-----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, KHesXw7cDV4llwEsQAo2X8cnzyRgJJNP0lgSKmKyNbbVm0KtJEizK7pY4xGj447y TMyACg+Lp4FYm4VWaP5lwg== 0000950170-98-001138.txt : 19980602 0000950170-98-001138.hdr.sgml : 19980602 ACCESSION NUMBER: 0000950170-98-001138 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19980601 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: 0831 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-55709 FILM NUMBER: 98640556 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 S-3 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 1, 1998 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------- INTERNATIONAL SPEEDWAY CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) FLORIDA 59-0709342 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
---------------- GLENN R. PADGETT INTERNATIONAL SPEEDWAY CORPORATION 1801 WEST INTERNATIONAL 1801 WEST INTERNATIONAL SPEEDWAY BOULEVARD SPEEDWAY BOULEVARD DAYTONA BEACH, FLORIDA 32114 DAYTONA BEACH, FLORIDA 32114 (904) 947-6446 (904) 254-2700 FAX: (904) 947-6884 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE) INCLUDING AREA CODE, OF AGENT FOR SERVICE)
---------------- COPIES OF COMMUNICATIONS TO: BRUCE E. MACDONOUGH GREENBERG TRAURIG HOFFMAN DONN A. BELOFF LIPOFF ROSEN & QUENTEL, P.A. HOLLAND & KNIGHT LLP 1221 BRICKELL AVENUE ONE EAST BROWARD BOULEVARD MIAMI, FLORIDA 33131 FT. LAUDERDALE, FLORIDA 33302 PHONE: (305) 579-0500 PHONE: (954) 525-1000 FAX: (305) 579-0717 FAX (954) 463-2030
---------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] ---------------- CALCULATION OF REGISTRATION FEE - --------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF OF SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE(2) OFFERING PRICE(1)(2) REGISTRATION FEE Class A Common Stock, $.01 par value per share....... 4,600,000 shares $ 30.00 $138,000,000 $40,710
- -------------------------------------------------------------------------------- (1) Includes shares of Common Stock which may be purchased by the Underwriters pursuant to an over-allotment option. (2) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) under the Securities Act of 1933 and based on the average of the high and low sales prices for the Registrant's Class A Common Stock on May 27, 1998 as reported by the Nasdaq National Market. ---------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED JUNE 1, 1998 P R O S P E C T U S [GRAPHIC OMITTED] INTERNATIONAL SPEEDWAY CORPORATION 4,000,000 Shares Class A Common Stock ---------------- All of the shares of Class A Common Stock offered hereby (the "Offering") are being sold by International Speedway Corporation (the "Company"). The Company's Class A Common Stock is traded on the Nasdaq National Market under the symbol "ISCA." On , 1998, the closing price of the Class A Common Stock on the Nasdaq National Market was $ . See "Price Range of Common Stock." The Company's authorized capital stock includes Class A Common Stock and Class B Common Stock. The economic rights of the Class A Common Stock and the Class B Common Stock (collectively the "Common Stock") are identical, except that each share of Class A Common Stock entitles the holder thereof to one-fifth (1/5) vote in respect of matters submitted for the vote of holders of Common Stock, whereas each share of Class B Common Stock entitles the holder thereof to one (1) vote on such matters. Immediately after this Offering, the outstanding Class A Common Stock will represent approximately 5.6% of the combined voting power of both classes of Common Stock. Immediately after this Offering, William C. France (the Company's Chairman of the Board and Chief Executive Officer), James C. France (the Company's President and Chief Operating Officer), members of their families and affiliates (collectively the "France Family Group") will in the aggregate beneficially own approximately 49.8% of the Company's outstanding Common Stock and approximately 60.9% of the combined voting power of both classes of Common Stock. Each share of Class B Common Stock is convertible on a one-for-one basis at any time at the election of the holder into one fully paid and nonassessable share of Class A Common Stock. The Class A Common Stock is not convertible into Class B Common Stock. See "Description of Capital Stock." ---------------- SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE CLASS A COMMON STOCK OFFERED HEREBY. ---------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - --------------------------------------------------------------------------------
UNDERWRITING PRICE TO DISCOUNTS AND PROCEEDS TO PUBLIC COMMISSIONS(1) COMPANY(2) Per Share $ $ $ Total(3) $ $ $
- -------------------------------------------------------------------------------- (1) For information regarding indemnification of the Underwriters, see "Underwriting." (2) Before deducting expenses of the Offering, estimated at $ . (3) The Company has granted the Underwriters a 30-day option to purchase up to 600,000 additional shares of Class A Common Stock solely to cover over-allotments, if any. See "Underwriting." If such option is exercised, the total Price to Public, Underwriting Discounts and Commissions and Proceeds to Company will be $ , $ and $ , respectively. ---------------- The shares of Class A Common Stock are being offered by the several Underwriters named herein, subject to prior sale, when, as and if accepted by them and subject to certain conditions. It is expected that certificates for the shares of Class A Common Stock offered hereby will be available for delivery on or about , 1998, at the offices of Smith Barney Inc., 333 West 34th Street, New York, New York 10001. ---------------- Salomon Smith Barney CIBC Oppenheimer , 1998 [PHOTOS] CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON STOCK, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMPANY'S CLASS A COMMON STOCK ON NASDAQ IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING." PROSPECTUS SUMMARY THE FOLLOWING INFORMATION IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION. UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES HEREIN TO THE "COMPANY" MEAN INTERNATIONAL SPEEDWAY CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES CONSIDERED AS ONE ENTERPRISE. THE COMPANY International Speedway Corporation, a leading promoter of motorsports activities in the United States, owns and/or operates five of the nation's premier motorsports facilities--Daytona International Speedway in Florida; Talladega Superspeedway in Alabama; Phoenix International Raceway in Arizona; Darlington Raceway in South Carolina; and Watkins Glen International road course facility in upstate New York. Other motorsports interests include the operation of Tucson Raceway Park in Arizona, a 45% indirect interest in the operations of the Metro--Dade Homestead Motorsports Complex near Miami, Florida and an approximately 11% indirect interest in Penske Motorsports, Inc. The Company currently promotes over 80 stock car, sports car, truck, motorcycle and other racing events annually, including eight NASCAR Winston Cup Series championship point races, two Winston Cup Series non-championship point events, five NASCAR Busch Series, Grand National Division ("Busch Grand National Series") races, the premier sports car endurance event in the United States (the Rolex 24 at Daytona) and a number of prestigious motorcycle races. The Company also owns and operates MRN Radio, the nation's largest independent sports radio network, and DAYTONA USA--The Ultimate Motorsports Attraction, a motorsports-themed entertainment complex that includes interactive media, theaters, historical memorabilia, exhibits and tours of Daytona International Speedway. In the year ended November 30, 1997 ("fiscal 1997"), NASCAR-sanctioned races at the Company's facilities accounted for approximately 78% of the Company's total revenues. According to THE WALL STREET JOURNAL, stock car racing is the most-watched professional sport on U.S. television behind the National Football League. According to Nielsen Media Research ("Nielsen"), more than 175 million people tuned to NASCAR's televised events in 1997. Moreover, based on statistics developed by The Goodyear Tire and Rubber Co. ("Goodyear"), attendance at NASCAR's three major professional circuits, the Winston Cup Series, the Busch Grand National Series and the Craftsman Truck Series, grew 9.0%, 16.6% and 13.5%, respectively, from 1996 to 1997. The Company believes that the demographic profile of this growing base of spectators and viewers has considerable appeal to sponsors and advertisers, including leading consumer product and manufacturing companies which have expanded their participation in the motorsports industry. Published reports indicate that corporate sponsors will spend an estimated $1.1 billion on motorsports marketing programs in 1998. The Company's major sponsors include Pepsi, Coca-Cola, Kmart, Sears, Anheuser Busch, Rolex, Pontiac, Ford, Chevrolet, Dura-Lube, DuPont, Circuit City, Goodyear, TranSouth Financial, First Union, NAPA Auto Parts and Gatorade. The Company attributes its historical increases in revenues and profits to the increasing popularity of the Winston Cup Series, the Busch Grand National Series and other motorsports events in the United States, as well as an operating strategy that emphasizes (i) senior management's long-term association with the motorsports industry, (ii) capital improvements and other efforts designed to maximize race spectators' total entertainment experience, (iii) integrated marketing programs targeting both corporate and individual customers, (iv) the development of long-term relationships with sponsors, and (v) the use of media to increase awareness of the Company's major racing events and the motorsports industry. 3 RECENT DEVELOPMENTS Following its initial public offering of Class A Common Stock in November 1996, the Company completed several significant projects: /bullet/ During fiscal 1997, the Company increased combined grandstand seating capacity at Daytona, Talladega, Darlington and Watkins Glen by approximately 13%, and increased the total number of luxury suites at these facilities by approximately 40%. /bullet/ In April 1997, the Company acquired the 50% interest it did not own in Watkins Glen International, strengthening the Company's presence in an important northeast market. /bullet/ In July 1997, the Company acquired Phoenix International Raceway, providing a key western presence in one of the nation's largest markets. /bullet/ In July 1997, the Company also acquired a 40% indirect interest in the operations of the Metro-Dade Homestead Motorsports Complex located south of Miami, Florida, and increased this interest to 45% in March 1998. FUTURE GROWTH STRATEGY The Company has experienced significant growth in recent years with revenues and net income increasing from approximately $59.2 million and $12.8 million for the fiscal year ended August 31, 1993 to $141.4 million and $29.8 million for the year ended November 30, 1997, respectively. The Company expects to continue to increase its revenues and profitability by focusing on the key elements of its growth strategy, including (i) expanding the Company's existing track facilities to satisfy existing spectator demand, (ii) developing a unique brand identity for each of the Company's motorsports facilities, (iii) increasing television, sponsorship and other motorsports related income, (iv) maximizing the profitability of existing facilities and events, and (v) acquiring and/or developing additional motorsports facilities in new markets. The Company expects to make approximately $56.0 million of capital expenditures for projects at existing facilities during the 24-month period ending February 29, 2000 to increase grandstand seating capacity, to construct luxury suites, and for a number of other improvements, of which approximately $7.8 million had been spent as of the date hereof. These planned capital expenditures include a track lighting project at Daytona, which will allow CBS Sports to broadcast the Pepsi 400 at Daytona on the evening of July 4, 1998, the first live network broadcast of an automobile race in prime time. In December 1997, the Company entered into a development agreement for the construction of the Kansas International Speedway, a 1.5 mile oval motor speedway near Kansas City, Kansas. The aggregate cost of acquiring and developing the first phase of the Kansas International Speedway land and facility (which will accommodate approximately 75,000 spectators) is expected to be over $200 million, of which the Company's estimated investment of approximately $58.8 million will be funded with a portion of the proceeds of this Offering. Ground breaking is scheduled for 1998, with racing expected to begin in 2000. In addition, the Company and Indianapolis Motor Speedway Corporation are equal partners in a venture exploring the possible development of a new motorsports facility near Chicago, Illinois. The Company's ability to develop the Kansas International Speedway is subject to the resolution of certain litigation and to a number of other significant conditions, including the Company's ability to acquire the land and obtain all requisite regulatory approvals. 4 The Company was incorporated in 1953 under the laws of the State of Florida under the name "Bill France Racing, Inc." and changed its name to "International Speedway Corporation" in 1968. The Company's principal executive offices are located at 1801 West International Speedway Boulevard, Daytona Beach, Florida 32114, and its telephone number is (904) 254-2700. "DAYTONA USA/registered trademark/", the "Daytona 500/registered trademark/", "Daytona International Speedway/registered trademark/", "Talladega Superspeedway/registered trademark/", "Darlington/registered trademark/", "Phoenix International Raceway/registered trademark/", "Watkins Glen International/registered trademark/" and "World Center of Racing/registered trademark/" are registered trademarks and service marks of the Company. "NASCAR/registered trademark/" and "Grand National/registered trademark/" are registered trademarks and service marks of the National Association for Stock Car Auto Racing, Inc. ("NASCAR"). THE OFFERING Class A Common Stock offered .......... 4,000,000 shares Common Stock to be outstanding after the Offering ................... 9,702,135 shares of Class A Common Stock 32,800,498 shares of Class B Common Stock 42,502,633 total shares of Common Stock Use of proceeds ....................... The Company intends to use approximately $58.8 million of the net proceeds from this Offering to partially fund its estimated investment in the Kansas International Speedway, approximately $48.2 million to fund additions and improvements to track facilities and the balance for working capital and other general corporate purposes, including possible acquisitions. See "Use of Proceeds." Nasdaq National Market symbol ......... ISCA
5 SUMMARY FINANCIAL INFORMATION
YEAR ENDED AUGUST 31,(1) ---------------------------------------------------------- 1993 1994 1995 1996 ---------------- ------------- ------------- ------------- (IN THOUSANDS, EXCEPT PER SHARE, SELECTED OPERATING AND INDUSTRY ATTENDANCE DATA) INCOME STATEMENT DATA: Revenues: Admissions, net ............................. $ 32,078 $ 36,935 $ 43,274 $ 50,140 Motorsports related income .................. 16,557 18,764 24,033 27,433 Food, beverage and souvenir income ..................................... 9,515 12,291 14,442 17,505 Other income ................................ 1,003 943 423 964 --------- ----------- ----------- ----------- Total revenues ............................. 59,153 68,933 82,172 96,042 Expenses: Direct expenses: Prize and point fund monies and NASCAR sanction fees ...................... 8,251 9,412 11,765 13,865 Motorsports related expenses ............... 10,470 11,470 11,604 15,336 Food, beverage and souvenir expenses .................................. 4,775 7,867 8,107 10,278 General and administrative expenses ................................... 13,046 14,307 18,202 20,930 Depreciation and amortization ............... 3,006 3,828 4,798 6,302 --------- ----------- ----------- ----------- Total expenses ............................. 39,548 46,884 54,476 66,711 --------- ----------- ----------- ----------- Operating income (loss) ...................... 19,605 22,049 27,696 29,331 Net income (loss) ............................ $ 12,763(2) $ 14,566 $ 18,363 $ 19,681 =========== =========== =========== =========== Diluted earnings (loss) per share(3) ......... $ 0.37(2) $ 0.43 $ 0.54 $ 0.57 SELECTED OPERATING DATA: Total admissions ............................. 767,717 848,134 985,739 1,028,970 Number of seats(4): Daytona ..................................... 99,204 103,600 109,779 113,149 Talladega ................................... 67,435 74,793 82,671 95,256 Phoenix(5) .................................. N/A N/A N/A N/A Darlington .................................. 32,455 37,281 39,917 42,553 Watkins Glen ................................ 26,061 26,061 28,095 33,221 INDUSTRY ATTENDANCE DATA(6): Winston Cup Series events .................... 4,020,000 4,896,000 5,327,000 5,588,000 Busch Grand National Series events ........... 1,165,000 1,302,000 1,604,000 1,666,000 THREE TWELVE THREE MONTHS MONTHS MONTHS YEAR ENDED ENDED ENDED ENDED FEBRUARY 28, NOV. 30, NOV. 30, NOV. 30, ------------------------- 1996 1996 1997 1997 1998 ------------ ------------- ------------- ------------ ------------ (IN THOUSANDS, EXCEPT PER SHARE, SELECTED OPERATING AND INDUSTRY ATTENDANCE DATA) INCOME STATEMENT DATA: Revenues: Admissions, net ............................. $ 4,191 $ 50,705 $ 69,487 $26,360 $31,889 Motorsports related income .................. 3,972 28,376 46,650 17,209 27,165 Food, beverage and souvenir income ..................................... 1,943 17,723 23,408 8,078 8,966 Other income ................................ 390 1,192 1,829 219 264 ------- ----------- ----------- ------- ------- Total revenues ............................. 10,496 97,996 141,374 51,866 68,284 Expenses: Direct expenses: Prize and point fund monies and NASCAR sanction fees ...................... 1,301 13,724 20,567 6,984 11,092 Motorsports related expenses ............... 2,814 16,384 23,075 5,150 8,154 Food, beverage and souvenir expenses .................................. 1,536 10,559 13,435 4,510 4,469 General and administrative expenses ................................... 5,057 21,721 29,486 6,174 8,528 Depreciation and amortization ............... 2,353 7,368 9,910 1,945 3,041 ------- ----------- ----------- ------- ------- Total expenses ............................. 13,061 69,756 96,473 24,763 35,284 ------- ----------- ----------- ------- ------- Operating income (loss) ...................... (2,565) 28,240 44,901 27,103 33,000 Net income (loss) ............................ $(1,867) $ 18,834 $ 29,796 $17,475 $20,149 ======= =========== =========== ======= ======= Diluted earnings (loss) per share(3) ......... $ (0.05) $ 0.54 $ 0.78 $ 0.46 $ 0.53 SELECTED OPERATING DATA: Total admissions ............................. N/A N/A 1,416,618 N/A N/A Number of seats(4): Daytona ..................................... 113,149 113,149 126,067 126,067 146,628 Talladega ................................... 95,256 95,256 110,133 95,256 110,133 Phoenix(5) .................................. N/A N/A 68,817 N/A 68,817 Darlington .................................. 42,553 42,553 50,805 42,553 50,805 Watkins Glen ................................ 33,221 33,221 35,884 33,221 35,884 INDUSTRY ATTENDANCE DATA(6): Winston Cup Series events .................... N/A 5,588,000 6,091,000 N/A N/A Busch Grand National Series events ........... N/A 1,666,000 1,943,000 N/A N/A
FEBRUARY 28, 1998 ---------------------------- ACTUAL AS ADJUSTED(7) ------------ --------------- BALANCE SHEET DATA: Working capital (deficit) .......... $ (9,129) $ Total assets ....................... 337,366 Long-term debt ..................... -- Total shareholders' equity ......... 230,675
- ---------------- (1) The Company changed its fiscal year-end to November 30 effective December 1, 1996. This resulted in a three-month transition period commencing September 1, 1996 and ending November 30, 1996. (2) Reflects income of $288,000 ($0.01 per share) attributable to the cumulative effect of a change in accounting principle. (3) Earnings per share amounts prior to 1998 have been restated as required to comply with Statement of Financial Accounting Standards No. 128. See Note 1 of Notes to the Company's audited financial statements. (4) Consists of seating in grandstands and luxury suites as of the end of period. Excludes infield admission. (5) Phoenix International Raceway was acquired July 14, 1997. (6) This information relates to the year which ended December 31 following the end of the specified fiscal year and was obtained from public information provided by Goodyear. (7) Adjusted to give effect to the sale by the Company of 4,000,000 shares of Class A Common Stock at an assumed public offering price of $ per share and the application of the estimated net proceeds therefrom as set forth in "Use of Proceeds." 6 RISK FACTORS PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE FACTORS SET FORTH BELOW, AS WELL AS THE OTHER INFORMATION PROVIDED ELSEWHERE IN THIS PROSPECTUS, IN EVALUATING AN INVESTMENT IN THE COMPANY. STATEMENTS IN THIS PROSPECTUS TO THE EFFECT OF THE COMPANY'S OR MANAGEMENT'S ANTICIPATIONS, BELIEFS, EXPECTATIONS, INTENTIONS, STRATEGIES, SCHEDULES AND/OR WORDS OF SIMILAR IMPORT WHICH ARE NOT PURELY HISTORICAL FACT OR WHICH APPLY PROSPECTIVELY ARE "FORWARD-LOOKING" STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934. SUCH STATEMENTS RELATE TO, AMONG OTHER ITEMS, (I) THE COMPANY'S GROWTH STRATEGIES, INCLUDING ITS POTENTIAL ACQUISITION AND/OR DEVELOPMENT OF NEW MOTORSPORTS FACILITIES, (II) ANTICIPATED TRENDS IN THE MOTORSPORTS INDUSTRY AND DEMOGRAPHICS, AND (III) THE COMPANY'S ABILITY TO ENTER INTO CONTRACTS WITH TELEVISION NETWORKS AND SPONSORS. THESE FORWARD-LOOKING STATEMENTS ARE BASED LARGELY ON THE COMPANY'S EXPECTATIONS AND ARE SUBJECT TO A NUMBER OF RISKS AND UNCERTAINTIES, CERTAIN OF WHICH ARE BEYOND THE COMPANY'S CONTROL. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF A NUMBER OF FACTORS, INCLUDING THOSE DESCRIBED BELOW. IN LIGHT OF THESE RISKS AND UNCERTAINTIES, THERE CAN BE NO ASSURANCE THAT THE EVENTS THAT ARE SUBJECT TO THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS PROSPECTUS WILL IN FACT TRANSPIRE. DEPENDENCY UPON NASCAR The Company'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. See "NASCAR." 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. See "NASCAR," "Business--Growth Strategy" and "Management." 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 7 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 would 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. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources," "Business--Growth Strategy" and "Business--Legal Proceedings." INDUSTRY SPONSORSHIPS AND GOVERNMENT REGULATION The motorsports industry and the Company generate significant recurring revenue from the promotion, sponsorship and advertising of various companies and their products. 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 Company's events. In August 1996, the U.S. Food and Drug Administration (the "FDA") issued regulations concerning advertising and sales of cigarettes and smokeless tobacco to minors which would, in part, restrict tobacco industry sponsorship of all sporting events, including motorsports, effective August 1998. The FDA regulations would prohibit the present practice of tobacco product brand name sponsorship of, or identification with, motorsports events, entries and teams. If these rules become effective, no assurance can be given that suitable alternative sponsors for the events, entries and teams could be located. Management is aware of pending legal challenges, as well as legislative initiatives, which are expected to delay and could change the scheduled implementation of these regulations. In June 1997, the major United States companies engaged in the manufacture of cigarettes and smokeless tobacco (collectively the "tobacco industry") entered into a memorandum of understanding with, among others, the Attorneys General of six states to support the adoption of federal legislation and ancillary undertakings that would resolve many of the regulatory and litigation issues affecting the United States tobacco industry, and which would have had an effect similar to the pending FDA regulations and thereby settle potential challenges. This proposed settlement required federal legislative approval and enabling legislation which was not ultimately obtained in a form satisfactory to the tobacco industry. Accordingly, the tobacco industry has recently announced that it is withdrawing from the proposed settlement. At this point, the final outcome of the challenges to the FDA regulations is uncertain, and the ultimate impact on the motorsports industry and the Company, if any, is unclear. The Company is not 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 Grand National Series. 8 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. See "Business--Legal Proceedings." POTENTIAL CONFLICTS OF INTEREST William C. France and James C. France beneficially own all of NASCAR's capital stock, and each of the France Family Executives, the Company's Vice President--Administration, the Company's General Counsel and certain other non-officer employees (collectively the "Shared Employees") devote portions of their time to NASCAR's affairs. Each of the Shared Employees devotes substantial 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. See "NASCAR," "Management" and "Certain Transactions." 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. See "Business--Competition." 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 9 in advance of its most popular events, poor weather conditions could have a material adverse effect on the Company's results of operations, particularly any interruption of the Company's February "Speedweeks" events. LIABILITY FOR PERSONAL INJURIES Motorsports can be dangerous to participants and to spectators. The Company maintains insurance policies that provide coverage within limits that management believes should generally be sufficient to protect the Company from material financial loss due to liability for personal injuries sustained by persons on the Company's premises in the ordinary course of Company business. Nevertheless, there can be no assurance that such insurance will be adequate or available at all times and in all circumstances. The Company'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. 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 race events. Historically, the Company has achieved its highest net income in the fiscal quarter ending February 28. Partly in response to this seasonality and the desire to better conform to the traditional racing season, the Company changed its fiscal year-end from August 31 to November 30 effective December 1, 1996. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Seasonality and Quarterly Results." IMPACT OF THE YEAR 2000 The Year 2000 issue is the result of computer programs and other business systems being written using two digits rather than four to represent the year. Many of the time sensitive applications and business systems of the Company and its business partners may recognize a date using "00" as the year 1900 rather than the year 2000, which could result in system failure or disruption of operations. The Year 2000 problem will impact the Company and its business partners. An assessment of the Year 2000 exposure has been made by the Company and the plans to resolve the related issues are being 10 implemented. Most major systems have already been updated or replaced with applications that are Year 2000 compliant in the normal course of business. The Company believes it will be able to achieve Year 2000 compliance by the end of fiscal 1998. The Company has also developed a plan of communication with significant business partners to ensure that the Company's operations are not disrupted through these relationships and that the Year 2000 issues are resolved in a timely manner. The Company believes that it will satisfactorily resolve all significant Year 2000 problems and that the related costs will not be material. Estimates of Year 2000 related costs are based on numerous assumptions, including the continued availability of certain resources, the ability to correct all relevant applications and third party modification plans. There is no guarantee that the estimates will be achieved and actual costs could differ materially from those anticipated. BROAD DISCRETION REGARDING PROCEEDS OF THE OFFERING A substantial portion of the net proceeds of this Offering has been allocated to working capital and general corporate purposes. Accordingly, management will have broad discretion as to the application of the Offering proceeds. Pending the Company's use of such proceeds for general corporate purposes, including improvements to existing facilities and the possible acquisition and/or development of new facilities, such proceeds will be placed in interest-bearing investments. It is possible that the return on such investments will be less than that which would be realized were the Company immediately to use such funds for other purposes. EFFECTIVE VOTING CONTROL BY FRANCE FAMILY GROUP AND ANTI-TAKEOVER EFFECT OF DUAL CLASSES OF STOCK Holders of Class A Common Stock have per share voting rights that are one-fifth (1/5th) of the voting rights of holders of Class B Common Stock. One of the principal purposes of having two classes of Common Stock with different voting rights is to maintain existing shareholders' control of the Company. Immediately after this Offering, the Class A Common Stock will represent approximately 5.6% of the combined voting power of both classes of the Company's Common Stock. Immediately after this Offering, the France Family Group will in the aggregate beneficially own approximately 49.8% of the Company's outstanding capital stock and approximately 60.9% of the combined voting power of both classes of Common Stock. Accordingly, if members of the France Family Group vote their shares of Common Stock in the same manner, they will have sufficient voting power (without the approval of the Company's other shareholders) to elect the entire Board of Directors of the Company and, in general, to determine the outcome of various matters submitted to shareholders for approval, including fundamental corporate transactions. The members of the France Family Group have advised the Company that they do not presently intend to convert the shares of Class B Common Stock beneficially owned by them into shares of Class A Common Stock. To the extent that holders of Class B Common Stock other than the France Family Group elect to convert such shares, the relative voting power of the France Family Group will increase. Voting control by the France Family Group may discourage certain types of transactions involving an actual or potential change in control of the Company, including transactions in which the holders of Class A Common Stock might receive a premium for their shares over prevailing market prices. See "Description of Capital Stock." POSSIBLE ANTI-TAKEOVER EFFECTS OF FLORIDA LAW, CHARTER PROVISIONS AND PREFERRED STOCK Certain provisions of Florida law and the Company's Amended and Restated Articles of Incorporation ("Articles") may deter or frustrate a takeover attempt of the Company that a shareholder might consider in its best interest. Among other things, the Company's Articles (i) divide the Company's Board of Directors into three classes, each of which serves for different three-year periods, (ii) provide that special meetings of the shareholders may be called only by the Board of Directors or upon the written demand of the holders of not less than 50% of the votes entitled to be cast at a special meeting, and (iii) establish certain advance notice procedures for nomination of candidates for election as directors and for shareholder proposals to be considered at annual shareholders' 11 meetings. In addition, the Company is authorized to issue one million shares of preferred stock in one or more series, having terms fixed by the Board of Directors without shareholder approval, including voting, dividend or liquidation rights that could be greater than or senior to the rights of holders of Common Stock. Issuance of shares of Preferred Stock could also be used as an anti-takeover device. The Company has no current intentions or plans to issue any such Preferred Stock. See "Description of Capital Stock." SHARES ELIGIBLE FOR FUTURE SALE Upon completion of this Offering, all of the shares of Class A Common Stock offered hereby will be eligible for public sale without restriction. Approximately 16.7 million additional shares of Class A Common Stock currently outstanding or issuable upon conversion of currently outstanding shares of Class B Common Stock are also eligible for public sale without restriction. The holders of the approximately 21.8 million remaining outstanding shares of Common Stock have agreed not to sell or otherwise dispose of such shares, without the consent of Smith Barney Inc. until 90 days after this Offering. After such date, all such shares may be sold subject to the limitations of Rule 144 of the Securities Act of 1933, as amended (the "Securities Act"). Future sales of substantial amounts of Common Stock, or the potential for such sales, could adversely affect prevailing market prices. See "Shares Eligible for Future Sale." POSSIBLE VOLATILITY OF STOCK PRICE The Company's Class A Common Stock is quoted on the Nasdaq National Market, which has experienced and may continue to experience significant price and volume fluctuations which could adversely affect the market price of the Class A Common Stock without regard to the operating performance of the Company. In addition, the Company believes that factors such as quarterly fluctuations in the financial results of the Company, earnings below analyst estimates, and the financial performance and other activities of the Company's principal sponsors and other publicly traded motorsports companies could cause the price of the Class A Common Stock to fluctuate substantially. See "Price Range of Common Stock." 12 USE OF PROCEEDS The net proceeds to the Company from the sale of the 4,000,000 shares of Class A Common Stock offered hereby are estimated to be approximately $ million, after deduction of underwriting discounts and commissions and estimated expenses of the Offering and assuming a per share public offering price of $ . ($ million if the Underwriters' over-allotment option is exercised in full). The Company intends to use approximately $58.8 million of such net proceeds to partially fund the Company's estimated investment in the proposed Kansas International Speedway. The Company intends to use approximately $48.2 million of the net proceeds to fund the completion of certain additions and improvements to the Company's motorsports facilities, including additional suites and/or grandstand seating at its Daytona, Talladega and Phoenix facilities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources," "Business-Growth Strategy" and "Business-Motorsports Facilities." The approximately $ million of remaining net proceeds will be used for working capital and other general corporate purposes, including potential acquisitions and continued improvements to and expansion of the Company's operations. Except for its proposed development of the Kansas International Speedway and an additional motorsports facility near Chicago, the Company does not currently have any agreement regarding any potential acquisition or development project. Pending such uses, the Company intends to invest the net proceeds of this Offering in money market funds or other interest-bearing obligations. PRICE RANGE OF COMMON STOCK The Class A Common Stock commenced trading on the Nasdaq National Market under the symbol "ISCA" on November 4, 1996. The Class B Common Stock is traded on the OTC Bulletin Board under the symbol "ISCB" and, at the option of the holder, is convertible to Class A Common Stock at any time. The reported high and low sales prices or high and low bid information as applicable (as adjusted for the Company's November 1996 15-for-1 stock split) for each quarter indicated are as follows:
ISCA ISCB(1) ------------------------- ------------------------- QUARTER ENDING: HIGH LOW HIGH LOW - ----------------------- ----------- ----------- ----------- ----------- February 1996 ......... N/A N/A $ 19.33 $ 12.33 May 1996 .............. N/A N/A 23.33 16.67 August 1996 ........... N/A N/A 19.33 16.67 November 1996 ......... $ 22.25 $ 18.50 25.00 17.33 February 1997 ......... 24.75 19.38 24.00 16.50 May 1997 .............. 22.50 17.25 21.75 17.00 August 1997 ........... 22.00 18.63 21.88 18.75 November 1997 ......... 22.50 17.00 22.63 19.75 February 1998 ......... 29.75 21.25 29.13 21.50 May 1998 ..............
- ---------------- (1) ISCB quotations were obtained from the OTC Bulletin Board and represent prices between dealers and do not include mark-up, mark-down or commission. Such quotations do not necessarily represent actual transactions. On May 29, 1998, the closing price of the Class A Common Stock on the Nasdaq National Market was $30.50. As of April 30, 1998 there were a total of record holders of both classes of Common Stock. 13 DIVIDEND POLICY The Company has historically paid annual cash dividends on its Common Stock. See "Selected Financial Data." In addition, in April 1998, the Company declared an annual dividend of $0.06 per share of Common Stock that will be paid on or about June 30, 1998 to shareholders of record as of May 29, 1998. Future dividends, if any, will depend upon the Company's future earnings, capital requirements and financial condition, as well as such other factors as the Company's Board of Directors may deem relevant. Accordingly, there can be no assurance that future dividends will be declared. CAPITALIZATION The following table sets forth the capitalization of the Company as of February 28, 1998, and as adjusted to give effect to the sale of the 4,000,000 shares of Class A Common Stock offered by the Company hereby at an assumed per share public offering price of $ and the application of the estimated net proceeds therefrom as described under "Use of Proceeds."
FEBRUARY 28, 1998 --------------------------- ACTUAL AS ADJUSTED ------------ ------------ (IN THOUSANDS) Long-term debt .................................................. $ -- $ -- Shareholders' equity: Preferred Stock, $.01 par value, 1,000,000 shares authorized, no shares issued and outstanding ................. -- -- Class A Common Stock, $.01 par value, 80,000,000 shares authorized, 5,502,762 shares issued and outstanding, 9,502,762 shares as adjusted ................................. 55 95 Class B Common Stock, $.01 par value, 40,000,000 shares authorized, 32,977,635 shares issued and outstanding ......... 330 330 Additional paid-in capital ..................................... 86,877 Retained earnings .............................................. 145,468 Unearned compensation--restricted stock(1) ..................... (2,055) (2,055) -------- -------- Total shareholders' equity .................................... 230,675 -------- -------- Total capitalization ......................................... $230,675 ======== ========
- ---------------- (1) See Note 11 of Notes to the Company's audited Consolidated Financial Statements. 14 SELECTED FINANCIAL DATA The following selected historical financial data as of and for each of the fiscal years ended August 31, 1993 through 1996, the three months ended November 30, 1996, and the fiscal year ended November 30, 1997 have been derived from the Company's Consolidated Financial Statements which have been audited by Ernst & Young LLP, independent certified public accountants. The selected financial data for the twelve months ended November 30, 1996 and as of and for the three months ended February 28, 1997 and 1998 have been derived from the unaudited financial statements of the Company which, in the opinion of management, include all adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation of the information set forth therein. The results of operations for the three months ended February 28, 1998 are not necessarily indicative of results for the full year. For comparability, certain prior period results have been reclassified to conform to the presentation adopted in fiscal 1997. The following selected financial data should be read in conjunction with the Company's Consolidated Financial Statements, including the notes thereto, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Prospectus.
YEAR ENDED AUGUST 31,(1) ------------------------------------------------------- 1993 1994 1995 1996 ---------------- ------------ ------------ ------------ (IN THOUSANDS, EXCEPT PER SHARE DATA) INCOME STATEMENT DATA: Revenues: Admissions, net ............................ $ 32,078 $ 36,935 $ 43,274 $ 50,140 Motorsports related income ................. 16,557 18,764 24,033 27,433 Food, beverage and souvenir income ......... 9,515 12,291 14,442 17,505 Other income ............................... 1,003 943 423 964 --------- -------- --------- -------- Total revenues ............................ 59,153 68,933 82,172 96,042 Expenses: Direct expenses: Prize and point fund monies and NASCAR sanction fees ............................ 8,251 9,412 11,765 13,865 Motorsports related expenses .............. 10,470 11,470 11,604 15,336 Food, beverage and souvenir expenses ...... 4,775 7,867 8,107 10,278 General and administrative expenses ........ 13,046 14,307 18,202 20,930 Depreciation and amortization .............. 3,006 3,828 4,798 6,302 --------- -------- --------- -------- Total expenses ............................ 39,548 46,884 54,476 66,711 --------- -------- --------- -------- Operating income (loss) ..................... 19,605 22,049 27,696 29,331 Interest income, net ........................ 724 972 1,436 872 Equity in net income (loss) from equity investments ................................ (27) 207 285 1,441 --------- -------- --------- -------- Income (loss) before income taxes ........... 20,302 23,228 29,417 31,644 Income taxes (benefit) ...................... 7,827 8,662 11,054 11,963 --------- -------- --------- -------- Net income (loss) ........................... $ 12,763(2) $ 14,566 $ 18,363 $ 19,681 =========== ======== ========= ======== Basic earnings (loss) per share(3) .......... $ 0.37(2) $ 0.43 $ 0.54 $ 0.58 Diluted earnings (loss) per share(3) ............................... $ 0.37(2) $ 0.43 $ 0.54 $ 0.57 Dividends per share ......................... $ 0.03 $ 0.04 $ 0.05 $ 0.05 BALANCE SHEET DATA (END OF PERIOD): Working capital (deficit) ................... $ 16,356 $ 11,839 $ 20,821 $ (6,751) Total assets ................................ 78,847 96,401 119,571 152,791 Long-term debt .............................. -- -- -- -- Total shareholders' equity .................. 55,236 68,277 85,247 106,667 THREE TWELVE THREE MONTHS MONTHS MONTHS YEAR ENDED ENDED ENDED ENDED FEBRUARY 28, NOV. 30, NOV. 30, NOV. 30, ----------------------- 1996 1996 1997 1997 1998 ------------ ------------ ------------ ---------- ------------ (IN THOUSANDS, EXCEPT PER SHARE DATA) INCOME STATEMENT DATA: Revenues: Admissions, net ............................ $ 4,191 $ 50,705 $ 69,487 $ 26,360 $ 31,889 Motorsports related income ................. 3,972 28,376 46,650 17,209 27,165 Food, beverage and souvenir income ......... 1,943 17,723 23,408 8,078 8,966 Other income ............................... 390 1,192 1,829 219 264 -------- --------- --------- -------- -------- Total revenues ............................ 10,496 97,996 141,374 51,866 68,284 Expenses: Direct expenses: Prize and point fund monies and NASCAR sanction fees ............................ 1,301 13,724 20,567 6,984 11,092 Motorsports related expenses .............. 2,814 16,384 23,075 5,150 8,154 Food, beverage and souvenir expenses ...... 1,536 10,559 13,435 4,510 4,469 General and administrative expenses ........ 5,057 21,721 29,486 6,174 8,528 Depreciation and amortization .............. 2,353 7,368 9,910 1,945 3,041 -------- --------- --------- -------- -------- Total expenses ............................ 13,061 69,756 96,473 24,763 35,284 -------- --------- --------- -------- -------- Operating income (loss) ..................... (2,565) 28,240 44,901 27,103 33,000 Interest income, net ........................ 261 843 2,687 992 128 Equity in net income (loss) from equity investments ................................ (304) 1,291 366 (441) (421) -------- --------- --------- -------- -------- Income (loss) before income taxes ........... (2,608) 30,374 47,954 27,654 32,707 Income taxes (benefit) ...................... (741) 11,540 18,158 10,179 12,558 -------- --------- --------- -------- -------- Net income (loss) ........................... $ (1,867) $ 18,834 $ 29,796 $ 17,475 $ 20,149 ======== ========= ========= ======== ======== Basic earnings (loss) per share(3) .......... $ (0.05) $ 0.55 $ 0.78 $ 0.46 $ 0.53 Diluted earnings (loss) per share(3) ............................... $ (0.05) $ 0.54 $ 0.78 $ 0.46 $ 0.53 Dividends per share ......................... $ -- $ 0.05 $ 0.06 $ -- $ -- BALANCE SHEET DATA (END OF PERIOD): Working capital (deficit) ................... $ 52,922 $ 52,922 $ (24,976) $ 62,670 $ (9,129) Total assets ................................ 234,069 234,069 302,823 259,902 337,366 Long-term debt .............................. -- -- 1,007 -- -- Total shareholders' equity .................. 179,289 179,289 209,907 197,228 230,675
- --------------- (1) The Company changed its fiscal year-end to November 30 effective December 1, 1996. This resulted in a three-month transition period commencing September 1, 1996 and ending November 30, 1996. The unaudited results for the 12-month period ended November 30, 1996 are presented for the purpose of comparison to the fiscal year ended November 30, 1997. (2) Reflects income of $288,000 ($0.01 per share) attributable to a cumulative effect of change in accounting principle. (3) Earnings per share amounts prior to 1998 have been restated as required to comply with Statement of Financial Accounting Standards No. 128. See Note 1 of Notes to the Company's audited financial statements. 15 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 held at its motorsports facilities, (ii) revenue generated in conjunction with or as a result of motorsports events conducted at the Company's facilities, and (iii) catering, concession and souvenir sales made during or as a result of such events. "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 souvenir 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. During fiscal 1997, the Company acquired Phoenix International Raceway ("Phoenix") and the 50% interest it did not own in Watkins Glen International ("Watkins Glen"). The consolidation of Watkins Glen, effective April 1, 1997, and the July 14, 1997 purchase of Phoenix resulted in the addition of numerous events to the Company's fiscal 1997 event schedule, including two Winston Cup Series events, a Busch Grand National Series event and two Craftsman Truck Series events. These acquisitions resulted in increases in both revenues and expenses in fiscal 1997 and the three months ended February 28, 1998 as compared to the twelve months ended November 30, 1996 and the three months ended February 28, 1997, respectively. Accordingly, the Company's results of operations are not necessarily comparable on a period-to-period basis. 16 The following table sets forth, for each of the indicated periods, certain selected income statement data as a percentage of total revenues:
TWELVE MONTHS FISCAL YEAR THREE MONTHS ENDED ENDED ENDED ------------------------------ NOVEMBER 30, NOVEMBER 30, FEBRUARY 28, FEBRUARY 28, 1996(1) 1997 1997 1998 --------------- ------------- -------------- ------------- Revenues: Admissions, net ............................... 51.7% 49.1% 50.8% 46.7% Motorsports related income .................... 29.0 33.0 33.2 39.8 Food, beverage and souvenir income ............ 18.1 16.6 15.6 13.1 Other income .................................. 1.2 1.3 0.4 0.4 ----- ----- ----- ----- Total revenues ............................... 100.0% 100.0% 100.0% 100.0% Expenses: Direct expenses: Prize and point fund monies and NASCAR sanction fees .............................. 14.0 14.5 13.5 16.2 Motorsports related expenses ................. 16.7 16.3 9.9 11.9 Food, beverage and souvenir expenses ......... 10.8 9.5 8.7 6.6 General and administrative expenses ........... 22.2 20.9 11.9 12.5 Depreciation and amortization ................. 7.5 7.0 3.8 4.5 ----- ----- ----- ----- Total expenses ............................... 71.2 68.2 47.8 51.7 ----- ----- ----- ----- Operating income ............................... 28.8 31.8 52.2 48.3 Interest income, net ........................... 0.9 1.9 1.9 0.2 Equity in net income (loss) from equity investments ................................... 1.3 0.2 ( 0.8) ( 0.6) ----- ----- ----- ----- Income before income taxes ..................... 31.0 33.9 53.3 47.9 Income taxes ................................... 11.8 12.8 19.6 18.4 ----- ----- ----- ----- Net income ..................................... 19.2% 21.1% 33.7% 29.5% ===== ===== ===== =====
- ---------------- (1) The Company changed its fiscal year end to November 30 effective December 1, 1996. Management believes that a comparison of the year ended November 30, 1997 to the twelve months ended November 30, 1996 is more meaningful than a comparison of the year ended November 30, 1997 to the year ended August 31, 1996. Therefore, the discussion and analysis of results of operations for fiscal 1997 is compared to the unaudited twelve months ended November 30, 1996. COMPARISON OF THREE MONTHS ENDED FEBRUARY 28, 1998 TO THREE MONTHS ENDED FEBRUARY 28, 1997 Admissions revenue increased approximately $5.5 million, or 21%, for the three months ended February 28, 1998 as compared to the three months ended February 28, 1997. Most of this increase was related to the Speedweeks events held at Daytona International Speedway ("Daytona"). Approximately two thirds of the Speedweeks-related increase was attributable to increased seating capacity and attendance, with the remaining portion of this increase resulting from an increase in the weighted average price of tickets sold. The remaining increase was primarily attributable to events conducted at Phoenix. Motorsports related income increased approximately $10.0 million, or 57.9%, during the three months ended February 28, 1998 as compared to the three months ended February 28, 1997. Approximately two-thirds of this increase was a result of increased television broadcast rights fees for the Speedweeks events at Daytona. Increases in sponsorship fees, luxury suite and hospitality rentals and advertising revenues for Speedweeks and, to a lesser extent, Phoenix, accounted for the remainder of this increase. Food, beverage and souvenir income increased approximately $900,000, or 11%, during the three months ended February 28, 1998 as compared to the three months ended February 28, 1997. Increased attendance and, to a lesser extent, increases in certain prices at Daytona's Speedweeks events accounted 17 for more than one-half of the increase. The remaining increase was primarily attributable to increased sales of souvenirs at the gift shop adjacent to DAYTONA USA and the events conducted at Phoenix. Prize and point fund monies and NASCAR sanction fees increased by approximately $4.1 million, or 58.8%, during the three months ended February 28, 1998 as compared to the three months ended February 28, 1997. Approximately 80% of this increase was due to increases in the prize and point fund monies paid by the Company and distributed by NASCAR to participants in the Speedweeks events. This increase was primarily attributable to the increases in the Company's television broadcast rights fees because standard NASCAR sanctioning agreements require that a specified percentage of television broadcast rights fees be paid as part of prize money. Motorsports related expenses increased approximately $3.0 million, or 58.3%, during the three months ended February 28, 1998 as compared to the three months ended February 28, 1997. Approximately two-thirds of this increase related to an increase in salaries, advertising and other increased operating costs for the Speedweeks events held at Daytona. The operating costs of Phoenix and, to a lesser extent, Watkins Glen, accounted for the remaining increase. Motorsports related expenses as a percentage of combined admissions and motorsports related revenue increased to 13.8% in the three months ended February 28, 1998 from 11.8% in the three months ended February 28, 1997. This decreased margin was primarily attributable to the lower margin on events conducted at Phoenix during the three months ended February 28, 1998. Food, beverage and souvenir expenses decreased approximately $50,000, or 1%, during the three months ended February 28, 1998 as compared to the three months ended February 28, 1997. However, food, beverage and souvenir expenses as a percentage of food, beverage and souvenir revenue decreased to approximately 49.8% in the three months ended February 28, 1998 from 55.8% in the three months ended February 28, 1997. This improvement was attributable to the discontinuation of certain lower margin activities at facilities not operated by the Company, an increase in margins on souvenir merchandise sales, and fees from third party vendors at Phoenix for which there are no associated costs. General and administrative expenses increased approximately $2.4 million, or 38.1%, during the three months ended February 28, 1998 as compared to the three months ended February 28, 1997. General and administrative expenses at Phoenix and Watkins Glen accounted for approximately half of this increase. Excluding the effects of Watkins Glen and Phoenix, general and administrative expenses remained relatively constant as a percentage of total revenues for the three months ended February 28, 1998 as compared to the same period of the prior year. Depreciation and amortization expense increased approximately $1.1 million, or 56.3%, during the three months ended February 28, 1998 as compared to the three months ended February 28, 1997. More than half of this increase was attributable to Phoenix and Watkins Glen, including the amortization of goodwill related to the Phoenix acquisition. The remaining increase was attributable to the ongoing improvements to the Company's facilities. The approximately $850,000 decrease in net interest income resulted from lower average investment balances and interest expense related to the note payable associated with the Phoenix acquisition. Equity in net loss from equity investments for the three months ended February 28, 1998 represents the Company's pro rata share of losses and the amortization of the Company's investment in excess of its share of the investee's underlying net assets from its 11% indirect investment in Penske Motorsports, Inc. ("PMI"), its then 40% investment in the operations of Homestead-Miami Speedway, LLC ("Homestead") and its then approximately 7% investment in Grand Prix Association of Long Beach ("Long Beach"). The comparable period of the prior year included the Company's equity in net losses from PMI and the Company's 50% interest in Watkins Glen. In March 1998, the Company purchased an additional 5% interest in Homestead for $2.8 million, which was substantially financed through a 7.5% interest bearing note, payable in December 2001, and sold its entire interest in Long Beach for $5.3 million. 18 As a result of the foregoing, the Company's net income increased approximately $2.7 million, or 15.3%, for the three months ended February 28, 1998 as compared to the comparable period of the prior year. COMPARISON OF TWELVE MONTHS ENDED NOVEMBER 30, 1997 TO THE TWELVE MONTHS ENDED NOVEMBER 30, 1996 Admissions revenue increased approximately $18.8 million, or 37%, during fiscal 1997 as compared to the twelve months ended November 30, 1996. Approximately one-third of this increase is a result of increased seating capacity and attendance at Daytona, Talladega Superspeedway ("Talladega") and Darlington Raceway ("Darlington"). Approximately one-quarter of the increase is attributable to an increase in the weighted average price of tickets sold at Daytona, Talladega and Darlington. The remainder of the increase is primarily attributable to the impact of admissions revenue for events conducted at Watkins Glen and Phoenix. Motorsports related income increased approximately $18.3 million, or 64.4%, during fiscal 1997 as compared to the same period of the prior year. Approximately one-half of this increase is a result of an increase in broadcast rights fees, the rentals of hospitality facilities, and promotion and sponsorship fees related to events conducted at Daytona, Talladega and Darlington. The remaining increase is attributable to the events conducted at Watkins Glen and Phoenix, advertising revenue, other promotion and sponsorship fees and royalties. Food, beverage and souvenir income increased approximately $5.7 million, or 32.1%, for fiscal 1997 as compared to the same period of the prior year. Increased attendance at events conducted at Daytona, Talladega and Darlington, and, to a lesser extent, increases in certain prices accounted for approximately one-half of the increase. The remaining increase is a result of events conducted at Watkins Glen and Phoenix and direct sales of souvenirs at the gift shop adjacent to DAYTONA USA. Prize and point fund monies and NASCAR sanction fees increased by approximately $6.8 million, or 49.9%, during fiscal 1997 as compared to the same period of the prior year. Over one-half of this increase is due to events conducted at Watkins Glen and Phoenix. The remaining increase is primarily the result of increases in the prize and point fund monies paid by the Company and distributed by NASCAR to participants in the Company's events. This increase is primarily attributable to increases in the Company's television broadcast rights because standard NASCAR sanction agreements require that a specified percentage of television broadcast rights be paid as part of the prize money. Motorsports related expenses increased approximately $6.7 million, or 40.8%, for fiscal 1997 as compared to the same period of the prior year. This increase is primarily attributable to operating costs related to the events held at Watkins Glen and Phoenix, increases in direct race expenses related to events conducted at Daytona, Talladega and Darlington, including increases in operating costs related to the rain out and rescheduling of Talladega's second quarter NASCAR Winston Cup event and, to a lesser extent, the operation of DAYTONA USA. Motorsports related expenses remained relatively constant as a percentage of combined admissions and motorsports related income during both periods. Food, beverage and souvenir expenses increased approximately $2.9 million, or 27.2%, in fiscal 1997 as compared to the same period of the prior year, primarily due to increases in personnel and product costs. Food, beverage and souvenir expenses as a percentage of food, beverage and souvenir income decreased from approximately 59.6% for the twelve months ended November 30, 1996 to 57.4% in fiscal 1997 primarily due to the use of third party vendors at the Company's Phoenix facility. General and administrative expenses increased approximately $7.8 million, or 35.7%, during fiscal 1997 as compared to the same period of the prior year. The increases are due to the acquisition of Phoenix, the consolidation of Watkins Glen, and expenses related to the ongoing expansion of the Company's business. General and administrative expenses as a percentage of total revenue decreased from approximately 22.2% for the twelve months ended November 30, 1996 to 20.9% in fiscal 1997. The Company's depreciation and amortization expense increased approximately $2.5 million, or 34.5%, during fiscal 1997 as compared to the same period of the prior year, primarily as a result of 19 DAYTONA USA, the ongoing expansion of the Company's motorsports facilities and amortization of goodwill related to the acquisition of Phoenix. This increase was partially mitigated by an approximately $1 million decrease in depreciation associated with the lengthening of the estimated service lives of grandstands and other significant assets as a result of management's review of actual service lives of these types of assets conducted at the beginning of fiscal 1997. The approximately $1.8 million increase in the Company's net interest income during fiscal 1997 as compared to the same period of the prior year is attributable primarily to the investment of proceeds, pending their use, from the Company's initial public offering of Class A Common Stock in November 1996. Equity in net income 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, accounted for using the equity method of accounting. In fiscal 1997 this included the Company's 11% indirect interest in PMI, its 40% investment in Homestead from July 1997, its approximately 7% investment in Long Beach from August 1997, and its 50% investment in Watkins Glen through March 31, 1997. The approximately $900,000, or 71.6% decrease in equity in net income from equity investments during fiscal 1997, as compared to the same period of the prior year, is due to the changes in the Company's equity investments and the timing of those changes. As a result of the foregoing, the Company's net income increased approximately $11.0 million, or 58.2%, during fiscal 1997 as compared to the same period 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 February 28, 1998, the Company had a working capital deficit of $9.1 million, compared to a working capital deficit of $25.0 million at November 30, 1997. There were no borrowings under the Company's credit facility at February 28, 1998. CASH FLOWS Net cash provided by operating activities was approximately $29.5 million for the three months ended February 28, 1998, as compared to $20.6 million for the three months ended February 28, 1997. The difference between the Company's net income of $20.1 million and the $29.5 million of operating cash flow was primarily attributable to a $7.9 million increase in income taxes payable, a $4.9 million increase in accounts payable and other current liabilities, a $4.0 million increase in deferred income taxes and depreciation and amortization of $3.0 million, partially offset by an increase in accounts receivable of $7.3 million, a decrease in deferred revenue of $2.7 million and an increase in prepaids, inventory and other current assets of $1.2 million. Net cash used in investing activities was $23.1 million for the three months ended February 28, 1998, compared to $13.7 million for the three months ended February 28, 1997. The Company's use of cash for investing activities for the three months ended February 28, 1998, reflects $10.6 million in capital expenditures and the net acquisition of $12.1 million of short-term investments. CAPITAL EXPENDITURES Capital expenditures totaled $10.6 million for the three months ended February 28, 1998, compared to $10.3 million for the three months ended February 28, 1997. Capital expenditures during the three months ended February 28, 1998 related primarily to increased seating capacity at Daytona, Darlington and Talladega and construction in progress related to additional luxury suites and track lighting at Daytona. 20 The Company expects to make approximately $56.0 million of capital expenditures for approved projects at existing facilities during the 24-month period ending February 29, 2000 to increase grandstand seating capacity, to construct luxury suites, and for a number of other improvements, of which approximately $7.8 million had been spent as of the date hereof. See "Business--Motorsports Facilities" and "Use of Proceeds." 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. The Company is currently pursuing the development of new 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 this 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 obtain all requisite regulatory approvals. See "Risk Factors--Uncertain Prospects of New Motorsports Facilities" and "Business--Legal Proceedings." The Company believes that cash flow from operations will be sufficient to fund the Company's operations for the foreseeable future. In addition, the Company intends to pursue further development and/or acquisition opportunities, the timing, size, success or associated potential capital commitments of which are unpredictable. Accordingly, a material acceleration of 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. SEASONALITY AND 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 race events. For example, one of Darlington's Winston Cup events is traditionally held on the Sunday preceding Labor Day. Accordingly, the admission revenue and expenses for that race and/or certain of its supporting events may be recognized in either the fiscal quarter ending August 31 or the fiscal quarter ending November 30. Partly in response to this seasonality and the desire to better conform to the traditional racing season, the Company changed its fiscal year end from August 31 to November 30 effective December 1, 1996. This resulted in a three-month transition period commencing September 1, 1996 and ending November 30, 1996. 21 Historically, the Company had incurred net losses in the fiscal quarter ending November 30, and achieved its highest net income in the fiscal quarter ending February 28. However, in fiscal 1997 the Company had net income for the quarter ended November 30, primarily due to (i) the acquisition of Phoenix, which resulted in the addition of a NASCAR Winston Cup event in the quarter ended November 30, and (ii) the date change for Talladega's second Winston Cup race, which moved the event from the quarter ended August 31 to the quarter ended November 30. The following table presents certain unaudited financial data for each of the Company's prior nine fiscal quarters (in thousands, except per share amounts):
FISCAL QUARTER ENDED ------------------------------------------------------------ FEBRUARY 29, MAY 31, AUGUST 31, NOVEMBER 30, 1996 1996 1996 1996 -------------- ------------ ------------ ------------- Total revenues ............................ $ 40,277 $ 24,176 $ 23,047 $ 10,496 Operating income (loss) ................... 20,338 6,230 4,237 (2,565) Net income (loss) ......................... 12,089 3,817 4,795 (1,867) Basic earnings (loss) per share ........... 0.35 0.11 0.14 (0.05) Diluted earnings (loss) per share ......... 0.35 0.11 0.14 (0.05)
FISCAL QUARTER ENDED ------------------------------------------------------------ FEBRUARY 28, MAY 31, AUGUST 31, NOVEMBER 30, 1997 1997 1997 1997 -------------- ------------ ------------ ------------- Total revenues ..................... $ 51,866 $ 29,630 $ 33,106 $ 26,772 Operating income ................... 27,103 7,075 8,762 1,961 Net income ......................... 17,475 4,486 5,985 1,850 Basic earnings per share ........... 0.46 0.12 0.16 0.05 Diluted earnings per share ......... 0.46 0.12 0.16 0.05
FISCAL QUARTER ENDED FEBRUARY 28, 1998 ------------- Total revenues ..................... $ 68,284 Operating income ................... 33,000 Net income ......................... 20,149 Basic earnings per share ........... 0.53 Diluted earnings per share ......... 0.53
INCOME TAXES Due to the seasonal fluctuation of the Company's business, federal estimated tax deposits historically have not been required until the second quarter of the fiscal year. As a result, income taxes payable at February 28, 1998 have increased since November 30, 1997. The deferred income tax liability increased from November 30, 1997 primarily as a result of differences between financial and tax accounting treatments relating to depreciation expense and different bases in the equity 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. IMPACT OF THE YEAR 2000 The Company believes that it will satisfactorily resolve all significant Year 2000 problems by the end of fiscal 1998 and that the related costs will not be material. Estimates of Year 2000 related costs are based on numerous assumptions, including the continued availability of certain resources, the ability to correct all relevant applications and third party modification plans. There is no guarantee that the estimates will be achieved and actual costs could differ materially from those anticipated. See "Risk Factors--Impact of the Year 2000." 22 NASCAR The National Association for Stock Car Auto Racing, Inc. ("NASCAR") has been influential in the growth and development of both the Company's operations and professional stock car racing generally. NASCAR, all of whose capital stock is beneficially owned by William C. France and James C. France, the Company's principal shareholders, is widely recognized as the premier official sanctioning body of professional stock car racing in the United States. See "Certain Transactions." NASCAR sanctions all races that constitute the Winston Cup Series and Busch Grand National Series, as well as the Craftsman Truck Series and a number of other racing series and events. The Company derived approximately 78% of its total revenues from NASCAR-sanctioned racing events at the Company's facilities in fiscal 1997. OVERVIEW OF STOCK CAR RACING Professional stock car racing developed in the Southeastern United States in the 1930's. It began to mature in 1947, when William H.G. France (the father of both the Company's Chairman and its President) organized NASCAR. The first NASCAR-sanctioned race was held in 1948 in Daytona Beach, Florida. In 1959, the Company completed construction of the Daytona International Speedway and promoted the first "Daytona 500." The motorsports industry began to gather momentum in the mid-1960's, when major North American automobile and tire manufacturers first offered engineering and financial support. In the early 1970's, NASCAR created a more elite circuit focused on the best drivers. Accordingly, it reduced the number of races constituting its premier series, now known as the Winston Cup Series, from approximately 50 to 30 races. NASCAR-sanctioned events, particularly Winston Cup races, enjoy a large and growing base of spectator support. Based on statistics developed by Goodyear, attendance at NASCAR's Winston Cup Series, Busch Grand National Series and Craftsman Truck Series grew 9.0%, 16.6% and 13.5%, respectively, from 1996 to 1997. Moreover, according to Nielsen, more than 175 million people tuned in to NASCAR's televised events in 1997. Winston Cup, Busch Grand National and other major NASCAR-sanctioned races also receive extensive national radio coverage, including programs produced and syndicated by the Company's MRN Radio network. Management believes that increased media coverage has led to national recognition of NASCAR drivers, which has further increased the popularity of the sport, thereby resulting in (i) record NASCAR race attendance, (ii) increasing payments to track operators for broadcast rights and sponsorship fees, and (iii) increased sales of motorsports-related souvenirs. Management believes that the increasing payments for broadcast rights and sponsorship fees are also the result of the demographic appeal of the motorsports spectator base to advertisers. See "--Economics of Stock Car Racing--Spectators." Corporate sponsors of NASCAR-sanctioned events now include a large number of leading manufacturing and consumer products companies. GOVERNANCE OF STOCK CAR RACING NASCAR regulates its membership (including drivers, their crews, team owners and track operators), the composition of race cars and the sanctioning of races. It sanctions events by means of one-year agreements with track operators, each of which specifies the race date, the sanctioning fee and the purse. NASCAR officials control qualifying procedures, the line-up of the cars, the start of the race, the control of cars throughout the race, the election to stop or delay a race, "pit" activity, "flagging," the positioning of cars, the assessment of lap and time penalties and the completion of the race. NASCAR also administers, monitors and promotes the championship point systems for its Winston Cup Series, Busch Grand National Series and Craftsman Truck Series events. Such point systems were designed to encourage drivers to participate in all of the races of the relevant series. By sanctioning an event, NASCAR does not warrant, either expressly or by implication, nor is it responsible for, the financial or other success of the sanctioned event or the number or identity of vehicles or competitors participating in the event. Similarly, no existing NASCAR sanction agreement, 23 nor anything in the course of dealing between NASCAR and the Company, should be construed to require NASCAR to enter into a sanction agreement or to issue a sanction for any other event in the future. ECONOMICS OF STOCK CAR RACING The primary participants in the business of stock car racing are spectators, sponsors, track operators, drivers and team members and team owners. SPECTATORS. According to Goodyear, approximately 9.0 million spectators attended the 1997 Winston Cup Series, Busch Grand National Series and Craftsman Truck Series events. Moreover, according to Nielsen, approximately 123 million viewers tuned to televised Winston Cup Series events in 1997. The Company believes that the demographic profile of the growing base of spectators has considerable appeal to track operators, sponsors and advertisers. According to Simmons Market Research Bureau, Inc. and Performance Research, approximately 38% of NASCAR spectators are women and 69% are between the ages of 18 and 44. The Company believes that motorsports spectators are loyal to both the sport of motor racing and to the sponsors of the sport. SPONSORS. Drawn to the sport by its attractive demographics, sponsors are active in all phases of professional stock car racing. In addition to directly supporting racing teams through the funding of certain costs of their operations, sponsors support track operators by paying fees associated with specific name events such as the "Pepsi 400 at Daytona", the "DieHard 500" or the "Bud Shootout at Daytona." In addition, premier racing events such as the Daytona 500 frequently have multiple "official corporate sponsors." In return, sponsors receive advertising exposure through television and radio coverage, newspapers, race programs, brochures and advertising at the track on race day. TRACK OPERATORS. Track operators such as the Company market and promote events at their facilities. Their principal revenue sources generally include (i) admissions, (ii) television and radio broadcast rights fees, (iii) sponsorship fees, (iv) the sale of merchandise such as souvenirs, collectibles and apparel, (v) food and beverage concessions, (vi) hospitality fees paid for catering receptions and private parties, (vii) luxury suite and hospitality village rentals, (viii) parking, and (ix) advertising on track signage and in souvenir racing programs. Sanction agreements require race track operators to pay fees to the relevant sanctioning body for each sanctioned event conducted, including sanction fees and prize money. With the exception of NASCAR's Craftsman Truck Series, track operators negotiate directly with television and radio networks for coverage of NASCAR-sanctioned events. DRIVERS AND TEAM MEMBERS. Although a majority of drivers contract independently with team owners, certain drivers own their own teams. Drivers receive income from contracts with team owners, sponsorship fees and prize money. Successful drivers may also receive income from personal endorsement fees and souvenir sales. The success and personality of a driver can be an important marketing advantage for team owners because it can help attract corporate sponsorships and generate sales for officially licensed merchandise vendors such as the Company. The efforts of each driver are supported by a number of other team members, all of whom are supervised by a crew chief. TEAM OWNERS. In most instances, team owners bear the financial risk of placing their teams in competition. They (i) contract with drivers, (ii) acquire racing vehicles and support equipment, (iii) hire pit crews and mechanics, and (iv) syndicate sponsorship of their teams. THE WINSTON CUP SERIES The most prominent and well-attended NASCAR-sanctioned events are the Winston Cup Series events. According to statistics compiled by Goodyear, total attendance at Winston Cup Series events increased from approximately 3.3 million in 1990 to approximately 6.0 million in 1997. 24 The Winston Cup Series begins in February with Speedweeks (consisting of the annual "Bud Shootout at Daytona" all star event, the "Gatorade 125's" qualifying races and a number of other premier racing events culminating with the Daytona 500) and concludes with the "NAPA 500" in November. In 1998, NASCAR will sanction 37 events, including four non-championship point events, at 21 tracks operating in 17 states and Japan. The following table shows the 1998 Winston Cup Series schedule (events held at facilities operated by the Company are noted in bold). 1998 WINSTON CUP SERIES SCHEDULE
DATE RACE TRACK LOCATION - -------------- ----------------------------------- ------------------------------------- FEBRUARY 8 BUD SHOOTOUT AT DAYTONA* DAYTONA INTERNATIONAL SPEEDWAY FEBRUARY 12 GATORADE 125S* DAYTONA INTERNATIONAL SPEEDWAY FEBRUARY 15 DAYTONA 500 DAYTONA INTERNATIONAL SPEEDWAY February 22 GM Goodwrench Service North Carolina Speedway March 1 Las Vegas 400 Las Vegas Motor Speedway March 8 PRIMESTAR 500 Atlanta Motor Speedway MARCH 22 TRANSOUTH FINANCIAL 400 DARLINGTON RACEWAY March 29 Food City 500 Bristol Motor Speedway April 5 Texas 500 Texas Motor Speedway April 19 Goody's 500 Martinsville Speedway APRIL 26 DIEHARD 500 TALLADEGA SUPERSPEEDWAY May 3 California 500 presented by NAPA California Speedway May 16 The Winston* Charlotte Motor Speedway May 24 Coca-Cola 600 Charlotte Motor Speedway May 31 MBNA Platinum 400 Dover Downs International Speedway June 6 Pontiac Excitement 400 Richmond International Raceway June 14 Miller-Lite 400 Michigan Speedway June 21 Pocono 500 Pocono Raceway June 28 Save Mart/Kragen 350 Sears Point Raceway JULY 4 PEPSI 400 AT DAYTONA DAYTONA INTERNATIONAL SPEEDWAY July 12 Jiffy Lube 300 New Hampshire International Speedway July 26 Pennsylvania 500 Pocono Raceway August 1 Brickyard 400 Indianapolis Motor Speedway AUGUST 9 THE BUD AT THE GLEN WATKINS GLEN INTERNATIONAL August 16 Pepsi 400 presented by DeVilbiss Michigan Speedway August 22 Goody's 500 Bristol Motor Speedway August 30 New Hampshire 300 New Hampshire International Speedway SEPTEMBER 6 PEPSI SOUTHERN 500 DARLINGTON RACEWAY September 12 Exide NASCAR Select Batteries 400 Richmond International Raceway September 20 MBNA Gold 400 Dover Downs International Speedway September 27 NAPA AutoCar 500 Martinsville Speedway October 4 UAW-GM Quality 500 Charlotte Motor Speedway OCTOBER 11 WINSTON 500 TALLADEGA SUPERSPEEDWAY OCTOBER 25 DURA-LUBE 500 PRESENTED BY KMART PHOENIX INTERNATIONAL RACEWAY November 1 ACDelco 400 North Carolina Speedway November 8 NAPA 500 Atlanta Motor Speedway November 22 Twin Ring Motegi, Japan* Motegi, Japan
- ---------------- * Non-championship point events. No track currently promotes more than two Winston Cup Series championship point events. The Company has sanctioning agreements for a total of eight such point events, as well as sanctioning agreements for the non-point "Bud Shootout at Daytona" all star race and "Gatorade 125s" (qualifying races for the Daytona 500) at Daytona International Speedway. THE BUSCH GRAND NATIONAL SERIES AND OTHER NASCAR EVENTS Among series sanctioned by NASCAR, the Busch Grand National Series is generally perceived as second in prominence to the Winston Cup Series. In 1998, 31 Busch Grand National Series events will be promoted at 25 tracks in 19 states. Many track operators, including the Company, host a Busch 25 Grand National Series event in conjunction with a Winston Cup Series event in order to boost overall attendance for a race weekend. The Company has sanctioning agreements for five Busch Grand National Series races in 1998: the NAPA Auto Parts 300, the Lysol 200, the Touchstone Energy 500K, the Diamond Hill Plywood 200, and the Dura-Lube 200, all of which are scheduled to be televised. In addition to Winston Cup Series and Busch Grand National Series events, NASCAR sanctions various other stock car racing events and series, including the Craftsman Truck Series, Winston Racing Series, Goody's Dash Series and Winston West Series. OTHER MOTORSPORTS Other motorsports include stock car racing not sanctioned by NASCAR, a variety of open-wheel racing formats such as "Champ Car," "Indy car" and "Formula One," as well as sports car, motorcycle and go-kart racing. STOCK CAR RACING. Sanctioning bodies for stock car racing include NASCAR, the Automobile Racing Club of America ("ARCA"), the American Motor Racing Association ("AMRA"), the International Super Modified Association ("ISMA"), the National Championship Racing Association ("CRA") and the United States Racers Association ("USRA"). In 1998, the Company is scheduled to promote two ARCA races--First Plus Financial 200 at Daytona, the annual season-opener for the ARCA Bondo/Mar-Hyde Supercar series, and the Winn Dixie 300 at Talladega. The Company also promotes one of the four races in the International Race of Champions ("IROC") series, in which a selected field of 12 drivers from different motorsports disciplines compete in equally prepared Pontiac Firebird Trans-Ams. OPEN WHEEL RACING. The most established open-wheel racing series are the CART FedEx Championship Series, the Indy Racing League (the "IRL"), a United States-based oval-racing series that includes the Indianapolis 500, and Formula One. CHAMP CAR RACING. In 1997, CART Champ Car racing was conducted at 17 events in four countries on four different types of tracks--superspeedways, ovals, temporary street courses and permanent road courses. INDY CAR RACING. "Indy cars" take their name from cars which race at the Indianapolis Motor Speedway, which holds the "Indianapolis 500" on the Sunday before Memorial Day every year. Indy car racing is sanctioned by the IRL. In fiscal 1998, the Company will promote an IRL race at Phoenix International Raceway. FORMULA ONE. Formula One car races are typically held outside the United States and are sanctioned by the Federation Internationale de l'Automobile ("FIA"). Although FIA also serves as an umbrella organization for other sanctioning bodies for Company-promoted races, the Company does not currently promote Formula One races. SPORTS CAR RACING. Sports car racing is sanctioned in the United States by the Sports Car Club of America ("SCCA"), the United States Road Racing Championship ("USRRC") and Professional Sports Car Racing ("PSR"), which sanction races held on road courses throughout the country. The Company promotes a number of sports car racing events sanctioned by SCCA and USRRC, including the Rolex 24 at Daytona, the premier sports car endurance event held in the United States. MOTORCYCLE AND GO-KART RACING. The American Motorcyclists Association ("AMA") sanctions motorcycle races and the World Karting Association ("WKA") sanctions go-kart races. The Company promotes numerous motorcycle and go-kart racing events at its facilities, including the Daytona 200 by Arai (part of the AMA Superbike National Championship Series) and the Supercross by Honda, each of which is conducted in connection with the Company's Daytona 200 Motorcycle Week held each Spring in Daytona Beach. 26 BUSINESS The Company, a leading promoter of motorsports activities in the United States, owns and/or operates five of the nation's premier motorsports facilities--Daytona International Speedway in Florida; Talladega Superspeedway in Alabama; Phoenix International Raceway in Arizona; Darlington Raceway in South Carolina; and the Watkins Glen International road course facility in upstate New York. Other motorsports interests include the operation of Tucson Raceway Park in Arizona, a 45% indirect interest in the operations of the Metro-Dade Homestead Motorsports Complex near Miami, Florida and an approximately 11% indirect interest in Penske Motorsports, Inc. The Company currently promotes over 80 stock car, sports car, truck, motorcycle and other racing events annually, including eight NASCAR Winston Cup Series championship point races, two Winston Cup Series non-championship point events, five Busch Grand National Series races, the premier sports car endurance event in the United States (the Rolex 24 at Daytona) and a number of prestigious motorcycle races. The Company also owns and operates MRN Radio, the nation's largest independent sports radio network, and DAYTONA USA--The Ultimate Motorsports Attraction, a motorsports-themed entertainment complex that includes interactive media, theaters, historical memorabilia, exhibits and tours of Daytona International Speedway. In fiscal 1997, NASCAR-sanctioned races at the Company's facilities accounted for approximately 78% of the Company's total revenues. According to THE WALL STREET JOURNAL, stock car racing is the most-watched professional sport on U.S. television behind the National Football League. According to Nielsen, more than 175 million people tuned to NASCAR's televised events in 1997. Moreover, based on statistics developed by Goodyear, attendance at NASCAR's three major professional circuits, the Winston Cup Series, the Busch Grand National Series and the Craftsman Truck Series, grew 9.0%, 16.6% and 13.5%, respectively, from 1996 to 1997. The Company believes that the demographic profile of this growing base of spectators and viewers has considerable appeal to sponsors and advertisers, including leading consumer product and manufacturing companies which have expanded their participation in the motorsports industry. Published reports indicate that corporate sponsors will spend an estimated $1.1 billion on motorsports marketing programs in 1998. The Company's major sponsors include Pepsi, Coca-Cola, Kmart, Sears, Anheuser Busch, Rolex, Pontiac, Ford, Chevrolet, Dura-Lube, DuPont, Circuit City, Goodyear, TranSouth Financial, First Union, NAPA Auto Parts and Gatorade. OPERATING STRATEGY Key elements of the Company's general operating strategy emphasize (i) senior management's long-term association with the motorsports industry, (ii) capital improvements and other efforts designed to maximize race spectators' total entertainment experience, (iii) integrated marketing programs targeting both corporate and individual customers, (iv) the development of long-term relationships with sponsors, and (v) the use of media to increase awareness of the Company's major racing events and the motorsports industry. LONG-TERM ASSOCIATION WITH MOTORSPORTS INDUSTRY. Members of the France family have been involved in senior management positions with the Company since its formation in 1953. The Company believes that senior management's extensive network of contacts in the motorsports industry, as well as the Company's reputation as a long-term steward for the sport, frequently enhance the Company's ability to learn of and pursue new market and other growth opportunities. The Company also believes that the France family's long-standing involvement with the Company has provided a number of other significant advantages, including a reduced risk of disruption in the Company's operating policies and long-range strategies, which in turn provides an assurance of continuity to employees, sponsors, sanctioning bodies and other entities that enter into commitments or relationships with the Company. Moreover, the experience and expertise of the Company and its senior management team extend beyond stock car racing to a wide variety of other motorsports disciplines, including sports cars and motorcycles. In addition, the France family has been instrumental in the development of the nation's motorsports industry through their organization and continued management of NASCAR. See "NASCAR." 27 COMMITMENT TO CUSTOMER SATISFACTION. The Company believes that its growth has to a significant degree resulted from its emphasis on enhancing race spectators' total entertainment experience. The Company continually strives to increase the comfort, view and amenities offered to race spectators, which management believes serves to maximize customer loyalty. To that end, the Company has in recent years engaged in a series of capital improvements, including the construction of additional permanent grandstand seating, new luxury suites, innovative corporate entertainment facilities and a number of aesthetic and other improvements to food and beverage concession, restroom and other customer convenience facilities. The Company's fiscal 1997 capital expenditures attributable to such improvement projects totalled approximately $27.2 million. Recent efforts to improve customer satisfaction have included the use of Jumbotron television screens to enhance viewing, the creation of premium seating sections such as the "Daytona Club" and the provision of a tram system to transport spectators to and within Daytona International Speedway. EMPHASIS ON MARKETING. Management believes that it is important to market the Company's racing events, facilities and trademarks to both corporate and individual customers. The Company recently expanded its corporate marketing staff to 12 persons. This staff, supervised by the Company's Vice President--Marketing, works with marketing personnel at each of the Company's facilities to develop and execute integrated marketing programs that provide enhanced value to the Company's marketing partners. The Company pursues a fully integrated marketing strategy including sponsorships, advertising, promotion, licensing and public relations. For example, the DAYTONA USA entertainment complex and the Company's licenses for computer and video games, apparel and other merchandise are intended in part to increase the awareness and popularity of motorsports with younger spectators and thereby ensure a foundation for future growth. The Company's superspeedways also host three of the five events included in NASCAR's "Winston No Bull 5", a special promotion introduced in 1998, which offers the top five finishers of each of five designated NASCAR Winston Cup events the opportunity to win a bonus of $1 million by winning the next of the five designated events. DEVELOPMENT OF STRATEGIC ALLIANCES WITH CORPORATE SPONSORS. Corporate sponsors support the Company and the motorsports industry in several ways. First, sponsors pay fees to track operators. Second, the promotional and advertising expenditures of major sponsors provide the Company with indirect marketing benefits. Third, sponsors support racing teams through the funding of certain operational costs. Accordingly, the Company devotes significant resources to developing long-term relationships with leading consumer products and manufacturing companies. Although the identities of sponsors and the terms of sponsorships change from time to time, principal Company sponsors currently include Pepsi, Coca-Cola, Kmart, Sears, Anheuser Busch, Rolex, Pontiac, Ford, Chevrolet, Dura-Lube, DuPont, Circuit City, Goodyear, TranSouth Financial, First Union, NAPA Auto Parts and Gatorade. Some contracts allow the sponsor to name a particular racing event, as in the "DieHard 500" and the "Pepsi 400." Other consideration ranges from official car or official corporate sponsor designation to advertising and promotional rights in the sponsor's product category. UTILIZATION OF MEDIA TO MAXIMIZE EXPOSURE. The Company's comprehensive and integrated media campaign includes television, radio, newspapers and trade and consumer publications. The Company negotiates directly with network and cable television companies for live and rebroadcast coverage of all of its televised races except for Craftsman Truck Series events, which are negotiated by NASCAR. All of the Company's Winston Cup Series and Busch Grand National Series races are televised on CBS, ESPN or TNN, and management intends to seek similar arrangements for other racing events when opportunities arise. In addition, certain of the Company's events, including the Daytona 500 and the Rolex 24 at Daytona, are televised world-wide. The Company also produces and syndicates its Winston Cup Series, Busch Grand National Series and Craftsman Truck Series races, as well as other races promoted by the Company or third parties, on MRN Radio, its proprietary motor racing network. MRN Radio programs are currently carried by more than 500 radio stations. Management also seeks to increase the visibility of its racing events and facilities through local and regional media exposure and the use of public relations professionals to obtain favorable press coverage. 28 GROWTH STRATEGY The Company intends to increase its revenues and profitability by capitalizing on both its existing strengths and the growth and popularity of motorsports generally. Key components of this growth strategy are as follows: EXPAND EXISTING FACILITIES. Management believes that the spectator demand for its largest events continues to exceed existing seating capacity. Accordingly, the Company plans to continue its expansion by adding permanent grandstand seating and luxury suites at each of its superspeedways. During fiscal 1997, the Company increased its combined grandstand seating capacity at Daytona, Talladega, Darlington and Watkins Glen by approximately 37,000 seats, or 13%. This expansion included the addition of approximately 12,500 seats along the "superstretch" in Daytona to increase capacity for the Daytona 500 and the acceleration of construction of approximately 7,900 seats in Talladega to meet the additional demand resulting from the date change of a Winston Cup Series event from July 1996 to October 1997, thereby allowing the Company to capitalize on the cooler Fall date. In addition, during fiscal 1997 the Company added a total of 30 luxury suites, representing a 40% increase over the prior year, to expand the Company's sponsorship opportunities and to compete with other major sports facilities. Management continually evaluates the demand for its most popular racing events in order to ensure that additional seating continues to provide an acceptable rate of return on invested capital. Subject to such analyses, the Company currently expects to add approximately 46,000 seats in fiscal 1998 through the construction of additional suites and grandstands at its Daytona, Talladega, Darlington, Phoenix and Watkins Glen facilities. In the long term, the Company intends to continue to expand its facilities based upon customer demand and available capital. DEVELOP BRAND IDENTITY FOR EACH COMPANY SPEEDWAY. The Company intends to continue its efforts to develop a unique brand identity for each of its motorsports facilities. The Company attempts to differentiate its tracks through unique racing configurations, distinct logos, aesthetic environments and marketing themes that seek to capture the particular diverse characteristics of the facility or locale, extensive marketing materials and promotional campaigns that emphasize the history and attributes of that speedway, as well as integrated advertising and promotional activities that focus on both the facility and the featured racing event. Examples of the Company's efforts to develop unique brand imaging and positioning statements for its facilities include (i) Daytona International Speedway, the "World Center of Racing," (ii) Talladega Superspeedway, the "Most Competitive Track in America," and (iii) Darlington Raceway, "A NASCAR Tradition," while brand imaging for its events includes (a) The Daytona 500, "The Great American Race," (b) The Pepsi 400 at Daytona, "Daytona at the Speed of Light," and (c) The Bud Shootout, "The Fastest Guns in NASCAR." Management believes that these track-specific branding activities, combined with the Company's general business strategy of ongoing capital improvements to enhance spectators' total entertainment experience, will position the Company for continued growth in attendance, merchandising sales, sponsorships and cross-marketing opportunities. Management believes that the best example of the Company's branding strategy is Daytona International Speedway, which enjoys international brand name recognition as a result of its association with the sport's history and development, the prestige and caliber of the Daytona 500 and other racing events held at the track, as well as the generally greater speeds resulting from its length and unique, high banked tri-oval configuration, all of which provide a significant competitive advantage. In addition, Daytona International Speedway's landmark position as the "World Center of Racing" is supported by serving as the venue for racing events in a wide variety of motorsports races held on nine different weekends, including (i) the supercross, vintage, road race and other motorcycle events held in conjunction with Daytona's annual Daytona 200 Motorcycle Week, (ii) sports car races hosted by the Company, including the Rolex 24 at Daytona, and (iii) the season opener for the IROC series. The Company has initiated a number of projects to capitalize on Daytona's prestige and brand name recognition, including the opening in July 1996 of DAYTONA USA--The Ultimate Motorsports Attraction, an agreement with General Motors to produce and market a limited edition "Daytona 500" Grand Prix pace car, an upcoming television commercial that features the Daytona 500 and Sega's popular DAYTONA USA video arcade and CD ROM computer race games. 29 INCREASE MOTORSPORTS RELATED INCOME. Motorsports related income, which includes television and radio broadcast fees, promotion and sponsorship fees, hospitality rentals, advertising revenues and royalties from licenses of the Company's trademarks, increased from 28.6% of the Company's total revenues in fiscal 1996 to 33.0% in fiscal 1997, reflecting the growing importance of this component of the Company's revenue stream. Televised motorsports events are continuing to experience significant growth in viewership. According to Nielsen, ratings for the Winston Cup Series races televised by ABC, CBS, ESPN, TBS and TNN increased 54%, 24%, 54%, 61% and 43%, respectively, from 1991 to 1997. Moreover, according to THE WALL STREET JOURNAL, for the last four years, the Daytona 500 has drawn racing's largest television audience. This significant growth in viewership, together with unique market conditions that favor prestigious "content" providers, has resulted in higher broadcast rights fees from television networks in recent periods. In March 1997, the Company entered into an agreement with CBS to broadcast the Daytona 500, the NAPA Auto Parts 300, the Pepsi 400 at Daytona, the Bud Shootout and the Gatorade 125s from 1998 through 2001. The Company also has an agreement with ESPN to broadcast five Winston Cup Series races, four Busch Grand National Series races and one ARCA race to be promoted by the Company in each year from 1998 to 2001. The Company's agreement with TNN terminates with the 1998 Dura-Lube 500 presented by Kmart, and a renewal agreement is currently being negotiated. Management believes that certain Busch Grand National Series, Craftsman Truck Series and other racing events promoted by the Company may also provide increased television broadcast fees. The Company believes that the rapidly growing popularity of motorsports will provide opportunities to increase sponsorship fees and royalties from the licensing of its trademarks. The Company intends to aggressively explore a number of race related marketing partnerships, including additional official status programs and promotional programs for corporate sponsors. In addition, the Company will emphasize increasing revenues from motorsports collectibles, home entertainment products, video licensing and automotive related products. The Company will also seek to expand its radio broadcast rights fees through methods such as the recent expansion of MRN Radio to include the NASCAR Truck Network. In addition, the Company recently expanded its corporate marketing staff to better pursue sponsorship opportunities on an ongoing basis. Published reports indicate that corporate sponsors will spend an estimated $1.1 billion on motorsports marketing programs in 1998. MAXIMIZE PROFITABILITY OF EXISTING FACILITIES AND EVENTS. Although spectator demand for its largest events continues to exceed existing capacity, there is often unused capacity for other events. For example, attendance at the Winston Cup Series event at Talladega, historically held in the summer, was below capacity. As a result of NASCAR's schedule expansion in 1997, the Company capitalized on the opportunity to move this event to a cooler Fall date. The sell-out crowd for this rescheduled event represented more than a 50% increase in attendance over the prior year and the largest crowd in Talladega history. Similarly, the lighting of Daytona International Speedway, one of the world's largest outdoor lighting projects, will permit the July 4th 1998 Pepsi 400 at Daytona to be held at night, thereby increasing ticket sales and providing a prime time network television audience. Other elements of the Company's efforts to increase attendance at non-sold-out events and maximize the profitability of existing facilities include (i) the sale of multi-event ticket packages, (ii) the strategic bundling of other products and services, including sponsorship promotions and hospitality suites, (iii) continued improvements to the quality and diversity of food and beverage concessions, and (iv) other enhancements and upgrades to the design, presentation and quality of the Company's promoted events, facilities and spectator amenities. ACQUIRE AND DEVELOP ADDITIONAL MOTORSPORTS FACILITIES. Senior management personnel regularly review acquisition and development prospects that would augment or complement the Company's existing operations or otherwise offer significant growth opportunities. Current examples of these efforts include the Company's proposed development of new motorsports facilities near Kansas City, Kansas and Chicago, Illinois. The aggregate cost of acquiring and developing the first phase of the Kansas International Speedway land and facility (which will accommodate approximately 75,000 spectators) is expected to be over $200 million, of which the Company's estimated investment of approximately $58.8 million will be funded with 30 a portion of the proceeds of this Offering. Ground breaking is scheduled for 1998, with racing expected to begin in 2000. However, the Company's ability to develop the Kansas City facility is subject to the resolution of certain pending litigation and a number of other significant conditions, including its ability to acquire the requisite land, and obtain all requisite regulatory approvals. See "--Legal Proceedings." Similarly, there can be no assurance that suitable acquisition candidates will be available or, because of competition from other purchasers or other business reasons, that the Company will be able to consummate the acquisition of additional motorsports facilities on satisfactory terms. Management believes that the Company's recent acquisitions of Phoenix International Raceway, the 50% interest in Watkins Glen not previously owned and a 45% indirect interest in the operations of South Florida's Metro-Dade Homestead Motorsports Complex exemplify the Company's commitment to increasing its motorsports presence. MOTORSPORTS FACILITIES The following table sets forth certain information relating to each of the Company's speedway facilities.
NUMBER OF APPROXIMATE TRACK NAME LOCATION SEATS* ACREAGE TRACK LENGTH - -------------------------------- ---------------------------- ----------- ------------ ------------- Daytona International Speedway Daytona Beach, Florida 146,628 440 2.5 miles Talladega Superspeedway Talladega, Alabama 110,133 1,365 2.6 miles Phoenix International Raceway Phoenix, Arizona 68,817 320 1.0 miles Darlington Raceway Darlington, South Carolina 50,805 230 1.3 miles Watkins Glen International Watkins Glen, New York 35,884 1,377 3.4 miles Tucson Raceway Park Tucson, Arizona 5,372 58 .4 miles
- ---------------- *At February 28, 1998 and consisting of seating in grandstands and luxury suites (excludes infield admission). DAYTONA INTERNATIONAL SPEEDWAY. The Daytona International Speedway is a high banked, asphalt superspeedway which also includes a 3.6 mile road course. Management believes that this superspeedway, completed in 1959, includes a number of unique features that provide a significant competitive advantage, including (i) a tri-oval design which provides optimum viewing for race fans, (ii) a twin tunnel underground entry system which offers easy access to the infield before and during events, and (iii) 31-degree banking which, when combined with the track's 2.5 mile length, permits exceptionally high lap speeds. Daytona International Speedway is located on approximately 440 acres of leased land in Daytona Beach, Florida. The Company's lease with the Daytona Beach Racing and Recreational Authority expires in 2032, including renewal options. The Company also owns approximately 15 acres of property adjacent to the Daytona International Speedway. The Company is currently completing a $5.8 million track lighting project that will permit night racing events, including the Pepsi 400 at Daytona in July 1998, which will be the first live prime time telecast of a race by a television network. At February 28, 1998, Daytona International Speedway had 142,268 grandstand seats, 38 suites (including air conditioned luxury sky boxes and Winston Tower suites that include access to hospitality areas) that include a total of 2,360 additional seats, and 40 "Paddock Club" suites that provide seating for 2,000 along "Pit Road" in Daytona's infield. During major events, the Company also uses chalet villages and other pre-race hospitality facilities that service approximately 15,000. Pending capital improvement projects include (i) premium grandstand seating for approximately 6,000 additional spectators on the Speedway's frontstretch, (ii) 28 additional "superstretch" suites, seating approximately 1,200 spectators, and (iii) a variety of other hospitality and aesthetic improvements. TALLADEGA SUPERSPEEDWAY. Talladega Superspeedway, which holds the record for the fastest lap speed attained in stock car racing, is a high banked, tri-oval track with an infield road course. The facility is located about 90 minutes from Atlanta, Georgia and 45 minutes from Birmingham, Alabama. The track and related parking areas are located on approximately 1,365 acres owned by the Company, 31 most of which is reserved for agricultural uses. The Company also owns an additional 115 acres of undeveloped property located immediately north of the entrance to the Talladega track. At February 28, 1998, the facility included 108,129 grandstand seats, 22 luxury suites containing an additional 1,760 seats, a Paddock Club Suite for up to 244 spectators, and hospitality chalets providing service for approximately 10,000. The facility also includes a 400-acre campground facility, the International Motorsports Hall of Fame owned by the State of Alabama, hospitality and souvenir villages, as well as ticket and administrative offices. Pending capital improvement projects include (i) additional grandstand seating for approximately 21,000 spectators, (ii) eight new luxury suites providing seating for approximately 240 spectators, (iii) an extensive renovation of the facility's hospitality village, and (iv) the purchase of an additional 630 acres of land. PHOENIX INTERNATIONAL RACEWAY. The Phoenix International Raceway motorsports complex is located near Phoenix, Arizona on 320 acres owned by the Company. The complex, which was acquired by the Company in July 1997, has a 1-mile oval racing surface and a 1.5 mile road course. There are 67,477 grandstand seats and 25 suites that provide seating for an additional 1,340 spectators. Pending capital improvement projects include (i) additional grandstand seating for approximately 5,000 spectators, (ii) six new luxury suites providing seating for approximately 400 spectators, (iii) additional track wall cable barrier systems, and (iv) the purchase of additional land previously being leased for parking. DARLINGTON RACEWAY. Darlington Raceway, the first superspeedway to host a NASCAR-sanctioned race, is a high banked track located on approximately 230 acres owned by the Company. The Darlington facility includes the 1.3 mile, "egg shaped" oval track commonly known as "too tough to tame", grandstands that seat 49,883 spectators, nine luxury suites containing an additional 922 seats and hospitality chalets providing service for approximately 4,700. Capital improvement projects completed subsequent to February 28, 1998 include additional grandstand seating for approximately 4,500 spectators. WATKINS GLEN INTERNATIONAL. Watkins Glen International includes 3.4 mile and 2.4 mile road course tracks located on approximately 1,377 acres owned by the Company. The Watkins Glen International facility includes grandstands that seat 35,244 spectators, five suites containing an additional 640 seats and hospitality chalets providing service for approximately 8,900. Additional temporary seating for approximately 3,000 spectators will be added for the NASCAR Winston Cup Series event scheduled for August 1998. TUCSON RACEWAY PARK. Tucson Raceway Park includes a progressively banked, 3/8 mile paved oval track, grandstands providing seating for 5,372 spectators, a luxury suite and other spectator facilities located on part of the Pima County Fairgrounds. The Company's sublease with the fairground manager expires in 2013, including renewals. The Company has no current plans to expand this facility. OTHER FACILITIES. The Company's 67,000 square foot corporate headquarters, acquired and renovated in fiscal 1997, is located on approximately nine acres across International Speedway Boulevard from Daytona International Speedway. The Company also owns approximately 14 acres of real property (including three buildings containing an aggregate of approximately 180,000 square feet) located in close proximity to Daytona International Speedway and the Company's corporate headquarters, as well as concession facilities in Daytona Beach and in Talladega. In addition, the Company leases real estate and office space in Talladega, and the property and premises at the Talladega Municipal Airport. The lease for the Company's Talladega business offices, located within the International Motorsports Hall of Fame, expires in 2002, including renewals. The Company's lease for the Talladega Municipal Airport expires in 2022, including renewals. OPERATIONS The Company's operations consist principally of racing events at its six tracks. The Company also owns a 45% indirect interest in the operations of the Metro-Dade Homestead Motorsports Complex 32 south of Miami, Florida and a 11% indirect interest in Penske Motorsports. In addition, the Company owns and operates the DAYTONA USA entertainment complex, provides catering, merchandising and concession services at certain of its facilities and operates two radio networks--MRN Radio and the NASCAR Truck Network (collectively "MRN Radio"). Approximately $110 million, or 78%, of the Company's fiscal 1997 revenues were attributable to NASCAR-sanctioned races at the Company's facilities, including applicable admissions, luxury suite rental, sponsorship, television and MRN Radio broadcast rights fees, food and beverage concession and catering, souvenir, advertising and other revenues. Winston Cup and Busch Grand National races accounted for approximately 87.7% and 10.1%, respectively, of such fiscal 1997 NASCAR-sanctioned race event revenues, with the approximately 2.2% balance attributable to Craftsman Truck, Goody's Dash and other NASCAR racing series. The Company's fiscal 1997 revenues that were not attributable to NASCAR-sanctioned races at the Company's facilities were derived from a number of sources, including (i) admission and luxury suite rental revenue from racing events sanctioned by bodies other than NASCAR, (ii) broadcast and sponsorship fees for such non-NASCAR racing events, (iii) MRN Radio's revenues from the sale of advertising and rights fees paid by broadcast affiliates with respect to events other than NASCAR-sanctioned races at the Company's facilities, (iv) Americrown's catering, merchandising and concession revenues for the Company's non-NASCAR racing events, (v) admissions and sponsorship fees attributable to DAYTONA USA, (vi) merchandising, food and beverage revenues from the gift shop and snackbar adjacent to DAYTONA USA, and (vii) other revenues unrelated to racing events such as hangar rentals and gas sales at the Talladega Municipal Airport. None of the foregoing non-NASCAR revenue sources accounted for over 5% of the Company's fiscal 1997 revenues. RACING EVENTS The 1998 race schedule for the Company includes eight Winston Cup Series races (not including the Bud Shootout at Daytona all star event or the Gatorade 125s qualifying races for the Daytona 500), five Busch Grand National Series races and over 50 other NASCAR races and events. In addition, in fiscal 1998 the Company is scheduled to promote over 20 other stock car, sports car, motorcycle and go-kart racing events, including events sanctioned by USRRC, ARCA, IRL, USAC, SCCA, AMA, WKA, the Championship Cup Series, the American Historic Racing Motorcycle Association, Historic Sportscar Racing, and the Sportscar Vintage Racing Association. OTHER OPERATIONS HOMESTEAD MOTORSPORTS COMPLEX. In July 1997, the Company acquired a 40% indirect interest in the operations of the Metro-Dade Homestead Motorsports Complex located south of Miami, Florida. The Company increased its stake to 45% in March 1998. The Homestead facility has a 1.5 mile oval racing track on 320 acres of leased property. The state-of-the-art facility has grandstands that seat approximately 36,000 spectators, 50 suites containing an additional 2,260 seats, and temporary seating for approximately 5,700 additional persons. The Homestead facility will be the site of a number of significant racing events in 1998, including the Grand Prix of Miami (a CART event) and the Jiffy Lube 300 (a Busch Grand National Series event). PENSKE MOTORSPORTS. The Company beneficially owns an approximately 11% indirect interest in Penske Motorsports, Inc., a publicly traded promoter and marketer of motorsports events. PMI owns and operates The California Speedway near Los Angeles, California, Michigan International Speedway in Brooklyn, Michigan, North Carolina Motor Speedway in Rockingham, North Carolina and Nazareth Speedway in Nazareth, Pennsylvania. Major racing events scheduled to be promoted by Penske Motorsports in 1998 include five Winston Cup Series races, five Busch Grand National Series races, three Champ Car races sanctioned by CART, two Craftsman Truck Series races, two IROC races and one ARCA race. Two of the Company's directors serve on the Board of Directors of Penske Motorsports. See "Management." 33 DAYTONA USA. The Company's DAYTONA USA--The Ultimate Motorsports Attraction motorsports-themed entertainment complex is located adjacent to the Daytona International Speedway. DAYTONA USA includes (i) the Velocitorium, which covers approximately 50,000 square feet, stands nearly four stories high and contains numerous highly interactive motorsports exhibits, many of which are sponsored by leading consumer brands; (ii) Western Auto's Speedway Tours, a tram tour of the Daytona International Speedway's garage area, pit road and high banked track; (iii) the Richard Petty Riding Experience at Daytona; and (iv) for groups of fifteen or more, the VIP Tour, which includes a tour of the Winston Tower suites. Adjoining DAYTONA USA are (a) the Daytona Beach Area Convention and Visitors Official Welcome Center; (b) the Daytona ticket office; (c) the Sega Speedway, a high tech arcade using state of the art video technology and computerized, "virtual" racing simulators; (d) the Pit Shop, which sells DAYTONA USA, Daytona International Speedway, NASCAR and race team clothing, books, collectibles and other officially licensed merchandise; and (e) the Fourth Turn Grill concessions facility. Management believes that DAYTONA USA and these adjoining facilities appeal to individual tourists, tour groups, conventions and the Company's corporate sponsors, thereby (i) increasing the use of the Company's Daytona facility, (ii) expanding the Company's concessions and souvenir sales, and (iii) providing greater visibility for the Company's business and motorsports generally, which in turn is expected to increase spectator interest. MRN RADIO. MRN Radio, which includes the NASCAR Truck Network, produces and syndicates Winston Cup Series, Busch Grand National Series, Craftsman Truck Series and other races promoted by the Company and others. These networks also produce daily and weekly NASCAR racing programs. Network radio programs are currently carried by over 500 radio stations. The Company derives revenue from the sale of advertising on the networks and rights fees paid by broadcast affiliates. In addition, management believes that MRN Radio and the NASCAR Truck Network enhance the Company through increased media exposure to an expanding radio audience. AMERICROWN. The Company's Americrown subsidiary conducts the food, beverage and souvenir concession operations at Daytona, Talladega and Darlington. Americrown also provides catering services to corporate customers both in suites and entertainment chalets at these facilities and at Homestead. Americrown was formed in 1989 to conduct concessions operations as part of the Company's ongoing efforts to enhance race spectators' total entertainment experience. OTHER ACTIVITIES. The Company from time to time uses its track facilities for car shows, auto fairs, vehicle testing and settings for television commercials, print advertisements and motion pictures. For example, Harley Davidson uses Talladega Superspeedway as a test facility for its motorcycles. The Company also operates Talladega Municipal Airport, which is located adjacent to the Talladega Superspeedway. COMPETITION Racing events compete with other sports such as professional football, basketball and baseball, as well as other recreational events. The Company's events also compete with other racing events sanctioned by various racing bodies such as NASCAR, CART, IRL, USAC, SCCA, USRRC, ARCA and others, many of which are often held on the same dates at separate tracks. Management believes that the type and caliber of promoted racing events, facility location, sight lines, pricing and level of customer conveniences are the principal factors that distinguish competing motorsports facilities. See "Risk Factors--Competition." EMPLOYEES As of February 28, 1998, the Company had approximately 400 full-time employees. The Company also engages a significant number of temporary personnel to assist during periods of peak attendance at its events. For example, the Daytona International Speedway engages approximately 2,500 persons during Speedweeks, some of whom are volunteers. None of the Company's employees are represented by a labor union. Management believes that the Company enjoys a good relationship with its employees. 34 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 October 1996, Americrown was served with a class action complaint filed in the Circuit Court of Talladega County, Alabama. The complaint alleges, among other things, that Americrown engaged in price-fixing activities in connection with the sale of racing souvenirs and merchandise at the Talladega Superspeedway. The complaint seeks at least $500 for each member of the class (persons buying racing souvenirs at Talladega Superspeedway since September 1992), but does not otherwise seek to recover compensatory or punitive damages or statutory attorneys' fees. Americrown, the sole defendant in this case, disputes the allegations and intends to defend the action fully and vigorously. In March 1997, two purported class action companion lawsuits were filed in the United States District Court, Northern District of Georgia, against the Company, Americrown and a number of other persons alleging, in substance, that the defendants unlawfully conspired to fix prices of souvenirs and merchandise sold to consumers in violation of federal antitrust laws. One suit was filed by Florida residents and the other suit was filed by Georgia residents. Both suits seek damages and injunctive relief on behalf of all persons who purchase souvenirs or merchandise from certain vendors at any NASCAR Winston Cup Series race or supporting event in the United States during the period 1991 to present. The two suits have been consolidated and the court has established a timetable to consider class certification. Discovery is proceeding. The Company and Americrown dispute the allegations and intend to defend the actions fully and vigorously. In April 1998, Kansas International Speedway Corporation, a wholly owned subsidiary of the Company, was named as a defendant in a lawsuit filed in the District Court of Wyandotte County, Kansas, by certain county property owners against the Unified Government of Wyandotte County/ Kansas City, Kansas (the "Unified Government") seeking to temporarily and permanently enjoin the development of the Kansas International Speedway on constitutional grounds. Also in April 1998, the District Attorney of Wyandotte County initiated a proceeding against the Unified Government challenging the constitutionality of the Kansas statute authorizing, among other things, the Unified Government's issuance of special obligation bonds and its exercise of eminent domain and zoning decisions regarding the development of Kansas International Speedway. The District Attorney requested an expedited review by the Supreme Court of the State of Kansas, which was granted. The Supreme Court is expected to rule on these issues in the summer of 1998. An adverse disposition by the Supreme Court would most likely impede or preclude development of the Kansas International Speedway. Further, the ultimate disposition of the District Court proceeding may adversely impact the development of the Kansas International Speedway. ENVIRONMENTAL MATTERS The Company believes that the facilities operated by it and its subsidiaries are in material compliance with applicable environmental statutes and regulations. Nevertheless, if damage to persons or property or contamination of the environment is determined to have been caused or exacerbated by the conduct of the Company'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. Changes in federal, state or local laws, regulations or requirements or the discovery of theretofore unknown conditions, could also require material expenditures by the Company. TRADEMARKS The Company has various registered and common law trademark rights, including "DAYTONA USA," the "Daytona 500," "Daytona International Speedway," "Talladega Superspeedway," 35 "Darlington," "World Center of Racing," "Watkins Glen International," "Phoenix International Raceway" and related logos. The Company also has licenses from NASCAR, various drivers and other businesses to use names and logos for merchandising programs and product sales. Management's policy is to protect its intellectual property rights vigorously, through litigation if necessary, chiefly because of their proprietary value in merchandise and promotional sales. 36 MANAGEMENT The executive officers and directors of the Company are as follows:
NAME AGE POSITION WITH THE COMPANY - -------------------------------- ----- -------------------------------------------------- William C. France .............. 64 Chairman of the Board and Chief Executive Officer James C. France ................ 53 President, Chief Operating Officer and Director Lesa D. Kennedy ................ 36 Executive Vice President and Director H. Lee Combs ................... 44 Senior Vice President--Operations and Director Robert E. Smith ................ 65 Vice President--Administration Susan G. Schandel .............. 34 Treasurer and Chief Financial Officer Gregory J. Sullivan ............ 43 Vice President--Marketing John E. Graham, Jr. ............ 49 Vice President W. Grant Lynch, Jr. ............ 44 Vice President James H. Hunter ................ 58 Vice President John R. Saunders ............... 41 Vice President--Corporate Administrative Services W. Garrett Crotty .............. 34 Secretary and General Counsel J. Hyatt Brown ................. 60 Director John R. Cooper ................. 65 Director Robert R. Dyson ................ 51 Director James H. Foster ................ 70 Director Brian Z. France ................ 35 Director Christy F. Harris .............. 52 Director Raymond K. Mason, Jr. .......... 42 Director Edward H. Rensi ................ 53 Director Lloyd E. Reuss ................. 61 Director Chapman Root, II ............... 48 Director Thomas W. Staed ................ 67 Director
The Company's Articles provide that the Board of Directors be divided into three classes, with regular three year staggered terms. Messrs. James C. France, Cooper, Brian Z. France, Mason and Reuss will hold office until the annual meeting of shareholders to be held in 1999, Ms. Kennedy and Messrs. Brown, Dyson, Rensi and Staed will hold office until the annual meeting of shareholders to be held in 2000, and Messrs. William C. France, Combs, Foster, Harris and Root will hold office until the annual meeting of shareholders to be held in 2001. William C. France and James C. France are brothers. Lesa D. Kennedy and Brian Z. France are the children of William C. France. There are no other family relationships among the Company's executive officers and directors. Mr. William C. France, a director since 1958, has served as Chairman of the Board of the Company since 1987 and as Chief Executive Officer since 1981. From 1981 to 1987, Mr. France served as the Company's President. Mr. France also serves as a director of Penske Motorsports. Mr. James C. France, a director since 1970, has served as President and Chief Operating Officer of the Company since 1987. Ms. Lesa D. Kennedy, a director since 1984, was appointed an Executive Vice President of the Company in January 1996. Ms. Kennedy served as the Company's Secretary from 1987 until January 1996 and served as its Treasurer from 1989 until January 1996. Mr. H. Lee Combs, a director since 1987, was appointed the Company's Senior Vice President-- Operations in January 1996. Mr. Combs served as a Vice President and the Company's Chief Financial Officer from 1987 until such time. He also serves as a director of Penske Motorsports. Mr. Robert E. Smith has served as Vice President--Administration of the Company for more than five years. 37 Ms. Susan G. Schandel was appointed the Company's Treasurer and Chief Financial Officer in January 1996. From November 1992 until such time, Ms. Schandel served as the Company's Controller. From 1988 until 1992, Ms. Schandel was employed by Ernst & Young LLP, where she most recently served as an audit manager. Mr. Gregory G. Sullivan, appointed the Company's Vice-President--Marketing in November 1994, joined the Company in September 1994. Prior to joining the Company, Mr. Sullivan was employed by Kraft Foods (a division of Phillip Morris) for more than five years, where he most recently served as Director of Marketing Services for Kraft's Maxwell House division. Mr. John E. Graham, Jr., appointed as a Vice President in November 1994, joined the Company as President of Daytona International Speedway in September 1994. Prior to joining the Company, Mr. Graham was employed by First Union National Bank of Florida for more than five years, where he most recently served as President of First Union National Bank of Volusia and Flagler Counties. Mr. W. Grant Lynch, Jr. has served as a Vice President and as President of Talladega Superspeedway since joining the Company in November 1993. Prior to such time, Mr. Lynch was employed by R.J. Reynolds Tobacco Company, Sports Marketing Division, where from 1990 until 1993 he served as Senior Operations and Public Relations Manager for the Winston Cup Racing Program. Mr. James H. Hunter has served as a Vice President and as President of Darlington Raceway since joining the Company in November 1993. Prior to joining the Company, Mr. Hunter served as NASCAR's Vice President of Administration and Marketing for more than five years. Mr. John R. Saunders has served as a Vice President since May 1997 and was President of Watkins Glen International from 1983 until 1997. Mr. W. Garrett Crotty has served as Secretary and General Counsel since 1996. Prior to that time he had been in the private practice of law for more than five years. Mr. J. Hyatt Brown, a director since 1987, serves as the President and Chief Executive Officer of Poe & Brown, Inc. and has been in the insurance business with Brown & Brown, Inc., its predecessor, since 1959. Mr. Brown also serves as a director of Rock Tenn Co, SunTrust Banks, Inc., BellSouth Corporation, and FPL Group, Inc. Mr. John R. Cooper, a director since 1987, served as Vice President--Corporate Development of the Company from December 1987 until July 1994. Since January 1996, Mr. Cooper has served as a special project facilitator for the Company. Mr. Robert R. Dyson, a director since January 1997, has served as Chairman and Chief Executive Officer of the Dyson-Kissner-Moran Corporation (DKM), a private company involved in a variety of businesses, since November 1992. Mr. James H. Foster, a director since 1968, served as the Company's Senior Vice President--Special Projects from January 1994 until his retirement in 1997. Mr. Foster served as President of Daytona International Speedway from 1988 until 1994. Mr. Brian Z. France, a director since 1994, has served as NASCAR's Vice President of Marketing and Corporate Communications since December 1992 and as the Company's Manager--Group Projects since February 1994. From 1983 until such time, Mr. France served in a number of other capacities with NASCAR, including Winston Racing Series Administrative Assistant and National Tour Director. Mr. Christy F. Harris, a director since 1984, has been engaged in the private practice of business and commercial law with Harris, Midyette & Geary, P.A. for more than twenty years. Mr. Raymond K. Mason, Jr., a director since 1981, has served as Chairman and President of American Banks of Florida, Inc., Jacksonville, Florida, since 1978. 38 Mr. Edward H. Rensi, a director since January 1997, is an executive consultant with McDonald's Corporation. He served as President and Chief Executive Officer of McDonald's USA from 1991 until 1997. Mr. Rensi also serves as a director of McDonald's Corporation and Snap-On Incorporated. Mr. Lloyd E. Reuss, a director since January 1996, served as President of General Motors Corporation from 1990 until his retirement in January 1993. Mr. Reuss also serves as a director of Handleman Co., Detroit Mortgage and Realty, Co. and United States Sugar Company. Mr. Chapman Root, II, a director since 1992, has served as President of the Root Company, a private investment company, since 1989. Mr. Root also serves as a director of First Financial Corp. and Terre Haute First National Bank. Mr. Thomas W. Staed, a director since 1987, has served as President of Oceans Eleven Resorts, Inc., a hotel/motel business, for more than five years. CERTAIN TRANSACTIONS NASCAR, which sanctions most of the Company's major racing events, is controlled by William C. France and James C. France. See "NASCAR" and "Management." Standard NASCAR sanction agreements require racetrack operators to pay various monies to NASCAR for each sanction event conducted. Included are sanction fees and prize and point fund monies. The prize and point fund monies are distributed by NASCAR to participants in the events. The Company paid $20.6 million in NASCAR sanction fees and prize and point fund monies in fiscal 1997. In addition, NASCAR and the Company share a variety of expenses in the ordinary course of business. NASCAR pays rent to the Company for office space based upon estimated fair market lease rates for comparable facilities. NASCAR also reimburses the Company for 50% of the compensation paid to certain personnel working in the Company's legal and risk management departments, as well as 50% of the compensation expense associated with receptionists and the Company's archive departments. The Company's payments to NASCAR for MRN Radio's broadcast rights to Craftsman Truck Series races represents an agreed-upon percentage of the Company's advertising revenues attributable to such race broadcasts. NASCAR's reimbursement for use of the Company's mail room, graphics and publications departments, and the Company's reimbursement of NASCAR for use of corporate aircraft, is based on actual usage. The aggregate amount paid by the Company to NASCAR for shared expenses, net of the amounts received from NASCAR for shared expenses, totalled approximately $720,000 during fiscal 1997. The Company strives to ensure, and management believes that, the terms of the Company's transactions with NASCAR are no less favorable to the Company than could be obtained in arms'-length negotiations. J. Hyatt Brown, a director of the Company, serves as President and Chief Executive Officer of Poe & Brown, Inc. ("Poe"). Poe has received commissions for serving as the Company's insurance broker for several of the Company's insurance policies, including its property and casualty policy, certain employee benefit programs and the split-dollar arrangements established for the benefit of William C. France, James C. France and their respective spouses. The aggregate commissions received by Poe in connection with Company policies were approximately $166,000 during fiscal 1997. 39 DESCRIPTION OF CAPITAL STOCK The Company's authorized capital stock includes 80 million shares of Class A Common Stock, 40 million shares of Class B Common Stock, and one million shares of Preferred Stock. As of February 28, 1998, there were 5,502,762 shares of Class A Common Stock and 32,977,635 shares of Class B Common Stock outstanding. No shares of Preferred Stock are outstanding as of the date of this Prospectus. The following descriptions of the Company's capital stock set forth all material provisions of the Company's Articles and Bylaws. However, such descriptions are not necessarily complete and, in each instance, reference is made to the copies of the Company's Articles and Bylaws which are included as exhibits to the Registration Statement of which this Prospectus is a part. COMMON STOCK The shares of Class A Common Stock and Class B Common Stock are identical in all respects, except for voting rights and certain dividend and conversion rights, as described below. VOTING RIGHTS. Each share of Class A Common Stock entitles the holder to one-fifth (1/5) vote on each matter submitted to a vote of the Company's shareholders and each share of Class B Common Stock entitles the holder to one (1) vote on each such matter, in each case including the election of directors. Except as required by applicable law, holders of the Class A Common Stock and Class B Common Stock will vote together on all matters submitted to a vote of the shareholders. See "Risk Factors--Effective Voting Control by France Family Group and Anti-Takeover Effect of Dual Classes of Stock." Neither the Class A Common Stock nor the Class B Common Stock have cumulative voting rights. Any action that can be taken at a meeting of the shareholders may be taken by written consent in lieu of the meeting if the Company receives consents signed by shareholders having the minimum number of votes that would be necessary to approve the action at a meeting at which all shares entitled to vote on the matter were present. This could permit the holders of Class B Common Stock to take all actions required to be taken by the shareholders without providing the other shareholders the opportunity to make nominations or raise other matters at a meeting. DIVIDENDS. Holders of Class A Common Stock and Class B Common Stock are entitled to receive dividends at the same rate if and when declared by the Board of Directors out of funds legally available therefrom, subject to the dividend and liquidation rights of any Preferred Stock that may be issued and outstanding. No dividend or other distribution (including redemptions or repurchases of shares of capital stock) may be made if after giving effect to such distribution, the Company would not be able to pay its debts as they become due in the usual course of business, or if the Company's total assets would be less than the sum of its total liabilities plus the amount that would be needed at the time of a liquidation to satisfy the preferential rights of any holders of Preferred Stock. See "Dividend Policy." If a dividend or distribution payable in Class A Common Stock is made on the Class A Common Stock, the Company must also make a pro rata and simultaneous dividend or distribution on the Class B Common Stock payable in shares of either Class A Common Stock or Class B Common Stock. Conversely, if a dividend or distribution payable in Class B Common Stock is made on the Class B Common Stock, the Company must also make a pro rata and simultaneous dividend or distribution on the Class A Common Stock payable solely in shares of Class A Common Stock. CONVERSION. Class A Common Stock has no conversion rights. Class B Common Stock is convertible into Class A Common Stock, in whole or in part, at any time and from time to time at the option of the holder, on the basis of one share of Class A Common Stock for each share of Class B Common Stock converted. Each share of Class B Common Stock will also automatically convert into one share of Class A Common Stock if, on the record date for any meeting of the shareholders, the number of shares of Class B Common Stock then outstanding is less than 10% of the aggregate number of shares of Class A Common Stock and Class B Common Stock then outstanding. 40 LIQUIDATION. In the event of liquidation, after payment of the debts and other liabilities of the Company and after making provision for the holders of Preferred Stock, if any, the remaining assets of the Company will be distributable ratably among the holders of the Class A Common Stock and Class B Common Stock treated as a single class. MERGERS AND OTHER BUSINESS COMBINATIONS. Upon the merger or consolidation of the Company, holders of each class of Common Stock are entitled to receive equal per share payments or distributions, except that in any transaction in which shares of capital stock are distributed, such shares may differ as to voting rights and otherwise to the extent and only to the extent that the Class A Common Stock and Class B Common Stock differ. OTHER PROVISIONS. The holders of the Class A Common Stock and Class B Common Stock are not entitled to preemptive rights. Neither the Class A Common Stock nor the Class B Common Stock may be subdivided or combined in any manner unless the other class is subdivided or combined in the same proportion. TRANSFER AGENT AND REGISTRAR. The Transfer Agent and Registrar for the Class A Common Stock is SunTrust Bank, Central Florida, N.A. PREFERRED STOCK The Board of Directors of the Company is authorized, without further shareholder action, to divide any or all shares of the authorized Preferred Stock into series and fix and determine the designations, preferences and relative rights and qualifications, limitations, or restrictions thereon of any series so established, including voting powers, dividend rights, liquidation preferences, redemption rights and conversion privileges. As of the date of this Prospectus, the Board of Directors has not authorized any series of Preferred Stock, and there are no plans, agreements or understandings for the authorization or issuance of any shares of Preferred Stock. The issuance of Preferred Stock with voting rights or conversion rights may adversely affect the voting power of the Common Stock, including the loss of voting control to others. ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF FLORIDA LAW AND OTHER PROVISIONS OF THE COMPANY'S ARTICLES The Company is subject to certain anti-takeover provisions under Florida law, including the "affiliated transactions" and "control-share acquisition" provisions of the Florida Business Corporation Act. These provisions require, subject to certain exceptions, that an "affiliated transaction" be approved by the holders of two-thirds of the voting shares other than those beneficially owned by an "interested shareholder" or by a majority of disinterested directors, and that voting rights be conferred on "control shares" acquired in specified "control share acquisitions" generally only to the extent conferred through approval by the holders of a majority of all shares, excluding holders of "interested shares." In addition, certain provisions of the Company's Articles summarized in the following paragraphs may be deemed to have an anti-takeover effect and may delay, defer or prevent a tender offer or takeover attempt that a shareholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by shareholders. CLASSIFIED BOARD OF DIRECTORS. The Articles provide for the Board of Directors to be divided into three classes of directors serving staggered three-year terms. As a result, approximately one-third of the Board of Directors will be elected each year. These provisions, when coupled with the provision of the Articles authorizing only the Board of Directors to increase the size of the Board of Directors, prevent a shareholder from removing incumbent directors and simultaneously gaining control of the Board of Directors by filling the vacancies created by such removal with its own nominees. SPECIAL MEETING OF SHAREHOLDERS. The Articles further provide that special meetings of shareholders of the Company be called only by the Board of Directors or holders of not less than 50% of the votes entitled to be cast at the special meeting. 41 ADVANCE NOTICE REQUIREMENTS FOR SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS. The Articles provide that shareholders seeking to bring business before an annual meeting of shareholders, or to nominate candidates for election as directors at an annual or special meeting of shareholders, must provide timely notice thereof in writing. To be timely with respect to an annual meeting, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the Company not less than 120 days nor more than 180 days prior to the first anniversary of the date of the Company's notice of annual meeting provided with respect to the previous year's meeting. The Articles also specify certain requirements for a shareholder's notice to be in proper written form. These provisions may preclude shareholders from bringing matters before the shareholders at an annual or special meeting or from making nominations for directors at an annual or special meeting. AUTHORIZED BUT UNISSUED SHARES. The authorized but unissued shares of Common Stock and Preferred Stock are available for future issuance without shareholder approval. These additional shares may be utilized for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved Common Stock and Preferred Stock may enable the Board of Directors to issue shares to persons friendly to current management which could render more difficult or discourage an attempt to obtain control of the Company by means of a proxy contest, tender offer, merger or otherwise, and thereby protect the continuity of the Company's management. SHARES ELIGIBLE FOR FUTURE SALE Upon completion of the Offering, the Company will have approximately 42.5 million outstanding shares of Common Stock. Of these shares, the 4,000,000 shares of Class A Common Stock sold in this Offering (or a maximum of 4,600,000 shares if the Underwriters' over-allotment option is exercised in full) will be freely tradeable by persons other than "affiliates" of the Company without restriction or further registration under the Securities Act. In addition, all of the 38.5 million currently outstanding shares of Common Stock are eligible for resale in the public market, subject in the case of approximately 21.8 million shares to the Rule 144 limitations applicable to affiliates and to the lock-up agreements described below. Persons who are deemed affiliates of the Company are generally entitled under Rule 144 as currently in effect to sell within any three-month period a number of shares that does not exceed 1% of the number of shares of the applicable class of Common Stock then outstanding or the average weekly trading volume of such class of Common Stock during the four calendar weeks preceding the making of a filing with the Securities and Exchange Commission (the "Commission") with respect to such sale. Such sales under Rule 144 are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about the Company. The Company is unable to estimate accurately the number of shares of Common Stock that ultimately will be sold under Rule 144 because the number of shares will depend in part on the market price for the Common Stock, the personal circumstances of the sellers and other factors. The Company and each of the Company's executive officers and directors have agreed, subject to certain limitations, not to sell any shares of Common Stock, or securities convertible into or exchangeable for Common Stock, for a period of 90 calendar days after the date of this Prospectus without the prior consent of Smith Barney Inc. See "Underwriting." The Company can make no prediction as to the effect, if any, that sales of shares of Common Stock, or the availability of such shares for sale, will have on the market price of Class A Common Stock prevailing from time to time. Nevertheless, sales of substantial amounts of Common Stock in the public market could adversely affect prevailing market prices. See "Risk Factors--Shares Eligible for Future Sale" and "Risk Factors--Possible Volatility of Stock Price." 42 UNDERWRITING Upon the terms and subject to the conditions stated in the Underwriting Agreement dated the date hereof, each Underwriter named below has severally agreed to purchase, and the Company has agreed to sell to such Underwriter, the number of shares of Class A Common Stock set forth opposite the name of such Underwriter.
UNDERWRITER NUMBER OF - -------------------------------- SHARES Smith Barney Inc. .............. CIBC Oppenheimer Corp. ......... --------- Total ...................... 4,000,000 =========
The Underwriting Agreement provides that the obligations of the several Underwriters to pay for and accept delivery of the shares of Class A Common Stock offered hereby are subject to approval of certain legal matters by counsel and to certain other conditions. The Underwriters are obligated to take and pay for all shares of Class A Common Stock offered hereby (other than those covered by the over-allotment option described below) if any such shares of Class A Common Stock are taken. The Underwriters, for whom Smith Barney Inc. and CIBC Oppenheimer Corp. are acting as the Representatives, propose to offer part of the shares of Class A Common Stock directly to the public at the public offering price set forth on the cover page of this Prospectus and part of the shares of Class A Common Stock to certain dealers at a price which represents a concession not in excess of $ per share below the public offering price. The Underwriters may allow, and such dealers may reallow, a concession not in excess of $ per share to certain other dealers. After the Offering, the price to the public, concession, allowance and reallowance may be changed by the Representatives. The Company has granted to the Underwriters an option, exercisable for thirty days from the date of this Prospectus, to purchase in the aggregate up to 600,000 additional shares of Class A Common Stock at the price to public set forth on the cover page of this Prospectus minus underwriting discounts and commissions. The Underwriters may exercise such option solely for the purpose of covering over-allotments, if any, in connection with the Offering. To the extent such option is exercised, each Underwriter will be obligated, subject to certain conditions, to purchase approximately the same percentage of such additional shares as the number of shares of Class A Common Stock set forth opposite each Underwriter's name in the preceding table bears to the total number of shares of Class A Common Stock listed in such table. The Company and the Underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act. The Underwriters may engage in over-allotment, stabilizing transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Over-allotment involves syndicate sales in excess of the offering size, which creates a syndicate short position. Stabilizing transactions permit bids for and 43 purchases of the Class A Common Stock so long as the stabilizing bids do not exceed a specified maximum. Syndicate covering transactions involve purchases of the Class A Common Stock in the open market in order to cover syndicate short positions. Penalty bids permit the Underwriters to reclaim a selling concession from a syndicate member when the Class A Common Stock originally sold by such syndicate member is purchased in a stabilizing transaction or syndicate covering transaction to cover syndicate short positions. Such stabilizing transactions, syndicate covering transactions and penalty bids may cause the price of the Class A Common Stock to be higher than it would otherwise be in the absence of such transactions. These transactions may be effected on The Nasdaq National Market or otherwise and, if commenced, may be discontinued at any time. The Underwriters and dealers may engage in passive market making transactions in the Class A Common Stock in accordance with Rule 103 of Regulation M under the Exchange Act. In general, a passive market maker may not bid for, or purchase, the Class A Common Stock at a price that exceeds the highest independent bid. In addition, the net daily purchases made by any passive market maker may not bid for, or purchase, the Class A Common Stock at a price that exceeds the highest independent bid. In addition, the net daily purchases made by any passive market maker generally may not exceed 30% of its average daily trading volume in the Class A Common Stock during a specified two month prior period, or 200 shares, whichever is greater. A passive market maker must identify passive market making bids as such on the Nasdaq electronic inter-dealer reporting system. Passive market making may stabilize or maintain the market price of the Class A Common Stock above independent market levels. Underwriters and dealers are not required to engage in passive market making and may end passive market making activities at any time. The Company and each of the Company's executive officers and directors, who beneficially hold an aggregate of approximately 21.8 million shares of Common Stock, have agreed that, for a period of 90 days following the date of this Prospectus, they will not, without the prior written consent of Smith Barney Inc. and subject to certain limited exceptions, offer, sell, contract to sell, or otherwise dispose of any shares of Class A Common Stock (other than shares offered pursuant to this Prospectus) or any securities convertible into, or exercisable or exchangeable for shares of Class A Common Stock. From time to time in the ordinary course of its business, an affiliate of one of the Representatives has provided, and one or more of the Representatives or their affiliates may in the future provide, investment banking or other services to the Company. LEGAL MATTERS The validity of the shares of Common Stock offered hereby will be passed upon for the Company by Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A., Miami, Florida. Certain legal matters will be passed upon for the Underwriters by Holland & Knight LLP, Ft. Lauderdale, Florida. EXPERTS The consolidated financial statements (including the schedule incorporated by reference) of International Speedway Corporation as of November 30, 1996 and 1997, and for each of the years ended August 31, 1995 and 1996, the three-month period ended November 30, 1996 and the fiscal year ended November 30, 1997, appearing in this Prospectus and the Registration Statement have been audited by Ernst & Young LLP, independent certified public accountants, as set forth in their reports thereon appearing and incorporated by reference elsewhere herein, and are included in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing. 44 AVAILABLE INFORMATION The Company is subject to the informational requirements of the Exchange Act, and in accordance therewith files reports, information statements and other information with the Commission. Such reports, information statements and other information filed by the Company may be inspected and copied (at prescribed rates) at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the Commission's regional office located at Seven World Trade Center, 13th Floor, New York, New York 10048 and at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The Commission also maintains a World Wide Web site on the Internet at http://www.sec.gov that provides access to reports, proxy and information statements and other information regarding registrants, such as the Company, that file electronically with the Commission. Information concerning the Company is also available for inspection at the offices of the Nasdaq National Market, 1735 K Street, N.W., Washington, D.C. 20006. The Company has also filed with the Commission a Registration Statement on Form S-3 (together with all amendments, exhibits and schedules thereto, the "Registration Statement") under the Securities Act with respect to the Class A Common Stock offered hereby. This Prospectus does not contain all of the information set forth in the Registration Statement. For further information with respect to the Company and the Class A Common Stock offered hereby, reference is hereby made to such Registration Statement. Statements contained in this Prospectus as to the contents of any contract or other document filed as an exhibit to the Registration Statement accurately describe the material terms of such contracts and documents. However, such statements are not necessarily complete and, in each instance, reference is made to the copy of such contract or document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. Copies of the Registration Statement may be obtained from the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of the fees prescribed by the Commission, may be obtained through the Commission's World Wide Web site, or may be examined, without charge, at the public reference facilities maintained by the Commission. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by the Company with the Commission are incorporated herein by reference: (1) the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1997; (2) the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1998; and (3) the Company's Registration Statement registering the Company's common stock under Section 12(g) of the Exchange Act. All documents filed by the Company with the Commission pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date hereof and prior to the termination of this Offering shall be deemed to be incorporated by reference into this Prospectus and to be as part hereof from the date of filing such documents. Any statements contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that the statement contained herein or in any other subsequently filed document which also is, or is deemed to be, incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to each person to whom this Prospectus is delivered, upon a written or oral request of such person, a copy of any or all of the foregoing documents incorporated by reference into this Prospectus (other than exhibits to such documents, unless such exhibits are specifically incorporated by reference into such documents). Request for such copies should be delivered to Glenn R. Padgett, 1801 West International Speedway Boulevard, Daytona Beach, Florida 32114, telephone (904) 947-6446; telecopy (904) 947-6884. 45 INDEX TO FINANCIAL STATEMENTS PAGE ---- UNAUDITED INTERIM FINANCIAL STATEMENTS: Condensed Consolidated Balance Sheets as of November 30, 1997 and February 28, 1998 .......................... F-2 Condensed Consolidated Statements of Income for the Three Months ended February 28, 1997 and 1998 .................. F-3 Condensed Consolidated Statements of Shareholders' Equity for the Three Months ended February 28, 1997, the Nine Months ended November 30, 1997 and the Three Months ended February 28, 1998 ......... F-4 Condensed Consolidated Statements of Cash Flows for the Three Months ended February 28, 1997 and 1998 .................. F-5 Notes to Condensed Consolidated Financial Statements .................... F-6 AUDITED FINANCIAL STATEMENTS: Report of Independent Certified Public Accountants ...................... F-9 Consolidated Balance Sheets as of November 30, 1996 and 1997 ....................................... F-10 Consolidated Statements of Income for the Years ended August 31, 1995 and 1996, the Three Months ended November 30, 1996 and the Year ended November 30, 1997 ................. F-11 Consolidated Statements of Shareholders' Equity for the Years ended August 31, 1995 and 1996, the Three Months ended November 30, 1996 and the Year ended November 30, 1997 ................. F-12 Consolidated Statements of Cash Flows for the Years ended August 31, 1995 and 1996, the Three Months ended November 30, 1996 and the Year ended November 30, 1997 ................. F-13 Notes to Consolidated Financial Statements .............................. F-14
F-1 INTERNATIONAL SPEEDWAY CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS
NOVEMBER 30, FEBRUARY 28, 1997 1998 -------------- ------------- (UNAUDITED) ASSETS (IN THOUSANDS) Current Assets: Cash and cash equivalents ............................................... $ 9,974 $ 16,193 Short-term investments .................................................. 23,601 35,674 Receivables, less allowances of $100..................................... 7,425 14,703 Inventories ............................................................. 866 1,410 Prepaid expenses and other current assets ............................... 4,077 4,781 -------- -------- Total Current Assets ..................................................... 45,943 72,761 Property and Equipment--at cost--less accumulated depreciation of $53,917 and $56,644 at November 30 and February 28, respectively......... 166,078 173,814 Other Assets: Cash surrender value of life insurance (Note 3) ......................... 3,590 3,640 Equity investments ...................................................... 45,844 45,945 Goodwill, less accumulated amortization of $382 and $638 at November 30 and February 28, respectively ............................. 40,400 40,144 Long-term investments ................................................... 500 500 Other ................................................................... 468 562 -------- -------- 90,802 90,791 -------- -------- Total Assets ............................................................. $302,823 $337,366 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable ........................................................ $ 6,898 $ 8,818 Income taxes payable .................................................... 7 7,726 Deferred income ......................................................... 49,338 46,665 Current portion of note payable ......................................... 13,295 14,613 Other current liabilities ............................................... 1,381 4,068 -------- -------- Total Current Liabilities ................................................ 70,919 81,890 Notes payable ............................................................ 1,007 -- Deferred income taxes .................................................... 20,990 24,801 Commitments and Contingencies (Note 5) Shareholders' Equity (Note 1) Class A Common Stock, $.01 par value, 80,000,000 shares authorized; 5,342,042 and 5,502,762 issued at November 30 and February 28, respectively ............................. 53 55 Class B Common Stock, $.01 par value, 40,000,000 shares authorized; 33,154,920 and 32,977,635 issued at November 30 and February 28, respectively ............................. 332 330 Additional paid-in capital .............................................. 86,437 86,877 Retained earnings ....................................................... 125,457 145,468 -------- -------- 212,279 232,730 Less unearned compensation--restricted stock ............................ 2,372 2,055 -------- -------- Total Shareholders' Equity ............................................... 209,907 230,675 -------- -------- Total Liabilities and Shareholders' Equity ............................... $302,823 $337,366 ======== ========
See accompanying notes. F-2 INTERNATIONAL SPEEDWAY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED ------------------------------ FEBRUARY 28, FEBRUARY 28, 1997 1998 -------------- ------------- (UNAUDITED) (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Revenues: Admissions, net ............................................... $26,360 $31,889 Motorsports related income .................................... 17,209 27,165 Food, beverage and souvenir income ............................ 8,078 8,966 Other income .................................................. 219 264 ------- ------- 51,866 68,284 Expenses: Direct expenses: Prize and point fund monies and NASCAR sanction fees ......... 6,984 11,092 Motorsports related expenses ................................. 5,150 8,154 Food, beverage and souvenir expenses. ........................ 4,510 4,469 General and administrative expenses ........................... 6,174 8,528 Depreciation and amortization ................................. 1,945 3,041 ------- ------- 24,763 35,284 ------- ------- Operating Income ............................................... 27,103 33,000 Interest income, net ........................................... 992 128 Equity in net loss from equity investments ..................... (441) (421) ------- ------- Income before income taxes ..................................... 27,654 32,707 Income taxes ................................................... 10,179 12,558 ------- ------- Net Income ..................................................... $17,475 $20,149 ======= ======= Basic net income per share (Note 2) ............................ $ 0.46 $ 0.53 ======= ======= Diluted net income per share (Note 2) .......................... $ 0.46 $ 0.53 ======= ======= Dividends per share ............................................ $ -- $ -- ======= =======
See accompanying notes. F-3 INTERNATIONAL SPEEDWAY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
CLASS A CLASS B COMMON COMMON UNEARNED STOCK STOCK ADDITIONAL COMPENSATION-- TOTAL $.01 PAR $.01 PAR PAID-IN RETAINED RESTRICTED SHAREHOLDERS' VALUE VALUE CAPITAL EARNINGS STOCK EQUITY ---------- ----------- ------------ -------------- ---------------- -------------- (IN THOUSANDS) BALANCE AT NOVEMBER 30, 1996 .............. $40 $344 $82,236 $ 98,119 $ (1,450) $179,289 Activity 12/1/96 - 2/28/97--unaudited: Net income ............................... -- -- -- 17,475 -- 17,475 Additional expense of Class A Common Stock Offering .................. -- -- (29) -- -- (29) Increase in equity investment ............ -- -- 400 -- -- 400 Restricted stock granted ................. -- 1 1,984 -- (1,985) -- Reacquisition of previously issued common stock ........................... -- -- -- (147) -- (147) Conversion of Class B Common Stock to Class A Common Stock ................ 4 (4) -- -- -- -- Amortization of unearned compensation ........................... -- -- -- -- 240 240 --- ----- ------- -------- -------- -------- BALANCE AT FEBRUARY 28, 1997-- unaudited ................................ 44 341 84,591 115,447 (3,195) 197,228 Activity 3/1/97 - 11/30/97--unaudited: Net income ............................... -- -- -- 12,321 -- 12,321 Cash dividends (6.0\c per share) ......... -- -- -- (2,310) -- (2,310) Additional expense of Class A Common Stock Offering .................. -- -- (17) -- -- (17) Increase in equity investment ............ -- -- 1,863 -- -- 1,863 Reacquisition of previously issued common stock ........................... -- -- -- (1) -- (1) Conversion of Class B Common Stock to Class A Common Stock ................ 9 (9) -- -- -- -- Amortization of unearned compensation ........................... -- -- -- -- 823 823 --- ----- ------- --------- -------- --------- BALANCE AT NOVEMBER 30, 1997 .............. 53 332 86,437 125,457 (2,372) 209,907 Activity 12/1/97-2/28/98--unaudited: Net income ............................... -- -- -- 20,149 -- 20,149 Increase in equity investment ............ -- -- 115 -- -- 115 Reacquisition of previously issued common stock ........................... -- -- (57) (138) -- (195) Conversion of Class B Common Stock to Class A Common Stock ................ 2 (2) -- -- -- -- Forfeiture of restricted shares .......... -- -- (110) -- 110 -- Income tax benefit related to restricted stock plan ............................. -- -- 492 -- -- 492 Amortization of unearned compensation ........................... -- -- -- -- 207 207 --- ----- ------- --------- -------- --------- BALANCE AT FEBRUARY 28, 1998-- unaudited ................................ $55 $330 $86,877 $145,468 $ (2,055) $230,675 === ===== ======= ========= ======== =========
See accompanying notes. F-4 INTERNATIONAL SPEEDWAY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED ------------------------------ FEBRUARY 28, FEBRUARY 28, 1997 1998 -------------- ------------- (UNAUDITED) (UNAUDITED) (IN THOUSANDS) OPERATING ACTIVITIES Net income .................................................. $ 17,475 $ 20,149 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization .............................. 1,945 3,041 Amortization of unearned compensation ...................... 240 207 Deferred income taxes ...................................... 1,447 4,035 Undistributed loss from equity investments ................. 441 421 Loss on disposition of property and equipment .............. -- 98 Changes in Operating Assets and Liabilities: Receivables ............................................... (7,031) (7,278) Inventories ............................................... (343) (544) Prepaid expenses and other current assets ................. (798) (704) Other assets .............................................. (3) (100) Accounts payable .......................................... 4,330 1,919 Income taxes payable ...................................... 8,008 7,915 Deferred income ........................................... (7,174) (2,673) Other current liabilities ................................. 2,066 2,998 ---------- --------- Net Cash Provided by Operating Activities. ................... 20,603 29,484 INVESTING ACTIVITIES Acquisition of investments .................................. (12,025) (64,983) Proceeds from maturities of investments ..................... 8,646 52,910 Capital expenditures ........................................ (10,328) (10,612) Cash surrender value of life insurance ...................... (34) (50) Equity investments .......................................... -- (335) ---------- --------- Net Cash Used in Investing Activities ........................ (13,741) (23,070) FINANCING ACTIVITIES Reacquisition of previously issued common stock ............. (147) (195) Additional expense of Class A Common Stock Offering ......... (29) -- ---------- --------- Net Cash Used in Financing Activities ........................ (176) (195) ---------- --------- Net Increase in Cash and Cash Equivalents .................... 6,686 6,219 Cash and Cash Equivalents at Beginning of Period ............. 8,057 9,974 ---------- --------- Cash and Cash Equivalents at End of Period ................... $ 14,743 $ 16,193 ========== =========
See accompanying notes. F-5 INTERNATIONAL SPEEDWAY CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 28, 1998 (UNAUDITED) NOTE 1--BASIS OF PRESENTATION The accompanying condensed consolidated financial statements have been prepared in compliance with Rule 10-01 of Regulation S-X and generally accepted accounting principles but do not include all of the information and disclosures required for complete financial statements. The statements should be read in conjunction with the consolidated financial statements and notes thereto that follow. In management's opinion, the statements include all adjustments which are necessary for a fair presentation of the results for the interim periods. All such adjustments are of a normal recurring nature. Certain reclassifications have been made to conform to the financial presentation at February 28, 1998. Because of the seasonal concentration of racing events, the results of operations for the three-month periods ended February 28, 1997 and February 28, 1998 are not indicative of the results to be expected for the year. NOTE 2--EARNINGS PER SHARE The Company has adopted Statement of Financial Accounting Standards No. 128, "Earnings Per Share", during the three months ended February 28, 1998. This statement requires the Company to present "Basic" and "Diluted" earnings per share on the face of the income statement for current periods and to restate earnings per share for prior periods. For the three months ended February 28, 1997 and February 28, 1998 earnings per share were $.46 and $.53, respectively, for both basic and diluted earnings per share. Basic weighted average shares outstanding for the three-month periods ended February 28, 1997 and February 28, 1998 were 38,172,705 and 38,204,357, respectively. Diluted weighted average shares outstanding for the three-month periods ending February 28, 1997 and February 28, 1998 were 38,299,227 and 38,361,625, respectively. The difference between basic weighted average shares and diluted weighted average shares is related to shares issued under the Company's Long-term Incentive Restricted Stock Plan, using the treasury stock method as prescribed by the standard. NOTE 3--RELATED PARTY DISCLOSURES AND TRANSACTIONS All of the racing events that take place during the Company's fiscal year are sanctioned by various racing organizations, such as the American Historic Racing Motorcycle Association ("AHRMA"), the American Motorcyclist Association ("AMA"), the Automobile Racing Club of America ("ARCA"), the Championship Cup Series ("CCS"), the Federation Internationale de l'Automobile ("FIA"), the Federation Internationale Motocycliste ("FIM"), the International Race of Champions ("IROC"), the Indy Racing League ("IRL"), the Sports Car Club of America ("SCCA"), the Sportscar Vintage Racing Association ("SVRA"), the United States Auto Club ("USAC"), the United States Road Racing Championship ("USRRC"), the World Karting Association ("WKA"), and the National Association for Stock Car Auto Racing, Inc. ("NASCAR"). NASCAR, which sanctions some of the Company's principal racing events, is a member of the France Family Group which controls in excess of 55% of the outstanding stock of the Company and some members of which serve as directors and officers. Standard NASCAR sanction agreements require racetrack operators to pay sanction fees and prize and point fund monies for each sanctioned event conducted. The prize and point fund monies are distributed by NASCAR to participants in the events. Prize and point fund monies paid by the Company to NASCAR for disbursement to competitors totaled approximately $5.6 million and $8.9 million for the three-month periods ended February 28, 1997 and February 28, 1998, respectively. F-6 INTERNATIONAL SPEEDWAY CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) FEBRUARY 28, 1998 (UNAUDITED) NOTE 3--RELATED PARTY DISCLOSURES AND TRANSACTIONS--(CONTINUED) In October 1995 the Company entered into collateral assignment split-dollar insurance agreements covering the lives of William C. France and James C. France and their respective spouses. Pursuant to the agreements, the Company will advance the annual premiums of approximately $1,205,000 each year for a period of eight years. Upon surrender of the policies or payment of the death benefits thereunder, the Company is entitled to repayment of an amount equal to the cumulative premiums previously paid by the Company. The Company may cause the agreements to be terminated and the policies surrendered at any time after the cash surrender value of the policies equals the cumulative premiums advanced under the agreements. The Company records a net insurance expense representing the excess of the premiums paid over the increase in cash surrender value of the policies associated with these agreements. During the three-month periods ended February 28, 1997 and February 28, 1998, premiums paid were approximately equal to the increase in cash surrender value of the policies. NOTE 4--SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid for income taxes and interest for the three months ended February 28, 1997 and February 28, 1998 is as follows:
1997 1998 ------ ------- (IN THOUSANDS) Income taxes paid ......... $619 $547 Interest paid ............. $ -- $ --
NOTE 5--LEGAL PROCEEDINGS On October 21, 1996, the Company's indirect corporate subsidiary, Americrown Service Corporation ("Americrown"), was served with a Class Action Complaint filed in the Circuit Court of Talladega County, Alabama by Howard Padgett, Bill Lutz and Tommy Jones. The complaint was filed in September 1996 and alleged, among other things, that Americrown engaged in price-fixing activities in connection with the sale of racing souvenirs and merchandise at the Talladega Superspeedway. The complaint seeks at least $500 for each member of the putative class (persons buying racing souvenirs at Talladega Superspeedway since September 1992), but does not otherwise seek to recover compensatory or punitive damages or statutory attorneys' fees. Although Americrown attempted to remove the suit to Federal District Court, it was remanded to the Circuit Court of Talladega County, Alabama, where discovery and the class certification process are proceeding. Americrown disputes the allegations and intends to defend the action fully and vigorously. In March 1997, two purported class action companion lawsuits were filed in the United States District Court, Northern District of Georgia, against the Company, its indirect corporate subsidiary, Americrown Service Corporation, and a number of other persons alleging, in substance, that the defendants unlawfully conspired to fix prices of souvenirs and merchandise sold to consumers in violation of federal antitrust laws. One suit was filed by Florida residents and the other suit was filed by Georgia residents. Both suits seek damages and injunctive relief on behalf of all persons who purchased souvenirs or merchandise from certain vendors at any NASCAR Winston Cup Series stock car race or supporting event in the United States during the period 1991 to present. The two suits have been consolidated and the court has established a timetable to consider class certification. Discovery is proceeding. The Company and Americrown dispute the allegations and intend to defend the actions fully and vigorously. Management is presently unable to predict or quantify the outcome of these matters. F-7 INTERNATIONAL SPEEDWAY CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) FEBRUARY 28, 1998 (UNAUDITED) NOTE 6--ACQUISITION On July 14, 1997, Phoenix Speedway Corporation, a newly formed wholly-owned subsidiary of the Company, acquired substantially all of the assets comprising the business and motorsports complex known as "Phoenix International Raceway" from Phoenix International Raceway, Inc., Phoenix International Raceway, L.L.C. and Phoenix International Raceway Limited Partnership. The acquisition has been accounted for under the purchase method of accounting, and accordingly, the results of operations have been included in the Company's consolidated statements of operations since the date of acquisition. The following unaudited pro forma financial information presents a summary of consolidated results of operations as if the acquisition had occurred as of December 1, 1996 after giving effect to certain adjustments, including depreciation, amortization of goodwill, interest income, interest expense on acquisition debt and related income tax effects. The pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the acquisition been made on that date, nor are they necessarily indicative of results which may occur in the future.
PRO FORMA--UNAUDITED FOR THE THREE MONTHS ENDED FEBRUARY 28, 1997 ----------------------------------------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Total revenues ....................... $54,047 Net income ........................... 16,769 Basic net income per share ........... .44 Diluted net income per share ......... .44
NOTE 7--SUBSEQUENT EVENTS In March, 1998, the Company sold its entire equity interest in Grand Prix Association of Long Beach, Inc. for $5.3 million. The Company acquired its position in Grand Prix through a series of transactions during 1997 for a total of $4.3 million, including acquisition costs. In March of 1998, the Company acquired an additional 5% ownership interest in the Homestead-Miami Speedway, LLC for $2.8 million, which was substantially financed by a 7.5% interest bearing note, payable on December 31, 2001. In April 1998, Kansas International Speedway Corporation, a wholly owned subsidiary of the Company, was named as a defendant in a lawsuit filed in the District Court of Wyandotte County, Kansas, by certain county property owners against the Unified Government of Wyandotte County/ Kansas City, Kansas (the "Unified Government") seeking to temporarily and permanently enjoin the development of the Kansas International Speedway on constitutional grounds. Also in April 1998, the District Attorney of Wyandotte County initiated a proceeding against the Unified Government challenging the constitutionality of the Kansas statute authorizing, among other things, the Unified Government's issuance of special obligation bonds and its exercise of eminent domain and zoning decisions regarding the development of Kansas International Speedway. The District Attorney requested an expedited review by the Supreme Court of the State of Kansas, which was granted. The Supreme Court is expected to rule on these issues in the summer of 1998. An adverse disposition by the Supreme Court would most likely impede or preclude development of the Kansas International Speedway. Further, the ultimate disposition of the District Court proceeding may adversely impact the development of the Kansas International Speedway. F-8 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The Board of Directors and Shareholders International Speedway Corporation We have audited the accompanying consolidated balance sheets of International Speedway Corporation and subsidiaries as of November 30, 1996 and 1997, and the related consolidated statements of income, shareholders' equity and cash flows for the years ended August 31, 1995 and 1996, the three month period ended November 30, 1996, and the year ended November 30, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of International Speedway Corporation and subsidiaries at November 30, 1996 and 1997, and the consolidated results of their operations and their cash flows for the years ended August 31, 1995 and 1996, the three month period ended November 30, 1996 and the year ended November 30, 1997, in conformity with generally accepted accounting principles. Ernst & Young LLP Jacksonville, Florida January 22, 1998, except as to Note 1, Earnings Per Share, as to which the date is April 14, 1998. F-9 INTERNATIONAL SPEEDWAY CORPORATION CONSOLIDATED BALANCE SHEETS
NOVEMBER 30, ------------------------- 1996 1997 ----------- ----------- ASSETS (IN THOUSANDS) Current Assets: Cash and cash equivalents ......................................... $ 8,057 $ 9,974 Short-term investments (Note 4) ................................... 75,557 23,601 Receivables, less allowances of $35 and $100, respectively......... 4,860 7,425 Inventories ....................................................... 1,253 866 Prepaid expenses and other current assets ......................... 2,906 4,077 -------- -------- Total Current Assets ............................................... 92,633 45,943 Property and Equipment: Land and leasehold improvements ................................... 3,668 15,177 Buildings, grandstands and tracks ................................. 104,152 153,044 Furniture and equipment ........................................... 27,173 33,168 Construction in progress .......................................... 15,618 18,606 -------- -------- 150,611 219,995 Less: accumulated depreciation .................................... 39,258 53,917 -------- -------- 111,353 166,078 Other Assets: Cash surrender value of life insurance ............................ 2,337 3,590 Equity investments (Note 2) ....................................... 26,952 45,844 Goodwill, less accumulated amortization of $382 (Note 3)........... -- 40,400 Long-term investments (Note 4) .................................... 500 500 Other ............................................................. 294 468 -------- -------- 30,083 90,802 -------- -------- Total Assets ....................................................... $234,069 $302,823 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable .................................................. $ 3,306 $ 6,898 Income taxes payable (Note 5) ..................................... 87 7 Deferred income ................................................... 35,760 49,338 Current portion of note payable ................................... -- 13,295 Other current liabilities ......................................... 558 1,381 -------- -------- Total Current Liabilities .......................................... 39,711 70,919 Notes Payable ...................................................... -- 1,007 Deferred Income Taxes (Note 5) ..................................... 15,069 20,990 Commitments and Contingencies (Note 8) Shareholders' Equity (Notes 1 and 7): Class A Common Stock, $.01 par value, 80,000,000 shares authorized; 4,000,000 and 5,342,042 issued and outstanding in 1996 and 1997, respectively .................................. 40 53 Class B Common Stock, $.01 par value, 40,000,000 shares authorized; 34,406,325 and 33,154,920 issued and outstanding in 1996 and 1997, respectively .................................. 344 332 Additional paid-in capital ........................................ 82,236 86,437 Retained earnings ................................................. 98,119 125,457 -------- -------- 180,739 212,279 Less unearned compensation--restricted stock (Note 11) ............ 1,450 2,372 -------- -------- Total Shareholders' Equity ......................................... 179,289 209,907 -------- -------- Total Liabilities and Shareholders' Equity ......................... $234,069 $302,823 ======== ========
See accompanying notes. F-10 INTERNATIONAL SPEEDWAY CORPORATION CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS YEAR ENDED ENDED YEAR ENDED AUGUST 31, NOVEMBER 30, NOVEMBER 30, --------------------------- -------------- ------------- 1995 1996 1996 1997 ------------ ------------ -------------- ------------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Revenues: Admissions, net ................................... $ 43,274 $ 50,140 $ 4,191 $ 69,487 Motorsports related income ........................ 24,033 27,433 3,972 46,650 Food, beverage and souvenir income ................ 14,442 17,505 1,943 23,408 Other income ...................................... 423 964 390 1,829 -------- -------- -------- --------- 82,172 96,042 10,496 141,374 Expenses: Direct expenses: Prize and point fund monies and NASCAR sanction fees .................................. 11,765 13,865 1,301 20,567 Motorsports related expenses ..................... 11,604 15,336 2,814 23,075 Food, beverage and souvenir expenses ............. 8,107 10,278 1,536 13,435 General and administrative expenses ............... 18,202 20,930 5,057 29,486 Depreciation and amortization ..................... 4,798 6,302 2,353 9,910 -------- -------- -------- --------- 54,476 66,711 13,061 96,473 -------- -------- -------- --------- Operating income (loss) ............................ 27,696 29,331 (2,565) 44,901 Interest income, net ............................... 1,436 872 261 2,687 Equity in net income (loss) from equity investments ............................... 285 1,441 (304) 366 -------- -------- -------- --------- Income (loss) before income taxes .................. 29,417 31,644 (2,608) 47,954 Income taxes (benefit) (Note 5) .................... 11,054 11,963 (741) 18,158 -------- -------- -------- --------- Net income (loss) .................................. $ 18,363 $ 19,681 $ (1,867) $ 29,796 ======== ======== ======== ========= Basic earnings (loss) per share (Note 1) ........... $ 0.54 $ 0.58 $ (0.05) $ 0.78 ======== ======== ======== ========= Diluted earnings (loss) per share (Note 1) ......... $ 0.54 $ 0.57 $ (0.05) $ 0.78 ======== ======== ======== ========= Dividends per share (Note 1) ....................... 4.7cents 5.3cents -- 6.0cents ======== ======== ======== =========
See accompanying notes. F-11 INTERNATIONAL SPEEDWAY CORPORATION 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 AUGUST 31, 1994 .................. $-- $344 $1,364 $ 67,194 $ (625) $ 68,277 Net income ................................. -- -- -- 18,363 -- 18,363 Cash dividends (4.7\c per share) ........... -- -- -- (1,605) -- (1,605) Reacquisition of previously issued common stock ............................. -- -- -- (106) -- (106) Restricted stock granted (Note 11) ......... -- -- 489 -- (489) -- Amortization of unearned compensation (Note 11) ................... -- -- -- -- 318 318 --- ----- ------- -------- -------- -------- BALANCE AT AUGUST 31, 1995 .................. -- 344 1,853 83,846 (796) 85,247 Net income ................................. -- -- -- 19,681 -- 19,681 Cash dividends (5.3\c per share) ........... -- -- -- (1,836) -- (1,836) Reacquisition of previously issued common stock ............................. -- (1) (2) (1,705) -- (1,708) Restricted stock granted (Note 11) ......... -- 1 1,599 -- (1,600) -- Amortization of unearned compensation (Note 11) ................... -- -- -- -- 606 606 Recapitalization of equity investment ...... -- -- 4,677 -- -- 4,677 --- ------ -------- -------- -------- -------- BALANCE AT AUGUST 31, 1996 .................. -- 344 8,127 99,986 (1,790) 106,667 Net loss ................................... -- -- -- (1,867) -- (1,867) Public offering--Class A Common Stock (Note 7) ........................... 40 -- 74,327 -- -- 74,367 Forfeiture of restricted shares ............ -- -- (218) -- 218 -- Amortization of unearned compensation (Note 11) ................... -- -- -- -- 122 122 --- ------ -------- -------- -------- -------- BALANCE AT NOVEMBER 30, 1996 ................ 40 344 82,236 98,119 (1,450) 179,289 Net income ................................. -- -- -- 29,796 -- 29,796 Cash dividends (6.0\c per share) ........... -- -- -- (2,310) -- (2,310) Increase in equity investments (Note 2)..... -- -- 2,263 -- -- 2,263 Additional expense of Class A Common Stock Offering .................... -- -- (46) -- -- (46) Restricted stock granted (Note 11) ......... -- 1 1,984 -- (1,985) -- Reacquisition of previously issued common stock ............................. -- -- -- (148) -- (148) Conversion of Class B Common Stock to Class A Common Stock .................. 13 (13) -- -- -- -- Amortization of unearned compensation (Note 11) ................... -- -- -- -- 1,063 1,063 --- ------ -------- -------- -------- -------- BALANCE AT NOVEMBER 30, 1997 ................ $53 $332 $86,437 $125,457 $ (2,372) $209,907 === ====== ======== ======== ======== ========
See accompanying notes. F-12 INTERNATIONAL SPEEDWAY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS YEAR ENDED ENDED YEAR ENDED AUGUST 31, NOVEMBER 30, NOVEMBER 30, -------------------------- -------------- ------------- 1995 1996 1996 1997 ------------- ------------ -------------- ------------- (IN THOUSANDS) OPERATING ACTIVITIES Net income (loss) ..................................... $ 18,363 $ 19,681 $ (1,867) $ 29,796 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization ........................ 4,798 6,302 2,353 9,910 Amortization of unearned compensation ................ 318 606 122 1,063 Deferred income taxes ................................ 1,650 1,500 (766) 4,425 Undistributed (income) loss from equity investments. ................................ (285) (1,441) 304 (366) (Gain) loss on disposition of property and equipment ...................................... 251 (13) -- -- Changes in Operating Assets and Liabilities: Receivables ......................................... (447) (1,661) (1,405) (667) Inventories ......................................... (89) (251) 156 485 Prepaid expenses and other current assets ........... (1,322) 712 651 (689) Other assets ........................................ (61) (127) -- (204) Accounts payable .................................... 1,167 1,201 (514) 3,280 Deferred income ..................................... 2,702 6,111 9,797 6,791 Income taxes payable ................................ 272 (267) 30 (80) Other current liabilities ........................... 409 317 (1,038) 1,190 ---------- --------- --------- ---------- Net Cash Provided by Operating Activities .............. 27,726 32,670 7,823 54,934 INVESTING ACTIVITIES Acquisition of investments ............................ (125,982) (83,502) (70,959) (145,391) Proceeds from maturities of investments ............... 119,392 106,330 3,771 197,347 Capital expenditures .................................. (16,831) (34,792) (14,864) (38,627) Equity investments .................................... -- (15,287) -- (17,725) Cash surrender value of life insurance ................ (30) (725) (1,123) (1,253) Proceeds from sale of assets .......................... 80 21 -- -- Acquisition of Watkins Glen International interest, net of cash acquired ................................ -- -- -- (996) Acquisition of Phoenix International Raceway, net of cash acquired ................................ -- -- -- (43,868) ---------- --------- --------- ---------- Net Cash Used in Investing Activities .................. (23,371) (27,955) (83,175) (50,513) FINANCING ACTIVITIES Reacquisition of previously issued common stock ....... (106) (1,708) -- (148) Additional expense of Class A Common Stock Offering . ............................. -- -- -- (46) Cash dividends paid ................................... (1,605) (1,836) -- (2,310) Issuance of Class A Common Stock ...................... -- -- 74,367 -- Short-term borrowings ................................. -- -- 7,800 -- Repayment of short-term borrowings .................... -- -- (7,800) -- ---------- --------- --------- ---------- Net Cash Provided by (Used in) Financing Activities..... (1,711) (3,544) 74,367 (2,504) ---------- --------- --------- ---------- Net Increase (Decrease) in Cash and Cash Equivalents .................................. 2,644 1,171 (985) 1,917 Cash and Cash Equivalents at Beginning of Period ....... 5,227 7,871 9,042 8,057 ---------- --------- --------- ---------- Cash and Cash Equivalents at End of Period ............. $ 7,871 $ 9,042 $ 8,057 $ 9,974 ========== ========= ========= ==========
See accompanying notes. F-13 INTERNATIONAL SPEEDWAY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOVEMBER 30, 1997 NOTE 1--DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF BUSINESS: International Speedway Corporation and its wholly-owned subsidiaries (the "Company") is a leading promoter of motorsports activities in the United States. The Company owns and operates five premier motorsports facilities--Daytona International Speedway, a 2.5 mile, tri-oval track located in Daytona Beach, Florida; Talladega Superspeedway, a 2.6 mile, tri-oval track located in Talladega, Alabama; Phoenix International Raceway ("Phoenix"), a one mile oval track located outside of Phoenix, Arizona (See Note 3); Darlington Raceway, a 1.3 mile track located in Darlington, South Carolina; and Watkins Glen International ("Watkins Glen"), a 3.4 mile road course located in Watkins Glen, New York (See Note 3). The Company also operates Tucson Raceway Park in Pima County Arizona. At these facilities the Company currently promotes over 80 stock car, sports car, truck, motorcycle and other racing events annually, including eight NASCAR Winston Cup Series championship point races, two NASCAR Winston Cup Series non-championship point races, five NASCAR Busch Series--Grand National Division races, three NASCAR Craftsman Truck Series races, and a number of prestigious sports car and motorcycle races. The Company also has investments in other motorsports entertainment companies. The Company holds an 11% indirect interest in Penske Motorsports, Inc. ("PMI"), which owns and operates Michigan International Speedway, Pennsylvania's Nazareth Speedway, the California Speedway, and the North Carolina Motor Speedway. The Company also holds a 40% interest in Homestead--Miami Speedway, LLC ("Homestead"), the operator of the Metro-Dade Homestead Motorsports Complex, and an approximately 7% interest in Grand Prix Association of Long Beach ("Long Beach"), the operator of Grand Prix of Long Beach, California, Gateway International Raceway in Madison, Illinois and Memphis Motorsports Park in Millington, Tennessee. The Company owns and operates DAYTONA USA--The Ultimate Motorsports Attraction, a motorsports theme-entertainment complex that includes interactive media, theaters, historical memorabilia and exhibits. Americrown Service Corporation ("Americrown"), one of the Company's wholly-owned subsidiaries, conducts the food, beverage and souvenir concession operations at the Daytona, Talladega and Darlington facilities. Americrown is also responsible for providing catering services to corporate customers both in suites and entertainment chalets at these facilities and at unaffiliated sporting events. The Company's proprietary MRN radio network and NASCAR Truck Network produces and syndicates NASCAR Winston Cup Series, NASCAR Busch Series--Grand National Division, NASCAR Craftsman Truck Series and other races promoted by the Company and others. MRN Radio also produces daily and weekly NASCAR racing programs. BASIS OF PRESENTATION: On September 5, 1996 the Company's Board of Directors approved a recapitalization of the Company which became effective November 4, 1996, concurrently with the effectiveness of the Registration Statement filed on September 6, 1996 with the Securities and Exchange Commission in connection with the offering of 4,000,000 shares of the Company's newly authorized Class A Common Stock (discussed below). The recapitalization modified the Company's F-14 INTERNATIONAL SPEEDWAY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOVEMBER 30, 1997 NOTE 1--DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) authorized capital to include one million shares of Preferred Stock, eighty million shares of Class A Common Stock and forty million shares of Class B Common Stock. Pursuant to the recapitalization, all of the Company's existing outstanding shares of Common Stock were automatically converted, on a 15-for-one basis, into the newly authorized shares of Class B Common Stock and the shares of Common Stock previously held as treasury stock were retired. Shareholders' equity and all share information and per share data have been adjusted to give effect to the recapitalization and related stock split. Effective December 1, 1996, the Company changed its fiscal year end from August 31 to November 30. This resulted in a three-month transition period commencing September 1, 1996 and ending November 30, 1996. SIGNIFICANT ACCOUNTING POLICIES: PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial statements include the accounts of International Speedway Corporation and its wholly-owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. CASH AND CASH EQUIVALENTS: For purposes of reporting cash flows, cash and cash equivalents include cash on hand, bank demand deposit accounts, repurchase agreements and money market accounts at investment firms. Cash and cash equivalents exclude certificates of deposit, obligations of U.S. Government Agencies, U.S. Treasury Notes and U.S. Treasury Bills, regardless of original maturity. INVESTMENTS (NOTE 4): The Company accounts for investments in accordance with Statement of Financial Accounting Standard (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The Company determines the appropriate classification of investments at the time of purchase and reevaluates such designation as of each balance sheet date. Debt securities are classified as held-to-maturity based on the Company's positive intent and ability to hold the securities to maturity. These securities are stated at cost. Interest and dividends are included in interest income. Short-term investments consist of certificates of deposit and securities held-to-maturity which are due in one year or less. Certificates of deposit are readily convertible to cash and are stated at cost. Long-term investments consist of securities held-to-maturity which are due after one year and are stated at cost. INVENTORIES: Inventories of items for resale are stated at the lower of cost, determined on the first-in, first-out basis, or market. F-15 INTERNATIONAL SPEEDWAY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOVEMBER 30, 1997 NOTE 1--DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) PROPERTY AND EQUIPMENT: Property and equipment, including improvements to existing facilities, are stated at cost. Depreciation is provided for financial reporting purposes using either the straight-line or accelerated methods over estimated useful lives as follows: Buildings, grandstands and tracks ......... 5-34 years Furniture and equipment ................... 3-20 years
EQUITY INVESTMENTS (NOTE 2): Equity investments at November 30, 1996, represent a 50% ownership interest in Watkins Glen and a 20% ownership interest in PSH Corp (resulting in an approximately 11% indirect interest in PMI). At November 30, 1997, equity investments represent a 40% interest in Homestead, an approximately 7% interest in Long Beach and a 20% ownership interest in PSH Corp. These investments are accounted for using the equity method of accounting. The Company's equity in the net income from equity investments is recorded as income with a corresponding increase in the investment. Dividends received and amortization of the Company's investment in excess of its pro rata share of the underlying assets reduce the investment. The Company's investment in excess of its pro rata share of the underlying assets is amortized by the straight-line method over 20 years. The Company recognizes the effects of transactions involving the sale or distribution by an equity investee of its common stock as capital transactions. GOODWILL: Goodwill resulting from acquisitions is being amortized by the straight-line method over 40 years. Recoverability of intangibles is assessed using estimated undiscounted cash flows of related operations. FAIR VALUE OF FINANCIAL INSTRUMENTS: The Company's financial instruments consist of cash, short- and long-term investments, accounts receivable and accounts payable. The carrying value of these financial instruments approximates their fair value at November 30, 1997. INCOME TAXES (NOTE 5): Income taxes have been provided using the liability method in accordance with SFAS No. 109, "Accounting for Income Taxes." Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. ADMISSION INCOME: Admission income and all race-related revenue is earned upon completion of an event and is stated net of admission and sales taxes collected. Refundable advance ticket sales and all race-related revenue on future events are deferred until earned. ADVERTISING EXPENSE: Advertising costs are expensed as incurred or, as in the case of race-related advertising, upon the completion of the event. Advertising expense was approximately $1.3 million, $1.7 million, $290,000 and $2.4 million for the years ended August 31, 1995 and 1996, the three months ended November 30, 1996 and the year ended November 30, 1997, respectively. EARNINGS PER SHARE: The Company adopted Statement of Financial Accounting Standards No. 128, "Earnings Per Share", during its first quarter ended February 28, 1998. This statement requires the Company to present "Basic" and "Diluted" earnings per share on the face of the income statement F-16 INTERNATIONAL SPEEDWAY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOVEMBER 30, 1997 NOTE 1--DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) for current periods and to restate earnings per share for prior periods. All earnings per share amounts presented have been restated to conform to Statement 128 requirements. Weighted shares outstanding for the restated periods presented are:
BASIC DILUTED ------------ ----------- Year ended August 31, 1995 .................... 34,215,479 34,294,530 Year ended August 31, 1996 .................... 34,191,106 34,317,430 Three months ended November 30, 1996 .......... 35,327,263 35,470,048 Year ended November 30, 1997 .................. 38,185,473 38,339,978
The difference between basic weighted average shares and diluted weighted average shares is related to shares issued under the Company's long-term incentive restricted stock plan, using the treasury stock method as prescribed by the standard. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NEW ACCOUNTING PROUNCEMENTS: In 1997, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." SFAS 121 requires recognition of impairment of long-lived assets in the event the net book value of such assets exceeds the future undiscounted cash flows attributable to such assets. The adoption of SFAS No. 121 had no impact on the Company's financial position or results of operations. The Company accounts for its long-term incentive restricted stock plan in accordance with provisions of Accounting Principles Board Opinion No. 25 (APB 25), "Accounting for Stock Issued to Employees." In 1995, SFAS No. 123, "Accounting for Stock Based Compensation" was issued. SFAS No. 123 provides an alternative to APB 25 and is effective for the Company in fiscal year 1997. The Company has elected to continue to account for its long-term incentive plan in accordance with the provisions of APB 25. See Note 11. In February 1997, SFAS No. 128, "Earnings Per Share," was issued and is effective for financial statements issued for periods ending after December 15, 1997. This statement requires companies to present earnings per share on the face of the income statement in two categories called "Basic" and "Diluted" and requires restatement of all periods presented. The Company will adopt SFAS No. 128 during the first quarter of 1998. Management believes the impact on earnings per share will not be material. In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was issued. SFAS No. 130 establishes standards for the reporting and display of comprehensive income and its components in a full set of general-purpose financial statements and is effective for fiscal years beginning after December 15, 1997. The Company will adopt SFAS No. 130 in fiscal 1999. SFAS No. 130 expands or modifies disclosures and, accordingly, will have no impact on the Company's reported financial position, results of operations or cash flows. F-17 INTERNATIONAL SPEEDWAY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOVEMBER 30, 1997 NOTE 1--DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," was issued. SFAS No. 131 establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and reporting selected information about operating segments in interim financial reports and is effective for fiscal years beginning after December 15, 1997. The Company has not yet determined the effect of SFAS No. 131 on its financial statement disclosures. COMPARABILITY: For comparability, certain 1995 and 1996 amounts have been reclassified where appropriate to conform with the presentation adopted in 1997. NOTE 2--EQUITY INVESTMENTS Equity investments includes the following:
% % 1996 OWNERSHIP 1997 OWNERSHIP ---------------- ----------- --------------- ---------- (IN THOUSANDS) (IN THOUSANDS) PSH Corp. ............................. $23,774 20 $30,628 20 Watkins Glen International, Inc. (Note 3) ............................. 3,178 50 -- -- Grand Prix Association of Long Beach, Inc. .......................... -- -- 3,816 7 Homestead-Miami Speedway, LLC ......... -- -- 11,400 40 ------- ------- $26,952 $45,844 ======= =======
On December 13, 1996, PMI acquired property adjacent to the California Speedway for $13.4 million, which was paid with cash of $5 million and the issuance of 254,298 shares of its common stock. As a result of the increase in PMI's equity, the Company recorded an increase in its equity investment in PSH Corp. of approximately $650,000 and recorded a corresponding increase in deferred income taxes and additional paid-in capital of approximately $250,000 and $400,000, respectively. On May 19, 1997, PMI increased its ownership interest in North Carolina Motor Speedway ("NCMS") to approximately 70% through the issuance of 906,542 shares of its common stock valued at $30 per share. As a result of PMI's increased investment in NCMS, the Company recorded an increase in its equity investment in PSH Corp. of approximately $3 million and recorded a corresponding increase in deferred income taxes and additional paid-in capital of approximately $1.2 million and $1.8 million, respectively. In July 1997, the Company invested $11.8 million, plus related acquisition costs, for its 40% interest in Homestead. On August 8, 1997, the Company invested $3.9 million, plus related acquisition costs, for an approximately 7% interest in Long Beach. The Company's investment exceeded its share of the underlying net assets by approximately $1.9 million. The excess is being amortized into expense by decreasing the equity in income of equity investments using the straight-line method over twenty years. F-18 INTERNATIONAL SPEEDWAY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOVEMBER 30, 1997 NOTE 2--EQUITY INVESTMENTS--(CONTINUED) The Company's investment in excess of its share of underlying net assets in equity investments net of amortization amounted to $7.3 million and $8.8 million in 1996 and 1997, respectively. Amortization of the excess over the Company's share of the underlying net assets for the year ended August 31, 1996, the three month period ended November 30, 1996 and the year ended November 30, 1997 was approximately $288,000, $96,000 and $416,000, respectively. The Company's share of undistributed equity in the earnings from equity investments included in retained earnings at November 30, 1996 and 1997 was approximately $3,002,000 and $3,784,000, respectively. Summarized financial information for the Company's affiliated companies accounted for by the equity method (PSH Corp. and Watkins Glen as of August 31 and November 30, 1996, PSH Corp., Homestead and Long Beach as of November 30, 1997) is as follows (in thousands):
THREE MONTHS YEAR ENDED ENDED YEAR ENDED AUGUST 31, NOVEMBER 30, NOVEMBER 30, 1996 1996 1997 ------------ -------------- ------------- (IN THOUSANDS) Current assets ................. $79,900 $ 62,500 $ 22,400 Noncurrent assets .............. 97,100 115,700 379,900 Current liabilities ............ 26,000 19,300 44,100 Noncurrent liabilities ......... 12,500 14,000 116,200 Minority interests ............. 52,900 55,500 84,900 Net revenues ................... 58,900 24,800 126,800 Operating income ............... 20,500 9,200 29,200 Net income ..................... 7,500 3,800 8,900
NOTE 3--ACQUISITIONS On April 1, 1997, the Company exercised its contractual option to acquire the 50% interest it did not already own in Watkins Glen from Corning, Inc. for approximately $3.1 million. The transaction price represented the stock's book value at December 31, 1996. The Company's option to purchase Corning's interest for its book value was part of a shareholder agreement between the two companies in place since 1988. The Company's equity in Watkins Glen's net loss through March 31, 1997 is included in equity in net income from equity investments at November 30, 1997. The acquisition of the additional 50% interest was accounted for under the purchase method. Subsequent to the acquisition on April 1, 1997, Watkins Glen International is accounted for on a consolidated basis. 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 for consideration consisting of $46.4 million in cash, notes payable of $13.8 million, and related acquisition costs. Interest is being accrued on the note payable to the former principal and shareholder at an annual rate of 9%. F-19 INTERNATIONAL SPEEDWAY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOVEMBER 30, 1997 NOTE 3--ACQUISITIONS--(CONTINUED) The Phoenix 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 purchase price was allocated to the assets and liabilities acquired based on estimated fair values at the acquisition date. The excess of the purchase price over the fair value of the net assets acquired was approximately $40.8 million and has been recorded as goodwill, which is being amortized on a straight-line basis over 40 years. The amount amortized for the year ended November 30, 1997 was approximately $382,000. The following unaudited pro forma financial information presents a summary of consolidated results of operations as if the Phoenix transaction had occurred as of September 1, 1995 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 --------------------------------------------------- YEAR ENDED THREE MONTHS ENDED YEAR ENDED AUGUST 31, NOVEMBER 30, NOVEMBER 30, 1996 1996 1997 ------------ -------------------- ------------- (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Total revenues ................... $ 107,343 $17,449 $ 146,135 Net income ....................... 19,752 119 28,953 Basic income per share ........... 0.58 -- 0.76 Diluted income per share ......... 0.58 -- 0.76
NOTE 4--INVESTMENTS The following is a summary of short-term and long-term investments:
NOVEMBER 30, 1996 ----------------------------------------------------- GROSS GROSS ESTIMATED UNREALIZED UNREALIZED MARKET COST GAINS LOSSES VALUE ---------- ------------ ------------ ---------- (IN THOUSANDS) Held-to-maturity securities Municipal securities ........... $74,642 $-- $ 3 $74,639 Certificates of deposit ......... 1,415 -- -- 1,415 ------- --- --- ------- $76,057 $-- $ 3 $76,054 ======= === === =======
F-20 INTERNATIONAL SPEEDWAY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOVEMBER 30, 1997 NOTE 4--INVESTMENTS--(CONTINUED)
NOVEMBER 30, 1997 ----------------------------------------------------- GROSS GROSS ESTIMATED UNREALIZED UNREALIZED MARKET COST GAINS LOSSES VALUE ---------- ------------ ------------ ---------- (IN THOUSANDS) Held-to-maturity securities Obligations of U.S. Government agencies ......... $11,936 $36 $-- $11,972 Municipal securities ............................ 957 -- 2 955 ------- --- --- ------- 12,893 36 2 12,927 Certificates of deposit .......................... 11,208 -- -- 11,208 ------- --- --- ------- $24,101 $36 $ 2 $24,135 ======= === === =======
The cost and market values of held-to-maturity securities include accrued investment income of approximately $81,000 and $12,000 at November 30, 1996 and 1997, respectively. The cost and estimated market value of the held-to-maturity securities at November 30, 1997, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because the issuers of certain securities have the right to prepay obligations.
NOVEMBER 30, 1997 -------------------------- ESTIMATED COST MARKET VALUE ---------- ------------- (IN THOUSANDS) Held-to-maturity securities Due in one year or less ........................ $12,393 $12,429 Due after one year through three years ......... 500 498 ------- ------- $12,893 $12,927 ======= =======
NOTE 5--FEDERAL AND STATE INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Substantially all of the deferred tax liability results from the excess of tax accelerated depreciation over depreciation for financial reporting purposes and from different bases in the equity investments for tax and financial reporting purposes. F-21 INTERNATIONAL SPEEDWAY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOVEMBER 30, 1997 NOTE 5--FEDERAL AND STATE INCOME TAXES--(CONTINUED) Significant components of the provision for income taxes are as follows:
YEARS ENDED THREE MONTHS AUGUST 31, ENDED YEAR ENDED --------------------- NOVEMBER 30, NOVEMBER 30, 1995 1996 1996 1997 --------- --------- -------------- ------------- (IN THOUSANDS) Current tax expense (benefit): Federal ........................... $ 8,274 $ 9,117 $(1,140) $12,973 State ............................. 1,150 1,310 (3) 2,042 Deferred tax expense: Federal ........................... 1,369 1,341 352 2,181 State ............................. 261 195 50 962 ------- ------- --------- ------- Provision for income taxes ......... $11,054 $11,963 $ (741) $18,158 ======= ======= ========= =======
The reconciliation of income tax computed at the federal statutory tax rates to income tax expense is as follows:
THREE MONTHS YEARS ENDED ENDED YEAR ENDED AUGUST 31, 1995 AUGUST 31, 1996 NOVEMBER 30, 1996 NOVEMBER 30, 1997 ----------------------- -------------------- % OF % OF % OF % OF PRE-TAX PRE-TAX PRE-TAX PRE-TAX AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME ------------- --------- ---------- --------- ---------- ------------ ---------- ---------- (IN THOUSANDS) Income tax computed at federal statutory rates .... $10,296 35.0% $11,075 35.0% $ (913) (35.0%) $16,784 35.0% State income taxes, net of federal tax benefit ........ 884 3.0 977 3.1 26 1.0 2,053 4.3 Non-taxable share of (income) loss from unconsolidated affiliates... (100) ( .3) (504) (1.6) 73 2.8 (238) ( .5) Officers' life insurance expense .................... (2) -- 162 .5 17 .7 23 -- Other, net .................. (24) ( .1) 253 .8 56 2.1 (464) ( .9) -------- ---- ------- ---- ------ ------ ------- ---- $11,054 37.6% $11,963 37.8% $ (741) (28.4%) $18,158 37.9% ======== ==== ======= ==== ====== ====== ======= ====
NOTE 6--LINES OF CREDIT The Company has a $10 million line of credit with a financial institution which expires in March 1999. There were no borrowings under the Company's credit facility at November 30, 1997. F-22 INTERNATIONAL SPEEDWAY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOVEMBER 30, 1997 NOTE 7--CAPITAL STOCK The Company's authorized capital includes 80 million shares of Class A Common Stock, par value $.01 ("Class A Common Stock"), 40 million shares of Class B Common Stock, par value $.01 ("Class B Common Stock"), and one million shares of Preferred Stock, par value $.01 (the "Preferred Stock"). The shares of Class A Common Stock and Class B Common Stock are identical in all respects, except for voting rights and certain dividend and conversion rights as described below. Each share of Class A Common Stock entitles the holder to one-fifth (1/5) vote on each matter submitted to a vote of the Company's shareholders and each share of Class B Common Stock entitles the holder to one (1) vote on each such matter, in each case including the election of directors. Holders of Class A Common Stock and Class B Common Stock are entitled to receive dividends at the same rate if and when declared by the Board of Directors out of funds legally available therefrom, subject to the dividend and liquidation rights of any Preferred Stock that may be issued and outstanding. Class A Common Stock has no conversion rights. Class B Common Stock is convertible into Class A Common Stock, in whole or in part, at any time at the option of the holder on the basis of one share of Class A Common Stock for each share of Class B Common Stock converted. Each share of Class B Common Stock will also automatically convert into one share of Class A Common Stock if, on the record date of any meeting of the shareholders, the number of shares of Class B Common Stock then outstanding is less than 10% of the aggregate number of shares of Class A Common Stock and Class B Common Stock then outstanding. The Board of Directors of the Company is authorized, without further shareholder action, to divide any or all shares of the authorized Preferred Stock into series and fix and determine the designations, preferences and relative rights and qualifications, limitations, or restrictions thereon of any series so established, including voting powers, dividend rights, liquidation preferences, redemption rights and conversion privileges. The Board of Directors has not authorized any series of Preferred Stock, and there are no plans, agreements or understandings for the authorization or issuance of any shares of Preferred Stock. On November 4, 1996 the Company sold 4,000,000 shares of its newly created Class A Common Stock in an underwritten public offering (the "Offering"). The price to the public was $20 per share. The net proceeds to the Company from the sale of the stock sold by the Company in the Offering were approximately $74.3 million, after deduction of underwriting discounts and commissions and expenses of the Offering. Approximately $7.8 million of the net proceeds of this Offering was used to repay borrowings incurred under one of the Company's lines of credit in September 1996. The Company used approximately $3.1 million of the net proceeds to acquire the 50% interest it did not already own in Watkins Glen International, Inc., $43.9 million to acquire Phoenix International Raceway and $16.2 million for equity investments in Homestead-Miami Speedway, LLC and Grand Prix Association of Long Beach, Inc. The remaining net proceeds were used for working capital and other general corporate purposes, including continued improvements to and expansion of the Company's facilities and operations. Pending such uses, the Company had invested the net proceeds of the Offering in short-term interest-bearing obligations. No shares of Preferred Stock are outstanding. See also Note 1--Basis of Presentation. F-23 INTERNATIONAL SPEEDWAY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOVEMBER 30, 1997 NOTE 8--COMMITMENTS AND CONTINGENCIES A. In 1985, International Speedway Corporation ("ISC") established a salary incentive plan designed to qualify under Section 401(k) of the Internal Revenue Code. Employees of ISC and certain participating subsidiaries who have completed 1,000 hours and 12 months continuous service are eligible to participate in the plan. Matching contributions are made to a savings trust (subject to certain limits) concurrent with employees' contributions. The level of the matching contribution depends upon the amount of the employee contribution. Employees become 100% vested upon entrance to the plan. The contribution expense for the plan was approximately $228,000, $307,000, $85,000 and $376,000 for the years ended August 31, 1995 and 1996, for the three month period ended November 30, 1996 and the year ended November 30, 1997, respectively. B. The estimated cost to complete construction in progress at November 30, 1997 is approximately $55.3 million. C. On October 21, 1996, Americrown was served with a Class Action Complaint filed in the Circuit Court of Talladega County, Alabama by Howard Padgett, Bill Lutz and Tommy Jones. The complaint was filed in September 1996 and alleged, among other things, that Americrown engaged in price-fixing activities in connection with the sale of racing souvenirs and merchandise at the Talladega Superspeedway. The complaint seeks at least $500 for each member of the putative class (persons buying racing souvenirs at Talladega Superspeedway since September 1992), but does not otherwise seek to recover compensatory or punitive damages or statutory attorneys' fees. Although Americrown attempted to remove the suit to Federal District Court, it was remanded to the Circuit Court of Talladega County, Alabama, where discovery and the class certification process are proceeding. Americrown disputes the allegations and intends to defend the action fully and vigorously. In March 1997, two purported class action companion lawsuits were filed in the United States District Court, Northern District of Georgia, against the Company, Americrown, and a number of other persons alleging, in substance, that the defendants unlawfully conspired to fix prices of souvenirs and merchandise sold to consumers in violation of federal antitrust laws. One suit was filed by Florida residents and the other suit was filed by Georgia residents. Both suits seek damages and injunctive relief on behalf of all persons who purchased souvenirs or merchandise from certain vendors at any NASCAR Winston Cup Series stock car race or supporting event in the United States during the period 1991 to present. The two suits have been consolidated and the court has established a timetable to consider class certification. Discovery is proceeding. The Company and Americrown dispute the allegations and intend to defend the actions fully and vigorously. Management is presently unable to predict or quantify the outcome of these matters. F-24 INTERNATIONAL SPEEDWAY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOVEMBER 30, 1997 NOTE 9--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 National Association for Stock Car Auto Racing, Inc. ("NASCAR"), 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"), and the World Karting Association ("WKA"). NASCAR, which sanctions some of the Company's principal racing events, is a member of the France Family Group which controls in excess of 55% of the outstanding stock of the Company and some members of which serve as directors and officers. Standard NASCAR sanction agreements require racetrack operators to pay sanction fees and prize and point fund monies for each sanctioned event conducted. The prize and point fund monies are distributed by NASCAR to participants in the events. Prize and point fund monies paid by the Company to NASCAR for disbursement to competitors totaled approximately $10.1, $11.6 and $17.0 million for the years ended August 31, 1995, 1996 and November 30, 1997, respectively. For the three month period ended November 30, 1996, monies paid by the Company to NASCAR for disbursements to competitors totaled approximately $1.1 million. In October 1995, the Company entered into collateral assignment split-dollar insurance agreements covering the lives of William C. France and James C. France and their respective spouses. Pursuant to the agreements, the Company will advance the annual premiums of approximately $1,205,000 each year for a period of eight years. Upon surrender of the policies or payment of the death benefits thereunder, the Company is entitled to repayment of an amount equal to the cumulative premiums previously paid by the Company. The Company may cause the agreements to be terminated and the policies surrendered at any time after the cash surrender value of the policies equals the cumulative premiums advanced under the agreements. The Company recorded a net insurance expense of approximately $450,000 and $38,000, representing the excess of the premiums paid over the increase in cash surrender value of the policies associated with these agreements for the year ended August 31, 1996, and the three months ended November 30, 1996, respectively. During the year ended November 30, 1997, premiums paid were approximately equal to the increase in the cash surrender value of the policies. Poe & Brown, Inc., the servicing agent for the split-dollar insurance agreements, received a commission from an insurance company for its participation in the transactions. J. Hyatt Brown, President and Chief Executive Officer of Poe & Brown, Inc., is a Director of the Company. F-25 INTERNATIONAL SPEEDWAY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOVEMBER 30, 1997 NOTE 10--SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid for income taxes and interest for respective periods is summarized as follows:
YEARS ENDED THREE MONTHS AUGUST 31, ENDED YEAR ENDED ---------------------- NOVEMBER 30, NOVEMBER 30, 1995 1996 1996 1997 --------- ---------- -------------- ------------- (IN THOUSANDS) Income taxes paid ......... $9,806 $10,763 $185 $13,652 ====== ======= ==== ======= Interest paid ............. $ -- $ -- $ 69 $ 31 ====== ======= ==== =======
See Note 2 for discussion of non-cash equity investment transactions. NOTE 11--LONG-TERM INCENTIVE RESTRICTED STOCK PLAN In November 1993, the Company's Board of Directors and a majority of the Company's shareholders approved a Long-term Incentive Restricted Stock Plan (the "Plan") for certain officers and managers of the Company. Under the Plan, up to 750,000 shares of the Company's Class B Common Stock were authorized to be granted as restricted stock at no cost to Plan participants. Shares awarded under the Plan vest at the rate of 50% of each award on the third anniversary of the award date and the remaining 50% on the fifth anniversary of the award date. Shares awarded under the Plan generally are subject to forfeiture in the event of termination of employment prior to the vesting dates. The Plan participants own the shares and may vote and receive dividends, but are subject to restrictions under the Plan. Restrictions include the prohibition of the sale or transfer of the shares during the period prior to vesting of the shares. The Company also has a right of first refusal to purchase any shares of stock issued under the Plan which are offered for sale. On January 1, 1995, 1996 and 1997, a total of 70,410, 102,075 and 98,010 restricted shares of the Company's Class B Common Stock, respectively, were awarded to certain officers and managers. The market value of shares on January 1, 1995, 1996 and 1997 amounted to approximately $489,000, $1,600,000, and $1,985,000, respectively, and has been recorded as "Unearned compensation--restricted stock", which is shown as a separate component of shareholders' equity in the accompanying consolidated balance sheets. The unearned compensation is being amortized over the vesting periods of the shares. The total expense charged against operations during the years ended August 31, 1995, and 1996, for the three month period ended November 30, 1996 and the year ended November 30, 1997 was approximately $318,000, $606,000, $122,000 and $1,063,000, respectively. In accordance with APB 25, the Company will recognize a compensation charge over the vesting periods equal to the fair market value of these shares on the date awarded. The SFAS No. 123 expense is equal to the APB 25 expense. In September 1996, the Company and the Board of Directors adopted a new Long-term Incentive Plan (the "1996 Plan") for certain employees and consultants of the Company. Under the 1996 Plan, up to 1,000,000 shares of Class A Common Stock may be granted as stock options (incentive and nonstatutory), stock appreciation rights (SARS) and restricted stock. No grants have been made under the 1996 Plan. F-26 INTERNATIONAL SPEEDWAY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOVEMBER 30, 1997 NOTE 12--CHANGE IN FISCAL YEAR END Effective December 1, 1996, the Company changed its fiscal year end from August 31 to November 30. This resulted in a three-month transition period commencing September 1, 1996 and ending November 30, 1996. Consequently, the consolidated audited financial statements contain information as of and for the three months ended November 30, 1996. The following supplemental unaudited consolidated statement of operations and unaudited consolidated statement of cash flows for the three months ended November 30, 1995 are presented for comparative purposes only and were presented in the Transition Form 10-Q filed for the period ended November 30, 1996. CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED NOVEMBER 30, 1995 ---------------------- (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) Revenues .............................................................. $ 8,542 Expenses .............................................................. 10,016 ----------- Operating loss ........................................................ (1,474) Interest income, net .................................................. 290 Equity in net loss from equity investments ............................ (154) ----------- Loss before income taxes .............................................. (1,338) Income tax benefit .................................................... (318) ----------- Net loss .............................................................. $ (1,020) =========== Basic loss per share .................................................. $ (0.03) =========== Diluted loss per share ................................................ $ (0.03) =========== Weighted average number of common shares outstanding--Basic ........... 34,214,610 Weighted average number of common shares outstanding--Diluted ......... 34,315,301
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED NOVEMBER 30, 1995 ------------------- (UNAUDITED) (IN THOUSANDS) Net cash provided by operating activities ................ $ 3,673 Investing Activities Proceeds from maturities of investments, net ............ 21,053 Capital expenditures .................................... (8,229) Investment in PSH Corp. ................................. (14,975) Other investing activities .............................. (732) --------- Net cash used in investing activities .................... (2,883) Net cash provided by financing activities ................ -- --------- Net increase in cash and cash equivalents ................ 790 Cash and cash equivalents at beginning of period ......... 7,871 --------- Cash and cash equivalents at end of period ............... $ 8,661 =========
F-27 INTERNATIONAL SPEEDWAY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOVEMBER 30, 1997 NOTE 13--QUARTERLY DATA (UNAUDITED) The Company derives most of its income from event admissions and related revenue from a limited number of NASCAR-sanctioned races. As a result, the Company's business has been, and is expected to remain, highly seasonal based on the timing of major race events. For example, the Darlington Southern 500 is traditionally held on the Sunday preceding Labor Day. Accordingly, the revenue and expenses for that race and/or certain of its supporting events may be recognized in either the fiscal quarter ending August 31 or the fiscal quarter ending November 30. Partly in response to this seasonality and the desire to better conform to the traditional racing season, the Company changed its fiscal year end from August 31 to November 30 effective December 1, 1996. This resulted in a three-month transition period commencing September 1, 1996 and ending November 30, 1996. Historically, the Company has incurred net losses in the fiscal quarter ending November 30, and achieved its highest net income in the fiscal quarter ending February 28. In fiscal 1997, the Company had net income for the quarter ended November 30. This was primarily due to the acquisition of Phoenix, which resulted in the addition of a NASCAR Winston Cup Series event in the quarter ending November 30, and the date change for the Company's DieHard 500 race, which moved the event from the quarter ended August 31 to the quarter ended November 30. The following table presents certain unaudited financial data for each fiscal quarter of fiscal 1996 and fiscal 1997 and for the transition quarter ended November 30, 1996 (in thousands, except per share amounts):
TRANSITION FISCAL QUARTER ENDED QUARTER ------------------------------------------------------- ------------- NOVEMBER 30, FEBRUARY 29, MAY 31, AUGUST 31, NOVEMBER 30, 1995 1996 1996 1996 1996 -------------- -------------- ------------ ------------ ------------- Total revenues ........................ $ 8,542 $ 40,277 $ 24,176 $ 23,047 $ 10,496 Operating income (loss) ............... (1,474) 20,338 6,230 4,237 (2,565) Net income (loss) ..................... (1,020) 12,089 3,817 4,795 (1,867) Basic earnings (loss) per share ....... (0.03) 0.35 0.11 0.14 (0.05) Diluted earnings (loss) per share ..... (0.03) 0.35 0.11 0.14 (0.05)
FISCAL QUARTER ENDED ------------------------------------------------------------ FEBRUARY 28, MAY 31, AUGUST 31, NOVEMBER 30, 1997 1997 1997 1997 -------------- ------------ ------------ ------------- Total Revenues ................. $ 51,866 $ 29,630 $ 33,106 $ 26,772 Operating Income ............... 27,103 7,075 8,762 1,961 Net Income ..................... 17,475 4,486 5,985 1,850 Basic earnings per share ....... 0.46 0.12 0.16 0.05 Diluted earnings per share ..... 0.46 0.12 0.16 0.05
F-28 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, BY ANY UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THOSE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL THOSE TO WHICH IT RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFERS IN SUCH STATE, OR SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. -------------------------- TABLE OF CONTENTS
PAGE ---------- Prospectus Summary ....................... 3 Risk Factors ............................. 7 Use of Proceeds .......................... 13 Price Range of Common Stock .............. 13 Dividend Policy .......................... 14 Capitalization ........................... 14 Selected Financial Data .................. 15 Management's Discussion and Analysis of Financial Condition and Results of Operations ............. 16 NASCAR ................................... 23 Business ................................. 27 Management ............................... 37 Certain Transactions ..................... 39 Description of Capital Stock ............. 40 Shares Eligible for Future Sale .......... 42 Underwriting ............................. 43 Legal Matters ............................ 44 Experts .................................. 44 Available Information .................... 45 Incorporation of Certain Documents by Reference .......................... 45 Index to Financial Statements ............ F-1
4,000,000 Shares [GRAPHIC OMITTED] INTERNATIONAL SPEEDWAY CORPORATION Class A Common Stock ----------------- P R O S P E C T U S , 1998 ----------------- Salomon Smith Barney CIBC Oppenheimer - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The Company estimates that expenses payable by it in connection with the offering described in this registration statement (other than underwriting discounts and commissions) will be as follows: Securities and Exchange Commission registration fee .................................... $ 40,710 NASD filing fee ........................................................................ 14,300 Nasdaq National Market listing fee ..................................................... 17,500 Printing expenses ...................................................................... 125,000 Accounting fees and expenses ........................................................... 90,000 Legal fees and expenses ................................................................ 110,000 Fees and expenses (including legal fees) for qualifications under state securities laws. 500 Registrar and Transfer Agent's fees and expenses ....................................... 1,500 Miscellaneous .......................................................................... 175,000 -------- Total ................................................................................ $574,510 ========
All amounts except the Securities and Exchange Commission registration fee, the NASD filing fee and the Nasdaq National Market listing fee are estimated. The Company intends to pay all expenses of registration with respect to shares being offered hereby, with the exception of underwriting discounts and commissions. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Company has authority under Florida law to indemnify its directors and officers to the extent provided in such statute. The Articles provide that the Company shall indemnify its directors to the fullest extent permitted by law either now or hereafter. The Company has also entered into an agreement with each of its directors and certain of its officers wherein it has agreed to indemnify each of them to the fullest extent permitted by law. The Company also maintains a policy of directors' and officers' liability insurance that insures, subject to certain exclusions, the Company's directors and officers against the cost of defense, settlement of, payment of a judgment in connection with a proceeding, whether actual or threatened, to which any person may be made a party by reason of the fact that such person is or was a director or officer of the Company. At present, there is no pending litigation or proceeding involving a director or officer of the Company as to which indemnification is being sought, nor is the Company aware of any threatened litigation that may result in claims for indemnification by any officer or director. Pursuant to the Underwriting Agreement filed as Exhibit 1.1 to this Registration Statement, the Underwriters have agreed to indemnify the directors, officers and controlling persons of the Company against certain civil liabilities that may be incurred in connection with this offering, including certain liabilities under the Securities Act. Section 607.0850 of the Florida Business Corporation Act permits a Florida corporation to indemnify a present or former director or officer of the corporation (and certain other persons serving at the request of the corporation in related capacities) for liabilities, including legal expenses, arising by reason of service in such capacity if such person shall have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and in any criminal proceeding if such person had no reasonable cause to believe his conduct was unlawful. However, in the II-1 case of actions brought by or in the right of the corporation, no indemnification may be made with respect to any matter as to which such director or officer shall have been adjudged liable, except in certain limited circumstances. ITEM 16. EXHIBITS
EXHIBIT DESCRIPTION - ----------- --------------------------------------------------------------------------------------------- 1.1 Underwriting Agreement*** 3.1 Amended and Restated Articles of Incorporation(3)(i)** 3.2 Amended and Restated Bylaws(3)(ii)** 5.1 Opinion of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A. as to the validity of the Class A Common Stock to be registered.* 10.1 Daytona Property Lease(3)** 10.2 1994 Long-Term Incentive Plan(4)** 10.3 1996 Long-Term Incentive Plan(5)** 10.4 Split-Dollar Agreement(6)** 10.5 Split-Dollar Agreement(7)** 10.6 Registrant's Credit Agreement with First Union Bank*** 23.1 Consent of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A. (to be included in its opinion to be filed as Exhibit 5.1)* 23.2 Consent of Ernst & Young LLP*** 24.1 Reference is made to the Signatures section of this Registration Statement for the Power of Attorney contained therein.***
- ---------------- * To be filed by amendment. ** Incorporated by reference to the exhibit shown in parentheses and filed with the registrant's Annual Report on Form 10-K for the year ended November 30, 1997. *** Filed herewith. ITEM 17. UNDERTAKINGS (a) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (b) The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of the registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration II-2 statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) For the purpose of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Daytona, State of Florida, on May 20, 1998. INTERNATIONAL SPEEDWAY CORPORATION BY: /s/ JAMES C. FRANCE ------------------------------------------- JAMES C. FRANCE President and Chief Operating Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints W. Garrett Crotty and Glenn R. Padgett his true and lawful attorneys-in-fact, each acting alone, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments, including any post-effective amendments, to this registration statement, or any registration statement relating to this offering to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact or their substitutes, each acting alone, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.
NAME AND SIGNATURE TITLE DATE - ------------------------------ --------------------------------------- ------------- /s/ WILLIAM C. FRANCE Chairman of the Board and May 20, 1998 - ---------------------------- Chief Executive Officer William C. France (Principal Executive Officer) /s/ SUSAN G. SCHANDEL Treasurer and Chief Financial Officer May 20, 1998 - ---------------------------- (Principal Financial Officer) Susan G. Schandel /s/ DANIEL W. HOUSER Controller May 20, 1998 - ---------------------------- (Principal Accounting Officer) Daniel W. Houser /s/ JAMES C. FRANCE President, Chief Operating Officer May 20, 1998 - ---------------------------- and Director James C. France /s/ LESA D. KENNEDY Executive Vice President May 20, 1998 - ---------------------------- and Director Lesa D. Kennedy /s/ H. LEE COMBS Senior Vice President--Operations May 20, 1998 - ---------------------------- and Director H. Lee Combs /s/ J. HYATT BROWN Director May 20, 1998 - ---------------------------- J. Hyatt Brown
II-4
NAME AND SIGNATURE TITLE DATE - --------------------------------- ---------- ------------- /s/ JOHN R. COOPER Director May 20, 1998 - ---------------------------- John R. Cooper /s/ ROBERT R. DYSON Director May 20, 1998 - ---------------------------- Robert R. Dyson /s/ JAMES H. FOSTER Director May 21, 1998 - ---------------------------- James H. Foster /s/ BRIAN Z. FRANCE Director May 20, 1998 - ---------------------------- Brian Z. France /s/ CHRISTY F. HARRIS Director May 21, 1998 - ---------------------------- Christy F. Harris /s/ RAYMOND K. MASON, JR. Director May 22, 1998 - ---------------------------- Raymond K. Mason, Jr. /s/ EDWARD H. RENSI Director May 22, 1998 - ---------------------------- Edward H. Rensi /s/ LLOYD E. REUSS Director May 20, 1998 - ---------------------------- Lloyd E. Reuss /s/ CHAPMAN ROOT, II Director May 21, 1998 - ---------------------------- Chapman Root, II /s/ THOMAS W. STAED Director May 21, 1998 - ---------------------------- Thomas W. Staed
II-5 INDEX TO EXHIBITS
SEQUENTIALLY NUMBERED EXHIBIT DESCRIPTION PAGE - --------- ---------------------------------------------------- ------------- 1.1 Underwriting Agreement 10.6 Registrant's Credit Agreement with First Union Bank 23.2 Consent of Ernst & Young LLP
EX-1.1 2 4,000,000 Shares INTERNATIONAL SPEEDWAY CORPORATION Common Stock UNDERWRITING AGREEMENT June __, 1998 SMITH BARNEY INC. CIBC OPPENHEIMER CORP. As Representatives of the Several Underwriters c/o SMITH BARNEY INC. 388 Greenwich Street New York, New York 10013 Dear Sirs: International Speedway Corporation, a Florida corporation (the "Company"), proposes to issue and sell an aggregate of 4,000,000 shares (the "Firm Shares") of its Class A common stock, $0.01 par value per share (the "Common Stock"), to the several Underwriters named in Schedule I hereto (the "Underwriters"). The Company also proposes to sell to the Underwriters, upon the terms and conditions set forth in Section 2 hereof, up to an additional 600,000 shares (the "Additional Shares") of Common Stock. The Firm Shares and the Additional Shares are hereinafter collectively referred to as the "Shares." The Company wishes to confirm as follows its agreement with you (the "Representatives") and the other several Underwriters on whose behalf you are acting, in connection with the several purchases of the Shares by the Underwriters. (As used herein, the term "you" shall mean the Representatives of the several Underwriters.) 1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has prepared and filed with the Securities and Exchange Commission (the "Commission") in accordance with the provisions of the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder (collectively, the "Act"), a registration statement on Form S-3 (File No. 333-_____) under the Act (the "registration statement"), including a prospectus subject to completion relating to the Shares. The term "Registration Statement" as used in this Agreement means the registration statement (including all financial schedules and exhibits), as amended at the time it becomes effective, or, if the registration statement became effective prior to the execution of this 1 Agreement, as supplemented or amended prior to the execution of this Agreement. If it is contemplated, at the time this Agreement is executed, that a post-effective amendment to the registration statement will be filed and must be declared effective before the offering of the Shares may commence, the term "Registration Statement" as used in this Agreement means the registration statement as amended by said post-effective amendment. If an abbreviated registration statement is prepared and filed with the Commission in accordance with Rule 462(b) under the Act (an "Abbreviated Registration Statement"), the term "Registration Statement" as used in this Agreement includes the Abbreviated Registration Statement. The term "Prospectus" as used in this Agreement means the prospectus in the form included in the Registration Statement, or, if the prospectus included in the Registration Statement omits information in reliance on Rule 430A under the Act and such information is included in a prospectus filed with the Commission pursuant to Rule 424(b) under the Act, the term "Prospectus" as used in this Agreement means the prospectus in the form included in the Registration Statement as supplemented by the addition of the Rule 430A information contained in the prospectus filed with the Commission pursuant to Rule 424(b). The term "Prepricing Prospectus" as used in this Agreement means the prospectus subject to completion in the form included in the registration statement at the time of the initial filing of the registration statement with the Commission, and as such prospectus shall have been amended from time to time prior to the date of the Prospectus. Any reference in this Agreement to the registration statement, the Registration Statement, any Prepricing Prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the Act, as of the date of the registration statement, the Registration Statement, such Prepricing Prospectus or the Prospectus, as the case may be, and any reference to any amendment or supplement to the registration statement, the Registration Statement, any Prepricing Prospectus or the Prospectus shall be deemed to refer to and include any documents filed after such date under the Securities Exchange Act of 1934, as amended (the "Exchange Act") which, upon filing, are incorporated by reference therein, as required by paragraph (b) of Item 12 of Form S-3. As used herein, the term "Incorporated Documents" means the documents which at the time are incorporated by reference in the registration statement, the Registration Statement, any Prepricing Prospectus, the Prospectus, or any amendment or supplement thereto. 2. AGREEMENTS TO SELL AND PURCHASE. The Company hereby agrees, subject to all the terms and conditions set forth herein, to issue and sell to each Underwriter and, upon the basis of the representations, warranties and agreements of the Company herein contained and subject to all the terms and conditions set forth herein, each Underwriter agrees, severally and not jointly, to purchase from the Company, at a purchase price of $__.__ per Share (the "purchase price per share"), the number of Firm Shares set forth opposite the name of such Underwriter in Schedule I hereto (or such number of Firm Shares increased as set forth in Section 10 hereof). The Company also agrees, subject to all the terms and conditions set forth herein, to sell to the Underwriters, and, upon the basis of the representations, warranties and agreements of the Company herein contained and subject to all the terms and conditions set forth herein, the Underwriters shall have the right to purchase from the Company, at the purchase price per share, pursuant to an option (the "over-allotment option") which may be exercised at any time 2 and from time to time prior to 9:00 P.M., New York City time, on the 30th day after the date of the Prospectus (or, if such 30th day shall be a Saturday or Sunday or a holiday, on the next business day thereafter when the New York Stock Exchange is open for trading), up to an aggregate of 600,000 Additional Shares from the Company. Additional Shares may be purchased only for the purpose of covering over-allotments made in connection with the offering of the Firm Shares. Upon any exercise of the over-allotment option, each Underwriter, severally and not jointly, agrees to purchase from the Company the number of Additional Shares (subject to such adjustments as you may determine in order to avoid fractional shares) which bears the same proportion to the number of Additional Shares to be sold by the Company as the number of Firm Shares set forth opposite the name of such Underwriter in Schedule I hereto (or such number of Firm Shares increased as set forth in Section 12 hereof) bears to the aggregate number of Firm Shares. 3. TERMS OF PUBLIC OFFERING. The Company has been advised by you that the Underwriters propose to make a public offering of the Shares as soon after the Registration Statement and this Agreement have become effective as in your judgment is advisable, and initially to offer the Shares upon the terms set forth in the Prospectus. 4. DELIVERY OF THE SHARES AND PAYMENT THEREFOR. The closing with respect to the purchase of the Firm Shares by the Underwriters shall be held at the office of Holland & Knight LLP, One East Broward Boulevard, Fort Lauderdale, Florida 33301, at 10:00 A.M., New York City time, on June __, 1998 (the "Closing Date"). The place of closing for the Firm Shares and the Closing Date may be varied by agreement between you and the Company. The closing with respect to any Additional Shares to be purchased by the Underwriters shall be held at the aforementioned office of Holland & Knight LLP at such time on such date (the "Option Closing Date"), which may be the same as the Closing Date but shall in no event be earlier than the Closing Date nor earlier than two nor later than ten business days after the giving of the notice hereinafter referred to, as shall be specified in a written notice from you on behalf of the Underwriters to the Company of the Underwriters' determination to purchase a number, specified in such notice, of Additional Shares. The place of closing for any Additional Shares and the Option Closing Date for such Additional Shares may be varied by agreement between you and the Company. Certificates, if any, for the Firm Shares and for any Additional Shares to be purchased hereunder shall be registered in such names and in such denominations as you shall request prior to 9:30 A.M., New York City time, on the second business day preceding the Closing Date or any Option Closing Date, as the case may be. Such certificates shall be made available to you in New York City for inspection and packaging not later than 9:30 A.M., New York City time, on the business day next preceding the Closing Date or the Option Closing Date, as the case may be. The certificates or Depository Trust Corporation electronic notifications, as the case may be, evidencing the Firm Shares and any Additional Shares to be purchased hereunder shall be delivered to you on the Closing Date or the Option Closing Date, as the case may be, against payment of the purchase price therefor by wire transfer of immediately available funds to accounts specified in writing by the Company. 3 5. AGREEMENTS OF THE COMPANY. The Company agrees with the several Underwriters as follows: (a) If, at the time this Agreement is executed and delivered, it is necessary for the Registration Statement or a post-effective amendment thereto or any Abbreviated Registration Statement to be declared effective before the offering of the Shares may commence, the Company will endeavor to cause the Registration Statement or such post-effective amendment to become effective as soon as possible and will advise you promptly and, if requested by you, will confirm such advice in writing, when the Registration Statement or such post-effective amendment has become effective. (b) The Company will advise you promptly and, if requested by you, will confirm such advice in writing: (i) of any request by the Commission for amendment of, or a supplement to, the Registration Statement, any Prepricing Prospectus or the Prospectus, or for additional information; (ii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement, or of the suspension of qualification of the Shares for offering or sale in any jurisdiction, or the initiation of any proceeding for such purpose; and (iii) within the period of time referred to in paragraph (f) below, of any change in the Company's condition (financial or other), business, prospects, properties, net worth or results of operations, or of the happening of any event, which makes any statement of a material fact made in the Registration Statement or the Prospectus (as then amended or supplemented) untrue, or which requires the making of any additions to or changes in the Registration Statement or the Prospectus (as then amended or supplemented) in order to state a material fact required by the Act or the regulations thereunder to be stated therein or necessary in order to make the statements therein not misleading, or of the necessity to amend or supplement the Prospectus (as then amended or supplemented) to comply with the Act or any other law. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, the Company will make every reasonable effort to obtain the withdrawal of such order at the earliest possible time. (c) The Company will furnish to you, without charge (i) three signed copies of the registration statement as originally filed with the Commission and of each amendment thereto, including financial statements and all exhibits to the registration statement, (ii) such number of conformed copies of the registration statement as originally filed and of each amendment thereto, but without exhibits, as you may request, (iii) such number of copies of the Incorporated Documents, without exhibits, as you may request, and (iv) three copies of the exhibits to the Incorporated Documents. (d) The Company will not file any amendment to the registration statement or make any amendment or supplement to the prospectus or, prior to the end of the period of time referred to in the first sentence in subsection (f) below, file any document which, upon filing becomes an Incorporated Document, of which you shall not previously have been advised or to which, after you shall have received a copy of the document proposed to be filed, you shall reasonably object. 4 (e) Prior to the execution and delivery of this Agreement, the Company has delivered to you, without charge, in such quantities as you have requested, copies of each form of the Prepricing Prospectus. The Company consents to the use of each Prepricing Prospectus so furnished by the Company, in accordance with the provisions of the Act and with the securities or Blue Sky laws of the jurisdictions in which the Shares are offered by the several Underwriters and by dealers to whom Shares may be sold, prior to the date of the Prospectus. (f) As soon after the execution and delivery of this Agreement as possible, and thereafter from time to time for such period as in the opinion of counsel for the Underwriters a prospectus is required by the Act to be delivered in connection with sales of Shares by any Underwriter or dealer, the Company will expeditiously deliver to each Underwriter and each dealer, without charge, as many copies of the Prospectus (and of any amendment or supplement thereto) as you may request. The Company consents to the use of the Prospectus (and of any amendment or supplement thereto) in accordance with the provisions of the Act and with the securities or Blue Sky laws of the jurisdictions in which the Shares are offered by the several Underwriters and by all dealers to whom Shares may be sold, both in connection with the offering and sale of the Shares and for such period of time thereafter as the Prospectus is required by the Act to be delivered in connection with sales by any Underwriter or dealer. If during such period of time any event shall occur that, in the judgment of the Company, or in the reasonable opinion of counsel for the Underwriters, is required to be set forth in the Prospectus (as then amended or supplemented) or should be set forth therein in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary to supplement or amend the Prospectus (or to file under the Exchange Act any document which, upon filing, becomes an Incorporated Document) in order to comply with the Act or any other law, the Company will forthwith prepare and, subject to the provisions of paragraph (d) above, file with the Commission an appropriate supplement or amendment thereto (or to such document), and will expeditiously furnish to the Underwriters and dealers a reasonable number of copies thereof. In the event that the Company and you, as Representatives of the several Underwriters, agree that the Prospectus should be amended or supplemented, the Company, if requested by you, will promptly issue a press release announcing or disclosing the matters to be covered by the proposed amendment or supplement. (g) The Company will cooperate with you and with counsel for the Underwriters in connection with the registration or qualification of the Shares for offering and sale by the several Underwriters and by dealers under the securities or Blue Sky laws of such jurisdictions as you may designate, and will file such consents to service of process or other documents necessary or appropriate in order to effect such registration or qualification; provided that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action which would subject it to service of process in suits, other than those arising out of the offering or sale of the Shares, in any jurisdiction where it is not now so subject. (h) The Company will make generally available to its security holders a consolidated earnings statement, which need not be audited, covering a twelve-month period commencing after the effective date of the Registration Statement and ending not later than 15 5 months thereafter, as soon as practicable after the end of such period, which consolidated earnings statement shall satisfy the provisions of Section 11(a) of the Act. (i) During the period of three years hereafter, the Company will furnish to you (i) as soon as available, a copy of each report of the Company mailed to stockholders or filed with the Commission, and (ii) from time to time such other information concerning the Company as you may reasonably request. (j) If this Agreement shall terminate or shall be terminated after execution pursuant to any provisions hereof (otherwise than pursuant to the second paragraph of Section 12 hereof or by notice given by you terminating this Agreement pursuant to Section 12 or Section 13 hereof), or if this Agreement shall be terminated by the Underwriters because of any failure or refusal on the part of the Company to comply with the terms or fulfill any of the conditions of this Agreement, the Company agrees to reimburse the Representatives for all out-of-pocket expenses (including all fees and expenses of counsel for the Underwriters) incurred by you in connection herewith. (k) The Company will apply the net proceeds from the sale of the Shares substantially in accordance with the description set forth in the Prospectus. (l) If Rule 430A of the Act is employed, the Company will timely file the Prospectus pursuant to Rule 424(b) under the Act and will advise you of the time and manner of such filing. (m) Except as provided in this Agreement, and except for the issuance of shares and options pursuant to the Company's 1994 Long Term Incentive Plan and/or 1996 Long-Term Incentive Plan, the Company will not sell, contract to sell or otherwise dispose of any Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock, or grant any options or warrants to purchase Common Stock, for a period of 90 days after the date of the Prospectus, without the prior written consent of Smith Barney Inc. (n) The Company has furnished or will furnish to you "lock-up" letters, in form and substance satisfactory to you, signed by each of the Company's current officers and directors and each of its stockholders designated by you. (o) Except as stated in this Agreement and in the Prepricing Prospectus and Prospectus, the Company has not taken, nor will it take, directly or indirectly, any action designed to, or that might reasonably be expected to, cause or result in stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of the Shares. (p) The Company will use its best efforts to have the Shares listed, subject to notice of issuance, on the Nasdaq National Market on or before the Closing Date. 6. [INTENTIONALLY OMITTED] 6 7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to each Underwriter that: (a) Each Prepricing Prospectus included as part of the registration statement as originally filed or as part of any amendment or supplement thereto, or filed pursuant to Rule 424 under the Act, complied when so filed in all material respects with the provisions of the Act. The Commission has not issued any order preventing or suspending the use of any Prepricing Prospectus. (b) The Company and the transactions contemplated by this Agreement meet the requirements for using Form S-3 under the Act. The Registration Statement in the form in which it became or becomes effective and also in such form as it may be when any post-effective amendment thereto shall become effective and the Prospectus and any supplement or amendment thereto when filed with the Commission under Rule 424(b) under the Act, complied or will comply in all material respects with the provisions of the Act and will not at any such times contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, except that this representation and warranty does not apply to statements in, or omissions from, the Registration Statement or the Prospectus made in reliance upon, and in conformity with, information relating to any Underwriter furnished to the Company in writing by or on behalf of any Underwriter through you expressly for use therein. (c) The Incorporated Documents heretofore filed, when they were filed (or, if any amendment with respect to any such document was filed, when such amendment was filed), conformed in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder, and any further Incorporated Documents so filed will, when they are filed, conform in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder; no such Incorporated Document when it was filed (or, if an amendment with respect to any such document was filed, when such amendment was filed), contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading; and no such further Incorporated Document, when it is filed, will contain an untrue statement of a material fact or will omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading. (d) All the outstanding shares of Common Stock of the Company have been duly authorized and validly issued, are fully paid and nonassessable and are free of any preemptive or similar rights; the Shares to be issued and sold by the Company have been duly authorized and, when issued and delivered to the Underwriters against payment therefor in accordance with the terms hereof, will be validly issued, fully paid and nonassessable and free of any preemptive or similar rights; and the capital stock of the Company conforms in all material respects to the description thereof in the Registration Statement and the Prospectus. (e) The Company is a corporation duly organized and validly existing in good standing under the laws of the State of Florida with full corporate power and authority to own, 7 lease and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus, and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure so to register or qualify does not have a material adverse effect on the condition (financial or other), business, properties, net worth or results of operations of the Company and the Subsidiaries (as hereinafter defined) taken as a whole (a "Material Adverse Effect"). (f) All the Company's subsidiaries (collectively, the "Subsidiaries") are listed in an exhibit to the Company's Annual Report on Form 10-K which is incorporated by reference into the Registration Statement. Each Subsidiary is a corporation duly organized, validly existing and in good standing in the jurisdiction of its incorporation, with full corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus, and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure so to register or qualify does not, singly or in the aggregate, have a Material Adverse Effect; all the outstanding shares of capital stock of each of the Subsidiaries have been duly authorized and validly issued, are fully paid and nonassessable, and are owned by the Company directly, or indirectly through one of the other Subsidiaries, free and clear of any lien, adverse claim, security interest, equity or other encumbrance. (g) There are no legal or governmental proceedings pending or, to the knowledge of the Company, threatened, against the Company or any of the Subsidiaries, or to which the Company or any of the Subsidiaries, or to which any of their respective properties is subject, that are required to be described in the Registration Statement or the Prospectus but are not described as required, and there are no agreements, contracts, indentures, leases or other instruments that are required to be described in the Registration Statement or the Prospectus or to be filed as an exhibit to the Registration Statement or any Incorporated Document that are not described or filed as required by the Act or the Exchange Act. (h) Neither the Company nor any of the Subsidiaries is (i) in violation of its certificate or articles of incorporation or by-laws, or other organizational documents, (ii) in violation of any law, ordinance, administrative or governmental rule or regulation applicable to the Company or any of the Subsidiaries, or of any decree of any court or governmental agency or body having jurisdiction over the Company or any of the Subsidiaries, other than violations that, singly or in the aggregate, would not have a Material Adverse Effect, or (iii) in default in any material respect in the performance of any obligation, agreement or condition contained in any bond, debenture, note or any other evidence of indebtedness or in any material agreement, indenture, lease or other instrument to which the Company or any of the Subsidiaries is a party or by which any of them or any of their respective properties may be bound, other than defaults that, singly or in the aggregate, would not have a Material Adverse Effect. (i) Neither the issuance and sale of the Shares, the execution, delivery or performance of this Agreement by the Company nor the consummation by the Company of the 8 transactions contemplated hereby: (i) requires any consent, approval, authorization or other order of, or registration or filing with, any court, regulatory body, administrative agency or other governmental body, agency or official (except such as may be required for the registration of the Shares under the Act and compliance with the securities or Blue Sky laws of various jurisdictions, and except for the Nasdaq Stock Market's approval of the listing of the Shares on the Nasdaq National Market and the clearance of the underwriting terms as required by the NASD's Conduct Rules), or (ii) conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, the certificate or articles of incorporation or bylaws, or other organizational documents, of the Company or any of the Subsidiaries; or (iii) conflicts or will conflict with, or constitutes or will constitute a breach of, or a default under, any agreement, indenture, lease or other instrument to which the Company or any of the Subsidiaries is a party or by which any of them or any of their respective properties may be bound, other than conflicts that, singly or in the aggregate, will not have a Material Adverse Effect, or (iv) violates or will violate any statute, law, regulation or filing or judgment, injunction, order or decree applicable to the Company or any of the Subsidiaries or any of their respective properties, other than violations that, singly or in the aggregate, would not have a Material Adverse Effect, or (v) will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of the Subsidiaries pursuant to the terms of any agreement or instrument to which any of them is a party or by which any of them may be bound, or to which any of the property or assets of any of them is subject. (j) Ernst & Young LLP, the accountants who have certified or shall certify the financial statements included or incorporated by reference in the Registration Statement and the Prospectus (or any amendment or supplement thereto) are independent public accountants as required by the Act. (k) The financial statements, together with related schedules and notes, included or incorporated by reference in the Registration Statement and the Prospectus (and any amendment or supplement thereto), present fairly, in all material respects, the consolidated financial position, results of operations and changes in financial position of the Company and the Subsidiaries on the basis stated in the Registration Statement at the respective dates or for the respective periods to which they apply; such financial statements and related schedules and notes have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved, except as disclosed therein; and the other financial and statistical information and data included or incorporated by reference in the Registration Statement and the Prospectus (and any amendment or supplement thereto) are, in all material respects, accurately presented and prepared on a basis consistent with such financial statements and the books and records of the Company and the Subsidiaries. (l) The execution and delivery of, and the performance by the Company of its obligations under, this Agreement have been duly and validly authorized by the Company, and this Agreement has been duly executed and delivered by the Company and constitutes the valid and legally binding agreement of the Company, enforceable against the Company in accordance with its terms, except to the extent enforceability may be limited by laws relating 9 to creditors' rights generally or by general equitable principles, and except as rights to indemnity and contribution hereunder may be limited by federal or state securities laws. (m) Except as disclosed in the Registration Statement and the Prospectus (or any amendment or supplement thereto), subsequent to the respective dates as of which such information is given in the Registration Statement and the Prospectus (or any amendment or supplement thereto), (i) neither the Company nor any of the Subsidiaries has incurred any liability or obligation, direct or contingent, or entered into any transaction, not in the ordinary course of business, that is material to the Company and the Subsidiaries taken as a whole, (ii) there has not been any change in the capital stock, or material increase in the short-term debt or long-term debt, of the Company or any of the Subsidiaries, or (iii) there has not been any other change or any development involving or which may reasonably be expected to have, singly or in the aggregate, a Material Adverse Effect. (n) Each of the Company and the Subsidiaries has good and marketable title to all property (real and personal) described in the Prospectus as being owned by it, free and clear of all liens, claims, security interests or other encumbrances except such as are described in the Registration Statement and the Prospectus or in a document filed as an exhibit to the Registration Statement, and all the property described in the Prospectus as being held under lease by each of the Company and the Subsidiaries is held by it under valid, subsisting and enforceable leases. (o) The Company has not distributed and, prior to the later to occur of (i) the Closing Date and (ii) completion of the distribution of the Shares, will not distribute, any offering material in connection with the offering and sale of the Shares other than the Registration Statement, the Prepricing Prospectus, the Prospectus or other materials, if any, permitted by the Act. (p) The Company and each of the Subsidiaries has such permits, licenses, franchises and authorizations of governmental or regulatory authorities ("permits") as are necessary to own its respective properties and to conduct its business in the manner described in the Prospectus, except where the failure to have such Permits, singly or in the aggregate, would not have a Material Adverse Effect; and the Company and each of the Subsidiaries has fulfilled and performed all its material obligations with respect to such permits and no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other material impairment of the rights of the holder of any such permit, subject in each case to such qualification as may be set forth in the Prospectus and except to the extent that revocation or termination would not, singly or in the aggregate, have a Material Adverse Effect. (q) (i) All policies of insurance and fidelity or surety bonds insuring the Company or any of the Subsidiaries or their respective businesses, assets, employees, officers and directors are in full force and effect; (ii) the Company and the Subsidiaries are in compliance with the terms of such policies and instruments in all material respects; and (iii) there are no material claims by the Company or any of the Subsidiaries under any such policy 10 or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause. (r) To the best knowledge of the Company, no labor problem exists with its employees or with employees of the Subsidiaries or is imminent that could reasonably be expected, singly or in the aggregate, to have a Material Adverse Effect, and the Company is not aware of any existing or imminent labor disturbance by the employees of any of its or the Subsidiaries' principal suppliers, contractors or customers that could reasonably be expected, singly or in the aggregate, to have a Material Adverse Effect. (s) The Company and the Subsidiaries are (i) in compliance with any and all applicable federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or other approvals would not, singly or in the aggregate, have a Material Adverse Effect. Except as set forth in the Prospectus, neither the Company nor any of the Subsidiaries has been named as a "potentially responsible party" under the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended ("CERCLA"). (t) The Company maintains a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (u) Neither the Company, nor any of its Subsidiaries, nor, to the Company's knowledge, any employee or agent of the Company or any Subsidiary has made any payment of funds of the Company or any Subsidiary or received or retained any funds in violation of any law, rule or regulation, which payment, receipt or retention of funds is of a character required to be disclosed in the Prospectus. (v) The Company and each of the Subsidiaries have filed all tax returns required to be filed (other than certain state or local tax returns, as to which the failure to file, singly or in the aggregate, would not have a Material Adverse Effect), which returns are complete and correct, and neither the Company nor any Subsidiary is in default in the payment of any taxes which were payable pursuant to said returns or any assessments with respect thereto, other than defaults that, singly or in the aggregate, would not have a Material Adverse Effect. 11 (w) No holder of any security of the Company has any right to require registration of shares of Common Stock or any other security of the Company as a result of the filing of the registration statement or consummation of the transactions contemplated by this Agreement. (x) The Company and the Subsidiaries own or possess all patents, trademarks, trademark registration, service marks, service mark registrations, trade names, copyrights, licenses, inventions, trade secrets and rights described in the Prospectus as being owned by them, or any of them, or necessary for the conduct of their respective businesses, and the Company is not aware of any claim to the contrary or any challenge by any other person to the rights of the Company and the Subsidiaries with respect to the foregoing. (y) The Company has complied with all provisions of Florida Statutes 517.075, relating to issuers doing business with Cuba. (z) The Company has complied with all provisions of SEC Staff Legal Bulletin No. 5 (CF/IM), concerning the Company's disclosure obligations relating to anticipated costs, problems and uncertainties associated with the Year 2000 issue. 8. [INTENTIONALLY OMITTED] 9. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to indemnify and hold harmless each of you and each other Underwriter and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act from and against any and all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Prepricing Prospectus or in the Registration Statement or the Prospectus or in any amendment or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or expenses arise out of or are based upon any untrue statement or omission or alleged untrue statement or omission which has been made therein or omitted therefrom in reliance upon and in conformity with the information relating to such Underwriter furnished in writing to the Company by or on behalf of any Underwriter through you expressly for use in connection therewith; provided, however, that the indemnification contained in this paragraph (a) with respect to any Prepricing Prospectus shall not inure to the benefit of any Underwriter (or to the benefit of any person controlling such Underwriter) on account of any such loss, claim, damage, liability or expense arising from the sale of the Shares by such Underwriter to any person if a copy of the Prospectus shall not have been delivered or sent to such person within the time required by the Act and the regulations thereunder, and the untrue statement or alleged untrue statement or omission or alleged omission of a material fact contained in such Prepricing Prospectus was corrected in the Prospectus, provided that the Company has delivered the Prospectus to the several Underwriters in requisite quantity on a timely basis to permit such delivery or sending. The foregoing indemnity agreement shall be in addition to any liability which the Company may otherwise have. 12 (b) If any action, suit or proceeding shall be brought against any Underwriter or any person controlling any Underwriter (within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act) in respect of which indemnity may be sought against the Company, such Underwriter or such controlling person shall promptly notify the parties against whom indemnification is being sought (the "indemnifying parties"), and such indemnifying parties shall assume the defense thereof, including the employment of counsel and payment of all fees and expenses. Such Underwriter or any such controlling person shall have the right to employ separate counsel in any such action, suit or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Underwriter or such controlling person unless (i) the indemnifying parties have agreed in writing to pay such fees and expenses, (ii) the indemnifying parties have failed to assume the defense and employ counsel, or (iii) the named parties to any such action, suit or proceeding (including any impleaded parties) include both such Underwriter or such controlling person and the indemnifying parties and such Underwriter or such controlling person shall have been advised by its counsel that representation of such indemnified party and any indemnifying party by the same counsel would be inappropriate under applicable standards of professional conduct (whether or not such representation by the same counsel has been proposed) due to actual or potential differing interests between them (in which case the indemnifying party shall not have the right to assume the defense of such action, suit or proceeding on behalf of such Underwriter or such controlling person). It is understood, however, that the indemnifying parties shall, in connection with any one such action, suit or proceeding or separate but substantially similar or related actions, suits or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of only one separate firm of attorneys (in addition to any local counsel) at any time for all such Underwriters and controlling persons not having actual or potential differing interests with you or among themselves, which firm shall be designated in writing by Smith Barney Inc., and that all such fees and expenses shall be reimbursed as they are incurred. The indemnifying parties shall not be liable for any settlement of any such action, suit or proceeding effected without their written consent, but if settled with such written consent, or if there be a final judgment for the plaintiff in any such action, suit or proceeding, the indemnifying parties agree to indemnify and hold harmless any Underwriter, to the extent provided in the preceding paragraph, and any controlling person of any Underwriter from and against any loss, claim, damage, liability or expense by reason of such settlement or judgment. (c) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, its officers who sign the Registration Statement, and any person who controls the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, to the same extent as the foregoing indemnity from the Company to each Underwriter, but only with respect to information relating to such Underwriter furnished in writing by or on behalf of such Underwriter through you expressly for use in the Registration Statement, the Prospectus or any Prepricing Prospectus, or any amendment or supplement thereto. If any action, suit or proceeding shall be brought against the Company, any of its directors or officers, or any such person who controls the Company, based on the Registration Statement, the Prospectus or any Prepricing Prospectus, or any amendment or supplement thereto, and in respect of which indemnity may be sought against any Underwriter pursuant to 13 this paragraph (c), such Underwriter shall have the rights and duties given to the Company by paragraph (b) above (except that if the Company shall have assumed the defense thereof, such Underwriter shall not be required to do so, but may employ separate counsel therein and participate in the defense thereof, but the fees and expenses of such counsel shall be at such Underwriter's expense), and the Company, its directors, any such officer, and any such controlling person shall have the rights and duties given to the Underwriters by paragraph (b) above. The foregoing indemnity agreement shall be in addition to any liability which any Underwriter may otherwise have. (d) If the indemnification provided for in this Section 9 is unavailable to an indemnified party under paragraphs (a) or (c) hereof in respect of any losses, claims, damages, liabilities or expenses referred to therein, then an indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, on the one hand, and the Underwriters, on the other hand, from the offering of the Shares, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and the Underwriters, on the other, in connection with the statements or omissions that resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Underwriters, on the other, shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus; provided, however, that, in the event that the Underwriters shall have purchased any Additional Shares hereunder, any determination of the relative benefits received by the Company or the Underwriters from the offering of the Shares shall include the net proceeds (before deducting expenses) received by the Company, and the underwriting discounts and commissions received by the Underwriters, from the sale of such Additional Shares, in each case computed on the basis of the respective amounts set forth in the notes to the table on the cover page of the Prospectus. The relative fault of the Company, on the one hand, and the Underwriters, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, on the one hand, or by the Underwriters, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (e) The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by a pro rata allocation (even if the Underwriters were treated as one entity for such purpose), or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities and expenses referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by 14 such indemnified party in connection with investigating any claim or defending any such action, suit or proceeding. Notwithstanding the provisions of this Section 9, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price of the Shares underwritten by it and distributed to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations to contribute pursuant to this Section 9 are several in proportion to the respective numbers of Firm Shares set forth opposite their names in Schedule I hereto (or such numbers of Firm Shares increased as set forth in Section 12 hereof) and not joint. (f) No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding. (g) Any losses, claims, damages, liabilities or expenses for which an indemnified party is entitled to indemnification or contribution under this Section 9 shall be paid by the indemnifying party to the indemnified party as such losses, claims, damages, liabilities or expenses are incurred. The indemnity and contribution agreements contained in this Section 9 and the representations and warranties of the Company set forth in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Underwriter or any person controlling any Underwriter, the Company, its directors or officers, or any person controlling the Company, (ii) acceptance of any Shares and payment therefor hereunder, and (iii) any termination of this Agreement. A successor to any Underwriter or any person controlling any Underwriter, or to the Company, its directors or officers, or any person controlling the Company, shall be entitled to the benefits of the indemnity, contribution and reimbursement agreements contained in this Section 9. 10. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of the Underwriters to purchase the Firm Shares hereunder are subject to the following conditions: (a) If, at the time this Agreement is executed and delivered, it is necessary for the Registration Statement or a post-effective amendment thereto (or an Abbreviated Registration Statement) to be declared effective before the offering of the Shares may commence, the Registration Statement or such post-effective amendment or Abbreviated Registration Statement shall have become effective not later than 5:30 P.M., New York City time, on the date hereof, or at such later date and time as shall be consented to in writing by you, and all filings, if any, required by Rules 424 and 430A under the Act shall have been timely made; no stop order suspending the effectiveness of the registration statement shall have been issued and no proceeding for that purpose shall have been instituted or, to the knowledge of the Company or any Underwriter, threatened by the Commission, and any request of the Commission for 15 additional information (to be included in the registration statement, the prospectus or otherwise) shall have been complied with to your satisfaction. (b) Subsequent to the effective date of this Agreement, there shall not have occurred: (i) any change, or any development involving a prospective change, in or affecting the condition (financial or other), business, properties, net worth, or results of operations of the Company or the Subsidiaries not contemplated by the Prospectus, which in your reasonable opinion, as Representatives of the several Underwriters, would materially adversely affect the market for the Shares, or (ii) any event or development relating to or involving the Company, or any officer or director of the Company, which makes any statement made in the Prospectus untrue or which, in the reasonable opinion of the Company and its counsel or the Underwriters and their counsel, requires the making of any addition to or change in the Prospectus in order to state a material fact required by the Act or any other law to be stated therein or necessary in order to make the statements therein not misleading, if amending or supplementing the Prospectus to reflect such event or development would, in your reasonable opinion, as Representatives of the several Underwriters, materially adversely affect the market for the Shares. (c) You shall have received on the Closing Date, an opinion of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., counsel for the Company, dated the Closing Date and addressed to you, as Representatives of the several Underwriters, to the effect that: (i) The Company is a corporation duly incorporated and validly existing in good standing under the laws of the State of Florida with full corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus (and any amendment or supplement thereto), and, to the knowledge of such counsel, is duly registered and qualified to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure so to register or qualify does not have, singly or in the aggregate, have a Material Adverse Effect; (ii) Each of the Subsidiaries is a corporation duly organized and validly existing in good standing under the laws of the jurisdiction of its organization, with full corporate power and authority to own, lease, and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus (and any amendment or supplement thereto); and all the outstanding shares of capital stock of each of the Subsidiaries have been duly authorized and validly issued, are fully paid and nonassessable, and, to the knowledge of such counsel, except as disclosed in the Prospectus, are owned by the Company directly, or indirectly through one of the other Subsidiaries, free and clear of any security interest, lien, adverse claim, equity or other encumbrance; (iii) To the knowledge of such counsel, the Company and each of the Subsidiaries has all necessary governmental authorizations, approvals, orders, licenses, certificates, franchises and permits of and from all governmental regulatory officials and bodies to own their respective properties and to conduct their respective businesses as now being 16 conducted, as described in the Prospectus, except where the failure so to have any such authorizations, approvals, orders, licenses, certificates, franchises or permits, individually or in the aggregate, would not have a Material Adverse Effect; (iv) The authorized capital stock of the Company consists of 80 million shares of Class A Common Stock, par value $.01 per share, 40 million shares of Class B Common Stock, par value $.01 per share, and one million shares of Preferred Stock, par value $.01 per share; and the authorized Class A Common Stock, Class B Common Stock and Preferred Stock of the Company conforms in all material respects as to legal matters to the description thereof contained in the Prospectus under the caption "Description of Capital Stock"; (v) Such counsel does not know of any commitment, plan or arrangement to issue, any shares of capital stock of the Company or any security convertible into or exchangeable or exercisable for capital stock of the Company; (vi) To the knowledge of such counsel, there is no holder of any security of the Company or any other person who has the right, contractual or otherwise, to cause the Company to sell or otherwise issue to them, or to permit them to underwrite the sale of, the Shares or the right to have any Common Stock or other securities of the Company included in the Registration Statement or the right, as a result of the filing of the registration statement, to require registration under the Act of any shares of Common Stock or other securities of the Company. (vii) The Shares to be issued and sold to the Underwriters by the Company hereunder have been duly authorized and, when issued and delivered to the Underwriters against payment therefor in accordance with the terms hereof, will be validly issued, fully paid and nonassessable and free of any statutory preemptive, or to the knowledge of such counsel, similar rights that entitle or will entitle any person to acquire any Shares upon the issuance thereof by the Company; (viii) The form of certificates for the Shares conforms to the requirements of the Florida Business Corporation Act; (ix) Based solely on telephonic, verbal confirmation provided to such counsel by the staff of the Commission, the Registration Statement and all post-effective amendments, if any, have become effective under the Act and, to the knowledge of such counsel, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose are pending before or contemplated by the Commission; and any required filing of the Prospectus pursuant to Rule 424(b) has been made in accordance with Rule 424(b); (x) The Company has corporate power and authority to enter into this Agreement and to issue, sell and deliver the Shares to be sold by it to the Underwriters as provided herein, and this Agreement has been duly authorized, executed and delivered by the Company and is a valid, legal and binding agreement of the Company, enforceable against the 17 Company in accordance with its terms, except as enforcement of rights to indemnity and contribution hereunder may be limited by Federal or state securities laws or principles of public policy and subject to the qualification that the enforceability of the Company's obligations hereunder may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors' rights generally and by general equitable principles; (xi) To our knowledge, neither the Company nor any of the Subsidiaries is in violation of its respective certificate or articles of incorporation or bylaws, or other organizational documents, or is in default in the performance of any material obligation, agreement or condition contained in any bond, debenture, note or other evidence of indebtedness, except as may be disclosed in the Prospectus; (xii) Neither the offer, sale or delivery of the Shares, the execution, delivery or performance of this Agreement, compliance by the Company with the provisions hereof, nor consummation by the Company of the transactions contemplated hereby (i) conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, the certificate or articles of incorporation or bylaws, or other organizational documents, of the Company or any of the Subsidiaries or, to the knowledge of such counsel and except to the extent that any conflict, breach or default, singly or in the aggregate, would not have a Material Adverse Effect, any agreement, indenture, lease or other instrument to which the Company or any of the Subsidiaries is a party or by which any of them or any of their respective properties is bound that is an exhibit to the Registration Statement or to any Incorporated Document, or is known to such counsel after reasonable inquiry, or (ii) to the knowledge of such counsel, will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of the Subsidiaries, nor (iii) will any such action result in any violation of any existing law, regulation, ruling (assuming compliance with all applicable state securities and Blue Sky laws), judgment, injunction, order or decree known to such counsel after reasonable inquiry, applicable to the Company, the Subsidiaries or any of their respective properties, the violation of which, singly or in the aggregate, would have a Material Adverse Effect; (xiii) No consent, approval, authorization or other order of, or registration or filing with, any court, regulatory body, administrative agency or other governmental body, agency, or official is required on the part of the Company (except as have been obtained under the Act and the Exchange Act or such as may be required under state securities or Blue Sky laws governing the purchase and distribution of the Shares) for the valid issuance and sale of the Shares to the Underwriters as contemplated by this Agreement, and such counsel need not express any opinion regarding such state securities or Blue Sky laws; (xiv) [INTENTIONALLY OMITTED] (xv) [INTENTIONALLY OMITTED] 18 (xvi) The Registration Statement and the Prospectus and any supplements or amendments thereto (except for the financial statements and the notes thereto and the schedules and other financial and statistical data included therein, as to which such counsel need not express any opinion) comply as to form in all material respects with the requirements of the Act; (xvii) To the knowledge of such counsel, there are no legal or governmental proceedings pending or threatened against the Company or any of the Subsidiaries, or to which the Company or any of the Subsidiaries, or any of their property, is subject, which (i) are required to be described in the Registration Statement or Prospectus (or any amendment or supplement thereto) which are not described as required, or (ii) challenge any of the trademarks and servicemarks of the Company and its Subsidiaries described in the Prospectus; (xviii) To the knowledge of such counsel, there are no agreements, contracts, indentures, leases or other instruments, that are required to be described in the Registration Statement or the Prospectus (or any amendment or supplement thereto) or to be filed as an exhibit to the Registration Statement or any Incorporated Document that are not described or filed as required, as the case may be; (xix) To the knowledge of such counsel, neither the Company nor any of the Subsidiaries is in violation of any law, ordinance, administrative or governmental rule or regulation applicable to the Company or any of the Subsidiaries or of any decree of any court or governmental agency or body having jurisdiction over the Company or any of the Subsidiaries, the violation of which, singly or in the aggregate, would have a Material Adverse Effect; (xx) The statements in the Prospectus under the captions "Risk Factors", "Business", "Management", "Description of Capital Stock - - Anti-takeover Effects of Certain Provisions of Florida Law and Other Provisions of the Company's Articles" and "Shares Eligible for Future Sale", insofar as such statements constitute summaries of documents referred to therein or summaries of matters of law, present fairly in all material respects the information required to be disclosed by the Act and the regulations thereunder with due regard to the fact that they are summaries; (xxi) Upon delivery of the Shares pursuant to this Agreement and payment therefor as contemplated herein, the Underwriters will acquire good and marketable title to the Shares free and clear of any lien, claim, security interest, or other encumbrance, restriction on transfer or other defect in title; and (xxii) Although counsel has not undertaken, except as otherwise indicated in their opinion, to determine independently, and does not assume any responsibility for, the accuracy or completeness of the statements in the Registration Statement, such counsel has participated in the preparation of the Registration Statement and the Prospectus, including review and discussion of the contents thereof (including review and discussion of the contents of all Incorporated Documents), and nothing has come to the attention of such counsel that has caused 19 them to believe that the Registration Statement at the time the Registration Statement became effective, or the Prospectus, as of its date and as of the Closing Date or the Option Closing Date, as the case may be, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that any amendment or supplement to the Prospectus, as of its respective date, and as of the Closing Date or the Option Closing Date, as the case may be, contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading (it being understood that such counsel need express no opinion with respect to the financial statements and the notes thereto and the schedules and other financial and statistical data included in the Registration Statement or the Prospectus or any Incorporated Document). In rendering their opinion as aforesaid, counsel may rely upon an opinion or opinions, each dated the Closing Date, of other counsel retained by them or the Company as to laws of any jurisdiction other than the United States or the State of Florida, provided that: (1) each such local counsel is acceptable to the Representatives, (2) such reliance is expressly authorized by each opinion so relied upon and a copy of each such opinion is delivered to the Representatives and is, in form and substance satisfactory to them and their counsel, and (3) counsel shall state in their opinion that they believe that they and the Underwriters are justified in relying thereon. (d) You shall have received on the Closing Date an opinion of Holland & Knight LLP, counsel for the Underwriters, dated the Closing Date and addressed to you, as Representatives of the several Underwriters, with respect to the matters referred to in clauses (vii), (ix), (x), (xvi) and (xxii) of the foregoing paragraph (c) and such other related matters as you may request. (e) You shall have received letters addressed to you, as Representatives of the several Underwriters, and dated the date hereof and the Closing Date from Ernst & Young LLP, independent certified public accountants, substantially in the forms heretofore approved by you. (f) (i) No stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been taken or, to the knowledge of the Company, shall be contemplated by the Commission at or prior to the Closing Date; (ii) there shall not have been any change in the capital stock of the Company nor any material increase in the short-term or long-term debt of the Company (other than in the ordinary course of business) from that set forth or contemplated in the Registration Statement or the Prospectus (or any amendment or Supplement thereto); (iii) there shall not have been, since the respective dates as of which information is given in the Registration Statement and the Prospectus (or any amendment or supplement thereto), except as may otherwise be stated in the Registration Statement and Prospectus (or any amendment or supplement thereto), any material adverse change in the condition (financial or other), business, prospects, properties, net worth or results of operations of the Company and the Subsidiaries taken as a whole; (iv) the Company and the Subsidiaries shall not have any liabilities or obligations, direct or contingent (whether or not in the ordinary course of business), that are material to the Company and the Subsidiaries, 20 taken as a whole, other than those reflected in the Registration Statement or the Prospectus (or any amendment or supplement thereto); and (v) all the representations and warranties of the Company contained in this Agreement shall be true and correct in all material respects on and as of the date hereof and on and as of the Closing Date as if made on and as of the Closing Date, and you shall have received a certificate, dated the Closing Date and signed by the chief executive officer and the chief financial officer of the Company (or such other officers as are acceptable to you), to the effect set forth in this Section 10(f) and in Section 10(g) hereof. (g) The Company shall not have failed at or prior to the Closing Date to have performed or complied in all material respects with any of its agreements herein contained and required to be performed or complied with by it hereunder at or prior to the Closing Date. (h) [INTENTIONALLY OMITTED] (i) [INTENTIONALLY OMITTED] (j) Prior to the Closing Date the shares of Common Stock which the Company agrees to sell pursuant to this Agreement shall have been listed, subject to notice of issuance, on the Nasdaq National Market. (k) The Company shall have furnished or caused to be furnished to you such further certificates and documents as you shall have reasonably requested. All such opinions, certificates, letters and other documents will be in compliance with the provisions hereof only if they are reasonably satisfactory in form and substance to you and your counsel. Any certificate or document signed by any officer of the Company and delivered to you in connection with the closing of the sale of the Shares hereunder, as Representatives of the Underwriters, or to counsel for the Underwriters, shall be deemed a representation and warranty by the Company to each Underwriter as to the statements made therein. The several obligations of the Underwriters to purchase Additional Shares hereunder are subject to the satisfaction on and as of any Option Closing Date of the conditions set forth in this Section 10, except that, if any Option Closing Date is other than the Closing Date, the certificates, opinions and letters referred to in paragraphs (c) through (i) shall be dated the Option Closing Date in question and the opinions called for by paragraphs (c), (d) and (e) shall be revised to reflect the sale of Additional Shares. 11. EXPENSES. The Company agrees to pay the following costs and expenses and all other costs and expenses incident to the performance by the Company of its obligations hereunder: (i) the preparation, printing or reproduction, and filing with the Commission of the registration statement (including financial statements and exhibits thereto), each Prepricing Prospectus, the Prospectus, and each amendment or supplement to any of them; (ii) the printing (or reproduction) and delivery (including postage, air freight charges and charges for counting 21 and packaging) of such copies of the registration statement, each Prepricing Prospectus, the Prospectus, the Incorporated Documents, and all amendments or supplements to any of them, as may be reasonably requested for use in connection with the offering and sale of the Shares; (iii) the preparation, printing, authentication, issuance and delivery of certificates for the Shares, including any stamp taxes in connection with the original issuance and sale of the Shares; (iv) the printing (or reproduction) and delivery of this Agreement, the preliminary and supplemental Blue Sky Memoranda and all other agreements or documents printed (or reproduced) and delivered in connection with the offering of the Shares; (v) the listing of the Shares on the Nasdaq National Market; (vi) the registration or qualification of the Shares for offer and sale under the securities or Blue Sky laws of the several states as provided in Section 5(g) hereof (including the reasonable fees, expenses and disbursements of counsel for the Underwriters relating to the preparation, printing or reproduction, and delivery of the preliminary and supplemental Blue Sky Memoranda and such registration and qualification); (vii) the filing fees and the fees and expenses of counsel for the Underwriters in connection with any filings required to be made with the National Association of Securities Dealers, Inc.; (viii) the transportation and other expenses incurred by or on behalf of Company representatives (which shall not include representatives of the Underwriters) in connection with presentations to prospective purchasers of the Shares; and (ix) the fees and expenses of the Company's accountants and the fees and expenses of counsel (including local and special counsel) for the Company. 12. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become effective: (i) upon the execution and delivery hereof by the parties hereto; or (ii) if, at the time this Agreement is executed and delivered, it is necessary for the Registration Statement or a post-effective amendment thereto to be declared effective before the offering of the Shares may commence, when notification of the effectiveness of the Registration Statement or such post-effective amendment has been released by the Commission. Until such time as this Agreement shall have become effective, it may be terminated by the Company, by notifying you, or by you, as Representatives of the several Underwriters, by notifying the Company. If any one or more of the Underwriters shall fail or refuse to purchase Shares which it or they are obligated to purchase hereunder on the Closing Date, and the aggregate number of Shares which such defaulting Underwriter or Underwriters are obligated but fail or refuse to purchase is not more than one-tenth of the aggregate number of Shares which the Underwriters are obligated to purchase on the Closing Date, each non-defaulting Underwriter shall be obligated, severally, in the proportion which the number of Firm Shares set forth opposite its name in Schedule I hereto bears to the aggregate number of Firm Shares set forth opposite the names of all non-defaulting Underwriters, or in such other proportion as you may specify in accordance with Section 20 of the Master Agreement Among Underwriters of Smith Barney Inc., to purchase the Shares which such defaulting Underwriter or Underwriters are obligated, but fail or refuse, to purchase. If any one or more of the Underwriters shall fail or refuse to purchase Shares which it or they are obligated to purchase on the Closing Date and the aggregate number of Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Shares which the Underwriters are obligated to purchase on the Closing Date, and arrangements satisfactory to you and the Company for the purchase of such Shares by one or more non-defaulting Underwriters or other party or parties approved by you and the 22 Company are not made within 36 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Underwriter or the Company. In any such case described in the preceding sentence which does not result in termination of this Agreement, either you or the Company shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and the Prospectus or any other documents or arrangements may be effected. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any such default of any such Underwriter under this Agreement. The term "Underwriter" as used in this Agreement includes, for all purposes of this Agreement, any party not listed in Schedule I hereto who, with your approval and the approval of the Company, purchases Shares which a defaulting Underwriter is obligated, but fails or refuses, to purchase. Any notice under this Section 12 may be given by telegram, telecopy or telephone but shall be subsequently confirmed by letter. 13. TERMINATION OF AGREEMENT. This Agreement shall be subject to termination in your absolute discretion, without liability on the part of any Underwriter or the Company, by notice to the Company, if prior to the Closing Date or any Option Closing Date (if different from the Closing Date and then only as to the Additional Shares), as the case may be, (i) trading in securities generally on the New York Stock Exchange, the American Stock Exchange or the Nasdaq National Market shall have been suspended or materially limited, (ii) a general moratorium on commercial banking activities in New York or Florida shall have been declared by either federal or state authorities, or (iii) there shall have occurred any outbreak or escalation of hostilities or other international or domestic calamity, crisis or change in political, financial or economic conditions, the effect of which on the financial markets of the United States is such as to make it, in your judgment, impracticable or inadvisable to commence or continue the offering of the Shares at the offering price to the public set forth on the cover page of the Prospectus or to enforce contracts for the resale of the Shares by the Underwriters. Notice of such termination may be given to the Company by telegram, telecopy or telephone and shall be subsequently confirmed by letter. 14. INFORMATION FURNISHED BY THE UNDERWRITERS. The statements set forth in the last paragraph on the cover page, the stabilization and passive market making legends on the inside cover page, and the statements in the first, third and sixth paragraphs under the caption "Underwriting" in any Prepricing Prospectus and in the Prospectus, constitute the only information furnished by or on behalf of the Underwriters through you as such information is referred to in Sections 7(b) and 9 hereof. 15. MISCELLANEOUS. Except as otherwise provided in Sections 5, 12 and 13 hereof, notice given pursuant to any provision of this Agreement shall be in writing and shall be delivered (i) if to the Company, at the office of the Company at 1801 W. International Speedway Boulevard, Daytona Beach, Florida 32114-1243, Attention: William C. France, Chairman of the Board and Chief Executive Officer, with a copy to Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., 1221 Brickell Avenue, Miami, Florida 33131, Att: Bruce E. Macdonough; or (ii) if to you, as Representatives of the several Underwriters, care of Smith Barney Inc., 388 23 Greenwich Street, New York, New York 10013, Attention: Manager, Investment Banking Division, with a copy to Holland & Knight LLP, One East Broward Boulevard, Ft. Lauderdale, Florida 33301, Att: Donn A. Beloff, Esq.. This Agreement has been and is made solely for the benefit of the several Underwriters, the Company, its directors and officers, and the other controlling persons referred to in Section 9 hereof and their respective successors and assigns, to the extent provided herein, and no other person shall acquire or have any right under or by virtue of this Agreement. Neither the term "successor" nor the term "successors and assigns" as used in this Agreement shall include a purchaser from any Underwriter of any of the Shares in his status as such purchaser. 16. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida applicable to contracts made and to be performed within the State of Florida. This Agreement may be signed in various counterparts which together constitute one and the same instrument. If signed in counterparts, this Agreement shall not become effective unless at least one counterpart hereof shall have been executed and delivered on behalf of each party hereto. 24 Please confirm that the foregoing correctly sets forth the agreement between the Company and the several Underwriters. Very truly yours, INTERNATIONAL SPEEDWAY CORPORATION By ....................... William C. France Chairman of the Board Confirmed as of the date first above mentioned on behalf of themselves and the other several Underwriters named in Schedule I hereto. SMITH BARNEY INC. CIBC OPPENHEIMER CORP. As Representatives of the Several Underwriters By SMITH BARNEY INC. By .............................. Director 25 SCHEDULE I INTERNATIONAL SPEEDWAY CORPORATION NUMBER OF UNDERWRITER FIRM SHARES - ----------- ----------- Smith Barney Inc. CIBC Oppenheimer Corp. --------- Total 4,000,000 ========= EX-10.6 3 EXECUTION DRAFT [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- US$ 100,000,000 CREDIT AGREEMENT between INTERNATIONAL SPEEDWAY CORPORATION and FIRST UNION NATIONAL BANK as of May 5, 1998 - -------------------------------------------------------------------------------- TABLE OF CONTENTS PAGE Preliminary Statement.........................................................1 ARTICLE I DEFINITIONS..........................................................1 ARTICLE II ADVANCES.............................................................5 2.1 Availability of Advances..................................5 2.2 Principal Repayment.......................................6 2.3 Request for Advances......................................6 2.4 Purpose of Advances.......................................7 2.5 Interest..................................................7 ARTICLE III ADDITIONAL PROVISIONS RELATING TO THE ADVANCES.......................8 3.1 Interest Rate Limitation..................................8 3.2 Payments to Principal Office..............................8 3.3 Default Rate..............................................9 3.4 Limitation of All Advances................................9 3.5 Indebtedness..............................................9 3.6 Indemnification and Additional Costs......................9 3.7 Guaranties...............................................10 ARTICLE IV CONDITIONS TO ADVANCES..............................................11 4.1 Representations and Warranties...........................11 4.2 Performance of Obligations...............................11 4.3 Documentation............................................11 4.4 Events of Default or Unmatured Events of Default.........11 ARTICLE V REPRESENTATIONS AND WARRANTIES......................................12 5.1 Incorporation............................................12 5.2 Power and Authority......................................12 5.3 Indebtedness.............................................12 5.4 Asset Ownership; Liens and Encumbrances..................12 5.5 Investments..............................................13 5.6 Litigation...............................................13 -i- 5.7 Tax Returns...............................................13 5.8 Contract or Restriction...................................13 5.9 ERISA Requirement.........................................14 5.10 Possession of Franchises and Licenses.....................14 5.11 Governmental Authorization................................14 5.12 Financial Condition.......................................14 5.13 Compliance with Laws......................................14 5.14 Regulation U..............................................15 5.15 Material Facts............................................15 5.16 Claims and Offsets........................................15 5.17 Intent and Effect of Transactions.........................16 ARTICLE VI COVENANTS............................................................16 6.1 Reports, Certificates and Other Information...............16 6.2 Compliance with Laws......................................18 6.3 Further Assurances........................................18 6.4 Insurance.................................................18 6.5 Conduct of Business.......................................19 6.6 Maintain Existence and Rights.............................19 6.7 Right of Inspection.......................................19 6.8 Substantial Banking Relationship..........................19 6.9 Payments to Affiliates....................................19 6.10 Compliance with ERISA.....................................19 6.11 Indebtedness..............................................20 6.12 Liens.....................................................20 6.13 Permitted Investments.....................................20 6.14 Extraordinary Dividends and Other Payments................20 6.15 Merger, Consolidation, Recapitalization and Acquisition...21 6.16 Sale of Assets............................................21 6.17 Transactions with Affiliates..............................21 6.18 Change in Business........................................21 6.19 Leases....................................................21 6.20 Change in Fiscal Year.....................................22 6.21 Consolidated Leverage Ratio...............................22 6.22 "Funded Debt to Capitalization Ratio".....................22 6.23 "Major Motorsports Events"................................22 6.24 Guaranties of Subsidiaries................................22 ARTICLE VII EVENTS OF DEFAULT....................................................22 7.1 Events of Default.........................................22 7.2 Remedies..................................................24 -ii- ARTICLE VIII MISCELLANEOUS........................................................25 8.1 Waiver of Default.........................................25 8.2 Amendments and Waivers....................................25 8.3 Notices...................................................25 8.4 No Waiver; Cumulative Remedies............................27 8.5 Exercise of Remedies......................................27 8.6 Survival of Representations, Warranties and Agreements....27 8.7 Liens; Set Off by Bank....................................27 8.8 Entire Agreement..........................................27 8.9 Enforceability............................................28 8.10 Reimbursement of Expenses.................................28 8.11 Execution of Counterparts.................................28 8.12 Stamp or Other Taxes......................................28 8.13 Waiver of Jury Trial; Arbitration.........................28 8.14 Governing Law.............................................29 EXHIBITS EXHIBIT A Promissory Note EXHIBIT B Form of Guaranty EXHIBIT C Form of Opinion of Counsel to Borrower EXHIBIT D Form of Consolidated Cash Flow Projections SCHEDULES SCHEDULE 5.1 List of All Existing Subsidiaries SCHEDULE 5.3 Existing and Continuing Indebtedness SCHEDULE 5.4 Permitted Liens SCHEDULE 5.5 Investments -iii- [GRAPHIC OMITTED] EXECUTION DRAFT CREDIT AGREEMENT This Credit Agreement made and entered into as of May 5, 1998 (together with any renewals, extensions, amendments, modifications, restatements and/or supplements hereto, this "Agreement"), between INTERNATIONAL SPEEDWAY CORPORATION, a Florida corporation ("Borrower"), and FIRST UNION NATIONAL BANK, a national banking association ("Bank"). PRELIMINARY STATEMENT WHEREAS, Borrower has requested that Bank make available, and subject to the terms and conditions set forth herein Bank has agreed to make available to Borrower, a line of credit (the "Credit Facility") in the initial aggregate principal amount of US$25,000,000, with increases (under certain circumstances more fully described herein) up to but not exceeding an aggregate principal amount of $100,000,000; NOW, THEREFORE, for good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged by each of Borrower and Bank, and subject to the terms and conditions set forth herein, the parties hereby agree as follows: ARTICLE I DEFINITIONS For purposes of this Agreement, all terms used herein without definition that are defined in the Uniform Commercial Code, as enacted and in force from time to time in the State of Florida (the "Uniform Commercial Code"), have the same meanings herein as they have in the Uniform Commercial Code. In addition, the following terms have the following meanings: 1.1 "ADVANCE" or "ADVANCES" (as the context may require) means an advance of loan monies to Borrower pursuant to this Agreement on any given Advance Date. 1.2 "ADVANCE DATE" means the date as of which an Advance is made. 1.3 "AFFILIATE" or "AFFILIATES" (as the context may require) means, as to any Person, (i) any individual related by blood or marriage and (ii) any corporation or other Person directly or indirectly owned or controlled by, owning or controlling or under common ownership or control with such Person. "Control" shall be deemed to include, but shall not be limited to, the power, directly or indirectly, to direct or cause the direction of the management or policies of another Person, whether through ownership, common directors, trustees or officers, by contract or otherwise. All Subsidiaries shall be deemed to be Affiliates. In addition, for purposes of this Agreement, unless otherwise indicated, "Homestead - Miami Speedway, L.L.C." shall also be deemed an affiliate of Borrower. 1.4 "BANKRUPTCY CODE" means Bankruptcy Reform Act of 1978, as amended, 11 U.S.C. /section/101, ET SEQ. 1.5 "BORROWER" means International Speedway Corporation, a Florida corporation. 1.6 "BUSINESS DAY" means a day on which Bank's Principal Office is open for business; and "LONDON BUSINESS DAY" means any Business Day that is also a day on which banking institutions in London, England are open for business. 1.7 "COMMENCEMENT DATE" means May 1, 1998, or such other date as shall be mutually agreed upon by Bank and Borrower. 1.8 "CONSOLIDATED EBITDA" means the aggregate consolidated gross earnings of Borrower and its Subsidiaries, before application of interest charges, taxes, depreciation and amortization, as determined in accordance with Generally Accepted Accounting Principles consistently applied. 1.9 "CONSOLIDATED FUNDED INDEBTEDNESS" means Indebtedness constituting money borrowed by Borrower that shall have been or should be, in accordance with Generally Accepted Accounting Principles, recorded or classified as a liability, on a consolidated basis. 1.10 "CONSOLIDATED SHAREHOLDERS EQUITY" means the shareholders equity of Borrower, as reported on the consolidated financial statements of Borrower, in accordance with Generally Accepted Accounting Principles. 1.11 "CREDIT DOCUMENT" or "CREDIT DOCUMENTS" (as the context may require) means this Agreement, the Note, the Guaranties, and all other affidavits, documents, instruments, certificates or agreements delivered or hereafter delivered pursuant to the terms hereof or otherwise evidencing the Advances or any other Indebtedness of Borrower to Bank. 1.12 "CREDIT FACILITY" means the line of credit made available to Borrower by Bank pursuant hereto. -2- 1.13 "ERISA" means the Employee Retirement Income Security Act of 1974, together with all amendments from time to time thereto, including any rules or regulations promulgated thereunder. 1.14 "EVENT OF DEFAULT" shall have the meaning specified in ARTICLE VII hereof. 1.15 "EXECUTIVE OFFICER" means, for purposes of this Agreement and the Credit Documents, any one of the chief executive officer, executive vice president, the chief financial officer or the chief operating officer of Borrower. 1.16 "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means the then prevailing principles and practices of the accounting profession conforming to the standards of the American Institute of Certified Public Accountants. 1.17 "GUARANTY" or "GUARANTIES" (as the context may require) means those certain Unconditional guaranties issued and to be issued by each Subsidiary to and in favor of Bank, guarantying amounts owing hereunder and under the Note, in substantially the form of EXHIBIT B hereto. 1.18 "INDEBTEDNESS" of a Person means all indebtedness (other than indebtedness to suppliers for the purchase of products and merchandise incurred in the ordinary course of business), including, without limitation, (a) indebtedness for borrowed money; indebtedness for (or deferred purchase price in connection with) the acquisition of property or assets; indebtedness obligations evidenced by debentures, notes or other similar instruments; reimbursement or other similar obligations arising in connection with letters of credit, surety bonds or reimbursement obligations therefor; and indebtedness of third parties secured by any lien, pledge or other encumbrance on the property or assets of the Person in question, whether or not such indebtedness is assumed; (b) all liability by way of endorsements (other than for collection or deposit in the ordinary course of business); (c) all guarantees of indebtedness (including any 'keepwell' or other agreement, contingent or otherwise, to purchase any obligation representing such indebtedness or property constituting security therefor, or to advance or supply funds for such purpose or to maintain working capital or any other balance sheet or income statement condition, or otherwise to assure a creditor against loss in respect of indebtedness or obligations of others, or any other arrangement in substance affecting any of the foregoing); (d) liabilities in respect of unfunded vested benefits under plans covered by Title IV of ERISA; and (e) obligations as lessee under leases (including synthetic leases) which shall have been or should be, in accordance with Generally Accepted Accounting Principles, recorded or classified as capital leases or financing leases; PROVIDED that, for purposes of this Agreement, that certain Keepwell Agreement dated as of August, 1997 with respect to Homestead - Miami Speedway, L.L.C. shall not be Indebtedness of Borrower. -3- 1.19 "INTEREST PERIOD" means (i) in the case of Advances bearing interest calculated on the basis of the LIBOR Market Index Rate, three (3) months, and (ii) in the case of Advances bearing interest calculated on the basis of the LIBOR Rate, any of one(1) month, two (2) months or three (3) months, as selected by Borrower on the date of the initial Advance hereunder and immediately preceding the commencement of each Interest Period thereafter, PROVIDED that no Interest Period shall extend beyond the Maturity Date. 1.20 "IRC" means the Internal Revenue Code of 1986, as amended from time to time. 1.21 "LIBOR MARKET INDEX RATE", for any day, means the rate (rounded to the next higher 1/100 of 1%) for one-month United States dollar-denominated deposits as reported (or if not so reported, then as determined by Bank from another recognized source of interbank quotation) on Telerate page 3750 as of 11:00 a.m., London time, for such day; PROVIDED that if such day is not a London Business Day, then for the immediately preceding London Business Day. 1.22 "LIBOR RATE", for any day, means the rate (rounded to the next higher 1/100 of 1%) for United States dollar-denominated deposits of that many months maturity as reported (or if not so reported, then as determined by Bank from another recognized source of interbank quotation) on Telerate page 3750 as of 11:00 a.m., London time, for the second London Business Day immediately preceding the day on which the relevant Interest Period begins (PROVIDED that if such day is not a London Business Day, then for the immediately preceding London Business Day), adjusted for reserves by dividing that rate by 1.00 MINUS the LIBOR Reserve. "LIBOR Reserve" is the maximum percentage reserve requirement (rounded to the next higher 1/100 of 1% and expressed as a decimal) in effect for any date during the Interest Period under the Federal Reserve Board's Regulation D for Eurocurrency Liabilities as defined herein. 1.23 "MATURITY DATE" means April 30, 2003, as such date may be extended or modified with the consent of Bank and Borrower. 1.24 "NASCAR" means the National Association for Stock Car Auto Racing, Inc. 1.25 "NON-COMPANY AFFILIATE" means any Affiliate of either Borrower or a Subsidiary that is neither Borrower nor a Subsidiary. 1.26 "NOTE" means that certain promissory note of even date herewith made by Borrower to and in favor of Bank, in substantially the form of EXHIBIT A hereto, in the original principal amount of US$100,000,000, evidencing the obligations of Borrower arising with respect to the Credit Facility; together with any -4- renewals, modifications, restatements, supplements, extensions or amendments thereto. 1.27 "PERSON" means any individual, firm, corporation, company, partnership, trust, trustee, agent, employee, organization, association or entity. 1.28 "PRIME RATE" means the rate of interest per annum announced by Bank from time to time to be its commercial prime rate, IT BEING UNDERSTOOD that such rate is one of several interest rate basis used by Bank and is not represented or intended necessarily to be the lowest or most favorable rate for any particular type or category of customer or loan; and IT BEING FURTHER UNDERSTOOD that any change in the prime rate shall be effective as of the Business Day on which such change is announced. 1.29 "PRINCIPAL OFFICE" means the office of Bank at First Union National Bank Building, 225 Water Street, Jacksonville, Florida 32202, or such other address as Bank may from time to time designate by notice to Borrower. 1.30 "RETURNS" has the meaning set forth in Section 5.7 hereof. 1.31 "SALE" means any sale, transfer, assignment, or other disposition, whether or not for value or for fair value, and regardless of the consideration (cash, property or otherwise), if any, transferred therefor. 1.32 "SUBSIDIARY" or "SUBSIDIARIES" (as the context may require) of a Person means any other Person of which 50% or more of the issued and outstanding voting stock or other indicia of ownership and/or control are owned or controlled directly or indirectly by such Person. For purposes of this Agreement, all Subsidiaries are also Affiliates. 1.33 "TAX" or "TAXES" (as the context may require) of a Person means any federal, state, county, local, or other tax (including, without limitation, income, profits, estimated, excise, sales, use, occupancy, gross receipts, franchise, ad valorem, severance, production, transfer, withholding, employment and payroll-related, real estate and property taxes, import duties, alternative minimum tax and other similar governmental charges and assessments) due from or in respect of such Person, and including interest, additions to tax or interest, and penalties with respect thereto. 1.34 "TAXING AUTHORITY" means any governmental or regulatory body with jurisdiction over matters relating to the payment of Taxes. 1.35 "UNMATURED EVENT OF DEFAULT" means the occurrence of any event that with the giving of notice, the lapse of time or both would constitute an Event of Default. -5- ARTICLE II ADVANCES 2.1 AVAILABILITY OF ADVANCES. Upon the terms and subject to the conditions of this Agreement and the other Credit Documents, Bank agrees to make available to Borrower, on and after the Commencement Date, Advances under the Credit Facility in an aggregate amount not exceeding $25,000,000, PROVIDED that, at any time after the Commencement Date but prior to the Maturity Date, and no less frequently than within thirty (30) days after the end of each fiscal quarter, Borrower shall inform Bank in writing of Borrower's projected needs based on Borrower's most recent consolidated cash flow projections (a copy of which shall simultaneously be delivered to Bank substantially in the form of Exhibit D), whereupon the aggregate amount available under the Credit Facility shall be automatically adjusted in increments of $10,000,000 (PROVIDED that an increase of less than $10,000,000 will be permitted if an increase of $10,000,000 would cause the aggregate principal amount available hereunder to exceed $100,000,000) to reflect such projected needs, IT BEING UNDERSTOOD and agreed that (i) the aggregate principal amount available under the Credit Facility shall not exceed $100,000,000; and (ii) in no event shall the aggregate principal amount available under the Credit Facility be increased if such increase would cause Borrower to be in default of the covenants (including the financial ratio covenants set forth in Article VI) and obligations hereunder and under the Note. Advances made to Borrower under the Credit Facility shall be evidenced by the Note, which Borrower has delivered on the date hereof. Pursuant to the Credit Facility commitment, Borrower may borrow, pay, re-borrow, and repay from Bank on a revolving basis, from time to time, but prior to the Maturity Date, such aggregate amounts as may then be available in accordance with the requirements of this Agreement; PROVIDED, HOWEVER, that (i) the principal amount requested for any funding shall be not less than $1,000,000, and (ii) the aggregate principal sum of all amounts so requested and outstanding at any one time under the Note shall never exceed the aggregate principal amount applicable under the terms of this Agreement. On or after the Maturity Date, no additional Advances will be made under the Credit Facility. 2.2 PRINCIPAL REPAYMENT. Except to the extent required under Article VII (events of default), Borrower shall make payment in full of the entire outstanding principal amount of the Note (together with all accrued and unpaid interest thereon), on or before the Maturity Date. 2.3 REQUEST FOR ADVANCES. Each request for an Advance under the Note shall be in writing executed by an Executive Officer of Borrower and specifically requesting a borrowing of funds under the Credit Facility and certifying that, to the best of his/her knowledge after due inquiry (1) no Event of Default and no Unmatured Event of Default has occurred or is continuing under the terms of any of the Credit Documents, and (2) all representations and warranties contained in the Credit -6- Documents are true and correct as of the date of such requested Advance, and all obligations to be performed by Borrower under the Credit Documents have been duly performed. Any request for an Advance under the Credit Facility shall be given to Bank not later than 11:00 a.m. (EST) at least three (3) Business Days prior to the day upon which the Advance is requested to be advanced. Any such request shall also (a) state the amount and date of the requested Advance, (b) state the interest rate calculation basis selected by Borrower (either LIBOR Market Index Rate or LIBOR Rate) and if Borrower has selected the LIBOR Rate, also state the selected Interest Period duration (one month, two month or three month), and (c) be, and shall state that it is, requested for a purpose that is permitted by this Agreement. Notices received after 11:00 a.m. shall be deemed to have been received on the next Business Day. 2.4 PURPOSE OF ADVANCES. Any advances made to Borrower hereunder shall be used by Borrower solely (i) to provide general working capital to support Borrower's business, (ii) for the payment of ordinary expenses incurred in the normal operation of Borrower's business, and (iii) for any other purpose explicitly stated to be contemplated by this Agreement. Without limiting the generality of the foregoing, Borrower shall not use, and shall not allow any Affiliate to use, any of such funds for any impermissible purpose. 2.5 INTEREST. (a) RATE OF INTEREST. Subject to the provisions hereof, the aggregate outstanding principal amount of Advances shall bear interest at a per annum rate equal to THE SUM OF (i) either (x) the LIBOR Market Index Rate or (y) the LIBOR Rate (as selected by Borrower on the date of the initial closing of this Agreement and from time to time in accordance herewith), PLUS (ii) the applicable percentage amount set forth below: IF THE RATIO OF CONSOLIDATED THEN THE APPLICABLE FUNDED INDEBTEDNESS TO EBITDA IS: PERCENTAGE IS: --------------------------------- -------------- 0 - less than 1.5:1 .40% 1.5:1 - less than 2.5:1 .60% 2.5:1 - less than 3.0:1 .80% Interest shall be calculated on the outstanding principal balance of the Note and shall be computed on the basis of a year of three hundred sixty (360) days, calculated for the actual number of days elapsed. When the LIBOR Market Index Rate is selected as the basis upon which the rate of interest on outstanding Advances is to be calculated, such rate of interest shall be adjusted daily to reflect the LIBOR Market Index Rate, and the LIBOR Market Index Rate will continue as the basis upon which such rate of interest is calculated until Borrower shall otherwise indicate in writing to Bank. When the LIBOR Rate is selected as the basis upon which the rate of interest on outstanding Advances is to be calculated, such rate of interest shall be fixed for the Interest Period, IT BEING UNDERSTOOD that if Borrower fails to notify Bank in writing of its selection of the LIBOR Rate as the continuing basis upon which the rate of interest hereunder shall be calculated, upon the expiration of such Interest Period, -7- Borrower shall be deemed to have selected the LIBOR Market Index Rate as the basis upon which the rate of interest hereunder shall thereafter be calculated. (b) SELECTION OF INTEREST RATE. On the date of the initial Advance hereunder and on the third Business Day immediately preceding the last day of each Interest Period, Borrower shall select either the LIBOR Market Index Rate or the LIBOR Rate as the basis on which the rate of interest applicable to Advances outstanding shall be calculated, IT BEING UNDERSTOOD that if Borrower fails to notify Bank in writing of its selection of the basis (either LIBOR Market Index Rate or LIBOR Rate) upon which the rate of interest hereunder shall be calculated, upon the expiration of the then current Interest Period, Borrower shall be deemed to have selected the LIBOR Market Index Rate as the basis upon which the rate of interest hereunder shall thereafter be calculated. If Borrower shall at any time select the LIBOR Rate as the basis on which the rate of interest applicable to Advances outstanding shall be calculated, then Borrower shall also notify the Bank of its selection of the duration of the Interest Period (either one month, two month or three month), IT BEING UNDERSTOOD that if Borrower fails to notify Bank in writing of its selection of such duration, then Borrower shall be deemed to have selected the three month LIBOR Rate as the basis upon which the rate of interest hereunder shall thereafter be calculated. During each Interest Period, the rate of interest so selected shall apply continuously. (c) PAYMENT OF INTEREST. All accrued Interest shall be payable on the last day of each Interest Period, IT BEING UNDERSTOOD that (i) if such last day shall not be a London Business Day, then all accrued Interest shall be payable on the London Business Day immediately following such day, unless such succeeding day falls in a different calendar month, in which event, such Interest shall be payable on the London Business Day immediately preceding such last day, and (ii) in any event all accrued and unpaid Interest shall be paid in full on the Maturity Date. ARTICLE III ADDITIONAL PROVISIONS RELATING TO THE ADVANCES 3.1 INTEREST RATE LIMITATION. Notwithstanding anything to the contrary contained in any of the Credit Documents, if any specified interest rate shall exceed the maximum rate permitted by applicable law as in effect from time to time, Borrower shall pay interest at the highest permissible rate, which rate shall change as and when the highest permissible rate shall change. If Borrower makes an interest payment under any of the Credit Documents that exceeds the maximum amount of interest permitted by applicable law, the excess of such payment above the maximum amount that lawfully may be paid shall be refunded to Borrower or, at Borrower's option, credited toward the payment of principal due under such Credit Document (as directed by Borrower); or, if Borrower makes an interest payment that exceeds the maximum amount of interest permitted by applicable law and all principal thereunder -8- shall have been previously or thereby paid in full, such payment shall be deemed to have been the result of mathematical error and Bank shall refund to Borrower the amount of such payment that is in excess of the amount that lawfully may be paid. 3.2 PAYMENTS TO PRINCIPAL OFFICE. Each payment of principal (including any prepayment), interest and any other amount required to be paid to Bank pursuant to this Agreement, the Note or any other Credit Document shall be made to Bank at its Principal Office, in immediately available funds constituting legal tender in the United States of America for the payment of public and private debts, on or before 11:00 a.m. Jacksonville, Florida, time on the date such payment is due. IN CASE ANY SUCH PAYMENT IS NOT SO MADE, BANK IS HEREBY AUTHORIZED TO, BUT SHALL NOT BE OBLIGATED TO, DEBIT THE AMOUNT OF SUCH PAYMENT FROM ANY ONE OR MORE ACCOUNTS OF BORROWER WITH BANK. 3.3 DEFAULT RATE. In the event that any payment of principal of, interest on or other amount with respect to this Agreement, the Note or any of the other Credit Documents is not made when due or any other Event of Default shall have occurred and be continuing, such unpaid amount shall continue to be an obligation of Borrower hereunder and shall bear interest from the due date thereon until paid in full in the manner provided in SECTION 3.2 hereof, at a rate of interest per annum equal to five percent (5%) IN EXCESS OF the LIBOR Market Index Rate (the "Default Rate"). Notwith standing the foregoing, failure to make any payment when due in the manner provided in the immediately preceding paragraph shall constitute an Event of Default hereunder. The Default Rate shall also apply from acceleration until all obligations owing hereunder, under the Note, and under the other Credit Documents, or any judgment thereon, is paid in full. 3.4 LIMITATION OF ALL ADVANCES. Notwithstanding any other provision of this Agreement, no Advance hereunder shall be made if the conditions precedent contained herein and in the other Credit Documents have not been fully satisfied and performed. Bank shall not be obligated to honor any request for an Advance if an Event of Default or an Unmatured Event of Default shall have occurred or be continuing. In addition, Bank shall not be obligated to fund any amount in excess of its lending limitation as determined by applicable law; IT BEING UNDERSTOOD that the aggregate amount that could become available pursuant to this Agreement (i.e., $100,000,000) and under the circumstances presently encompassing Borrower and Bank, is in compliance with the lending limitations as are applicable to Bank. 3.5 INDEBTEDNESS. At the time of each Advance made under or pursuant to this Agreement, Borrower shall immediately become indebted to Bank for the amount of such Advance, which Advance shall be made in immediately available funds. 3.6 INDEMNIFICATION AND ADDITIONAL COSTS. (a) INDEMNIFICATION. Borrower indemnifies Bank against Bank's loss or expense in employing deposits as a -9- consequence (a) of Borrower's failure to make any payment when due under this Agreement or the Note or (b) of any payment, prepayment or conversion of any Advance on a date other than the last day of the Interest Period ("Indemnified Loss or Expense"). Borrower also indemnifies and holds Bank, its Affiliates, officers, directors, employees, agents and representatives ("Indemnified Persons") harmless to the fullest extent permitted by law from and against all claims, liabilities, damages, or other expenses or costs (including without limitation reasonable attorneys' fees and expenses) ("Liabilities") incurred by Bank or any Indemnified Person in connection with or as a result of or arising out of the making by Bank of the Advances contemplated by this Agreement and the Note (or, if applicable, any security granted to collateralize the obligations hereunder), including without limitation liabilities arising from or with respect to the imposition upon, or incurrence by, Bank of any taxes, fees, interest, penalties, charges, costs or expenses, except in each case those liabilities arising from the gross negligence or willful misconduct of the Bank or any Indemnified Person. This covenant shall survive payment of all amounts due under this Agreement, the Note and the other Credit Documents. (b) ADDITIONAL COSTS. If, at any time, a new, or a revision of any existing, law or interpretation or administration (including reversals) thereof by any government authority, central bank or comparable agency imposes, increases or modifies any reserve or similar requirement against assets, deposits or credit extended by Bank, or subjects Bank to any tax, duty or other charge (except tax on Bank's net income), and any of the foregoing increase the cost to Bank of maintaining its commitment or reduce the amount of any sum received or receivables by Bank under this Note, within 15 days after demand by Bank, Borrower agrees to pay Bank such additional amounts as will compensate Bank for such increased costs or reduction ("Additional Costs"). (c) UNAVAILABILITY OF INTEREST RATE. If, at any time, (i) Bank shall determine that, by reasons of circumstances affecting foreign exchange and interbank markets generally, LIBOR deposits in the applicable amounts are not being offered to Bank, or (ii) a new, or a revision in any existing, law or interpretation or administration (including reversals) thereof by any government authority, central bank or comparable agency shall make it unlawful or impossible for Bank to honor its obligations under this Note, then (x) Bank's obligation to make, maintain or convert into a rate of interest calculated on the basis of the LIBOR Rate or, if applicable, the LIBOR Market Index Rate shall be suspended; and (y) the applicable rate of interest so calculated on the basis of the LIBOR Rate or, if applicable, the LIBOR Market Index Rate shall immediately be converted to a rate of interest calculated for the remainder of the Interest Period on the basis of the rate of interest per annum equal to THE SUM OF (i) the Prime Rate, MINUS (ii) the applicable percentage amount set forth below: IF THE RATIO OF CONSOLIDATED THEN THE APPLICABLE FUNDED INDEBTEDNESS TO EBITDA IS: PERCENTAGE IS: --------------------------------- -------------- 0 - less than 1.5:1 2.00% -10- 1.5:1 - less than 2.5:1 1.80% 2.5:1 - less than 3.0:1 1.60% Interest shall be calculated on the outstanding principal balance of the Note and shall be computed on the basis of a year of three hundred sixty (360) days, calculated for the actual number of days elapsed. 3.7 GUARANTIES. The obligations of Borrower hereunder and under the Note shall at all times be guaranteed by all Subsidiaries of Borrower, whether now existing or hereafter acquired or created, pursuant to an Unconditional Guaranty executed and delivered by each Subsidiary, in substantially the form of EXHIBIT B hereto. ARTICLE IV CONDITIONS TO ADVANCES The obligation of Bank to make the Advances hereunder is subject to the following conditions precedent, which must be satisfied at the time each Advance is to be made hereunder: 4.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties made by Borrower in this Agreement and the other Credit Documents or in any list, schedule, document or certificate delivered to Bank in connection herewith or therewith shall have been true as of the time made and shall be true on the date of each Advance. 4.2 PERFORMANCE OF OBLIGATIONS. Borrower shall have performed all of its obligations under the Credit Documents to be performed on or before the date of the Advance. 4.3 DOCUMENTATION. All instruments and documents incident to the issuance and delivery of the Credit Documents shall be satisfactory in form and substance to Bank and counsel for Bank; and Bank shall have received: (1) Two executed counterparts of each of the Credit Documents not previously executed and delivered to Bank, (2) Two executed counterparts of a Guaranty executed by each Subsidiary of Borrower, (3) All other documents that it may reasonably request in connection therewith, including certified copies of the Articles of Incorporation, By-Laws and resolutions of Borrower -11- authorizing the transactions contemplated by the Credit Documents, and certificates of good standing, and (4) With respect only to the initial closing of this Agreement, the favorable opinion of counsel for Borrower, in form and substance substantially similar to EXHIBIT C hereto. 4.4 EVENTS OF DEFAULT OR UNMATURED EVENTS OF DEFAULT. No Event of Default or Unmatured Event of Default shall exist. ARTICLE V REPRESENTATIONS AND WARRANTIES In order to induce Bank to enter into this Agreement and to commit to make the Advances hereunder, Borrower represents and warrants to Bank (which representations and warranties shall survive the delivery of the Credit Documents and the making of the Advances) as follows: 5.1 INCORPORATION. Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida, has the corporate power to own its properties and to carry on its business as now being conducted, is duly qualified as a foreign corporation to do business in every jurisdiction in which the nature of its business makes such qualification necessary, and is in good standing in all such jurisdictions. SCHEDULE 5.1 sets forth a true, correct and complete list of all Subsidiaries of Borrower as of the date hereof. 5.2 POWER AND AUTHORITY. Borrower has the legal capacity and right, and is duly authorized under all applicable provisions of law, to execute, deliver and perform each of the Credit Documents, and all corporate and other action on the part of Borrower required for the lawful execution, delivery and performance thereof has been duly taken. Each of the Credit Documents, upon execution and delivery thereof, will be a valid and binding obligation of Borrower, enforceable in accordance with its respective terms. Neither the execution or delivery of the Credit Documents, nor the fulfillment of or compli ance with their provisions and terms, will conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a violation of or default under any applicable law, regulation, order, writ or decree, the Articles of Incorporation or Bylaws of Borrower, or any agreement or instrument to which Borrower is now or hereafter becomes a party, or create any lien, charge or encumbrance upon any of Borrower's property or assets pursuant to the terms of any agreement or instrument to which Borrower is a party or by which Borrower or any of its properties are bound. -12- 5.3 INDEBTEDNESS. Borrower does not have any Indebtedness (including, but not limited to, Indebtedness owing to Affiliates) other than (or in excess of) the amounts set forth in its most recent financial statements or on SCHEDULE 5.3 hereto. 5.4 ASSET OWNERSHIP; LIENS AND ENCUMBRANCES. Borrower has good and marketable title to all of the properties and assets reflected on its most recent audited financial statements (other than replacements, additions or modifications in such properties and assets that arise in the ordinary course of Borrower's business and are not material, either individually or in the aggregate). Borrower does not have any liens, charges, claims or other encumbrances (collectively, "Liens") on or against any of its properties or assets other than (i) liens for Taxes being contested in good faith and for which appropriate reserves have been established and being maintained, (ii) liens accruing by operation of law for employee benefit liabilities, (iii) liens imposed by law (such as liens of carriers, warehousemen, mechanics, materialmen and landlords, and other similar liens incurred in the ordinary course of business that, either individually or taken as a whole, are not material to the financial condition of Borrower; (iv) purchase money liens upon property used by Borrower in the ordinary course of its business, securing Indebtedness incurred solely to pay all or a portion of the purchase price thereof (including in connection with capital leases) which liens, either individually or taken as a whole, would not be material to the financial condition of Borrower; or (v) those liens set forth on SCHEDULE 5.4 hereto. 5.5 INVESTMENTS. Borrower does not own or control, and is not under any obligation to purchase or acquire, any stock, securities, bonds, notes or other evidence of indebtedness issued or to be issued by any Person other than those listed on its most recent financial statements or on SCHEDULE 5.5 hereto. 5.6 LITIGATION. There are no pending or, to the best of Borrower's knowledge, threatened actions or proceedings before any court, arbitrator or governmental or administrative body or agency that could materially adversely affect the properties, business or condition, financial or otherwise, of Borrower, or in any way adversely affect or call into question the power or authority of Borrower to enter into or perform any of the Credit Documents or the validity or enforceability of any of the Credit Documents. 5.7 TAX RETURNS. Borrower has filed all Tax returns, statements, reports and forms (collectively, the "Returns") required to be filed by it with any Taxing Authority in accordance with all applicable laws. Borrower has timely paid or made provision for (in accordance with Generally Accepted Accounting Principles) all Taxes shown as due and payable on the Returns that have been filed, and will timely pay or make provisions for all Taxes shown to be due on the Returns. There are no liens or other encumbrances for Taxes upon the assets or properties of Borrower. There are no outstanding agreements or waivers extending the statutory period of limitation applicable to any Return required to be filed with respect to Borrower. So long as any amounts are outstanding under the Note, Borrower will not request any extension of -13- time to file any Return unless (i) it or they shall have disclosed such intention to Bank in writing prior to the filing of such request and (ii) such extension is not requested as a result of or in connection with a materially adverse event or circumstances affecting Borrower that has not been previously disclosed to Bank in writing. All Taxes which are required to be withheld or collected by Borrower have been duly withheld or collected and, to the extent required, have been paid to the proper Taxing Authority or properly deposited as required by applicable law. 5.8 CONTRACT OR RESTRICTION. Borrower is not a party to or bound by any contract or agreement or is subject to any charter or other corporate or partnership restrictions that could materially and adversely affect the business, properties or condition, financial or otherwise, of Borrower or adversely affect or call into question the power or authority of Borrower to enter into or perform any of the Credit Documents or the validity or enforceability of any of the Credit Documents. 5.9 ERISA REQUIREMENT. Borrower has not incurred any material accumulated funding deficiency within the meaning of ERISA or incurred any material liability to the Pension Benefit Guaranty Corporation established under ERISA (or any successor thereto under ERISA) in connection with any employee pension benefit plan established or maintained by it or by any Person under common control with it (within the meaning of Section 424(c) of the IRC or of Section 4001(b) of ERISA), or in which its employees are entitled to participate. No Reportable Event or prohibited transaction (each as defined in ERISA) in connection with any such plan has occurred and is continuing, Borrower is in compliance with all requirements of ERISA and there are no circumstances that could cause the loss of any such plan's qualification under Section 401(a) of ERISA. 5.10 POSSESSION OF FRANCHISES AND LICENSES. Borrower possesses all franchises, certificates, licenses, permits and other authorizations from governmental subdivisions or regulatory authorities, free from restrictions, that are necessary in any material respect for the ownership, maintenance or operation of its properties and the conduct of its business as presently conducted, and Borrower is not in violation of any thereof. 5.11 GOVERNMENTAL AUTHORIZATION. No authorization, consent, approval, exemption, franchise, permit, license or action of or filing with any governmental or public body or authority is required to authorize, or is required in connection with, the execution, delivery and performance by Borrower of any of the Credit Documents or the performance of any of the transactions contemplated hereby or thereby. 5.12 FINANCIAL CONDITION. The financial statements of Borrower as of August 31, 1996, November 30, 1996, and November 30, 1997, as previously delivered to Bank, have been prepared in accordance with Generally Accepted Accounting Principles consistently applied, and accurately reflect the financial condition of Borrower as of that date. Since November 30, 1997, there has not been -14- any materially adverse change in the business, operations or financial condition of Borrower, and Borrower has incurred no material liabilities other than those incurred in the ordinary course of business which is not shown on SCHEDULE 5.3. 5.13 COMPLIANCE WITH LAWS. Borrower is in compliance in all material respects with all laws, statutes, rules, regulations, orders and decisions of all governmental authorities that apply to the conduct of its business, its properties or its assets, including without limitation statutes, regulations or ordinances, relating to (a) the handling, storage, discharge, leakage, emission, escape or release of any substance or material that may be considered a hazardous or toxic substance, waste or material under any governmental statute, regulation or ruling; (b) the discharge, release or emission of any pollutant on or into the soil, air or water; (c) wages, hours, hiring, non-discrimination, promotion, retirement, benefits, pensions and working conditions; (d) land use requirements; (e) trade and antitrust regulations; and (f) federal and state laws relating to liquor or narcotics or any commercial crimes. Borrower has all permits, consents and approvals required by any governmental authority and is in compliance with all require ments, conditions and limitations contained in or imposed by such permits. 5.14 REGULATION U. No part of the proceeds of any Advance will be or has been used to purchase or carry, or to reduce or retire any loan incurred to purchase or carry, any margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System) or to extend credit to others for the purpose of purchasing or carrying any such margin stock. Borrower is not engaged as one of its important activities in extending credit for the purpose of purchasing or carrying such margin stock. If requested by Bank, Borrower will furnish to Bank, in connection with any Advance, a statement in conformance with the requirements of Federal Reserve Form U-1 referred to in Regulation U. In addition, no part of the proceeds of any Advance will be used for the purchase of commodity future contracts (or margins therefor for short sales) or any commodity. Neither the making of the Advances nor the use of the proceeds thereof will violate or be inconsistent with the provisions of Regulations G, T, U or X issued by the Board of Governors of the Federal Reserve System, in each case as now in effect or as the same may hereafter be in effect. 5.15 MATERIAL FACTS. Neither any of the Credit Documents nor any affidavit, document, instrument, certificate or statement furnished to Bank by or on behalf of Borrower in connection with the transactions contemplated hereby or thereby contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading. There is no fact known to Borrower that has not been disclosed to Bank in writing that materially and adversely affects, or in the future may materially and adversely affect, the business, operations, properties or assets or the condition, financial or otherwise, of Borrower. -15- 5.16 CLAIMS AND OFFSETS. No Event of Default or Unmatured Event of Default exists and there is no defense, set off or counterclaim against payment of principal of or interest under the Note or against any other amounts due or that may become due under the Credit Documents. All defenses, setoffs, counterclaims or claims against Bank and all affiliated persons and entities, and all of its officers, directors, shareholders, agents, attorneys and employees in each case in their roles as such with First Union, and their respective successors, assigns, heirs and legal representatives, of any nature, if any, held by Borrower, whether known or unknown, are hereby forever waived, released and discharged. 5.17 INTENT AND EFFECT OF TRANSACTIONS. The transactions provide for herein: (a) Are not made or incurred with the intent to hinder, delay or defraud any Person to whom Borrower has been, is now or may hereafter become indebted; (b) Do not render Borrower insolvent, nor is Borrower insolvent at the time the transactions provided for herein and the other Credit Documents are entered into; (c) Do not leave Borrower with unreasonably small capital with which to engage in its business, or in any business or transaction in which it intends to engage; and (d) Are not entered into with the intent to incur, or with the belief that Borrower would incur, debts that would be beyond its ability to pay as such debts mature. ARTICLE VI COVENANTS Borrower covenant and agree that, so long as any portion of the Advances or any of Borrower's liabilities to Bank remains unpaid or outstanding: 6.1 REPORTS, CERTIFICATES AND OTHER INFORMATION. (a) ANNUAL FINANCIALS. Within ninety (90) days after the end of each fiscal year of Borrower, Borrower shall furnish to Bank a copy of the audited consolidated financial statements of Borrower, prepared in accordance with Generally Accepted Accounting Principles, consistently applied, together with an unqualified letter of an independent certified public accounting firm selected by Borrower and acceptable to Bank and such other information as may be reasonably requested by Bank. Such statements shall include a balance sheet, a statement of income and -16- expenses, a statement of cash flow and such other and further reports and schedules as may reasonably be requested by Bank, including without limitation verification of Borrower's compliance with the financial covenants set forth in this Agreement. Such statements shall be certified as to their correctness by an Executive Officer of Borrower. (b) CONSOLIDATING FINANCIAL STATEMENTS. Within ninety (90) days after the end of each fiscal year of Borrower, Borrower shall give Bank access to a copy of the unaudited consolidating financial statements of Borrower, prepared in accordance with Generally Accepted Accounting Principles, consistently applied, together with supporting schedules; IT BEING UNDERSTOOD AND AGREED that such access will be accomplished in the following fashion: the Senior Credit Officer for Florida, Senior Underwriter responsible for the Credit Facility and the Senior Portfolio Manager responsible for monitoring the account may review the unaudited annual consolidating financial statements of Borrower at the offices of Borrower upon reasonable notice during normal business hours of Borrower. The representatives reviewing the unaudited consolidating financial statements of Borrower may make notes of such review. If requested in connection with Bank's compliance with bank regulatory requirements, Borrower will make a copy of the unaudited annual consolidating financial statements of Borrower available solely for such compliance purposes. In such event, the unaudited annual consolidating financial statements of Borrower will be marked "confidential", and the review of such materials will be limited to the individuals listed above and the government examiner who will be required to acknowledge the confidentiality of the materials prior to review. Bank agrees it will not furnish a copy of the materials to any other person or agency without the prior express written consent of the Borrower. Such consolidating statements shall include a balance sheet and a statement of income and expenses, and such other and further reports and schedules as may reasonably be requested by Bank, and shall be certified as to their correctness by an Executive Officer of Borrower (c) QUARTERLY FINANCIALS. Within forty-five (45) days after the end of each fiscal quarter of Borrower, Borrower shall furnish to Bank a copy of an unaudited management-prepared quarterly consolidated financial statements of Borrower, prepared in accordance with Generally Accepted Accounting Principles, consistently applied. Such statements shall include a balance sheet, a statement of income and expenses, a statement of cash flow and such other and further reports and schedules as may reasonably be requested by Bank, and verification of Borrower's compliance with the financial covenants set forth in this Agreement. Such statements shall also be certified as to their correctness by an Executive Officer of Borrower. (d) CERTIFICATES. Contemporaneously with the furnishing of a copy of each annual report and each quarterly report provided for in this SECTION 6.1, Borrower shall furnish to Bank a certificate dated the date of each such report, signed by an Executive Officer, (i) to the effect that (x) no such report contains any untrue -17- statement or omits to state a material fact necessary to make the facts contained therein not misleading, and (y) to the best of Borrower's knowledge, after reasonable and customary diligence and review, no Event of Default or Unmatured Event of Default has occurred and is continuing, or, if there is any such event, describing it and the steps, if any, being taken to cure it, and (z) containing a computation of, and showing compliance with, each of the restrictions contained in this ARTICLE VI; and (ii) requesting that Bank adjust the aggregate principal amount available under the Credit Facility to reflect Borrower's projected credit needs based on its most recent financial projections. (e) SEC REPORTS. Within ten (10) days of transmittal to its intended addressees, Borrower shall furnish to Bank (i) a copy of all financial statements, reports, notices, and proxy statements sent by Borrower to its shareholders, (ii) all regular or periodic reports required to be filed by Borrower to the United States Securities and Exchange Commission (the "SEC") or any other governmental agency or authority, including all exhibits and schedules thereto (except to the extent previously furnished by Borrower to Bank), other than Tax returns of Borrower, and (iii) all official press releases distributed by the investor relations department of Borrower that maybe of general interest to the investment community and other public announcements of financial results (such as earnings, etc.) made by Borrower. (f) NOTICES. Forthwith upon learning of the occurrence of any of the following, Borrower shall furnish to Bank written notice thereof, describing the same and the steps being taken by Borrower with respect thereto: (i) the occurrence of an Event of Default or an Unmatured Event of Default, (ii) the institution of, or any adverse determination in, any litigation, arbitration proceeding or governmental proceeding that is material to Borrower, or (iii) if Borrower learns that any of its representations herein is untrue in any material respect. (g) OTHER INFORMATION. From time to time such other information concerning Borrower as Bank may reasonably request. 6.2 COMPLIANCE WITH LAWS. Borrower shall comply with all statutes and governmental rules and regulations and pay promptly when due all taxes, assessments, governmental charges, claims for labor, supplies, rent and other obligations that, if unpaid, might become a lien against the property of Borrower, EXCEPT liabilities being contested in good faith, PROVIDED, HOWEVER, that Borrower will set up reserves against such liabilities to the extent (and in the amounts) required by Generally Accepted Accounting Principles. 6.3 FURTHER ASSURANCES. Upon the reasonable request of Bank, Borrower shall execute, acknowledge and deliver such further instruments (including, without limitation, a declaration of no set-off) and do such further acts as may be necessary, desirable or proper to carry out more effectively the purpose of this Agreement and any renewals, additions, substitutions, replacements or betterments thereto. -18- 6.4 INSURANCE. Borrower shall keep all of its insurable assets insured with responsible insurers, rated "A" or better by A.M. Best & Company, in accordance with good business practice in such amounts as may be reasonably requested by Bank or, in the absence of any such request, as are customarily maintained by companies engaged in similar businesses, but in no event in an amount less than the replacement cost of such assets. Borrower shall provide Bank with one or more certificates evidencing such insurance. Borrower shall timely pay all premiums and amounts necessary to keep such insurance in full force and effect. 6.5 CONDUCT OF BUSINESS. Borrower shall conduct its business substantially as now conducted and as previously represented to Bank, in the ordinary course, and will not expand into other different types of unrelated business. 6.6 MAINTAIN EXISTENCE AND RIGHTS. Borrower shall maintain, preserve and keep its properties in good repair, working order and condition, making all needed replacements, additions and improvements thereto. Borrower shall cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights and franchises and to comply with all laws applicable to it, shall be qualified to do business and in good standing in the State of Florida and every other jurisdiction in which the nature of its business makes such qualification necessary and shall not suffer or permit its dissolution or liquidation, in whole or in part. 6.7 RIGHT OF INSPECTION. Subject to the provisions and conditions described in SECTION 6.1(b) with respect to consolidating financial statements of Borrower, Borrower shall permit or arrange for Bank or its duly authorized representatives to visit and inspect Borrower's other assets, examine Borrower's books of account and make copies thereof and extracts therefrom and discuss its affairs, finances and accounts with its officers and independent public accountants, all upon reasonable notice at such reasonable times during normal business hours and as often as may be reasonably desired by Bank, IT BEING UNDERSTOOD that Bank and its agents shall not disclose to any Person any confidential information regarding the Borrower except (i) as required by law, or court or administrative order, (ii) information otherwise publicly available or freely usable or obtained from another public source, (iii) basic and general information regarding the level of lending activity and deposit activity and account status, given in response to an inquiry from a creditor of Borrower, or (iv) with the consent of Borrower. 6.8 SUBSTANTIAL BANKING RELATIONSHIP. Borrower shall maintain a substantial banking relationship with Bank, which shall include the proportionate maintenance of depository balances at historic relationship levels. 6.9 PAYMENTS TO AFFILIATES. Borrower shall not make payments of any kind (other than regularly scheduled salary, expense reimbursement and similar benefit payments, bonuses, lease or other ordinary course payments) to any Non-Company Affiliate on account of Indebtedness owed by Borrower, whether now existing or -19- subsequently incurred, other than payments that may become due pursuant to that certain Keepwell Agreement dated as of August, 1997 with respect to Homestead - -Miami Speedway, L.L.C. 6.10 COMPLIANCE WITH ERISA. Borrower shall cause each employee benefit plan to remain qualified under Section 401(a) of the IRC and remain in compliance with the provisions of ERISA. With respect to any such plan, Borrower shall not shall cause or permit to be caused any material accumulated funding deficiency (as described in SECTION 5.9 hereof), any material liability to the Pension Benefit Guaranty Corporation, any Reportable Event or prohibited transaction (as described in SECTION 5.9 hereof), or any action, the effect of which could result in the loss of a Plan's compliance with ERISA or qualification under Section 401(a) of the IRC. 6.11 INDEBTEDNESS. Borrower shall not incur, create, assume or permit to exist any Indebtedness of Borrower other than (i) Indebtedness owed to Bank, (ii) the Indebtedness disclosed on its then current financial statements of Borrower delivered to Bank or on SCHEDULE 5.3 hereto, (iii) Indebtedness (including guarantees therefor) in a principal amount not to exceed $85,000,000 in the aggregate in connection with the purchase of and financing for the Kansas City racetrack currently under consideration, and (iv) guarantees by Borrower of Indebtedness of one or more Subsidiaries not in excess of ten percent (10%) of Borrower's Total Shareholders' Equity (as shown on its most recent consolidated financial statements filed with the Securities and Exchange Commission (the "SEC")) in the aggregate. Borrower shall furnish to Bank a detailed list of all Indebtedness and other liabilities within the annual audited financial statements referred to in SECTION 6.1(a). 6.12 LIENS. Borrower shall not incur, create, assume or permit to exist any mortgage, pledge, security interest, lien, charge or other encumbrance of any kind on any of Borrower's other assets other than (i) those arising under the Credit Documents, (ii) those set forth on SCHEDULE 5.4 hereof, and (iii) those permitted liens described in subparagraphs (i), (ii), and (iii) of SECTION 5.4. 6.13 PERMITTED INVESTMENTS. Borrower shall not invest or otherwise purchase any stock, securities, bonds, notes or other evidences of indebtedness issued by any other Person other than (i) investments in direct or indirect obligations of the United States Government; (ii) certificates of deposit of United States commercial banks having a "Tier 1" capital ratio of not less than 6%, PROVIDED that in the case of investments in or purchases of such certificates of deposit, the aggregate amount of such purchases and/or investments shall not exceed ten percent (10%) of the issuing bank's unimpaired capital and surplus; (iii) those investments set forth on SCHEDULE 5.5; and (iv) investments of any kind so long as the aggregate amount of such investments do not exceed five percent (5%) of Borrower's Total Shareholders' Equity (as shown on its most recent consolidated financial statements filed with the SEC), provided, however, that nothing in this SECTION 6.13 shall prevent Borrower from investing in motorsports facilities or related motorsports businesses -20- so long as any such investments, in the aggregate, do not have a material adverse effect on the consolidated financial condition of Borrower or any of its Subsidiaries. 6.14 EXTRAORDINARY DIVIDENDS AND OTHER PAYMENTS. Borrower shall not, directly or indirectly, purchase, redeem or otherwise retire any capital stock in advance of the regularly scheduled date for such retirement, or apply or set apart any of its assets therefor, other than repurchases, redemptions or retirements in connection with Borrower's long-term incentive compensation plans approved by Borrower's shareholders and on file with the Securities and Exchange Commission; or make any other extraordinary distribution (by reduction of capital or otherwise) in respect of any such capital stock (other than ordinary dividends and transfers expressly contemplated herein), or agree to do any of the foregoing; or make any loan or other payment (other than salary and other payments expressly permitted herein and other than (i) those permitted by SECTION 6.11, (ii) payments owing under that certain Keepwell Agreement dated as of August, 1997 with respect to Homestead-Miami Speedway, L.L.C., (iii) payments owing to any Affiliate, or (iv) loans to and/or payments owing to any shareholder who (x) holds five percent (5%) or less of the voting capital stock of Borrower and (y) is an employee of Borrower and/or its Affiliates. 6.15 MERGER, CONSOLIDATION, RECAPITALIZATION AND ACQUISITION. Without the express prior written consent of Bank, which may not be unreasonably withheld by Bank, Borrower shall not (i) acquire, reorganize, merge or consolidate with or into any other Person, (ii) sell, transfer or dispose of any substantial part of its assets, (iii) issue any shares of capital stock, warrants, rights or options to acquire, or securities convertible into, capital stock (other than those issued in connection with Borrower's long-term incentive compensation plans), or (iv) authorize any new class of capital stock, or (v) make any other material change in its capitalization if, in the case of (i) through (v), it will (A) result in a material adverse effect on the consolidated financial condition of Borrower and its Subsidiaries, and (B) reduce voting control of the France family members in the Borrower to less than fifty percent (50%) in the aggregate. 6.16 SALE OF ASSETS. Borrower shall not sell, lease, convey or otherwise dispose of any of Borrower's material assets, except for sales in the ordinary course of business. 6.17 TRANSACTIONS WITH AFFILIATES. Except as expressly permitted hereby, Borrower shall not make any payment to or enter into any transaction with any Non-Company Affiliate, in excess of $100,000 in the aggregate (when taken together with all other such payments or transactions by Borrower to Non-Company Affiliates), other than payments to members of the France family individually (or family-related entities controlled by France family members) or to National Association for Stock Car Auto Racing, Inc. ("NASCAR") in the ordinary course of business in accordance with past practices of Borrower. -21- 6.18 CHANGE IN BUSINESS. Borrower shall not materially change its business focus of operations. 6.19 LEASES. Borrower shall not incur, create, or assume any direct or indirect liability for the payment of rent or otherwise, under any lease or rental arrangement (excluding capitalized leases) if immediately thereafter the sum of such lease or rental payments to be made by Borrower during any 12-month period is increased by $1,000,000 in the aggregate; PROVIDED, HOWEVER, that Bank shall not unreasonably withhold its consent to a request by Borrower to enter into a lease or guarantee lease payments in a principal amount not to exceed $85,000,000 (when aggregated with all other Indebtedness and guaranties arising in connection with the Kansas City racetrack transaction) in any 12-month period in connection with the purchase of and financing for the Kansas City racetrack currently under consideration. 6.20 CHANGE IN FISCAL YEAR. Borrower shall not change its fiscal year without the consent of Bank. 6.21 CONSOLIDATED LEVERAGE RATIO. Borrower shall maintain a ratio of Consolidated Funded Indebtedness to Consolidated EBITDA of not more than 3.00 to 1.00, verified quarterly (on the basis of Borrower's quarterly unaudited financial statements described in SECTION 6.1(a)) for the immediately preceding four (4) fiscal quarters. 6.22 "FUNDED DEBT TO CAPITALIZATION RATIO". Borrower shall maintain a ratio of Consolidated Funded Indebtedness to THE SUM OF (i) Consolidated Funded Indebtedness PLUS Consolidated Shareholders Equity of not more than fifty percent (50%), verified annually (on the basis of Borrower's audited financial statements described in SECTION 6.1(a)). 6.23 "MAJOR MOTORSPORTS EVENTS". Borrower will not voluntarily change the scope and magnitude of major motorsports events conducted at facilities controlled by Borrower or any of its Subsidiaries in a fashion which is materially adverse to the consolidated financial condition of the Borrower or any of its Subsidiaries. 6.24 GUARANTIES OF SUBSIDIARIES. Within fifteen (15) days of creating or acquiring any Subsidiary, Borrower shall cause such Subsidiary to execute and deliver to Bank a Guaranty, in form and substance substantially similar to EXHIBIT B. -22- ARTICLE VII EVENTS OF DEFAULT 7.1 EVENTS OF DEFAULT. If any one or more of the following events (herein called "Events of Default") shall occur, an Event of Default shall be deemed to have occurred: (a) PAYMENT OR PERFORMANCE. (a) If Borrower defaults in the payment of any principal of or interest on the Note or of any other amount payable hereunder or under any of the other Credit Documents or under any other Indebtedness to Bank, either by the terms hereof or thereof or otherwise as herein or therein provided; or (b) MISREPRESENTATION. If Bank shall have made an Advance to Borrower over and above the amount permitted hereunder; and Borrower shall not have repaid Bank immediately for any such over-advancement; or (c) PAYMENT AND PERFORMANCE OF KEEPWELL AGREEMENT. If Borrower defaults in the payment or performance of any of the obligations owing under the Keepwell Agreement described in SECTION 6.9 (beyond any period of grace provided with respect thereto); or (d) REPRESENTATIONS AND WARRANTIES. If any representation, warranty, report or certification made by or on behalf of Borrower herein or in any of the other Credit Documents or in any certificate, schedule, or other writing furnished in connection with or pursuant to this Agreement or any of the other Credit Documents shall be false or misleading in any material respect (i) on the date as of which made or reaffirmed or (ii) at any other time; or (e) SALE OF ASSETS. If Borrower sells a material portion of its assets; or (f) OTHER COVENANTS. If Borrower defaults in the performance or observance of any material agreement, covenant, term or condition binding on them contained in the Credit Documents and, except with respect to defaults in the performance of the covenants contained in any of SECTIONS 6.9, 6.11, 6.12, 6.14, 6.15, 6.16, and 6.17 hereof (as to which there is no cure period), such default is not remedied within thirty (30) days after its occurrence; or (g) DEFAULT UNDER CREDIT DOCUMENTS. If a default or event of default shall occur under any of the other Credit Documents; or (h) LIQUIDATION, DISSOLUTION OR BANKRUPTCY. Liquidation or dissolution of Borrower or suspension of the business of Borrower; the filing by Borrower of a -23- voluntary petition or an answer, or the filing against any of them of an involuntary petition that is not dismissed within thirty (30) days, seeking reorganization, arrangement, readjustment of any of their respective debts or for any other relief under Bankruptcy Code or under any other insolvency act or law, state or federal, now or hereafter existing, or any other action of Borrower indicating its consent to, approval of or acquiescence in any such petition or proceeding; the application by Borrower for, or the appointment of, a receiver, trustee or custodian of Borrower or for all or a substantial part of any of its property; the making by Borrower of an assignment for the benefit of creditors; the inability of Borrower or the admission by Borrower in writing of the inability to pay any of its debts as they mature; or the issuance of a warrant of attachment, execution or similar process against any substantial part of the property of Borrower that is not dismissed within thirty (30) days and which attachment, warrant or process relates to a claim in excess of $25,000 either alone or when aggregated with all other such warrants, attachments, and processes; or (i) JUDGMENT. If a final judgment in excess of $5,000,000 shall be rendered against Borrower and if, within thirty (30) days after entry thereof, such judgment shall not have been discharged or execution thereon stayed pending appeal, or if within thirty (30) days after the expiration of any such stay, such judgment shall not have been discharged; or (j) INVALIDITY OF CREDIT DOCUMENTS. If (i) any of the Credit Documents shall be deemed invalid or unenforceable for any reason; or (ii) any Person shall contest the validity of any of the Credit Documents, PROVIDED Bank reasonably believes that such Person's claim may be valid and such invalidity or unenforceability could have a material adverse effect on the condition (financial or otherwise) of Borrower, or on Bank's position vis-a-vis this Agreement or the Note. 7.2 REMEDIES. (a) Upon the occurrence of any Event of Default (but after the expiration of any grace period provided herein with respect to such Event of Default) and at any time thereafter Bank may, at its option, declare the Credit Facility and all or any portion of the obligations owing by Borrower to Bank under the Credit Documents to be forthwith due and payable, whereupon (or otherwise upon the occurrence of any event described in SECTION 7.1.(h) hereof, whether or not such declaration shall be made) the Advances and any other such obligations shall forthwith become due and payable, without presentment, demand, protest or other notice of any kind, all of which are expressly waived, anything contained herein or in the other Credit Documents to the contrary notwithstanding (other than grace periods and/or notice provisions provided for herein), and whereafter Bank shall no longer be obligated to make any Advances to Borrower under the Credit Facility. In addition, Bank may immediately proceed to foreclose its mortgages or liens on or security interest in any collateral that it may then hold and to exercise its rights under -24- and to do all other things provided for by law or by the terms of the Credit Documents. Bank shall have the sole right to determine the order in which it enforces its rights in any collateral, the manner of sale of such collateral (which shall be commercially reasonable) and the application of proceeds of sale of any collateral. (b) In addition, Borrower acknowledges the unconditional right of Bank to pledge or transfer the Note to any third party (i) thirty (30) days after providing notice of such sale to Borrower in the case of a pledge or transfer at any time other than a time during which a Default has occurred and is continuing or (ii) ten (10) days after providing notice of such sale to Borrower in the case of a pledge or transfer at any time during which a Default has occurred and is continuing, it being understood that in either case, at any time during such 30-day or 10-day period, Borrower shall have the right to purchase, or cause to be purchased by parties of its choosing, the Note under the terms offered by the third party selected by Bank; PROVIDED, HOWEVER, that Bank shall have an unconditional right to pledge or transfer the Note to any party at any time following an Event of Default contained in SECTIONS 7.1(a) or 7.1(h) hereof. Subject to the conditions set forth in SECTION 6.1(b), with respect to Borrower's consolidating financial statements, Borrower hereby grants to Bank the right to disclose to any prospective purchaser(s) of the Note any information requested by such prospective purchaser(s). Other than such permitted disclosures to any such prospective purchasers, Bank shall not disclose to any Person any confidential information regarding the financial condition of Borrower except (i) as required by law, or court or administrative order, (ii) information otherwise publicly available or freely usable or obtained from another public source, (iii) basic and general information regarding the level of lending activity and deposit activity and account status, given in response to an inquiry from a creditor of Borrower, or (iv) with the consent of Borrower. ARTICLE VIII MISCELLANEOUS 8.1 WAIVER OF DEFAULT. Bank may, by written notice to Borrower at any time and from time to time, waive any default in the performance or observance of any condition, covenant or other term hereof or any Event of Default that shall have occurred hereunder and its consequences. Any such waiver shall be for such period and subject to such conditions as shall be specified in any such notice. In the case of any such waiver, Borrower and Bank shall be restored to their former positions and rights hereunder and under the other Credit Documents, and any Event of Default so waived, whether or not in writing, shall be deemed to be cured and not continuing, but no such waiver shall extend to any subsequent or other Event of Default or impair any right consequent thereon. 8.2 AMENDMENTS AND WAIVERS. Bank and Borrower may, subject to the provisions of this Section, from time to time enter into written agreements for the -25- purpose of adding any provisions to this Agreement or the other Credit Documents or changing in any manner the rights of Bank or Borrower hereunder or under the other Credit Documents. No such amendment, modification or supplement shall be established by custom, conduct or course of dealing, but solely by an instrument in writing duly executed by the party to be charged therewith. 8.3 NOTICES. All notices and other communications required or permitted hereunder or under any of the other Credit Documents shall be in writing (including telex, telefax or telegraphic communication) and shall be delivered personally, telexed (with appropriate answerback received), telefaxed (with confirmation of receipt immediately thereafter by telephone), telegraphed, sent by nationally recognized overnight courier (marked for overnight delivery), or sent by registered, certified or express mail, postage prepaid, return receipt requested, addressed as follows or to such other address as may be hereafter designated in writing hereunder by the respective parties: Borrower: International Speedway Corporation 1801 West International Speedway Blvd. Daytona Beach, Florida 32114 Attention: James C. France, President Phone: 904-947-6736 Fax: 904-947-6570 With a copy to: International Speedway Corporation 1801 West International Speedway Blvd. Daytona Beach, Florida 32214 Attention: W. Garrett Crotty, General Counsel Phone: 904-947-6715 Fax: 904-947-6884 Bank: First Union National Bank 225 Water Street -- FL0074 Jacksonville, Florida 32202 Attention: Michael J. Carlin, Sr. Vice President Phone: 904-361-3455 Fax: 904-361-3526 With a copy to: LeBoeuf, Lamb, Greene & MacRae, LLP 50 North Laura Street, Suite 2800 Jacksonville, Florida 32202-3650 Attention: Pamela K. Phillips, Esq. Phone: 904-354-8000 Fax: 904-353-1673 -26- All such notices and communications shall (i) when delivered in person on any Business Day between the hours of 9:00 AM to 5:00 PM. (local time), be effective when delivered (or if delivered after 5:00 PM, be effective on the next Business Day to occur), (ii) when telexed (provided the correct answerback has been received) or telefaxed (provided receipt is immediately thereafter confirmed by telephone) or telegraphed, in each case on any Business Day between the hours of 9:00 AM to 5:00 PM (local time), be effective when telexed, telefaxed or delivered to the telegraph company for immediate transmittal, respectively (or if telexed, telefaxed or delivered to the telegraph company after 5:00 PM, be effective on the next Business Day to occur), or (iii) if mailed, be effective three (3) Business Days after the same has been deposited in the mails, postage prepaid, by registered or certified mail, return receipt requested, or (iv) if sent by a nationally recognized overnight courier service, be effective one (1) Business Day after the same has been delivered to such courier service marked for overnight delivery; in each case addressed as aforesaid. Any party may by notice given in accordance with this Section to the other parties designate another address or person for receipt of notices hereunder. 8.4 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise or delay in exercising, on the part of Bank, any right, power or privilege hereunder or under any of the other Credit Documents shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder or thereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies provided herein and in the other Credit Documents are cumulative and not exclusive of any other rights or remedies provided by law. 8.5 EXERCISE OF REMEDIES. The right is hereby given by Borrower to Bank to make releases (whether in whole or in part) of all or any part of any collateral held by Bank without notice to or the consent, approval or agreement of other parties in interest, including Borrower or junior lienors, which releases shall not impair in any manner the validity or priority of the mortgages, liens and security interests in the remaining collateral conferred under such documents nor release Borrower from liability for the indebtedness thereby secured. Notwithstanding the existence of any other lien or security interest in the collateral held by Bank, Bank shall have the right to determine the order in which any or all of the collateral shall be subjected to the remedies provided herein and in the other Credit Documents. The proceeds realized upon the exercise of the remedies provided herein or therein shall be applied by Bank in the manner herein or therein provided. 8.6 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All agreements, representations and warranties made herein shall survive the delivery of the Note and the other Credit Documents and the making and any renewal of the Advances, notwithstanding any investigation thereof made by Bank or its agents. -27- 8.7 LIENS; SET OFF BY BANK. Borrower hereby grants to Bank a continuing lien for the Note, the obligations under the other Credit Documents and all other Indebtedness of Borrower to Bank upon any and all monies, securities and other property of Borrower, and the proceeds thereof, now or hereafter held or received by or in transit to Bank from or for Borrower, and also upon any and all deposits (general or special) and credits of Borrower, if any, against Bank, at any time existing. UPON THE OCCURRENCE OF ANY EVENT OF DEFAULT, BANK IS HEREBY AUTHORIZED AT ANY TIME AND FROM TIME TO TIME, WITHOUT NOTICE TO BORROWER, TO SET OFF, APPROPRIATE AND APPLY ANY OR ALL ITEMS HEREIN ABOVE REFERRED TO AGAINST ALL INDEBTEDNESS OF BORROWER TO BANK, UNDER THE CREDIT DOCUMENTS OR OTHERWISE, WHETHER NOW EXISTING OR HEREAFTER ARISING. 8.8 ENTIRE AGREEMENT. This Agreement, together with the other Credit Documents and other documents executed in connection herewith or contemplated hereby, contains the entire agreement of the parties regarding the subject matter hereof. The parties acknowledge that Bank has made no promises, agreements, conditions, undertakings, warranties or representations that are not specifically set forth in such agreements. 8.9 ENFORCEABILITY. Should any one or more of the provisions of this Agreement be determined to be illegal or unenforceable as to one or more of the parties, all other provisions nevertheless shall remain effective and binding on the parties hereto. 8.10 REIMBURSEMENT OF EXPENSES. Borrower shall reimburse Bank on demand (a) for all costs and out-of-pocket expenses (including without limitation reasonable attorneys' fees, appraisal fees, accounting fees, brokerage fees, title insurance premiums, recording fees and other reasonable expenses), directly or indirectly incurred in connection with the preparation, execution, delivery, modification, waiver and amendment of this Agreement and the other Credit Documents and (b) for all expenses incurred by Bank (including without limitation reasonable attorneys' fees, court costs and other expenses, whether or not incurred in trials, appeals, bankruptcy actions or otherwise) in the enforcement of this Agreement or the other Credit Documents or in the collection of any indebtedness or other amounts owing under this Agreement or the other Credit Documents. 8.11 EXECUTION OF COUNTERPARTS. The Credit Documents may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which together shall constitute one and the same instrument. 8.12 STAMP OR OTHER TAXES. Borrower shall pay any and all stamp, documentary, excise and intangible taxes and recording fees now or hereafter payable in respect of this Agreement, the Note, and the other Credit Documents or any modifica tion(s) thereof, and shall hold Bank harmless with respect thereto. Bank may, -28- but shall not be obligated to, at any time or from time to time, debit any deposit account of Borrower at Bank for the amount of any such taxes. 8.13 WAIVER OF JURY TRIAL; ARBITRATION. EACH OF BANK AND BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR BANK TO ENTER INTO THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS. Upon demand of either party hereto, whether made before or after institution of any judicial proceeding, any dispute, claim or controversy arising out of, connected with or relating to this Agreement and other Credit Documents ("Disputes") between or among parties to this Agreement shall be resolved by binding arbitration as provided herein. Institution of a judicial proceeding by a party does not waive the right of that party to demand arbitration hereunder. Disputes may include, without limitation, tort claims, counterclaims, disputes as to whether a matter is subject to arbitration, claims brought as class actions, claims arising from Credit Documents executed in the future, or claims arising out of or connected with the transaction reflected by this Agreement. Arbitration shall be conducted under and governed by the Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American Arbitration Association (the "AAA") and Title 9 of the U.S. Code. All arbitration hearings shall be conducted in the city of the Principal Office. The expedited procedures set forth in Rule 51 ET SEQ. of the Arbitration Rules shall be applicable to claims of less than $1,000,000.00. All applicable statutes of limitation shall apply to any Dispute. A judgment upon the award may be entered in any court having jurisdiction. The panel from which all arbitrators are selected shall be comprised of licensed attorneys. The single arbitrator selected for expedited procedure shall be a retired judge from the highest court of general jurisdiction, state or federal, of the state where the hearing will be conducted or if such person is not available to serve, the single arbitrator may be a licensed attorney. Notwithstanding the foregoing, this arbitration provision does not apply to disputes under or related to swap agreements. 8.14 GOVERNING LAW. This Agreement and the other Credit Documents issued hereunder shall be governed in all respects by the laws of the State of Florida. IN WITNESS WHEREOF, each Borrower and Bank have caused this Agreement to be duly executed under seal as of the day and year first above written. -29- INTERNATIONAL SPEEDWAY CORPORATION By /S/ SUSAN G. SCHANDEL ------------------------------------------------ Name: Susan G. Schandel Title: Chief Financial Officer FIRST UNION NATIONAL BANK By /S/ MICHAEL J. CARLIN ------------------------------------------------ Name: Michael J. Carlin Title: Senior Vice President -30- EX-23.2 4 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We consent to the reference to our firm under the captions "Experts" and "Selected Financial Data" and to the use of our report dated January 22, 1998 (except Note 1, EARNINGS PER SHARE, as to which the date is April 14, 1998) in the Registration Statement (Form S-3) and the related Prospectus of International Speedway Corporation for the registration of 4,000,000 shares of its Class A Common Stock. We also consent to the incorporation by reference therein of our report dated January 22, 1998 with respect to the financial statement schedule of International Speedway Corporation for the years ended August 31, 1995 and 1996, for the three months ended November 30, 1996 and for the year ended November 30, 1997 included in the Annual Report (Form 10-K) for 1997 filed with the Securities and Exchange Commission. /s/ ERNST & YOUNG LLP - --------------------- Jacksonville, Florida May 29, 1998 -----END PRIVACY-ENHANCED MESSAGE-----