will accommodate approximately
75,000 spectators)result, no ineffectiveness is expected to be over $200recognized in our earnings associated with the interest rate swap agreement.
In January 1999, the Unified Government issued approximately $71.3 million which is expected to be
financedin TIF bonds and approximately $24.3 million in sales tax special obligation revenue (“STAR”) bonds, in connection with (i) approximately $58.8 million invested by the Company and funded
with a portionfinancing of the proceeds from this Offering, (ii) approximately $75.0
millionconstruction of proceeds from the sale of 30-year, taxable special obligation "TIF"Kansas. The STAR bonds that will be serviced through payments by the Company escalating from an
annual rate of approximately $4.8 million to $7.7 million, (iii) approximately
$25.0 million of proceeds from the sale of tax-exempt special obligation "STAR"
bonds that will be retired with state and local taxes generated within the project'sproject’s boundaries and (iv)are not our obligation. The TIF bonds are comprised of a variety$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 repaid by the Unified Government, with payments made in lieu of other mechanismsproperty taxes (“Funding Commitment”) by our wholly-owned subsidiary, Kansas Speedway Corporation, which granted a mortgage and governmental
incentives. However, there currently are no firm commitments from any person to
purchase anysecurity interest in the Kansas project for its Funding Commitment obligation. In addition, the then unexpended portion of Kansas Speedway Corporation’s initial equity commitment of approximately $77.9 million, along with the net TIF and STAR bond proceeds, were deposited into trustee administered accounts for the benefit of the contemplated bond instruments, and there can be no assurance
that the contemplated bond financings will be consummated or that the expected
terms of the bonds will not be materially changed. Moreover, completionconstruction of the Kansas Internationalfacility. At
27
We are a member of Motorsports Alliance (owned 50% by us and 50% by Indianapolis Motor Speedway Corp.), which owns 75% of Raceway Associates. Raceway Associates owns Route 66 Raceway and also owns 930 adjacent acres on which it developed Chicagoland. The Chicagoland development was financed through equity contributions of approximately $50 million from Motorsports Alliance and approximately $50 million in borrowings by Raceway Associates. The members of Motorsports Alliance have agreed to guarantee up to $50 million in borrowings by Raceway Associates on a pro rata basis until such time as the operations of Raceway Associates meet certain financial criteria. In December 1999 the City of Joliet, Illinois sold approximately $9 million in 6.75% municipal bonds (which are to be repaid by Raceway Associates through property tax assessments over twelve years) to help fund a portion of the project costs that relate to public infrastructure for the superspeedway development project. The additional project costs in excess of $109 million were funded from advance sales for events at Chicagoland and by the members of Raceway Associates on a pro rata basis during the construction period. Through November 30, 2001, we had contributed approximately $35.2 million to Motorsports Alliance, including $25 million which has fulfilled our portion of Motorsports Alliance’s $50 million equity commitment and $6.9 million in approved advances. At November 30, 2001, Raceway Associates had borrowed approximately $47.8 million for the Chicagoland construction under the arrangement discussed above, which is subjectcurrently guaranteed by the members of Motorsports Alliance. Chicagoland, which was awarded a NASCAR Winston Cup, a NASCAR Busch Grand National, an IRL and an Automobile Racing Club of America RE/ MAX series event for its inaugural season, successfully commenced motorsports operations in July 2001.
We acquired the remaining 10% interest we did not already own in Miami on October 1, 2001 for $3.9 million. As predetermined in the July 1997 purchase agreement when we acquired our initial 40% interest in Miami, the purchase price was based on 10% of the negotiated facility valuation as of July 1997, plus interest. The acquisition was accounted for under the purchase method of accounting.
During fiscal 1999, we announced our intention to resolutionsearch for a site for a major motorsports facility in the New York metropolitan area. In January 2000, we announced that, through a wholly-owned subsidiary, we had entered into an exclusive agreement with the New Jersey Sports and Exposition Authority to conduct a feasibility study on the development of certain litigationa motorsports facility at the Meadowlands Sports Complex in New Jersey. The original agreement for the feasibility study was extended and now will expire in April 2002. The Meadowlands Sports Complex, located five miles west of the Lincoln Tunnel, is the site of Giants Stadium, Continental Airlines Arena and Meadowlands Racetrack and is the home of professional sports franchises, horse racing, college athletics, concerts and family shows. We have not yet determined the feasibility of the Meadowlands (or any other) site, formulated an estimate of the costs to construct a major motorsports facility in the New York metropolitan area, or established a timetable for completion, or even commencement, of such a project.
Our cash flow from operations consists primarily of ticket, catering and concession sales and contracted revenues arising from television broadcast rights and marketing partnerships. While we expect our strong operating cash flow to continue in the future, our financial success depends significantly on a number of factors relating to consumer and corporate spending, including economic conditions affecting disposable consumer income and corporate budgets such as employment, business conditions, interest rates and taxation rates. These factors can impact both attendance at our events and advertising and marketing dollars available from the motorsports industry’s principal sponsors. In addition, consumer and corporate spending could be adversely affected by economic, security and other significantlifestyle conditions, includingresulting in lower than expected future operating cash flows. General economic conditions were significantly and negatively impacted by the Company's ability to
acquire the landSeptember 11th terrorist attacks and obtain all requisite regulatory approvals. See "Risk
Factors--Uncertain Prospectscould be similarly affected by any future attacks or fear of New Motorsports Facilities"such attacks or acts of war. While a weakened economic and "Business--Legal
Proceedings."
The Company believesbusiness climate, as well as consumer
28
| • | operations and approved capital projects at existing facilities for the foreseeable future; | |
| • | payments required in connection with the funding of the Unified Government’s debt service requirements related to the TIF bonds; and | |
| • | payments related to our existing debt service commitments. |
We intend to pursue further development and/or acquisition opportunities (including the possible development of new motorsports facilities in Denver and the New York metropolitan area) the timing, size and success, oras well as associated potential capital commitments of which, are unpredictable.unknown at this time. Accordingly, a material acceleration of the Company'sin our growth strategy could require the Companyus to obtain additional capital through debt and/or equity financings. Although there can be no assurance, management
believeswe believe that adequate debt orand equity financing wouldwill be available on satisfactory terms.
SEASONALITY AND QUARTERLY RESULTS
The Company derives
Future Trends in Operating Results
An important component of our operating strategy has been our long-standing practice of focusing closely on supply and demand regarding additional capacity at our facilities. We continually evaluate the demand for our most popular racing events in order to ensure that additional capacity provides an acceptable rate of return on invested capital. Through prudent expansion, we have historically been able to keep demand at a higher level than supply, which stimulates ticket renewals and advance sales. This results in earlier cash flow and reduces the potential negative impact of actual and forecasted inclement weather on ticket sales. While we will join with sponsors and offer promotions to generate additional ticket sales, we avoid rewarding last-minute ticket buyers by discounting tickets. We believe it is more important to encourage advance ticket sales and maintain price integrity to achieve long-term growth than to recognize short-term incremental revenue. Based on the current state of the economy and our desire to keep demand at a higher level than supply, we do not anticipate adding to our grandstand seating capacity during 2002 and foresee only modest increases in the weighted average ticket prices for our events. We will continue to annually evaluate expansion opportunities, as well as the pricing of our tickets and other products. Over the long term, we plan to continue to expand capacity at our speedways.
Fiscal 2001 is our first year under NASCAR’s multi-year consolidated television broadcast rights agreements with NBC Sports, Turner Sports, FOX and its incomeFX cable network. These agreements cover the domestic broadcast of NASCAR’s entire Winston Cup and Busch Grand National racing seasons from event admissions and related
revenue from a limited number of NASCAR-sanctioned races.2001 through 2006. As a result, our television broadcast and ancillary rights revenues increased approximately 84% in fiscal 2001 as compared to fiscal 2000. We expect media rights revenues, as well as certain variable costs, to continue to increase based on NASCAR’s announcement that the Company's business has been,annual increase in the domestic television rights fees will range between 15% and 21% from 2001 through 2006, with an average increase of 17%. The increase for fiscal 2002 is expected to remain, highly seasonal based
onbe approximately 15%.
Current economic conditions may make it more difficult in the timingshort term to increase our revenues from corporate marketing partnerships than it has been in recent years. However, we believe that our presence in key markets and impressive portfolio of events are beneficial as we continue to pursue existing and new corporate marketing partners. We believe that revenues from our corporate marketing partnerships will continue to grow over the long term.
In the third quarter of fiscal 2001, we completed the development of and commenced racing operations at our Kansas facility and the Chicagoland facility, in which we have a 37.5% interest. Both facilities hosted inaugural schedules featuring major race events. For example, oneNASCAR, IRL and Automobile Racing Club of Darlington's Winston
CupAmerica events is traditionally held onand sold all of their grandstand seats as season ticket packages. Due to the Sunday preceding Labor Day.
Accordingly,fact that both facilities opened in mid-2001, they were only depreciated for half of the admission revenueyear in fiscal 2001, while they will be depreciated for a full year in future periods. In addition, certain operating and general expenses that were only incurred for a partial year in fiscal 2001 will be incurred by these facilities for a full year in
29
As a result of our merger with Penske Motorsports in July 1999, we recorded a significant amount of goodwill that was not deductible for tax purposes. The amortization of this seasonality and the desire to better conform to the traditional racing season,
the Company changed its fiscal year end from August 31 to November 30 effective
December 1, 1996. Thisnon-deductible goodwill in our financial statements resulted in a three-month transition period commencing
September 1, 1996 and ending November 30, 1996.
21
Historically, the Company had incurred net lossessignificant increase in the fiscal quarter
ending November 30, and achieved its highest netour effective income in the fiscal quarter
ending February 28. However, in fiscal 1997 the Company had net income for the
quarter ended November 30, primarily due to (i) the acquisition of Phoenix,
which resulted in the addition of a NASCAR Winston Cup event in the quarter
ended November 30, and (ii) the date change for Talladega's second Winston Cup
race, which moved the event from the quarter ended August 31tax rate subsequent to the quarter
ended November 30.
The following table presents certain unaudited financial data for each of
the Company's prior nine fiscal quarters (in thousands, except per share
amounts):
FISCAL QUARTER ENDED
------------------------------------------------------------
FEBRUARY 29, MAY 31, AUGUST 31, NOVEMBER 30,
1996 1996 1996 1996
-------------- ------------ ------------ -------------
Total revenues ............................ $ 40,277 $ 24,176 $ 23,047 $ 10,496
Operating income (loss) ................... 20,338 6,230 4,237 (2,565)
Net income (loss) ......................... 12,089 3,817 4,795 (1,867)
Basic earnings (loss) per share ........... 0.35 0.11 0.14 (0.05)
Diluted earnings (loss) per share ......... 0.35 0.11 0.14 (0.05)
FISCAL QUARTER ENDED
------------------------------------------------------------
FEBRUARY 28, MAY 31, AUGUST 31, NOVEMBER 30,
1997 1997 1997 1997
-------------- ------------ ------------ -------------
Total revenues ..................... $ 51,866 $ 29,630 $ 33,106 $ 26,772
Operating income ................... 27,103 7,075 8,762 1,961
Net income ......................... 17,475 4,486 5,985 1,850
Basic earnings per share ........... 0.46 0.12 0.16 0.05
Diluted earnings per share ......... 0.46 0.12 0.16 0.05
FISCAL
QUARTER
ENDED
FEBRUARY 28,
1998
-------------
Total revenues ..................... $ 68,284
Operating income ................... 33,000
Net income ......................... 20,149
Basic earnings per share ........... 0.53
Diluted earnings per share ......... 0.53
INCOME TAXES
Due to the seasonal fluctuation of the Company's business, federal
estimated tax deposits historically have not been required until the second
quarter of the fiscal year.merger. As a result income taxes payable at February 28,
1998 have increased since November 30, 1997. The deferred income tax liability
increased from November 30, 1997 primarily as a result of differences between
financial and tax accounting treatments relating to depreciation expense and
different bases in the equity investmentsour early adoption of Statement of Financial Accounting Standard No. 142, goodwill will no longer be amortized for tax and financial reporting purposes. INFLATION
Management doesAs a result, our effective tax rate is expected to decrease in fiscal 2002.
Inflation
We do not believe that inflation has had a material impact on our operating costs and earnings.
Recent Accounting Pronouncements
In July 2001, the FASB issued SFAS No. 141, “Business Combinations.” SFAS No. 141 supercedes prior guidance and requires that all business combinations in the scope of this statement be accounted for using the purchase method. The provisions of this statement apply to all business combinations initiated after June 30, 2001, as well as all business combinations accounted for using the purchase method for which the date of acquisition is July 1, 2001 or later. We adopted this statement as required on July 1, 2001 and it did not have a material affect on our financial statements.
In July 2001, the FASB also issued SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 supercedes prior guidance and requires that goodwill no longer be amortized to earnings, but instead be annually reviewed for impairment. The impairment test under SFAS No. 142 is based on a two-step process involving (i) comparing the estimated fair value of the Company.
IMPACT OF THE YEAR 2000related reporting unit to its net book value, and (ii) comparing the estimated implied fair value of goodwill to its carrying value. We have elected to early adopt SFAS No. 142 in the first quarter of 2002. Accordingly, we will not record amortization expense of approximately $18.4 million, or approximately $0.30 per diluted share, in fiscal 2002 based on the level of goodwill as of November 30, 2001. In addition, based on an independent appraisal firm’s valuation of each reporting unit’s fair value using discounted cash flows, which reflect changes in certain assumptions since the date of the acquisitions, and the identification of qualifying intangibles, we expect to record a non-cash after-tax charge of $513.8 million as a cumulative effect of change in accounting principle for the write-off of goodwill in the first quarter of 2002.
The Company believeswrite-off of goodwill results from the use of discounted cash flows in assessment of fair value for each reporting unit as required by SFAS No. 142 and the fact that it will satisfactorily resolve all significant
Year 2000 problemscertain acquired intangible assets were not reclassified and accounted for apart from goodwill upon transition to SFAS No. 142. In addition, FASB Staff Announcement Topic No. D-100 states that the transition provisions do not allow entities to “carve-out” from goodwill any intangible assets not identified and measured at fair value in the initial rendering of a business combination and subsequently accounted for separately from goodwill. At the date of the acquisitions, we recognized our relationships with multiple sanctioning bodies, including NASCAR, CART and IRL evidenced by the endsanction agreement assets, and goodwill, as a single asset labeled “Goodwill.” We amortized the combined assets over their estimated useful lives of fiscal 1998 and that40 years. According to SFAS No. 142, the related costs will
not be material. Estimates of Year 2000 related costs are based on numerous
assumptions, includinggoodwill impairment loss is measured as the continued availability of certain resources, the
ability to correct all relevant applications and third party modification
plans. There is no guarantee that the estimates will be achieved and actual
costs could differ materially from those anticipated. See "Risk Factors--Impactexcess of the Year 2000."
22
NASCAR
carrying amount of goodwill (which included the carrying amount of the acquired intangible assets) over the implied fair value of goodwill (which excludes the fair value of the acquired intangible assets). Thus, the measured goodwill impairment loss was substantially larger than it would have been had the acquired intangible assets initially been recognized apart from goodwill.
30
MOTORSPORTS INDUSTRY OVERVIEW
The National Associationmotorsports industry consists of several distinct categories of auto racing, each with its own organizing body and sanctioned racing events. The Federation Internationale de l’Automobile, or FIA, based in Paris, France, is a worldwide governing body for Stock Car Auto Racing, Inc. ("NASCAR") has
been influentialauto racing, with representative members in more than 100 countries. The FIA’s United States representative is the Automobile Competition Committee of the United States, which in turn consists of the following eight-member sanctioning organizations:
| NASCAR | National Association for Stock Car Auto Racing | |
| IRL | Indy Racing League | |
| CART | Championship Auto Racing Teams | |
| Grand Am | Grand American Road Racing Association | |
| NHRA | National Hot Rod Association | |
| PSCR | Professional Sports Car Racing | |
| SCCA | Sports Car Club of America | |
| USAC | United States Auto Club |
Motorsports is among the most popular and fastest growing spectator sports in the growthUnited States, with annual attendance at all U.S. motorsports events exceeding 17 million people. The NASCAR Winston Cup, NASCAR Busch Grand National and development of bothNASCAR Craftsman Truck events, each sanctioned by NASCAR, and open-wheel events sanctioned by IRL and CART are generally the Company's operations
and professional stock car racing generally. NASCAR, all of whose capital stock
is beneficially owned by William C. France and James C. France, the Company's
principal shareholders, is widely recognized as the premier official
sanctioning body of professional stock car racingmost popular motorsports events in the United States. See
"Certain Transactions." NASCAR sanctions all races that constitute the Winston
Cup Series and Busch Grand National Series, as well as the Craftsman Truck
Series and a number of other racing series and events. The CompanyWe derived approximately 78%82% of its totalour 2001 revenues from NASCAR-sanctioned racing events at the Company's facilities in fiscal 1997.
OVERVIEW OF STOCK CAR RACING
Professional stock car racing developed in the Southeastern United States
in the 1930's. It began to mature in 1947, when William H.G. France (the father
of both the Company's Chairman and its President) organized NASCAR. The first
NASCAR-sanctioned race was held in 1948 in Daytona Beach, Florida. In 1959, the
Company completed construction of the Daytona International Speedway and
promoted the first "Daytona 500." The motorsports industry began to gather
momentum in the mid-1960's, whenour wholly-owned facilities.
Among all major North American automobile and tire
manufacturers first offered engineering and financial support. In the early
1970's,U.S. professional sports, NASCAR created a more elite circuit focused on the best drivers.
Accordingly, it reduced the number of races constituting its premier series,
now known as the Winston Cup Series,events have experienced the greatest increase in spectator attendance, growing at a compound annual rate of 6% from approximately 501990 to 30 races.
NASCAR-sanctioned events, particularly2001. Average household television viewership for the 2001 NASCAR Winston Cup races, enjoy a large
and growing base of spectator support. Based on statistics developed by
Goodyear, attendance at NASCAR'sincreased more than 36% over the prior year. More than 280 million television viewers watched NASCAR Winston Cup Series, Busch Grand National
Series and Craftsman Truck Series grew 9.0%, 16.6% and 13.5%, respectively,
from 1996 to 1997. Moreover, according to Nielsen, more than 175 million people
tuned in to NASCAR's televised events in 1997. Winston Cup, Busch Grand
National2001, up 54% from the previous year. The demographic numbers showed a 29% increase in male viewers ages 18 to 34, and a 34% increase in male viewers ages 18 to 49. In addition, a significant milestone was reached with the airing of Talladega’s EA Sports 500. The race’s 4.8 Nielsen rating, representing 8 million viewers, was the highest national rating ever for an auto race that was broadcast in direct television competition with professional football.
Economics of Auto Racing
Motorsports events generally are heavily promoted, with a number of supporting events surrounding each main race event. Examples of supporting events include secondary races, qualifying time trials, practice sessions, driver autograph sessions, automobile and product expositions, catered parties and other major NASCAR-sanctioned races also receive extensive
national radio coverage, including programs produced and syndicated by the
Company's MRN Radio network. Management believes that increased media coverage
has led to national recognition of NASCAR drivers,related events which has further increased
the popularity of the sport, thereby resulting in (i) record NASCAR race
attendance, (ii) increasing payments to track operators for broadcast rights
and sponsorship fees, and (iii) increased sales of motorsports-related
souvenirs. Management believes that the increasing payments for broadcast
rights and sponsorship fees are also the result of the demographic appeal of
the motorsports spectator base to advertisers. See "--Economics of Stock Car
Racing--Spectators." Corporate sponsors of NASCAR-sanctioned events now include
a large number of leading manufacturing and consumer products companies.
GOVERNANCE OF STOCK CAR RACING
NASCAR regulates its membership (including drivers, their crews, team
owners and track operators), the composition of race cars and the sanctioning
of races. It sanctions events by means of one-year agreements with track
operators, each of which specifies the race date, the sanctioning fee and the
purse. NASCAR officials control qualifying procedures, the line-up of the cars,
the start of the race, the control of cars throughout the race, the election to
stop or delay a race, "pit" activity, "flagging," the positioning of cars, the
assessment of lap and time penalties and the completion of the race. NASCAR
also administers, monitors and promotes the championship point systems for its
Winston Cup Series, Busch Grand National Series and Craftsman Truck Series
events. Such point systems wereall designed to encourage driversmaximize the spectators’ overall entertainment experience and enhance the value to participate in
all of the races of the relevant series.
By sanctioning an event, NASCAR does not warrant, either expressly or by
implication, nor is it responsible for, the financial or other success of the
sanctioned event or the number or identity of vehicles or competitors
participating in the event. Similarly, no existing NASCAR sanction agreement,
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nor anything in the course of dealing between NASCAR and the Company, should be
construed to require NASCAR to enter into a sanction agreement or to issue a
sanction for any other event in the future.
ECONOMICS OF STOCK CAR RACINGsponsors. The primary participants in the business of stock carauto racing are sanctioning bodies, spectators, sponsors, track operators, sponsors, major automobile manufacturers, drivers and crew members, team membersowners and team
owners.
SPECTATORS. Accordingvendors of officially licensed merchandise.
Sanctioning Bodies
Sanctioning bodies such as NASCAR and IRL sanction events at various race venues in exchange for fees from track operators. Sanctioning bodies are responsible for all aspects of race management necessary to Goodyear, approximately 9.0conduct the event. They are responsible for regulating racing cars, drivers and teams and providing officials to ensure fair competition, as well as administering the race and series purses and other prize payments.
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Spectators
Motorsports is among the most watched sports worldwide and is among the fastest growing spectator sports in the United States. Annual attendance at all U.S. motorsports events exceeds 17 million spectators
attended the 1997 Winston Cup Series, Busch Grand National Series and Craftsman
Truck Series events. Moreover, according to Nielsen, approximately 123 million
viewers tuned to televised Winston Cup Series events in 1997. The Company
believespeople. We believe that the demographic profile of the growing base of spectators, including demographics such as household income, education, gender and age, has considerable appeal to the primary participants in the business of auto racing.
Track Operators
Track operators such as ISC market and promote events at their facilities. Their principal revenue sources generally include admissions, television, radio and ancillary rights fees, promotion and sponsorship fees, the sale of merchandise, food and beverage concessions, hospitality fees paid for catering receptions and private parties, luxury suite and hospitality village rentals, parking, and advertising on track signage and in souvenir racing programs. Sanction agreements require race track operators sponsorsto pay fees for each sanctioned event conducted, including sanction fees and advertisers. According to
Simmons Market Research Bureau, Inc.prize and Performance Research, approximately
38% of NASCAR spectators are women and 69% are between the ages of 18 and 44.
The Company believes that motorsports spectators are loyal to both the sport of
motor racing and to the sponsors of the sport.
SPONSORS.championship point money.
Sponsors
Drawn to the sport by its attractive demographics and the strong brand loyalty of the fans, sponsors are active in all phasesaspects of professional stock carauto racing. In addition to directly supporting racing teams through the funding of certain costs of their operations, sponsors support track operators by paying fees associated with specific namethe naming of events such as the "PepsiPepsi 400 at Daytona",Daytona, the "DieHard 500"Pontiac Excitement 400 or the "Bud Shootout at Daytona."EA Sports 500. In addition, premier racing events such as the Daytona 500 frequently have multiple "officialofficial corporate sponsors." In return,
sponsors Sponsors negotiate to receive specified advertising exposure through television and radio coverage, newspapers, race programs, brochures and advertising at the track on race day.
TRACK OPERATORS. Track operators such as the Company market and promote
events at their facilities. Their principal revenue sources generally include
(i) admissions, (ii) television and radio broadcast rights fees, (iii)
sponsorship fees, (iv)day of the sale of merchandise such as souvenirs, collectibles
and apparel, (v) food and beverage concessions, (vi) hospitality fees paid for
catering receptions and private parties, (vii) luxury suite and hospitality
village rentals, (viii) parking, and (ix) advertising on track signage and in
souvenir racing programs. Sanction agreements require race track operators torace. Finally, sponsors pay fees to the relevant sanctioning body for each sanctioned event conducted,
including sanction fees and prize money. With the exception of NASCAR's
Craftsman Truck Series, track operators negotiate directlyfor the use of intellectual properties to promote the sponsor’s association with televisionan event and radio networksdrive retail sales.
Major Automobile Manufacturers
Major automobile manufacturers, including General Motors, Ford, and Chrysler, play a key role in the success of the sport by providing financial support to drivers, teams and track operators; technological support in the form of research and development; and exposure for coverage of NASCAR-sanctioned events.
DRIVERS AND TEAM MEMBERS. Although athe sport through advertising and dealer promotion.
Drivers and Crew Members
The majority of drivers contract independently with team owners, certainowners; however, some drivers own their own teams. Drivers receive income from contracts with team owners, sponsorship fees and prize money. Successful driversDrivers may also receive income from personal endorsement fees and souvenir sales.merchandise licensing fees. The success and personality of a driver can beis an important marketing advantage for team owners because it can help attract corporate sponsorships and generate sales for vendors of officially licensed merchandise, vendors such as the Company.including ISC. The efforts of each driver are supported by a number of other teamcrew members, all of whom are supervised by a crew chief.
TEAM OWNERS. In most instances,chief or team manager.
Team Owners
Team owners generally bear the financial risk of placing their teams in competition. They (i) contract with drivers, (ii) acquire racing vehicles and support equipment, (iii) hire pit crews and mechanics, and (iv) syndicatearrange sponsorship of their teams. THE WINSTON CUP SERIESTeam owners generally receive income principally from sponsorships and prize money.
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Merchandise Vendors
The most prominentgrowing popularity of motorsports events, combined with the demographics of the spectators, has resulted in substantial revenue growth for vendors of officially licensed racing-related merchandise. For example, sales of apparel, souvenirs, collectibles and well-attended NASCAR-sanctioned events are the
Winston Cup Series events. According to statistics compiledother merchandise licensed by Goodyear, total
attendance at Winston Cup Series events increasedNASCAR, drivers, teams and track operators have climbed from approximately 3.3$80 million in 1990 to approximately 6.0 million$1.3 billion in 1997.
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NASCAR
The largest auto racing category in the United States, in terms of attendance, media exposure and sponsorships, is stock car racing. Stock car racing utilizes equipment similar in appearance to standard passenger automobiles. Stock car races are conducted on oval tracks, including short tracks of one-half mile or less in length, intermediate tracks between one-half mile and one mile in length or superspeedways of one mile or greater in length, and permanent road courses. The most prominent sanctioning body in stock car racing is NASCAR, based on such factors as geographic presence and number of members, series and sanctioned events.
Professional stock car racing developed in the southeastern United States in the 1930’s. It began to mature in 1947 when William H.G. France (the father of both our Chairman and President) organized NASCAR. The first NASCAR-sanctioned race was held in 1948 in Daytona Beach, Florida. In 1959, we completed construction of Daytona International Speedway and promoted the first Daytona 500. The motorsports industry began to gather momentum in the mid-1960’s, when major North American automobile and tire manufacturers first offered engineering and financial support. Evolving from the NASCAR Grand National Series which began in 1950, in the early 1970’s NASCAR created the NASCAR Winston Cup Series begins in February with Speedweeks (consistingSeries. In 2002, this premier series will consist of the annual "Bud Shootout at Daytona" all star event, the "Gatorade 125's"
qualifying races and a number of other premier racing events culminating with
the Daytona 500) and concludes with the "NAPA 500" in November. In 1998, NASCAR
will sanction 3739 televised events, including fourthree non-championship point events, at 2123 tracks operating in 17 states and Japan.19 states. No track currently promotes more than two NASCAR Winston Cup championship point events. The following table shows the 19982002 NASCAR Winston Cup Series schedule (events held at facilities operated by the Companyus or in which we have a financial interest are noted in bold).
1998 WINSTON CUP SERIES SCHEDULE
:
2002 NASCAR Winston Cup Schedule
| Television | ||||||
| Date | Facility | Network | ||||
Feb 10* | Daytona International Speedway | TNT | ||||
Feb 14* | Daytona International Speedway | TNT | ||||
Feb 17 | Daytona International Speedway | NBC | ||||
Feb 24 | North Carolina Speedway | FOX | ||||
| Mar 3 | Las Vegas Motor Speedway | FOX | ||||
| Mar 10 | Atlanta Motor Speedway | FOX | ||||
Mar 17 | Darlington Raceway | FOX | ||||
| Mar 24 | Bristol Motor Speedway | FOX | ||||
| Apr 7 | Texas Motor Speedway | FOX | ||||
| Apr 14 | Martinsville Speedway | FX | ||||
Apr 21 | Talladega Superspeedway | FOX | ||||
Apr 28 | California Speedway | FOX | ||||
May | Richmond International Raceway | FX | ||||
| May 18* | Lowe’s Motor Speedway | FX | ||||
| May | Lowe’s Motor Speedway | FOX | ||||
| Jun 2 | Dover Downs International Speedway | FX | ||||
| Jun 9 | Pocono Raceway | FOX | ||||
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| Television | ||||||
| Date | Facility | Network | ||||
Jun 16 | Michigan International | FOX | ||||
| Jun 23 | Sears Point Raceway | FOX | ||||
Jul 6 | Daytona International Speedway | FOX | ||||
Jul 14 | Chicagoland Speedway | NBC | ||||
| Jul 21 | New Hampshire International Speedway | TNT | ||||
| Jul 28 | Pocono Raceway | TNT | ||||
| Aug 4 | Indianapolis Motor Speedway | NBC | ||||
Aug 11 | Watkins Glen International | NBC | ||||
Aug 18 | Michigan International Speedway | TNT | ||||
| Aug 24 | Bristol Motor Speedway | TNT | ||||
Sep 1 | Darlington Raceway | TNT | ||||
Sep 7 | Richmond International Raceway | TNT | ||||
| Sep 14 | New Hampshire International Speedway | NBC | ||||
| Sep 22 | Dover Downs International Speedway | TNT | ||||
Sep 29 | Kansas Speedway | NBC | ||||
Oct 6 | Talladega Superspeedway | NBC | ||||
| Oct 13 | Lowe’s Motor Speedway | NBC | ||||
| Oct 20 | Martinsville Speedway | NBC | ||||
| Oct 27 | Atlanta Motor Speedway | NBC | ||||
Nov 3 | North Carolina Speedway | TNT | ||||
Nov 10 | Phoenix International Raceway | NBC | ||||
Nov 17 | Homestead-Miami Speedway | NBC | ||||
| * | Represent non-championship point events |
NASCAR also sanctions various other racing events as well as sanctioning agreements forand series, including the non-point "Bud Shootout
at Daytona" all star race and "Gatorade 125s" (qualifying races for the Daytona
500) at Daytona International Speedway.
THE BUSCH GRAND NATIONAL SERIES AND OTHER NASCAR EVENTS
Among series sanctioned by NASCAR, the Busch Grand National Series is
generally perceived as second in prominence to the Winston Cupand NASCAR Craftsman Truck Series. In 1998,
312002, 34 NASCAR Busch Grand National Series events will be promoted at 2526 tracks in 1923 states. Many track operators, including the Company,us, host a NASCAR Busch
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Seriesor NASCAR Craftsman Truck event in conjunction with a NASCAR Winston Cup Series event in order to boost overall attendance for a race weekend. The Company hasIncluding our indirect interest in Chicagoland, we have sanctioning agreements for five16 NASCAR Busch Grand National Series racesevents in 1998: the
NAPA Auto Parts 300, the Lysol 200, the Touchstone Energy 500K, the Diamond
Hill Plywood 200, and the Dura-Lube 200,2002, all of which are scheduled to be televised.televised on FOX, NBC, TNT or FX. In 2002, 23 NASCAR Craftsman Truck events are scheduled to be promoted at 22 tracks in 18 states. We have sanctioning agreements for eight Craftsman Truck races in 2002, all of which are scheduled to be televised on ESPN or ESPN2.
| Electronic Media Rights |
Historically, track operators negotiated directly with television and cable networks for coverage of substantially all of the televised NASCAR-sanctioned events held at their facilities. In February 1999, NASCAR announced it would retain television, radio and all other electronic media rights and negotiate such rights other than radio for the NASCAR Winston Cup and NASCAR Busch Grand National series events. In November 1999, NASCAR reached an agreement on a six-year television contract with NBC Sports and Turner Sports, and an eight-year agreement with FOX and its FX cable network, for the domestic television broadcast rights beginning in 2001. Under these agreements, the NASCAR Winston Cup and NASCAR Busch Grand National events at Daytona will alternate between FOX and NBC annually. The remainder of the events will be split between the broadcasters, with FOX and FX broadcasting the first half of the season and NBC and Turner Broadcasting the second half.
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In addition to generating substantially higher rights fees, these agreements are expected to create significant indirect benefits for the industry that will help drive future growth. For example, network event coverage increased significantly during 2001, when approximately 70% of the NASCAR Winston Cup Seriesevents were scheduled on network broadcasts compared to approximately 30% during the previous year. This resulted in additional viewers and exposure for the sport, as network broadcasts offer the opportunity to reach significantly more households than cable broadcasts.
Prior to 2001, NASCAR Winston Cup and NASCAR Busch Grand National Series events NASCAR sanctions various other stock car racing eventswere broadcast by as many as six different network and series, includingcable operators each year. This resulted in little promotion by the Craftsman Truck Series, Winston Racing Series, Goody's Dash Seriesbroadcasters and Winston West Series.
OTHER MOTORSPORTS
Other motorsports include stock car racing not sanctioned by NASCAR, a
varietylack of open-wheel racing formats such as "Champ Car," "Indy car"continuity in race coverage. FOX, NBC and "Formula One,"their respective cable partners began actively promoting their involvement beginning with the 2001 season through advertising and support programming, as well as sports car, motorcycleworking together to improve race coverage and go-kartprovide continuity of coverage throughout the season. This is creating additional exposure for the sport and is expected to help drive future growth.
IRL and CART
Internationally, the most recognized form of auto racing is open-wheel racing. STOCK CAR RACING.In the United States, the most established open-wheel racing series are sanctioned by IRL and CART.
IRL was formed in 1995 to sanction a U.S.-based open-wheel series on oval courses and began racing in 1996. In 2002, the IRL schedule features 15 races, including the Indianapolis 500, one of the world’s most prestigious motorsports events. IRL also owns and sanctions the Indy Racing Infiniti Pro Series, a developmental series for IRL. In fiscal 2002, we will promote eight IRL races. We believe IRL’s long-term business plan of growing a domestic oval-based racing series favorably complements our business.
CART was formed in 1978 and sanctions the CART FedEx Championship Series, which in 2002 is scheduled to consist of 19 races in seven countries. CART events are typically staged on three different types of tracks — ovals, temporary street courses and permanent road courses. CART also owns and sanctions the Toyota Atlantic Championship Series, a developmental series for the CART FedEx Championship Series. In 2002, we will promote one CART FedEx Championship race, at California.
Other Sanctioning bodies forBodies
Although NASCAR is the most prominent sanctioning body, a number of other organizations also sanction stock car racing include NASCAR,races, including the Automobile Racing Club of America ("ARCA"), the American Motor Racing
Association ("AMRA"), the International Super Modified Association ("ISMA"),
the National Championship Racing Association ("CRA") and the United States
Racers Association ("USRA"). In 1998, the Company isAmerica. Including events at Chicagoland, in 2002, we are scheduled to promote two
ARCA races--First Plus Financial 200 at Daytona, the annual season-opener for
the ARCA Bondo/Mar-Hyde Supercar series,five Automobile Racing Club of America races and the Winn Dixie 300 at Talladega.
The Company also promotes onethree of the four races in the International Race of Champions ("IROC") series, in which a selectedselect field of 12 drivers from different motorsports disciplines compete in equally prepared Pontiac Firebird
Trans-Ams.
OPEN WHEEL RACING. The most established open-wheel racing series are the
CART FedEx Championship Series, the Indy Racing League (the "IRL"), a United
States-based oval-racing series that includes the Indianapolis 500,vehicles. Other examples of motorsports events and Formula
One.
CHAMP CAR RACING. In 1997, CART Champ Car racing was conducted at 17
events in four countries on four different types of tracks--superspeedways,
ovals, temporary street courses and permanent road courses.
INDY CAR RACING. "Indy cars" take their name from cars which race at the
Indianapolis Motor Speedway, which holds the "Indianapolis 500" on the
Sunday before Memorial Day every year. Indy car racing is sanctioned by the
IRL. In fiscal 1998, the Company will promote an IRL race at Phoenix
International Raceway.
FORMULA ONE. Formula One car races are typically held outside the United
States and are sanctioned by the Federation Internationale de l'Automobile
("FIA"). Although FIA also serves as an umbrella organization for other sanctioning bodies for Company-promoted races, the Company does not
currently promote Formula One races.
SPORTS CAR RACING. Sports car racing is sanctioned in the United States by
the Sports Car Club of America ("SCCA"), the United States Road Racing
Championship ("USRRC") and Professional Sports Car Racing ("PSR"), which
sanction races held on road courses throughout the country. The Company
promotes a number of sports car racing events sanctioned by SCCA and USRRC,
including the Rolex 24 at Daytona, the premier sports car endurance event held
in the United States.
MOTORCYCLE AND GO-KART RACING. The American Motorcyclists Association
("AMA") sanctions motorcycle races and the World Karting Association ("WKA")
sanctions go-kart races. The Company promotes numerous motorcycle and go-kart
racing events at its facilities, including the Daytona 200 by Arai (part of the
AMA Superbike National Championship Series) and the Supercross by Honda, each
of which is conducted in connection with the Company's Daytona 200 Motorcycle
Week held each Spring in Daytona Beach.
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| • | Formula One open-wheel races held on road courses in several countries and sanctioned by the FIA; | |
| • | sports car races held on road courses and temporary street courses and sanctioned in the United States by Grand Am, American LeMans and SCCA; | |
| • | motorcycle races sanctioned by the American Motorcyclist Association; | |
| • | drag strip races sanctioned in the United States by NHRA and International Hot Rod Association; and | |
| • | go-kart races sanctioned by the World Karting Association. |
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BUSINESS
The Company,
We are a leading promoter of motorsports entertainment activities in the United States, ownsStates. We own and/or operates fiveoperate twelve of the nation's premiernation’s major motorsports facilities--Daytonafacilities:
| • | Daytona International Speedway in Florida; | |
| • | Talladega Superspeedway in Alabama; | |
| • | Michigan International Speedway in Michigan; | |
| • | Richmond International Raceway in Virginia; | |
| • | California Speedway in California; | |
| • | Kansas Speedway in Kansas; | |
| • | Phoenix International Raceway in Arizona; | |
| • | Homestead-Miami Speedway in Florida; | |
| • | North Carolina Speedway in North Carolina; | |
| • | Darlington Raceway in South Carolina; | |
| • | Watkins Glen International in New York; and | |
| • | Nazareth Speedway in Pennsylvania. |
In addition, Raceway Associates, in Florida; Talladega Superspeedwaywhich we hold a 37.5% indirect equity interest, owns and operates two nationally recognized major motorsports facilities in Alabama; Phoenix International Raceway in Arizona; Darlington Raceway in
South Carolina; and the Watkins Glen International road course facility in
upstate New York. OtherIllinois:
| • | Chicagoland Speedway; and | |
| • | Route 66 Raceway. |
In 2001, these motorsports interests include the operation of Tucson
Raceway Park in Arizona, a 45% indirect interest in the operations of the
Metro-Dade Homestead Motorsports Complex near Miami, Florida and an
approximately 11% indirect interest in Penske Motorsports, Inc. The Company
currently promotesfacilities promoted well over 80100 stock car, open-wheel, sports car, truck, motorcycle and other racing events, annually, including eight NASCAR Winston Cup Series championship
point races, two Winston Cup Series non-championship pointincluding:
| • | 20 NASCAR Winston Cup events; | |
| • | 16 NASCAR Busch Grand National events; | |
| • | 8 NASCAR Craftsman Truck events; | |
| • | 5 IRL events; | |
| • | 3 CART FedEx Championship Series events; | |
| • | 2 NHRA national events; | |
| • | the premier sports car endurance event in the United States (the Rolex 24 at Daytona sanctioned by Grand Am); and | |
| • | a number of prestigious motorcycle races. |
Our business consists principally of racing events five Busch
Grand National Series races,at these major motorsports facilities, which, in total, currently have more than 1 million grandstand seats. We generate revenue primarily from admissions, television, radio and ancillary rights fees, promotion and sponsorship fees, hospitality rentals (including luxury suites, chalets and the premier sports car endurance event in the
United States (the Rolex 24hospitality portion of club seating), advertising revenues, royalties from licenses of our trademarks and track rentals, as well as from catering, merchandise and food concession services at Daytona)most of our facilities. We also own and a number of prestigious motorcycle
races. The Company also owns and operatesoperate MRN Radio, the nation'snation’s largest independent sports radio network and DAYTONA USA--TheUSA — The Ultimate Motorsports Attraction, a motorsports-themed entertainment complex that includes
interactive media, theaters, historical memorabilia, exhibits and toursthe Official Attraction of Daytona International Speedway. InNASCAR.
36
We have grown significantly in recent years through both internal and external initiatives. From fiscal 1997 NASCAR-sanctioned racesthrough fiscal 2001, our revenues increased from $141.4 million to $528.5 million, a CAGR of 39%. In particular, our motorsports related income increased from 33.0% of our total revenues in fiscal 1997 to 45.1% in fiscal 2001, or at a CAGR of 50%. Over the Company's facilities accounted for approximately 78%same period, our EBITDA increased from $54.8 million to $224.0 million, a CAGR of the Company's total
revenues.
According42%, and our EBITDA margin increased from 38.8% in fiscal 1997 to THE WALL STREET JOURNAL, stock car racing is the most-watched
professional sport42.4% in fiscal 2001. We remain focused on U.S. television behind the National Football League.
Accordingseveral growth opportunities, including maximizing our media income and exposure and developing long-term marketing partnerships, which should enable us to Nielsen, more than 175 million people tuned to NASCAR's televised
events in 1997. Moreover, based on statistics developed by Goodyear, attendance
at NASCAR's three major professional circuits, the Winston Cup Series, the
Busch Grand National Series and the Craftsman Truck Series, grew 9.0%, 16.6%
and 13.5%, respectively, from 1996 to 1997. The Company believes that the
demographic profile of this growing base of spectators and viewers has
considerable appeal to sponsors and advertisers, including leading consumer
product and manufacturing companies which have expanded their participationenhance our leadership position in the motorsports entertainment industry. Published reports indicate
Business Strengths
We have experienced significant growth in recent years, which we believe is attributable to the following strengths of our business:
| A Leader in Motorsports Entertainment and the Largest NASCAR Promoter |
Our main focus has been driving revenue growth by creating a strong network of facilities across the country. We own, operate and/or have a material interest in 14 major motorsports facilities that, corporate sponsors
will spend an estimated $1.1 billion on motorsports marketing programs in 1998.
The Company's major sponsors include Pepsi, Coca-Cola, Kmart, Sears, Anheuser
Busch, Rolex, Pontiac, Ford, Chevrolet, Dura-Lube, DuPont, Circuit City,
Goodyear, TranSouth Financial, First Union, NAPA Auto Partstotal, have more than 1 million grandstand seats and Gatorade.
OPERATING STRATEGY
Key elementsare located in six of the Company's general operating strategy emphasize (i)
senior management's long-term association with the motorsports industry, (ii)
capital improvements and other efforts designed to maximize race spectators'
total entertainment experience, (iii) integrated marketing programs targeting
both corporate and individual customers, (iv) the development of long-term
relationships with sponsors, and (v) the use ofnation’s top ten media to increase awarenessmarkets. Nearly 80% of the Company'scountry’s population is located within the primary trading areas, a 400-mile radius, of our facilities. We promote major events in every month of the racing season — more than any other motorsports promoter. Collectively, these 14 facilities are scheduled to promote well over 100 motorsports events andduring the motorsports industry.
LONG-TERM ASSOCIATION WITH MOTORSPORTS INDUSTRY.2002 racing season, including 20 NASCAR Winston Cup races — 51% of the 2002 NASCAR Winston Cup schedule, including non-championship point events.
| Long-Term Affiliation with the Motorsports Industry and NASCAR |
Members of the France family have been involved in senior management positions with the Companyus since itsour formation in 1953. The Company believesWe believe that senior management'sthe France family’s extensive network of contacts in the motorsports industry, as well as the Company'stheir reputation as a long-term steward forof the sport, frequently enhance the
Company'senhances our ability to learn of and pursue new market and other growth opportunities. The CompanyWe also believesbelieve that the France family'sfamily’s long-standing involvement with the Companyus has provided a number of other significant advantages, including a reduced risk of disruption in the Company'sour operating policies and long-range strategies, which, in turn, provides an assurance of continuity to employees, sponsors, sanctioning bodies and other entities that enter into commitments or relationships with the Company.us. Moreover, theour experience and expertise of the Company and its senior management team extend beyond stock car racing to a wide variety of other motorsports disciplines, including open-wheel, sports cars and motorcycles. In addition, the France family has been instrumental in the development of the nation'snation’s motorsports industry through their organization, and continued management and ownership of NASCAR. See "NASCAR."
27
COMMITMENT TO CUSTOMER SATISFACTION. The Company believesNASCAR, which, in turn, has been influential in the growth and development of both our operations and professional stock car racing generally.
NASCAR, all of whose voting capital stock is beneficially owned by William C. France and James C. France (and their spouses), our principal shareholders, is widely recognized as the premier official sanctioning body of professional stock car racing in the United States. NASCAR sanctions all races that its growth
has to a significant degree resulted from its emphasis on enhancing race
spectators' total entertainment experience. The Company continually strives to
increaseconstitute the comfort, viewNASCAR Winston Cup, NASCAR Busch Grand National and amenities offered to race spectators, which
management believes serves to maximize customer loyalty. To that end, the
Company has in recent years engaged in aNASCAR Craftsman Truck series of capital improvements,
including the construction of additional permanent grandstand seating, new
luxury suites, innovative corporate entertainment facilities andas well as a number of aestheticother racing series and other improvementsevents. We derived approximately 82% of our 2001 revenues from NASCAR-sanctioned racing events at our wholly-owned facilities.
| Proven Ability to Capitalize on Marketing Opportunities |
In order to foodmaximize the exposure from advertising and beverage concession, restroompromotions and other customer convenience facilities. The Company's fiscal 1997 capital
expenditures attributable to such improvement projects totalled approximately
$27.2 million. Recent efforts to improve customer satisfaction have included
the use of Jumbotron television screens to enhance viewing, the creation of
premium seating sections such as the "Daytona Club"increase per capita spending from our customers, we pursue a fully integrated marketing strategy that includes sponsorships, advertising, promotion, licensing and the provision of a tram
system to transport spectators to and within Daytona International Speedway.
EMPHASIS ON MARKETING. Management believes thatindividual consumer initiatives. We believe it is important to market the Company'sour racing events, facilities and trademarks to both corporate and individual customers. The Company recently expanded itsOur leadership position in the motorsports industry enables us to market to a broader base of corporate and individual
37
We utilize a centralized corporate marketing staffstructure complemented by strong facility resources to 12 persons. This staff, supervised by the Company's Vice
President--Marketing, works with marketing personnel at each of the Company's
facilities to develop and execute integrated marketing programs that provide enhanced value to our marketing partners and develop and execute consumer marketing programs. In 2001, nearly 80 of our corporate marketing partners capitalized on multi-track positions, and we executed more than a dozen promotions targeting customers in ten markets through e-mail offers, consumer sweepstakes, auctions and other direct marketing campaigns.
| Highly Predictable and Recurring Revenue Base |
We have strong visibility on our future revenue streams due to long-term media contracts, multi-year sponsorship and luxury suite agreements, and recurring ticket and hospitality sales. NASCAR has signed multi-billion dollar television contracts covering its NASCAR Winston Cup Series and NASCAR Busch Grand National Series, which extend through the Company's2006 season. We will receive a significant portion of the rights fees under these contracts, assuming the number of NASCAR races held at our tracks each year remains stable, consistent with our past experience. We also have a significant number of long-term sponsorship and luxury suite contracts. In addition, a substantial portion of the grandstand seating and hospitality capacity for our major events is sold on a renewable basis in advance of the event date.
| Proven Ability to Acquire, Develop and Integrate Facilities |
We regularly review acquisition and development prospects that would augment or complement our existing operations or otherwise offer significant growth opportunities. As a result, we have successfully completed several acquisitions over the last few years.
In 1999, we acquired Richmond, and through our merger with Penske Motorsports, we acquired California, Michigan, North Carolina and Nazareth and increased to 90% our ownership in Miami, the remaining 10% of which we acquired in October 2001. Each of these businesses was successfully integrated into our operations within twelve months of the transaction. These transactions strategically increased our motorsports presence and were financed through a combination of internal and external financing sources, including investment grade debt.
Recent examples of development include our Kansas facility and the Chicagoland facility, in which we hold a 37.5% interest, each of which opened in mid-2001. Both facilities hosted significant inaugural schedules featuring major NASCAR, IRL and Automobile Racing Club of America events, and received favorable reviews from the fans, drivers, teams and media. In addition, both facilities received significant support from corporate marketing partners. The Company pursues a fully
integrated marketing strategy including sponsorships, advertising, promotion,
licensingpartners and public relations.individual consumers. For example, both Kansas and Chicagoland sold all of their grandstand seats as season ticket packages — a first for a major facility in motorsports entertainment.
We also believe that our financing arrangements for Kansas reflect our ability to successfully pursue public-private partnerships that are based on widespread community support for our business. In addition, the DAYTONA USA entertainment
complexnew facilities in Kansas and Chicago provide a number of significant additional profit opportunities, including “Founding Fan” arrangements similar to the permanent seat licenses used to finance a number of NFL and NBA stadiums, and enhanced incentives such as the “Fan Walk” in Kansas and the Company's licenses for computer“Expo Village” in Chicagoland. The Fan Walk offers spectators a close-up view of drivers and video games, apparelpre-race action in the garages and pits. The Expo Village features interactive displays, sweepstakes and entertainment vehicles provided by sponsors.
| Highly Experienced and Incentivized Management Team |
William H.G. France, the father of both our Chairman and President, founded NASCAR in 1947, and the France family has controlled us since our inception in 1953. The France family has been instrumental in the development of the nation’s motorsports industry through their organization, continued management and ownership of NASCAR. As we derived approximately 82% of our 2001 revenues from
38
Growth Strategy
We attribute our historical increases in revenues and profitability to the popularity of the NASCAR Winston Cup, the NASCAR Busch Grand National and other merchandisemotorsports events in the United States, as well as a growth strategy that emphasizes (i) maximizing our media income and exposure, (ii) developing new and expanding existing marketing partnerships, (iii) maximizing the profitability of our existing events and facilities, (iv) expanding our existing facilities, and (v) acquiring and developing additional motorsports facilities.
We have grown significantly in recent years through both internal and external growth initiatives. We have focused on initiatives that provide long-term growth, increase earnings and cash flow visibility and improve margins. Motorsports related income, which includes television, radio and ancillary 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 our trademarks and track rentals, increased from 33.0% of our total revenues in fiscal 1997 to 45.1% in fiscal 2001, reflecting the growing importance of this component of our revenue stream.
| Maximize Media Income and Exposure |
Our media initiatives are intendeddesigned to be comprehensive and integrated and include television, radio, newspapers and trade and consumer publications. The most important medium continues to be television, and televised motorsports events continue to experience significant growth in partviewership. Since 1997, NASCAR Winston Cup and NASCAR Busch Grand National domestic television rights revenues have grown at a CAGR of 54%, from $46 million in 1997 to $259 million in 2001. During this time, gross television rights revenues attributable to our events, excluding Chicagoland, increased from $13.5 million to $126.5 million, a CAGR of 75%. We expect media rights revenues to continue to increase based on NASCAR’s announcement that the awarenessannual increase in the domestic television contracts will range between 15% and popularity21% from 2001 through 2006, with an average annual increase of motorsports with younger spectators and thereby ensure a foundation17%. The increase for fiscal 2002 is expected to be approximately 15%.
In addition to generating substantially higher rights fees, these television rights agreements are expected to create significant indirect benefits for the industry that will help drive future growth. The Company's superspeedways also host threeFor example, network event coverage increased significantly during 2001. In 2001, approximately 70% of the five events
included in NASCAR's "Winston No Bull 5", a special promotion introduced in
1998, which offers the top five finishers of each of five designated NASCAR Winston Cup events were scheduled on network broadcasts compared to approximately 30% during the opportunityprevious year. Over the long term, we believe the exposure created by the continuing shift from cable to win a bonus of $1 million by winningnetwork coverage, combined with the nextgeographic expansion of the five designated events.
DEVELOPMENT OF STRATEGIC ALLIANCES WITH CORPORATE SPONSORS. Corporatesport, will result in even more television viewers. We believe the increase in television viewership will attract new sponsors, increase commitments from existing sponsors, and translate into incremental ticket, merchandise and concession sales. In addition, higher television ratings should provide NASCAR with additional leverage when negotiating future media contracts, including television and ancillary rights.
With the FOX, FX, NBC and Turner Sports agreements limited to domestic broadcast coverage, we believe there is a substantial long-term revenue opportunity associated with the sale of ancillary rights, including international rights and internet-related media. NASCAR began to capitalize on these opportunities in 2001 through strategic partnerships with Turner Sports, America Online, FOX, Eurosport, XM Satellite Radio and others. We believe the unique market conditions that favor prestigious “content” providers and the increased exposure and awareness the sport will receive from its media partners provide an ideal opportunity for us to capitalize on a wider audience base.
39
Through MRN Radio, our proprietary motor racing network, we currently produce and syndicate substantially all of the NASCAR Winston Cup and NASCAR Busch Grand National events, all the NASCAR Craftsman Truck races, and certain other races promoted by us and third parties. MRN Radio programs are currently carried by more than 650 radio stations.
| Develop New and Expand Existing Marketing Partnerships |
Marketing partners support the Companyus and the motorsports industry in several ways. First, sponsorsthey pay fees to track operators.operators for sponsorship, official status benefits and the use of intellectual properties. Second, the promotional and advertising expenditures of major sponsorsmarketing partners provide the Companyus with indirect marketing benefits.benefits by promoting awareness for our events through various distribution channels, including in-store promotions and direct mail campaigns. Third, sponsorsmarketing partners pay fees to track operators for hospitality packages to entertain their customers at events. Finally, marketing partners support racing teams through theby funding of certain operational costs. Accordingly, the Company devoteswe devote significant resources to developing long-termdevelop new and expand existing relationships with leading consumer productscompanies.
Marketing partners form a variety of different relationships with track operators. Some contracts allow the marketing partner to name a particular racing event, as in the Pepsi 400 at Daytona, the Pontiac Excitement 400 and manufacturing companies. the EA Sports 500. Other considerations range from official status designation to advertising and promotional rights in the marketing partner’s product category. Our sponsorship portfolio has evolved dramatically over the past few years. We have been successful in attracting new marketing partners by creating additional official status categories, more narrowly defining existing categories, and growing revenues associated with licensing and on-site interactive programs. As a result of these efforts, event title sponsorships, which made up a substantial majority of sponsorship revenue in 1996, represented less than 30% of our sponsorship revenue in 2001. In addition, in 2001, we had over 100 official status categories and approximately 250 marketing partners.
Although the identities of sponsorsmarketing partners and the terms of sponsorships change from time to time, our principal Company sponsors currently include Pepsi, Coca-Cola, Kmart, Sears, Anheuser Busch, Rolex, Pontiac, Ford,
Chevrolet, Dura-Lube,AT&T Broadband, Coors, Dodge, DuPont, Circuit City, Goodyear, TranSouth Financial,
First Union,Electronic Arts, General Motors, GNC, Home Depot, Mattel, Miller, NAPA Auto Parts, Pepsi, Rolex, SunTrust Banks, UPS and Gatorade. Some contracts allow the sponsor to
name a particular racing event, as in the "DieHard 500" and the "Pepsi 400."
Other consideration ranges from official car or official corporate sponsor
designation to advertising and promotional rights in the sponsor's product
category.
UTILIZATION OF MEDIA TO MAXIMIZE EXPOSURE. The Company's comprehensive
and integrated media campaign includes television, radio, newspapers and trade
and consumer publications. The Company negotiates directly with network and
cable television companies for live and rebroadcast coverage of all of its
televised races except for Craftsman Truck Series events, which are negotiated
by NASCAR. All of the Company's Winston Cup Series and Busch Grand National
Series races are televised on CBS, ESPN or TNN, and management intends to seek
similar arrangements for other racing events when opportunities arise. In
addition, certain of the Company's events, including the Daytona 500 and the
Rolex 24 at Daytona, are televised world-wide. The Company also produces and
syndicates its Winston Cup Series, Busch Grand National Series and Craftsman
Truck Series races, as well as other races promoted by the Company or third
parties, on MRN Radio, its proprietary motor racing network. MRN Radio programs
are currently carried by more than 500 radio stations. Management also seeks to
increase the visibility of its racing events and facilities through local and
regional media exposure and the use of public relations professionals to obtain
favorable press coverage.
28
GROWTH STRATEGY
The Company intends to increase its revenues and profitability by
capitalizing on both its existing strengths and the growth and popularity of
motorsports generally. Key components of this growth strategy are as follows:
EXPAND EXISTING FACILITIES. Management believes that the spectatorValvoline.
| Maximize Profitability of Existing Events and Facilities |
Spectator demand for itsour largest events continueshas continued to meet or exceed existing seating capacity.
Accordingly, the Company plans to continue its expansion by adding permanent
grandstand seating and luxury suites at each of its superspeedways. During
fiscal 1997, the Company increased its combined grandstand seating capacity at
Daytona, Talladega, Darlington and Watkins Glen by approximately 37,000 seats,
or 13%. This expansion included the addition of approximately 12,500 seats
along the "superstretch" in Daytona to increase capacity for the Daytona 500
and the acceleration of construction of approximately 7,900 seats in Talladega
to meet the additional demand resulting from the date change of a Winston Cup
Series event from July 1996 to October 1997, thereby allowing the Company to
capitalize on the cooler Fall date. In addition, during fiscal 1997 the Company
added a total of 30 luxury suites, representing a 40% increase over the prior
year, to expand the Company's sponsorship opportunities and to compete with
other major sports facilities. Management continually evaluates the demand for
its most popular racing events in order to ensure that additional seating
continues to provide an acceptable rate of return on invested capital. Subject
to such analyses, the Company currently expects to add approximately 46,000
seats in fiscal 1998 through the construction of additional suites and
grandstands at its Daytona, Talladega, Darlington, Phoenix and Watkins Glen
facilities. In the long term, the Company intends to continue to expand its
facilities based upon customer demand and available capital.
DEVELOP BRAND IDENTITY FOR EACH COMPANY SPEEDWAY. The Company intends to
continue its efforts to develop a unique brand identity for each of its
motorsports facilities. The Company attempts to differentiate its tracks
through unique racing configurations, distinct logos, aesthetic environments
and marketing themes that seek to capture the particular diverse
characteristics of the facility or locale, extensive marketing materials and
promotional campaigns that emphasize the history and attributes of that
speedway, as well as integrated advertising and promotional activities that
focus on both the facility and the featured racing event. Examples of the
Company's efforts to develop unique brand imaging and positioning statements
for its facilities include (i) Daytona International Speedway, the "World
Center of Racing," (ii) Talladega Superspeedway, the "Most Competitive Track in
America," and (iii) Darlington Raceway, "A NASCAR Tradition," while brand
imaging for its events includes (a) The Daytona 500, "The Great American Race,"
(b) The Pepsi 400 at Daytona, "Daytona at the Speed of Light," and (c) The Bud
Shootout, "The Fastest Guns in NASCAR." Management believes that these
track-specific branding activities, combined with the Company's general
business strategy of ongoing capital improvements to enhance spectators' total
entertainment experience, will position the Company for continued growth in
attendance, merchandising sales, sponsorships and cross-marketing
opportunities.
Management believes that the best example of the Company's branding
strategy is Daytona International Speedway, which enjoys international brand
name recognition as a result of its association with the sport's history and
development, the prestige and caliber of the Daytona 500 and other racing
events held at the track, as well as the generally greater speeds resulting
from its length and unique, high banked tri-oval configuration, all of which
provide a significant competitive advantage. In addition, Daytona International
Speedway's landmark position as the "World Center of Racing" is supported by
serving as the venue for racing events in a wide variety of motorsports races
held on nine different weekends, including (i) the supercross, vintage, road
race and other motorcycle events held in conjunction with Daytona's annual
Daytona 200 Motorcycle Week, (ii) sports car races hosted by the Company,
including the Rolex 24 at Daytona, and (iii) the season opener for the IROC
series. The Company has initiated a number of projects to capitalize on
Daytona's prestige and brand name recognition, including the opening in July
1996 of DAYTONA USA--The Ultimate Motorsports Attraction, an agreement with
General Motors to produce and market a limited edition "Daytona 500" Grand Prix
pace car, an upcoming television commercial that features the Daytona 500 and
Sega's popular DAYTONA USA video arcade and CD ROM computer race games.
29
INCREASE MOTORSPORTS RELATED INCOME. Motorsports related income, which
includes television and radio broadcast fees, promotion and sponsorship fees,
hospitality rentals, advertising revenues and royalties from licenses of the
Company's trademarks, increased from 28.6% of the Company's total revenues in
fiscal 1996 to 33.0% in fiscal 1997, reflecting the growing importance of this
component of the Company's revenue stream. Televised motorsports events are
continuing to experience significant growth in viewership. According to
Nielsen, ratings for the Winston Cup Series races televised by ABC, CBS, ESPN,
TBS and TNN increased 54%, 24%, 54%, 61% and 43%, respectively, from 1991 to
1997. Moreover, according to THE WALL STREET JOURNAL, for the last four years,
the Daytona 500 has drawn racing's largest television audience. This
significant growth in viewership, together with unique market conditions that
favor prestigious "content" providers, has resulted in higher broadcast rights
fees from television networks in recent periods. In March 1997, the Company
entered into an agreement with CBS to broadcast the Daytona 500, the NAPA Auto
Parts 300, the Pepsi 400 at Daytona, the Bud Shootout and the Gatorade 125s
from 1998 through 2001. The Company also has an agreement with ESPN to
broadcast five Winston Cup Series races, four Busch Grand National Series races
and one ARCA race to be promoted by the Company in each year from 1998 to 2001.
The Company's agreement with TNN terminates with the 1998 Dura-Lube 500
presented by Kmart, and a renewal agreement is currently being negotiated.
Management believes that certain Busch Grand National Series, Craftsman Truck
Series and other racing events promoted by the Company may also provide
increased television broadcast fees.
The Company believes that the rapidly growing popularity of motorsports
will provide opportunities to increase sponsorship fees and royalties from the
licensing of its trademarks. The Company intends to aggressively explore a
number of race related marketing partnerships, including additional official
status programs and promotional programs for corporate sponsors. In addition,
the Company will emphasize increasing revenues from motorsports collectibles,
home entertainment products, video licensing and automotive related products.
The Company will also seek to expand its radio broadcast rights fees through
methods such as the recent expansion of MRN Radio to include the NASCAR Truck
Network. In addition, the Company recently expanded its corporate marketing
staff to better pursue sponsorship opportunities on an ongoing basis. Published
reports indicate that corporate sponsors will spend an estimated $1.1 billion
on motorsports marketing programs in 1998.
MAXIMIZE PROFITABILITY OF EXISTING FACILITIES AND EVENTS. Although
spectator demand for its largest events continues to exceed existing capacity,capacity; however, there is often unused capacity for other events. For example, attendance at the
Winston Cup Series event at Talladega, historically held in the summer, was
below capacity. As a result of NASCAR's schedule expansion in 1997, the Company
capitalized on the opportunity to move this event to a cooler Fall date. The
sell-out crowd for this rescheduled event represented more than a 50% increase
in attendance over the prior year and the largest crowd in Talladega history.
Similarly, the lighting of Daytona International Speedway, one of the world's
largest outdoor lighting projects, will permit the July 4th 1998 Pepsi 400 at
Daytona to be held at night, thereby increasing ticket sales and providing a
prime time network television audience. Other elements of the Company'sOur efforts to increase attendance at non-sold-outnon-sold out events and maximize the profitability of
existing facilities include (i) establishing multiple ticket price points, including the sale of multi-event ticket packages, (ii) the strategic bundlingmarketing of other products and services, including sponsorship promotions and hospitality suites, (iii) continued improvements toin the quality and diversity of food and beverage concessions, and (iv) other enhancements and upgrades to the design, presentation and quality of the Company'sour promoted events, facilities and spectator amenities. ACQUIRE AND DEVELOP ADDITIONAL MOTORSPORTS FACILITIES. Senior management
personnelThese strategies are designed to introduce new fans to the sport, retain existing fans and increase per capita spending by our fans.
While each of our facilities conducts several major events annually, there is significant opportunity to increase the utilization of these facilities. We strive to maximize our profitability by working with various sanctioning bodies to modify event schedules. For example, in 2001 we added a successful IRL event at Richmond. Also in 2001, a NASCAR “Triple Header” weekend was conducted at Phoenix, which included NASCAR Winston Cup, NASCAR Busch Grand National and NASCAR Craftsman Truck races. Based on the success of Phoenix’s weekend, “Triple Header” weekends are scheduled in 2002 for Darlington and Miami. In addition, a NASCAR Busch Grand National event has been added to Daytona’s July 2002 schedule, and Watkins Glen was removed from the 2002 NASCAR Busch Grand National schedule. We believe over the long term a NASCAR Busch Grand National event at Daytona will be more profitable than a NASCAR Busch Grand National event at Watkins Glen due to the prestige and size of Daytona, and the ability to hold the event on the evening prior to the NASCAR Winston Cup Pepsi 400 at Daytona.
40
| Expand Existing Facilities |
An important component of our strategy has been our long-standing practice of focusing closely on supply and demand regarding additional capacity at our facilities. We continually evaluate the demand for our most popular racing events in order to ensure that additional capacity provides an acceptable rate of return on invested capital. Through prudent expansion, we have historically been able to keep demand at a higher level than supply, which stimulates ticket renewals and advance sales. This results in earlier cash flow and reduces the potential negative impact of actual and forecasted inclement weather on ticket sales. While we will join with sponsors and offer promotions to generate additional ticket sales, we avoid rewarding last-minute ticket buyers by discounting tickets. We believe it is more important to encourage advance ticket sales and maintain price integrity to achieve long-term growth than to recognize short-term incremental revenue.
Excluding the addition of approximately 78,000 seats at Kansas, during 2001 we expanded our grandstand seating capacity by approximately 10,000 net seats, including increases at California, Talladega and Daytona. We now manage more than 1 million total grandstand seats at our facilities across the country. Based on the current state of the economy and our desire to keep demand at a higher level than supply, we do not anticipate adding to our grandstand capacity during 2002. Over the long term, we plan to continue to expand capacity at our speedways.
During 2001, we also expanded our existing facilities by constructing a road course and a “street legal” drag strip at California. This enables us to conduct additional events, including sports car, motorcycle and drag races, thereby increasing the facility’s daily utilization and providing long-term growth opportunities.
In addition to capital spending, we expand our facilities by renting temporary structures such as grandstand seats, suites and hospitality chalets to supplement our permanent capacity as needed.
| Acquire and Develop Additional Motorsports Facilities |
We regularly review acquisition and development prospectsopportunities that would augment or complement the Company'sour existing operations or otherwise offer significant growth opportunities. Current examples of these efforts includeIn 1999, we acquired Richmond, and through our merger with Penske Motorsports, we acquired California, Michigan, North Carolina, Nazareth and increased to 90% our ownership in Miami, the Company's proposed development of new motorsports facilities near Kansas City,
Kansas and Chicago, Illinois. The aggregate cost of acquiring and developing the
first phase of the Kansas International Speedway land and facility (which will
accommodate approximately 75,000 spectators) is expected to be over $200
million,remaining 10% of which the Company's estimated investment of approximately $58.8
million will be funded with
30
a portion of the proceeds of this Offering. Ground breaking is scheduled
for 1998, with racing expected to beginwe acquired in 2000. However, the Company's ability
to develop the Kansas City facility is subject to the resolution of certain
pending litigationOctober 2001. In addition, in 1997 we acquired Phoenix and a number of other significant conditions, including its
ability to acquire the requisite land, and obtain all requisite regulatory
approvals. See "--Legal Proceedings." Similarly, there can be no assurance that
suitable acquisition candidates will be available or, because of competition
from other purchasers or other business reasons, that the Company will be able
to consummate the acquisition of additional motorsports facilities on
satisfactory terms. Management believes that the Company's recent acquisitions
of Phoenix International Raceway, the 50% interest in Watkins Glen not previously owned by us, as well as made our initial investment in Miami.
Recent examples of development efforts include our Kansas facility and the Chicagoland facility, in which we have a 45% indirect37.5% interest, both of which opened in mid-2001. We are currently exploring developing motorsports facilities in the operationsmetropolitan New York and Denver areas. Through a wholly-owned subsidiary, we have an exclusive agreement to conduct a feasibility study on the development of South
Florida's Metro-Dade Homestead Motorsportsa motorsports facility at the Meadowlands Sports Complex, located five miles west of the Lincoln Tunnel. This agreement is currently scheduled to expire in April 2002. While we view the metropolitan New York market as our top priority, we also view the Denver area as an attractive long-term opportunity.
We believe our acquisition and development efforts exemplify the Company'sour commitment to increasing itsstrategically increase our presence in the motorsports presence.
MOTORSPORTS FACILITIES
entertainment industry.
41
Motorsports Facilities
The following table sets forth certain information relating to each of the
Company'sour principal speedway facilities.
facilities as of December 31, 2001.
| Number | Approximate | |||||||||||||||
| Track Name | Location | of Seats | Acreage | Track Length | ||||||||||||
| Daytona International Speedway | Daytona Beach, Florida | 168,000 | 440 | 2.5 miles | ||||||||||||
| Talladega Superspeedway | Talladega, Alabama | 143,000 | 1,435 | 2.6 miles | ||||||||||||
| Michigan International Speedway | Brooklyn, Michigan | 136,000 | 1,180 | 2.0 miles | ||||||||||||
| Richmond International Raceway | Richmond, Virginia | 100,000 | 635 | 0.8 miles | ||||||||||||
| California Speedway | Fontana, California | 92,000 | 566 | 2.0 miles | ||||||||||||
| Kansas Speedway | Kansas City, Kansas | 78,000 | 1,000 | 1.5 miles | ||||||||||||
| Phoenix International Raceway | Phoenix, Arizona | 75,000 | 598 | 1.0 mile | ||||||||||||
| Homestead-Miami Speedway | Homestead, Florida | 65,000 | 404 | 1.5 miles | ||||||||||||
| North Carolina Speedway | Rockingham, North Carolina | 60,000 | 300 | 1.0 mile | ||||||||||||
| Darlington Raceway | Darlington, South Carolina | 59,000 | 230 | 1.3 miles | ||||||||||||
| Watkins Glen International | Watkins Glen, New York | 37,000 | 1,377 | 3.4 miles | ||||||||||||
| Nazareth Speedway | Nazareth, Pennsylvania | 44,000 | 283 | 1.0 mile | ||||||||||||
| Chicagoland Speedway (37.5%) | Joliet, Illinois | 75,000 | 930 | 1.5 miles | ||||||||||||
| Route 66 Raceway (37.5%) | Joliet, Illinois | 30,000 | 240 | 1/4 mile | ||||||||||||
| Daytona International Speedway |
The Daytona International Speedway is a high banked,high-banked, lighted, asphalt, tri-oval superspeedway whichthat also includes a 3.6 mile3.6-mile road course. Management believes that this superspeedway, completed in 1959, includes a
number of unique features that provide a significant competitive advantage,
including (i) a tri-oval design which provides optimum viewing for race fans,
(ii) a twin tunnel underground entry system which offers easy access to the
infield before and during events, and (iii) 31-degree banking which, when
combined with the track's 2.5 mile length, permits exceptionally high lap
speeds. Daytona International Speedway is located on approximately 440 acres of leased land in Daytona Beach, Florida. The Company'sOur lease with the Daytona Beach Racing and Recreational Authority expires in 2032, including renewal options. The CompanyWe also ownsown various parcels of real property aggregating approximately 15295 acres of property adjacent to
thenear Daytona, International Speedway. The Company is currently completing a $5.8
million track lighting project that will permit night racing events, including
the Pepsi 400 at Daytona in July 1998, which will be the first live prime time
telecast of a race by a television network.
At February 28, 1998, Daytona International Speedway had 142,268
grandstand seats, 38 suites (including air conditioned luxury sky boxes and
Winston Tower suites that include access to hospitality areas) that include a
total of 2,360 additional seats, and 40 "Paddock Club" suites that provide
seatingare used for 2,000 along "Pit Road" in Daytona's infield. During major events,
the Company also uses chalet villagesparking and other pre-race hospitality facilities
that service approximately 15,000. Pending capital improvement projects include
(i) premium grandstand seating for approximately 6,000 additional spectators on
the Speedway's frontstretch, (ii) 28 additional "superstretch" suites, seating
approximately 1,200 spectators, and (iii) a variety of other hospitality and
aesthetic improvements.
TALLADEGA SUPERSPEEDWAY.ancillary purposes.
| Talladega Superspeedway |
The Talladega Superspeedway which holds the record
for the fastest lap speed attained in stock car racing, is a high banked,high-banked, asphalt, tri-oval tracksuperspeedway with an infield road course. The facility is located about 90 minutes from Atlanta, Georgia and 45 minutes from Birmingham, Alabama.
| Michigan International Speedway |
The trackMichigan International Speedway is a moderately-banked, asphalt, tri-oval superspeedway located in Brooklyn, Michigan, approximately 70 miles southwest of Detroit and related parking areas are18 miles southeast of Jackson.
| Richmond International Raceway |
The Richmond International Raceway is an asphalt, oval, intermediate speedway located on approximately 1,365 acres owned
by the Company,
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most10 miles from downtown Richmond, Virginia.
| California Speedway |
The California Speedway is a moderately-banked, asphalt, tri-oval superspeedway located 40 miles east of which is reserved for agricultural uses. The Company also owns an
additional 115 acres of undeveloped property located immediately north of the
entrance to the Talladega track. At February 28, 1998, the facility included
108,129 grandstand seats, 22 luxury suites containing an additional 1,760
seats, a Paddock Club Suite for up to 244 spectators, and hospitality chalets
providing service for approximately 10,000.Los Angeles in Fontana, California. The facility also includes a 400-acre campground facility, the International Motorsports Hall of Fame owned
by the State of Alabama, hospitality and souvenir villages, as well as ticket
and administrative offices. Pending capital improvement projects include (i)
additional grandstand seating for approximately 21,000 spectators, (ii) eight
new luxury suites providing seating for approximately 240 spectators, (iii)one-quarter mile drag strip.
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| Kansas Speedway |
The Kansas Speedway is an extensive renovation of the facility's hospitality village, and (iv) the
purchase of an additional 630 acres of land.
PHOENIX INTERNATIONAL RACEWAY. asphalt, 1.5-mile tri-oval speedway located in Kansas City, Kansas.
| Phoenix International Raceway |
The Phoenix International Raceway motorsports complex is an asphalt, oval superspeedway that also includes a 1.5-mile road course located near Phoenix, Arizona on 320 acres owned by the
Company. Arizona.
| Homestead-Miami Speedway |
The complex, which was acquired by the CompanyHomestead-Miami Speedway is a low-banked, asphalt, oval superspeedway located in July 1997, hasHomestead, Florida. We operate Miami under an agreement that expires in 2075, including renewal options.
| North Carolina Speedway |
The North Carolina Speedway is a 1-milemoderately-banked, asphalt, oval racing surface and a 1.5 mile road course. There are 67,477
grandstand seats and 25 suites that provide seating for an additional 1,340
spectators. Pending capital improvement projects include (i) additional
grandstand seating forsuperspeedway located in Rockingham, North Carolina, approximately 5,000 spectators, (ii) six new luxury
suites providing seating for approximately 400 spectators, (iii) additional
track wall cable barrier systems, and (iv) the purchase90 miles south of additional land
previously being leased for parking.
DARLINGTON RACEWAY.Raleigh, North Carolina.
| Darlington Raceway |
The Darlington Raceway the first superspeedway to host a
NASCAR-sanctioned race, is a high banked trackhigh-banked, egg-shaped, asphalt, oval superspeedway located on approximately 230
acres owned by the Company. Thein Darlington, facility includes the 1.3 mile, "egg
shaped" oval track commonly known as "too tough to tame", grandstands that seat
49,883 spectators, nine luxury suites containing an additional 922 seats and
hospitality chalets providing service for approximately 4,700. Capital
improvement projects completed subsequent to February 28, 1998 include
additional grandstand seating for approximately 4,500 spectators.
WATKINS GLEN INTERNATIONAL. Watkins Glen International includes 3.4 mile
and 2.4 mile road course tracks located on approximately 1,377 acres owned by
the Company. South Carolina.
| Watkins Glen International |
The Watkins Glen International facility includes grandstands that
seat 35,244 spectators, five suites containing an additional 640 seats3.4-mile and hospitality chalets providing service for approximately 8,900. Additional
temporary seating for approximately 3,000 spectators will be added for the
NASCAR Winston Cup Series event scheduled for August 1998.
TUCSON RACEWAY PARK. Tucson Raceway Park includes a progressively banked,
3/8 mile paved oval track, grandstands providing seating for 5,372 spectators,
a luxury suite2.4-mile road course tracks and other spectator facilities located on part of the Pima
County Fairgrounds. The Company's sublease with the fairground manager expires
in 2013, including renewals. The Company has no current plans to expand this
facility.
OTHER FACILITIES. The Company's 67,000 square foot corporate
headquarters, acquired and renovated in fiscal 1997, is located onnear Watkins Glen, New York.
| Nazareth Speedway |
The Nazareth Speedway facility is a moderately-banked, asphalt, oval superspeedway located in Nazareth, Pennsylvania.
| Other Facilities |
We own approximately nine54 acres of real property across International Speedway Boulevard from Daytona International Speedway. The Company also owns approximately 14 acres of real
property (including threeon which are located seven buildings containing an aggregate of approximately 180,000375,000 square feet)feet. Our corporate headquarters and other offices and facilities are located in close proximity to Daytona International
Speedway and the Company's corporate headquarters, as well asa portion of these facilities. We also own concession facilities in Daytona Beach and in Talladega. In addition, the Company leasesWe lease real estate and office space in Talladega and the property and premises at the Talladega Municipal Airport. The lease for the Company'sour Talladega business offices, located within the International Motorsports Hall of Fame, expires in 2002, including renewals. The Company'sOur lease for the Talladega Municipal Airport expires in 2022, including renewals. OPERATIONSWe also have a lease for the Tucson Raceway Park in Pima County, Arizona, which expires in 2005. Two of our wholly-owned subsidiaries, Phoenix Speedway Corporation and ISC.com, rent office and other space in Phoenix, Arizona. ISC Properties rents office space in both Charlotte, North Carolina and New York, New York, and Kansas Speedway Corporation leases office space in Kansas City, Kansas. The Company'sRichmond facility includes a state fairgrounds complex that operates various non-motorsports events.
Operations
Our motorsports event operations consist principally of racing events at its six
tracks. The Company also owns a 45% indirect interestour facilities, which include providing catering, merchandise and food concessions at most of our facilities. Our other operations include the DAYTONA USA motorsports entertainment complex, MRN Radio, our 37.5% equity investment in theRaceway Associates and certain other activities.
43
| Americrown |
We conduct, either through operations of the Metro-Dade Homestead Motorsports Complex
32
south of Miami, Florida and a 11% indirect interest in Penske Motorsports. In
addition,particular facility or through certain wholly-owned subsidiaries operating under the Company owns and operates the DAYTONA USA entertainment complex,
provides catering,name Americrown, souvenir merchandising and concession services at certain of its
facilities and operates two radio networks--MRN Radio and the NASCAR Truck
Network (collectively "MRN Radio").
Approximately $110 million, or 78%, of the Company's fiscal 1997 revenues
were attributable to NASCAR-sanctioned races at the Company's facilities,
including applicable admissions, luxury suite rental, sponsorship, television
and MRN Radio broadcast rights fees,operations, food and beverage concession operations and catering souvenir, advertisingservices to corporate customers both in suites and other revenues. Winston Cupchalets at most of our motorsports facilities. However, we do not currently conduct food, beverage and Busch Grand National
races accounted for approximately 87.7%catering operations at California or catering operations at Phoenix, and 10.1%, respectively, ofwe provide catering services only in chalets at North Carolina. Americrown also produces and markets motorsports-related merchandise such fiscal
1997 NASCAR-sanctioned race event revenues, with the approximately 2.2% balance
attributableas apparel, souvenirs and collectibles to Craftsman Truck, Goody's Dashretail customers through internet and other NASCAR racing series.
The Company's fiscal 1997 revenues that were not attributable to
NASCAR-sanctioned races at the Company's facilities were derived from a number
of sources, including (i) admission and luxury suite rental revenue from racing
events sanctioned by bodies other than NASCAR, (ii) broadcast and sponsorship
fees for such non-NASCAR racing events, (iii) MRN Radio's revenues from the
sale of advertising and rights fees paid by broadcast affiliates with respect
to events other than NASCAR-sanctioned races at the Company's facilities, (iv)
Americrown's catering, merchandising and concession revenues for the Company's
non-NASCAR racing events, (v) admissions and sponsorship fees attributable tocatalog sales.
| DAYTONA USA |
DAYTONA USA (vi) merchandising, food and beverage revenues from the gift shop
and snackbar adjacent to DAYTONA USA, and (vii) other revenues unrelated to
racing events such as hangar rentals and gas sales at the Talladega Municipal
Airport. None of the foregoing non-NASCAR revenue sources accounted for over 5%
of the Company's fiscal 1997 revenues.
RACING EVENTS— The 1998 race schedule for the Company includes eight Winston Cup Series
races (not including the Bud Shootout at Daytona all star event or the Gatorade
125s qualifying races for the Daytona 500), five Busch Grand National Series
races and over 50 other NASCAR races and events. In addition, in fiscal 1998
the Company is scheduled to promote over 20 other stock car, sports car,
motorcycle and go-kart racing events, including events sanctioned by USRRC,
ARCA, IRL, USAC, SCCA, AMA, WKA, the Championship Cup Series, the American
Historic Racing Motorcycle Association, Historic Sportscar Racing, and the
Sportscar Vintage Racing Association.
OTHER OPERATIONS
HOMESTEAD MOTORSPORTS COMPLEX. In July 1997, the Company acquired a 40%
indirect interest in the operations of the Metro-Dade Homestead Motorsports
Complex located south of Miami, Florida. The Company increased its stake to 45%
in March 1998. The Homestead facility has a 1.5 mile oval racing track on 320
acres of leased property. The state-of-the-art facility has grandstands that
seat approximately 36,000 spectators, 50 suites containing an additional 2,260
seats, and temporary seating for approximately 5,700 additional persons. The
Homestead facility will be the site of a number of significant racing events in
1998, including the Grand Prix of Miami (a CART event) and the Jiffy Lube 300
(a Busch Grand National Series event).
PENSKE MOTORSPORTS. The Company beneficially owns an approximately 11%
indirect interest in Penske Motorsports, Inc., a publicly traded promoter and
marketer of motorsports events. PMI owns and operates The California Speedway
near Los Angeles, California, Michigan International Speedway in Brooklyn,
Michigan, North Carolina Motor Speedway in Rockingham, North Carolina and
Nazareth Speedway in Nazareth, Pennsylvania. Major racing events scheduled to
be promoted by Penske Motorsports in 1998 include five Winston Cup Series
races, five Busch Grand National Series races, three Champ Car races sanctioned
by CART, two Craftsman Truck Series races, two IROC races and one ARCA race.
Two of the Company's directors serve on the Board of Directors of Penske
Motorsports. See "Management."
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DAYTONA USA. The Company's DAYTONA USA--The Ultimate Motorsports Attraction, our motorsports-themed entertainment complex, is located adjacent to the Daytona International Speedway. Speedway and is open 364 days a year, every day except Christmas.
DAYTONA USA includes (i) the Velocitorium, which covers approximately 50,00060,000 square feet, stands nearly four stories high and contains numerous highly interactive motorsports exhibits (including the new Acceleration Alley racing simulator and the Daytona Dream Laps motion ride film), many of which are sponsored by leading consumer brands; (ii) Western Auto'sDAYTONA USA’s Speedway Tours, a semi-automated tram tour of the Daytona International Speedway'sSpeedway’s garage area, pit road and high bankedhigh-banked track; (iii) the Richard Petty Driving and Riding Experience at Daytona; and (iv) for groups of fifteen or more, the VIP Tour, which includes a tour of the Winston Tower suites.Tower. Adjoining DAYTONA USA are (a) the Daytona Beach Area Convention and Visitors Official Welcome Center; (b) the Daytona ticket office;International Speedway Ticket Office; (c) the Sega Speedway,Daytona SpeedPlay, a high techhigh-tech arcade using state of the art video technology and computerized, "virtual" racing simulators;technology; (d) the Pit Shop, which sells DAYTONA USA, Daytona International Speedway, NASCAR and race teamteams’ clothing, books, collectibles and other officially licensed merchandise; and (e) the Fourth Turn Grill concessions facility. Management believesWe believe that DAYTONA USA and these adjoining facilities appeal to individual tourists, tour groups, conventions and the Company's corporate sponsors, thereby (i) increasing the use of the Company'sour Daytona facility, (ii) expanding the
Company'sour concessions and souvenir sales and (iii) providing greater visibility for the Company'sour business and motorsports generally, which in turn is expected to increase spectator interest.
| MRN Radio |
One of our subsidiaries, Motor Racing Network, Inc., does business under the name “MRN Radio,” but is not a radio station. Rather, it creates race-related programming content carried on radio stations around the country. MRN RADIO. MRN Radio which includes the NASCAR Truck Network, produces and syndicates to radio stations the NASCAR Winston Cup Series,races, NASCAR Busch Grand National Series,races, NASCAR Craftsman Truck Seriesraces and certain other races promoted byconducted at our tracks, as well as some races from tracks we do not own. Each track presently has the Companyability to separately contract for the rights to radio broadcasts of events held at its facilities. MRN Radio also produces and others. These networks also
producesyndicates daily and weekly NASCAR racingracing-themed programs. Network radio programs are
currently carried by over 500 radio stations. The CompanyMRN Radio derives revenue from the sale of national advertising on the networks andcontained in its syndicated programming, as well as from rights fees paid by radio stations that broadcast affiliates. In addition, management believesthe programming.
| Chicagoland Speedway and Route 66 Raceway |
We indirectly own 37.5% of Raceway Associates. Raceway Associates owns Chicagoland and Route 66 Raceway. Route 66 Raceway hosts events including NHRA drag racing, dirt oval racing and concerts. Chicagoland is a 1.5-mile moderately banked oval track. The facility has grandstands that MRN Radioseat approximately 75,000 spectators and the24 luxury suites containing approximately 1,000 additional seats. Chicagoland, which was awarded a NASCAR Truck Network enhance the Company through increased media exposure to an
expanding radio audience.
AMERICROWN. The Company's Americrown subsidiary conducts the food,
beverageWinston Cup, NASCAR Busch Grand National, IRL and souvenir concessionAutomobile Racing Club of America RE/MAX series event for its inaugural season, successfully commenced motorsports operations at Daytona, Talladega and
Darlington. Americrown also provides catering services to corporate customers
both in suites and entertainment chalets at these facilities and at Homestead.
Americrown was formed in 1989 to conduct concessions operations as part of the
Company's ongoing efforts to enhance race spectators' total entertainment
experience.
OTHER ACTIVITIES. The Company fromJuly 2001.
44
| Other Activities |
From time to time, uses itswe use our track facilities for car shows, driving schools, auto fairs, vehicle testing and settings for television commercials, print advertisements and motion pictures. For example, Harley
Davidson uses Talladega Superspeedway as a test facilityWe also rent “show cars” for its motorcycles.
The Company also operatespromotional events. We operate Talladega Municipal Airport, which is located adjacent to the Talladega Superspeedway.
COMPETITIONTalladega. We rent certain warehouse and office space in Daytona Beach, Florida to unrelated parties. Our Richmond facility includes a fairgrounds complex that operates various non-motorsports related events.
Competition
Racing events compete with other sports such as professional football, basketball and baseball, as well as other recreational events. The Company'sOur events also compete with other racing events sanctioned by various racing bodies such as NASCAR, IRL, CART, IRL, USAC, SCCA, USRRC, ARCAGrand Am, Automobile Racing Club of America and others, many of which are often held on the same dates at separate tracks. Management believesWe believe that the type and caliber of promoted racing events, facility location, sight lines, pricing and level of customer conveniences are the principal factors that distinguish competing motorsports facilities. See "Risk
Factors--Competition."
EMPLOYEES
Employees
As of February 28, 1998, the CompanyNovember 30, 2001, we had approximately 400over 900 full-time employees. The CompanyWe also engagesengage a significant number of temporary personnel to assist during periods of peak attendance at itsour events. For example, the Daytona International Speedway engages approximately 2,500more than 6,500 persons during Speedweeks, some of whom are volunteers. None of the Company'sour employees are represented by a labor union. Management believesWe believe that the Company enjoyswe enjoy a good relationship with itsour employees.
34
LEGAL PROCEEDINGS
The Company is
Legal Proceedings
We are from time to time a party to routine litigation incidental to itsour business. Management doesWe do not believe that the resolution of any or all of such litigation is likely to have a material adverse effect on the Company'sour financial condition or results of operations.
In October 1996, Americrown was served with a class action complaint filed
in the Circuit Court of Talladega County, Alabama. The complaint alleges, among
other things, that Americrown engaged in price-fixing activities in connection
with the sale of racing souvenirs and merchandise at the Talladega
Superspeedway. The complaint seeks at least $500 for each member of the class
(persons buying racing souvenirs at Talladega Superspeedway since September
1992), but does not otherwise seek to recover compensatory or punitive damages
or statutory attorneys' fees. Americrown, the sole defendant in this case,
disputes the allegations and intends to defend 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 alleging, in substance, that
the defendants unlawfully conspired to fix prices of souvenirs and merchandise
sold to consumers in violation of federal antitrust laws. One suit was filed by
Florida residents and the other suit was filed by Georgia residents. Both suits
seek damages and injunctive relief on behalf of all persons who purchase
souvenirs or merchandise from certain vendors at any NASCAR Winston Cup Series
race or supporting event in the United States during the period 1991 to
present. The two suits have been consolidated and the court has established a
timetable to consider class certification. Discovery is proceeding. The Company
and Americrown dispute the allegations and intend to defend the actions fully
and vigorously.
In April 1998, Kansas International Speedway Corporation, a wholly owned
subsidiary of the Company, was named as a defendant in a lawsuit filed in the
District Court of Wyandotte County, Kansas, by certain county property owners
against the Unified Government of Wyandotte County/ Kansas City, Kansas (the
"Unified Government") seeking to temporarily and permanently enjoin the
development of the Kansas International Speedway on constitutional grounds.
Also in April 1998, the District Attorney of Wyandotte County initiated a
proceeding against the Unified Government challenging the constitutionality of
the Kansas statute authorizing, among other things, the Unified Government's
issuance of special obligation bonds and its exercise of eminent domain and
zoning decisions regarding the development of Kansas International Speedway.
The District Attorney requested an expedited review by the Supreme Court of the
State of Kansas, which was granted. The Supreme Court is expected to rule on
these issues in the summer of 1998. An adverse disposition by the Supreme Court
would most likely impede or preclude development of the Kansas International
Speedway. Further, the ultimate disposition of the District Court proceeding
may adversely impact the development of the Kansas International Speedway.
ENVIRONMENTAL MATTERS
The Company believes
Environmental Matters
We believe that the facilities operated by itus and itsour subsidiaries are in material compliance with applicable environmental statutes and regulations. Nevertheless, if damage to persons or property or contamination of the environment is determined to have been caused or exacerbated by the conduct of the Company'sour business or by pollutants, substances, contaminants or wastes used, generated or disposed of by the
Company,us, or which may beif pollutants, substances, contaminants or wastes are found on the property of the Company, the Companycurrently or previously owned or operated 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 the Company iswe are self-insured, could be material. Changes in federal, state or local laws, regulations or requirements, or the discovery of theretoforepreviously unknown conditions, could also require us to make material expenditures by the Company.
TRADEMARKS
The Company hasexpenditures.
Trademarks
We have various registered and common law trademark rights, including, "DAYTONA USA," the "Daytonabut not limited to, “California Speedway,” “Darlington Raceway,” “Southern 500," "Daytona” “Too Tough to Tame,” “Daytona International Speedway,"
"Talladega Superspeedway,"
35
"Darlington," "World” “DAYTONA USA,” the “Daytona 500,” the “24 Hours of Daytona,” “Acceleration Alley,” “Daytona Dream Laps,” “Speedweeks,” “World Center of Racing," "Watkins” “Homestead-Miami Speedway,” “Kansas Speedway,” “Michigan International Speedway,” “Nazareth Speedway,” “North Carolina Speedway,” “The Rock,” “Phoenix International Raceway,” “Richmond International Raceway,” “The Action Track,” “Talladega Superspeedway,” “Watkins Glen International," "Phoenix
International Raceway"” “The Glen,” “Americrown,” “Motor Racing Network,” “MRN,” “Truxpo Truck Tour” and related logos. The CompanyWe also hashave licenses from NASCAR, various drivers and other businesses to use names and logos for merchandising programs and product sales. Management'sOur policy is to protect itsour intellectual property rights vigorously, through litigation, if necessary, chiefly because of their proprietary value in merchandise and promotional sales.
36
45
MANAGEMENT
The
As of January 1, 2002, our executive officers and directors of the Company arewere as follows:
| Name | Age | Position With ISC | ||||
| William C. France | 68 | Chairman of the Board, | ||||
| Roger S. Penske | 64 | Vice Chairman and Director | ||||
| James C. France | 57 | President, Chief Operating Officer and Director | ||||
| Lesa D. Kennedy | 40 | Executive Vice President and Director | ||||
| H. Lee Combs | 48 | Senior Vice | ||||
| John R. Saunders | 45 | Senior Vice | ||||
| Gregory W. Penske | 39 | Senior Vice President — Western Operations and Director | ||||
| Susan G. Schandel | 38 | Vice President — Administrative Services, Chief Financial Officer | ||||
| W. Garrett Crotty | 38 | Vice | ||||
| John E. Graham, Jr. | 53 | Vice President | ||||
| W. Grant Lynch, Jr. | 48 | Vice President | ||||
| Leslie A. Richter | 71 | Vice President | ||||
| Paul D. H. | 54 | Vice President | ||||
| J. Hyatt Brown | 64 | Director | ||||
| John R. Cooper | 69 | Director | ||||
| Walter P. Czarnecki | 58 | Director | ||||
| Robert R. Dyson | 55 | Director | ||||
| Brian Z. France | 39 | Director | ||||
| Christy F. Harris | 56 | Director | ||||
| Raymond K. Mason, Jr. | 46 | Director | ||||
| Edward H. Rensi | 57 | Director | ||||
| Lloyd E. Reuss | 65 | Director | ||||
| Chapman Root, II | 52 | Director | ||||
| Thomas W. Staed | 70 | Director | ||||
Our Board of Directors beis divided into three classes, with regular three yearthree-year staggered terms. Messrs. James C. France, Cooper, Brian Z. France, Mason, Roger S. PenskeandReuss will hold office until the annual meeting of shareholders to be held in 1999,2002. Ms. Kennedyand Messrs. Brown, Czarnecki, Dyson, RensiandStaed will hold office until the annual meeting of shareholders to be held in 2000, and2003. Messrs. William C. France, Combs, Foster,
Harris, Gregory W. PenskeandRoot will hold office until the annual meeting of shareholders to be held in 2001.
2004. Pursuant to the merger agreement for the acquisition of Penske Motorsports, we were obligated to place three individuals designated by Penske Performance, Inc., the selling stockholder, on our Board of Directors and to include such designees as nominees recommended by our Board of Directors at future elections of directors by shareholders. If the holdings of Penske Performance fall to less than 7%, but not less than 5%, of the aggregate shares of our outstanding class A and class B common stock, we would be obligated to include as nominees for our Board of Directors only two individuals designated by Penske Performance. If the holdings of Penske Performance fall to less than 5%, but not less than 2%, of the aggregate shares of our outstanding class A and class B
46
Messrs. Roger S. Penske, Gregory W. PenskeandWalter P. Czarneckiare currently the designees of Penske Performance serving on our Board of Directors.
William C. FranceandJames C. Franceare brothers.Lesa D. KennedyandBrian Z. Franceare the children ofWilliam C. France. Gregory W. Penskeis the son ofRoger S. Penske. There are no other family relationships among the Company'sour executive officers and directors.
Mr.William C. France, a director since 1958, has served as our Chairman of the Board of the Company since 1987 and as Chief Executive Officer since 1981.
From 1981 to 1987,
Mr. FranceRoger S. Penskehas served as the Company's President. Mr. France
also serves as a director and Vice Chairman since July 1999. Mr. Penskewas Chairman of the Board of Penske Motorsports.Motorsports from March 1996 until its acquisition by us in 1999. Prior to March 1996, Mr. Penskewas Chairman of the Board of Michigan International Speedway, Inc. since 1973, Chairman of the Board and President of Pennsylvania International Raceway, Inc. since 1986, and Chairman of the Board of The California Speedway, Inc. since 1994. Mr. Penskeis also Chairman of the Board and Chief Executive Officer of Penske Corporation. Penske Corporation is a privately-owned diversified transportation services company which (among other things) holds, through its subsidiaries, interests in a number of businesses, including ISC. Mr. Penskeis also a member of the Boards of Directors of General Electric Company, Detroit Diesel Corporation, United Auto Group, Inc., and Delphi Automotive Systems, Inc. Mr. Penskeis also a founder of Penske Racing, Inc. and Penske Racing South, Inc.
Mr. James C. France, a director since 1970, has served as our President and Chief Operating Officer of the Company since 1987.
Ms. Lesa D. Kennedy, a director since 1984, was appointed an Executive Vice President of the CompanyISC in January 1996. Ms. Kennedyserved as the
Company'sour Secretary from 1987 until January 1996 and served as itsour Treasurer from 1989 until January 1996.
Mr. H. Lee Combs, a director since 1987, was appointed the Company's
Senior Vice President--President — Corporate Development in July 1999. He served as Senior Vice President — Operations insince January 1996.1996 until that date. Mr. Combsserved as a Vice President and the
Company'sour Chief Financial Officer from 1987 until such time.January 1996.
Mr. John R. Saundershas served as Senior Vice President — Operations since July 1999. He also serveshad served as a Vice President since 1997 and was President of Watkins Glen International from 1983 until 1997.
Mr. Gregory W. Penskehas served as Senior Vice President — Western Operations and a director since July 1999 when we acquired Penske Motorsports. Mr. Penskehad been a director of Penske Motorsports.Motorsports since its formation in September 1995 and President and Chief Executive Officer since July 1, 1997. Prior to July 1, 1997, Mr. Robert E. Smith Penskeserved as an Executive Vice President of Penske Motorsports since February 1996. In addition, Mr. Penskeserved as President of The California Speedway, Inc. from January 1997 to January 1999. Mr. Penskeis also the President of Penske Automotive Group, Inc., which owns and operates five automobile dealerships in Southern California, and has served in that position since December 1993. From July 1992 to the present, Mr. Penskehas served as Vice President--Administrationthe President of D. Longo, Inc., which owns and operates a Toyota dealership in El Monte, California and is a subsidiary of Penske Automotive Group, Inc. Having successfully completed his pivotal transition role in our integration plan established at the Company for more than five years.
37
47
Ms. Susan G. Schandel was appointed the Company'sbecame a Vice President in July 1999 and since January 1996 has continued to serve as our Treasurer and Chief Financial OfficerOfficer.
Mr. W. Garrett Crottybecame a Vice President in January 1996. From November 1992 until such time, Ms.
SchandelJuly 1999 and since 1996 has served as the Company's Controller. From 1988 until 1992, Ms. Schandel
was employed by Ernst & Young LLP, where she most recently served as an audit
manager.
Secretary and General Counsel.
Mr. Gregory G. Sullivan, appointed the Company's Vice-President--Marketing
in November 1994, joined the Company in September 1994. Prior to joining the
Company, Mr. Sullivan was employed by Kraft Foods (a division of Phillip
Morris) for more than five years, where he most recently served as Director of
Marketing Services for Kraft's Maxwell House division.
Mr. John E. Graham, Jr., appointedhas served as a Vice President in November 1994,
joined the Companyand as President of Daytona International Speedway in Septembersince November 1994. Prior to joining the Company,
Mr. Graham was employed by First Union
National Bank of Florida for more than five years, where he most recently
served as President of First Union National Bank of Volusia and Flagler
Counties.
Mr. W. Grant Lynch, Jr.has served as a Vice President and as President of Talladega Superspeedway since joining the Company in November 1993. Prior to
such time, Mr. Lynch was employed by R.J. Reynolds Tobacco Company, Sports
Marketing Division, where from 1990 until 1993 heHe has also served as Senior Operations
and Public Relations Manager for the Winston Cup Racing Program.
Mr. James H. Hunter has served as a Vice President and as President of Darlington RacewayKansas Speedway since joining the Companyits inception in November 1993. Prior to joining
the Company, 1997.
Mr. Hunter served as NASCAR's Vice President of Administration and
Marketing for more than five years.
Mr. John R. Saunders Leslie A. Richterhas served as a Vice President since May 1997 and was
President of Watkins Glen International from 1983 until 1997.February 2000. Mr. W. Garrett Crotty Richterhas served as Secretarythe Executive Vice President of The California Speedway, Inc. since November 1994.
Mr. Paul D.H. Phippshas served as the Vice President — Sales and General CounselMarketing since 1996. Prior to that time he had been inFebruary 2001. Mr. Phippswas the private practiceExecutive Vice President of lawMajor League Soccer for more than five years.
years prior to that.
Mr. J. Hyatt Brown, a director since 1987, serves as the President and Chief Executive Officer of PoeBrown & Brown, Inc. and has been in the insurance business with Brown & Brown, Inc., its predecessor, since 1959. Mr. Brownalso serves as a director of Rock Tenn Co,Co., SunTrust Banks, Inc., BellSouth Corporation, and FPL Group, Inc.
Mr. John R. Cooper, a director since 1987, served as our Vice President--CorporatePresident — Corporate Development of the Company from December 1987 until July 1994. SinceIn January 1996 Mr. Cooperrejoined our staff.
Mr. Walter P. Czarneckihas been a director since July 1999. Mr. Czarneckihad served as Vice Chairman of the Board of Penske Motorsports since January 1996, and, prior thereto, served as its President. Mr. Czarneckihad also served as a special project
facilitator forsenior executive of the Company.Penske Speedway Group since 1979. Mr. Czarneckiis the Executive Vice President of Penske Corporation, has been a member of the Board of Directors of Penske Corporation since 1979 and serves as a director of Penske Truck Leasing Corporation, which is the general partner of Penske Truck Leasing Co., L.P.
Mr. Robert R. Dyson, a director since January 1997, has served as Chairman and Chief Executive Officer of the Dyson-Kissner-Moran Corporation (DKM), a
private company involved in a variety of businesses, since November 1992.
Mr. James H. Foster, a director since 1968, served as the Company's Senior
Vice President--Special Projects from January 1994 until his retirement in
1997. Mr. Foster served as President of Daytona International Speedway from
1988 until 1994.
Mr. Brian Z. France, a director since 1994, has served as NASCAR'sNASCAR’s Senior Vice President since 2000. Previously, he served as NASCAR’s Vice President of Marketing and Corporate Communications since December 1992 and1992. He has served as the Company's Manager--Groupour Manager — Group Projects since February 1994. From 1983 until such
time,
Mr. France served in a number of other capacities with NASCAR, including
Winston Racing Series Administrative Assistant and National Tour Director.
Mr. Christy F. Harris, a director since 1984, has been engaged in the private practice of business and commercial law with Harris, Midyette & Geary,
P.A. for more than twenty years.
years and currently practices with Peterson & Myers, P.A.
Mr. Raymond K. Mason, Jr., a director since 1981, hashad served as Chairman and President of American Banks of Florida, Inc., Jacksonville, Florida, since
1978.
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Mr. Edward H. Rensi, a director since January 1997, is currently Chairman & CEO of Team Rensi Motorsports. Mr. Rensiwas an executive consultant with McDonald's Corporation.McDonald’s Corporation from 1997 to 1998. He served as President and Chief Executive Officer of McDonald'sMcDonald’s USA from 1991 until his retirement in 1997. Mr. RensiHe is also serves
as a director of McDonald's Corporation and Snap-On Incorporated.
Tools.
Mr. Lloyd E. Reuss, a director since January 1996, served as President of General Motors Corporation from 1990 until his retirement in January 1993. Mr. Reussalso serves as a director of Handleman Co., Detroit Mortgage and Realty, Co. and United States Sugar Company.
Mr. Chapman Root, II, a director since 1992, has served as PresidentChairman of the Root Company, a private investment company, since 1989. Mr. Rootalso serves as a director of First Financial Corp. and Terre Haute First National Bank.
Mr. Thomas W. Staed, a director since 1987, hasis currently Chairman of Staed Family Associates and served as President of Oceans Eleven Resorts, Inc., a hotel/motel business, forfrom 1968 to 1999.
48
PRINCIPAL STOCKHOLDERS
The following tables set forth information regarding the beneficial ownership of our class A common stock and our class B common stock as of December 31, 2001, by:
| • | all persons known to us who beneficially own 5% or more of either our class A common stock or our class B common stock; | |
| • | our chief executive officer and each of our other four most highly compensated executive officers in fiscal 2001; | |
| • | each of our directors; and | |
| • | all of our directors and executive officers as a group. |
The information in the following tables has been presented to show the effect of the sale of the shares being offered by the selling stockholder without giving effect to the overallotment option.
As of December 31, 2001, we had 24,536,711 shares of class A common stock and 28,627,121 shares of class B common stock issued and outstanding. Each share of the class A common stock is entitled to one-fifth (1/5) of one vote on matters submitted to shareholder approval or a vote of shareholders. Each share of the class B common stock is entitled to one vote on matters submitted to shareholder approval or a vote of shareholders.
As described in the notes to the table, voting and/or investment power with respect to certain shares of common stock is shared by the named individuals. Consequently, such shares may be shown as beneficially owned by more than five years.
one person.
Beneficial Ownership Before This Offering by the Selling Stockholder
| Number of Shares of Common | Percentage of Common | Percentage of | ||||||||||||||||||||||||||
| Stock Beneficially Owned(2) | Stock Beneficially Owned | Combined Voting | ||||||||||||||||||||||||||
| Power of All Classes | ||||||||||||||||||||||||||||
| Name of Beneficial Owner(1) | Class A | Class B | Total | Class A | Class B | Total | of Common Stock | |||||||||||||||||||||
| France Family Group(3) | 62,301 | 21,164,831 | 21,227,132 | 0.25 | % | 73.93 | % | 39.93 | % | 63.15 | % | |||||||||||||||||
| James C. France(4) | 15,762 | 15,352,721 | 15,368,483 | 0.06 | % | 53.63 | % | 28.91 | % | 45.79 | % | |||||||||||||||||
| William C. France(5) | 17,137 | 15,340,501 | 15,357,638 | 0.07 | % | 53.59 | % | 28.89 | % | 45.76 | % | |||||||||||||||||
| Roger S. Penske(6) | 4,587,760 | — | 4,587,760 | 18.70 | % | — | 8.63 | % | 2.74 | % | ||||||||||||||||||
| Penske Corp.(7) | 4,552,621 | — | 4,552,621 | 18.55 | % | — | 8.56 | % | 2.72 | % | ||||||||||||||||||
| Penske Performance, Inc.(8) | 4,552,621 | — | 4,552,621 | 18.55 | % | — | 8.56 | % | 2.72 | % | ||||||||||||||||||
| Lesa D. Kennedy(9) | 19,356 | 621,903 | 641,259 | 0.08 | % | 2.17 | % | 1.21 | % | 1.87 | % | |||||||||||||||||
| Brian Z. France(10) | 3,796 | 483,046 | 486,842 | 0.02 | % | 1.69 | % | 0.92 | % | 1.44 | % | |||||||||||||||||
| Raymond K. Mason(11) | 1,042 | 196,740 | 197,782 | — | 0.69 | % | 0.37 | % | 0.59 | % | ||||||||||||||||||
| H. Lee Combs | 11,746 | 39,697 | 51,443 | 0.05 | % | 0.14 | % | 0.10 | % | 0.13 | % | |||||||||||||||||
| Thomas W. Staed(12) | 4,992 | 45,000 | 49,992 | 0.02 | % | 0.16 | % | 0.09 | % | 0.14 | % | |||||||||||||||||
| Robert R. Dyson(13) | 19,500 | 29,500 | 49,000 | 0.08 | % | 0.10 | % | 0.09 | % | 0.10 | % | |||||||||||||||||
| Chapman J. Root, II | 5,042 | 12,000 | 17,042 | 0.02 | % | 0.04 | % | 0.03 | % | 0.04 | % | |||||||||||||||||
| J. Hyatt Brown(14) | 2,400 | 9,000 | 11,400 | 0.01 | % | 0.03 | % | 0.02 | % | 0.03 | % | |||||||||||||||||
| Lloyd E. Reuss | 9,000 | — | 9,000 | 0.04 | % | — | 0.02 | % | 0.01 | % | ||||||||||||||||||
| Gregory W. Penske(15) | 8,728 | — | 8,728 | 0.04 | % | — | 0.02 | % | 0.01 | % | ||||||||||||||||||
| Walter P. Czarnecki | 8,230 | — | 8,230 | 0.03 | % | — | 0.02 | % | — | |||||||||||||||||||
| John R. Cooper | 6,042 | 1,500 | 7,542 | 0.02 | % | 0.01 | % | 0.01 | % | 0.01 | % | |||||||||||||||||
| Christy F. Harris(16) | 5,600 | 150 | 5,750 | 0.02 | % | — | 0.01 | % | — | |||||||||||||||||||
| Edward H. Rensi | — | 1,500 | 1,500 | — | 0.01 | % | — | — | ||||||||||||||||||||
| All directors and executive officers as a group (24 persons)(17) | 4,773,243 | 20,715,685 | 25,488,928 | 19.45 | % | 72.36 | % | 47.94 | % | 64.62 | % | |||||||||||||||||
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Beneficial Ownership After Giving Effect to this Offering by the Selling Shareholder
| Number of Shares of Common | Percentage of Common | Percentage of | ||||||||||||||||||||||||||
| Stock Beneficially Owned(2) | Stock Beneficially Owned | Combined Voting | ||||||||||||||||||||||||||
| Power of All Classes | ||||||||||||||||||||||||||||
| Name of Beneficial Owner(1) | Class A | Class B | Total | Class A | Class B | Total | of Common Stock | |||||||||||||||||||||
| France Family Group(3) | 62,301 | 21,164,831 | 21,227,132 | 0.25 | % | 73.93 | % | 39.93 | % | 63.15 | % | |||||||||||||||||
| James C. France(4) | 15,762 | 15,352,721 | 15,368,483 | 0.06 | % | 53.63 | % | 28.91 | % | 45.79 | % | |||||||||||||||||
| William C. France(5) | 17,137 | 15,340,501 | 15,357,638 | 0.07 | % | 53.59 | % | 28.89 | % | 45.76 | % | |||||||||||||||||
| Roger S. Penske(6) | 2,087,760 | — | 2,087,760 | 8.51 | % | — | 3.93 | % | 1.25 | % | ||||||||||||||||||
| Penske Corp.(7) | 2,052,621 | — | 2,052,621 | 8.37 | % | — | 3.86 | % | 1.22 | % | ||||||||||||||||||
| Penske Performance, Inc.(8) | 2,052,621 | — | 2,052,621 | 8.37 | % | — | 3.86 | % | 1.22 | % | ||||||||||||||||||
| Lesa D. Kennedy(9) | 19,356 | 621,903 | 641,259 | 0.08 | % | 2.17 | % | 1.21 | % | 1.87 | % | |||||||||||||||||
| Brian Z. France (10) | 3,796 | 483,046 | 486,842 | 0.02 | % | 1.69 | % | 0.92 | % | 1.44 | % | |||||||||||||||||
| Raymond K. Mason(11) | 1,042 | 196,740 | 197,782 | — | 0.69 | % | 0.37 | % | 0.59 | % | ||||||||||||||||||
| H. Lee Combs | 11,746 | 39,697 | 51,443 | 0.05 | % | 0.14 | % | 0.10 | % | 0.13 | % | |||||||||||||||||
| Thomas W. Staed(12) | 4,992 | 45,000 | 49,992 | 0.02 | % | 0.16 | % | 0.09 | % | 0.14 | % | |||||||||||||||||
| Robert R. Dyson (13) | 19,500 | 29,500 | 49,000 | 0.08 | % | 0.10 | % | 0.09 | % | 0.10 | % | |||||||||||||||||
| Chapman J. Root, II | 5,042 | 12,000 | 17,042 | 0.02 | % | 0.04 | % | 0.03 | % | 0.04 | % | |||||||||||||||||
| J. Hyatt Brown(14) | 2,400 | 9,000 | 11,400 | 0.01 | % | 0.03 | % | 0.02 | % | 0.03 | % | |||||||||||||||||
| Lloyd E. Reuss | 9,000 | — | 9,000 | 0.04 | % | — | 0.02 | % | 0.01 | % | ||||||||||||||||||
| Gregory W. Penske(15) | 8,728 | — | 8,728 | 0.04 | % | — | 0.02 | % | 0.01 | % | ||||||||||||||||||
| Walter P. Czarnecki | 8,230 | — | 8,230 | 0.03 | % | — | 0.02 | % | — | |||||||||||||||||||
| John R. Cooper | 6,042 | 1,500 | 7,542 | 0.02 | % | 0.01 | % | 0.01 | % | 0.01 | % | |||||||||||||||||
| Christy F. Harris(16) | 5,600 | 150 | 5,750 | 0.02 | % | — | 0.01 | % | — | |||||||||||||||||||
| Edward H. Rensi | — | 1,500 | 1,500 | — | 0.01 | % | — | — | ||||||||||||||||||||
| All directors and executive officers as a group (24 persons)(17) | 2,273,243 | 20,715,685 | 22,988,928 | 9.26 | % | 72.36 | % | 43.24 | % | 63.13 | % | |||||||||||||||||
| (1) | Unless otherwise indicated, the address of each of the beneficial owners identified is c/o ISC, 1801 West International Speedway Boulevard, Daytona Beach, Florida 32114. | |
| (2) | Unless otherwise indicated, each person has sole voting and investment power with respect to all such shares. | |
| (3) | The France Family Group consists of William C. France, James C. France, members of their families and entities controlled by the natural person members of the group. Amounts shown reflect the non-duplicative aggregate of 58,270 shares of class A common stock and 20,322,140 shares of class B common stock indicated in the table as beneficially owned by James C. France, William C. France, Lesa D. Kennedy and Brian Z. France, as well as 4,031 shares of class A common stock and 842,691 shares of class B common stock held beneficially by the adult children of James C. France. See footnotes (4), (5), (9) and (10). | |
| (4) | Includes (i) 1,500 shares of class A common stock held of record and 304,725 shares of class B common stock held beneficially by Sharon M. France, his spouse, (ii) 9,115,125 shares of class B common stock held of record by Western Opportunity Limited Partnership, (iii) 4,052,369 shares of class B common stock held of record by Carl Investment Limited Partnership, and (iv) 1,880,502 shares of class B common stock held of record by White River Investment Limited Partnership. James C. France is the sole shareholder and director of (x) Principal Investment Company, one of the two general partners of Western Opportunity, (y) Quaternary Investment Company, the general partner of Carl, and (z) Secondary Investment Company, one of the two general partners of White River. Also see footnote (5). Does not include shares held beneficially by the adult children of James C. France. |
50
| (5) | Includes (i) 2,642 shares of class A common stock held jointly with Betty Jane France, his spouse, (ii) 9,115,125 shares of class B common stock held of record by Western Opportunity, (iii) 4,344,874 shares of class B common stock held of record by Polk City Limited Partnership, and (iv) 1,880,502 shares of class B common stock held of record by White River. William C. France is the sole shareholder and director of each of (x) Sierra Central Corp., one of the two general partners of Western Opportunity, (y) Boone County Corporation, the general partner of Polk City, and (z) Cen Rock Corp., one of the two general partners of White River. Also see footnote (4). Does not include the shares shown in the table as beneficially owned by Lesa D. Kennedy and Brian Z. France, adult children of William C. France. | |
| (6) | This owner’s address is c/o Penske Corporation, 13400 West Outer Drive, Detroit, MI 48239-4001. Includes the shares of class A common stock shown in the table as beneficially owned by Penske Corporation and Penske Performance. | |
| (7) | This owner’s address is c/o Penske Corporation, 13400 West Outer Drive, Detroit, MI 48239-4001. Shares shown are also beneficially owned by Roger S. Penske and Penske Performance. | |
| (8) | This owner’s address is 1100 North Market Street, Suite 780, Wilmington, DE 19801. Shares shown are also beneficially owned by Roger S. Penske and Penske Corporation. | |
| (9) | Includes (i) 2,542 shares of class A common stock held of record by Ms. Kennedy’s spouse as custodian for their minor son, Benjamin, (ii) 1,500 shares of class A common stock held jointly with her spouse, (iii) 1,936 shares of class A common stock and 343,950 shares of class B common stock held of record by BBL Limited Partnership and (iv) 238,548 shares of class B common stock held of record by Western Opportunity. Mrs. Kennedy is the sole shareholder and a director of BBL Company, the sole general partner of BBL Limited Partnership. |
| (10) | Includes 244,498 shares of class B common stock held of record by Zack Limited Partnership and 238,548 shares of class B common stock held of record by Western Opportunity. Mr. France is the sole shareholder and director of Zack Company, the sole general partner of Zack Limited Partnership. |
| (11) | Includes 75 shares of class B common stock owned by The Raymond K. Mason, III Trust, as to which Mr. Mason disclaims beneficial ownership. |
| (12) | Owned jointly with Barbara Staed, his spouse. |
| (13) | Includes 5,000 shares of class A common stock held in the Robert R. Dyson 1987 Family Trust and 9,500 shares of class A common stock held as Trustee of the Charles H. Dyson Trust No. 2, U/ A dated 4/15/76. |
| (14) | Held of record as joint tenants with Cynthia R. Brown, his spouse. |
| (15) | Includes 1,563 shares of class A common stock held by Patricia Durham Penske (his spouse) Trust. |
| (16) | Includes 500 shares of class A common stock held by M. Dale Harris, his spouse, and 1,500 shares of class A common stock held by Mr. Harris as trustee of a Profit Sharing Plan and Trust. |
| (17) | See footnotes (4) through (16). |
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SELLING STOCKHOLDER
The selling stockholder is Penske Performance, Inc. All of the capital stock of Penske Performance is owned indirectly by Penske Corporation. Roger S. Penske, one of our directors and our Vice Chairman, owns a majority of the capital stock of Penske Corporation and controls Penske Corporation and its affiliates. Penske Performance owns more than 5% of our outstanding common stock.
As more fully described in the section of this prospectus entitled “Certain Relationships,” we have obligations to Penske Performance regarding representation on our Board of Directors. In addition, Penske Performance has arrangements with us regarding certain executive, legal and commercial services, as more fully described in “Certain Relationships.”
The following table sets forth information with respect to the selling stockholder’s beneficial ownership of our common stock at December 31, 2001, as adjusted to reflect the sale of 2,500,000 shares of class A common stock offered by this prospectus (assuming no exercise of the underwriters’ over-allotment option). The selling stockholder does not own any shares of our class B common stock.
| Shares of Class A | ||||||||||||||||
| Common Stock | ||||||||||||||||
| Beneficially | Shares of Class A Common | |||||||||||||||
| Owned Before This | Stock Beneficially Owned | |||||||||||||||
| Offering | After This Offering(2) | |||||||||||||||
| Name of Beneficial Owner | Number | Percent(1) | Number | Percent(1) | ||||||||||||
| Penske Performance, Inc. | 4,552,621 | 18.55 | % | 2,052,621 | 8.37 | % | ||||||||||
| (1) | Based on shares outstanding at December 31, 2001. |
| (2) | Assumes no exercise of the underwriters’ over-allotment option with respect to 375,000 shares of class A common stock. If such option is exercised in full, the selling stockholder will own 1,677,621 shares of our class A common stock, which is 6.84% of our outstanding class A common stock and 3.16% of the aggregate shares of our outstanding class A and class B common stock. |
52
CERTAIN TRANSACTIONSRELATIONSHIPS
NASCAR, which sanctions most of the Company'sour major racing events, is controlled by William C. France and James C. France. See "NASCAR" and
"Management." Standard NASCAR sanction agreements require racetrack operators to pay various monies to NASCAR for each sanction event conducted. Included are sanction fees and prize and point fund monies. The prize and point fund monies are distributed by NASCAR to participants in the events. The Company paid $20.6
million inaggregate NASCAR sanction fees and prize and point fund monies inpaid by us with respect to fiscal 1997.1999, 2000 and 2001 were $45.6 million, $71.3 million and $87.9 million, respectively.
In addition, NASCAR and the CompanyISC share a variety of expenses in the ordinary course of business. NASCAR pays rent to the Companyus for office space in our corporate office complex in Daytona Beach, Florida, and we pay rent to NASCAR for office space in Charlotte, North Carolina and New York, New York. These rents are based upon estimated fair market lease rates for comparable facilities. NASCAR also reimburses the Companyus for 50% of the compensation paid to certain
personnel working in the Company'sour legal and risk management departments, as well as 50% of the compensation expense associated with receptionists and the
Company's archive departments. The Company'sreceptionists. Our payments to NASCAR for MRN Radio'sRadio’s broadcast rights to NASCAR Craftsman Truck Series races represents an agreed-upon percentage of the Company'sour advertising revenues attributable to such race broadcasts. NASCAR'sNASCAR’s reimbursement for use of the Company's mail room, graphicsour telephone system, mailroom and publications departments,janitorial, catering, transportation, graphic arts, photo and the Company'spublishing services, and our reimbursement of NASCAR for use of corporate aircraft, is based on actual usage or an allocation of total actual usage. The aggregate amount paid by the Companyus to NASCAR for shared expenses, net of the amounts received from NASCAR for shared expenses, totalledtotaled approximately $720,000$356,000 during fiscal 1997.1999. The Company strivesaggregate amount received from NASCAR by us for shared expenses, net of amounts paid by us for shared expenses, totaled approximately $281,000 and $239,000 during fiscal 2000 and 2001, respectively. We strive to ensure, and management believes, that the terms of the
Company'sour transactions with NASCAR are no less favorable to the Companyus than could be obtained in arms'arms’-length negotiations.
J. Hyatt Brown, a directorone of the Company,our directors, serves as President and Chief Executive Officer of PoeBrown & Brown, Inc. ("Poe"(“Brown”). PoeBrown has received commissions for serving as the Company'sour insurance broker for several of the Company'sour insurance policies, including itsour property and casualty policy, certain employee benefit programs and the split-dollar arrangements established for the benefit of William C. France, James C. France and their respective spouses. The aggregate commissions received by PoeBrown in connection with Companyour policies were approximately $166,000$185,000, $435,000, and $549,000 during fiscal 1997.
39
DESCRIPTION OF CAPITAL STOCK1999, 2000 and 2001, respectively.
Walter P. Czarnecki, one of our directors, owns Raceway Services, which purchases tickets to events at many of our facilities. The Company's authorized capital stock includes 80 millionprice paid by Raceway Services for the tickets it purchases are established on the same basis as the price paid by other purchasers of tickets to the same events without regard to Mr. Czarnecki’s status as a director. The amounts paid for tickets by Raceway Services were approximately $141,000 and $95,000 in fiscal 2000 and 2001, respectively.
All of the above transactions, payments and exchanges are considered normal in the ordinary course of business. Transactions, payments and exchanges similar to all of the above are planned during our current fiscal year.
On May 5, 1999, Motorsports Alliance and the former owners of Route 66 Raceway, LLC formed Raceway Associates, which is owned 75% by Motorsports Alliance and 25% by the former owners of Route 66 Raceway, LLC. As a result of this transaction, Raceway Associates now owns Route 66 Raceway, LLC and the Route 66 Raceway motorsports complex, as well as Chicagoland Speedway. Edward H. Rensi, one of our directors, was one of the former owners of Route 66 Raceway, LLC. Mr. Rensi owned approximately 5.13% of Route 66 Raceway, LLC and as a result of the transaction now owns approximately 1.28% of Raceway Associates.
Pursuant to the merger agreement for the Penske Motorsports acquisition, we were obligated to place three individuals designated by Penske Performance, Inc. on our board of directors and to include such designees as nominees recommended by our board of directors at future elections of directors by shareholders. If the holdings of Penske Performance fall to less than 7%, but not less than 5%, of the
53
During fiscal 1999 subsequent to the Penske Motorsports acquisition, Penske Corporation provided us with certain executive and legal services at a cost of approximately $313,000. During fiscal 2000 and 2001, Penske Corporation provided us with certain executive and legal services at a cost of approximately $662,000 paid in cash and $496,000, paid in both cash and stock, respectively. Also, we rented Penske Corporation and its affiliates certain facilities for a driving school and sold admissions to our events, hospitality suite occupancy and related services, merchandise, apparel and racing tires and accessories to Penske Corporation, its affiliates and other related companies. In fiscal 1999 subsequent to the Penske Motorsports acquisition, Penske Corporation, its affiliates and other related companies paid approximately $759,000 for the aforementioned goods and services. In fiscal 2000 and 2001, Penske Corporation, its affiliates and other related companies paid approximately $3.6 million and $2.6 million, respectively, for these same goods and services. We have outstanding receivables and payables/accrued expenses related to Penske Corporation and its affiliates of approximately $295,000 and $186,000, respectively, at November 30, 2000 and $389,000 and $30,000 respectively, at November 30, 2001.
We sold our ownership in our Competition Tire subsidiaries to Competition Tire, LLC on November 15, 2000. The ownership of Competition Tire, LLC includes Competition Tire East, Inc. (an unrelated entity), Penske Performance Holdings Corp. (a wholly-owned subsidiary of Penske Corporation) and certain former members of management of our Competition Tire subsidiaries.
54
CERTAIN UNITED STATES TAX CONSIDERATIONS OF NON-U.S. HOLDERS
A general discussion of certain U.S. federal income and estate tax consequences of the acquisition, ownership and disposition of class A common stock applicable to Non-U.S. Holders (as defined) of class A common stock is set forth below. In general, a “Non-U.S. Holder” is a person that, for U.S. federal income tax purposes, is a non-resident alien individual, a foreign corporation, a foreign partnership, or a foreign estate or trust. This discussion is based on current law and is provided for general information only. This discussion does not address aspects of U.S. federal taxation other than income and estate taxation and does not address the effects of state, local and foreign tax laws. This discussion does not purport to deal with all aspects of U.S. federal income and estate taxation that might be relevant to particular holders in light of their personal investment circumstances or status, nor does it discuss the U.S. federal income or estate tax consequences to certain types of holders subject to special treatment under such laws (for example, insurance companies, pass-through entities, tax-exempt organizations, financial institutions or broker-dealers). This discussion is based on the Internal Revenue Code of 1986, as amended, Treasury Regulations promulgated thereunder and administrative and judicial interpretations thereof, all of which are subject to change, possibly with retroactive effect.Accordingly, prospective investors are urged to consult their tax advisors regarding the United States federal, state, local and foreign income and other tax consequences of acquiring, holding and disposing of class A common stock.
Dividends
In general, the gross amount of dividends paid to a Non-U.S. Holder will be subject to U.S. withholding tax at a 30% rate (or any lower rate prescribed by an applicable tax treaty); however, if the dividends are effectively connected with a trade or business carried on by the Non-U.S. Holder within the United States and a Form W-8ECI is filed with the withholding agent, subject to a lower rate or exemption from tax under an applicable treaty, the dividend will be taxed at ordinary U.S. federal income tax rates. In the case of a Non-U.S. Holder that is a corporation, effectively connected income may also be subject to the dividendbranch profits tax (which is generally imposed on a foreign corporation on the actual or deemed repatriation from the United States of earnings and liquidation rightsprofits attributable to U.S. trade or business income), except to the extent that an applicable tax treaty provides otherwise. For purposes of any Preferred Stockdetermining whether tax is to be withheld at a reduced rate under an income tax treaty, a Non-U.S. Holder will be required to file a Form W-8BEN with the withholding agent certifying its entitlement to benefits under a treaty. In addition, where dividends are paid to a holder that may be issued and
outstanding. No dividendis a partnership or other distribution (including redemptionspass-through entity, persons holding an interest in the entity may need to provide the certification.
Sale of Common Stock
Generally, a Non-U.S. Holder will not be subject to United States federal income tax on any gain realized upon the disposition of his or repurchasesher class A common stock unless: (i) we are or have been a “U.S. real property holding corporation” for federal income tax purposes, at any time within the shorter of the five-year period preceding the disposition and the Non-U.S. Holder’s holding period; (ii) the gain is effectively connected with a trade or business carried on by the Non-U.S. Holder within the United States, unless an applicable tax treaty provides otherwise; (iii) the class A common stock is disposed of by an individual Non-U.S. Holder who holds the class A common stock as a capital asset and is present in the United States for 183 days or more in the taxable year of the disposition or (iv) the Non-U.S. Holder is an individual who lost his U.S. citizenship within the last 10 years and such loss had, as one of its principal purposes, the avoidance of taxes. We have not made a determination as to whether we are a U.S. real property holding corporation, and there can be no assurance that we have not been, are not, or will not become a U.S. real property holding corporation. If we have been, are or become a U.S. real property holding corporation at any time during the shorter of the five-year period preceding the disposition and the Non-U.S. Holder’s holding period, generally gains realized upon a disposition of our shares of capital stock) may be made if after giving effect to
such distribution, the Companyclass A common stock by a Non-U.S. Holder that did not, actually or constructively, own more than 5% of our class A common stock during this period would not be ablesubject to pay its debtsU.S. federal income tax, provided that our class A common stock is “regularly traded on an established securities market” within the meaning of
55
Estate Tax
Class A common stock owned or if the Company's total assets
would be less than the sum of its total liabilities plus the amount that would
be neededtreated as owned by an individual Non-U.S. Holder at the time of a liquidation to satisfy the preferential rights of
any holders of Preferred Stock. See "Dividend Policy."
If a dividend or distribution payable in Class A Common Stock is made on
the Class A Common Stock, the Company must also make a pro rata and
simultaneous dividend or distribution on the Class B Common Stock payable in
shares of either Class A Common Stock or Class B Common Stock. Conversely, if a
dividend or distribution payable in Class B Common Stock is made on the Class B
Common Stock, the Company must also make a pro rata and simultaneous dividend
or distribution on the Class A Common Stock payable solely in shares of Class A
Common Stock.
CONVERSION. Class A Common Stock has no conversion rights. Class B Common
Stock is convertible into Class A Common Stock, in whole or in part, at any
time and from time to time at the option of the holder, on the basis of one
share of Class A Common Stock for each share of Class B Common Stock converted.
Each share of Class B Common Stock will also automatically convert into one
share of Class A Common Stock if, on the record date for any meeting of the
shareholders, the number of shares of Class B Common Stock then outstanding is
less than 10% of the aggregate number of shares of Class A Common Stock and
Class B Common Stock then outstanding.
40
LIQUIDATION. In the event of liquidation, after payment of the debts and
other liabilities of the Company and after making provision for the holders of
Preferred Stock, if any, the remaining assets of the Companyhis death will be distributable ratably amongincludable in the holders of the Class A Common Stockindividual’s gross estate for U.S. federal estate tax purposes, unless an applicable treaty provides otherwise, and Class B
Common Stock treated as a single class.
MERGERS AND OTHER BUSINESS COMBINATIONS. Upon the merger or consolidation
of the Company, holders of each class of Common Stock are entitledmay be subject to receive
equal per share payments or distributions, except that in any transaction in
which shares of capital stock are distributed, such shares may differ asU.S. federal estate tax.
Backup Withholding and Information Reporting Requirements
We will be required to voting rights and otherwisereport annually to the extent and only to the extent that the Class
A Common Stock and Class B Common Stock differ.
OTHER PROVISIONS. The holders of the Class A Common Stock and Class B
Common Stock are not entitled to preemptive rights. Neither the Class A Common
Stock nor the Class B Common Stock may be subdivided or combined in any manner
unless the other class is subdivided or combined in the same proportion.
TRANSFER AGENT AND REGISTRAR. The Transfer Agent and Registrar for the
Class A Common Stock is SunTrust Bank, Central Florida, N.A.
PREFERRED STOCK
The Board of Directors of the Company is authorized, without further
shareholder action, to divide any or all shares of the authorized Preferred
Stock into series and fix and determine the designations, preferences and
relative rights and qualifications, limitations, or restrictions thereon of any
series so established, including voting powers, dividend rights, liquidation
preferences, redemption rights and conversion privileges. As of the date of
this Prospectus, the Board of Directors has not authorized any series of
Preferred Stock, and there are no plans, agreements or understandings for the
authorization or issuance of any shares of Preferred Stock. The issuance of
Preferred Stock with voting rights or conversion rights may adversely affect
the voting power of the Common Stock, including the loss of voting control to
others.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF FLORIDA LAW AND OTHER PROVISIONS
OF THE COMPANY'S ARTICLES
The Company is subject to certain anti-takeover provisions under Florida
law, including the "affiliated transactions" and "control-share acquisition"
provisions of the Florida Business Corporation Act. These provisions require,
subject to certain exceptions, that an "affiliated transaction" be approved by
the holders of two-thirds of the voting shares other than those beneficially
owned by an "interested shareholder" or by a majority of disinterested
directors, and that voting rights be conferred on "control shares" acquired in
specified "control share acquisitions" generally only to the extent conferred
through approval by the holders of a majority of all shares, excluding holders
of "interested shares." In addition, certain provisions of the Company's
Articles summarized in the following paragraphs may be deemed to have an
anti-takeover effect and may delay, defer or prevent a tender offer or takeover
attempt that a shareholder might consider in its best interest, including those
attempts that might result in a premium over the market price for the shares
held by shareholders.
CLASSIFIED BOARD OF DIRECTORS. The Articles provide for the Board of
Directors to be divided into three classes of directors serving staggered
three-year terms. As a result, approximately one-third of the Board of
Directors will be elected each year. These provisions, when coupled with the
provision of the Articles authorizing only the Board of Directors to increase
the size of the Board of Directors, prevent a shareholder from removing
incumbent directors and simultaneously gaining control of the Board of
Directors by filling the vacancies created by such removal with its own
nominees.
SPECIAL MEETING OF SHAREHOLDERS. The Articles further provide that
special meetings of shareholders of the Company be called only by the Board of
Directors or holders of not less than 50% of the votes entitled to be cast at
the special meeting.
41
ADVANCE NOTICE REQUIREMENTS FOR SHAREHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. The Articles provide that shareholders seeking to bring business
before an annual meeting of shareholders, or to nominate candidates for
election as directors at an annual or special meeting of shareholders, must
provide timely notice thereof in writing. To be timely with respect to an
annual meeting, a shareholder's notice must be delivered to or mailed and
received at the principal executive offices of the Company not less than 120
days nor more than 180 days prior to the first anniversary of the date of the
Company's notice of annual meeting provided with respect to the previous year's
meeting. The Articles also specify certain requirements for a shareholder's
notice to be in proper written form. These provisions may preclude shareholders
from bringing matters before the shareholders at an annual or special meeting
or from making nominations for directors at an annual or special meeting.
AUTHORIZED BUT UNISSUED SHARES. The authorized but unissued shares of
Common Stock and Preferred Stock are available for future issuance without
shareholder approval. These additional shares may be utilized for a variety of
corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions and employee benefit plans. The existence of
authorized but unissued and unreserved Common Stock and Preferred Stock may
enable the Board of Directors to issue shares to persons friendly to current
management which could render more difficult or discourage an attempt to obtain
control of the Company by means of a proxy contest, tender offer, merger or
otherwise, and thereby protect the continuity of the Company's management.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have approximately 42.5
million outstanding shares of Common Stock. Of these shares, the 4,000,000
shares of Class A Common Stock sold in this Offering (or a maximum of 4,600,000
shares if the Underwriters' over-allotment option is exercised in full) will be
freely tradeable by persons other than "affiliates" of the Company without
restriction or further registration under the Securities Act. In addition, all
of the 38.5 million currently outstanding shares of Common Stock are eligible
for resale in the public market, subject in the case of approximately 21.8
million shares to the Rule 144 limitations applicable to affiliatesIRS and to each Non-U.S. Holder the lock-up agreements described below.
Persons who are deemed affiliatesamount of dividends paid to, and the Company are generally entitled
under Rule 144 as currently in effect to sell within any three-month period a
number of shares that does not exceed 1% of the number of shares of the
applicable class of Common Stock then outstanding or the average weekly trading
volume of such class of Common Stock during the four calendar weeks preceding
the making of a filing with the Securities and Exchange Commission (the
"Commission")tax withheld with respect to, such sale. Such sales under Rule 144 areholder, regardless of whether any tax was actually withheld. This information may also subjectbe made available to certain mannerthe tax authorities in the Non-U.S. Holder’s country of sale provisions and noticeresidence.
U.S. information reporting requirements and backup withholding will generally apply to the availability of current public information about the Company. The Company is
unabledividends paid to estimate accurately the number of shares of Common Stock that
ultimately will be sold under Rule 144 because the number of shares will depend
in part on the market price for the Common Stock, the personal circumstancesNon-U.S. Holders and to payments to Non-U.S. Holders of the sellers and other factors. The Company and eachproceeds of a sale of class A common stock by a U.S. office of a broker unless such Non-U.S. Holder certifies its Non-U.S. status under penalties of perjury or otherwise establishes an exemption. Information reporting (but not backup withholding, unless the payor has actual knowledge that the payee is a U.S. person) generally will also apply to payments of the Company's executive
officersproceeds of sales of class A common stock by non-U.S. offices of U.S. brokers, or non-U.S. brokers with some types of relationships with the U.S., unless the Non-U.S. Holder complies with certain certification procedures to establish its Non-U.S. status or otherwise establishes an exemption. Information reporting and directors have agreed, subjectbackup withholding generally will not apply to certain limitations, notpayments of the proceeds of sales of class A common stock to sell
any sharesor through a non-U.S. office of Common Stock, or securities convertible into or exchangeable for
Common Stock, for a periodnon-U.S. broker (absent actual knowledge that the payee is a U.S. person).
Any amount withheld under the backup withholding rules from a payment to a Non-U.S. Holder is allowable as a credit against the holder’s U.S. federal income tax, which may entitle the Non-U.S. Holder to a refund, provided that the holder furnishes the required information to the IRS.
Prospective purchasers of 90 calendar days afterclass A common stock are urged to consult their tax advisors as to the dateapplication of this
Prospectus without the prior consent of Smith Barney Inc. See "Underwriting."
The Company can make no predictioncurrent rules regarding backup withholding and information reporting and as to the effect, if any, that sales of
shares of Common Stock, or the availability of such shares for sale, will haverules on their acquisition, ownership and disposition of the market priceclass A common stock.
56
UNDERWRITING
Salomon Smith Barney Inc., J.P. Morgan Securities Inc., Raymond James & Associates, Inc. and First Union Securities, Inc., a subsidiary of Class A Common Stock prevailing from timeWachovia Corporation, are acting as representatives of the underwriters named below. Subject to time.
Nevertheless, sales of substantial amounts of Common Stock in the public market
could adversely affect prevailing market prices. See "Risk Factors--Shares
Eligible for Future Sale" and "Risk Factors--Possible Volatility of Stock
Price."
42
UNDERWRITING
Upon the terms and subject to the conditions stated in the Underwriting
Agreementunderwriting agreement dated the date hereof,of this prospectus, each Underwriterunderwriter named below has severally agreed to purchase, and the Companyselling stockholder has agreed to sell to such Underwriter,that underwriter, the number of shares of Class A Common Stock set forth opposite the name of such
Underwriter.
underwriter’s name.
| Number | |||||
| Underwriter | of shares | ||||
| Salomon Smith Barney Inc. | |||||
| J.P. Morgan Securities Inc. | |||||
| Raymond James & Associates, Inc. | |||||
| First Union Securities, Inc. | |||||
| Total | 2,500,000 | ||||
The Underwriting Agreementunderwriting agreement provides that the obligations of the several
Underwritersunderwriters to pay for and accept delivery ofpurchase the shares of Class A Common
Stock offered herebyincluded in this offering are subject to approval of certain legal matters by counsel and to certain other conditions. The Underwritersunderwriters are obligated to take
and pay forpurchase all the shares of Class A Common Stock offered hereby (other than those covered by the over-allotment option described below) if they purchase any such shares of Class A Common Stock are taken.the shares.
The Underwriters, for whom Smith Barney Inc. and CIBC Oppenheimer Corp.
are acting as the Representatives,underwriters propose to offer partsome of the shares of Class
A Common Stock directly to the public at the public offering price set forth on the cover page of this Prospectusprospectus and partsome of the shares of Class A Common
Stock to certain dealers at athe public offering price which representsless a concession not in excess
ofto exceed $ per share below the public offering price.share. The Underwritersunderwriters may allow, and such dealers may reallow, a concession not in excess ofto exceed $ per share on sales to certain other dealers. AfterIf all of the Offering,shares are not sold at the initial offering price, tothe representatives may change the public concession, allowanceoffering price and reallowance may be changed by the Representatives.other selling terms.
The Companyselling stockholder has granted to the Underwritersunderwriters an option, exercisable for thirty30 days from the date of this Prospectus,prospectus, to purchase in the aggregate up to 600,000375,000 additional shares of Classclass A Common Stockcommon stock at the public offering price to public set
forth onless the cover page of this Prospectus minus underwriting discounts and
commissions.discount. The Underwritersunderwriters may exercise suchthe option solely for the purpose of covering over-allotments, if any, in connection with the Offering.this offering. To the extent suchthe option is exercised, each Underwriterunderwriter must purchase a number of additional shares approximately proportionate to that underwriter’s initial purchase commitment.
We, our officers and directors, the selling stockholder and our major shareholders have agreed that, for a period of 90 days from the date of this prospectus, we and they will be obligated,not, without the prior written consent of Salomon Smith Barney, dispose of or hedge any shares of our common stock or any securities convertible into or exchangeable for our common stock, subject to certain conditions,exceptions. Salomon Smith Barney in its sole discretion may release any of the securities subject to these lock-up agreements at any time without notice.
The class A common stock is quoted on the Nasdaq National Market under the symbol “ISCA.”
The following table shows the underwriting discounts and commissions that the selling stockholder is to pay to the underwriters in connection with this offering. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase approximately the same percentage of such additional shares asof class A common stock.
| Paid by selling stockholder | ||||||||
| No Exercise | Full Exercise | |||||||
| Per share | $ | $ | ||||||
| Total | $ | $ | ||||||
In connection with the offering, Salomon Smith Barney, on behalf of the underwriters, may purchase and sell shares of common stock in the open market. These transactions may include short sales, syndicate
57
The underwriters also may impose a penalty bid. Penalty bids permit the Underwritersunderwriters to reclaim a selling concession from a syndicate member when the Class A Common StockSalomon Smith Barney repurchases shares originally sold by suchthat syndicate member is purchased in a stabilizing transaction or
syndicate covering transactionorder to cover syndicate short positions. Suchpositions or make stabilizing transactions, syndicate covering transactions and penalty bidspurchases.
Any of these activities may have the effect of preventing or retarding a decline in the market price of the common stock. They may also cause the price of the Class A Common Stockcommon stock to be higher than itthe price that would otherwise beexist in the open market in the absence of suchthese transactions. TheseThe underwriters may conduct these transactions may be
effected on Thethe Nasdaq National Market or otherwise and, if commenced,in the over-the-counter market, or otherwise. If the underwriters commence any of these transactions, they may be
discontinueddiscontinue them at any time.
We and the selling stockholder estimate that the total expenses of this offering will be $450,000.
The Underwritersunderwriters have performed investment banking and dealersadvisory services for us from time to time for which they have received customary fees and expenses. The underwriters may, from time to time, engage in passive market making
transactions in the Class A Common Stock in accordance with Rule 103 of
Regulation M under the Exchange Act. In general, a passive market maker may not
bidand perform services for or purchase, the Class A Common Stock at a price that exceeds the
highest independent bid. In addition, the net daily purchases made by any
passive market maker may not bid for, or purchase, the Class A Common Stock at
a price that exceeds the highest independent bid. In addition, the net daily
purchases made by any passive market maker generally may not exceed 30% of its
average daily trading volume in the Class A Common Stock during a specified two
month prior period, or 200 shares, whichever is greater. A passive market maker
must identify passive market making bids as such on the Nasdaq electronic
inter-dealer reporting system. Passive market making may stabilize or maintain
the market price of the Class A Common Stock above independent market levels.
Underwriters and dealers are not required to engage in passive market making
and may end passive market making activities at any time.
The Company and each of the Company's executive officers and directors,
who beneficially hold an aggregate of approximately 21.8 million shares of
Common Stock, have agreed that, for a period of 90 days following the date of
this Prospectus, they will not, without the prior written consent of Smith
Barney Inc. and subject to certain limited exceptions, offer, sell, contract to
sell, or otherwise dispose of any shares of Class A Common Stock (other than
shares offered pursuant to this Prospectus) or any securities convertible into,
or exercisable or exchangeable for shares of Class A Common Stock.
From time to timeus in the ordinary course of its business, an affiliate of
one oftheir business.
A prospectus in electronic format may be made available on the Representatives has provided, andwebsites maintained by one or more of the Representativesunderwriters. The representatives may agree to allocate a number of shares to underwriters for sale to their online brokerage account holders. The representatives will allocate shares to underwriters that may make internet distributions on the same basis as other allocations. In addition, shares may be sold by the underwriters to securities dealers who resell shares to online brokerage account holders.
First Union Securities, Inc., a subsidiary of Wachovia Corporation, conducts its investment banking, institutional and capital markets businesses under the trade name of Wachovia Securities. Any references to “Wachovia Securities” in this prospectus, however, do not include Wachovia Securities, Inc., a separate broker-dealer subsidiary of Wachovia Corporation and affiliate of First Union Securities, Inc. which may or their affiliates may not be participating as a separate selling dealer in the future provide, investment bankingdistribution of the securities offered by this prospectus.
We and the selling stockholder have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act of 1933, or other
services to contribute to payments the Company.
underwriters may be required to make because of any of those liabilities.
LEGAL MATTERS
The
Certain legal matters in connection with the securities offered hereby, including the validity of the class A common stock offered through this prospectus, will be passed upon for us by Glenn R. Padgett of ISC. Mr. Padgett owns approximately 1,870 shares of Common Stock offered herebyclass A common stock directly. In addition, certain legal matters in connection with the offering will be passed upon for us by Baker Botts L.L.P. Certain
58
Ernst & KnightYoung LLP, Ft. Lauderdale, Florida.
EXPERTS
Theindependent auditors, have audited our consolidated financial statements (including the schedule incorporated
by reference) of International Speedway Corporation as ofat November 30, 19962001 and 1997,2000, and for each of the three years ended August 31, 1995 and 1996,in the three-month period ended November 30, 1996 and the fiscal year ended November 30, 1997,
appearing in this Prospectus and the Registration Statement have been audited
by Ernst & Young LLP, independent certified public accountants,2001, as set forth in their reports thereon appearingreport. We have included our consolidated financial statements in this prospectus and incorporated by reference elsewhere herein,
and are includedin the registration statement in reliance upon such reportson Ernst & Young LLP’s report, given upon theon their authority of such
firm as experts in accounting and auditing.
44
AVAILABLE INFORMATION
We “incorporate by reference” into this prospectus the information we file with the SEC, which means that we can disclose important information to you by referring you to those documents. The Companyinformation we incorporate by reference is subjectconsidered to be part of this prospectus, unless we update or supercede that information by the information contained in this prospectus or information we file subsequently that is incorporated by reference into this prospectus. We are incorporating by reference into this prospectus the following documents that we have filed with the SEC, as well as our future filings with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 prior to the informational requirementstermination of the Exchange
Act,offering of these securities:
| • | Our annual report on Form 10-K for the fiscal year ended November 30, 2001; and | |
| • | the description of our class A common stock contained in our registration statement on Form S-3, filed on October 29, 1996. |
We will provide to each person, including any beneficial owner, to whom this prospectus is delivered, a copy of any or all of the information that has been incorporated by reference in this prospectus but not delivered with this prospectus. You may request a copy of these filings at no cost by writing to, telephoning or completing the request form on our website at the following address, telephone number or website:
| International Speedway Corporation | |
| 1801 West International Speedway Boulevard | |
| Daytona Beach, Florida 32114-1243 | |
| Attn: Investor Relations | |
| Telephone: (386) 947-6406 | |
| www.iscmotorsports.com |
We file annual, quarterly and in accordance therewith filesspecial reports, informationproxy statements and other information with the Securities and Exchange Commission. Such reports, information statements and
other information filed byOur SEC filings are available to the Company may be inspected and copied (at
prescribed rates)public over the internet at the SEC’s web site at http://www.sec.gov. You may also read and copy any document we file with the SEC at its public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at
the Commission's regional office located at Seven World Trade Center, 13th
Floor, New York, New York 10048 and at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. The Commission also maintains a World Wide Web site on
the Internet at http://www.sec.gov that provides access to reports, proxy and
information statements and other information regarding registrants, such as the
Company, that file electronically with the Commission. Information concerning
the Company is also available for inspection at the offices of the Nasdaq
National Market, 1735 K Street, N.W., Washington, D.C. 20006.
The Company has also filed with the Commission a Registration Statement on
Form S-3 (together with all amendments, exhibits and schedules thereto, the
"Registration Statement") under the Securities Act with respect to the Class A
Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement. For further information
with respect to the Company and the Class A Common Stock offered hereby,
reference is hereby made to such Registration Statement. Statements contained
in this Prospectus as to the contents of any contract or other document filed
as an exhibit to the Registration Statement accurately describe the material
terms of such contracts and documents. However, such statements are not
necessarily complete and, in each instance, reference is made to the copy of
such contract or document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. Copies
of the Registration Statement may be obtained from the Commission's principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment20549. You can also obtain copies of the feesdocuments at prescribed rates by writing to the Commission, may be obtained throughPublic Reference Section of the Commission's
World Wide Web site, or may be examined, without charge,SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities maintained byfacilities. You can also obtain information about us at the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCEoffices of the National Association of Securities Dealers, 1735 K St., N.W., Washington, D.C. 20006.
OTHER INFORMATION
The following documents filed by the Company with the Commission are
incorporated herein by reference: (1) the Company's Annual Report on Form 10-KTransfer Agent and Registrar for the fiscal year ended November 30, 1997; (2) the Company's Quarterly Report
on Form 10-Q for the quarter ended February 28, 1998; and (3) the Company's
Registration Statement registering the Company'sclass A common stock under Section
12(g) of the Exchange Act. All documents filed by the Company with the
Commission pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act
subsequent to the date hereof and prior to the termination of this Offering
shall be deemed to be incorporated by reference into this Prospectus and to be
as part hereof from the date of filing such documents. Any statements contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that the statement contained herein or in any other subsequently
filed document which also is or is deemed to be, incorporated by reference
herein modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus. The Company will provide without charge
to each person to whom this Prospectus is delivered, upon a written or oral
request of such person, a copy of any or all of the foregoing documents
incorporated by reference into this Prospectus (other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
such documents). Request for such copies should be delivered to Glenn R.
Padgett, 1801 West International Speedway Boulevard, Daytona Beach,SunTrust Bank, Central Florida, 32114, telephone (904) 947-6446; telecopy (904) 947-6884.
45
59
INTERNATIONAL SPEEDWAY CORPORATION
| Page | ||||
Audited Consolidated Financial Statements: | ||||
| Report of Independent Certified Public Accountants | F-2 | |||
| Consolidated Balance Sheets as of November 30, | F-3 | |||
| Consolidated Statements of Income for the | F-4 | |||
| Consolidated Statements of | F-5 | |||
| Consolidated Statements of Cash Flows for the | F-6 | |||
| Notes to Consolidated Financial Statements | F-7 | |||
F-1
INTERNATIONAL SPEEDWAY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
NOVEMBER 30, FEBRUARY 28,
1997 1998
-------------- -------------
(UNAUDITED)
ASSETS (IN THOUSANDS)
Current Assets:
Cash and cash equivalents ............................................... $ 9,974 $ 16,193
Short-term investments .................................................. 23,601 35,674
Receivables, less allowances of $100..................................... 7,425 14,703
Inventories ............................................................. 866 1,410
Prepaid expenses and other current assets ............................... 4,077 4,781
-------- --------
Total Current Assets ..................................................... 45,943 72,761
Property and Equipment--at cost--less accumulated depreciation of
$53,917 and $56,644 at November 30 and February 28, respectively......... 166,078 173,814
Other Assets:
Cash surrender value of life insurance (Note 3) ......................... 3,590 3,640
Equity investments ...................................................... 45,844 45,945
Goodwill, less accumulated amortization of $382 and $638 at
November 30 and February 28, respectively ............................. 40,400 40,144
Long-term investments ................................................... 500 500
Other ................................................................... 468 562
-------- --------
90,802 90,791
-------- --------
Total Assets ............................................................. $302,823 $337,366
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable ........................................................ $ 6,898 $ 8,818
Income taxes payable .................................................... 7 7,726
Deferred income ......................................................... 49,338 46,665
Current portion of note payable ......................................... 13,295 14,613
Other current liabilities ............................................... 1,381 4,068
-------- --------
Total Current Liabilities ................................................ 70,919 81,890
Notes payable ............................................................ 1,007 --
Deferred income taxes .................................................... 20,990 24,801
Commitments and Contingencies (Note 5)
Shareholders' Equity (Note 1)
Class A Common Stock, $.01 par value, 80,000,000 shares
authorized; 5,342,042 and 5,502,762 issued at
November 30 and February 28, respectively ............................. 53 55
Class B Common Stock, $.01 par value, 40,000,000 shares
authorized; 33,154,920 and 32,977,635 issued at
November 30 and February 28, respectively ............................. 332 330
Additional paid-in capital .............................................. 86,437 86,877
Retained earnings ....................................................... 125,457 145,468
-------- --------
212,279 232,730
Less unearned compensation--restricted stock ............................ 2,372 2,055
-------- --------
Total Shareholders' Equity ............................................... 209,907 230,675
-------- --------
Total Liabilities and Shareholders' Equity ............................... $302,823 $337,366
======== ========
See accompanying notes.
F-2
INTERNATIONAL SPEEDWAY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED
------------------------------
FEBRUARY 28, FEBRUARY 28,
1997 1998
-------------- -------------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
Revenues:
Admissions, net ............................................... $26,360 $31,889
Motorsports related income .................................... 17,209 27,165
Food, beverage and souvenir income ............................ 8,078 8,966
Other income .................................................. 219 264
------- -------
51,866 68,284
Expenses:
Direct expenses:
Prize and point fund monies and NASCAR sanction fees ......... 6,984 11,092
Motorsports related expenses ................................. 5,150 8,154
Food, beverage and souvenir expenses. ........................ 4,510 4,469
General and administrative expenses ........................... 6,174 8,528
Depreciation and amortization ................................. 1,945 3,041
------- -------
24,763 35,284
------- -------
Operating Income ............................................... 27,103 33,000
Interest income, net ........................................... 992 128
Equity in net loss from equity investments ..................... (441) (421)
------- -------
Income before income taxes ..................................... 27,654 32,707
Income taxes ................................................... 10,179 12,558
------- -------
Net Income ..................................................... $17,475 $20,149
======= =======
Basic net income per share (Note 2) ............................ $ 0.46 $ 0.53
======= =======
Diluted net income per share (Note 2) .......................... $ 0.46 $ 0.53
======= =======
Dividends per share ............................................ $ -- $ --
======= =======
See accompanying notes.
F-3
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, 1996 .............. $40 $344 $82,236 $ 98,119 $ (1,450) $179,289
Activity 12/1/96 - 2/28/97--unaudited:
Net income ............................... -- -- -- 17,475 -- 17,475
Additional expense of Class A
Common Stock Offering .................. -- -- (29) -- -- (29)
Increase in equity investment ............ -- -- 400 -- -- 400
Restricted stock granted ................. -- 1 1,984 -- (1,985) --
Reacquisition of previously issued
common stock ........................... -- -- -- (147) -- (147)
Conversion of Class B Common Stock
to Class A Common Stock ................ 4 (4) -- -- -- --
Amortization of unearned
compensation ........................... -- -- -- -- 240 240
--- ----- ------- -------- -------- --------
BALANCE AT FEBRUARY 28, 1997--
unaudited ................................ 44 341 84,591 115,447 (3,195) 197,228
Activity 3/1/97 - 11/30/97--unaudited:
Net income ............................... -- -- -- 12,321 -- 12,321
Cash dividends (6.0\c per share) ......... -- -- -- (2,310) -- (2,310)
Additional expense of Class A
Common Stock Offering .................. -- -- (17) -- -- (17)
Increase in equity investment ............ -- -- 1,863 -- -- 1,863
Reacquisition of previously issued
common stock ........................... -- -- -- (1) -- (1)
Conversion of Class B Common Stock
to Class A Common Stock ................ 9 (9) -- -- -- --
Amortization of unearned
compensation ........................... -- -- -- -- 823 823
--- ----- ------- --------- -------- ---------
BALANCE AT NOVEMBER 30, 1997 .............. 53 332 86,437 125,457 (2,372) 209,907
Activity 12/1/97-2/28/98--unaudited:
Net income ............................... -- -- -- 20,149 -- 20,149
Increase in equity investment ............ -- -- 115 -- -- 115
Reacquisition of previously issued
common stock ........................... -- -- (57) (138) -- (195)
Conversion of Class B Common Stock
to Class A Common Stock ................ 2 (2) -- -- -- --
Forfeiture of restricted shares .......... -- -- (110) -- 110 --
Income tax benefit related to restricted
stock plan ............................. -- -- 492 -- -- 492
Amortization of unearned
compensation ........................... -- -- -- -- 207 207
--- ----- ------- --------- -------- ---------
BALANCE AT FEBRUARY 28, 1998--
unaudited ................................ $55 $330 $86,877 $145,468 $ (2,055) $230,675
=== ===== ======= ========= ======== =========
See accompanying notes.
F-4
INTERNATIONAL SPEEDWAY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
------------------------------
FEBRUARY 28, FEBRUARY 28,
1997 1998
-------------- -------------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
OPERATING ACTIVITIES
Net income .................................................. $ 17,475 $ 20,149
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization .............................. 1,945 3,041
Amortization of unearned compensation ...................... 240 207
Deferred income taxes ...................................... 1,447 4,035
Undistributed loss from equity investments ................. 441 421
Loss on disposition of property and equipment .............. -- 98
Changes in Operating Assets and Liabilities:
Receivables ............................................... (7,031) (7,278)
Inventories ............................................... (343) (544)
Prepaid expenses and other current assets ................. (798) (704)
Other assets .............................................. (3) (100)
Accounts payable .......................................... 4,330 1,919
Income taxes payable ...................................... 8,008 7,915
Deferred income ........................................... (7,174) (2,673)
Other current liabilities ................................. 2,066 2,998
---------- ---------
Net Cash Provided by Operating Activities. ................... 20,603 29,484
INVESTING ACTIVITIES
Acquisition of investments .................................. (12,025) (64,983)
Proceeds from maturities of investments ..................... 8,646 52,910
Capital expenditures ........................................ (10,328) (10,612)
Cash surrender value of life insurance ...................... (34) (50)
Equity investments .......................................... -- (335)
---------- ---------
Net Cash Used in Investing Activities ........................ (13,741) (23,070)
FINANCING ACTIVITIES
Reacquisition of previously issued common stock ............. (147) (195)
Additional expense of Class A Common Stock Offering ......... (29) --
---------- ---------
Net Cash Used in Financing Activities ........................ (176) (195)
---------- ---------
Net Increase in Cash and Cash Equivalents .................... 6,686 6,219
Cash and Cash Equivalents at Beginning of Period ............. 8,057 9,974
---------- ---------
Cash and Cash Equivalents at End of Period ................... $ 14,743 $ 16,193
========== =========
See accompanying notes.
F-5
INTERNATIONAL SPEEDWAY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1998 (UNAUDITED)
NOTE 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 that
follow. In management's opinion, the statements include all adjustments which
are necessary for a fair presentation of the results for the interim periods.
All such adjustments are of a normal recurring nature. Certain
reclassifications have been made to conform to the financial presentation at
February 28, 1998.
Because of the seasonal concentration of racing events, the results of
operations for the three-month periods ended February 28, 1997 and February 28,
1998 are not indicative of the results to be expected for the year.
NOTE 2--EARNINGS PER SHARE
The Company has adopted Statement of Financial Accounting Standards No.
128, "Earnings Per Share", during the three months ended February 28, 1998.
This statement requires the Company to present "Basic" and "Diluted" earnings
per share on the face of the income statement for current periods and to
restate earnings per share for prior periods. For the three months ended
February 28, 1997 and February 28, 1998 earnings per share were $.46 and $.53,
respectively, for both basic and diluted earnings per share. Basic weighted
average shares outstanding for the three-month periods ended February 28, 1997
and February 28, 1998 were 38,172,705 and 38,204,357, respectively. Diluted
weighted average shares outstanding for the three-month periods ending February
28, 1997 and February 28, 1998 were 38,299,227 and 38,361,625, respectively.
The difference between basic weighted average shares and diluted weighted
average shares is related to shares issued under the Company's Long-term
Incentive Restricted Stock Plan, using the treasury stock method as prescribed
by the standard.
NOTE 3--RELATED PARTY DISCLOSURES AND TRANSACTIONS
All of the racing events that take place during the Company's fiscal year
are sanctioned by various racing organizations, such as the American Historic
Racing Motorcycle Association ("AHRMA"), the American Motorcyclist Association
("AMA"), the Automobile Racing Club of America ("ARCA"), the Championship Cup
Series ("CCS"), the Federation Internationale de l'Automobile ("FIA"), the
Federation Internationale Motocycliste ("FIM"), the International Race of
Champions ("IROC"), the Indy Racing League ("IRL"), 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"), the World Karting Association ("WKA"), and the National Association
for Stock Car Auto Racing, Inc. ("NASCAR"). NASCAR, which sanctions some of the
Company's principal racing events, is a member of the France Family Group which
controls in excess of 55% 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 $5.6 million and $8.9 million for the three-month periods
ended February 28, 1997 and February 28, 1998, respectively.
F-6
INTERNATIONAL SPEEDWAY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FEBRUARY 28, 1998 (UNAUDITED)
NOTE 3--RELATED PARTY DISCLOSURES AND TRANSACTIONS--(CONTINUED)
In October 1995 the Company entered into collateral assignment
split-dollar insurance agreements covering the lives of William C. France and
James C. France and their respective spouses. Pursuant to the agreements, the
Company will advance the annual premiums of approximately $1,205,000 each year
for a period of eight years. Upon surrender of the policies or payment of the
death benefits thereunder, the Company is entitled to repayment of an amount
equal to the cumulative premiums previously paid by the Company. The Company
may cause the agreements to be terminated and the policies surrendered at any
time after the cash surrender value of the policies equals the cumulative
premiums advanced under the agreements. The Company records a net insurance
expense representing the excess of the premiums paid over the increase in cash
surrender value of the policies associated with these agreements. During the
three-month periods ended February 28, 1997 and February 28, 1998, premiums
paid were approximately equal to the increase in cash surrender value of the
policies.
NOTE 4--SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for income taxes and interest for the three months ended
February 28, 1997 and February 28, 1998 is as follows:
1997 1998
------ -------
(IN THOUSANDS)
Income taxes paid ......... $619 $547
Interest paid ............. $ -- $ --
NOTE 5--LEGAL PROCEEDINGS
On October 21, 1996, the Company's indirect corporate subsidiary,
Americrown Service Corporation ("Americrown"), was served with a Class Action
Complaint filed in the Circuit Court of Talladega County, Alabama by Howard
Padgett, Bill Lutz and Tommy Jones. The complaint was filed in September 1996
and alleged, among other things, that Americrown engaged in price-fixing
activities in connection with the sale of racing souvenirs and merchandise at
the Talladega Superspeedway. The complaint seeks at least $500 for each member
of the putative class (persons buying racing souvenirs at Talladega
Superspeedway since September 1992), but does not otherwise seek to recover
compensatory or punitive damages or statutory attorneys' fees. Although
Americrown attempted to remove the suit to Federal District Court, it was
remanded to the Circuit Court of Talladega County, Alabama, where discovery and
the class certification process are proceeding. Americrown disputes the
allegations and intends to defend 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, its indirect corporate subsidiary, Americrown Service Corporation, and
a number of other persons alleging, in substance, that the defendants
unlawfully conspired to fix prices of souvenirs and merchandise sold to
consumers in violation of federal antitrust laws. One suit was filed by Florida
residents and the other suit was filed by Georgia residents. Both suits seek
damages and injunctive relief on behalf of all persons who purchased souvenirs
or merchandise from certain vendors at any NASCAR Winston Cup Series stock car
race or supporting event in the United States during the period 1991 to
present. The two suits have been consolidated and the court has established a
timetable to consider class certification. Discovery is proceeding. The Company
and Americrown dispute the allegations and intend to defend the actions fully
and vigorously.
Management is presently unable to predict or quantify the outcome of these
matters.
F-7
INTERNATIONAL SPEEDWAY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FEBRUARY 28, 1998 (UNAUDITED)
NOTE 6--ACQUISITION
On July 14, 1997, Phoenix Speedway Corporation, a newly formed
wholly-owned subsidiary of the Company, acquired substantially all of the
assets comprising the business and motorsports complex known as "Phoenix
International Raceway" from Phoenix International Raceway, Inc., Phoenix
International Raceway, L.L.C. and Phoenix International Raceway Limited
Partnership. The acquisition has been accounted for under the purchase method
of accounting, and accordingly, the results of operations have been included in
the Company's consolidated statements of operations since the date of
acquisition.
The following unaudited pro forma financial information presents a summary
of consolidated results of operations as if the acquisition had occurred as of
December 1, 1996 after giving effect to certain adjustments, including
depreciation, amortization of goodwill, interest income, interest expense on
acquisition debt and 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 been made on that date, nor are
they necessarily indicative of results which may occur in the future.
PRO FORMA--UNAUDITED
FOR THE THREE MONTHS
ENDED FEBRUARY 28, 1997
-----------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Total revenues ....................... $54,047
Net income ........................... 16,769
Basic net income per share ........... .44
Diluted net income per share ......... .44
NOTE 7--SUBSEQUENT EVENTS
In March, 1998, the Company sold its entire equity interest in Grand Prix
Association of Long Beach, Inc. for $5.3 million. The Company acquired its
position in Grand Prix through a series of transactions during 1997 for a total
of $4.3 million, including acquisition costs.
In March of 1998, the Company acquired an additional 5% ownership interest
in the Homestead-Miami Speedway, LLC for $2.8 million, which was substantially
financed by a 7.5% interest bearing note, payable on December 31, 2001.
In April 1998, Kansas International Speedway Corporation, a wholly owned
subsidiary of the Company, was named as a defendant in a lawsuit filed in the
District Court of Wyandotte County, Kansas, by certain county property owners
against the Unified Government of Wyandotte County/ Kansas City, Kansas (the
"Unified Government") seeking to temporarily and permanently enjoin the
development of the Kansas International Speedway on constitutional grounds.
Also in April 1998, the District Attorney of Wyandotte County initiated a
proceeding against the Unified Government challenging the constitutionality of
the Kansas statute authorizing, among other things, the Unified Government's
issuance of special obligation bonds and its exercise of eminent domain and
zoning decisions regarding the development of Kansas International Speedway.
The District Attorney requested an expedited review by the Supreme Court of the
State of Kansas, which was granted. The Supreme Court is expected to rule on
these issues in the summer of 1998. An adverse disposition by the Supreme Court
would most likely impede or preclude development of the Kansas International
Speedway. Further, the ultimate disposition of the District Court proceeding
may adversely impact the development of the Kansas International Speedway.
F-8
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders
We have audited the accompanying consolidated balance sheets of International Speedway Corporation and subsidiaries as of November 30, 19962001 and 1997,2000, and the related consolidated statements of income, shareholders'shareholders’ equity and cash flows for the years ended August 31, 1995 and 1996, the three month
period ended November 30, 1996,2001, 2000 and the year ended November 30, 1997.1999. These financial statements are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted auditing
standards.in the United States. 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, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of International Speedway Corporation and subsidiaries at November 30, 19962001 and 1997,2000, and the consolidated results of their operations and their cash flows for the years ended August 31, 1995 and 1996, the three month period ended November 30, 19962001, 2000 and the year ended November 30, 1997,1999, in conformity with accounting principles generally accepted accounting principles.in the United States.
/s/ Ernst & Young LLP
Jacksonville, Florida
F-2
INTERNATIONAL SPEEDWAY CORPORATION
| November 30, | ||||||||||
| 2000 | 2001 | |||||||||
| (in thousands) | ||||||||||
| ASSETS | ||||||||||
| Current Assets: | ||||||||||
| Cash and cash equivalents | $ | 50,592 | $ | 71,004 | ||||||
| Short-term investments | 200 | 200 | ||||||||
| Receivables, less allowance of $1,200 and $1,500, respectively | 21,916 | 25,142 | ||||||||
| Inventories | 3,009 | 4,583 | ||||||||
| Prepaid expenses and other current assets | 10,793 | 6,466 | ||||||||
| Total Current Assets | 86,510 | 107,395 | ||||||||
| Property and Equipment, net (Note 2) | 794,869 | 855,819 | ||||||||
| Other Assets: | ||||||||||
| Equity investments (Note 8) | 28,579 | 32,667 | ||||||||
| Goodwill, less accumulated amortization of $24,807 and $42,902, respectively (Note 1) | 692,481 | 676,150 | ||||||||
| Restricted investments (Notes 1 and 5) | 35,193 | 1,263 | ||||||||
| Other | 27,806 | 28,852 | ||||||||
| 784,059 | 738,932 | |||||||||
| Total Assets | $ | 1,665,438 | $ | 1,702,146 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
| Current Liabilities: | ||||||||||
| Accounts payable | $ | 14,340 | $ | 14,918 | ||||||
| Deferred income (Note 1) | 111,492 | 100,932 | ||||||||
| Current portion of long-term debt (Note 5) | 5,165 | 9,225 | ||||||||
| Other current liabilities | 9,554 | 10,791 | ||||||||
| Total Current Liabilities | 140,551 | 135,866 | ||||||||
| Long-Term Debt (Note 5) | 470,551 | 402,477 | ||||||||
| Deferred Income Taxes (Note 6) | 88,534 | 115,711 | ||||||||
| Long-Term Deferred Income (Note 1) | 11,780 | 11,709 | ||||||||
| Other Long-Term Liabilities | — | 961 | ||||||||
| Minority Interest (Note 3) | 3,151 | — | ||||||||
| Commitments and Contingencies (Note 8) | — | — | ||||||||
| Shareholders’ Equity (Notes 1 and 7): | ||||||||||
| Class A Common Stock, $.01 par value, 80,000,000 shares authorized; 23,687,603 and 24,500,608 issued and outstanding in 2000 and 2001, respectively | 237 | 245 | ||||||||
| Class B Common Stock, $.01 par value, 40,000,000 shares authorized; 29,457,567 and 28,663,224 issued and outstanding in 2000 and 2001, respectively | 294 | 287 | ||||||||
| Additional paid-in capital | 690,114 | 691,670 | ||||||||
| Retained earnings | 262,846 | 346,844 | ||||||||
| Accumulated other comprehensive loss (Note 1) | — | (961 | ) | |||||||
| 953,491 | 1,038,085 | |||||||||
| Less unearned compensation-restricted stock (Note 11) | 2,620 | 2,663 | ||||||||
| Total Shareholders’ Equity | 950,871 | 1,035,422 | ||||||||
| Total Liabilities and Shareholders’ Equity | $ | 1,665,438 | $ | 1,702,146 | ||||||
See accompanying notes.
F-10
F-3
INTERNATIONAL SPEEDWAY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS
YEAR ENDED ENDED YEAR ENDED
AUGUST 31, NOVEMBER 30, NOVEMBER 30,
--------------------------- -------------- -------------
1995 1996 1996 1997
------------ ------------ -------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Revenues:
Admissions, net ................................... $ 43,274 $ 50,140 $ 4,191 $ 69,487
Motorsports related income ........................ 24,033 27,433 3,972 46,650
Food, beverage and souvenir income ................ 14,442 17,505 1,943 23,408
Other income ...................................... 423 964 390 1,829
-------- -------- -------- ---------
82,172 96,042 10,496 141,374
Expenses:
Direct expenses:
Prize and point fund monies and NASCAR
sanction fees .................................. 11,765 13,865 1,301 20,567
Motorsports related expenses ..................... 11,604 15,336 2,814 23,075
Food, beverage and souvenir expenses ............. 8,107 10,278 1,536 13,435
General and administrative expenses ............... 18,202 20,930 5,057 29,486
Depreciation and amortization ..................... 4,798 6,302 2,353 9,910
-------- -------- -------- ---------
54,476 66,711 13,061 96,473
-------- -------- -------- ---------
Operating income (loss) ............................ 27,696 29,331 (2,565) 44,901
Interest income, net ............................... 1,436 872 261 2,687
Equity in net income (loss) from
equity investments ............................... 285 1,441 (304) 366
-------- -------- -------- ---------
Income (loss) before income taxes .................. 29,417 31,644 (2,608) 47,954
Income taxes (benefit) (Note 5) .................... 11,054 11,963 (741) 18,158
-------- -------- -------- ---------
Net income (loss) .................................. $ 18,363 $ 19,681 $ (1,867) $ 29,796
======== ======== ======== =========
Basic earnings (loss) per share (Note 1) ........... $ 0.54 $ 0.58 $ (0.05) $ 0.78
======== ======== ======== =========
Diluted earnings (loss) per share (Note 1) ......... $ 0.54 $ 0.57 $ (0.05) $ 0.78
======== ======== ======== =========
Dividends per share (Note 1) ....................... 4.7cents 5.3cents -- 6.0cents
======== ======== ======== =========
| Year Ended November 30, | ||||||||||||||
| 1999 | 2000 | 2001 | ||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||
| REVENUES: | ||||||||||||||
| Admissions, net | $ | 133,897 | $ | 192,789 | $ | 214,494 | ||||||||
| Motorsports related income | 115,570 | 175,809 | 238,208 | |||||||||||
| Food, beverage and merchandise income | 46,668 | 66,880 | 70,575 | |||||||||||
| Other income | 2,587 | 4,952 | 5,233 | |||||||||||
| 298,722 | 440,430 | 528,510 | ||||||||||||
| EXPENSES: | ||||||||||||||
| Direct expenses: | ||||||||||||||
| Prize and point fund monies and NASCAR sanction fees | 45,615 | 71,260 | 87,859 | |||||||||||
| Motorsports related expenses | 51,590 | 82,230 | 98,458 | |||||||||||
| Food, beverage and merchandise expenses | 25,539 | 38,448 | 38,251 | |||||||||||
| General and administrative expenses | 54,956 | 75,030 | 79,953 | |||||||||||
| Depreciation and amortization | 25,066 | 51,150 | 54,544 | |||||||||||
| 202,766 | 318,118 | 359,065 | ||||||||||||
| Operating income | 95,956 | 122,312 | 169,445 | |||||||||||
| Interest income | 8,780 | 6,156 | 3,446 | |||||||||||
| Interest expense | (6,839 | ) | (30,380 | ) | (26,505 | ) | ||||||||
| Equity in net (loss) income from equity investments | (1,819 | ) | (631 | ) | 2,935 | |||||||||
| Minority interest | (796 | ) | (100 | ) | 992 | |||||||||
| North Carolina Speedway litigation (Note 8) | — | (5,523 | ) | — | ||||||||||
| Income before income taxes | 95,282 | 91,834 | 150,313 | |||||||||||
| Income taxes (Note 6) | 38,669 | 41,408 | 62,680 | |||||||||||
| Net income | $ | 56,613 | $ | 50,426 | $ | 87,633 | ||||||||
| Basic earnings per share (Note 1) | $ | 1.22 | $ | 0.95 | $ | 1.65 | ||||||||
| Diluted earnings per share (Note 1) | $ | 1.22 | $ | 0.95 | $ | 1.65 | ||||||||
| Dividends per share (Note 1) | $ | 0.06 | $ | 0.06 | $ | 0.06 | ||||||||
| Basic weighted average shares outstanding (Note 1) | 46,394,614 | 52,962,646 | 52,996,660 | |||||||||||
| Diluted weighted average shares outstanding (Note 1) | 46,518,977 | 53,049,293 | 53,076,828 | |||||||||||
See accompanying notes.
F-11
F-4
INTERNATIONAL SPEEDWAY CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS'CHANGES IN 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 AUGUST 31, 1994 .................. $-- $344 $1,364 $ 67,194 $ (625) $ 68,277
Net income ................................. -- -- -- 18,363 -- 18,363
Cash dividends (4.7\c per share) ........... -- -- -- (1,605) -- (1,605)
Reacquisition of previously issued
common stock ............................. -- -- -- (106) -- (106)
Restricted stock granted (Note 11) ......... -- -- 489 -- (489) --
Amortization of unearned
compensation (Note 11) ................... -- -- -- -- 318 318
--- ----- ------- -------- -------- --------
BALANCE AT AUGUST 31, 1995 .................. -- 344 1,853 83,846 (796) 85,247
Net income ................................. -- -- -- 19,681 -- 19,681
Cash dividends (5.3\c per share) ........... -- -- -- (1,836) -- (1,836)
Reacquisition of previously issued
common stock ............................. -- (1) (2) (1,705) -- (1,708)
Restricted stock granted (Note 11) ......... -- 1 1,599 -- (1,600) --
Amortization of unearned
compensation (Note 11) ................... -- -- -- -- 606 606
Recapitalization of equity investment ...... -- -- 4,677 -- -- 4,677
--- ------ -------- -------- -------- --------
BALANCE AT AUGUST 31, 1996 .................. -- 344 8,127 99,986 (1,790) 106,667
Net loss ................................... -- -- -- (1,867) -- (1,867)
Public offering--Class A Common
Stock (Note 7) ........................... 40 -- 74,327 -- -- 74,367
Forfeiture of restricted shares ............ -- -- (218) -- 218 --
Amortization of unearned
compensation (Note 11) ................... -- -- -- -- 122 122
--- ------ -------- -------- -------- --------
BALANCE AT NOVEMBER 30, 1996 ................ 40 344 82,236 98,119 (1,450) 179,289
Net income ................................. -- -- -- 29,796 -- 29,796
Cash dividends (6.0\c per share) ........... -- -- -- (2,310) -- (2,310)
Increase in equity investments (Note 2)..... -- -- 2,263 -- -- 2,263
Additional expense of Class A
Common Stock Offering .................... -- -- (46) -- -- (46)
Restricted stock granted (Note 11) ......... -- 1 1,984 -- (1,985) --
Reacquisition of previously issued
common stock ............................. -- -- -- (148) -- (148)
Conversion of Class B Common Stock
to Class A Common Stock .................. 13 (13) -- -- -- --
Amortization of unearned
compensation (Note 11) ................... -- -- -- -- 1,063 1,063
--- ------ -------- -------- -------- --------
BALANCE AT NOVEMBER 30, 1997 ................ $53 $332 $86,437 $125,457 $ (2,372) $209,907
=== ====== ======== ======== ======== ========
| Class A | Class B | Accumulated | ||||||||||||||||||||||||||||
| Common | Common | Other | Unearned | |||||||||||||||||||||||||||
| Stock | Stock | Additional | Comprehensive | Compensation — | Total | |||||||||||||||||||||||||
| $.01 Par | $.01 Par | Paid-in | Retained | Income | Restricted | Shareholders’ | ||||||||||||||||||||||||
| Value | Value | Capital | Earnings | (Loss) | Stock | Equity | ||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||
| Balance at November 30, 1998 | $ | 115 | $ | 316 | $ | 205,089 | $ | 163,201 | $ | — | $ | (1,866 | ) | $ | 366,855 | |||||||||||||||
| Net income | — | — | — | 56,613 | — | — | 56,613 | |||||||||||||||||||||||
| Issuance of common stock for acquisition | 100 | — | 480,472 | — | — | — | 480,572 | |||||||||||||||||||||||
| Cash dividends ($.06 per share) | — | — | — | (2,586 | ) | — | — | (2,586 | ) | |||||||||||||||||||||
| Change in equity investment | — | — | (90 | ) | — | — | — | (90 | ) | |||||||||||||||||||||
| Restricted stock grant (Note 11) | — | — | 1,035 | — | — | (1,035 | ) | — | ||||||||||||||||||||||
| Reacquisition of previously issued common stock | — | — | (314 | ) | (796 | ) | — | — | (1,110 | ) | ||||||||||||||||||||
| Conversion of Class B Common Stock to Class A Common Stock | 14 | (14 | ) | — | — | — | — | — | ||||||||||||||||||||||
| Income tax benefit related to restricted stock plan (Note 11) | — | — | 1,129 | — | — | — | 1,129 | |||||||||||||||||||||||
| Amortization of unearned compensation (Note 11) | — | — | — | — | — | 1,087 | 1,087 | |||||||||||||||||||||||
| Balance at November 30, 1999 | 229 | 302 | 687,321 | 216,432 | — | (1,814 | ) | 902,470 | ||||||||||||||||||||||
| Net income | — | — | — | 50,426 | — | — | 50,426 | |||||||||||||||||||||||
| Cash dividends ($.06 per share) | — | — | — | (3,188 | ) | — | — | (3,188 | ) | |||||||||||||||||||||
| Restricted stock grant (Note 11) | — | — | 1,978 | — | — | (1,978 | ) | — | ||||||||||||||||||||||
| Reacquisition of previously issued common stock | — | — | (354 | ) | (824 | ) | — | — | (1,178 | ) | ||||||||||||||||||||
| Conversion of Class B Common Stock to Class A Common Stock | 8 | (8 | ) | — | — | — | — | — | ||||||||||||||||||||||
| Income tax benefit related to restricted stock plan (Note 11) | — | — | 1,169 | — | — | — | 1,169 | |||||||||||||||||||||||
| Amortization of unearned compensation (Note 11) | — | — | — | — | — | 1,172 | 1,172 | |||||||||||||||||||||||
| Balance at November 30, 2000 | 237 | 294 | 690,114 | 262,846 | — | (2,620 | ) | 950,871 | ||||||||||||||||||||||
| Comprehensive income | ||||||||||||||||||||||||||||||
| Net income | — | — | — | 87,633 | — | — | 87,633 | |||||||||||||||||||||||
| Cumulative effect of change in accounting for interest rate swap (Note 1) | — | — | — | — | 472 | — | 472 | |||||||||||||||||||||||
| Interest rate swap (Note 1) | — | — | — | — | (1,433 | ) | — | (1,433 | ) | |||||||||||||||||||||
| Total comprehensive income | 86,672 | |||||||||||||||||||||||||||||
| Cash dividends ($.06 per share) | — | — | — | (3,190 | ) | — | — | (3,190 | ) | |||||||||||||||||||||
| Restricted stock grant (Note 11) | 1 | — | 1,789 | — | — | (1,790 | ) | — | ||||||||||||||||||||||
| Reacquisition of previously issued common stock | — | — | (520 | ) | (445 | ) | — | — | (965 | ) | ||||||||||||||||||||
| Conversion of Class B Common Stock to Class A Common Stock | 7 | (7 | ) | — | — | — | — | — | ||||||||||||||||||||||
| Forfeiture of restricted shares | — | — | (178 | ) | — | — | 128 | (50 | ) | |||||||||||||||||||||
| Income tax benefit related to restricted stock plan (Note 11) | — | — | 465 | — | — | — | 465 | |||||||||||||||||||||||
| Amortization of unearned compensation (Note 11) | — | — | — | — | — | 1,619 | 1,619 | |||||||||||||||||||||||
| Balance at November 30, 2001 | $ | 245 | $ | 287 | $ | 691,670 | $ | 346,844 | $ | (961 | ) | $ | (2,663 | ) | $ | 1,035,422 | ||||||||||||||
See accompanying notes.
F-12
F-5
INTERNATIONAL SPEEDWAY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS
YEAR ENDED ENDED YEAR ENDED
AUGUST 31, NOVEMBER 30, NOVEMBER 30,
-------------------------- -------------- -------------
1995 1996 1996 1997
------------- ------------ -------------- -------------
(IN THOUSANDS)
OPERATING ACTIVITIES
Net income (loss) ..................................... $ 18,363 $ 19,681 $ (1,867) $ 29,796
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization ........................ 4,798 6,302 2,353 9,910
Amortization of unearned compensation ................ 318 606 122 1,063
Deferred income taxes ................................ 1,650 1,500 (766) 4,425
Undistributed (income) loss from
equity investments. ................................ (285) (1,441) 304 (366)
(Gain) loss on disposition of property
and equipment ...................................... 251 (13) -- --
Changes in Operating Assets and Liabilities:
Receivables ......................................... (447) (1,661) (1,405) (667)
Inventories ......................................... (89) (251) 156 485
Prepaid expenses and other current assets ........... (1,322) 712 651 (689)
Other assets ........................................ (61) (127) -- (204)
Accounts payable .................................... 1,167 1,201 (514) 3,280
Deferred income ..................................... 2,702 6,111 9,797 6,791
Income taxes payable ................................ 272 (267) 30 (80)
Other current liabilities ........................... 409 317 (1,038) 1,190
---------- --------- --------- ----------
Net Cash Provided by Operating Activities .............. 27,726 32,670 7,823 54,934
INVESTING ACTIVITIES
Acquisition of investments ............................ (125,982) (83,502) (70,959) (145,391)
Proceeds from maturities of investments ............... 119,392 106,330 3,771 197,347
Capital expenditures .................................. (16,831) (34,792) (14,864) (38,627)
Equity investments .................................... -- (15,287) -- (17,725)
Cash surrender value of life insurance ................ (30) (725) (1,123) (1,253)
Proceeds from sale of assets .......................... 80 21 -- --
Acquisition of Watkins Glen International interest,
net of cash acquired ................................ -- -- -- (996)
Acquisition of Phoenix International Raceway,
net of cash acquired ................................ -- -- -- (43,868)
---------- --------- --------- ----------
Net Cash Used in Investing Activities .................. (23,371) (27,955) (83,175) (50,513)
FINANCING ACTIVITIES
Reacquisition of previously issued common stock ....... (106) (1,708) -- (148)
Additional expense of Class A
Common Stock Offering . ............................. -- -- -- (46)
Cash dividends paid ................................... (1,605) (1,836) -- (2,310)
Issuance of Class A Common Stock ...................... -- -- 74,367 --
Short-term borrowings ................................. -- -- 7,800 --
Repayment of short-term borrowings .................... -- -- (7,800) --
---------- --------- --------- ----------
Net Cash Provided by (Used in) Financing Activities..... (1,711) (3,544) 74,367 (2,504)
---------- --------- --------- ----------
Net Increase (Decrease) in Cash
and Cash Equivalents .................................. 2,644 1,171 (985) 1,917
Cash and Cash Equivalents at Beginning of Period ....... 5,227 7,871 9,042 8,057
---------- --------- --------- ----------
Cash and Cash Equivalents at End of Period ............. $ 7,871 $ 9,042 $ 8,057 $ 9,974
========== ========= ========= ==========
| Year Ended November 30, | |||||||||||||||
| 1999 | 2000 | 2001 | |||||||||||||
| (in thousands) | |||||||||||||||
| OPERATING ACTIVITIES | |||||||||||||||
| Net income | $ | 56,613 | $ | 50,426 | $ | 87,633 | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||
| Depreciation and amortization | 25,066 | 51,150 | 54,544 | ||||||||||||
| Amortization of unearned compensation | 1,087 | 1,172 | 1,619 | ||||||||||||
| Amortization of financing costs | 477 | 1,418 | 1,566 | ||||||||||||
| Deferred income taxes | 14,458 | 20,254 | 27,177 | ||||||||||||
| Undistributed loss (gain) from equity investments | 1,819 | 631 | (2,935 | ) | |||||||||||
| Minority interest | 796 | 100 | (992 | ) | |||||||||||
| Other | — | (254 | ) | 722 | |||||||||||
| Changes in operating assets and liabilities | |||||||||||||||
| Receivables, net | 6,413 | (7,350 | ) | (3,226 | ) | ||||||||||
| Inventories, prepaid expenses and other current assets | 3,549 | (1,454 | ) | 3,394 | |||||||||||
| Accounts payable and other current liabilities | 6,951 | (13,225 | ) | 1,815 | |||||||||||
| Deferred income | (16,789 | ) | 37,206 | (10,631 | ) | ||||||||||
| Net cash provided by operating activities | 100,440 | 140,074 | 160,686 | ||||||||||||
| INVESTING ACTIVITIES | |||||||||||||||
| Change in short-term investments, net | 53,937 | 490 | — | ||||||||||||
| Capital expenditures | (126,596 | ) | (132,661 | ) | (98,379 | ) | |||||||||
| Acquisition, net of cash acquired | (133,440 | ) | (215,627 | ) | (3,878 | ) | |||||||||
| Proceeds from sale of Competition Tire | — | 7,769 | — | ||||||||||||
| Equity investments | (17,723 | ) | (11,859 | ) | (1,202 | ) | |||||||||
| Advances to affiliate | — | (5,812 | ) | (1,500 | ) | ||||||||||
| Change in restricted investments, net | (242,429 | ) | 260,736 | 33,930 | |||||||||||
| Other, net | (3,245 | ) | (2,488 | ) | (925 | ) | |||||||||
| Net cash used in investing activities | (469,496 | ) | (99,452 | ) | (71,954 | ) | |||||||||
| FINANCING ACTIVITIES | |||||||||||||||
| Net borrowings (payments) under credit facilities | 92,022 | (20,500 | ) | (59,000 | ) | ||||||||||
| Payment of long-term debt | (2,082 | ) | (2,655 | ) | (5,165 | ) | |||||||||
| Proceeds from long-term debt | 294,276 | — | — | ||||||||||||
| Reacquisition of previously issued common stock | (1,110 | ) | (1,178 | ) | (965 | ) | |||||||||
| Cash dividends paid | (2,586 | ) | (3,188 | ) | (3,190 | ) | |||||||||
| Deferred financing fees | (12,329 | ) | (320 | ) | — | ||||||||||
| Net cash provided by (used in) financing activities | 368,191 | (27,841 | ) | (68,320 | ) | ||||||||||
| Net (decrease) increase in cash and cash equivalents | (865 | ) | 12,781 | �� | 20,412 | ||||||||||
| Cash and cash equivalents at beginning of period | 38,676 | 37,811 | 50,592 | ||||||||||||
| Cash and cash equivalents at end of period | $ | 37,811 | $ | 50,592 | $ | 71,004 | |||||||||
See accompanying notes.
F-13
F-6
INTERNATIONAL SPEEDWAY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER
| Note 1. | Description of Business, Basis of Presentation and Summary of Significant Accounting Policies |
| Description of Business |
International Speedway Corporation, andincluding its wholly-ownedmajority-owned subsidiaries (the "Company"(collectively the “Company”), is a leading promoter of motorsports entertainment activities in the United States. TheAs of November 30, 2001, the Company owned and/or operated twelve of the nation’s major motorsports facilities as follows:
| Track Name | Location | Track Length | ||||
| Daytona International Speedway | Daytona Beach, Florida | 2.5 Miles | ||||
| Talladega Superspeedway | Talladega, Alabama | 2.6 Miles | ||||
| Michigan International Speedway | Brooklyn, Michigan | 2.0 Miles | ||||
| Richmond International Raceway | Richmond, Virginia | 0.8 Miles | ||||
| California Speedway | Fontana, California | 2.0 Miles | ||||
| Kansas Speedway | Kansas City, Kansas | 1.5 Miles | ||||
| Phoenix International Raceway | Phoenix, Arizona | 1.0 Mile | ||||
| Homestead-Miami Speedway | Homestead, Florida | 1.5 Miles | ||||
| North Carolina Speedway | Rockingham, North Carolina | 1.0 Mile | ||||
| Darlington Raceway | Darlington, South Carolina | 1.3 Miles | ||||
| Watkins Glen International | Watkins Glen, New York | 3.4 Miles | ||||
| Nazareth Speedway | Nazareth, Pennsylvania | 1.0 Mile | ||||
In addition, Raceway Associates, LLC (“Raceway Associates”), in which the Company holds a 37.5% indirect equity interest, owns and operates five premierChicagoland Speedway and Route 66 Raceway, two nationally recognized major motorsports facilities--Daytona International Speedway, a 2.5 mile, tri-oval
track locatedfacilities in Daytona Beach, Florida; Talladega Superspeedway, a 2.6 mile,
tri-oval track located in Talladega, Alabama; Phoenix International Raceway
("Phoenix"), a one mile oval track located outside of Phoenix, Arizona (See
Note 3); Darlington Raceway, a 1.3 mile track located in Darlington, South
Carolina; and Watkins Glen International ("Watkins Glen"), a 3.4 mile road
course located in Watkins Glen, New York (See Note 3). The Company also
operates Tucson Raceway Park in Pima County Arizona.
AtJoliet, Illinois.
In fiscal 2001, these motorsports facilities the Company currently promotespromoted well over 80100 stock car, open-wheel, sports car, truck, motorcycle and other racing events, annually, including eight20 NASCAR Winston Cup Series championship point races, two NASCAR Winston Cup
Series non-championship point races, fiveevents, 16 NASCAR Busch Series--GrandSeries, Grand National Division races, threeevents, eight NASCAR Craftsman Truck Series races,events, five Indy Racing League (“IRL”) Indy Racing Northern Light Series events, three Championship Auto Racing Teams (“CART”) FedEx Championship Series events, two National Hot Rod Association (“NHRA”) national events, the premier sports car endurance event in the United States (the Rolex 24 at Daytona sanctioned by the Grand American Road Racing Association (“Grand Am”)) and a number of prestigious sports car and motorcycle races.events.
The Company’s business consists principally of racing events at these major motorsports facilities, which, in total, currently have more than 1 million grandstand seats. The Company also has investments in other motorsports entertainment
companies. The Company holds an 11% indirect interest in Penske Motorsports,
Inc. ("PMI"), which owns and operates Michigan International Speedway,
Pennsylvania's Nazareth Speedway, the California Speedway, and the North
Carolina Motor Speedway. The Company also holds a 40% interest in
Homestead--Miami Speedway, LLC ("Homestead"), the operatorconducts, either through operations of the Metro-Dade
Homestead Motorsports Complex, and an approximately 7% interest in Grand Prix
Association of Long Beach ("Long Beach"), the operator of Grand Prix of Long
Beach, California, Gateway International Raceway in Madison, Illinois and
Memphis Motorsports Park in Millington, Tennessee.
The Company owns and operates DAYTONA USA--The Ultimate Motorsports
Attraction, a motorsports theme-entertainment complex that includes interactive
media, theaters, historical memorabilia and exhibits.
Americrown Service Corporation ("Americrown"), one of the Company'sfacility or through its wholly-owned subsidiaries conductsoperating under the name “Americrown,” souvenir merchandising operations, food beverage and souvenirbeverage concession operations at the Daytona, Talladega and Darlington facilities. Americrown is
also responsible for providing catering services to corporate customers both in suites and entertainment chalets at these facilitiesmost of the Company’s motorsports facilities. However, the Company does not currently conduct food, beverage and catering operations at unaffiliated
sporting events.California or catering operations at Phoenix and the Company provides catering services only in chalets at North Carolina. The Company'sCompany, under the name Americrown, also produces and markets motorsports-related merchandise such as apparel, souvenirs and collectibles to retail customers, through catalog and internet sales and directly to dealers.
MRN Radio, the Company’s proprietary MRN radio network, and NASCAR Truck Network produces and syndicates NASCAR Winston Cup Series, NASCAR Busch Series--GrandSeries, Grand National Division, NASCAR Craftsman Truck Series and
F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
other races promoted by the Company, andas well as some races promoted by others. MRN Radio also produces daily and weekly NASCAR racing programs.
BASIS OF PRESENTATION: On September 5, 1996 the Company's Board of
Directors approved
The Company owns and operates DAYTONA USA — The Ultimate Motorsports Attraction, a recapitalization of the Company which became effective
November 4, 1996, concurrently with the effectiveness of the Registration
Statement filed on September 6, 1996 with the Securities and Exchange
Commission in connection with the offering of 4,000,000 shares of the Company's
newly authorized Class A Common Stock (discussed below). The recapitalization
modified the Company's
F-14
INTERNATIONAL SPEEDWAY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOVEMBER 30, 1997
NOTE 1--DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
authorized capital to include one million shares of Preferred Stock, eighty
million shares of Class A Common Stock and forty million shares of Class B
Common Stock. Pursuant to the recapitalization, all of the Company's existing
outstanding shares of Common Stock were automatically converted, on a
15-for-one basis, into the newly authorized shares of Class B Common Stockmotorsports-themed entertainment complex and the sharesOfficial Attraction of Common Stock previously held as treasury stock were retired.
Shareholders' equityNASCAR that includes interactive media, theaters, historical memorabilia and all share informationexhibits, tours and per share data have been
adjusted to give effect to the recapitalization and related stock split.
Effective December 1, 1996, the Company changed its fiscal year end from
August 31 to November 30. This resulted in a three-month transition period
commencing September 1, 1996 and ending November 30, 1996.
SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION:riding/driving experiences of Daytona International Speedway.
| Significant Accounting Policies |
Principles of Consolidation. The accompanying consolidated financial statements include the accounts of International Speedway Corporation and its wholly-ownedmajority-owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS:
Cash and Cash Equivalents. For purposes of reporting cash flows, cash and cash equivalents include cash on hand, bank demand deposit accounts, repurchase agreements and money market accounts at investment firms. Cash and cash equivalents exclude certificates of deposit, obligations of U.S. Government Agencies, U.S. Treasury Notes and U.S. Treasury Bills, regardless of original maturity.
INVESTMENTS (NOTE 4):
The Company maintained its cash primarily with one financial institution at November 30, 2001. The Company believes that it is not exposed to any significant credit risk on its cash balances due to the strength of the financial institution.
Investments. The Company accounts for investments in accordance with Statement of Financial Accounting Standard (SFAS)(“SFAS”) No. 115, "Accounting“Accounting for Certain Investments in Debt and Equity Securities."
The Company determines the appropriate classification of investments at
the time of purchase and reevaluates such designation as of each balance sheet
date. Debt securities are classified as held-to-maturity based on the Company's
positive intent and ability to hold the securities to maturity. These
securities are stated at cost. Interest and dividends are included in interest
income.”
Short-term investments consist of certificates of deposit and securities
held-to-maturity which are due in one year or less. Certificates of deposit are readily convertible to cash and are stated at cost.
Long-term investments consist of securities held-to-maturity which are due
after one year and are stated at cost.
INVENTORIES:
Inventories. Inventories of items for resale are stated at the lower of cost, determined on the first-in, first-out basis, or market.
F-15
INTERNATIONAL SPEEDWAY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOVEMBER 30, 1997
NOTE 1--DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
PROPERTY AND EQUIPMENT:
Property and Equipment (Note 2). Property and equipment, including improvements to existing facilities, are stated at cost. Depreciation is provided for financial reporting purposes using either the straight-line or accelerated methodsmethod over the estimated useful lives as follows:
| Buildings, grandstands and tracks | 5-34 years | |||
| Furniture and equipment | 3-20 years |
The carrying values of property and equipment 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.
Equity investments at November 30, 1996,
represent a 50% ownership interest in Watkins Glen and a 20% ownership interest
in PSH Corp (resulting in an approximately 11% indirect interest in PMI). At
November 30, 1997, equity investments represent a 40% interest in Homestead, an
approximately 7% interest in Long Beach and a 20% ownership interest in PSH
Corp. TheseInvestments. Equity investments are accounted for using the equity method of accounting. The Company'sCompany’s equity in the net income (loss) from equity investments is recorded as income (loss) with a corresponding increase (decrease) in the investment. Dividends received and amortization of the Company's investment in excess of its pro rata
share of the underlying assets reduce the investment. The Company's investment
in excess of its pro rata share of the underlying assets is amortized by the
straight-line method over 20 years. The Company recognizes the effects of transactions involving the sale or distribution by an equity investee of its common stock as capital transactions.
GOODWILL:
Equity investments at November 30, 2000 and 2001, include the Company’s interest in Motorsports Alliance, LLC (“Motorsports Alliance”) (owned 50% by the Company and 50% by Indianapolis Motor Speedway Corp.), which owns a 75% interest in Raceway Associates. Raceway Associates owns and operates Route 66 Raceway and Chicagoland Speedway (See Note 8).
F-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company’s share of undistributed equity in the earnings (losses) from equity investments included in retained earnings at November 30, 2000 and 2001 was approximately ($1.4) million and $1.6 million, respectively.
Goodwill (Note 3). Goodwill resulting from acquisitions prior to July 1, 2001 is being amortized by the straight-line method over 40 years. Recoverability of intangibles is assessed using estimated undiscounted cash flows of related operations. FAIR VALUE OF FINANCIAL INSTRUMENTS: The Company's financial instruments
consist of cash, short- and long-term investments, accounts receivable and
accounts payable. The carrying value of these financial instruments
approximates their fair value atAmortization expense for the years ended November 30, 1997.
INCOME TAXES (NOTE1999, 2000 and 2001 was approximately $5.4 million, $18.2 million and $18.1 million, respectively. In fiscal 1999, 2000 and 2001, approximately $4.0 million, $12.0 million and $11.9 million, respectively, is not deductible for tax purposes (See Note 1 — “New Accounting Pronouncements”).
Restricted Investments. Restricted investments reflect deposits in trustee administered accounts for the benefit of the Kansas Speedway project (See Note 5):.
Deferred Financing Fees. Deferred financing fees are amortized over the term of the related debt and are included in other non-current assets.
Derivative Financial Instruments (Note 12). The Company uses interest rate swap agreements to minimize the impact of interest rate fluctuations on certain fixed and floating interest rate long-term borrowings. The differential paid or received on interest rate swap agreements is recognized as an adjustment to interest expense.
Income Taxes (Note 6). Income taxes have been provided using the liability method in accordance with SFAS No. 109, "Accounting“Accounting for Income Taxes."” Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.
ADMISSION INCOME:
Revenue Recognition/ Deferred Income. Admission income and all race-related revenue is earned upon completion of an event and is stated net of admission and sales taxes collected. Refundable advanceAdvance ticket sales and all race-related revenue on future events are deferred until earned. ADVERTISING EXPENSE:Revenues from the sale of merchandise to retail customers, catalog and internet sales and direct sales to dealers are recognized at the time of the sale.
Kansas Speedway Corporation (“KSC”) offers Founding Fan Preferred Access Speedway Seating (“PASS”) agreements which give purchasers the exclusive right and obligation to purchase KSC season-ticket packages for certain sanctioned racing events annually for thirty years under specified terms and conditions. Among the conditions, licensees are required to purchase all season-ticket packages when and as offered each year. Founding Fan PASS agreements automatically terminate without refund should owners not purchase any offered season tickets.
Net fees received under PASS agreements are deferred and are amortized into income over the expected life of the PASS beginning in 2001.
Advertising Expense. Advertising costs are expensed as incurred or, as in the case of race-related advertising, upon the completion of the event. Advertising expense was approximately $1.3$5.8 million, $1.7$9.4 million $290,000 and $2.4$11.2 million for the years ended August 31, 1995 and 1996, the three months
ended November 30, 19961999, 2000 and the year ended November 30, 1997,2001, respectively.
EARNINGS PER SHARE:
Amortization of Unearned Compensation (Note 11). The Company adopted Statement of Financialaccounts for its long-term incentive stock plans in accordance with Accounting StandardsPrinciples Board (“APB”) Opinion No. 128, "Earnings25.
Earnings Per Share", during its first quarter ended
February 28, 1998. This statement requires the Company to present "Basic"Share. Basic and "Diluted"diluted earnings per share on the face of the income statement
F-16
INTERNATIONAL SPEEDWAY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOVEMBER 30, 1997
NOTE 1--DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
for current periods and to restate earnings per share for prior periods. All
earnings per share amounts presented have been restated to conform to Statementare calculated in accordance with SFAS No. 128, requirements. Weighted shares outstanding for the restated periods
presented are:
“Earnings Per Share.” The difference between basic weighted average shares and diluted weighted average shares is related to shares issued under the
BASIC DILUTED
------------ -----------
Year ended August 31, 1995 .................... 34,215,479 34,294,530
Year ended August 31, 1996 .................... 34,191,106 34,317,430
Three months ended November 30, 1996 .......... 35,327,263 35,470,048
Year ended November 30, 1997 .................. 38,185,473 38,339,978
Company'sCompany’s long-term stock incentive restricted stock plan,plans, using the treasury stock method as prescribed by the standard.
USE OF ESTIMATES:
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Use of 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, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
NEW ACCOUNTING PROUNCEMENTS:
New Accounting Pronouncements. In 1997,June 1999, the Company adopted Statement of Financial Accounting Standards (SFAS)Board (“FASB”) issued SFAS No. 121, "Accounting137, “Accounting for Derivative Instruments and Hedging Activities — Deferral of the ImpairmentEffective Date of Long-Lived AssetsFASB Statement No. 133.” SFAS No. 137 amends SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” to defer its effective date to all fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS No. 133 establishes accounting and reporting standards for Long-Lived Assetsderivative instruments including standalone instruments, such as forward currency exchange contracts and interest rate swaps or embedded derivatives and requires that these instruments be marked-to-market on an ongoing basis. These market value adjustments are to be Disposed of." SFAS 121
requires recognition of impairment of long-lived assetsincluded either in the eventincome statement or shareholders’ equity, depending on the net
booknature of the transaction. The Company adopted SFAS No. 133 on December 1, 2000, which resulted in an increase in total assets and shareholders’ equity of approximately $472,000, representing the fair market value of such assets exceedsan interest rate swap hedge (See Notes 5 and 12). Subsequent changes in the future undiscounted cash flows
attributablefair market value of the interest rate swap are reflected in comprehensive income (loss).
In December 1999, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements” which is required to such assets. The adoptionbe implemented no later than the fourth quarter of SFAS No. 121 had no impactfiscal years beginning after December 15, 1999, and provides guidance on the Company'srecognition, presentation and disclosures of revenue in financial statements filed with the SEC. SAB No. 101 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosures related to revenue recognition policies. The implementation of SAB No. 101 did not have a material effect on the Company’s financial position or results of operations.
In July 2001, the FASB issued SFAS No. 141, “Business Combinations.” SFAS No. 141 supercedes prior guidance and requires that all business combinations in the scope of this statement be accounted for using the purchase method. The provisions of this statement apply to all business combinations initiated after June 30, 2001, as well as all business combinations accounted for using the purchase method for which the date of acquisition is July 1, 2001 or later. The Company accounts for its long-term incentive restricted stock plan in
accordance with provisions of Accounting Principles Board Opinion No. 25 (APB
25), "Accounting for Stock Issued to Employees."adopted this statement as required on July 1, 2001, and it did not have a material affect on the financial statements.
In 1995,July 2001, the FASB issued SFAS No. 123,
"Accounting for Stock Based Compensation" was issued.142, “Goodwill and Other Intangible Assets.” SFAS No. 123 provides an
alternative142 supercedes prior guidance and requires that goodwill no longer be amortized to APB 25earnings, but instead be annually reviewed for impairment. The impairment test under SFAS No. 142 is based on a two-step process involving; (i) comparing the estimated fair value of the related reporting unit to its net book value, and is effective for(ii) comparing the Company in fiscal year 1997.estimated implied fair value of goodwill to its carrying value. The Company has elected to continue to account for its long-term incentive plan in
accordance with the provisions of APB 25. See Note 11.
In February 1997, SFAS No. 128, "Earnings Per Share," was issued and is
effective for financial statements issued for periods ending after December 15,
1997. This statement requires companies to present earnings per share on the
face of the income statement in two categories called "Basic" and "Diluted" and
requires restatement of all periods presented. The Company willearly adopt SFAS No. 128 during142 in the first quarter of 1998. Management believes2002. Accordingly, the impact on
earnings per shareCompany will not be material.record amortization expense of approximately $18.4 million in fiscal 2002 based on the level of goodwill as of November 30, 2001. In June 1997,addition, based on an independent appraisal firm’s valuation of the reporting unit level fair value using discounted cash flows, which reflect changes in certain assumptions since the date of the acquisitions, and the identification of qualifying intangibles, the Company expects to record a non-cash after tax charge of $513.8 million as a cumulative effect of change in accounting principle for the write-off of goodwill in the first quarter of 2002.
The write-off of goodwill results from the use of discounted cash flows in assessment of fair value for each reporting unit as required by SFAS No. 130, "Reporting Comprehensive Income," was issued.142 and the fact that certain acquired intangible assets were not reclassified and accounted for apart from goodwill upon transition to SFAS No. 130 establishes standards142. In addition, FASB Staff Announcement Topic No. D-100 states that the transition provisions do not allow entities to
F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
“carve-out” from goodwill any intangible assets not identified and measured at fair value in the initial rendering of a business combination and subsequently accounted for separately from goodwill. At the date of the acquisitions, the Company recognized its relationships with multiple sanctioning bodies, including NASCAR, CART and IRL evidenced by the sanction agreement assets, and goodwill, as a single asset labeled “Goodwill.” The Company amortized the combined assets over their estimated useful lives of 40 years. According to SFAS No. 142, the goodwill impairment loss is measured as the excess of the carrying amount of goodwill (which included the carrying amount of the acquired intangible assets) over the implied fair value of goodwill (which excludes the fair value of the acquired intangible assets). Thus, the measured goodwill impairment loss was substantially larger than it would have been had the acquired intangible assets initially been recognized apart from goodwill.
In August 2001, the FASB issued SFAS No. 144, “Accounting for the reportingImpairment or Disposal of Long Lived Assets.” Consistent with prior guidance, SFAS No. 144 continues to require a three-step approach for recognizing and displaymeasuring the impairment of comprehensive incomeassets to be held and its components in a full setused. Assets to be sold must be stated at the lower of general-purpose
financial statementsthe asset’s carrying amount or fair value and depreciation is no longer recognized. SFAS No. 144 is effective for fiscal years beginning after December 15, 1997.2001. The Company will adoptadoption of SFAS No. 130 in fiscal 1999. SFAS No. 130
expands or modifies disclosures and, accordingly, will144 is not expected to have noa material impact on the Company's reportedCompany’s financial position or results of operations or cash flows.
F-17
INTERNATIONAL SPEEDWAY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOVEMBER 30, 1997
NOTE 1--DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information," was issued. SFAS No. 131 establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements and reporting selected information
about operating segments in interim financial reports and is effective for
fiscal years beginning after December 15, 1997. The Company has not yet
determined the effect of SFAS No. 131 on its financial statement disclosures.
COMPARABILITY:operations.
Comparability. For comparability, certain 19951999 and 19962000 amounts have been reclassified where appropriate to conform with the presentation adopted in 1997.
NOTE 2--EQUITY INVESTMENTS
Equity investments includes the following:
2001.
| Note 2. | Property and Equipment |
Property and the
issuance of 254,298 shares of its common stock. As a resultequipment consists of the increase in
PMI's equity, the Company recorded an increase in its equity investment in PSH
Corp. of approximately $650,000 and recorded a corresponding increase in
deferred income taxes and additional paid-in capital of approximately $250,000
and $400,000, respectively.
On May 19, 1997, PMI increased its ownership interest in North Carolina
Motor Speedway ("NCMS") to approximately 70% through the issuance of 906,542
shares of its common stock valued at $30 per share. As a result of PMI's
increased investment in NCMS, the Company recorded an increase in its equity
investment in PSH Corp. of approximately $3 million and recorded a
corresponding increase in deferred income taxes and additional paid-in capital
of approximately $1.2 million and $1.8 million, respectively.
In July 1997, the Company invested $11.8 million, plus related acquisition
costs, for its 40% interest in Homestead.
On August 8, 1997, the Company invested $3.9 million, plus related
acquisition costs, for an approximately 7% interest in Long Beach. The
Company's investment exceeded its share of the underlying net assets by
approximately $1.9 million. The excess is being amortized into expense by
decreasing the equity in income of equity investments using the straight-line
method over twenty years.
F-18
INTERNATIONAL SPEEDWAY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOVEMBER 30, 1997
NOTE 2--EQUITY INVESTMENTS--(CONTINUED)
The Company's investment in excess of its share of underlying net assets
in equity investments net of amortization amounted to $7.3 million and $8.8
million in 1996 and 1997, respectively. Amortization of the excess over the
Company's share of the underlying net assets for the year ended August 31,
1996, the three month period ended November 30, 1996 and the year ended
November 30, 1997 was approximately $288,000, $96,000 and $416,000,
respectively.
The Company's share of undistributed equity in the earnings from equity
investments included in retained earnings at November 30, 1996 and 1997 was
approximately $3,002,000 and $3,784,000, respectively.
Summarized financial information for the Company's affiliated companies
accounted for by the equity method (PSH Corp. and Watkins Glen as of August 31
and November 30, 1996, PSH Corp., Homestead and Long Beachfollowing as of November 30 1997) is as follows (in thousands):
| 2000 | 2001 | |||||||
| Land and leasehold improvements | $ | 204,979 | $ | 207,406 | ||||
| Buildings, grandstands and tracks | 510,603 | 709,018 | ||||||
| Furniture and equipment | 70,247 | 76,363 | ||||||
| Construction in progress | 125,982 | 15,720 | ||||||
| 911,811 | 1,008,507 | |||||||
| Less accumulated depreciation | 116,942 | 152,688 | ||||||
| $ | 794,869 | $ | 855,819 | |||||
Depreciation expense was approximately $19.7 million, $32.6 million and $36.1 million for the years ended November 30, 1999, 2000 and 2001, respectively.
| Note 3. | Acquisitions |
On April 1, 1997,July 26, 1999, the Company exercised its contractual option to acquireacquired the 50% interestapproximately 88%, or 12.2 million outstanding common shares, of Penske Motorsports, Inc. (“PMI”) that it did not already own in Watkins Glen from Corning, Inc. for approximately $3.1$129.8 million and 10,029,861 shares of the Company’s Class A Common Stock. Transaction costs, net of cash acquired in the transaction, totaled approximately $3.6 million. The total cash and stock consideration issued in the transaction price representedwas approximately $611.1 million.
Motorsports facilities acquired in the stock's book
value at December 31, 1996.transaction include Michigan International Speedway in Brooklyn, Michigan; California Speedway in Fontana, California; North Carolina Speedway in Rockingham, North Carolina; and Nazareth Speedway in Nazareth, Pennsylvania. The Company's optionCompany also acquired PMI’s 45% interest in Homestead-Miami Speedway, LLC (“Miami”), bringing the Company’s ownership in that facility to purchase Corning's interest
for its book value was part of a shareholder agreement between the two
companies in place since 1988.
The Company's equity in Watkins Glen's net loss through March 31, 1997 is
included in equity in net income from equity investments at November 30, 1997.90%, as well as several PMI merchandising subsidiaries. The acquisition of the additional 50% interest was accounted
F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
for under the purchase method. Subsequentmethod of accounting and, accordingly, the results of their operations 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 was allocated to the assets and liabilities of PMI and Miami based upon their fair market values at the acquisition on April 1, 1997, Watkins Glen
International is accounted fordate. The excess of the purchase price over the fair value of the net assets acquired was allocated as goodwill of approximately $512.9 million and assembled workforce of approximately $1.5 million, which are being amortized on a consolidated basis.straight line basis over 40 years and five years, respectively, through November 30, 2001. The amount amortized during the years ended November 30, 1999, 2000 and 2001 was approximately $4.4 million, $13.3 million and $13.1 million, respectively.
On July 14, 1997, Phoenix Speedway Corporation, a newly formed
wholly-owned subsidiary ofDecember 1, 1999, the Company acquired substantially all of the
assets comprising the business and motorsports complex known as "Phoenix
International Raceway" from PhoenixRichmond International Raceway Inc., Phoenix
International Raceway, L.L.C. and Phoenix International Raceway Limited
Partnership(“Richmond”) for consideration consisting of $46.4approximately $215.6 million, in cash, notes
payable of $13.8 million, and relatedincluding acquisition costs. Interest is being
accrued on the note payable to the former principal and shareholder at an
annual rate of 9%.
F-19
INTERNATIONAL SPEEDWAY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOVEMBER 30, 1997
NOTE 3--ACQUISITIONS--(CONTINUED)
The PhoenixRichmond acquisition has beenwas accounted for under the purchase method of accounting and, accordingly, the results of operations have been included in the Company'sCompany’s consolidated statements of operationsincome since the date of acquisition.
The purchase price was allocated to the assets and liabilities acquired based on estimatedupon their fair market values at the acquisition date. The excess of the purchase price over the fair value of the net assets acquired was approximately $40.8$169.3 million and has beenwas recorded as goodwill, which is being amortized on a straight-linestraight line basis over 40 years.years, through November 30, 2001. The amount amortized forduring each of the yearyears ended November 30, 19972000 and 2001 was approximately $382,000.
The following unaudited pro forma financial information presents a summary$4.2 million.
On October 1, 2001, the Company acquired the remaining 10% interest it did not already own in Miami for $3.9 million. As predetermined in the July 1997 Purchase Agreement when the Company acquired its initial 40% interest in Miami, the purchase price was based on 10% of consolidated results of operations as if the Phoenix transaction had
occurrednegotiated facility valuation as of September 1, 1995 after giving effect to certain adjustments,
including depreciation, amortizationJuly 1997, plus interest. The acquisition was accounted for under the purchase method of goodwill, interest income, interest
expenseaccounting.
| Note 4. | Divestiture |
On November 15, 2000, the Company entered into a Stock Purchase Agreement with Competition Tire, LLC (an unrelated entity) for the sale of the Company’s ownership in its Competition Tire subsidiaries. The Company received approximately $7.8 million and recognized a gain of approximately $200,000, net of tax, on acquisitionthe transaction (See Note 9).
| Note 5. | Long-Term Debt |
Long-term debt and related income tax effects. The pro forma
results have been prepared for comparative purposes only and do not purport to
be indicativeconsists of what would have occurred had the acquisition been made on that
date, nor are they necessarily indicativefollowing as of results which may occur in the
future.
PRO FORMA
---------------------------------------------------
YEAR ENDED THREE MONTHS ENDED YEAR ENDED
AUGUST 31, NOVEMBER 30, NOVEMBER 30,
1996 1996 1997
------------ -------------------- -------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Total revenues ................... $ 107,343 $17,449 $ 146,135
Net income ....................... 19,752 119 28,953
Basic income per share ........... 0.58 -- 0.76
Diluted income per share ......... 0.58 -- 0.76
NOTE 4--INVESTMENTS
The following is a summary of short-term and long-term investments:
NOVEMBER 30, 1996
-----------------------------------------------------
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---------- ------------ ------------ ----------
(IN THOUSANDS)
Held-to-maturity securities
Municipal securities ........... $74,642 $-- $ 3 $74,639
Certificates of deposit ......... 1,415 -- -- 1,415
------- --- --- -------
$76,057 $-- $ 3 $76,054
======= === === =======
F-20
| 2000 | 2001 | |||||||
| Senior Notes, net of discount of $269 and $199, respectively | $ | 224,731 | $ | 224,801 | ||||
| Credit facilities | 149,000 | 90,000 | ||||||
| TIF bond debt service funding commitment, net of discount of $1,565 and $1,484, respectively | 68,935 | 68,851 | ||||||
| Term debt | 27,500 | 23,500 | ||||||
| Notes payable | 5,550 | 4,550 | ||||||
| 475,716 | 411,702 | |||||||
| Less: current portion | 5,165 | 9,225 | ||||||
| $ | 470,551 | $ | 402,477 | |||||
F-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOVEMBERSTATEMENTS — (Continued)
Schedule of Payments
| 2002 | $ | 9,225 | ||
| 2003 | 5,775 | |||
| 2004 | 301,890 | |||
| 2005 | 27,505 | |||
| 2006 | 635 | |||
| Thereafter | 68,355 | |||
| 413,385 | ||||
| Discount | 1,683 | |||
| $ | 411,702 | |||
The Company’s $225 million principal amount of unsecured senior notes (“Senior Notes”) bear interest at 7.875% and rank equally with all of the Company’s other senior unsecured and unsubordinated indebtedness. The Senior Notes require semi-annual interest payments through maturity on October 15, 2004. The Senior Notes may be redeemed in whole or in part, at the option of the Company, at any time or from time to time at a redemption price as defined in the indenture. The Company’s subsidiaries are guarantors of the Senior Notes (See Note 15). The Senior Notes also contain various restrictive covenants.
The Company’s $250 million senior revolving credit facility (“Credit Facility”) matures on March 31, 2004, and accrues interest at LIBOR plus 50-100 basis points based on certain financial criteria. At November 30, 1997
NOTE 4--INVESTMENTS--(CONTINUED)
The Company’s Miami subsidiary has a $20 million credit facility (“Miami Credit Facility”) and market valuesa $23.5 million term loan (“Term Loan”). The Miami Credit Facility and Term Loan are guaranteed by the Company and have the same interest terms and restrictive covenants as the Company’s Credit Facility. The Miami Credit Facility will be automatically reduced to $15 million on December 31, 2002 and will mature on December 31, 2004. At November 30, 2001, the Company had outstanding borrowings of held-to-maturity securities include accrued
investment income$20 million under the Miami Credit Facility. The Term Loan is payable in annual installments, which range from $4.5 million to $7.0 million. The Company’s Miami subsidiary also has an interest rate swap agreement that effectively fixes the floating rate on the outstanding balance under the Term Loan at 5.6% plus 50-100 basis points, based on certain consolidated financial criteria, for the remainder of the loan period (See Note 12).
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 Kansas Speedway. 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 repaid by the Unified Government, with payments made in lieu of property taxes (“Funding Commitment”) by KSC. Principal (mandatory redemption) payments per the Funding Commitment are payable by KSC on October 1 of each year. The semi-annual interest component of the Funding Commitment is payable on April 1 and October 1 of each year. KSC granted a mortgage and security interest in the Kansas project for its Funding Commitment obligation. The bond financing documents contain various restrictive covenants. The Company has agreed to guarantee KSC’s Funding Commitment until certain financial conditions have been met.
Simultaneous with the issuance of the TIF bonds, KSC deposited into a trust account the unexpended portion of its initial $77.9 million equity commitment to the Kansas project. The unexpended portion of
F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
KSC’s equity contribution remaining in the trust account is classified as Restricted Investments on the Company’s balance sheet (See Note 1).
Total interest incurred by the Company was approximately $6.8 million, $30.4 million and $26.5 million for the years ended November 30, 1999, 2000 and 2001, respectively. Total interest capitalized for the years ended November 30, 1999, 2000 and 2001 was approximately $3.3 million, $8.3 million and $6.9 million, respectively.
Financing costs of approximately $81,000$10.9 million and $12,000$9.2 million, net of accumulated amortization, have been deferred and are included in other assets at November 30, 19962000 and 1997,2001, respectively. The cost and estimated market valueThese costs are being amortized on an effective yield method over the life of the held-to-maturity securities at
November 30, 1997, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because the issuers of
certain securities have the right to prepay obligations.
related financing.
| Note 6. | Federal and State Income Taxes |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Substantially all of the deferred tax liability results from the excess of tax accelerated depreciation and amortization over depreciation and amortization for financial reporting purposes and from different bases in
the equity investments for tax and financial reporting purposes.
F-21
INTERNATIONAL SPEEDWAY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOVEMBER 30, 1997
NOTE 5--FEDERAL AND STATE INCOME TAXES--(CONTINUED)
Significant components of the provision for income taxes are as follows:
follows (in thousands):
YEARS ENDED THREE MONTHS
AUGUST 31, ENDED YEAR ENDED
--------------------- NOVEMBER 30, NOVEMBER 30,
1995 1996 1996 1997
--------- --------- -------------- -------------
(IN THOUSANDS)
Current tax expense (benefit):
Federal ........................... $ 8,274 $ 9,117 $(1,140) $12,973
State ............................. 1,150 1,310 (3) 2,042
Deferred tax expense:
Federal ........................... 1,369 1,341 352 2,181
State ............................. 261 195 50 962
------- ------- --------- -------
Provision for income taxes ......... $11,054 $11,963 $ (741) $18,158
======= ======= ========= =======
| Year Ended November 30, | |||||||||||||
| 1999 | 2000 | 2001 | |||||||||||
| Current tax expense: | |||||||||||||
| Federal | $ | 20,921 | $ | 18,661 | $ | 31,560 | |||||||
| State | 3,030 | 2,493 | 3,944 | ||||||||||
| Deferred tax expense (benefit): | |||||||||||||
| Federal | 14,843 | 19,725 | 23,986 | ||||||||||
| State | (125 | ) | 529 | 3,190 | |||||||||
| Provision for income taxes | $ | 38,669 | $ | 41,408 | $ | 62,680 | |||||||
The reconciliation of income tax computed at the federal statutory tax rates to income tax expense is as follows:
THREE MONTHS
YEARS ENDED ENDED YEAR ENDED
AUGUST 31, 1995 AUGUST 31, 1996 NOVEMBER 30, 1996 NOVEMBER 30, 1997
----------------------- --------------------
% OF % OF % OF % OF
PRE-TAX PRE-TAX PRE-TAX PRE-TAX
AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME
------------- --------- ---------- --------- ---------- ------------ ---------- ----------
(IN THOUSANDS)
Income tax computed at
federal statutory rates .... $10,296 35.0% $11,075 35.0% $ (913) (35.0%) $16,784 35.0%
State income taxes, net of
federal tax benefit ........ 884 3.0 977 3.1 26 1.0 2,053 4.3
Non-taxable share of
(income) loss from
unconsolidated affiliates... (100) ( .3) (504) (1.6) 73 2.8 (238) ( .5)
Officers' life insurance
expense .................... (2) -- 162 .5 17 .7 23 --
Other, net .................. (24) ( .1) 253 .8 56 2.1 (464) ( .9)
-------- ---- ------- ---- ------ ------ ------- ----
$11,054 37.6% $11,963 37.8% $ (741) (28.4%) $18,158 37.9%
======== ==== ======= ==== ====== ====== ======= ====
NOTE 6--LINES OF CREDITfollows (percent of pre-tax income):
| Year Ended November 30, | ||||||||||||
| 1999 | 2000 | 2001 | ||||||||||
| Income tax computed at federal statutory rates | 35.0 | % | 35.0 | % | 35.0 | % | ||||||
| State income taxes, net of federal tax benefit | 3.6 | 2.1 | 3.1 | |||||||||
| Nondeductible goodwill | 1.5 | 4.6 | 2.8 | |||||||||
| North Carolina Speedway litigation | — | 1.8 | — | |||||||||
| Other, net | 0.5 | 1.5 | 0.8 | |||||||||
| 40.6 | % | 45.0 | % | 41.7 | % | |||||||
The Company has recorded a $10deferred tax asset of approximately $1.2 million line of credit with a financial institution
which expiresrelated to various state net operating loss carryforwards that expire in March 1999. There were no borrowings under the Company's
credit facility at November 30, 1997.
F-22
INTERNATIONAL SPEEDWAY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOVEMBER 30, 1997
NOTE 7--CAPITAL STOCKvarying amounts beginning in fiscal 2020.
Note 7. Capital Stock
The Company'sCompany’s authorized capital includes 80 million shares of Class A Common Stock, par value $.01 ("(“Class A Common Stock"Stock”), 40 million shares of Class B Common Stock, par value $.01 ("(“Class B
F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Common Stock"Stock”), and one million shares of Preferred Stock, par value $.01 (the "Preferred Stock"(“Preferred Stock”). The shares of Class A Common Stock and Class B Common Stock are identical in all respects, except for voting rights and certain dividend and conversion rights as described below. Each share of Class A Common Stock entitles the holder to one-fifth (1/( 1/5) vote on each matter submitted to a vote of the Company'sCompany’s shareholders and each share of Class B Common Stock entitles the holder to one (1) vote on each such matter, in each case including the election of directors. Holders of Class A Common Stock and Class B Common Stock are entitled to receive dividends at the same rate if and when declared by the Board of Directors out of funds legally available therefrom, subject to the dividend and liquidation rights of any Preferred Stock that may be issued and outstanding. Class A Common Stock has no conversion rights. Class B Common Stock is convertible into Class A Common Stock, in whole or in part, at any time at the option of the holder on the basis of one share of Class A Common Stock for each share of Class B Common Stock converted. Each share of Class B Common Stock will also automatically convert into one share of Class A Common Stock if, on the record date of any meeting of the shareholders, the number of shares of Class B Common Stock then outstanding is less than 10% of the aggregate number of shares of Class A Common Stock and Class B Common Stock then outstanding.
The Board of Directors of the Company is authorized, without further shareholder action, to divide any or all shares of the authorized Preferred Stock into series and fix and determine the designations, preferences and relative rights and qualifications, limitations, or restrictions thereon of any series so established, including voting powers, dividend rights, liquidation preferences, redemption rights and conversion privileges. No shares of Preferred Stock are outstanding. The Board of Directors has not authorized any series of Preferred Stock, and there are no plans, agreements or understandings for the authorization or issuance of any shares of Preferred Stock.
On November 4, 1996 the Company sold 4,000,000 shares of its newly created
Class A Common Stock in an underwritten public offering (the "Offering"). The
price to the public was $20 per share. The net proceeds to the Company from the
sale of the stock sold by the Company in the Offering were approximately $74.3
million, after deduction of underwriting discounts
Note 8. Commitments and commissions and expenses
of the Offering. Approximately $7.8 million of the net proceeds of this
Offering was used to repay borrowings incurred under one of the Company's lines
of credit in September 1996. The Company used approximately $3.1 million of the
net proceeds to acquire the 50% interest it did not already own in Watkins Glen
International, Inc., $43.9 million to acquire Phoenix International Raceway and
$16.2 million for equity investments in Homestead-Miami Speedway, LLC and Grand
Prix Association of Long Beach, Inc. The remaining net proceeds were used for
working capital and other general corporate purposes, including continued
improvements to and expansion of the Company's facilities and operations.
Pending such uses, the Company had invested the net proceeds of the Offering in
short-term interest-bearing obligations.
No shares of Preferred Stock are outstanding. See also Note 1--Basis of
Presentation.
F-23
INTERNATIONAL SPEEDWAY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOVEMBER 30, 1997
NOTE 8--COMMITMENTS AND CONTINGENCIESContingencies
A. In 1985, International Speedway Corporation ("ISC"(“ISC”) established a salary incentive plan (the “ISC Plan”) designed to qualify under Section 401(k) of the Internal Revenue Code. Employees of ISC and certain participating subsidiaries who have completed 1,000 hours and 12 monthsone month of continuous service are eligible to participate in the plan. MatchingISC Plan. After twelve months of continuous service, matching contributions are made to a savings trust (subject to certain limits) concurrent with employees'employees’ contributions. The level of the matching contribution depends upon the amount of the employee contribution. Employees become 100% vested upon entrance to the plan.ISC Plan.
The contribution expense for the planISC Plan was approximately $228,000,
$307,000, $85,000$580,000, $934,000 and $376,000$1.2 million for the years ended August 31, 1995November 30, 1999, 2000, and 1996,2001, respectively.
As a result of the PMI acquisition, the Company assumed the PMI non-contributory profit-sharing plan, which covers employees who meet certain length of service requirements, and the PMI defined contribution plan under Section 401(k) of the Internal Revenue Code (collectively the “PMI Plans”). Contributions of approximately $158,000 were made to the PMI Plans for the three month period ended November 30, 1996 and thefiscal year ended November 30, 1997, respectively.1999. In April 2000, the PMI Plans were merged into the ISC Plan.
B. The estimated cost to complete construction in progress at November 30, 19972001 at the Company’s existing facilities is approximately $55.3$35.8 million, which includes the amounts related to Kansas Speedway which are included in Restricted Investments (See Notes 1 and 5).
The Company is a member of Motorsports Alliance, which owns a 75% interest in Raceway Associates. Raceway Associates owns and operates Route 66 Raceway and Chicagoland Speedway (See Note 1). The Chicagoland Speedway development was financed through equity contributions of approximately $50 million from Motorsports Alliance and approximately $50 million in borrowings by Raceway Associates. The members of Motorsports Alliance have agreed to guarantee up to $50 million in
F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
borrowings by Raceway Associates on a pro rata basis until such time as the operations of Raceway Associates meet certain financial criteria. Through November 30, 2001, the Company has contributed approximately $35.2 million to Motorsports Alliance, including $25.0 million, which fulfilled the Company’s portion of Motorsports Alliances’s $50 million equity commitment and $6.9 million in approved advances. At November 30, 2001, Raceway Associates has borrowed approximately $47.8 million for the Chicagoland Speedway construction under the arrangement discussed above, which is currently guaranteed by the members of Motorsports Alliance.
C. The Company operates the Homestead-Miami Speedway under an operating agreement which expires December 31, 2032 and provides for subsequent renewal terms through December 31, 2075. The future minimum payments under such agreement are as follows, (in thousands):
| Fiscal year ending November 30, | Amount | |||
| 2002 | $ | 2,215 | ||
| 2003 | 2,215 | |||
| 2004 | 2,215 | |||
| 2005 | 2,215 | |||
| 2006 | 2,215 | |||
| Thereafter | 37,785 | |||
| Total | $ | 48,860 | ||
Expenses incurred under this agreement for each of the years ended November 30, 1999, 2000 and 2001 was $2.2 million.
C. On October 21, 1996, Americrown was served with
D. The Company is from time to time a Class Action
Complaint filed inparty to routine litigation incidental to its business. Management does not believe that the Circuit Courtresolution of Talladega County, Alabama by Howard
Padgett, Bill Lutzany 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 has been party to other legal proceedings which were concluded during the year ending November 30, 2000 as described below:
Souvenir Litigation
The Company and Tommy Jones. The complaint was filed in September 1996
and alleged, among other things, that Americrown engaged incertain subsidiaries were parties to legal proceedings alleging price-fixing activities in connection with the sale of racingsouvenirs and merchandise which have been settled. The settlements were given final approval by the courts, and final orders were entered in the legal proceedings on August 25, 2000.
Under the terms of the settlement agreements, without any admission of wrongdoing on their part, the Company and its subsidiaries, Americrown Service Corporation (“Americrown”) and Motorsports International Corp. (“Motorsports International”) paid approximately $4.6 million in cash and agreed to redeem $6 million in souvenir merchandise discount coupons to settle with classes which encompass all purchasers of souvenirs and merchandise at the Talladega Superspeedway. The complaint seeks at least $500 for each member
of the putative class (persons buying racing souvenirs at Talladega
Superspeedway since September 1992), but does not otherwise seek to recover
compensatory or punitive damages or statutory attorneys' fees. Although
Americrown attempted to remove the suit to Federal District Court, it was
remanded to the Circuit Court of Talladega County, Alabama, where discovery and
the class certification process are proceeding. Americrown disputes the
allegations and intends to defend 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 alleging, in substance, that
the defendants unlawfully conspired to fix prices of souvenirs and merchandise
sold to consumers in violation of federal antitrust laws. One suit was filed by
Florida residents and the other suit was filed by Georgia residents. Both suits
seek damages and injunctive relief on behalf of all persons who purchased
souvenirs or merchandise from certain vendors at any NASCAR Winston Cup Series
stock car race or supporting event in the United Statesevents during the period from January 1, 1991 to present.August 25, 2000. In the third quarter of fiscal 1999 the Company accrued approximately $2.8 million representing Americrown’s cash portion of the proposed souvenir litigation settlement. The two suits have been consolidatedremaining $1.8 million is attributable to Motorsports International and was recorded as a part of the court has established
a timetable to consider class certification. Discovery is proceeding.PMI merger purchase price. The Company and Americrown disputeeffects of the allegations and intend to defenddiscount coupon program are being recognized as the actions
fully and vigorously.
Management is presently unable to predict or quantify the outcome of these
matters.
F-24
F-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOVEMBER 30,STATEMENTS — (Continued)
North Carolina Speedway Litigation
In connection with PMI’s acquisition of North Carolina Speedway in 1997, NOTE 9--RELATED PARTY DISCLOSURES AND TRANSACTIONScertain of the North Carolina Speedway stockholders (constituting more than 5% of the North Carolina shares outstanding prior to acquisition) exercised their right under North Carolina law to dissent to the price paid for the common stock of North Carolina Speedway.
On April 25, 2000, jurors in the North Carolina Speedway dissenter’s action case returned a verdict upon which a judgment was entered which entitled the dissenting shareholders to $23.47 per share, an amount $3.86 to $6.70 higher than the original consideration. The financial statements for fiscal year 2000 included an accrual of approximately $5.5 million, representing the judgment and related interest, amounts due to non-dissenting former shareholders and related legal fees. In June 2000, substantially all of the amounts related to this judgment were paid by the Company.
Note 9. Related Party Disclosures and Transactions
All of the racing events that take place during the Company'sCompany’s fiscal year are sanctioned by various racing organizations such as the American Historic Racing Motorcycle Association ("AHRMA"(“AHRMA”), the American Motorcyclist Association ("AMA"(“AMA”), the Automobile Racing Club of America ("ARCA"(“ARCA”), CART, the Championship Cup Series ("CCS"(“CCS”), the Federation Internationale de l'Automobile ("FIA"l’Automobile (“FIA”), the Federation Internationale Motocycliste ("FIM"(“FIM”), Grand Am, Historic Sportscar Racing (“HSR”), the International Race of Champions ("IROC"(“IROC”), IRL, NASCAR, the Indy Racing League ("IRL"), the National Association
for Stock Car Auto Racing, Inc. ("NASCAR"Professional Monster Trucks (“ProMT”), the Sports Car Club of America ("SCCA"(“SCCA”), the Sportscar Vintage Racing Association ("SVRA"(“SVRA”), the United States Auto Club ("USAC"(“USAC”), the United States Road Racing Championship ("USRRC"), and the World Karting Association ("WKA"(“WKA”). NASCAR, which sanctions some of the Company'sCompany’s principal racing events, is a member of the France Family Group which controls in excess of 55%60% of the combined voting power of the outstanding stock of the Company and some members of which serve as directors and officers. Standard NASCAR sanction agreements require racetrack operators to pay sanction fees and prize and point fund monies for each sanctioned event conducted. The prize and point fund monies are distributed by NASCAR to participants in the events. Prize and point fund monies paid by the Company to NASCAR for disbursement to competitors totaled approximately $10.1, $11.6$36.2 million, $55.7 million and $17.0$75.6 million for the years ended August
31, 1995, 1996 and November 30, 1997,1999, 2000 and 2001, respectively. ForGrand Am sanctions various events at certain of the three month period
ended November 30, 1996, moniesCompany’s facilities. While certain officers and directors of the Company are equity investors in GARRA, no officer or director has more than a 10% equity interest. In addition, certain officers and directors of the Company, representing a non-controlling interest, serve on Grand Am’s Board of Managers.
In addition, NASCAR and the Company share a variety of expenses in the ordinary course of business. NASCAR pays rent to the Company for office space in the Company’s corporate office complex in Daytona Beach, Florida and the Company pays rent to NASCAR for office space in Charlotte, North Carolina and New York, New York. These rents are based upon estimated fair market lease rates for comparable facilities. NASCAR also reimburses the Company for 50% of the compensation paid to personnel working in the Company’s legal and risk management departments, as well as 50% of the compensation expense associated with receptionists. The Company’s payments to NASCAR for MRN Radio’s broadcast rights to NASCAR Craftsman Truck races represents an agreed-upon percentage of the Company’s advertising revenues attributable to such race broadcasts. NASCAR’s reimbursement for use of the Company’s telephone system, mailroom and janitorial, catering, transportation, graphic arts, photo and publishing services, and the Company’s reimbursement of NASCAR for use of corporate aircraft, is based on actual usage or an allocation of total actual usage. The aggregate amount paid by the Company to NASCAR for disbursements
to competitorsshared expenses, net of the amounts received from NASCAR for shared expenses, totaled approximately $1.1 million.
In October 1995,$356,000 during fiscal 1999. The aggregate amount received from NASCAR by the Company for shared expenses, net of amounts paid by the Company for shared expenses, totaled
F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
approximately $281,000 and $239,000 during fiscal 2000 and 2001, respectively. The Company strives to ensure, and management believes, that the terms of the Company’s transactions with NASCAR are no less favorable to the Company than could be obtained in arms’-length negotiations.
The Company entered into collateral assignment split-dollar insurance agreements covering the lives of William C. France and James C. France and their respective spouses.spouses in October 1995. Pursuant to the agreements, the Company will advance the annual premiums of approximately $1,205,000$1.2 million each year for a period of eight years. Upon surrender of the policies or payment of the death benefits thereunder, the Company is entitled to repayment of an amount equal to the cumulative premiums previously paid by the Company. The Company may cause the agreements to be terminated and the policies surrendered at any time after the cash surrender value of the policies equals the cumulative premiums advanced under the agreements. The Company recorded a netrecords the insurance expense net of approximately $450,000 and $38,000, representing the excess of the
premiums paid over the increase in cash surrender value of the policies associated with these agreements for the year ended August 31, 1996, and the
three months ended November 30, 1996, respectively. During the year ended
November 30, 1997, premiums paid were approximately equal to the increase in
the cash surrender valueagreements.
J. Hyatt Brown, one of the policies.
Poe & Brown, Inc., the servicing agent for the split-dollar insurance
agreements, received a commission from an insurance company for its
participation in the transactions. J. Hyatt Brown,Company’s directors, serves as President and Chief Executive Officer of PoeBrown & Brown, Inc. (“Brown”). Brown has received commissions for serving as the Company’s insurance broker for several of the Company’s insurance policies, including the Company’s property and casualty policy, certain employee benefit programs and the split-dollar arrangements established for the benefit of William C. France, James C. France and their respective spouses. The aggregate commissions received by Brown in connection with the Company’s policies were approximately $185,000, $435,000, and $549,000 during fiscal 1999, 2000 and 2001, respectively.
Walter P. Czarnecki, one of the Company’s directors, owns Raceway Services, which purchases tickets to events at many of the Company’s facilities. The price paid by Raceway Services for the tickets it purchases are established on the same basis as the price paid by other purchasers of tickets to the same events without regard to Mr. Czarnecki’s status as a director. The amounts paid for tickets by Raceway Services were approximately $141,000 and $95,000 in fiscal 2000 and 2001, respectively.
On May 5, 1999, Motorsports Alliance and the former owners of Route 66 Raceway, LLC formed Raceway Associates, which is owned 75% by Motorsports Alliance and 25% by the former owners of Route 66 Raceway, LLC. Edward H. Rensi, a director of the Company, was one of the former owners of the Route 66 Raceway, LLC. Mr. Rensi owned approximately 5.13% of Route 66 Raceway, LLC and as a result of the transaction, now owns approximately 1.28% of Raceway Associates.
Pursuant to the merger agreement for the PMI acquisition (See Note 3) the Company was obligated to place three individuals designated by Penske Performance, Inc., on its board of directors and to include such designees as nominees recommended by the Company’s board of directors at future elections of directors by shareholders. If the holdings of Penske Performance, Inc. fall to less than 7%, but not less than 5%, of the aggregate shares of the Company’s outstanding Class A and Class B Common Stock, the Company would be obligated to include as nominees for its board of directors only two individuals designated by Penske Performance, Inc. If the holdings of Penske Performance, Inc. fall to less than 5%, but not less than 2%, of the aggregate shares of the Company’s outstanding Class A and Class B Common Stock, the Company would be obligated to include as a nominee for its board of directors only one individual designated by Penske Performance, Inc. If the holdings of Penske Performance, Inc. fall to less than 2% of the aggregate shares of the Company’s outstanding Class A and Class B Common Stock, the Company would no longer be obligated to include any individuals designated by Penske Performance, Inc. as nominees for the Company’s board of directors. Messrs. Roger S. Penske, Gregory W. Penske and Walter P. Czarnecki are currently the designees of Penske Performance, Inc. serving on the Company’s board of directors. Penske Performance, Inc. is a Directorwholly-owned by Penske Corporation which beneficially owns more than 5% of the outstanding stock of the Company. F-25
F-18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOVEMBERSTATEMENTS — (Continued)
affiliates. During fiscal 1999 subsequent to the PMI acquisition, fiscal 2000 and 2001, Penske Corporation provided the Company with certain executive and legal services at a cost of approximately $313,000, $662,000 paid in cash and $496,000, paid in both cash and stock, respectively. Also, the Company rented Penske Corporation and its affiliates certain facilities for a driving school and sold admissions to the Company’s events, hospitality suite occupancy and related services, merchandise, apparel and racing tires and accessories to Penske Corporation, its affiliates and other related companies. In fiscal 1999 subsequent to the PMI acquisition, fiscal 2000 and 2001, Penske Corporation, its affiliates and other related companies paid approximately $759,000, $3.6 million and $2.6 million, respectively, for the aforementioned goods and services. The Company has outstanding receivables and payables/accrued expenses related to Penske Corporation and its affiliates of approximately $295,000 and $186,000, respectively, at November 30, 1997
NOTE 10--SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
2000 and $389,000 and $30,000, respectively, at November 30, 2001.
The Company sold its ownership in its Competition Tire subsidiaries to Competition Tire, LLC on November 15, 2000 (See Note 4). The ownership of Competition Tire, LLC includes Competition Tire East, Inc. (an unrelated entity), Penske Performance Holdings Corp. (a wholly-owned subsidiary of Penske Corporation) and certain former members of management of the Company’s Competition Tire subsidiaries.
Note 10. Supplemental Disclosures of Cash Flow Information
Cash paid for income taxes and interest for respective periods is summarized as follows:
YEARS ENDED THREE MONTHS
AUGUST 31, ENDED YEAR ENDED
---------------------- NOVEMBER 30, NOVEMBER 30,
1995 1996 1996 1997
--------- ---------- -------------- -------------
(IN THOUSANDS)
Income taxes paid ......... $9,806 $10,763 $185 $13,652
====== ======= ==== =======
Interest paid ............. $ -- $ -- $ 69 $ 31
====== ======= ==== =======
See follows (in thousands):
| Year ended November 30, | ||||||||||||
| 1999 | 2000 | 2001 | ||||||||||
| Income taxes paid | $ | 28,645 | $ | 21,783 | $ | 31,942 | ||||||
| Interest paid | $ | 7,005 | $ | 36,985 | $ | 32,032 | ||||||
Note 2 for discussion of non-cash equity investment transactions.
NOTE 11--LONG-TERM INCENTIVE RESTRICTED STOCK PLAN11. Long-Term Stock Incentive Plan
In November 1993,1996, the Company'sCompany’s Board of Directors and a majority of the Company'sCompany shareholders approved a Long-termthe 1996 Long-Term Stock Incentive Restricted Stock Plan (the "Plan"“1996 Plan”) for certain officers, employees and managersconsultants of the Company. UnderThe 1996 Plan authorizes the grant of stock options (incentive and nonstatutory), stock appreciation rights (“SARs”) and restricted stock. The Company has reserved an aggregate of 1,000,000 shares (subject to adjustment for stock splits and similar capital changes) of the Company’s Class A Common Stock for grants under the 1996 Plan.
Shares awarded under the 1996 Plan upgenerally are subject to 750,000forfeiture in the event of termination of employment prior to the vesting dates. Prior to vesting, the 1996 Plan participants own the shares and may vote and receive dividends, but are subject to certain restrictions. Restrictions include the prohibition of the sale or transfer of the shares during the period prior to vesting of the shares. The Company also has the right of first refusal to purchase any shares of stock issued under the 1996 Plan which are offered for sale subsequent to vesting.
On April 1, 1999, 2000 and 2001, the Company awarded 19,633, 44,017 and 40,592 restricted shares of the Company'sCompany’s Class BA Common Stock, were authorizedrespectively, to be granted ascertain officers and managers under the 1996 Plan. The market value of shares awarded on April 1, 1999, 2000 and 2001 amounted to approximately $1.0 million, $2.0 million and $1.5 million, respectively. These shares of restricted stock, at no cost to Plan participants. Sharesissued on April 1, awarded under the 1996 Plan vest at the rate of 50% of each award on the third anniversary of the award date and the remaining 50% on the fifth anniversary of the award date. Shares
F-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Additionally on April 16, 2001, the Company awarded under the Plan generally are subject to forfeiture in the
event of termination of employment prior to the vesting dates. The Plan
participants own the shares and may vote and receive dividends, but are subject
to restrictions under the Plan. Restrictions include the prohibition of the
sale or transfer of the shares during the period prior to vesting of the
shares. The Company also has a right of first refusal to purchase any shares of
stock issued under the Plan which are offered for sale.
On January 1, 1995, 1996 and 1997, a total of 70,410, 102,075 and 98,0106,506 restricted shares of the Company'sCompany’s Class BA Common Stock respectively, were
awarded to certain officers and managers.under the 1996 Plan. The market value of shares awarded on January
1, 1995, 1996 and 1997April 16, 2001 amounted to approximately $489,000, $1,600,000, and
$1,985,000, respectively, and$285,000. These shares of restricted stock, issued on April 16, 2001, vested on October 16, 2001.
The market value of the shares at the date of award has been recorded as "Unearned
compensation--restricted stock",“Unearned compensation — restricted stock,” which is shown as a separate component of shareholders'shareholders’ equity in the accompanying consolidated balance sheets. The unearned compensation is being amortized over the vesting periods of the shares. The total expense charged against operations during the years ended
August 31, 1995, and 1996, for the three month period ended November 30, 1996
and the year ended November 30, 1997 was approximately $318,000, $606,000,
$122,000 and $1,063,000, respectively. In accordance with APB Opinion 25, the Company will recognize a compensation charge over the vesting periods equal to the fair market value of these shares on the date awarded.of the award. The expense measured under SFAS No. 123 expense is
equaldoes not differ from that under APB Opinion 25.
Commencing with the April 2000 annual meeting, a portion of each non-employee director’s compensation became awards of options to the APB 25 expense.
In September 1996, the Company and the Board of Directors adopted a new
Long-term Incentive Plan (the "1996 Plan") for certain employees and
consultantsacquire shares of the Company. Under the 1996 Plan, up to 1,000,000 shares ofCompany’s Class A Common Stock may beunder the 1996 Plan for their services as directors. The Company granted as stocka total of 11,030 and 11,165 options (incentiveto purchase the Company’s Class A Common Stock to the non-employee directors at exercise prices of $44.50 and nonstatutory), stock appreciation rights (SARS)$44.25 per share in April of 2000 and restricted stock. No grants
have been made2001, respectively. These options become exercisable one year after the date of grant, and expire on the tenth anniversary of the date of grant.
On April 1, 2001, certain non-officer managers of the Company were granted a total of 24,000 options to purchase the Company’s Class A Common Stock, at an exercise price of $37.06 per share under the 1996 Plan. F-26
As the exercise price of these stock options equal the market price of the underlying stock on the date of grant, in accordance with APB Opinion 25 no compensation expense is recognized by the Company. For the years ended November 30, 2000 and 2001, the Company’s pro forma diluted earnings per share as adjusted for compensation expense of the stock options, determined in accordance with SFAS No. 123, does not differ from actual results.
The tax effect of income tax deductions that differ from expense under these plans is credited or charged to additional paid-in capital.
| Note 12. | Financial Instruments |
The carrying values of cash and cash equivalents, accounts receivable, short-term investments, restricted investments, accounts payable, and accrued liabilities approximate fair value due to the short-term maturities of these assets and liabilities.
Fair values of long-term debt and interest rate swaps are based on quoted market prices at the date of measurement. The Company’s credit facilities approximate fair value as they bear interest rates that approximate market. At November 30, 2001, the fair value of the remaining long-term debt, which includes the Senior Notes, TIF bond Funding Commitment and Term Loan, as determined by quotes from financial institutions, was $327.9 million compared to the carrying amount of $317.2 million.
The Company periodically utilizes interest rate swap agreements to limit the impact of the variable interest rate of certain long-term debt. The differential between fixed and variable rates to be paid or received on swaps is accrued as interest rates change in accordance with the agreements and is included in current interest expense. Credit risk arises from the possible inability of counterparties to meet the terms of their contracts on a net basis. The Company entered into an interest swap agreement to limit the impact of the variable interest rate on certain long-term debt. This agreement, with a principal notional amount of $23.5 million and an estimated fair value of a liability totaling $961,000 at November 30, 2001, expires at December 31, 2004.
F-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOVEMBER 30, 1997
NOTE 12--CHANGE IN FISCAL YEAR END
EffectiveSTATEMENTS — (Continued)
In December 1, 1996,2001, the Company changed its fiscal year end from
August 31entered into an interest rate swap agreement for interest rate exposure management purposes on $100 million of the $225 million principal amount of Senior Notes. This agreement involves the receipt of fixed rate amounts in exchange for floating rate interest payments over the life of the agreement without an exchange of the underlying principal amount. The interest rate swap effectively modifies the Company’s exposure to November 30. This resultedinterest risk by converting $100 million of the 7.875% fixed-rate Senior Notes to a floating rate based on six-month LIBOR, in arrears, plus a three-month transition period
commencing September 1, 1996spread. The agreement is deemed to be a perfectly effective fair value hedge and ending November 30, 1996. Consequently, the
consolidated audited financial statements contain information as of andtherefore qualifies for the three months ended November 30, 1996. “shortcut” method of accounting under SFAS No. 133. As a result, no ineffectiveness is expected to be recognized in our earnings associated with the interest rate swap agreement.
The following supplemental unaudited
consolidated statementCompany’s interest rate swap agreements were entered into with major financial institutions which are expected to fully perform under the terms of operations and unaudited consolidated statement of
cash flows for the three months ended November 30, 1995 are presented for
comparative purposes only and were presented in the Transition Form 10-Q filed
for the period ended November 30, 1996.
CONSOLIDATED STATEMENT OF OPERATIONS
agreements.
| Note 13. | Quarterly Data (Unaudited) |
The Company derives most of its income from event admissions and related
revenue from a limited number of NASCAR-sanctioned races. As a result, the Company'sCompany’s business has been, and is expected to remain, highly seasonal based on the timing of major race events. For example, theone of Darlington Southern 500Raceway’s Winston Cup Series events is traditionally held on the Sunday preceding Labor Day. Accordingly, the revenue and expenses for that race and/or certain of itsthe related supporting events may be recognized in either the fiscal quarter ending August 31 or the fiscal quarter ending November 30. Partly
The Company’s fiscal 2001 results of operations are not necessarily comparable to results of fiscal 2000 as a result of the new television broadcast agreements, which began in response to this seasonalityfiscal 2001 for all NASCAR Winston Cup and NASCAR Busch Grand National events, the desire to
better conform tocommencement of motorsports event operations at the traditional racing season,Kansas facility and Chicagoland, in which we have a 37.5% interest, in fiscal 2001, the Company changed its fiscal
year end from August 31 tosale of the Competition Tire subsidiaries in November 30 effective December 1, 1996. This
resulted in a three-month transition period commencing September 1, 1996 and
ending November 30, 1996.
Historically, the Company has incurred net losses in the fiscal quarter
ending November 30, and achieved its highest net income in the fiscal quarter
ending February 28. In fiscal 1997, the Company had net income for the quarter
ended November 30. This was primarily due to2000, the acquisition of Phoenix, which
resultedthe remaining 10% interest in the addition of a NASCAR Winston Cup Series eventMiami in the quarter
ending November 30,October 2001, and the date changecertain schedule changes for the Company's DieHard 500 race,
which moved the event from the quarter ended August 31motorsports events in fiscal 2001 as compared to the quarter ended
November 30.
fiscal 2000.
The following table presents certain unaudited financial data for each fiscal quarter of fiscal 19962000 and fiscal 1997 and for the transition quarter
ended November 30, 19962001 (in thousands, except per share amounts):
TRANSITION
FISCAL QUARTER ENDED QUARTER
------------------------------------------------------- -------------
NOVEMBER 30, FEBRUARY 29, MAY 31, AUGUST 31, NOVEMBER 30,
1995 1996 1996 1996 1996
-------------- -------------- ------------ ------------ -------------
Total revenues ........................ $ 8,542 $ 40,277 $ 24,176 $ 23,047 $ 10,496
Operating income (loss) ............... (1,474) 20,338 6,230 4,237 (2,565)
Net income (loss) ..................... (1,020) 12,089 3,817 4,795 (1,867)
Basic earnings (loss) per share ....... (0.03) 0.35 0.11 0.14 (0.05)
Diluted earnings (loss) per share ..... (0.03) 0.35 0.11 0.14 (0.05)
FISCAL QUARTER ENDED
------------------------------------------------------------
FEBRUARY 28, MAY 31, AUGUST 31, NOVEMBER 30,
1997 1997 1997 1997
-------------- ------------ ------------ -------------
Total Revenues ................. $ 51,866 $ 29,630 $ 33,106 $ 26,772
Operating Income ............... 27,103 7,075 8,762 1,961
Net Income ..................... 17,475 4,486 5,985 1,850
Basic earnings per share ....... 0.46 0.12 0.16 0.05
Diluted earnings per share ..... 0.46 0.12 0.16 0.05
F-28
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY, BY ANY UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THOSE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL
THOSE TO WHICH IT RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFERS IN SUCH STATE, OR SOLICITATION OF, ANY PERSON IN ANY
JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE DELIVERY
OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
--------------------------
TABLE OF CONTENTS
PAGE
----------
Prospectus Summary ....................... 3
Risk Factors ............................. 7
Use of Proceeds .......................... 13
Price Range of Common Stock .............. 13
Dividend Policy .......................... 14
Capitalization ........................... 14
Selected Financial Data .................. 15
Management's Discussion and
Analysis of Financial Condition
and Results of Operations ............. 16
NASCAR ................................... 23
Business ................................. 27
Management ............................... 37
Certain Transactions ..................... 39
Description of Capital Stock ............. 40
Shares Eligible for Future Sale .......... 42
Underwriting ............................. 43
Legal Matters ............................ 44
Experts .................................. 44
Available Information .................... 45
Incorporation of Certain Documents
by Reference .......................... 45
Index to Financial Statements ............ F-1
4,000,000 Shares
[GRAPHIC OMITTED]
| Fiscal Quarter Ended | ||||||||||||||||
| February 29, | May 31, | August 31, | November 30, | |||||||||||||
| 2000 | 2000 | 2000 | 2000 | |||||||||||||
| Total revenue | $ | 111,595 | $ | 98,748 | $ | 107,175 | $ | 122,912 | ||||||||
| Operating income | 35,187 | 22,230 | 27,485 | 37,410 | ||||||||||||
| Net income | 16,097 | 3,722 | 12,783 | 17,824 | ||||||||||||
| Basic earnings per share | 0.30 | 0.07 | 0.24 | 0.34 | ||||||||||||
| Diluted earnings per share | 0.30 | 0.07 | 0.24 | 0.34 | ||||||||||||
| Fiscal Quarter Ended | ||||||||||||||||
| February 28, | May 31, | August 31, | November 30, | |||||||||||||
| 2001 | 2001 | 2001 | 2001 | |||||||||||||
| Total revenue | $ | 120,689 | $ | 111,996 | $ | 132,122 | $ | 163,703 | ||||||||
| Operating income | 44,397 | 27,511 | 39,383 | 58,154 | ||||||||||||
| Net income | 22,750 | 13,300 | 21,767 | 29,816 | ||||||||||||
| Basic earnings per share | 0.43 | 0.25 | 0.41 | 0.56 | ||||||||||||
| Diluted earnings per share | 0.43 | 0.25 | 0.41 | 0.56 | ||||||||||||
F-21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| Note 14. | Segment Reporting |
The Company’s primary business is the promotion of motorsports events at its race facilities. The Company’s remaining business units, which are comprised of the radio network production and syndication of numerous racing events and programs, the operation of a motorsports-themed entertainment complex, certain souvenir merchandising operations not associated with the promotion of motorsports events at the Company’s facilities, construction management services, leasing operations, financing and licensing operations are included in the “All Other” segment. The Company evaluates financial performance of the business units on operating profit after allocation of corporate selling, general and administrative (“SG&A”) expenses. Corporate SG&A expenses are allocated to business units based on each business unit’s net revenues to total net revenues.
The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Intersegment revenues were approximately $3.9 million, $16.8 million and $10.1 million for the years ended November 30, 1999, 2000, and 2001, respectively (in thousands).
| Year Ended November 30, | |||||||||||||
| 1999 | 2000 | 2001 | |||||||||||
| Net revenues: | |||||||||||||
| Motorsports events | $ | 267,130 | $ | 396,664 | $ | 500,302 | |||||||
| All other | 35,494 | 60,582 | 38,353 | ||||||||||
| Total | $ | 302,624 | $ | 457,246 | $ | 538,655 | |||||||
| Operating income: | |||||||||||||
| Motorsports events | $ | 91,913 | $ | 113,212 | $ | 160,279 | |||||||
| All other | 4,043 | 9,100 | 9,166 | ||||||||||
| Total | $ | 95,956 | $ | 122,312 | $ | 169,445 | |||||||
| As of November 30, | |||||||||
| 2000 | 2001 | ||||||||
| Total assets: | |||||||||
| Motorsports events | $ | 1,521,639 | $ | 1,593,074 | |||||
| All other | 143,799 | 109,072 | |||||||
| Total | $ | 1,665,438 | $ | 1,702,146 | |||||
| Note 15. | Condensed Consolidating Financial Statements |
In connection with the Senior Notes (See Note 5), the Company is required to provide condensed consolidating financial information for its subsidiary guarantors. The Company has not presented separate financial statements for each of the guarantors, because it has deemed that such financial statements would not provide the investors with any material additional information. During the year ended November 30, 2000, certain operations of the Company were segregated into wholly-owned guarantor subsidiaries of the Company. Also, during the year ended November 30, 2001, certain non-guarantor subsidiaries became guarantor subsidiaries of the Company. As a result, the financial position, results of operations and cash flows of the Company in relation to its wholly-owned guarantor and non-guarantor subsidiaries are not comparable on a period-to-period basis.
Included are condensed consolidating balance sheets as of November 30, 2000 and 2001, and the condensed consolidating statements of income and cash flows for the years ending November 30, 1999,
F-22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2000 and 2001, of: (a) the Parent; (b) the guarantor subsidiaries; (c) the non-guarantor subsidiaries; (d) elimination entries necessary to consolidate Parent with guarantor and non-guarantor subsidiaries; and (e) the Company on a consolidated basis (in thousands):
| Condensed Consolidating Balance Sheet As Of November 30, 2000 | ||||||||||||||||||||
| Combined | Combined | |||||||||||||||||||
| Parent | Guarantor | Non-Guarantor | ||||||||||||||||||
| Company | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
| Current assets | $ | 47,932 | $ | 92,284 | $ | 10,019 | $ | (63,725 | ) | $ | 86,510 | |||||||||
| Property and equipment, net | 123,325 | 506,161 | 165,383 | — | 794,869 | |||||||||||||||
| Advances to and investments in subsidiaries | 1,491,683 | 417,329 | — | (1,909,012 | ) | — | ||||||||||||||
| Equity investments | — | 28,579 | — | — | 28,579 | |||||||||||||||
| Goodwill, net | — | 661,500 | 30,981 | — | 692,481 | |||||||||||||||
| Other assets | 12,203 | 8,543 | 42,253 | — | 62,999 | |||||||||||||||
| Total Assets | $ | 1,675,143 | $ | 1,714,396 | $ | 248,636 | $ | (1,972,737 | ) | $ | 1,665,438 | |||||||||
| Current liabilities | $ | 9,638 | $ | 143,119 | $ | 25,638 | $ | (37,844 | ) | $ | 140,551 | |||||||||
| Long-term debt | 704,260 | (1,691 | ) | 160,293 | (392,311 | ) | 470,551 | |||||||||||||
| Deferred income taxes | 29,779 | 64,169 | (5,414 | ) | — | 88,534 | ||||||||||||||
| Other liabilities | — | — | 14,931 | — | 14,931 | |||||||||||||||
| Total shareholders’ equity | 931,466 | 1,508,799 | 53,188 | (1,542,582 | ) | 950,871 | ||||||||||||||
| Total Liabilities and Shareholders’ Equity | $ | 1,675,143 | $ | 1,714,396 | $ | 248,636 | $ | (1,972,737 | ) | $ | 1,665,438 | |||||||||
| Condensed Consolidating Balance Sheet As Of November 30, 2001 | ||||||||||||||||||||
| Combined | Combined | |||||||||||||||||||
| Parent | Guarantor | Non-Guarantor | ||||||||||||||||||
| Company | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
| Current assets | $ | 22,404 | $ | 112,367 | $ | — | $ | (27,376 | ) | $ | 107,395 | |||||||||
| Property and equipment, net | 129,688 | 726,131 | — | — | 855,819 | |||||||||||||||
| Advances to and investments in subsidiaries | 1,495,643 | 370,038 | — | (1,865,681 | ) | — | ||||||||||||||
| Equity investments | — | 32,667 | — | — | 32,667 | |||||||||||||||
| Goodwill, net | — | 676,150 | — | — | 676,150 | |||||||||||||||
| Other assets | 12,420 | 17,695 | — | — | 30,115 | |||||||||||||||
| Total Assets | $ | 1,660,155 | $ | 1,935,048 | $ | — | $ | (1,893,057 | ) | $ | 1,702,146 | |||||||||
| Current liabilities | $ | 5,600 | $ | 147,867 | $ | — | $ | (17,601 | ) | $ | 135,866 | |||||||||
| Long-term debt | 693,752 | 93,857 | — | (385,132 | ) | 402,477 | ||||||||||||||
| Deferred income taxes | 36,770 | 78,941 | — | — | 115,711 | |||||||||||||||
| Other liabilities | — | 12,670 | — | — | 12,670 | |||||||||||||||
| Total shareholders’ equity | 924,033 | 1,601,713 | — | (1,490,324 | ) | 1,035,422 | ||||||||||||||
| Total Liabilities and Shareholders’ Equity | $ | 1,660,155 | $ | 1,935,048 | $ | — | $ | (1,893,057 | ) | $ | 1,702,146 | |||||||||
F-23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| Condensed Consolidating Statement Of Income For The Year Ended | ||||||||||||||||||||
| November 30, 1999 | ||||||||||||||||||||
| Combined | Combined | |||||||||||||||||||
| Parent | Guarantor | Non-Guarantor | ||||||||||||||||||
| Company | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
| Total revenues | $ | 156,899 | $ | 139,329 | $ | 19,681 | $ | (17,187 | ) | $ | 298,722 | |||||||||
| Total expenses | 96,131 | 111,439 | 12,383 | (17,187 | ) | 202,766 | ||||||||||||||
| Operating income | 60,768 | 27,890 | 7,298 | — | 95,956 | |||||||||||||||
| Interest and other income (expense), net | 12,880 | (5,819 | ) | (1,035 | ) | (6,700 | ) | (674 | ) | |||||||||||
| Net income | 46,932 | 9,469 | 6,912 | (6,700 | ) | 56,613 | ||||||||||||||
| Condensed Consolidating Statement Of Income For The Year Ended | ||||||||||||||||||||
| November 30, 2000 | ||||||||||||||||||||
| Combined | Combined | |||||||||||||||||||
| Parent | Guarantor | Non-Guarantor | ||||||||||||||||||
| Company | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
| Total revenues | $ | 104 | $ | 453,359 | $ | 25,749 | $ | (38,782 | ) | $ | 440,430 | |||||||||
| Total expenses | 21,265 | 312,123 | 23,512 | (38,782 | ) | 318,118 | ||||||||||||||
| Operating (loss) income | (21,161 | ) | 141,236 | 2,237 | — | 122,312 | ||||||||||||||
| Interest and other income (expense), net | 7,915 | 27,262 | (3,915 | ) | (61,740 | ) | (30,478 | ) | ||||||||||||
| Net income | 5,567 | 103,909 | 2,690 | (61,740 | ) | 50,426 | ||||||||||||||
| Condensed Consolidating Statement Of Income For The Year Ended | ||||||||||||||||||||
| November 30, 2001 | ||||||||||||||||||||
| Combined | Combined | |||||||||||||||||||
| Parent | Guarantor | Non-Guarantor | ||||||||||||||||||
| Company | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
| Total revenues | $ | 1,968 | $ | 600,733 | $ | — | $ | (74,191 | ) | $ | 528,510 | |||||||||
| Total expenses | 21,085 | 412,171 | — | (74,191 | ) | 359,065 | ||||||||||||||
| Operating (loss) income | (19,117 | ) | 188,562 | — | — | 169,445 | ||||||||||||||
| Interest and other income (expense), net | 1,009 | 22,055 | — | (42,196 | ) | (19,132 | ) | |||||||||||||
| Net (loss) income | (5,314 | ) | 135,143 | — | (42,196 | ) | 87,633 | |||||||||||||
F-24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| Condensed Consolidating Statement Of Cash Flows For The Year Ended | ||||||||||||||||||||
| November 30, 1999 | ||||||||||||||||||||
| Combined | Combined | |||||||||||||||||||
| Parent | Guarantor | Non-Guarantor | ||||||||||||||||||
| Company | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
| Net cash provided by operating activities | $ | 79,133 | $ | 21,414 | $ | 6,665 | $ | (6,772 | ) | $ | 100,440 | |||||||||
| Net cash used in investing activities | (395,432 | ) | (244 | ) | (73,892 | ) | 72 | (469,496 | ) | |||||||||||
| Net cash provided by (used in) financing activities | 301,067 | (8,095 | ) | 68,519 | 6,700 | 368,191 | ||||||||||||||
| Condensed Consolidating Statement Of Cash Flows For The Year Ended | ||||||||||||||||||||
| November 30, 2000 | ||||||||||||||||||||
| Combined | Combined | |||||||||||||||||||
| Parent | Guarantor | Non-Guarantor | ||||||||||||||||||
| Company | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
| Net cash provided by (used in) operating activities | $ | (23,850 | ) | $ | 181,274 | $ | 17,090 | $ | (34,440 | ) | $ | 140,074 | ||||||||
| Net cash provided by (used in) investing activities | 45,510 | (162,703 | ) | (16,699 | ) | 34,440 | (99,452 | ) | ||||||||||||
| Net cash provided by (used in) financing activities | (29,669 | ) | (17 | ) | 1,845 | — | (27,841 | ) | ||||||||||||
| Condensed Consolidating Statement Of Cash Flows For The Year Ended | ||||||||||||||||||||
| November 30, 2001 | ||||||||||||||||||||
| Combined | Combined | |||||||||||||||||||
| Parent | Guarantor | Non-Guarantor | ||||||||||||||||||
| Company | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
| Net cash provided by operating activities | $ | 33,545 | $ | 185,443 | $ | — | $ | (58,302 | ) | $ | 160,686 | |||||||||
| Net cash provided by (used in) investing activities | 40,579 | (170,835 | ) | — | 58,302 | (71,954 | ) | |||||||||||||
| Net cash provided by (used in) financing activities | (69,155 | ) | 835 | — | — | (68,320 | ) | |||||||||||||
F-25
Inside Back Cover
Description of photographs:
Collage consisting of racing events at ISC facilities.
2,500,000 Shares
International Speedway Corporation
Class A Common Stock
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P R O S P E C T U S
PROSPECTUS
, 1998
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2002
Salomon Smith Barney
CIBC Oppenheimer
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
| Item 14. | Other Expenses of Issuance and Distribution |
The Company estimates thatfollowing table sets forth the estimated expenses payable by itInternational Speedway Corporation in connection with the offering described in this registration statementRegistration Statement.
| Registration Fee | $ | 10,500 | |||
| Transfer agents’ fees | 5,000 | ||||
| Printing expenses | 100,000 | ||||
| Accounting fees and expenses | 150,000 | ||||
| Legal fees and expenses | 125,000 | ||||
| Miscellaneous | 59,500 | ||||
| Total | $ | 450,000 | |||
| Item 15. | Indemnification of Directors and Officers |
Subject to the procedures and limitations stated therein, Section 607.0850(1) of the Florida Business Corporation Act (“FBCA”) empowers a Florida corporation, such as ISC, to indemnify any person who was or is a party to any proceeding (other than underwriting
discounts and commissions) will be as follows:
Section 607.0850(2) of the FBCA also empowers a Florida corporation to indemnify any person who was or is a party to any proceeding by or in the right of the corporation to procure a judgment in its favor by reason of servicethe fact that he is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses and amounts paid in settlement not exceeding, in the judgment of the board of directors, the estimated expense of litigating the proceeding to conclusion, actually and reasonably incurred in connection with the defense or settlement of such capacityproceeding, including any appeal thereof, if such person shall havehe acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the corporation, andexcept that no indemnification may be made in respect of any criminal proceeding ifclaim, issue or matter as to which such person shall have been adjudged to be liable unless, and only to the extent that, the court in which such proceeding was brought, or any other court of competent jurisdiction, shall determine upon application that, despite the adjudication of liability but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper.
To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any proceeding referred to in Sections 607.0850(1) or 607.0850(2) of the FBCA, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses actually and reasonably incurred by him in connection therewith.
The indemnification and advancement of expenses provided pursuant to Section 607.0850 of the FBCA are not exclusive, and a corporation may make any other or further indemnification or advancement of expenses to any of its directors, officers, employees or agents, under any bylaw, agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. However, a director, officer, employee or agent is not
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ISC’s Amended and Restated Articles of Incorporation, as amended, provide that ISC shall indemnify and may beadvance expenses to its officers and directors to the fullest extent permitted by law in existence from time to time.
ISC maintains an insurance policy covering directors and officers under which the insurer agrees to pay, subject to certain exclusions, for any claim made against the directors and officers of ISC for a wrongful act for which they may become legally obligated to pay or for which ISC is required to indemnify its directors and officers.
| Item 16. | Exhibits |
See Index to Exhibits at page II-6.
| Item 17. | Undertakings |
| (a) | The undersigned registrant hereby undertakes: |
| (1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
| (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) of the Securities Act of 1933 if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (iii) To include any material information with respect Provided, however,that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement.
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(b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the
POWER OF ATTORNEY The Registrant and each person whose signature appears below hereby Pursuant to the requirements of the Securities Act of 1933, this
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II-5 INDEX TO EXHIBITS
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