-----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, Ou/YAB18Py8o6v1exmRYURNweMBFU0o8VUZFyz0gG/D4OIyi86658Wt7S8tv8qtx RdUfxCHzR39fCkgnr/46Uw== 0000925751-98-000012.txt : 19981015 0000925751-98-000012.hdr.sgml : 19981015 ACCESSION NUMBER: 0000925751-98-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980831 FILED AS OF DATE: 19981014 SROS: NASD 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: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-02384 FILM NUMBER: 98725199 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 August 31, 1998. Commission file Number 0-2384 International Speedway Corporation (Exact name of registrant as specified in its charter.) Florida, U.S.A. 59-0709342 (State of other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1801 West International Speedway Boulevard, Daytona Beach, Florida 32114-1243 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (904) 254-2700 Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date: Class A Common Stock, - 10,867,947 shares as of September 30, 1998 Class B Common Stock, - 32,234,686 shares as of September 30, 1998 PART I. - FINANCIAL INFORMATION Item 1. - Financial Statements INTERNATIONAL SPEEDWAY CORPORATION Condensed Consolidated Balance Sheets
November 30, August 31, 1997 1998 (Unaudited) -------------- ------------- (IN THOUSANDS) ASSETS Current Assets: Cash and cash equivalents ................................... $ 9,974 $ 151,364 Short-term investments ...................................... 23,601 7,738 Receivables, less allowances of $100 ........................ 7,425 13,532 Inventories ................................................. 866 1,706 Prepaid expenses and other current assets ................... 4,077 12,356 ------------ ------------ Total Current Assets ......................................... 45,943 $ 186,696 Property and Equipment - at cost - less accumulated depreciation of $53,917 and $62,614 at November 30 and August 31, respectively ................................. 166,078 194,940 Other Assets: Cash surrender value of life insurance ...................... 3,590 3,732 Equity investments .......................................... 45,844 45,079 Goodwill, less accumulated amortization of $382 and $1,148 at November 30 and August 31, respectively ........... 40,400 39,634 Long-term investments ....................................... 500 500 Other ....................................................... 468 799 ------------ ------------ 90,802 89,744 ------------ ------------ Total Assets ................................................. $302,823 $ 471,380 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable ............................................ $ 6,898 $ 5,921 Deferred income ............................................. 49,338 82,053 Current portion of note payable ............................. 13,295 1,656 Other current liabilities ................................... 1,388 3,330 ------------ ------------ Total Current Liabilities .................................... 70,919 92,960 Notes payable ................................................ 1,007 2,775 Deferred income taxes ........................................ 20,990 24,904 Commitments and Contingencies (Note 5) Shareholders' Equity Class A Common Stock, $.01 par value, 80,000,000 shares authorized; 5,342,042 and 10,460,100 issued at November 30 and August 31, respectively ............................... 53 105 Class B Common Stock, $.01 par value, 40,000,000 shares authorized; 33,154,920 and 32,642,533 issued at November 30 and August 31, respectively ............................... 332 326 Additional paid-in capital .................................. 86,437 205,211 Retained earnings ........................................... 125,457 147,260 ------------ ------------ 212,279 352,902 Less unearned compensation-restricted stock ................. 2,372 2,161 ------------ ------------ Total Shareholders' Equity ................................... 209,907 350,741 ------------ ------------ Total Liabilities and Shareholders' Equity ................... $302,823 $ 471,380 ============ ============
See accompanying notes. INTERNATIONAL SPEEDWAY CORPORATION Condensed Consolidated Statements of Operations
Three Months ended August 31, August 31, 1997 1998 (Unaudited) (Unaudited) _________________________ (In Thousands, Except Per Share Data) REVENUES: Admissions, net.................................... $16,337 $ 5,184 Motorsports related income......................... 11,159 9,187 Food, beverage and souvenir income................. 5,064 3,054 Other income....................................... 546 397 ___________ __________ 33,106 17,822 EXPENSES: Direct expenses: Prize and point fund monies and NASCAR sanction fees....................... 5,718 2,443 Motorsports related expenses..................... 5,813 5,449 Food, beverage and souvenir expenses............. 2,941 2,288 General and administrative expenses................ 7,161 9,020 Depreciation and amortization ..................... 2,711 3,309 ___________ __________ 24,344 22,509 ___________ __________ Operating income (loss).............................. 8,762 (4,687) Interest income, net ................................ 460 1,385 Equity in net income from equity investments ........ 697 131 ___________ __________ Income (loss) before income taxes.................... 9,919 (3,171) Income taxes (benefit) .............................. 3,934 (1,227) ___________ __________ Net income (loss) ................................... $ 5,985 $(1,944) =========== ========== Basic net income (loss) per share (Note 2) .......... $ 0.16 $( .05) =========== ========== Diluted net income (loss) per share (Note 2) ........ $ 0.16 $( .05) =========== ========== Dividends per share.................................. $ 0.00 $ 0.00 =========== ==========
See accompanying notes. INTERNATIONAL SPEEDWAY CORPORATION Condensed Consolidated Statements of Income
Nine Months ended August 31, August 31, 1997 1998 (Unaudited) (Unaudited) _________________________ (In Thousands, Except Per Share Data) REVENUES: Admissions, net.................................... $ 56,946 $ 54,432 Motorsports related income......................... 37,033 50,104 Food, beverage and souvenir income................. 19,362 18,666 Other income....................................... 1,261 1,095 ___________ ___________ 114,602 124,297 EXPENSES: Direct expenses: Prize and point fund monies and NASCAR sanction fees....................... 16,831 19,727 Motorsports related expenses..................... 16,520 22,119 Food, beverage and souvenir expenses............. 11,264 10,396 General and administrative expenses................ 20,097 26,365 Depreciation and amortization ..................... 6,950 9,593 ___________ ___________ 71,662 88,200 ___________ ___________ Operating income..................................... 42,940 36,097 Interest income, net ................................ 2,624 2,013 Equity in net loss from equity investments........... (95) (111) Gain on sale of equity investment ................... -- 1,245 ___________ ___________ Income before income taxes........................... 45,469 39,244 Income taxes......................................... 17,523 14,993 ___________ ___________ Net income........................................... $ 27,946 $ 24,251 =========== =========== Basic net income per share (Note 2) ................. $ 0.73 $ 0.62 =========== =========== Diluted net income per share (Note 2) ............... $ 0.73 $ 0.62 =========== =========== Dividends per share.................................. $ 0.06 $ 0.06 =========== ===========
See accompanying notes. International Speedway Corporation Condensed Consolidated Statements of Shareholders' Equity
CLASS A CLASS B COMMON COMMON UNEARNED STOCK STOCK ADDITIONAL COMPENSATION- TOTAL $.01 PAR $.01 PAR PAID-IN RETAINED RESTRICTED SHAREHOLDERS' VALUE VALUE CAPITAL EARNINGS STOCK EQUITY -------- --------- --------- --------- ----------- -------------- (IN THOUSANDS) BALANCE AT NOVEMBER 30, 1996 ........... $ 40 $344 $82,236 $ 98,119 $(1,450) $179,289 Activity 12/1/96 - 8/31/97 - unaudited: Net income ........................... -- -- -- 27,946 -- 27,946 Cash dividends ($.06 per share) -- -- -- (2,310) -- (2,310) Additional expense of Class A Common Stock Offering ..................... -- -- (46) -- -- (46) Increase in equity investment ........ -- -- 2,263 -- -- 2,263 Restricted stock granted ............. -- 1 1,984 -- (1,985) -- Reacquisition of previously issued common stock ....................... -- -- -- (148) -- (148) Conversion of Class B Common Stock to Class A Common Stock ............... 12 (12) -- -- -- -- Amortization of unearned compensation. -- -- -- -- 789 789 -------- -------- -------- --------- ---------- ------------ BALANCE AT AUGUST 31, 1997 - UNAUDITED 52 333 86,437 123,607 (2,646) 207,783 Activity 9/1/97 - 11/30/97 - unaudited: Net income ........................... -- -- -- 1,850 -- 1,850 Conversion of Class B Common Stock to Class A Common Stock ............... 1 (1) -- -- -- -- Amortization of unearned compensation. -- -- -- -- 274 274 -------- -------- -------- --------- ---------- ------------ BALANCE AT NOVEMBER 30, 1997 ........... 53 332 86,437 125,457 (2,372) 209,907 Activity 12/1/97 - 8/31/98 - unaudited: Net income ........................... -- -- -- 24,251 24,251 Public offering - Class A Common Stock 46 - 117,654 -- -- 117,700 Cash dividends ($.06 per share) - -- -- (2,310) -- (2,310) Increase in equity investment ........ - -- 115 -- -- 115 Restricted stock granted ............. -- -- 680 -- (680) -- Reacquisition of previously issued common stock ....................... -- -- (57) (138) -- (195) Conversion of Class B Common Stock to Class A Common Stock ............... 6 (6) -- -- -- -- Forfeiture of restricted shares ...... -- -- (110) -- 110 -- Income tax benefit related to restricted stock plan ......................... -- -- 492 -- -- 492 Amortization of unearned compensation. -- -- -- -- 781 781 -------- -------- --------- --------- ---------- ------------ BALANCE AT AUGUST 31, 1998 - UNAUDITED $ 105 $326 $205,211 $147,260 $(2,161) $350,741 ======== ======== ========= ========= ========== ============
See accompanying notes. International Speedway Corporation Condensed Consolidated Statements of Cash Flows
Nine Months ended August 31, August 31, 1997 1998 (Unaudited) (Unaudited) ______________________________ (In Thousands) OPERATING ACTIVITIES Net income...................................... $ 27,946 $ 24,251 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization .............. 6,950 9,593 Amortization of unearned compensation....... 789 781 Deferred income taxes....................... 3,325 4,138 Undistributed loss from equity investments . 95 111 Gain on sale of equity investment .......... (1,245) Changes in Operating Assets and Liabilities: Receivables................................. (457) (6,107) Inventories................................. 455 (840) Prepaid expenses and other current assets... (1,472) (8,279) Other assets................................ (203) (351) Accounts payable............................ 2,212 (978) Deferred income............................. (351) 32,715 Other current liabilities................... 2,071 2,549 ______________________________ Net Cash Provided by Operating Activities....... 41,360 56,338 INVESTING ACTIVITIES Acquisition of investments.................... (88,708) (142,058) Proceeds from maturities of investments....... 158,047 157,921 Capital expenditures.......................... (25,467) (37,667) Cash surrender value of life insurance........ (113) (142) Proceeds from sale of equity investment....... -- 5,270 Acquisition of Watkins Glen interest, net of cash.................................. (996) Acquisition of Phoenix, net of cash .......... (43,868) Additional investments in equity investments.. (17,696) (410) ________________________________ Net Cash Used in Investing Activities.......................... (18,801) (17,086) FINANCING ACTIVITIES Payment of notes payable -- (13,057) Reacquisition of previously issued common stock................................. (148) (195) Issuance of Class A Common Stock 117,700 Additional expense of Class A Common Stock Offering..................................... (46) - Cash dividends paid ........................... (2,310) (2,310) ________________________________ Net Cash (Used in) Provided by Financing Activities......................... (2,504) 102,138 ________________________________ Net Increase in Cash and Cash Equivalents ...... 20,055 141,390 Cash and Cash Equivalents at Beginning of Period 8,057 9,974 ________________________________ Cash and Cash Equivalents at End of Period ...... $ 28,112 $151,364 ================================
See accompanying notes. International Speedway Corporation Notes to Condensed Consolidated Financial Statements August 31, 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 included in the Company's latest annual report on Form 10-K. In management's opinion, the statements include all adjustments which are necessary for a fair presentation of the results for the interim periods. All such adjustments are of a normal recurring nature. Certain reclassifications have been made to conform to the financial presentation at August 31, 1998. Because of the seasonal concentration of racing events, the results of operations for the three-month and nine-month periods ended August 31, 1997 and August 31, 1998 are not indicative of the results to be expected for the year. Note 2. -- EARNINGS PER SHARE The Company adopted Statement of Financial Accounting Standards No. 128, "Earnings Per Share", during the first quarter of fiscal 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. Weighted average shares outstanding for the periods presented are: Basic Diluted ---------- ---------- Three months ended August 31, 1997 38,189,652 38,329,197 Nine months ended August 31, 1997 38,184,085 38,314,226 Three months ended August 31, 1998 40,864,391 40,864,391 Nine months ended August 31, 1998 39,100,175 39,259,164 The difference between basic weighted average shares and diluted weighted average shares is related to shares issued under the Company's Long-term Incentive Stock Plans, 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 combined voting power of both classes of Common 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 $4.8 million and $13.8 million for the three-month and nine-month periods ended August 31, 1997, respectively, and approximately $1.9 million and $15.8 million for the three-month and nine-month periods ended August 31, 1998, respectively. NOTE 4. -- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid for income taxes and interest for the nine months ended August 31, 1997 and August 31, 1998 is as follows: 1997 1998 ________________________________ (Thousands of Dollars) Income taxes paid $12,985 $12,385 ================================ Interest paid $ 31 $ 926 ================================ NOTE 5. -- LEGAL PROCEEDINGS The Company is from time to time a party to routine litigation incidental to its business. Management does not believe that the resolution of any or all of such litigation is likely to have a material adverse effect on the Company's financial condition or results of operations. In addition to such routine litigation incident to its business the Company faces exposure from other legal proceedings as described below. The Company's indirect corporate subsidiary, Americrown Service Corporation ("Americrown"), is the sole defendant in a class action proceeding in the Circuit Court of Talladega County, Alabama which was filed in October 1996. The plaintiffs allege, 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 suit seeks to recover at least $500 for each member of the class but does not otherwise seek to recover compensatory or punitive damages or statutory attorneys' fees. A class consisting of persons who purchased racing souvenirs at Talladega Superspeedway since September 1992 was certified on July 30, 1998 by the court. Americrown has moved for reconsideration and intends to appeal the ruling to the Alabama Supreme Court. 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 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 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 nine months ended August 31, 1997 ________________________ Total revenues $ 119,363 Net income 25,635 Basic net income per share .67 Diluted net income per share .67 NOTE 7. -- EQUITY INVESTMENTS In March, 1998, the Company sold its entire equity interest in Grand Prix Association of Long Beach, Inc. ("Long Beach") for approximately $5.3 million. The Company acquired its position in Long Beach through a series of transactions during 1997. The Company recorded a pre-tax gain of approximately $1.2 million from the sale. In March of 1998, the Company acquired an additional 5% ownership interest in the Metro-Dade Homestead Motorsports Complex ("Homestead") for approximately $2.8 million, which was substantially financed by a 7.5% interest bearing note, payable on December 31, 2001. The borrower has the option of calling $500,000 of this Note on December 31, 2000. This acquisition increased the Company's ownership of Homestead to 45%. NOTE 8. -- LONG-TERM INCENTIVE STOCK PLANS On April 1, 1998 a total of 22,236 restricted shares of the Company's Class A Common Stock were awarded to certain officers and managers under the Company's Long-term Incentive Plan (the "1996 Plan"). The market value of shares awarded amounted to approximately $680,000, and 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 for restricted stock awards charged against operations during the nine months ended August 31, 1997 and August 31, 1998 was approximately $789,000 and $781,000, respectively. NOTE 9. -- CREDIT FACILITY In May of 1998, the Company entered into a five-year, unsecured, $100 million revolving line of credit facility. Borrowings under the Credit Facility will bear interest at the applicable LIBOR rate plus 40-80 basis points depending on certain financial criteria. The Credit Facility includes customary representations and warranties, covenants, defaults and conditions. At August 31, 1998 there were no borrowings under the Credit Facility. NOTE 10 -- CLASS A COMMON STOCK OFFERING During July of 1998 the Company sold an additional 4,600,000 shares of Class A Common Stock in a primary offering, including the Underwriters' over-allotment, at a price to the public of $27.00. The net proceeds to the Company were approximately $117.7 million, after deduction of underwriting discounts and commissions and estimated expenses of the offering. The Company intends to use the net proceeds of the offering to fund its estimated investment in the proposed Kansas International Speedway, as well as to partially fund completion of additions and improvements to the Company's existing motorsports facilities, and for working capital and other corporate purposes. PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations General The Company derives revenues primarily from (i) admissions to racing events and motorsports activities held at its facilities, (ii) revenue generated in conjunction with or as a result of motorsports events and activities conducted at the Company's facilities, and (iii) catering, concession and souvenir sales made during or as a result of such events and activities. "Admissions" revenue includes ticket sales from all of the Company's events, track tours and the DAYTONA USA Velocitorium. Admissions revenue for racing events is recorded upon completion of the related motorsports event. "Motorsports related income" includes television and radio broadcast rights fees, promotion and sponsorship fees, hospitality rentals (including luxury suites and chalets), advertising revenues, royalties from licenses of the Company's 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's revenues from corporate sponsorships are paid in accordance with negotiated contracts, with the identities of sponsors and the terms of sponsorship changing from time to time. "Food, beverage and souvenir income" includes revenues from concession stands, hospitality catering and direct sales of souvenirs, programs and other merchandise, as well as fees paid by third party vendors for the right to sell souvenirs and concessions at the Company's facilities. Expenses include (i) prize and point fund monies and NASCAR sanction fees, (ii) motorsports related expenses, which include costs of competition paid to sanctioning bodies other than NASCAR, labor, advertising and other expenses associated with the Company's promotion of its racing events, and (iii) food, beverage and souvenir expenses, consisting primarily of labor and costs of goods sold. The following table sets forth, for each of the indicated periods, certain selected income statement data as a percentage of total revenues:
Three Months ended Nine Months Ended August 31, August 31, 1997 1998 1997 1998 (Unaudited) (Unaudited) (Unaudited) (Unaudited) _________________________ _________________________ Revenues: Admissions, net............................. 49.4% 29.1% 49.7% 43.8% Motorsports related income.................. 33.7 51.6 32.3 40.3 Food, beverage and souvenir income.......... 15.3 17.1 16.9 15.0 Other income................................ 1.6 2.2 1.1 0.9 ________ ________ ________ _______ Total revenues ........................... 100.0% 100.0% 100.0% 100.0% Expenses: Direct expenses: Prize and point fund monies and NASCAR sanction fees................ 17.3 13.7 14.7 15.9 Motorsports related expenses.............. 17.5 30.6 14.4 17.8 Food, beverage and souvenir expenses...... 8.9 12.8 9.8 8.4 General and administrative expenses......... 21.6 50.6 17.5 21.2 Depreciation and amortization .............. 8.2 18.6 6.1 7.7 ________ ________ ________ _______ Total expenses ........................... 73.5 126.3 62.5 71.0 ________ ________ ________ _______ Operating income (loss) ...................... 26.5 (26.3) 37.5 29.0 Interest income, net ......................... 1.4 7.8 2.3 1.7 Equity in net income (loss) from equity investments................................. 2.1 .7 (0.1) (0.1) Gain on sale of equity investment ............ -- -- -- 1.0 ________ ________ ________ _______ Income (loss) before income taxes ............ 30.0 (17.8) 39.7 31.6 Income tax expense (benefit) ................. 11.9 (6.9) 15.3 12.1 ________ ________ ________ _______ Net income (loss) ............................ 18.1% (10.9%) 24.4% 19.5%
Seasonality and Variability of Quarterly Results 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's business has been, and is expected to remain, highly seasonal based on the timing of major events. For example, one of Darlington Raceway's ("Darlington") Winston Cup Series events is traditionally held on the Sunday preceding Labor Day. Accordingly, the timing of the Labor Day holiday in 1997 and 1998 resulted in the revenue and expenses for that race and the related supporting events being recognized in the quarter ended August 31 in fiscal 1997, while not being recognized until the quarter ending November 30 in fiscal 1998. Further, in July 1998 the Company announced the postponement of the NASCAR Winston Cup Series Pepsi 400 at Daytona from July 4, 1998 to October 17, 1998 as a result of the nationally publicized forest fire emergency throughout the state of Florida. The rescheduling of the Pepsi 400 at Daytona will result in event-related revenues and expenses being recognized in the quarter ending November 30, 1998 while corresponding revenues and expenses were recognized in the quarter ended August 31 in fiscal 1997. Accordingly, the Company's results of operations are not necessarily comparable on a period-to-period basis. As Management does not expect a material adverse impact related to the rescheduling of the Pepsi 400 at Daytona, results for the three-month and nine-month periods of the current year, as compared to the same periods of the prior year, are not indicative of the results to be expected for fiscal year 1998 as compared to fiscal year 1997. During fiscal 1997, the Company acquired the 50% it did not already own in Watkins Glen International ("Watkins Glen") and purchased Phoenix International Raceway ("Phoenix"). The consolidation of Watkins Glen, effective April 1, 1997, and the July 14, 1997 purchase of Phoenix resulted in increases in both revenues and expenses in fiscal 1998, as compared to the periods prior to their acquisitions in fiscal 1997. Comparison of the Three and Nine Months Ended August 31, 1998 to the Three and Nine Months Ended August 31, 1997 Admissions revenue decreased approximately $11.2 million, or 68.3%, for the three months ended August 31, 1998 as compared to the three months ended August 31, 1997. The decrease was primarily attributable to the impact of the timing of the NASCAR Winston Cup Series events at Daytona International Speedway ("Daytona") and Darlington, as described above, partially offset by increased admissions for events at Watkins Glen. Admissions revenue decreased approximately $2.5 million, or 4.4%, for the nine months ended August 31, 1998 as compared to the nine months ended August 31, 1997. The decrease in admissions revenue associated with the timing of major NASCAR events at Daytona and Darlington was largely offset by increased seating capacity and attendance, as well as an increase in the weighted average price of tickets sold, for the Speedweeks events conducted at Daytona. The remaining offsetting increase was primarily attributable to the NASCAR events conducted at Talladega Superspeedway ("Talladega"), Darlington and Watkins Glen and, to a lesser extent, events held at Phoenix for which there were no comparable revenues in 1997. Motorsports related income decreased approximately $2.0 million, or 17.7%, during the three months ended August 31, 1998 as compared to the three months ended August 31, 1997. The decrease attributable to the timing of the NASCAR Winston Cup Series events at Daytona and Darlington was partially offset by increases in television broadcast rights fees and sponsorship revenues associated with the NASCAR Winston Cup Series event at Watkins Glen and, to a lesser extent, increases in track rental and royalty revenue. Motorsports related income increased approximately $13.1 million, or 35.3%, during the nine months ended August 31, 1998 as compared to the nine months ended August 31, 1997. Exclusive of the impact of the timing of the NASCAR Winston Cup Series events held in the third quarter in 1997 and the fourth quarter in 1998, approximately three-quarters of this increase was attributable to the Speedweeks events at Daytona and the NASCAR events conducted at Talladega, Darlington and Watkins Glen. These increases were primarily related to increased television broadcast rights fees and, to a lesser extent, increases in sponsorship, luxury suite and hospitality rentals, and advertising revenues. The majority of the remaining increase was attributable to events conducted at Phoenix, for which there was no comparable revenue in 1997. Food, beverage and souvenir income decreased approximately $2.0 million, or 39.7%, during the three months ended August 31, 1998, as compared to the three months ended August 31, 1997. The decrease was primarily attributable to the timing of major NASCAR events at Daytona and Darlington, as described above, partially offset by the growth in sales of souvenirs at the gift shop adjacent to DAYTONA USA. Food, Beverage and Souvenir income decreased approximately $696,000, or 3.6%, during the nine months ended August 31, 1998 as compared to the nine months ended August 31, 1997. This decrease was primarily attributable to the impact of the timing of NASCAR Winston Cup Series events at Daytona and Darlington. The discontinuation of services to certain events conducted at facilities not owned by the Company and the decrease in revenues for the second quarter NASCAR Winston Cup Series event conducted at Talladega as compared to the rained out and rescheduled event in the prior year, which experienced increased revenues as a result of spectator attendance over multiple event days, further contributed to the decrease in food, beverage and souvenir income during the period. These decreases were partially offset by increased attendance and, to a lesser extent, increases in certain prices at Daytona's Speedweeks events, strong sales of souvenirs at the gift shop adjacent to DAYTONA USA and fees from third party vendors at Phoenix. Prize and point fund monies and NASCAR sanction fees decreased $3.3 million, or 57.3%, and increased $2.9 million, or 17.2%, for the three months and nine months ended August 31, 1998, respectively, as compared to the same periods of the prior year. For the three months ended August 31, 1998, the decrease was attributable to the timing of the NASCAR events at Daytona and Darlington. For the nine months ended August 31, 1998, excluding the impact in the third quarter related to the timing of the certain events as discussed above, substantially all of the increase was related to the NASCAR events conducted at Daytona, Talladega, Darlington and Watkins Glen. These increases were primarily attributable to increased television broadcast rights fees because standard NASCAR sanctioning agreements require that a specified percentage of television broadcast rights fees be paid as a part of prize money. The remaining increase in the nine-month period was attributable to the NASCAR Craftsman Truck Series event conducted at Phoenix in the second quarter, for which there was no comparable event in fiscal 1997. Motorsports related expenses decreased $364,000, or 6.3%, and increased $5.6 million, or 33.9%, for the three months and nine months ended August 31, 1998, respectively, as compared to the same periods of the prior year. The decrease during the three months ended August 31, 1998 was primarily due to the timing of the NASCAR events at Daytona and Darlington, partially offset by an increase in expenses associated with the rescheduling of the Pepsi 400 at Daytona as well as increases in personnel related costs, advertising, non-NASCAR costs of competition and other direct expenses. Over one-half of the increase for the nine-month period was attributable to the timing of the acquisitions of Phoenix and Watkins Glen in the prior year. The remaining increase was due to increases in personnel related costs, advertising, non-NASCAR costs of competition and other direct expenses as well as current period costs of rescheduling the Pepsi 400 at Daytona, partially offset by a decrease in expenses associated with the timing of the NASCAR events at Daytona and Darlington. Food, beverage and souvenir expense decreased approximately $653,000, or 22.2%, and $868,000, or 7.7%, for the three-month and nine-month periods ended August 31, 1998, respectively, as compared to the same periods of the prior year. These decreases were primarily attributable to the timing of the NASCAR events at Daytona and Darlington, as discussed above, partially offset by increased product costs at the gift shop adjacent to DAYTONA USA, increases in personnel and other related expenses and the current period costs of rescheduling the Pepsi 400 at Daytona. Further, expenses were lower during the nine-month period, as compared to the same period of the prior year, due to the impact of additional expenses associated with the rain out and rescheduling of a NASCAR Winston Cup Series event at Talladega in the second quarter of fiscal 1997. General and administrative expenses increased $1.9 million, or 26.0%, and $6.3 million, or 31.2%, for the three months and nine months ended August 31, 1998, respectively, as compared to the same periods of the prior year. The increases related to the timing of the acquisitions of Phoenix and Watkins Glen in the prior year, as well as the expense of assisting in local fire fighting efforts, accounted for approximately 30% and 40% of the increases for the three months and nine months ended August 31, 1998, respectively. Exclusive of the expenses of the fire fighting efforts and the timing of revenue recognition associated with the Pepsi 400 at Daytona and the NASCAR Winston Cup Series event at Darlington, general and administrative expenses as a percentage of total revenues remained relatively constant for the three-month and nine-month periods ended August 31, 1998 as compared to the same periods of the prior year. Depreciation and amortization expense increased approximately $598,000, or 22.1%, and $2.6 million, or 38.0%, for the three months and nine months ended August 31, 1998, respectively, as compared to the same periods of the prior year. For the three months ended August 31, 1998, more than one-quarter of this increase was attributable to Phoenix, including the amortization of goodwill, for which there was no comparable expense in 1997. For the nine months ended August 31, 1998, more than one-half of this increase was attributable to the timing of the acquisitions of Phoenix and Watkins Glen in the prior year. The remaining increases were attributable to ongoing improvements at the Company's other facilities. The Company experienced an approximately $925,000 increase and $611,000 decrease in net interest income for the three months and nine months ended August 31, 1998, respectively, as compared to same periods of the prior year, as a result of lower average investment balances prior to the investment of the proceeds of the Class A Common Stock Offering in July 1998 and interest expense related to the notes payable associated with the Phoenix acquisition and the second quarter purchase of an additional 5% interest in Homestead-Miami Speedway, LLC ("Homestead"). Equity in net income (loss) from equity investments represents the Company's pro rata share of the current income and losses from its equity investments and the amortization of the Company's investment in excess of its share of the investee's underlying net assets. During the three months and nine months ended August 31, 1998 this included the Company's approximately 11% indirect investment in Penske Motorsports ("PMI"), its 40% investment in Homestead, which was increased to 45% in March 1998, and its approximately 7% investment in Grand Prix Association of Long Beach ("Long Beach"), which was sold in March 1998. The comparable periods of the prior year included net losses from PMI and the Company's 50% investment in Watkins Glen through March 31, 1997. The gain on sale of equity investments of approximately $1.2 million was a result of the Company selling its equity investment in Long Beach in March of 1998. The Company sold its investment in conjunction with Dover Downs Entertainment, Inc.'s announced plans to merge with Long Beach. The after tax impact of this transaction was a gain of approximately $850,000. As a result of the foregoing, the Company's net income decreased approximately $7.9 million, or 132.5%, and $3.7 million, or 13.2%, for the three months and nine months ended August 31, 1998, respectively, as compared to the same periods of the prior year. Liquidity and Capital Resources General The Company has historically generated sufficient cash flow from operations to fund its working capital needs and capital expenditures at existing facilities, as well as to pay an annual cash dividend. At August 31, 1998, the Company had working capital of $93.7 million, compared to a working capital deficit of $25.0 million at November 30, 1997. This was primarily attributable to the Class A Common Stock Offering discussed below under "Cash Flows". There were no borrowings under the Company's credit facility at August 31, 1998. Cash Flows Net cash provided by operating activities was approximately $56.3 million for the nine months ended August 31, 1998, as compared to $41.4 million for the nine months ended August 31, 1997. The difference between the Company's August 31, 1998 net income of $24.3 million and the $56.3 million of operating cash flow was primarily attributable to an increase in deferred income of $32.7 million, depreciation and amortization of $9.6 million, an increase in deferred income taxes of $4.1 and a net increase in other current liabilities and accounts payable of $1.6, partially offset by an increase in prepaid expenses and other current assets of $8.3 million, an increase in accounts receivable of $6.1 million, and the gain of $1.2 million from the sale of Grand Prix of Long Beach. Investing activities included capital expenditures of approximately $37.7 million, partially offset by net proceeds from maturities of investments of $15.9 million and approximately $5.3 million in proceeds from the sale of the Company's investment in Long Beach. Net cash provided by financing activities was $102.1 million for the nine months ended August 31, 1998, compared to net cash used by financing activities of $2.5 million for the nine months ended August 31, 1997. Net cash provided by financing activities included the net proceeds from the July 1998 Class A Common Stock of approximately $117.7 million, partially offset by payments totaling approximately $13.1 million on the note payable related to the Phoenix acquisition and dividends paid of $2.3 million. Capital Expenditures Capital expenditures totaled approximately $37.7 million for the nine months ended August 31, 1998, compared to $25.5 million for the nine months ended August 31, 1997. Capital expenditures during the nine months ended August 31, 1998 related primarily to increased seating capacity at the Company's superspeedways, additional luxury suites at Daytona and Talladega and track lighting at Daytona. The Company expects to make approximately $56.9 million of additional capital expenditures for approved projects within the next 24 months to increase grandstand seating capacity, to construct luxury suites, and for a number of other improvements to the Company's motorsports facilities, as well as for land and preliminary construction at Kansas International Speedway as discussed below. Future Liquidity In May 1998, the Company entered into a five-year, unsecured, $100 million revolving line of credit facility with First Union National Bank, N.A. (the "Credit Facility"). Borrowings under the Credit Facility will bear interest at the applicable LIBOR rate plus 40-80 basis points depending on certain financial criteria. The Credit Facility includes customary representations and warranties, covenants, defaults and conditions. The Credit Facility is intended to be used for short-term working capital and to finance the development and/or acquisition of additional motorsports facilities. There were no borrowings under the Credit Facility at August 31, 1998. The Company is currently pursuing the development of facilities in several major markets. In December 1997, the Company entered into an agreement with the Unified Government of Wyandotte County/Kansas City, Kansas for the construction of 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, which is expected to be financed with (I) approximately $58.8 million invested by the Company and funded with a portion of the proceeds from the July 1998 Class A Common Stock offering, (ii) approximately $75.0 million of proceeds from the sale of 30-year, taxable special obligation "TIF" 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's boundaries, and (iv) a variety of other mechanisms and governmental incentives. However, there currently are no firm commitments from any person to purchase any 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, completion of the Kansas International Speedway is subject to resolution of certain litigation and a number of other significant conditions, including the Company's ability to acquire the land and secure guaranteed maximum price construction contracts within the prescribed budget. The Company believes that cash flow from operations, along with the remaining net proceeds of the July 1998 Class A Common Stock offering, will be sufficient to fund the Company's operations and approved capital expenditures for the foreseeable future. In addition, the Company intends to pursue further development and/or acquisition opportunities, the timing, size and success as well as associated potential capital commitments of which are unpredictable. Accordingly, a material acceleration in the Company's growth strategy could require the Company to obtain additional capital through debt and/or equity financings. Although there can be no assurance, management believes that adequate debt or equity financing would be available on satisfactory terms. Income Taxes 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 investments for tax and financial reporting purposes. Inflation Management does not believe that inflation has had a material impact on operating costs and earnings of the Company. Factors That May Affect Operating Results Statements contained in this Report 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. All forward-looking statements contained in this document 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. Such statements are also based on information available to the Company on the date hereof, and the Company assumes no obligation to update any such forward- looking statements. It is important to note that the Company's actual results could differ materially from those contained or projected in, or even implied by, such forward-looking statements. Some of the factors that could cause the actual results to differ materially are set forth below. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the Company's SEC filings. Copies of those filings are available from the Company and/or the SEC. Dependency upon NASCAR The Company's success has been and will remain dependent upon maintaining a good working relationship with NASCAR, the sanctioning body for NASCAR's Winston Cup Series, the Busch Grand National Series and certain other races promoted 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 number of other NASCAR races for the 1998 racing season. 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 obligation to continue to enter into sanctioning agreements with the Company to promote 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's general growth strategy includes the possible development and/or acquisition of additional motorsports facilities, there can be no assurance that NASCAR will enter into sanctioning agreements with the Company to promote races at such facilities. Dependence on Key Personnel The Company's continued success will depend upon the availability and performance of its senior management team, particularly William C. France, the Company's Chairman of the Board and Chief Executive Officer, James C. France, its President and Chief Operating Officer, and Lesa D. Kennedy, its Executive Vice President (collectively the "France Family Executives"), each of whom possesses unique and extensive industry knowledge and experience. While the Company believes that its senior management team has significant depth, the loss of any of the Company's key personnel or its inability to attract and retain key employees in the future could have a material adverse effect on the Company's operations and business plans. Uncertain Prospects of New Motorsports Facilities The Company's growth strategy includes the potential acquisition and/or development of new motorsports facilities, including the proposed Kansas International Speedway and the possible development of a motorsports facility near Chicago, Illinois. The Company's ability to implement successfully this element of its growth strategy will depend on a number of factors, including (i) the Company's ability 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) 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 reason could adversely affect its business prospects. In addition, expenses associated with developing, constructing and opening a new facility may have a negative effect on the Company's financial condition and results of operations in one or more future reporting periods. The cost of any such transaction will depend on a number of factors, including the facility's location, the extent of the Company's ownership interest and the degree of any municipal or other public support. Moreover, although management believes that it will be able to obtain financing to fund the acquisition, development and/or construction of additional motorsports facilities should the Company implement this element of its growth strategy, there can be no assurance that adequate debt or equity financing will be available on satisfactory terms. Industry Sponsorships and Government Regulation The motorsports industry generates significant recurring revenue from the promotion, sponsorship and advertising of various companies and their products. Actual or proposed government regulation can adversely impact the availability to motorsports of this promotion, sponsorship and advertising revenue. Advertising by the tobacco and alcoholic beverage industries is generally subject to greater governmental regulation than advertising by other sponsors of the Corporations's events. Since August of 1996 there have been several thus far unsuccessful governmental attempts to impose restrictions on the advertising and promotion of cigarettes and smokeless tobacco, including sponsorship of motorsports activities. These regulatory efforts if successfully implemented would have prohibited the present practice of tobacco brand name sponsorship of, or identification with, motorsports events, entries and teams. At this point the ultimate outcome of these or future government efforts to regulate the advertising and promotion of cigarettes and smokeless tobacco is uncertain and the impact, if any, on the motorsports industry is unclear. The Company is not aware of any proposed governmental regulation which would materially limit the availability to motorsports of promotion, sponsorship or advertising revenue from the alcoholic beverage industry. The combined advertising and sponsorship revenue from the tobacco and alcoholic beverage industries accounted for approximately 1.5% of the Company's total revenues in both the fiscal year ended August 31, 1996 ("fiscal 1996") and fiscal 1997. In addition, the tobacco and alcoholic beverage industries provide financial support to the motorsports industry through, among other things, their purchase of advertising time, their sponsorship of racing teams and their sponsorship of racing series such as NASCAR's Winston Cup Series and Busch Series, Grand National Division. Legal Proceedings The Company is a party to certain legal proceedings alleging price-fixing activities in connection with the sale 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, there can be no assurance the defense of the suits, or a possible adverse resolution, will not require material expenditures by the Company. 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 time to the Company's affairs and all of the Company's other executive officers are available to the Company on 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. Competition The Company's racing events face competition from other spectator-oriented sporting events and other leisure and recreational activities, including professional football, basketball and baseball. As a result, the Company's revenues will be affected by the general popularity of motorsports, the availability of alternative forms of recreation and changing consumer preferences. The Company's 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"), the United States Auto Club ("USAC"), the National Hot Rod Association ("NHRA"), the Sports Car Club of America ("SCCA"), the United States Road Racing Championship ("USRRC"), the Automobile Racing Club of America ("ARCA") and others. Management believes that the primary elements of competition in attracting motorsports spectators and corporate sponsors to a racing event and facility are the type and caliber of promoted racing events, facility location, sight lines, pricing and customer conveniences that contribute to a total entertainment experience. Many sports and entertainment businesses have resources that exceed those of the Company. Impact of Consumer Spending on Results The success of the Company's operations depends to a significant extent upon a number of factors relating to discretionary consumer spending, including economic conditions affecting disposable consumer income such as employment, business conditions, interest rates and taxation. These factors can impact both attendance at 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 conditions affect sales of, among other things, tickets, concessions and souvenirs at these events. Although the Company sells tickets well 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's financial condition and results of operations would be adversely affected to the extent claims and associated expenses exceed insurance recoveries. Other Regulatory Matters Management believes that the Company's operations are in substantial compliance with all applicable federal, state and local environmental laws and regulations. Nonetheless, if damage to persons or property or contamination of the environment is determined to have been caused or exacerbated by the conduct of the Company's business or by pollutants, substances, contaminants or wastes used, generated or disposed of by the Company, or which may be found on the property of the Company, the Company 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 is self-insured could be material. State and local laws relating to the protection of the environment also include noise abatement laws that may be applicable to the Company's racing events. Changes in the provisions or application of federal, state or local environmental laws, regulations or requirements, or the discovery of theretofore unknown conditions, could also require additional material expenditures by the Company. In addition, the 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 Company 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. 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 related to information technology systems has been made and the plans to resolve the related issues are being implemented. Most major information technology 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 with regard to information technology systems by the end of fiscal 1998. The Company suspects that some of its non-information technology systems, such as exhibit controllers, elevators, heating and air-conditioning systems, etc., with date sensitive software and embedded microprocessors may be affected, and evaluation is underway. An estimate of the costs of correcting or replacing critical non-information technology systems is incomplete. The Company has also developed a plan of communication with significant business partners to identify and minimize disruptions to the Company's operations resulting from the Year 2000 issue. There can be no certainty that the computer programs and business systems of third parties on which the Company relies will not have an adverse effect on the Company's operations. However, because of the nature of its business, the Company believes at this time that a failure of the Company's vendors, sponsors or customers to resolve issues involving the Year 2000 problem will not be material. The Company anticipates completing substantially all of its Year 2000 preparation during fiscal 1999. In the event the Company falls behind on its timetable for achieving Year 2000 compliance, additional internal resources will be focused on completing critical projects and developing contingency plans. The Company at this time 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 information and non-information technology systems and third party modification plans. There is no guarantee that the estimates will be achieved and actual costs could differ materially from those anticipated. PART II - OTHER INFORMATION Item 1. Legal Proceedings The Company is from time to time a party to routine litigation incidental to its business. Management does not believe that the resolution of any or all of such litigation is likely to have a material adverse effect on the Company's financial condition or results of operations. In addition to such routine litigation incident to its business the Company faces exposure from other legal proceedings as described below. The Company's indirect corporate subsidiary, Americrown Service Corporation ("Americrown"), is the sole defendant in a class action proceeding in the Circuit Court of Talladega County, Alabama which was filed in October 1996. The plaintiffs allege, 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 suit seeks to recover at least $500 for each member of the class but does not otherwise seek to recover compensatory or punitive damages or statutory attorneys' fees. A class consisting of persons who purchased racing souvenirs at Talladega Superspeedway since September 1992 was certified on July 30, 1998 by the court. Americrown has moved for reconsideration and intends to appeal the ruling to the Alabama Supreme Court. 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 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 Item 5. Exhibits and Reports on Form 8-K a. Exhibits I. (27) - Article 5 Fin. Data Schedule for 3rd Qtr 10-Q b. Reports on Form 8-K On July 6, 1998, the Company filed a report on Form 8-K which reported the following "Other Events" pursuant to Item 5: On July 2, 1998, International Speedway Corporation issued press releases announcing its financial results for the second quarter and six months ended May 31, 1998 and the rescheduling of the Pepsi 400 to October 17, 1998 from July 4, 1998. Copies of the press releases were attached to the report as Exhibit 99.1 and Exhibit 99.2, respectively. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. INTERNATIONAL SPEEDWAY CORPORATION (Registrant) Date October 14, 1998 /s/ James C. France _____________________________________ James C. France, President Date October 14, 1998 /s/ Susan G. Schandel _____________________________________ Susan G. Schandel, Chief Financial Officer EX-27 2 ARTICLE 5 FIN. DATA SCHEDULE FOR 3RD QTR 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ACCOMPANYING CONDENSED CONSOLIDATED BALANCE SHEET OF INTERNATIONAL SPEEDWAY CORPORATION AS OF AUGUST 31, 1998, AND THE RELATED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS, SHAREHOLDERS' EQUITY AND CASH FLOWS FOR THE NINE-MONTH PERIOD ENDED AUGUST 31, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 Nov-30-1998 Dec-01-1997 Aug-31-1998 9-MOS 151,364 7,738 13,632 100 1,706 186,696 257,554 62,614 471,380 92,960 0 0 0 431 350,310 471,380 123,202 124,297 52,242 52,242 35,958 55 518 39,244 14,993 24,251 0 0 0 24,251 .62 .62
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