-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R12oisB8JzlsF2ru/4E7edWx3vTyPwBEAKW03kFSPu1H/ldXzrTHcm7Fuid7Dw5s DimSh+YCt5oLt/iFgBox2g== 0000925751-96-000010.txt : 19960412 0000925751-96-000010.hdr.sgml : 19960412 ACCESSION NUMBER: 0000925751-96-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960229 FILED AS OF DATE: 19960411 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL SPEEDWAY CORP CENTRAL INDEX KEY: 0000051548 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-RACING, INCLUDING TRACK OPERATION [7948] IRS NUMBER: 590709342 STATE OF INCORPORATION: FL FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-02384 FILM NUMBER: 96546245 BUSINESS ADDRESS: STREET 1: 1801 W INTERNATIONAL SPEEDWAY BLVD CITY: DAYTONA BEACH STATE: FL ZIP: 32114-1243 BUSINESS PHONE: 9042542700 MAIL ADDRESS: STREET 1: 1801 WEST INTERNATIONAL SPEEDWAY CORP CITY: DAYTONA BEACH STATE: FL ZIP: 32114-1243 FORMER COMPANY: FORMER CONFORMED NAME: DAYTONA INTERNATIONAL SPEEDWAY CORP DATE OF NAME CHANGE: 19691130 FORMER COMPANY: FORMER CONFORMED NAME: FRANCE BILL RACING INC DATE OF NAME CHANGE: 19670227 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended February 29, 1996. Commission file Number 0-2384 International Speedway Corporation (Exact name of registrant as specified in its charter.) Florida, U.S.A. 59-0709342 (State of other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1801 West International Speedway Boulevard, Daytona Beach, Florida 32114-1243 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (904) 254-2700 Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date: Common Stock, $0.10 Par Value - 2,299,870 shares as of April 5, 1996. PART I. - FINANCIAL INFORMATION Item 1. - Financial Statements INTERNATIONAL SPEEDWAY CORPORATION Condensed Consolidated Balance Sheets February 29, August 31, 1996 1995 (Unaudited) _______________________ (In Thousands) ASSETS Current Assets: Cash and cash equivalents........................... $ 16,035 $ 7,871 Short-term investments.............................. 13,574 30,950 Receivables, less allowance of $35.................. 7,844 1,794 Inventories......................................... 1,469 1,158 Prepaid expenses and other current assets........... 1,618 3,122 ___________ __________ Total Current Assets.................................. 40,540 44,895 Property and Equipment - at cost - less accumulated depreciation of $33,328 ($30,692 at August 31)....... 83,513 70,299 Other Assets: Cash surrender value of life insurance (Note 3)..... 1,228 489 Equity investments (Note 6)......................... 17,080 2,913 Long-term investments............................... 500 747 Other............................................... 210 228 ___________ __________ 19,018 4,377 ___________ __________ Total Assets.......................................... $143,071 $119,571 =========== ========== See accompanying notes and accountants' review report. February 29, August 31, 1996 1995 (Unaudited) _______________________ (In Thousands) LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable..................................... $ 5,428 $ 2,619 Income taxes payable................................. 6,229 324 Deferred income...................................... 21,666 19,852 Other current liabilities............................ 2,300 1,279 __________ __________ Total Current Liabilities.............................. 35,623 24,074 Deferred income taxes.................................. 10,900 10,250 Shareholders' Equity: Common stock, $.10 par value, 5,000,000 shares authorized; 3,509,390 and 3,502,585 issued at February 29 and August 31, respectively............ 351 350 Capital in excess of par value....................... 3,949 2,350 Retained earnings.................................... 100,011 88,942 __________ __________ 104,311 91,642 Less: Treasury stock - at cost, 1,209,520 shares..... 5,599 5,599 Unearned compensation - restricted stock (Note 5)...................................... 2,164 796 __________ __________ Total Shareholders' Equity............................. 96,548 85,247 __________ __________ Total Liabilities and Shareholders' Equity............. $143,071 $119,571 ========== ========== See accompanying notes and accountants' review report. INTERNATIONAL SPEEDWAY CORPORATION Condensed Consolidated Statements of Operations Three Months ended February 29, February 28, 1996 1995 (Unaudited) (Unaudited) _________________________ (In Thousands, Except for Per Share Amounts) REVENUES: Admissions, net.................................... $22,004 $19,117 Motorsports related income......................... 11,255 9,884 Food, beverage and souvenir income................. 6,860 5,895 Other income....................................... 158 126 ___________ ___________ 40,277 35,022 EXPENSES: Direct expenses: Prize and point fund monies and NASCAR sanction fees....................... 5,623 4,955 Motorsports related expenses..................... 3,919 3,149 Food, beverage and souvenir expenses............. 3,724 2,855 ___________ ___________ 13,266 10,959 General and administrative expenses................ 5,305 3,961 Depreciation....................................... 1,368 1,160 ___________ ___________ 19,939 16,080 ___________ ___________ Operating Income..................................... 20,338 18,942 Interest income...................................... 185 306 Equity in net loss from equity investments (Note 6).. (654) (290) ___________ ___________ Income before income taxes........................... 19,869 18,958 Income taxes......................................... 7,780 7,286 ___________ ___________ Net Income........................................... $12,089 $ 11,672 =========== =========== Earnings per share (Note 2).......................... $ 5.26 $ 5.09 =========== =========== Dividends per share.................................. $ -- $ -- =========== =========== See accompanying notes and accountants' review report. INTERNATIONAL SPEEDWAY CORPORATION Condensed Consolidated Statements of Operations Six Months ended February 29, February 28, 1996 1995 (Unaudited) (Unaudited) _________________________ (In Thousands, Except for Per Share Amounts) REVENUES: Admissions, net.................................... $25,630 $22,102 Motorsports related income......................... 14,284 12,154 Food, beverage and souvenir income................. 8,585 7,196 Other income....................................... 320 264 ___________ ___________ 48,819 41,716 EXPENSES: Direct expenses: Prize and point fund monies and NASCAR sanction fees....................... 7,065 6,080 Motorsports related expenses..................... 5,685 4,335 Food, beverage and souvenir expenses............. 4,979 3,963 ___________ ___________ 17,729 14,378 General and administrative expenses................ 9,571 7,741 Depreciation....................................... 2,655 2,262 ___________ ___________ 29,955 24,381 ___________ ___________ Operating Income..................................... 18,864 17,335 Interest income...................................... 475 633 Equity in net loss from equity investments (Note 6).. (808) (421) ___________ ___________ Income before income taxes........................... 18,531 17,547 Income taxes......................................... 7,462 6,746 ___________ ___________ Net Income........................................... $11,069 $ 10,801 =========== =========== Earnings per share (Note 2).......................... $ 4.82 $ 4.72 =========== =========== Dividends per share.................................. $ -- $ -- =========== =========== See accompanying notes and accountants' review report. International Speedway Corporation Condensed Consolidated Statements of Shareholders' Equity Common Unearned Stock Capital Compen- Total $.10 In Excess Treas- sation - Share- Par of Par Retained ury Restricted holders' Value Value Earnings Stock Stock Equity ___________________________________________________________ (In Thousands) Balance at August 31, 1994... $ 350 $1,861 $72,290 $(5,599) $ (625) $68,277 Activity 9/1/94- 2/28/95: Net Income -- Unaudited...... - - 10,801 - - 10,801 Reacquisition of previously issued common stock - unaudited.... - - (57) - - (57) Restricted stock granted - unaudited.... - 489 - - (489) - Amortization of unearned compensation - unaudited.... - - - - 105 105 ___________________________________________________________ Balance at February 28, 1995 - - Unaudited....... 350 2,350 83,034 (5,599) (1,009) 79,126 Activity 3/1/95- 8/31/95: Net income - Unaudited...... - - 7,562 - - 7,562 Cash dividends ($.70 per share) - unaudited... - - (1,605) - - (1,605) Reacquisition of previously issued common stock - unaudited.... - - (49) - - (49) Amortization of unearned compensation - unaudited...... - - - - 213 213 ___________________________________________________________ Balance at August 31, 1995... 350 2,350 88,942 (5,599) (796) 85,247 Activity 9/1/95- 02/29/96: Net income -- Unaudited...... - - 11,069 - - 11,069 Restricted stock granted - unaudited.... 1 1,599 - - (1,600) - Amortization of unearned compensation - unaudited...... - - - - 232 232 ___________________________________________________________ Balance at February 29, 1996 - - Unaudited....... $351 $3,949 $100,011 $(5,599) $(2,164) $96,548 =========================================================== See accompanying notes and accountants' review report. International Speedway Corporation Condensed Consolidated Statements of Cash Flows Six Months ended February 29, February 28, 1996 1995 (Unaudited) (Unaudited) ______________________________ (In Thousands) OPERATING ACTIVITIES Net income...................................... $11,069 $10,801 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation................................ 2,655 2,262 Amortization of unearned compensation....... 232 105 Deferred income taxes....................... 650 770 Undistributed loss from equity investments.. 808 421 Gain on disposition of property and equipment.................................. (8) - Changes in operating assets and liabilities: Receivables................................. (6,050) (5,315) Inventories................................. (311) (76) Prepaid expenses and other current assets... 1,504 93 Cash surrender value of life insurance...... (739) (17) Other assets................................ 9 (44) Accounts payable............................ 2,809 711 Income taxes payable........................ 5,905 5,512 Deferred income............................. 1,814 (429) Other current liabilities................... 1,021 940 ____________ ____________ Net cash provided by operating activities....... 21,368 15,734 INVESTING ACTIVITIES Acquisition of investments.................... (21,956) (22,181) Proceeds from maturities of investments....... 39,579 26,700 Capital expenditures.......................... (15,860) (6,379) Investment in PSH Corp........................ (14,975) - Proceeds from sale of assets.................. 8 - ____________ ____________ Net cash used in investing activities........... (13,204) (1,860) FINANCING ACTIVITIES Reacquisition of previously issued common stock................................ - (57) ____________ ____________ Net cash used in financing activities........... - (57) ____________ ____________ Net increase in cash and cash equivalents....... 8,164 13,817 Cash and cash equivalents at beginning of period........................... 7,871 5,227 ____________ ____________ Cash and cash equivalents at end of period...... $16,035 $19,044 ============ ============ See accompanying notes and accountants' review report. International Speedway Corporation Notes to Condensed Consolidated Financial Statements February 29, 1996 and August 31, 1995 (Unaudited - See Accountants' Review Report) 1. Basis of Presentation The accompanying condensed consolidated financial statements have been prepared in compliance with Rule 10-01 of Regulation S-X and generally accepted accounting principles but do not include all of the information and disclosures required for complete financial statements. The statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's latest annual report on Form 10-K. The statements have been reviewed by the Company's independent accountants. In management's opinion, the statements include all adjustments which are necessary for a fair presentation of the results for the interim periods. All such adjustments are of a normal recurring nature. Certain reclassifications have been made to conform to the financial presentation at February 29, 1996. Because of the seasonal concentration of racing events, the results of operations for the three-month and six-month periods ended February 29, 1996 and February 28, 1995 are not indicative of the results to be expected for the year. 2. Earnings Per Share Earnings per share have been computed on the weighted average total number of common shares outstanding during the respective periods. Weighted average shares outstanding for the three-month and six-month periods ended February 29, 1996 were 2,297,552 and 2,295,271, respectively. Weighted average shares outstanding for the three-month and six-month periods ended February 28, 1995 were 2,291,901 and 2,290,567, respectively. 3. Related Party Disclosures and Transactions All of the racing events that take place during the Company's fiscal year are sanctioned by various racing organizations such as the Sports Car Club of America (SCCA), Automobile Racing Club of America (ARCA), American Motorcyclist Association (AMA), the Championship Cup Series (CCS), International Motor Sports Association (IMSA), World Karting Association (WKA), Federation Internationale de l'Automobile (FIA), Federation Internationale Motorcycliste (FIM), and the National Association for Stock Car Auto Racing, Inc. (NASCAR). NASCAR, which sanctions some of the Company's principal racing events, is a member of the France Family Group which controls in excess of 60% of the outstanding stock of the Company and some members of which serve as directors and officers. Standard NASCAR sanction agreements require racetrack operators to pay sanction fees and prize and point fund monies for each sanctioned event conducted. The prize and point fund monies are distributed by NASCAR to participants in the events. Prize and point fund monies paid by the Company to NASCAR for disbursement to competitors totaled approximately $5.9 million and $4.7 million for the six-month and three-month periods ended February 29, 1996, respectively, and approximately $5.2 million and $4.2 million for the six-month and three-month periods ended February 28, 1995, respectively. In October 1995 the Company entered into collateral assignment split-dollar insurance agreements covering the lives of William C. France and James C. France and their respective spouses. Pursuant to the agreements, the Company will advance the annual premiums of approximately $1,205,000 each year for a period of eight years. Upon surrender of the policies or payment of the death benefits thereunder, the Company is entitled to repayment of an amount equal to the cumulative premiums previously paid by the Company. The Company may cause the agreements to be terminated and the policies surrendered at any time after the cash surrender value of the policies equals the cumulative premiums advanced under the agreements. During the six-month and three-month periods ended February 29, 1996, the Company recorded a net insurance expense of approximately $187,000 and $106,000, respectively, representing the excess of the premiums paid over the increase in cash surrender value of the policies associated with these agreements. Poe & Brown, Inc., the servicing agent for the split-dollar insurance agreements, received a commission for its participation in the transactions. J. Hyatt Brown, President and Chief Executive Officer of Poe & Brown, Inc., is a Director of the Company. 4. Supplemental Disclosures of Cash Flow Information Cash paid for income taxes for the six months ended February 29, 1996 and February 28, 1995 is as follows: 1996 1995 ______________________________ (Thousands of Dollars) Income taxes paid $ 898 $457 ============================== 5. Long-Term Incentive Restricted Stock On January 1, 1996 and 1995, a total of 6,805 and 4,694 restricted shares of the Company's common stock, respectively, were awarded to certain officers and managers under the Company's Long Term Incentive Plan. The market value of shares awarded on January 1, 1996 and 1995 amounted to approximately $1,599,000 and $489,000, respectively, and has been recorded as unearned compensation - restricted stock, which is shown as a separate component of shareholders' equity in the accompanying condensed consolidated balance sheets. The unearned compensation is being amortized over the vesting period of the shares. The total expense charged against operations during the six months ended February 29, 1996 and February 28, 1995 was approximately $232,000 and $105,000, respectively. 6. Equity Investments On November 22, 1995, Facility Investments, Inc., a newly formed wholly-owned subsidiary of the Company, purchased 200 shares of the common stock, representing 20% of the outstanding shares, of PSH Corp., a newly formed Delaware corporation, for $14,975,000 in cash. Penske Corporation contributed 100% of the outstanding shares of Penske Speedway, Inc. and its subsidiaries and the sum of $5,000,000 in cash for an indirect beneficial interest in the remaining 80% of the outstanding shares of PSH Corp. At February 29, 1996, PSH Corp. owned 85% of the outstanding shares of Penske Motorsports, Inc. The remaining 15% of Penske Motorsports, Inc., represented by convertible preferred stock, was owned by Kaiser Ventures Inc., for which Kaiser contributed all of the issued and outstanding stock of Speedway Development Corporation, its wholly owned subsidiary, which owned approximately 460 acres of real property near Ontario, California. At February 29, 1996, Penske Motorsports, Inc. owned 100% of the outstanding shares of Penske Speedway, Inc., which owned and operated Michigan International Speedway, owned approximately 85% of Nazareth Speedway in Pennsylvania, 2% of North Carolina Motor Speedway (Rockingham), 100% of a racing souvenir retailer called Motorsports International Corp and 100% of The California Speedway Corporation, which is constructing the California Speedway on the land formerly owned by Kaiser. The acquisition of the 20% interest in PSH Corp. is accounted for using the equity method of accounting and is included in equity investments on the condensed consolidated balance sheet, along with the Company's equity investment in Watkins Glen International, Inc. ("WGI"). The Company's share of the current losses of PSH Corp. and WGI for the six months ended February 29, 1996, were approximately $265,000 and $451,000, respectively. Because of the seasonal concentration of racing events, the Company's share of undistributed equity in the earnings of PSH Corp. and WGI for the period ended February 29, 1996 is not indicative of the results to be expected for the year. The Company's investment in PSH Corp. exceeded its share of the underlying net assets by approximately $7.3 million. The excess is being amortized into expense by decreasing the equity in income of equity investments using the straight-line method over twenty years. The amount amortized for the six months ended February 29, 1996, was approximately $92,000. 7. Subsequent Event - Equity Investment In March 1996, Penske Motorsports, Inc. (PMI) effected a recapitalization resulting in PMI ownership of 100% of the outstanding shares of Michigan International Speedway, Inc. (MIS) (f/k/a Penske Speedways, Inc.), Pennsylvania International Raceway, Inc., The California Speedway Corporation, Motorsports International Corp., Competition Tire West, Inc. and Competition Tire South, Inc. MIS owns 2% of North Carolina Motor Speedway. Also pursuant to the recapitalization, Kaiser Ventures' preferred stock was automatically converted into shares of PMI common stock. After giving effect to the foregoing transactions, but prior to the commencement of the offering described below, the effective beneficial ownership of the common stock of PMI by PSH Corp. was 84.1%. Subsequent to the recapitalization, PMI completed an initial public offering (IPO) by issuing 3,737,500 shares of common stock at a price to the public of $24 per share. The proceeds to PMI, after underwriting discounts and commissions, were approximately $83.6 million. After PMI's IPO, PSH Corp. owns approximately 59.9% of PMI. As a result of the IPO, in the quarter ending May 31, 1996 the Company will record an increase in its equity investment in PSH Corp. of approximately $10 million, and record corresponding increases in deferred income taxes and capital in excess of par value of approximately $3.8 million and $6.2 million, respectively. PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Financial Condition Liquidity Management believes that a high degree of liquidity is desirable due to the inherent insurance and weather risks associated with the production of large outdoor sporting and entertainment events. The trend during the past several years has been for the Company to have increasing liquidity. This trend has been due to a general increase in interest in motorsports, reflected in increased live and broadcast audiences, and generally favorable weather conditions for the events conducted at the Company's facilities. However, the Company experienced a decrease in liquidity from August 31, 1995 to February 29, 1996 as it began to utilize its liquid assets for capital projects and investments as described below under the caption "Capital Resources". Liquidity is expected to continue to decrease as the Company completes the Daytona USA (R) and Winston Tower capital projects described below. The Company's combined position in cash and cash equivalents and short- and long-term investments at February 29, 1996 decreased from August 31, 1995 primarily as a result of payments made for capital projects and the investment in PSH Corp., as described below. The decrease was offset in part by cash flows from its operations. The Company's working capital at February 29, 1996 decreased from August 31, 1995 due primarily to the use of cash for its investment in PSH Corp. and to finance capital improvements. Working capital also decreased due to a decrease in prepaid expenses and other current assets resulting from recognition of the August 31, 1995 prepaid expenses related to the September 1995 event held at Darlington Raceway, an increase in accounts payable related to capital improvements and the seasonal concentration of racing events, and an increase in income taxes payable as a result of income from operations and the timing of estimated tax deposits. The decrease in working capital is partially offset by an increase in receivables related primarily to the 1996 Daytona events. Receivables increased for the six months ended February 29, 1996, as compared to the six months ended February 28, 1995, primarily due to increases in billings for promotional fees and facility rentals for the 1996 Daytona racing season and increases in promotional fees related to future events to be held at the Company's Darlington and Talladega facilities. Prepaid expenses and other current assets decreased for the six months ended February 29, 1996, as compared to the corresponding period of the prior year, due to the recognition of increased costs of competition prepaid at August 31, 1995 related to the September 1995 Darlington event and a refund of estimated income tax payments related to fiscal year 1995. Accounts payable increased for the six months ended February 29, 1996, as compared to the six months ended February 28, 1995, primarily due to payables related to capital projects and expenses incurred during the February 1996 Daytona events. Deferred revenue increased for the six months ended February 29, 1996, as compared to the same period of 1995, due to an increase in seating capacity and certain ticket prices for future motorsports events. The increase in cash surrender value of life insurance for the six months ended February 29, 1996, as compared to the six months ended February 28, 1995, is due to collateral assignment split-dollar insurance agreements entered into by the Company during the first quarter of fiscal 1996. These agreements cover the lives of the Company's Chief Executive Officer and President, and their respective spouses. Pursuant to the agreements, the Company will advance the annual premiums of approximately $1,205,000 each year for a period of eight years. Upon surrender of the policies or payment of the death benefits thereunder, the Company is entitled to repayment of an amount equal to the cumulative premiums previously paid by the Company. The Company may cause the agreements to be terminated and the policies surrendered at any time after the cash surrender value of the policies equals the cumulative premiums advanced under the agreements. The increase in proceeds from maturities of investments during the six months ended February 29, 1996, as compared to the corresponding period of 1995, is the result of the shift in the Company's investment portfolio to short-term, highly liquid investments. Rather than being reinvested, a significant portion of the proceeds from maturities of these investments were used to finance capital projects and the investment in PSH Corp. The Company intends to continue to maintain the policy of investing excess cash primarily in short-term investments. The staggered maturities of these short-term investments would provide the Company with sufficient cash to cover the expenses arising from a delay, postponement or cancellation of an event due to poor weather conditions or other contingencies. Management believes that the Company has the ability to generate adequate amounts of cash through operations and outside financing, if necessary, to meet the Company's operational needs on both a long- and short-term basis. Capital Resources The Company continues to invest in the general improvement and expansion of its aging facilities. The amount of capital expenditures, however, can materially change from year to year based on approved projects and the availability of working capital resources. The Company's Board of Directors has approved general improvement and expansion projects with an estimated cost to complete of approximately $6.9 million at February 29, 1996. These projects consist primarily of additions and renovations to spectator capacity, administrative facilities, concession facilities and equipment. Management anticipates the completion of these projects within the next 24 months based on the availability of working capital resources. In addition to the general capital projects described above, the Company's Board of Directors approved two significant new capital expenditures in fiscal 1994 - an addition to the Winston Tower at the Daytona International Speedway and the development of a motor sports themed amusement complex at the Daytona facility to be called "Daytona USA"(R). The Winston Tower addition will encompass additional grandstands and suites, as well as catering and concession facilities. Construction began in July 1995. The project is expected to be completed in the fall of 1996. The total estimated cost to complete this project is approximately $6.7 million. "Daytona USA"(R) will combine interactive mediums, theaters, historical memorabilia and exhibits to form a motor sports themed amusement complex. The complex is being constructed adjacent to the existing Visitors Center at Daytona International Speedway. Construction began in July 1995 and opening is scheduled for the summer of 1996. Total remaining costs related to this project are expected to approximate $6.9 million. Total capital expenditures during the first half of fiscal 1996 increased approximately $9.5 million over the amount spent in the corresponding period of the prior year, primarily due to the Daytona USA (R) and Winston Tower projects, as described above. Based on the Company's current liquidity, cash and investment positions, as well as the Company's unused lines of credit of approximately $16 million, management believes that its present capital resources are sufficient to meet anticipated financing requirements in fiscal 1996. In management's opinion, financing resources are available to provide sufficient liquidity for continuing operations. Equity investments increased from August 31, 1995 as a result of the purchase by Facilities Investments, Inc., a newly formed wholly-owned subsidiary of the Company, of 200 shares of the common stock, representing 20% of the outstanding shares, of PSH Corp. for $14,975,000 in cash. At February 29, 1996, PSH Corp. owned 85% of the outstanding shares of Penske Motorsports, Inc. On that date Penske Motorsports, Inc. owned 100% of the outstanding shares of Penske Speedway, Inc., which owned and operated Michigan International Speedway, owned approximately 85% of Nazareth Speedway in Pennsylvania, 2% of North Carolina Motor Speedway (Rockingham), 100% of a racing souvenir retailer called Motorsports International Corp., and 100% of The California Speedway Corporation, which is constructing the California Speedway on 460 acres of land near Ontario, California. The Company's investment in PSH Corp. exceeded its share of the underlying net assets of PSH Corp. by approximately $7.3 million. The excess is being amortized into expense by decreasing the equity in income of equity investments using the straight-line method over twenty years. The amount amortized for the three months and six months ended February 29, 1996, was approximately $92,000. The increase in equity investments from August 31, 1995 was partially offset by the recognition of the Company's share of the current losses from operations of PSH Corp. and Watkins Glen International. The Company uses the equity method to account for its investments in PSH Corp. and Watkins Glen. Due to the seasonal concentration of racing events at the subsidiaries of PSH Corp. and at Watkins Glen, the results at February 29, 1996 are not indicative of the results to be expected for the year. In March 1996, Penske Motorsports, Inc. (PMI) effected a recapitalization resulting in PMI ownership of 100% of the outstanding shares of Michigan International Speedway, Inc. (MIS) (f/k/a Penske Speedways, Inc.), Pennsylvania International Raceway, Inc., The California Speedway Corporation, Motorsports International Corp., Competition Tire West, Inc. and Competition Tire South, Inc. MIS owns 2% of North Carolina Motor Speedway. Also pursuant to the recapitalization, Kaiser Ventures' preferred stock was automatically converted into shares of PMI common stock. After giving effect to the foregoing transactions, but prior to the commencement of the offering described below, the effective beneficial ownership of the common stock of PMI by PSH Corp. was 84.1%. Subsequent to the recapitalization, PMI completed an initial public offering (IPO) by issuing 3,737,500 shares of common stock at a price to the public of $24 per share. The proceeds to PMI, after underwriting discounts and commissions, were approximately $83.6 million. After PMI's IPO, PSH Corp. owns approximately 59.9% of PMI. As a result of the IPO, in the quarter ending May 31, 1996 the Company will record an increase in its investment in PSH Corp. of approximately $10 million, and record corresponding increases in deferred income taxes and capital in excess of par value of approximately $3.8 million and $6.2 million, respectively. Income Taxes Due to the seasonal fluctuation of the Company's business, estimated tax deposits are not required until the third quarter of operations. As a result, income taxes payable at February 29, 1996 have increased since August 31, 1995. The deferred income tax liability increased from August 31, 1995 primarily as a result of differences between financial and tax accounting treatments relating to depreciation expense. Inflation Management does not believe that inflation has had a material impact on operating costs and earnings of the Company. The Company has demonstrated the ability to appropriately adjust prices in reaction to changing costs and has aggressively pursued an ongoing cost improvement effort. Results of Operations Revenues Admission income increased during the three months and six months ended February 29, 1996, as compared to the corresponding period of the prior year, primarily due to increases in certain ticket prices. Increased interest in motorsports is reflected in both live and broadcast audiences. This continued interest has enabled the Company to successfully negotiate favorable current year contracts for broadcast rights, promotional fees and advertising. The combined effect of these contracts accounted for approximately two-thirds of the increase in motorsports related income for both the three months and six months ended February 29, 1996, as compared to the same periods of the preceding year. The remaining increase in motorsports related income for the three months and six months ended February 29, 1996, as compared to the prior year is due primarily to increases in parking and rentals of the Company's hospitality facilities. During the three months and six months ended February 29, 1996, the Company's wholly-owned subsidiary, Americrown Service Corporation, continued to expand its operations by providing food and beverage services at outdoor sporting events and entertainment activities unrelated to motorsports events conducted by International Speedway Corporation. The revenue generated by these new business opportunities accounted for over two-thirds of the increase in food, beverage and souvenir income for the three-month and six-month periods ended February 29, 1996, respectively, as compared to the corresponding periods of the prior year. The remaining increase in food, beverage and souvenir income for the three months and six months ended February 29, 1996, as compared to the three months and six months ended February 28, 1995, is attributed to increased attendance at the Company's Daytona facility and increases in certain prices. The motor sports industry generates significant revenue each year from the promotion, sponsorship and advertising of various companies and their products. General economic conditions and government regulation can adversely impact the availability to motor sports of promotion, sponsorship and advertising revenue. In August 1995, the U. S. Food and Drug Administration ("FDA") announced proposed regulations that, if implemented, could potentially restrict tobacco industry sponsorship of sporting events. Revenue generated by tobacco industry sponsorship of the Company's events accounted for less than 7% and 4% of motorsports related income for the three-month and six-month periods ended February 29, 1996 and February 28, 1995, respectively. The lengthy regulatory rulemaking process related to the FDA's proposed regulations encompasses several phases. The first phase of the process, which entailed an opportunity for official comment, closed on January 2, 1996. There are several pending legal challenges by third parties which, the Company believes, are likely to extend the process. The final outcome of this regulatory process is uncertain, and the impact on International Speedway Corporation, if any, is unclear. Expenses Standard NASCAR sanction agreements require a percentage of broadcast revenues be paid as prize money to participants in the events. As a result of increased broadcast revenues, the Company experienced a corresponding increase in prize money. This increased prize money, combined with increased point fund money, accounted for approximately three-quarters of the increase in prize and point fund monies and NASCAR sanction fees for the three-month and six-month periods ended February 29, 1996, respectively, as compared to the corresponding periods of the prior year. Motorsports related expenses, as a percentage of combined admissions and motorsports related income, remained relatively constant for the three months and six months ended February 29, 1996 and February 28,1995, respectively. As food, beverage and souvenir income increases, the Company experiences a corresponding increase in related expenses. Personnel related expenses, product costs and other fees associated with the expanded operations of Americrown Service Corporation accounted for approximately one-half and two-thirds of the increase in food, beverage and souvenir expenses for the three-month and six-month periods ended February 29, 1996, respectively, as compared with the corresponding periods of the prior year. Personnel costs associated with the Company's ongoing food, beverage and souvenir operations accounted for the majority of the remaining increases during both of these periods. General and administrative expenses, as a percentage of total operating revenues, remained relatively constant for the three months and six months ended February 29, 1996 and February 28, 1995. Because of the seasonal concentration of racing events, the results of operations for the three-month and six-month periods ended February 29, 1996 and February 28, 1995 are not indicative of the results to be expected for the year. Review Report of Independent Certified Public Accountants The Board of Directors International Speedway Corporation We have reviewed the accompanying condensed consolidated balance sheet of International Speedway Corporation as of February 29, 1996, and the related condensed consolidated statements of operations for the three-month and six-month periods ended February 29, 1996 and February 28, 1995, and the condensed consolidated statements of shareholders' equity and cash flows for the six-month periods ended February 29, 1996 and February 28, 1995. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of International Speedway Corporation as of August 31, 1995, and the related consolidated statements of income, shareholders' equity and cash flows for the year then ended (not presented separately herein) and in our report dated October 20, 1995, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of August 31, 1995, is fairly stated in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ Ernst & Young, LLP Jacksonville, Florida April 5, 1996 PART II - OTHER INFORMATION Item #6 Exhibits and Reports on Form 8-K a. Exhibits I. (27) - Article 5 Fin. Data Schedule for 2nd Qtr 10-Q B. Reports on Form 8-K A report on Form 8-K dated November 22, 1995 was filed on December 7, 1995 reporting the acquisition of assets by Facility Investments, Inc., a newly formed wholly-owned subsidiary of the Company, which purchased 200 shares of the common stock, representing 20% of the outstanding shares, of PSH Corp., a newly formed Delaware corporation, for $14,975,000 in cash. The acquisition of the 20% interest in PSH Corp., which is accounted for by the equity method, does not result in the direct or indirect acquisition of control of the underlying assets, including businesses, indirectly controlled by PSH Corp. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. INTERNATIONAL SPEEDWAY CORPORATION (Registrant) Date April 10, 1996 /s/ James C. France _____________________________________ James C. France, President Date April 10, 1996 /s/ Susan G. Schandel _____________________________________ Susan G. Schandel, Chief Financial Officer EX-27 2 ARTICLE 5 FIN. DATA SCHEDULE FOR 2ND QTR 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ACCOMPANYING CONDENSED CONSOLIDATED BALANCE SHEET OF INTERNATIONAL SPEEDWAY CORPORATION AS OF FEBRUARY 29, 1996, AND THE RELATED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED FEBRUARY 29, 1996 AND FEBRUARY 28, 1995, AND THE CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND CASH FLOWS FOR THE SIX-MONTH PERIODS ENDED FEBRUARY 29, 1996 AND FEBRUARY 28, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 Aug-31-1996 Sep-01-1995 Feb-29-1996 6-MOS 16,035 13,574 7,879 35 1,469 40,540 116,841 33,328 143,071 35,623 0 0 0 351 96,197 143,071 25,630 48,486 17,729 17,729 12,226 14 0 18,531 7,462 11,069 0 0 0 11,069 4.82 4.82
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