<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, 1998.
( ) 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.
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(Exact name of registrant as specified in its charter)
DELAWARE 51-0369517
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
13400 OUTER DRIVE WEST, DETROIT, MICHIGAN 48239-4001
- ----------------------------------------- --------------------
(Address of principal executive offices) (including zip code)
313-592-8255
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(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 14,208,898 SHARES
- ---------------------------- -----------------
CLASS OUTSTANDING AT AUGUST 12, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Notes to Unaudited Consolidated Financial Statements 6
Independent Accountants' Report 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 8
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION. 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 16
Signature 17
</TABLE>
2
<PAGE> 3
PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- -----------
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,294 $ 249
Receivables 10,598 4,787
Inventories 2,579 2,433
Prepaid expenses and other assets 2,293 2,082
-------- --------
TOTAL CURRENT ASSETS 16,764 9,551
PROPERTY AND EQUIPMENT, net 236,220 224,666
INVESTMENTS 13,652 15,366
GOODWILL, net 39,920 40,112
OTHER ASSETS 1,834 2,077
-------- --------
TOTAL $308,390 $291,772
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 609 $ 1,017
Accounts payable 10,419 3,868
Accrued expenses 5,428 2,343
Other payables 9,956
Deferred revenues, net 26,408 22,529
-------- --------
TOTAL CURRENT LIABILITIES 42,864 39,713
LONG-TERM DEBT, less current portion 47,504 47,278
DEFERRED REVENUES, net 738 738
DEFERRED TAXES 17,346 13,349
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, par value $ .01 share:
Authorized 50,000,000 shares
Issued and outstanding 14,208,898 shares 142 142
Additional paid-in-capital 159,371 159,371
Retained earnings 40,425 31,181
-------- --------
TOTAL STOCKHOLDERS' EQUITY 199,938 190,694
-------- --------
TOTAL $308,390 $291,772
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
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PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
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,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES:
Speedway admissions $ 20,972 $ 19,696 $ 24,210 $ 19,696
Other speedway revenues 17,384 15,699 20,337 15,750
Merchandise, tires and accessories 7,731 10,901 11,677 16,225
------------ ------------ ------------ ------------
TOTAL REVENUES 46,087 46,296 56,224 51,671
------------ ------------ ------------ ------------
EXPENSES:
Operating 15,052 14,028 21,242 16,314
Cost of sales 4,659 6,226 7,121 9,402
Depreciation and amortization 2,727 1,524 5,402 2,313
Selling, general and administrative 4,043 6,553 6,295 8,283
------------ ------------ ------------ ------------
TOTAL EXPENSES 26,481 28,331 40,060 36,312
------------ ------------ ------------ ------------
OPERATING INCOME 19,606 17,965 16,164 15,359
EQUITY IN LOSS OF AFFILIATES (922) (410)
GAIN ON SALE OF INVESTMENT 1,108
INTEREST INCOME (EXPENSE), net (809) (48) (1,668) 77
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 17,875 17,917 15,194 15,436
INCOME TAXES 6,983 6,988 5,950 6,018
------------ ------------ ------------ ------------
NET INCOME $ 10,892 $ 10,929 $ 9,244 $ 9,418
============ ============ ============ ============
BASIC NET INCOME PER SHARE $ .77 $ .80 $ .65 $ .70
============ ============ ============ ============
DILUTED NET INCOME PER SHARE $ .77 $ .80 $ .65 $ .70
============ ============ ============ ============
BASIC WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 14,208,898 13,670,164 14,208,898 13,457,164
============ ============ ============ ============
DILUTED WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 14,235,332 13,683,634 14,230,985 13,462,293
============ ============ ============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
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PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------
1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 9,244 $ 9,418
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,402 2,313
Equity in loss of affiliates 410
Gain on sale of investment (1,108)
Changes in assets and liabilities which provided (used) cash:
Receivables (5,811) (9,458)
Inventories, prepaid expenses and other assets (766) (4,059)
Accounts payable and accrued liabilities (320) 17,715
Deferred taxes 4,310 (44)
Deferred revenues 3,879 7,954
-------- --------
Net cash provided by operating activities 15,240 23,839
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions of property and equipment, net (16,433) (53,920)
Proceeds from sale of investment 5,270
-------- --------
Net cash used in investing activities (11,163) (53,920)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 11,467
Repayment of debt (3,032) (2,275)
-------- --------
Net cash provided by (used in) financing activities (3,032) 9,192
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,045 (20,889)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 249 27,862
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,294 $ 6,973
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for interest $ 1,806 $ 453
Cash paid during the period for taxes, net $ (1,792) $ 219
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE> 6
PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - FINANCIAL STATEMENTS. The consolidated financial statements include the
accounts of Penske Motorsports, Inc. (the "Company") and its wholly-owned
subsidiaries, Michigan International Speedway, Inc., Pennsylvania International
Raceway, Inc., California Speedway Corporation, North Carolina Speedway, Inc.,
Motorsports International Corp., Competition Tire West, Inc. and Competition
Tire South, Inc. The Company also owns 45% of the ownership interests of
Homestead-Miami Speedway, LLC ("HMS"), which is recorded using the equity method
of accounting. All material intercompany balances and transactions have been
eliminated.
The 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, 1998 and December 31, 1997, and the results of operations
and cash flows of the Company for the three months and six months ended June 30,
1998 and 1997. The consolidated financial statements should be read in
conjunction with the consolidated financial statements included in the Company's
Annual Report on Form 10-K filed with the Securities and Exchange Commission.
Because of the seasonal concentration of racing events, the results of
operations for the three months and six months ended June 30, 1998 and 1997 are
not indicative of the results to be expected for the year. Certain
reclassifications have been made to prior period financial statements to conform
with the 1998 presentation.
NOTE 2 - PROPERTY AND EQUIPMENT, NET. Property and equipment consists of the
following :
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- ------------
(In thousands)
<S> <C> <C>
Land and land improvements $ 96,056 $ 95,758
Buildings and improvements 143,483 129,031
Equipment 23,084 21,846
-------- --------
262,623 246,635
Less accumulated depreciation 26,403 21,969
-------- --------
$236,220 $224,666
======== ========
</TABLE>
NOTE 3 - EQUITY INVESTMENTS. In March 1998, the Company acquired an additional
5% equity interest in HMS, increasing the Company's ownership to 45%, for $2.85
million in exchange for a note payable on December 31, 2001, with interest
payable at 7.5%.
In March 1998, the Company sold its equity interest in Grand Prix Association of
Long Beach, Inc. for $5.3 million. The Company acquired this investment during a
series of transactions in 1997 with a total cost of $4.2 million.
6
<PAGE> 7
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, 1998 and the
related condensed consolidated statements of income and of cash flows for the
three and six month periods ended June 30, 1998 and 1997. These consolidated
financial statements are the responsibility of the 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,
1997, and the related consolidated statements of income, changes in
stockholders' equity and of cash flows, for the year then ended (not presented
herein); and in our report dated January 30, 1998, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
at December 31, 1997 is fairly stated, in all material respects, in relation to
the consolidated balance sheet from which such information has been derived.
/s/ Deloitte & Touche LLP
- -------------------------
Detroit, Michigan
July 30, 1998
7
<PAGE> 8
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW
Penske Motorsports, Inc. (the "Company") is a leading promoter and marketer of
professional motorsports in the United States. The Company owns and operates,
through its subsidiaries, Michigan Speedway in Brooklyn, Michigan, Nazareth
Speedway in Nazareth, Pennsylvania, California Speedway in Fontana, California
and North Carolina Speedway in Rockingham, North Carolina. In addition, the
Company owns 45% of the ownership interests of Homestead-Miami Speedway, LLC
("HMS"), which operates the Miami-Dade Homestead Motorsports Complex in
Homestead, Florida. The Company also sells motorsports-related merchandise such
as apparel, souvenirs and collectibles through its subsidiary Motorsports
International Corp. ("MIC") and Goodyear brand racing tires and accessories
through its subsidiaries Competition Tire West, Inc. ("CTW") and Competition
Tire South, Inc. ("CTS") in the midwest and southeastern regions of the United
States.
The Company classifies its revenues as speedway admissions, other speedway
revenues, and merchandise, tires and accessories revenues. Speedway admissions
includes ticket sales for racing events held at the Company's wholly-owned
speedways. Other speedway revenues includes revenues from concession sales,
corporate hospitality and sponsorship, broadcast rights, billboard and program
advertising and other promotional activities. Speedway admissions and other
speedway revenues are generally collected in advance and recorded as deferred
revenues until the completion of the related event. Merchandise, tires and
accessories revenues includes sales of motorsports-related merchandise and
revenues from showcar appearance fees by MIC and sales of racing tires and
accessories by CTW and CTS. Revenues from sales of merchandise, tires and
accessories are recorded as income at the time of the sale.
The Company classifies its expenses as operating, cost of sales, depreciation
and amortization and selling, general and administrative expenses. Operating
expenses consist primarily of costs associated with conducting race events, such
as sanction fees and wages. Cost of sales relates entirely to sales of
merchandise, tires and accessories.
Revenues for the three months ended June 30, 1998 were $46.1 million, compared
to revenues of $46.3 million for the three months ended June 30, 1997. The
Company recorded net income of $10.9 million, or $.77 per share, for the three
months ended June 30, 1998, compared to net income of $10.9 million, or $.80 per
share, in 1997. Revenues decreased due to a scheduling change, which resulted in
an event at Nazareth Speedway being held in the third quarter in 1998 as
compared to the second quarter in 1997, and a decrease of $3.2 million in
merchandise, tires and accessories revenues, primarily reflecting the December
1997 sale of the licensing rights for Rusty Wallace merchandise. These decreases
are offset by increases in speedway admissions at Michigan and California
Speedways from additional seating and increases in other speedway revenues at
all tracks. Net income for the three months ended June 30, 1998 of $10.9 million
is comparable to 1997 and reflects an increase in operating income of $1.6
million, net of increased interest expense of $.8 million and the equity in
losses of an affiliate of $.9 million.
8
<PAGE> 9
Revenues for the six months ended June 30, 1998 were $56.2 million, an increase
of $4.5 million, or 8.7%, over 1997 revenues of $51.7 million. This increase
resulted from the addition of North Carolina Speedway, which was acquired in May
1997, and increased speedway admissions and other speedway revenues at Michigan
and California Speedways. These increases were offset by lower revenues at
Nazareth Speedway due to the scheduling change and decreased sales of
merchandise, tires and accessories due to the sale of the licensing rights for
Rusty Wallace merchandise. Net income for the six months ended June 30, 1998 was
$9.2 million, or $.65 per share, compared to $9.4 million, or $.70 per share, in
1997. Net income in 1998 was impacted by an increase in operating income of $.8
million, from $15.4 million for the six months ended June 30, 1997 to $16.2
million in 1998. The Company also recorded a gain on the sale of its investment
in Grand Prix Association of Long Beach, Inc. ("GPLB"). These increases in
income were offset by the equity in losses of affiliates of $.4 million and net
interest expense of $1.7 million in 1998, as compared to net interest income of
$.1 million in 1997.
In March 1998, the Company acquired an additional 5% equity interest in HMS for
$2.85 million, in exchange for a note payable on December 31, 2001, with
interest payable at 7.5%. The acquisition increased the Company's ownership of
HMS to 45%.
Also in March 1998, the Company sold its interest in GPLB for $5.3 million. The
Company acquired this investment through a series of transactions in 1997 with a
total cost of $4.2 million.
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,
1998 1997 1998 1997
------ ------ ------- -------
<S> <C> <C> <C> <C>
REVENUES:
Speedway admissions 45.5% 42.6% 43.0% 38.1%
Other speedway revenues 37.7 33.9 36.2 30.5
Merchandise, tires and accessories 16.8 23.5 20.8 31.4
----- ----- ----- -----
TOTAL REVENUES 100.0 100.0 100.0 100.0
----- ----- ----- -----
EXPENSES:
Operating 32.7 30.3 37.8 31.6
Cost of sales 10.1 13.4 12.7 18.2
Depreciation and amortization 5.9 3.3 9.6 4.5
Selling, general and administrative 8.8 14.2 11.2 16.0
----- ----- ----- -----
TOTAL EXPENSES 57.5 61.2 71.3 70.3
----- ----- ----- -----
OPERATING INCOME 42.5% 38.8% 28.7% 29.7%
===== ===== ===== =====
</TABLE>
9
<PAGE> 10
SEASONALITY AND QUARTERLY RESULTS
Prior to 1997, the Company's weekend race events were held during the months
from April to August. As a result, the Company's business has historically been
highly seasonal. In 1997, in addition to the events held in April through
August, the Company hosted events in June, September and October at California
Speedway and in October at North Carolina Speedway. The 1998 racing schedule
includes events at California Speedway in May, July and November and at North
Carolina Speedway in February and November. The 1998 schedule also includes a
change at Nazareth Speedway whereby one event was rescheduled from June in 1997
to July in 1998. The Company expects that the addition of California Speedway
and North Carolina Speedway and the investment in HMS will lessen the impact of
seasonality on the Company's results of operations.
Set forth below is summary information with respect to the Company's operations
(in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
-------------------- ------------------------------------------ ----------------------------------------
FIRST SECOND FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
----- ------ ----- ------ ----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES $10,137 $46,087 $ 5,375 $ 46,296 $43,974 $14,171 $3,642 $24,614 $23,962 $2,957
NET INCOME
(LOSS) (1,648) 10,892 (1,511) 10,929 8,845 (1,818) (990) 6,717 6,499 (1,346)
EVENT
WEEKENDS 1 4 - 5 3 2 - 4 2 -
</TABLE>
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997.
Revenues - Revenues for the three months ended June 30, 1998 were $46.1 million
compared to $46.3 million for the same period in 1997. Speedway admissions
increased $1.3 million, from $19.7 million in 1997 to $21.0 million in 1998, due
to increased attendance at events held at Michigan and California Speedways, net
of decreased speedway admissions at Nazareth Speedway as one event was
rescheduled from a second quarter event in 1997 to a third quarter event in
1998. Attendance at Michigan and California Speedways was increased through the
addition of 5,124 seats and 15,777 seats, respectively. Other speedway revenues
increased $1.7 million, from $15.7 million in 1997 to $17.4 million in 1998, due
to increased revenues from sponsorship agreements, corporate hospitality and
broadcast rights, as well as track rentals at California Speedway. Sales of
merchandise, tires and accessories decreased from $10.9 million for the quarter
ended June 30, 1998 to $7.7 million in 1998, due primarily to the sale in
December 1997 of the licensing rights for Rusty Wallace merchandise.
Operating Expenses - Operating expenses increased from $14.0 million for the
three months ended June 30, 1997 to $15.1 million for the three months ended
June 30, 1998. The 1997 results include expenses at California Speedway only for
the month of June, which was when the track commenced operations, and expenses
at North Carolina Speedway for the period after May 19, when the Company
acquired a 70% ownership interest, while the 1998 results include operating
expenses for the entire quarter for both speedways. The Company also had
increased operating expenses at its other speedways, primarily reflecting
increased sanction fees, net of a reduction in expenses due to the schedule
change at Nazareth Speedway.
10
<PAGE> 11
Cost of Sales - Cost of sales for the three months ended June 30, 1998 was $4.7
million, or 60.3% of merchandise, tires and accessories revenues, compared to
$6.2 million, or 57.1% of those same revenues for the corresponding period of
1997. The decrease in cost of sales reflects the December 1997 sale of the
licensing rights for Rusty Wallace merchandise, while the increase in cost of
sales as a percentage of revenues reflects a greater percentage of sales
attributable to tires and accessories, which have a lower margin than
merchandise.
Depreciation and Amortization - Depreciation and amortization expense increased
$1.2 million, from $1.5 million for the three months ended June 30, 1997 to $2.7
million in 1998 due primarily to the inclusion of one month of depreciation and
amortization at California and North Carolina Speedways in 1997 compared to a
full quarter in 1998. The increase also reflects capital expenditures at all
speedways for additional seating and other improvements and the additional
goodwill amortization from the December 1997 acquisition of the minority
interest in North Carolina Speedway.
Selling, General and Administrative - Selling, general and administrative
expenses were $4.0 million for the three months ended June 30, 1998, a decrease
of $2.5 million from $6.5 million for the same period in 1997. This decrease
resulted primarily from reductions in promotional expenses and other grand
opening costs which were incurred at California Speedway during the 1997 season.
Operating Income - Operating income increased 9.1%, from $18.0 million for the
three months ended June 30, 1997 to $19.6 million in 1998. This increase
resulted from increased speedway admissions from additional seating, increased
other speedway revenues from increases in sponsorship fees, corporate
hospitality, broadcast revenues and track rental income and reduced selling,
general and administrative expenses at the Company's speedways, net of higher
depreciation and amortization expense from the opening of California Speedway,
the acquisition of North Carolina Speedway and capital improvements and the
impact of the sale of the licensing rights for Rusty Wallace merchandise.
Equity in Losses of Affiliates - The equity in losses of affiliates reflects
the Company's pro rata share of the operating results of HMS, which was
acquired in July 1997.
Interest - The Company recorded interest expense for the three months ended June
30, 1998 of $809,000, compared to $48,000 in 1997 due to an increase in the
average debt outstanding. Funds generated by the Company's March 1996 initial
public offering were fully utilized during the second quarter of 1997 to pay for
construction of California Speedway. The Company has borrowed on its line of
credit to fund the completion of California Speedway, capital improvements, the
investment in HMS and the acquisition of the minority interest in North Carolina
Speedway.
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. The effective tax rate
for the three months ended June 30, 1998 is 39.1%, compared to 39.0% in 1997.
11
<PAGE> 12
Net Income - Net income for the three months ended June 30, 1998 and 1997 was
$10.9 million. Increased operating income of $1.6 million was offset by
increased interest expense of $800,000 and the equity in losses of affiliates of
$900,000.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997.
Revenues - Revenues for the six months ended June 30, 1998 were $56.2 million,
an increase of $4.5 million, or 8.7%, compared to the same period in 1997. This
increase resulted from increases in speedway admissions of $4.5 million and
other speedway revenues of $4.5 million, net of lower sales of merchandise,
tires and accessories of $4.5 million. Speedway admissions increased as a result
of the 1997 acquisition of North Carolina Speedway and additional seating at
Michigan and California Speedways. Other speedway revenues increased $4.5
million due to the addition of North Carolina Speedway and increases in revenues
at the Company's other speedways from sponsorship agreements, corporate
hospitality and broadcast rights, as well as track rental income at California
Speedway. The increases in speedway admissions and other speedway revenues also
reflect the scheduling change at Nazareth Speedway which resulted in the shift
of one event from the second quarter of 1997 to the third quarter of 1998. Sales
of merchandise, tires and accessories decreased $4.5 million primarily as a
result of the December 1997 sale of the licensing rights for Rusty Wallace
merchandise.
Operating Expenses - Operating expenses increased $4.9 million, from $16.3
million for the six months ended June 30, 1997 to $21.2 million in 1998. The
1997 results include expenses at California Speedway only for the month of June,
which was when the track commenced operations, and expenses at North Carolina
Speedway for the period after May 19, when the Company acquired a 70% ownership
interest, while the 1998 results include operating expenses for the entire
period. The Company also had increased operating expenses at its other
speedways, primarily reflecting increased sanction fees, net of a reduction in
expenses due to the schedule change at Nazareth Speedway.
Cost of Sales - Cost of sales for the six months ended June 30, 1998 was $7.1
million, or 61.0% of merchandise, tires and accessories revenues, compared to
$9.4 million, or 57.9% of those same revenues for the corresponding period of
1997. Cost of sales decreased due to the sale of the licensing rights for Rusty
Wallace merchandise, while cost of sales as a percentage of merchandise, tires
and accessories revenues increased due to a shift in the sales mix toward a
higher concentration of sales of tires and accessories, which have a lower
margin.
Depreciation and Amortization - Depreciation and amortization expense increased
from $2.3 million for the six months ended June 30, 1997 to $5.4 million for the
six months ended June 30, 1998 due to the inclusion of California Speedway and
North Carolina Speedway for the entire period in 1998 and capital improvements
at the Company's other subsidiaries.
Selling, General and Administrative - Selling, general and administrative
expenses decreased $2.0 million, from $8.3 million for the six months ended June
30, 1997 to $6.3 million in 1998. This decrease resulted primarily from
reductions in promotional expenses and other grand opening costs which were
incurred at California Speedway during the 1997 season.
12
<PAGE> 13
Operating Income - Operating income for the six months ended June 30, 1998 was
$16.2 million, an increase of $.8 million over operating income of $15.4 million
during the first six months of 1997. This increase resulted from increased
speedway admissions and other speedway revenues and decreased selling, general
and administrative expenses, net of higher operating and depreciation and
amortization expenses and the impact of the sale of the licensing rights for
Rusty Wallace merchandise.
Equity in Losses of Affiliates - The equity in losses of affiliates reflects the
Company's pro rata share of the operating results of HMS and GPLB, both of
which were acquired in the third quarter of 1997.
Gain on Sale of Investment - In March 1998, the Company sold its investment in
GPLB for $5.3 million. The Company acquired this investment through a series of
transactions in 1997 with a total cost of $4.2 million.
Interest - Interest expense for the six months ended June 30, 1998 was $1.7
million, compared to net interest income of $.1 million for the six months ended
June 30, 1997. The interest income resulted from temporarily investing the
proceeds of the Company's March 1996 initial public offering. These funds were
fully utilized during the second quarter of 1997 to pay for construction at
California Speedway. The Company has borrowed on its line of credit to fund the
completion of California Speedway, capital improvements, the investment in HMS
and the acquisition of the minority interest in North Carolina Speedway.
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. The effective tax rate
for the six months ended June 30, 1998 is 39.2%, compared to 39.0% in 1997.
Net Income - Net income for the six months ended June 30, 1998 decreased to
$9.2 million from $9.4 million in 1997. The Company had a 5.2% increase in
operating income and a $1.1 million gain on the sale of the Company's
investment in GPLB, offset by increased interest expense of $1.7 million and
the equity in losses of affiliates of $410,000.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has relied on cash flows from operating activities
supplemented, as necessary, by bank borrowings to finance working capital,
investments and capital expenditures. The Company used the proceeds of its
initial public offering in March 1996 to repay debt and to fund construction of
California Speedway.
The Company has a $100 million unsecured revolving line of credit that matures
in the year 2002, of which $57.1 million was available as of June 30, 1998. The
outstanding debt of $42.9 million on the line of credit resulted from
expenditures for the completion of construction at California Speedway and other
capital expenditures, for the investment in HMS and to complete the acquisition
of North Carolina Speedway. The remaining line of credit is available for
general working capital needs and other capital expenditures. The
13
<PAGE> 14
Company is in compliance with all covenants in the loan agreement, and
management believes the Company would continue to be in compliance with all
material financial covenants in the loan agreement if the entire amount of
available credit was outstanding.
The Company expects to make approximately $29.0 million in capital expenditures
during 1998, consisting primarily of additional seating and other facility
upgrades at its speedways, of which $16.4 million was incurred during the first
six months of 1998.
The Company is considering the development of a new speedway near Denver,
Colorado, and will continue to pursue other growth opportunities, including
acquisition and development, in other markets. Future acquisitions or
development will be funded through available credit under existing debt
facilities and, if necessary, under other financing arrangements through the
capital or financial markets, depending on market conditions. The Company
believes that it has the ability to obtain funds through these markets, however,
there can be no assurance that adequate debt or equity financing will be
available on satisfactory terms.
For the six months ended June 30, 1998, the Company generated cash flows of
$15.2 million from operating activities, compared to $23.8 million in 1997,
primarily due to changes in working capital accounts. The Company used $11.2
million in investing activities, including additions of property and equipment
of $16.4 million, less the proceeds from the sale of GPLB of $5.3 million. Cash
flows of $3.0 million were used in financing activities to repay debt.
The Company believes it has sufficient resources from existing cash balances and
from operating activities and, if necessary, from borrowing under its lines of
credit to satisfy ongoing cash requirements for the next twelve months.
YEAR 2000
The Year 2000 problem arose because many existing computer programs do not
properly recognize a year that begins with "20" instead of the familiar "19". If
not corrected, many computer applications could fail or create erroneous
results. The Company has recognized the need to ensure that its computer
operations and operating systems will not be materially adversely affected by
the Year 2000 problem. To that end, the Company has assessed how it may be
impacted by the Year 2000 problem and plans to resolve the related issues are
being implemented. Most of the Company's major computer systems have already
been updated or replaced with applications that are Year 2000 compliant in the
normal course of business pursuant to existing service agreements and without
incremental cost. The Company is also developing a plan of communication with
significant business partners to ensure that the Company's operations are not
disrupted through such relationships and that any Year 2000 issues are resolved
in a timely manner. Because of the nature of the Company's business, however,
the Company believes that failure of the Company's vendors, sponsors or
customers to resolve issues involving the Year 2000 problem will not materially
affect the Company's financial position or results of operations. Nevertheless,
the Company believes that it will satisfactorily resolve issues affecting its
operations as a result of the Year 2000 problem.
14
<PAGE> 15
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995 Except for the historical information contained herein, certain matters
discussed in this report 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, the
ability of the Company to cost-effectively and timely correct all relevant and
material applications addressing the Year 2000 problem, the ability of third
party vendors, sponsors and customers to correct all relevant and material
applications addressing the Year 2000 problem and their impact on the Company's
financial position or results of operations and the accuracy of the Company's
assumption that failure of third party vendors, sponsors and customers to
correct any Year 2000 problems will not be material to the Company's financial
position or results of operations, 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 Company's ability to control construction and operational costs, 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
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
The Company must receive notice of any proposals of shareholders that are
intended to be presented at the Company's 1999 Annual Meeting of Shareholders,
but that are not intended to be considered for inclusion in the Company's Proxy
Statement and Proxy related to that meeting, no later than March 30, 1999 (the
latest possible date under the Company's bylaws for submission of such notice)
to be considered timely. Such proposals should be sent to the Company's
Secretary at the Company's executive offices, 13400 Outer Drive West, Detroit,
Michigan, 48239 by certified mail, return receipt requested. If the Company does
not have notice of the matter by that date, the Company's form of proxy in
connection with that meeting may confer discretionary authority to vote on that
matter, and the persons named in Company's form of proxy will vote the shares
represented by such proxies in accordance with their best judgment.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Exhibit Number and Description
(a) 3.2 Amended and Restated Bylaws of Penske Motorsports, Inc.
15.1 Letter RE: unaudited interim financial information.
27 Financial Data Schedules
(b) The Company was not required to file a Form 8-K during the three
months ended June 30, 1998.
16
<PAGE> 17
SIGNATURE
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 14, 1998 By: /s/ James H. Harris
-----------------------------------
Its: Senior Vice President and Treasurer
(Principal Financial Officer)
17
<PAGE> 18
Exhibit Index
Exhibit No. Description
- ----------- -----------
3.2 Amended and Restated Bylaws of Penske
Motorsports, Inc.
15.1 Letter RE: unaudited interim financial
information
27 Financial Data Schedules
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
PENSKE MOTORSPORTS, INC.,
Adopted by the Board of Directors
on July 23, 1998
<PAGE> 2
BYLAWS
OF
PENSKE MOTORSPORTS, INC.,
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I - OFFICES 1
1.1 Registered Office 1
1.2 Other Offices 1
ARTICLE II - MEETINGS OF STOCKHOLDERS 1
2.1 Time and Place 1
2.2 Annual Meetings 1
2.3 Special Meetings 1
2.4 Notice of Meetings 1
2.5 Advance Notice Requirements for
Stockholder Proposals and Director Nominations 1
2.6 List of Stockholders 2
2.7 Quorum; Adjournment 2
2.8 Voting 3
2.9 Proxies 3
2.10 Questions Concerning Elections 3
ARTICLE III - DIRECTORS 4
3.1 Number and Residence 4
3.2 Election and Term 4
3.3 Resignation 4
3.4 Removal 4
3.5 Vacancies 4
3.6 Place of Meetings 5
3.7 Annual Meetings 5
3.8 Regular Meetings 5
3.9 Special Meetings 5
3.10 Quorum 5
3.11 Voting 5
3.12 Telephonic Participation 5
3.13 Action By Written Consent 5
3.14 Committees 6
3.15 Compensation 6
</TABLE>
(2)
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IV - OFFICERS 7
4.1 Officers and Agents 7
4.2 Compensation 7
4.3 Term 7
4.4 Removal 7
4.5 Resignation 7
4.6 Vacancies 7
4.7 Chairman of the Board 7
4.8 Chief Executive Officer 7
4.9 President 8
4.10 Executive Vice Presidents and Vice Presidents 8
4.11 Secretary 8
4.12 Treasurer 8
4.13 Assistant Vice Presidents, Secretaries
and Treasurers 9
4.14 Execution of Contracts and Instruments 9
4.15 Voting of Shares and Securities of
Other Corporations and Entities 9
ARTICLE V - NOTICES AND WAIVERS OF NOTICE 9
5.1 Delivery of Notices 9
5.2 Waiver of Notice 10
ARTICLE VI - SHARE CERTIFICATES AND STOCKHOLDERS OF RECORD 10
6.1 Certificates 10
6.2 Lost or Destroyed Certificates 10
6.3 Transfer of Shares 10
6.4 Record Date 10
6.5 Registered Stockholders 11
ARTICLE VII - INDEMNIFICATION 11
7.1 Indemnification 11
7.2 Claims 12
7.3 Non-Exclusivity of Rights 12
</TABLE>
(3)
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE VIII - GENERAL PROVISIONS 12
8.1 Checks and Funds 12
8.2 Fiscal Year 12
8.3 Corporate Seal 12
8.4 Form of Records 12
8.5 Interested Directors; Quorum 12
ARTICLE IX - AMENDMENTS 13
ARTICLE X - SCOPE OF BYLAWS 13
</TABLE>
(4)
<PAGE> 5
PENSKE MOTORSPORTS, INC.
ARTICLE I
OFFICES
1.1 Registered Office. The registered office of the Corporation shall
be located at such place in Delaware as the Board of Directors from time to time
determines.
1.2 Other Offices. The Corporation may also have offices or branches at
such other places as the Board of Directors from time to time determines or the
business of the Corporation requires.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 Time and Place. All meetings of the stockholders shall be held at
such place and time as the Board of Directors determines.
2.2 Annual Meetings. An annual meeting of stockholders shall be held
for the election of directors at such date, time and place, either within or
without the State of Delaware, as may be designated by resolution of the Board
of Directors from time to time. Any other proper business may be transacted at
the annual meeting.
2.3 Special Meetings. Special meetings of the stockholders, for any
purpose, may be called by the Corporation's Chairman of the Board and shall be
called by the Secretary or any Assistant Secretary upon written request (stating
the purpose for which the meeting is to be called) of a majority of the Board of
Directors.
2.4 Notice of Meetings. Except as provided in Section 2.5 below,
written notice of each stockholders' meeting, stating the place, date and time
of the meeting and, in the case of a special meeting, the purposes for which the
meeting is called, shall be given (in the manner described in Section 5.1 below)
not less than 10 nor more than 60 days before the date of the meeting to each
stockholder of record entitled to vote at the meeting. Notice of adjourned
meetings is governed by Section 2.7 below.
2.5 Advance Notice Requirements for Stockholder Proposals and Director
Nominations. At an annual meeting of the stockholders, only such business shall
be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting business must be (a) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors in accordance with Section 2.4 above, (b) otherwise
properly brought before the meeting by or at the direction of the Board of
Directors, or (c) otherwise properly brought before the meeting by a
stockholder. For business to be properly brought before an annual meeting by a
stockholder, or for a stockholder to nominate candidates for
<PAGE> 6
election as directors at an annual or special meeting of the stockholders, the
stockholder must have given timely notice thereof in writing to the Secretary of
the Corporation. To be timely, a stockholder's notice must be delivered, mailed
and received at the principal executive offices of the Corporation, (a) in the
case of an annual meeting that is called for a date that is within 30 days
before or after the anniversary date of the immediately preceding annual meeting
of stockholders, not less than 60 days nor more than 90 days prior to such
anniversary date, and (b) in the case of an annual meeting that is not called
for a date that is not within 30 days before or after the anniversary date of
the immediately preceding annual meeting, or in the case of a special meeting of
the stockholders called for the purpose of electing directors, not later than
the close of business on the tenth day on which notice of the date of the
meeting was mailed or public disclosure of the date of the meeting was made,
whichever occurs first. A stockholder's notice to the Secretary shall set forth
as to each matter the stockholder proposes to bring before the annual meeting
(a) a brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (b)
the name and address, as they appear on the Corporation's books, of the
stockholder proposing such business, (c) the class and number of shares of the
Corporation which are beneficially owned by the stockholder, and (d) any
material interest of the stockholder in such business. Notwithstanding anything
in the Bylaws to the contrary, no business shall be conducted at any annual
meeting or special meeting called for the purpose of electing directors except
in accordance with the procedures set forth in this Section 2.5. The Chairman of
the annual meeting shall, if the facts warrant, determine and declare to the
meeting that business was not properly brought before the meeting and in
accordance with the provisions of this Section 2.5, and if he should so
determine, he shall so declare to the meeting and any such business not properly
brought before the meeting shall not be transacted.
2.6 List of Stockholders. The officer or agent who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting or any adjournment of the meeting. The list shall be
arranged alphabetically within each class and series and shall show the address
of, and the number of shares registered in the name of, each stockholder. Such
list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof and may be inspected by any stockholder who is
present. Upon the willful neglect or refusal of the directors to produce such a
list at any meeting for the election of directors, they shall be ineligible for
election to any office at such meeting. The stock ledger shall be the only
evidence as to who are the stockholders entitled to examine the stock ledger,
the list of stockholders or the books of the Corporation, or to vote in person
or by proxy at any meeting of stockholders.
2.7 Quorum; Adjournment. Except as otherwise provided by law, at all
stockholders' meetings, the stockholders present in person or represented by
proxy who, as of the record date for
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<PAGE> 7
the meeting, were holders of shares entitled to cast a majority of the votes at
the meeting, shall constitute a quorum. Once a quorum is present at a meeting,
all stockholders present in person or represented by proxy at the meeting may
continue to do business until adjournment, notwithstanding the withdrawal of
enough stockholders to leave less than a quorum. Regardless of whether a quorum
is present, a stockholders' meeting may be adjourned to another time and place
by a vote of the shares present in person or by proxy without notice other than
announcement at the meeting; provided, that (a) only such business may be
transacted at the adjourned meeting as might have been transacted at the
original meeting and (b) if the adjournment is for more than thirty days or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting must be given to each stockholder of record
entitled to vote at the meeting.
2.8 Voting. Except as otherwise provided by the Certificate of
Incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share having voting power
held by such stockholder and on each matter submitted to a vote. Voting at
meetings of stockholders need not be by written ballot. When an action, other
than the election of directors, is to be taken by vote of the stockholders, it
shall be authorized by a majority of the votes cast by the holders of shares
entitled to vote on such action, unless a greater vote is required by the
Certificate of Incorporation, these Bylaws or by law. Except as otherwise
provided by the Certificate of Incorporation, directors shall be elected by a
plurality of the votes cast at any election.
2.9 Proxies. Each stockholder entitled to vote at a meeting of
stockholders may authorize another person or persons to act for him by proxy,
but no such proxy shall be voted or acted upon after three years from its date,
unless the proxy provides for a longer period. A proxy shall be irrevocable if
it states that it is irrevocable and if, and only as long as, it is coupled with
an interest sufficient in law to support an irrevocable power. A stockholder may
revoke any proxy which is not irrevocable by attending the meeting and voting in
person or by filing an instrument in writing revoking the proxy or by delivering
a proxy in accordance with applicable law bearing a later date to the Secretary
of the corporation.
2.10 Questions Concerning Elections. The Board of Directors may, in
advance of the meeting, or the presiding officer may, at the meeting, appoint
one or more inspectors to act at a stockholders' meeting or any adjournment. If
appointed, the inspectors shall determine the number of shares outstanding and
the voting power of each, the shares represented at the meeting, the existence
of a quorum, the validity and effect of proxies, and shall receive votes,
ballots or consents, hear and determine challenges and questions arising in
connection with the right to vote, count and tabulate votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all stockholders.
-3-
<PAGE> 8
ARTICLE III
DIRECTORS
3.1 Number and Residence. The business and affairs of the Corporation
shall be managed by or under the direction of its Board of Directors consisting
of not less than three nor more than eleven directors, the number thereof to be
determined from time to time by resolution of the Board of Directors; provided,
however, that the number of directors shall not be reduced so as to shorten the
term of any director at the time in office, and provided further, that the
number of directors constituting the entire Board shall be ten until otherwise
fixed by a majority of the entire Board of Directors. Directors need not be
stockholders. The Board of Directors shall be divided into three classes, as
nearly equal in numbers as the total number of directors constituting the entire
Board permits.
3.2 Election and Term. The term of office of the Directors of the first
class shall end on the first annual stockholders' meeting after their election;
the term of office of the second class shall end on the second annual
stockholders' meeting after their election; and the term of the office of the
third class shall end on the third annual stockholders' meeting after their
election. At each annual meeting after the first annual stockholders' meeting, a
number of Directors equal to the number of the class whose term expires at the
time of meeting shall be elected to hold office until the third succeeding
annual stockholders' meeting after their election. Each Director elected shall
hold office for the term for which he or she is elected and until his or her
successor is elected and qualified or until his or her resignation or removal.
3.3 Resignation. A Director may resign by written notice to the
Corporation. A Director's resignation is effective upon its receipt by the
Corporation or a later time set forth in the notice of resignation.
3.4 Removal. One or more Directors may be removed with cause by vote of
the holders of a majority of the shares entitled to vote at an election of
Directors cast at a meeting of the stockholders called for that purpose.
3.5 Vacancies. During the intervals between annual meetings of
stockholders, any vacancy occurring in the Board of Directors caused by
resignation, death or other incapacity and any newly created directorships
resulting from an increase in the number of Directors may be filled by a
majority vote of the Directors then in office, whether or not a quorum. Each
Director chosen to fill a vacancy shall hold office for the unexpired term in
respect of which such vacancy occurred. Each Director chosen to fill a newly
created directorship shall hold office until the next election of the class for
which such Director shall have been chosen. When the number of Directors is
changed, any newly created directorships or any decrease in directorships shall
be apportioned among the classes as to make all classes as nearly equal in
number as possible.
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<PAGE> 9
3.6 Place of Meetings. The Board of Directors may hold meetings at any
location. The location of annual and regular Board of Directors' meetings shall
be determined by the Board and the location of special meetings shall be
determined by the person calling the meeting.
3.7 Annual Meetings. Each newly elected Board of Directors may meet
promptly after the annual stockholders' meeting for the purposes of electing
officers and transacting such other business as may properly come before the
meeting. No notice of the annual Directors' meeting shall be necessary to the
newly elected Directors in order to legally constitute the meeting, provided a
quorum is present.
3.8 Regular Meetings. Regular meetings of the Board of Directors or
Board committees may be held without notice at such places and times as the
Board or committee determines at least 30 days before the date of the meeting.
3.9 Special Meetings. Special meetings of the Board of Directors may be
called by the chief executive officer, and shall be called by the President or
Secretary upon the written request of two Directors, on two days notice to each
Director or committee member by mail or 24 hours notice by any other means
provided in Section 5.1. The notice must specify the place, date and time of the
special meeting, but need not specify the business to be transacted at, nor the
purpose of, the meeting. Special meetings of Board committees may be called by
the Chairperson of the committee or a majority of committee members pursuant to
this Section 3.9.
3.10 Quorum. At all meetings of the Board or a Board committee, a
majority of the Directors then in office, or of members of such committee,
constitutes a quorum for transaction of business, unless a higher number is
otherwise required. If a quorum is not present at any Board or Board committee
meeting, a majority of the Directors present at the meeting may adjourn the
meeting to another time and place without notice other than announcement at the
meeting. Any business may be transacted at the adjourned meeting which might
have been transacted at the original meeting, provided a quorum is present.
3.11 Voting. The vote of a majority of the members present at any Board
or Board committee meeting at which a quorum is present constitutes the action
of the Board of Directors or of the Board committee, unless a higher vote is
otherwise required.
3.12 Telephonic Participation. Members of the Board of Directors or any
Board committee may participate in a Board or Board committee meeting by means
of conference telephone or similar communications equipment through which all
persons participating in the meeting can communicate with each other.
Participation in a meeting pursuant to this Section 3.12 constitutes presence in
person at such meeting.
3.13 Action by Written Consent. Any action required or permitted to be
taken under authorization voted at a Board or Board committee meeting may be
taken without a meeting if, before or after the action, all members of the Board
then in office or of the Board committee consent to the action in writing. Such
consents shall be filed with the minutes of the proceedings of the
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<PAGE> 10
Board or committee and shall have the same effect as a vote of the Board or
committee for all purposes.
3.14 Committees. The Board of Directors may, by resolution passed by a
majority of the entire Board, designate one or more committees, each consisting
of one or more Directors. The Board may designate one or more Directors as
alternate members of a committee, who may replace an absent or disqualified
member at a committee meeting. In the absence or disqualification of a member of
a committee, the committee members present and not disqualified from voting,
regardless of whether they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in place of such absent
or disqualified member. Any committee, to the extent provided in the resolution
of the Board, may exercise all powers and authority of the Board of Directors in
management of the business and affairs of the Corporation, except a committee
does not have power or authority to:
(a) Amend the Certificate of Incorporation.
(b) Adopt an agreement of merger or consolidation.
(c) Recommend to stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets.
(d) Recommend to stockholders a dissolution of the Corporation
or a revocation of a dissolution.
(e) Amend the Bylaws of the Corporation.
(f) Fill vacancies in the Board.
(g) Unless the resolution designating the committee or a later
Board of Director's resolution expressly so provides, declare a
distribution or dividend or authorize the issuance of stock.
Each committee and its members shall serve at the pleasure of the Board, which
may at any time change the members and powers of, or discharge, the committee.
Each committee shall keep regular minutes of its meetings and report them to the
Board of Directors when required.
3.15 Compensation. The Board, by affirmative vote of a majority of
Directors in office and irrespective of any personal interest of any of them,
may establish reasonable compensation of Directors for services to the
Corporation as directors, officers or members of a Board committee. No such
payment shall preclude any Director from serving the Corporation in any other
capacity and receiving compensation for such service.
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<PAGE> 11
ARTICLE IV
OFFICERS
4.1 Officers and Agents. The Board of Directors, at its first meeting
after each annual meeting of stockholders, shall elect a President, a Secretary
and a Treasurer, and may also elect and designate as officers a Chairman of the
Board, a Vice Chairman of the Board and one or more Executive Vice Presidents,
Vice Presidents, Assistant Vice Presidents, Assistant Secretaries and Assistant
Treasurers. The Board of Directors may also from time to time appoint, or
delegate authority to the Corporation's chief executive officer to appoint, such
other officers and agents as it deems advisable. Any number of offices may be
held by the same person, but an officer shall not execute, acknowledge or verify
an instrument in more than one capacity if the instrument is required by law to
be executed, acknowledged or verified by two or more officers. An officer has
such authority and shall perform such duties in the management of the
Corporation as provided in these Bylaws, or as may be determined by resolution
of the Board of Directors not inconsistent with these Bylaws, and as generally
pertain to their offices, subject to the control of the Board of Directors.
4.2 Compensation. The compensation of all officers of the Corporation
shall be fixed by the Board of Directors.
4.3 Term. Each officer of the Corporation shall hold office for the
term for which he or she is elected or appointed and until his or her successor
is elected or appointed and qualified, or until his or her resignation or
removal. The election or appointment of an officer does not, by itself, create
contract rights.
4.4 Removal. An officer elected or appointed by the Board of Directors
may be removed by the Board of Directors with or without cause. The removal of
an officer shall be without prejudice to his or her contract rights, if any.
4.5 Resignation. An officer may resign by written notice to the
Corporation. The resignation is effective upon its receipt by the Corporation or
at a subsequent time specified in the notice of resignation.
4.6 Vacancies. Any vacancy occurring in any office of the Corporation
shall be filled by the Board of Directors.
4.7 Chairman of the Board. The Chairman of the Board, if such office is
filled, shall be a Director and shall preside at all stockholders' and Board of
Directors' meetings.
4.8 Chief Executive Officer. The Chairman of the Board, if any, or the
President, as designated by the Board, shall be the chief executive officer of
the Corporation and shall have the general powers of supervision and management
of the business and affairs of the Corporation usually vested in the chief
executive officer of a corporation and shall see that all orders and resolutions
of
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<PAGE> 12
the Board of Directors are carried into effect. If no designation of chief
executive officer is made, or if there is no Chairman of the Board, the
President shall be the chief executive officer. The chief executive officer may
delegate to the other officers such of his or her authority and duties at such
time and in such manner as he or she deems advisable.
4.9 President. If the office of Chairman of the Board is not filled,
the President shall perform the duties and execute the authority of the Chairman
of the Board. If the Chairman of the Board is designated by the Board as the
Corporation's chief executive officer, the President shall be the chief
operating officer of the Corporation, shall assist the Chairman of the Board in
the supervision and management of the business and affairs of the Corporation
and, in the absence of the Chairman of the Board, shall preside at all
stockholders' and Board of Directors' meetings. The President may delegate to
the officers other than the Chairman of the Board, if any, such of his or her
authority and duties at such time and in such manner as he or she deems
appropriate.
4.10 Executive Vice Presidents and Vice Presidents. The Executive Vice
Presidents and Vice Presidents shall assist and act under the direction of the
Chairman of the Board and President. The Board of Directors may designate one or
more Executive Vice Presidents and may grant other Vice Presidents titles which
describe their functions or specify their order of seniority. In the absence or
disability of the President, the authority of the President shall descend to the
Executive Vice Presidents or, if there are none, to the Vice Presidents in the
order of seniority indicated by their titles or otherwise specified by the
Board. If not specified by their titles or the Board, the authority of the
President shall descend to the Executive Vice Presidents or, if there are none,
to the Vice Presidents, in the order of their seniority in such office.
4.11 Secretary. The Secretary shall act under the direction of the
Corporation's chief executive officer and President. The Secretary shall attend
all stockholders' and Board of Directors' meetings, record minutes of the
proceedings and maintain the minutes and all documents evidencing corporate
action taken by written consent of the stockholders and Board of Directors in
the Corporation's minute book. The Secretary shall perform these duties for
Board committees when required. The Secretary shall see to it that all notices
of stockholders' meetings and special Board of Directors' meetings are duly
given in accordance with applicable law, the Certificate of Incorporation and
these Bylaws. The Secretary shall have custody of the Corporation's seal and,
when authorized by the Corporation's chief executive officer, President or the
Board of Directors, shall affix the seal to any instrument requiring it and
attest such instrument.
4.12 Treasurer. The Treasurer shall act under the direction of the
Corporation's chief executive officer and President. The Treasurer shall have
custody of the corporate funds and securities and shall keep full and accurate
accounts of the Corporation's assets, liabilities, receipts and disbursements in
books belonging to the Corporation. The Treasurer shall deposit all moneys and
other valuables in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. The Treasurer shall
disburse the funds of the Corporation as may be ordered by the Corporation's
chief executive
-8-
<PAGE> 13
officer, the President or the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the Corporation's chief
executive officer, the President and the Board of Directors (at its regular
meetings or whenever they request it) an account of all his or her transactions
as Treasurer and of the financial condition of the Corporation. If required by
the Board of Directors, the Treasurer shall give the Corporation a bond for the
faithful discharge of his or her duties in such amount and with such surety as
the Board prescribes.
4.13 Assistant Vice Presidents, Secretaries and Treasurers. The
Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers, if
any, shall act under the direction of the Corporation's chief executive officer,
the President and the officer they assist. In the order of their seniority, the
Assistant Secretaries shall, in the absence or disability of the Secretary,
perform the duties and exercise the authority of the Secretary. The Assistant
Treasurers, in the order of their seniority, shall, in the absence or disability
of the Treasurer, perform the duties and exercise the authority of the
Treasurer.
4.14 Execution of Contracts and Instruments. The Board of Directors may
designate an officer or agent with authority to execute any contract or other
instrument on the Corporation's behalf; the Board may also ratify or confirm any
such execution. If the Board authorizes, ratifies or confirms the execution of a
contract or instrument without specifying the authorized executing officer or
agent, the Corporation's chief executive officer, the President, any Executive
Vice President or Vice President or the Treasurer may execute the contract or
instrument in the name and on behalf of the Corporation and may affix the
corporate seal to such document or instrument.
4.15 Voting of Shares and Securities of Other Corporations and
Entities. Unless the Board of Directors otherwise directs, the Corporation's
chief executive officer shall be entitled to vote or designate a proxy to vote
all shares and other securities which the Corporation owns in any other
corporation or entity.
ARTICLE V
NOTICES AND WAIVERS OF NOTICE
5.1 Delivery of Notices. All written notices to stockholders, Directors
and Board committee members shall be given personally or by mail (registered,
certified or other first class mail, with postage pre-paid), addressed to such
person at the address designated by him or her for that purpose or, if none is
designated, at his or her last known address. Written notices to Directors or
Board committee members may also be delivered at his or her office on the
Corporation's premises, if any, or by overnight carrier, telegram, telex,
telecopy, radiogram, cablegram, facsimile, computer transmission or similar form
of communication, addressed to the address referred to in the preceding
sentence. Notices given pursuant to this Section 5.1 shall be deemed to be given
when dispatched, or, if mailed, when deposited in a post office or official
depository under the exclusive care and custody of the United States postal
service. Notices given by overnight carrier shall be deemed "dispatched" at 9:00
a.m. on the day the overnight carrier is reasonably requested to deliver
-9-
<PAGE> 14
the notice. The Corporation shall have no duty to change the written address of
any Director, Board committee member or stockholder unless the Secretary
receives written notice of such address change.
5.2 Waiver of Notice. Whenever notice is required to be given under the
Certificate of Incorporation, these Bylaws or applicable law, a written waiver,
signed by the person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except where the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened.
ARTICLE VI
SHARE CERTIFICATES AND STOCKHOLDERS OF RECORD
6.1 Certificates. The shares of the Corporation shall be represented by
certificates signed by the Chairman of the Board, Vice Chairman of the Board, or
the President or a Vice President and by the Treasurer or an Assistant
Treasurer, or by the Secretary or an Assistant Secretary representing the number
of shares registered in certificate form. Any of or all the signatures on the
certificate may be by facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent, or registrar at the date
of issue.
6.2 Lost or Destroyed Certificates. The Corporation may issue a new
certificate of stock in the place of any certificate theretofore issued by it,
alleged to have been lost, stolen or destroyed, and the Corporation may require
the owner of the lost, stolen or destroyed certificate, or his legal
representative, to give the Corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate.
6.3 Transfer of Shares. Shares of the Corporation are transferable only
on the Corporation's stock ledger upon surrender to the Corporation or its
transfer agent of a certificate for the shares, duly endorsed for transfer, and
the presentation of such evidence of ownership and validity of the transfer as
the Corporation requires.
6.4 Record Date. The Board of Directors may fix, in advance, a date as
the record date for determining stockholders for any purpose, including
determining stockholders entitled to (a) notice of, and to vote at, any
stockholders' meeting or any adjournment of such meeting; or (b) receive payment
of a share dividend or distribution or allotment of a right. The record date
shall not be more than 60 nor less than 10 days before the date of the meeting,
nor more than 60 days before any other action.
-10-
<PAGE> 15
If a record date is not fixed:
(a) the record date for determining the stockholders entitled
to notice of, or to vote at, a stockholders' meeting shall be the close
of business on the day next preceding the day on which notice of the
meeting is given, or, if no notice is given, the close of business on
the day next preceding the day on which the meeting is held; and
(b) the record date for determining stockholders for any other
purpose shall be the close of business on the day on which the
resolution of the Board of Directors relating to the action is adopted.
A determination of stockholders of record entitled to notice of, or to vote at,
a stockholders' meeting shall apply to any adjournment of the meeting, unless
the Board of Directors fixes a new record date for the adjourned meeting.
Only stockholders of record on the record date shall be entitled to
notice of, or to participate in, the action relating to the record date,
notwithstanding any transfer of shares on the Corporation's books after the
record date. This Section 6.4 shall not affect the rights of a stockholder and
the stockholder's transferor or transferee as between themselves.
6.5 Registered Stockholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of a share for all purposes, including notices, voting, consents, dividends and
distributions, and shall not be bound to recognize any other person's equitable
or other claim to interest in such share, regardless of whether it has actual or
constructive notice of such claim or interest.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification. The Corporation shall, to the fullest extent
permitted by applicable law as it presently exists or may hereafter be amended,
(a) indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was a Director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise (collectively, "Covered Matters") against all liability and
loss suffered and expenses (including attorneys' fees) reasonably incurred by
such person; and (b) pay or reimburse such expenses incurred by such person in
connection with any Covered Matter in advance of final disposition of such
Covered Matter. The Corporation may provide such other indemnification to
Directors, officers, employees and agents by insurance, contract or otherwise as
is permitted by law and authorized by the Board of Directors.
-11-
<PAGE> 16
7.2 Claims. If a claim for indemnification or payment of expenses under
this Article VII is not paid in full within sixty days after a written claim
therefor has been received by the Corporation, the claimant may file suit to
recover the unpaid amount of such claim and, if successful in whole or in part,
shall be entitled to be paid the expense of prosecuting such claim. In any such
action the Corporation shall have the burden of proving that the claimant was
not entitled to the requested indemnification or payment of expenses under
applicable law.
7.3 Non-Exclusivity of Rights. The rights conferred on any person by
this Article VII shall not be exclusive of any other rights which such person
may have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, these Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Checks and Funds. All checks, drafts or demands for money and notes
of the Corporation must be signed by such officer or officers or such other
person or persons as the Board of Directors from time to time designates. All
funds of the Corporation not otherwise employed shall be deposited or used as
the Board of Directors from time to time designates.
8.2 Fiscal Year. The fiscal year of the Corporation shall end on such
date as the Board of Directors from time to time determines.
8.3 Corporate Seal. The corporate seal shall have the name of the
Corporation inscribed thereon and shall be in such form as may be approved from
time to time by the Board of Directors.
8.4 Form of Records. Any records maintained by the Corporation in the
regular course of its business, including its stock ledger, books of account,
and minute books, may be kept on, or be in the form of, punch cards, magnetic
tape, photographs, microphotographs, or any other information storage device,
provided that the records so kept can be converted into clearly legible form
within a reasonable time.
8.5 Interested Directors; Quorum. No contract or transaction between
the Corporation and one or more of its Directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its Directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the Director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose, if: (a) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board of Directors or committee in
good faith authorizes the contract or
-12-
<PAGE> 17
transaction by the affirmative votes of a majority of the disinterested
Directors, even though the disinterested Directors be less than a quorum; or (b)
the material facts as to his relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders; or (c) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or ratified, by the
Board of Directors, a committee thereof, of the stockholders. Common or
interested Directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.
ARTICLE IX
AMENDMENTS
These Bylaws may be amended or repealed, or new Bylaws may be adopted,
by the Board of Directors at any meeting the notice of which shall have stated
the amendment of the Bylaws as one of the purposes of the meeting, but the
stockholders may make additional Bylaws and may amend and repeal any Bylaws
whether adopted by them or otherwise.
ARTICLE X
SCOPE OF BYLAWS
These Bylaws govern the regulation and management of the affairs of the
Corporation to the extent that they are consistent with applicable law and the
Certificate of Incorporation; to the extent they are not consistent, applicable
law and the Certificate of Incorporation shall govern.
-13-
<PAGE> 1
EXHIBIT 15.1
Penske Motorsports, Inc.
Detroit, Michigan
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of Penske Motorsports, Inc. for the periods ended June 30, 1998 and
1997, as indicated in our report dated July 30, 1998; because we did not perform
an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, is
incorporated by reference in Registration Statement No. 333-692 on Form S-8.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
/s/ Deloitte & Touche LLP
Detroit, Michigan
August 13, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING CONDENSED CONSOLIDATED BALANCE SHEET OF PENSKE MOTORSPORTS, INC. AS
OF JUNE 30, 1998 AND THE RELATED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE PERIODS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> APR-01-1998 JAN-01-1998
<PERIOD-END> JUN-30-1998 JUN-30-1998
<CASH> 1,294 1,294
<SECURITIES> 0 0
<RECEIVABLES> 10,598 10,598
<ALLOWANCES> 0 0
<INVENTORY> 2,579 2,579
<CURRENT-ASSETS> 16,764 16,764
<PP&E> 262,623 262,623
<DEPRECIATION> 26,403 26,403
<TOTAL-ASSETS> 308,390 308,390
<CURRENT-LIABILITIES> 42,255 42,255
<BONDS> 48,113 48,113
0 0
0 0
<COMMON> 142 142
<OTHER-SE> 199,796 199,796
<TOTAL-LIABILITY-AND-EQUITY> 308,390 308,390
<SALES> 7,731 11,677
<TOTAL-REVENUES> 46,087 56,224
<CGS> 4,659 7,121
<TOTAL-COSTS> 26,481 40,060
<OTHER-EXPENSES> 922 (698)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 809 1,668
<INCOME-PRETAX> 17,875 15,194
<INCOME-TAX> 6,983 5,950
<INCOME-CONTINUING> 10,892 9,244
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 10,892 9,244
<EPS-PRIMARY> .77 .65
<EPS-DILUTED> .77 .65
</TABLE>
