<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 1996.
( ) Transition report pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934 for the transition period ___ to ___.
Commission File No. 0-28044
PENSKE MOTORSPORTS, INC.
-----------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 51-0369517
-------- ----------
(State or other jurisdiction of incorporation or (IRS Employer Identification
organization) No.)
13400 OUTER DRIVE WEST, DETROIT, MICHIGAN 48239-4001
----------------------------------------- ----------
(Address of principal executive offices) (including zip code)
313-592-5258
-----------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
COMMON STOCK $0.01 PAR VALUE 12,987,500 SHARES
- ---------------------------- -----------------
CLASS OUTSTANDING AT AUGUST 1, 1996
This report contains 18 pages.
<PAGE> 2
Penske Motorsports, Inc. Form 10-Q (continued)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statement of Changes in Stockholders' Equity 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Independent Accountants' Review Report 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 11
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 16
Signature 17
</TABLE>
2
<PAGE> 3
Penske Motorsports, Inc. Form 10-Q (continued)
PENSKE MOTORSPORTS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1996 1995
------ -------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 66,769 $ 4,805
Receivables 5,975 1,708
Inventories 2,181 1,370
Prepaid expenses 797 575
--------------- ----------------
TOTAL CURRENT ASSETS 75,722 8,458
PROPERTY AND EQUIPMENT, net 83,678 61,009
NOTE RECEIVABLE - RELATED PARTY 1,512
OTHER ASSETS 1,795 909
GOODWILL, net 6,954 1,367
--------------- ----------------
TOTAL ASSETS $ 168,149 $ 73,255
=============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt $ 710 $ 150
Accounts payable and accrued expenses 14,068 6,648
Deferred revenue, net 8,805 8,866
--------------- ----------------
TOTAL CURRENT LIABILITIES 23,583 15,664
ADVANCES - RELATED PARTIES 1,254
LONG-TERM DEBT, less current portion 3,322 200
DEFERRED TAXES 9,192 9,115
MINORITY INTEREST 1,210
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, par value $ .01 share:
Authorized 50,000,000 shares
Issued and outstanding 12,987,500 shares
and 9,157,500 shares in 1996 and 1995, respectively 130 93
Additional paid-in-capital 122,247 37,446
Retained earnings 9,675 8,273
--------------- ----------------
TOTAL STOCKHOLDERS' EQUITY 132,052 45,812
--------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 168,149 $ 73,255
=============== ================
</TABLE>
See accompanying notes to unaudited consolidated financial statements
3
<PAGE> 4
Penske Motorsports, Inc. Form 10-Q (continued)
PENSKE MOTORSPORTS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except for share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------ -----------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE:
Speedway admissions $ 9,780 $ 7,975 $ 9,780 $ 7,975
Other speedway revenue 7,658 3,597 7,694 3,621
Merchandise, tires and accessories 7,226 5,738 10,905 8,576
----------- ----------- ----------- -----------
TOTAL REVENUES 24,664 17,310 28,379 20,172
----------- ----------- ----------- -----------
EXPENSES:
Operating 6,964 5,236 8,970 6,882
Cost of sales 4,416 3,373 6,515 5,064
Depreciation and amortization 813 607 1,473 1,196
Selling, general and administrative 2,642 1,463 3,113 1,928
----------- ----------- ----------- -----------
OPERATING EXPENSES 14,835 10,679 20,071 15,070
----------- ----------- ----------- -----------
OPERATING INCOME 9,829 6,631 8,308 5,102
INTEREST INCOME (EXPENSE), net 762 ( 239) 756 ( 484)
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 10,591 6,392 9,064 4,618
INCOME TAXES 3,874 2,155 3,337 1,538
----------- ----------- ----------- -----------
NET INCOME $ 6,717 $ 4,237 $ 5,727 $ 3,080
=========== =========== =========== ===========
NET INCOME PER SHARE (See Note 3) $ .52
===========
PRO FORMA NET INCOME PER SHARE (See Note 3) $ .54 $ .51 $ .39
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES (See Note 3) 12,987,500
===========
PRO FORMA WEIGHTED AVERAGE NUMBER OF SHARES (See
Note 3) 7,905,542 11,232,960 7,905,542
=========== =========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements
4
<PAGE> 5
Penske Motorsports, Inc. Form 10-Q (continued)
PENSKE MOTORSPORTS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Common Stock
--------------------------- Additional Retained
Shares Amount Paid-In Capital Earnings
------ ------ --------------- --------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1995 9,157,500 $ 93 $ 37,446 $ 8,273
Sale of Common Stock 3,737,500 37 82,766
Competition Tire West, Inc.
transaction (Note 2) ( 28) ( 4,325)
Acquisition of minority interest
(Note 2) 92,500 2,063
Net income 5,727
----------- --------- -------------- ---------
BALANCE, June 30, 1996 12,987,500 $ 130 $ 122,247 $ 9,675
=========== ========= ============== =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements
5
<PAGE> 6
Penske Motorsports, Inc. Form 10-Q (continued)
PENSKE MOTORSPORTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
------------------------------------------
1996 1995
----------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,727 $ 3,080
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,473 1,196
Changes in assets and liabilities which provided (used) cash:
Receivables ( 4,041) ( 2,064)
Inventories, prepaid expenses and other assets ( 1,729) ( 492)
Accounts payable and accrued liabilities 6,798 4,226
Deferred revenue 16 ( 368)
--------------- -------------
Net cash provided by operating activities 8,244 5,578
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions of property and equipment, net ( 23,827) ( 3,377)
Acquisition of Competition Tire South, Inc. (Note 2) ( 758)
Competition Tire West, Inc. transaction (Note 2) ( 3,176)
Acquisitions of minority interest in subsidiaries ( 12) ( 520)
--------------- -------------
Net cash used in investing activities ( 27,773) ( 3,897)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock 82,803
Proceeds from issuance of debt 12,089 1,520
Principal payments on long-term debt ( 12,145) ( 1,736)
Advances to affiliates ( 1,254) ( 1,379)
--------------- -------------
Net cash provided by (used in) financing activities 81,493 ( 1,595)
--------------- -------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 61,964 86
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,805 1,383
--------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 66,769 $ 1,469
=============== =============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for interest $ 29 $ 468
=============== =============
Cash paid during the period for taxes $ 2,662
===============
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
Increase in debt associated with acquisitions (Note 2) $ 3,738
===============
Decrease in minority interest associated with acquisitions (Note 2) $ 1,210
===============
</TABLE>
See accompanying notes to unaudited consolidated financial statements
6
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Penske Motorsports, Inc. Form 10-Q (continued)
PENSKE MOTORSPORTS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - FINANCIAL STATEMENTS. The consolidated financial statements include
the accounts of the Company, Penske Motorsports, Inc. and its wholly-owned
subsidiaries, Michigan International Speedway, Inc. (MIS), Pennsylvania
International Raceway, Inc. (PIR), Motorsports International Corp. (MIC), The
California Speedway Corporation (TCS), Competition Tire West, Inc. (CTW) and
Competition Tire South, Inc. (CTS). All material intercompany balances and
transactions have been eliminated.
The accompanying consolidated financial statements have been prepared by
management and, in the opinion of management, contain all adjustments,
consisting of normal recurring adjustments, necessary to present fairly the
financial position of the Company as of June 30, 1996 and December 31, 1995,
and the results of its operations for the three month and six month periods
ended June 30, 1996 and 1995 and its cash flows for the six month periods ended
June 30, 1996 and 1995.
The consolidated financial statements should be read in conjunction with the
consolidated financial statements included in the Company's registration
statement filed on Form S-1 with the Securities and Exchange Commission.
Because of the seasonal concentration of racing events, the results of
operations for the three and six month periods ended June 30, 1996 and 1995 are
not indicative of the results to be expected for the year.
NOTE 2 - INITIAL PUBLIC OFFERING AND RELATED ACQUISITIONS. On March 27, 1996,
the Company completed its initial public offering (IPO) of 3,737,500 shares of
common stock (including 487,500 shares issued at the option of the
underwriters). The initial offering price was $24 per share with net proceeds
to the Company of $82.8 million. The net proceeds from the offering were used
to repay outstanding balances on the Company's credit facilities (approximately
$10.6 million) with the remainder to be used to fund, in part, the construction
of the California Speedway.
Acquisition of Minority Interest in PIR - Immediately prior to the effective
date of the IPO, James E. Williams, an investor in PIR, exchanged his 2,557
shares (approximately 15% of the issued and outstanding shares of common stock)
of PIR for 92,500 shares of Common Stock of the Company. This transaction
resulted in recording goodwill of approximately $2 million.
7
<PAGE> 8
Penske Motorsports, Inc. Form 10-Q (continued)
PENSKE MOTORSPORTS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Acquisition of Minority Interest in CTW and Capital Distribution - On March 21,
1996, the Company acquired all of CTW's outstanding shares of common stock for
$7.4 million, of which $4.3 million was paid to the two selling shareholders in
cash with the balance of $3.1 million payable over a term not to exceed five
years with interest at 8% per annum. The acquisition of the shares of the
former 40% CTW shareholder was accounted for as an acquisition of a minority
interest and resulted in recording goodwill of approximately $1.9 million. The
former controlling shareholder of CTW (60%) is also the controlling shareholder
of the Company, therefore, the excess of the amount paid for such shares over
the net book value of assets acquired (approximately $2.9 million) was recorded
as a capital distribution.
CTW was included in the consolidated balance sheet at December 31, 1995 because
of common control and as a result of the aforementioned transaction. This
transaction resulted in the ownership of CTW by the Company and the elimination
of the net book value (approximately $1.4 million) of the controlling
shareholder's interest in CTW from consolidated stockholder's equity. Also, as
part of this transaction, the $1.5 million note receivable-related party was
repaid.
Acquisition of CTS Common Stock - On March 21, 1996, the Company acquired the
common shares of CTS not owned by CTW (approximately 67%) for cash and notes
totaling approximately $2.2 million. Notes payable of approximately $830,000
are payable over a term not to exceed five years with interest at 8% per annum.
This acquisition was accounted for using the purchase method of accounting and
resulted in recording $1.2 million of goodwill. CTS has been included in the
consolidated financial statements from the date acquired. Had the acquisitions
occurred as of January 1, 1996, the pro-forma effect on revenues would have
been an increase of $1.4 million with an immaterial impact on net income and
earnings per share.
NOTE 3 - COMMON STOCK EARNINGS PER SHARE AND PRO-FORMA EARNINGS PER SHARE.
Prior to the completion of the IPO, discussed in Note 2, the Company effected a
recapitalization pursuant to which the Company (i) increased its authorized
shares of common stock to 50,000,000 shares, (ii) effected a 91.575-to-one
share split, and (iii) converted 15,000 shares of outstanding preferred stock
to 1,373,625 shares of common stock. Net income per share for the three month
period ended June 30, 1996 reflects the weighted average number of shares
outstanding of 12,987,500. The pro forma net income per share reflects the
weighted average number of post-split shares outstanding of 11,232,960 for the
six month period ended June 30, 1996 and 7,905,542 for the three and six month
periods ended June 30, 1995 (including the dilutive effect of the number of
shares issued equivalent to the $2.9 million capital distribution of 121,667
shares based on the offering price of $24 per share).
8
<PAGE> 9
Penske Motorsports, Inc. Form 10-Q (continued)
PENSKE MOTORSPORTS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - PROPERTY AND EQUIPMENT, NET. Property and equipment consist of the
following :
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- -----------
(In thousands)
<S> <C> <C>
Land and land improvements $ 54,523 $ 35,976
Buildings and improvements 38,072 33,337
Equipment 5,650 4,656
-------- --------
98,245 73,969
Less accumulated depreciation 14,567 12,960
-------- --------
$ 83,678 $ 61,009
======== ========
</TABLE>
The Company is currently constructing The California Speedway with an estimated
cost of $83 million. Costs incurred through June 30, 1996 were approximately
$27 million.
9
<PAGE> 10
Penske Motorsports, Inc. Form 10-Q (continued)
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors and Stockholders
Penske Motorsports, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
Penske Motorsports, Inc. and subsidiaries (the "Company") as of June 30, 1996
and the related condensed consolidated statements of income for the three month
and six month periods ended June 30, 1996 and changes in stockholders' equity
and of cash flows for the six month period ended June 30, 1996, included in the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996.
These consolidated financial statements are the responsibility of Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and of making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is an expression of an opinion regarding the consolidated financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of the Company as of December 31,
1995, and the related consolidated statements of income, stockholders' equity
and cash flows, for the year then ended (not presented herein); and in our
report dated March 22, 1996, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth
in the condensed consolidated balance sheet at December 31, 1995 included in
the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996
is fairly stated, in all material respects, in relation to the condensed
consolidated balance sheet from which such information has been derived.
/s/ Deloitte & Touche LLP
- -------------------------
July 26, 1996
10
<PAGE> 11
Penske Motorsports, Inc. Form 10-Q (continued)
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS.
OVERVIEW
The Company derives revenue principally from ticket sales to racing events,
concessions sales, corporate hospitality and sponsorships, and broadcast
revenues at MIS and PIR. The Company also sells motorsports related
merchandise, racing tires and accessories.
The Company classifies its revenues as "Speedway admissions," which consists of
ticket sales; "Other speedway revenue," which includes corporate hospitality
and sponsorships, concessions, broadcast and other race related revenue;
"Merchandise, tires and accessories," which includes sales of race related
merchandise and revenue from tire and accessory sales.
The Company classifies its expenses as operating, cost of sales, depreciation
and amortization and selling, general and administrative expenses. Operating
consists of costs associated with conducting race events, principally sanction
fees and wages. Cost of sales relates to sales of merchandise, tires and
accessories.
Revenue for the three month and six month periods ended June 30, 1996 was $24.7
million and $28.4 million, respectively, compared to $17.3 million and $20.2
million, respectively for the same periods in 1995. Net income for the three
month and six month periods ended June 30, 1996 was $6.7 million, or $.52 per
share and $5.7 million, or $.51 per share, respectively, compared to $4.2
million, or $.54 per share and $3.1 million, or $.39 per share, respectively,
for the same periods in 1995. The increase in revenues in 1996 is due
primarily to increased admission sales at the speedways, an additional event at
PIR, incremental broadcast and concession revenue and an increase in sales of
merchandise, tires and accessories. The increase in net income resulted from
the additional speedway revenue and interest income from investing the IPO
proceeds until used for construction funding.
The increase in assets of $94.9 million from December 31, 1995 reflects the
proceeds of the Company's IPO, the goodwill from the acquisition of CTS, the
acquisition of the minority interests in CTW and PIR and the increase in land
as a result of the construction of the California Speedway. Liabilities
increased $8.7 million and reflect debt associated with the above acquisitions
and an increase in accounts payable and accrued expenses due to event
obligations, accrued construction costs and inventory purchases. Stockholders'
equity increased $84.8 million as a result of the Company's IPO.
Because of the seasonal concentration of racing events, the Company generates a
majority of its revenues and expenses in the second and third quarters of each
year, thus, the results of operations for the three and six month periods ended
June 30, 1996 and 1995 are not indicative of the results to be expected for the
year.
11
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Penske Motorsports, Inc. Form 10-Q (continued)
RESULTS OF OPERATIONS
The percentage relationships between revenues and other elements of the
Company's Consolidated Statements of Income for the comparative reporting
periods were:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------- ----------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUE:
Speedway admissions 39.7% 46.1% 34.5% 39.5%
Other speedway revenue 31.0% 20.8% 27.1% 18.0%
Merchandise, tires and accessories 29.3% 33.1% 38.4% 42.5%
------ ------ ------ ------
100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------
EXPENSES:
Operating 28.2% 30.2% 31.6% 34.1%
Cost of sales 17.9% 19.5% 23.0% 25.1%
Depreciation and amortization 3.3% 3.5% 5.2% 5.9%
Selling, general and administrative 10.7% 8.5% 11.0% 9.6%
----- ----- ----- -----
OPERATING EXPENSES 60.1% 61.7% 70.8% 74.7%
----- ------ ----- -----
OPERATING EARNINGS 39.9% 38.3% 29.2% 25.3%
----- ----- ----- -----
</TABLE>
SEASONAL AND QUARTERLY RESULTS
The Company's weekend race events are currently held in April, May, June, July
and August. As a result, the Company's business has been highly seasonal. Set
forth below is summary information with respect to the Company's operations.
<TABLE>
<CAPTION>
1994 1995 1996
Quarters First Second Third Fourth First Second Third Fourth First Second
----- ------ ----- ------ ----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue $2,457 $13,225 $21,339 $3,497 $2,862 $17,310 $19,285 $2,645 $3,715 $24,664
Net income (1,137) 2,762 5,921 (1,206) (1,157) 4,237 4,812 (1,118) (990) 6,717
(loss)
Number of
events - 4 5 - - 4 4 - - 5
</TABLE>
12
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Penske Motorsports, Inc. Form 10-Q (continued)
THREE AND SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE AND SIX MONTHS ENDED
JUNE 30, 1995.
Revenues - Revenues for the three months ended June 30, 1996 were $24.7
million, an increase of $7.4 million, or 42.5% compared to the same period in
1995. This improvement was due to increases in all revenue components.
Admissions revenue for the three month period of $9.8 million increased $1.8
million, or 22.6%, from the same period in 1995 and reflects increased
attendance at the events held in the second quarter as well as the incremental
revenue from an additional event held at PIR. Other speedway revenue of $7.7
million increased $4.1 million, or 113%, primarily due to incremental
television broadcast revenue, track rental revenue received in conjunction with
the U.S. 500 race held at MIS and increases in concessions, hospitality and
sponsorship revenue. Merchandise, tires and accessories revenue of $7.2
million increased $1.5 million, or 25.9%, from the same period in 1995
reflecting the acquisition of CTS as well as increases in sales of race related
apparel.
Revenues for the six months ended June 30, 1996 were $28.4 million, an increase
of $8.2 million, or 40.7%, over the comparable period of 1995. The increase in
revenues reflects the increasing speedway admissions, other speedway revenue
and sales of tires and accessories as discussed above.
Operating Expenses - Operating expenses of $7.0 million for the three months
ended June 30, 1996 increased $1.7 million, or 33%, from the three months ended
June 30, 1995 due to costs incurred in connection with conducting the U.S. 500
and the impact of the acquisition of CTS in the consolidated results. As a
percentage of total revenue, operating expenses were 28.2% for the three months
ended June 30, 1996 as compared to 30.2% for the comparable period in 1995.
Operating expenses for the six months ended June 30, 1996 were $9.0 million, or
31.6% of revenues, compared to $6.9 million, or 34.1% of revenues, in 1995.
The decrease in operating expenses as a percentage of total revenue, for both
the three and six month periods, reflects the ability of the Company to add
incremental revenue without a corresponding increase in operating expenses.
Cost of Sales - Cost of sales for the three months ended June 30, 1996 was $4.4
million, or 61.1% of merchandise, tires and accessory revenues, compared to
$3.4 million, or 58.8% of those same revenues for the corresponding period of
1995. For the six months ended June 30, 1996, cost of sales increased from
$5.1 million, or 59% of merchandise, tires and accessory revenues, in 1995 to
$6.5 million, or 59.7% of revenues. The slight increase in cost of sales as a
percent of revenue reflects an increase in sales of wholesale merchandise,
which has a lower gross profit margin.
Depreciation and Amortization - Depreciation and amortization expense of $ .8
million for the three months ended June 30, 1996 increased $ .2 million, or
33.9%, compared to the same period in 1995. For the six months ended June 30,
1996, depreciation and amortization expense increased $ .3 million, or 23.2%,
from $1.2 million to $1.5 million. The increase reflects capital improvements,
primarily additional seating and repaving at the race tracks, during 1995 and
1996 and the acquisition of CTS.
13
<PAGE> 14
Penske Motorsports, Inc. Form 10-Q (continued)
Selling, General and Administrative - Selling, general and administrative
expense of $2.6 million, or 10.7% of revenues, for the three months ended June
30, 1996 increased $1.2 million, or 8.5% of revenues for the same period in
1995. For the six months ended June 30, 1996, selling, general and
administrative expenses were $3.1 million, or 11% of revenues as compared to
$1.9 million, or 9.6% of revenues for the same period in 1995. These increases
are due to additional promotion for TCS, promotion expense for the additional
race held at PIR, and additional costs to conduct the U.S. 500.
Interest - The Company recorded net interest income for the three months ended
June 30, 1996 of $762,000, compared to net interest expense of $239,000 in
1995. For the six months ended June 30, 1996, the Company recorded net
interest income of $756,000 compared to net interest expense of $484,000 in
1995. The interest income results from temporarily investing the proceeds of
the IPO while the reduced interest expense reflects the repayment of existing
debt.
Income Tax Expense - Income tax expense is reported during the interim
reporting periods on the basis of the Company's estimated annual effective tax
rate for the taxable jurisdictions in which the Company operates and is
comparable to the prior period.
Net Income - Net income for the three months ended June 30, 1996 was $6.7
million, an increase of $2.5 million, or 58.5%, over 1995. For the six months
ended June 30, 1996, net income was $5.7 million, an increase of $2.6 million
or 85.9% over 1995. The increase in 1996 net income reflects increases in
speedway admissions and other speedway revenues, higher sales of merchandise,
tires and accessories and for the three months ended June 30, 1996 the benefit
of interest earned on invested IPO proceeds.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has funded facility improvements from operating cash
flow supplemented, as necessary, with borrowings under available credit
arrangements. The Company used the proceeds of its initial public offering to
repay debt and intends to use the remainder to principally fund construction of
the California Speedway.
The Company has lines of credit totaling $17.3 million, all of which was
available as of June 30, 1996. The Company is currently in the process of
replacing its existing lines of credit with a $20 million unsecured revolving
line of credit.
The Company believes it has sufficient resources from cash flow from the IPO
and its operations, and if necessary, by borrowings under its line of credit to
satisfy ongoing cash requirements for the next twelve months, including
construction costs of The California Speedway.
14
<PAGE> 15
Penske Motorsports, Inc. Form 10-Q (continued)
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
Except for the historical information contained herein, certain matters
discussed in this Form 10Q are forward-looking statements which involve risks
and uncertainties, including but not limited to the Company's ability to
maintain good working relationships with the sanctioning bodies for its events,
complete on schedule the construction of the California Speedway and obtain
sanctioning agreements for events at the California Speedway, as well as other
risks and uncertainties affecting the Company's operations, such as
competition, environmental, industry sponsorships, governmental regulation,
dependence on key personnel, the impact of bad weather at the Company's events
and those other factors discussed in the Company's filings with the Securities
and Exchange Commission.
15
<PAGE> 16
Penske Motorsports, Inc. Form 10-Q (continued)
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Exhibit Number and Description
------------------------------
27 Financial Data Schedule
(a) All exhibits are omitted from this report
because they are not applicable.
(b) The Company was not required to file a Form 8K
during the six months ended June 30, 1996.
16
<PAGE> 17
Penske Motorsports, Inc. Form 10-Q (continued)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PENSKE MOTORSPORTS, INC.
Date: August 8, 1996 By: /s/ James H. Harris
-------------------
James H. Harris
Its: Senior Vice President-Treasurer
(Principal Financial Officer)
17
<PAGE> 18
EXHIBIT INDEX
SEQUENTIALLY
NUMBERED
EXHIBIT NUMBER DESCRIPTION PAGE
- -------------- ----------- -------------
27 -- Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> APR-01-1996 JAN-01-1996
<PERIOD-END> JUN-30-1996 JUN-30-1996
<CASH> 66,769 66,769
<SECURITIES> 0 0
<RECEIVABLES> 5,975 5,975
<ALLOWANCES> 0 0
<INVENTORY> 2,181 2,181
<CURRENT-ASSETS> 75,722 75,722
<PP&E> 98,245 98,245
<DEPRECIATION> 14,567 14,567
<TOTAL-ASSETS> 168,149 168,149
<CURRENT-LIABILITIES> 23,583 23,583
<BONDS> 0 0
0 0
0 0
<COMMON> 130 130
<OTHER-SE> 122,247 122,247
<TOTAL-LIABILITY-AND-EQUITY> 168,149 168,149
<SALES> 24,664 28,379
<TOTAL-REVENUES> 24,664 28,379
<CGS> 4,416 6,515
<TOTAL-COSTS> 4,416 6,515
<OTHER-EXPENSES> 10,419 13,556
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (762) (756)
<INCOME-PRETAX> 10,591 9,064
<INCOME-TAX> 3,874 3,337
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 6,717 5,727
<EPS-PRIMARY> .52 .51
<EPS-DILUTED> .52 .51
</TABLE>
