UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended February 28, 1997.
Commission file Number 0-2384
International Speedway Corporation
(Exact name of registrant as specified in its charter.)
Florida, U.S.A. 59-0709342
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1801 West International Speedway Boulevard, Daytona Beach, Florida 32114-1243
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (904) 254-2700
Indicate by check mark whether the registrant(1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date:
Class A Common Stock, - 4,500,820 shares as of March 25, 1997.
Class B Common Stock, - 33,996,142 shares as of March 25, 1997.<PAGE>
<PAGE>
PART I. - FINANCIAL INFORMATION
Item 1. - Financial Statements
INTERNATIONAL SPEEDWAY CORPORATION
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
August 31, February 28,
1996 1997
(unaudited)
------------ -------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ................................... $ 9,042 $ 14,743
Short-term investments ...................................... 8,369 78,936
Receivables, less allowances of $35 ......................... 3,455 11,891
Inventories ................................................. 1,409 1,596
Prepaid expenses and other current assets ................... 2,410 2,557
------------ ------------
Total Current Assets ......................................... 24,685 109,723
Property and Equipment - at cost - less accumulated
depreciation of $41,175 ($36,912 at August 31) .............. 98,835 119,743
Other Assets:
Cash surrender value of life insurance (Note 3).............. 1,214 2,371
Equity investments .......................................... 27,256 27,275
Long-term investments ....................................... 500 500
Other ....................................................... 301 290
------------ ------------
29,271 30,436
------------ ------------
Total Assets ................................................. $152,791 $259,902
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable ............................................ $ 3,820 $ 7,636
Income taxes payable ........................................ 57 8,095
Deferred income ............................................. 25,963 28,586
Other current liabilities ................................... 1,596 2,736
------------ ------------
Total Current Liabilities .................................... 31,436 47,053
Deferred income taxes ........................................ 14,688 15,621
Commitments and Contingencies
Shareholders' Equity (Notes 1 and 6)
Class A Common Stock, $.01 par value, 80,000,000 shares
authorized; 0 and 4,373,645 issued at August 31
and February 28, respectively.............................. 0 44
Class B Common Stock, $.01 par value, 40,000,000 shares
authorized; 34,423,890 and 34,123,317 issued at August 31
and February 28, respectively.............................. 344 341
Additional paid-in capital .................................. 8,127 84,591
Retained earnings ........................................... 99,986 115,447
------------ ------------
108,457 200,423
Less unearned compensation-restricted stock (Note 5)......... 1,790 3,195
------------ ------------
Total Shareholders' Equity ................................... 106,667 197,228
------------ ------------
Total Liabilities and Shareholders' Equity ................... $152,791 $ 259,902
============ ============
</TABLE>
See accompanying notes and accountants' review report.
<PAGE>
<PAGE>
INTERNATIONAL SPEEDWAY CORPORATION
Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months ended
February 29, February 28,
1996 1997
(Unaudited) (Unaudited)
_________________________
(In Thousands, Except
Per Share Data)
<S> <C> <C>
REVENUES:
Admissions, net.................................... $22,004 $26,360
Motorsports related income......................... 11,255 17,209
Food, beverage and souvenir income................. 6,860 8,078
Other income....................................... 196 219
___________ __________
40,315 51,866
EXPENSES:
Direct expenses:
Prize and point fund monies
and NASCAR sanction fees....................... 5,623 6,984
Motorsports related expenses..................... 3,919 5,150
Food, beverage and souvenir expenses............. 3,724 4,510
General and administrative expenses................ 5,305 6,174
Depreciation....................................... 1,368 1,945
___________ __________
19,939 24,763
___________ __________
Operating Income..................................... 20,376 27,103
Interest income...................................... 185 992
Equity in net loss from equity investments........... (692) (441)
___________ __________
Income before income taxes........................... 19,869 27,654
Income taxes......................................... 7,780 10,179
___________ __________
Net Income........................................... $12,089 $17,475
=========== ==========
Earnings per share (Note 2).......................... $ 0.35 $ 0.45
=========== ==========
Dividends per share.................................. $ -- $ --
=========== ==========
</TABLE>
See accompanying notes and accountants' review report.<PAGE>
<PAGE> International Speedway Corporation
Condensed Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON COMMON UNEARNED
STOCK STOCK ADDITIONAL COMPENSATION- TOTAL
$.01 PAR $.01 PAR PAID-IN RETAINED RESTRICTED SHAREHOLDERS'
VALUE VALUE CAPITAL EARNINGS STOCK EQUITY
-------- --------- --------- --------- ----------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT AUGUST 31, 1995 ............ $ -- $ 344 $1,853 $ 83,846 $ (796) $ 85,247
Activity 9/1/95 - 2/29/96:
Net Income - Unaudited............... -- -- -- 11,069 -- 11,069
Restricted stock granted - unaudited. -- 1 1,599 -- (1,600) --
Amortization of unearned compensation
- unaudited......................... -- -- -- -- 232 232
-------- -------- -------- --------- ---------- ------------
BALANCE AT FEBRUARY 29, 1996 unaudited 345 3,452 94,915 (2,164) 96,548
Activity 3/1/96 - 8/31/96:
Net income - unaudited................ -- -- -- 8,612 -- 8,612
Cash dividends paid - unaudited....... -- -- -- (1,836) -- (1,836)
Reacquisition of previously issued
common stock - unaudited............. -- (1) (2) (1,705) -- (1,708)
Amortization of unearned compensation
- unaudited.......................... -- -- -- -- 374 374
Recapitalization of equity investment
- unaudited......................... -- -- 4,677 -- -- 4,677
-------- -------- -------- --------- ---------- ------------
BALANCE AT AUGUST 31, 1996 ............. 344 8,127 99,986 (1,790) 106,667
Activity 9/1/96 - 2/28/97:
Net Income - unaudited................ -- -- -- 15,608 -- 15,608
Public offering -Class A Common Stock. 40 -- 74,298 -- -- 74,338
Forfeiture of restricted shares -
Unaudited........................... -- -- (218) -- 218 --
Increase in equity investment -
Unaudited........................... -- -- 400 -- -- 400
Restricted stock granted - unaudited
Note 5.............................. -- 1 1,984 -- (1,985) --
Reacquisition of previously issued
Common Stock - unaudited............ -- -- -- (147) -- (147)
Conversion of Class B Common Stock to
Class A Common Stock - unaudited.... 4 (4) -- -- -- --
Amortization of unearned compensation-
Unaudited........................... -- -- -- -- 362 362
-------- -------- -------- --------- ---------- ------------
Balance at February 28, 1997 - unaudited $ 44 $341 $84,591 $115,447 (3,195) $197,228
======== ======== ======== ========= ========== ============
</TABLE>
See accompanying notes and accountants' review report.<PAGE>
<PAGE>
International Speedway Corporation
Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months ended
February 29, February 28,
1996 1997
(Unaudited) (Unaudited)
______________________________
(In Thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income...................................... $ 12,089 $ 17,475
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation................................ 1,368 1,945
Amortization of unearned compensation....... 152 240
Deferred income taxes....................... 1,098 1,447
Undistributed loss from equity investments . 692 441
Changes in operating assets and liabilities:
Receivables................................. (4,188) (7,031)
Inventories................................. (438) (343)
Prepaid expenses and other current assets... 383 (798)
Other assets................................ 3 (3)
Accounts payable............................ 2,844 4,330
Income taxes payable........................ 6,123 8,008
Deferred income............................. (3,406) (7,174)
Other current liabilities................... 1,714 2,066
______________________________
Net cash provided by operating activities....... 18,434 20,603
INVESTING ACTIVITIES
Acquisition of investments.................... (8,969) (12,025)
Proceeds from maturities of investments....... 5,539 8,646
Capital expenditures.......................... (7,631) (10,328)
Cash surrender value of life insurance........ 1 (34)
______________________________
Net cash used in investing activities........... (11,060) (13,741)
FINANCING ACTIVITIES
Reacquisition of previously issued
common stock................................. - (147)
Additional expense of Class A Common Stock
Offering..................................... - (29)
______________________________
Net cash used in financing activities........... - (176)
______________________________
Net increase in cash and cash equivalents....... 7,374 6,686
Cash and cash equivalents at beginning of period 8,661 8,057
______________________________
Cash and cash equivalents at end of period ...... $ 16,035 $ 14,743
==============================
</TABLE>
See accompanying notes and accountants' review report.<PAGE>
<PAGE>
International Speedway Corporation
Notes to Condensed Consolidated Financial Statements
August 31, 1996 and February 28, 1997
(Unaudited - See Accountants' Review Report)
1. Basis of Presentation
The accompanying condensed consolidated financial statements have been
prepared in compliance with Rule 10-01 of Regulation S-X and generally
accepted accounting principles but do not include all of the information and
disclosures required for complete financial statements. The statements should
be read in conjunction with the consolidated financial statements and notes
thereto included in the Company's latest annual report on Form 10-K. In
management's opinion, the statements include all adjustments which are
necessary for a fair presentation of the results for the interim periods. All
such adjustments are of a normal recurring nature. Certain reclassifications
have been made to conform to the financial presentation at February 28, 1997.
On September 5, 1996 the Company's Board of Directors approved a
recapitalization of the Company which became effective on November 4, 1996,
concurrently with the effectiveness of the Registration Statement filed on
September 6, 1996 with the Securities and Exchange Commission in connection
with the offering of 4,000,000 shares of the Company's newly authorized Class
A Common Stock (discussed below). The recapitalization modified the Company's
authorized capital to include one million shares of Preferred Stock, eighty
million shares of Class A Common Stock and forty million shares of Class B
Common Stock. Pursuant to the recapitalization, all of the Company's existing
outstanding shares of Common Stock were automatically converted, on a
15-for-one basis, into the newly authorized shares of Class B Common Stock
and the shares of Common Stock previously held as treasury stock were
retired. Shareholders' equity and all share information and per share data
have been adjusted to give effect to the recapitalization and related stock
split.
Effective December 1, 1996, the Company changed its fiscal year-end
from August 31 to November 30. This resulted in a three-month transition
period commencing September 1, 1996 and ending November 30, 1996.
Because of the seasonal concentration of racing events, the results of
operations for the three-month periods ended February 29, 1996 and February 28,
1997 are not indicative of the results to be expected for the year.
2. Earnings Per Share
Earnings per share has been computed on the weighted average total number of
common shares outstanding during the respective periods. Weighted average
shares outstanding for the three-month periods ended February 29, 1996 and
February 28, 1997 were 34,463,280 and 38,464,735 respectively.
<PAGE>
3. Related Party Disclosures and Transactions
All of the racing events that take place during the Company's fiscal year are
sanctioned by various racing organizations such as the Sports Car Club of
America (SCCA), Automobile Racing Club of America (ARCA), American Motorcyclist
Association (AMA), the Championship Cup Series (CCS), Professional Sports Car
Racing, Inc., World Karting Association (WKA), Federation Internationale de
l'Automobile (FIA), Federation Internationale Motorcycliste (FIM), and the
National Association for Stock Car Auto Racing, Inc. (NASCAR). NASCAR, which
sanctions some of the Company's principal racing events, is a member of the
France Family Group which controls in excess of 55% of the outstanding stock of
the Company and some members of which serve as directors and officers. Standard
NASCAR sanction agreements require racetrack operators to pay sanction fees and
prize and point fund monies for each sanctioned event conducted. The prize and
point fund monies are distributed by NASCAR to participants in the events. Prize
and point fund monies paid by the Company to NASCAR for disbursement to
competitors totaled approximately $4.7 million and $5.6 million for the
three-month periods ended February 29, 1996 and February 28, 1997, respectively.
In October 1995 the Company entered into collateral assignment split-dollar
insurance agreements covering the lives of William C. France and James C.
France and their respective spouses. Pursuant to the agreements, the Company
will advance the annual premiums of approximately $1,205,000 each year for a
period of eight years. Upon surrender of the policies or payment of the death
benefits thereunder, the Company is entitled to repayment of an amount equal
to the cumulative premiums previously paid by the Company. The Company may
cause the agreements to be terminated and the policies surrendered at any time
after the cash surrender value of the policies equals the cumulative premiums
advanced under the agreements. During the three-month period ended February 29,
1996, the Company recorded a net insurance expense of approximately $106,000,
representing the excess of the premiums paid over the increase in cash surrender
value of the policies associated with these agreements. During the three months
ended February 28, 1997, premiums paid were equal to the increase in cash
surrender value of the policies.
4. Supplemental Disclosures of Cash Flow Information
Cash paid for income taxes and interest for the three months ended February 29,
1996 and February 28, 1997 is as follows:
1996 1997
________________________________
(Thousands of Dollars)
Income taxes paid $551 $619
================================
Interest paid $ -- $ --
================================
<PAGE>
5. Long-Term Incentive Restricted Stock
On January 1, 1996 and 1997, a total of 102,075 and 98,010 restricted shares of
the Company's Class B Common Stock, respectively, were awarded to certain
officers and managers under the Company's Long Term Incentive Plan. The market
value of shares awarded on January 1, 1996 and 1997 amounted to approximately
$1,599,000 and $1,985,000, respectively, and has been recorded as unearned
compensation - restricted stock, which is shown as a separate component of
shareholders' equity in the accompanying condensed consolidated balance sheets.
The unearned compensation is being amortized over the vesting periods of the
shares. The total expense charged against operations during the three months
ended February 29, 1996 and February 28, 1997 was approximately $152,000 and
$240,000, respectively.
6. Class A Common Stock Offering
On November 4, 1996 the Company sold 4,000,000 shares of its newly created Class
A Common Stock in an underwritten public offering (the "Offering"). The price
to the public was $20 per share. The net proceeds to the Company from the sale
of the stock sold by the Company in the Offering were approximately $74.3 mil-
lion, after deduction of underwriting discounts and commissions and expenses of
the Offering. The Company intends to use approximately $40 million of such net
proceeds to fund the completion of certain additions and improvements to the
Company's Motorsports facilities, including additional suites and grandstand
seating at Daytona International Speedway, Talladega Superspeedway and
Darlington Raceway. Approximately $7.8 million of the net proceeds of this
Offering was used to repay borrowings incurred under one of the Company's lines
of credit in September 1996. The Company used approximately $3.1 million of the
net proceeds on April 1, 1997 to acquire the 50% interest the Company did not
already own in Watkins Glen International, Inc. ("WGI"). The approximately
$23.4 million of remaining net proceeds will be used for working capital and
other general corporate purposes, including potential acquisitions and continued
improvements to and expansion of the Company's facilities and operations.
However, the Company does not currently have any understanding or arrangement
regarding any potential acquisition other than the purchase of the additional
interest in WGI discussed above. Pending such uses, the Company has invested
the net proceeds of the Offering in short-term interest-bearing obligations, the
carrying value of which approximates their fair value at February 28, 1997.
<PAGE>
7. Legal Proceedings
On October 21, 1996, the Company's indirect corporate subsidiary, Americrown
Service Corporation ("Americrown"), was served with a Class Action Complaint
filed in the Circuit Court of Talladega County, Alabama by Howard Padgett, Bill
Lutz and Tommy Jones. The complaint was filed in September 1996 and alleged,
among other things, that Americrown engaged in price-fixing activities in
connection with the sale of racing souvenirs and merchandise at the Talladega
Superspeedway. The complaint seeks at least $500 for each member of the class
(persons buying racing souvenirs at Talladega Superspeedway since September
1992), but does not otherwise seek to recover compensatory or punitive damages
or statutory attorneys' fees. Although Americrown attempted to remove the suit
to Federal District Court, it has been remanded to the Circuit Court of
Talladega County, Alabama, where discovery is proceeding. Americrown disputes
the allegations and intends to defend the action fully and vigorously.
In March 1997, two purported class action companion lawsuits were filed in the
United States District Court, Northern District of Georgia, against the Company,
its indirect corporate subsidiary, Americrown Service Corporation, and a number
of other persons alleging, in substance, that the defendants unlawfully
conspired to fix prices of souvenirs and merchandise sold to consumers in
violation of federal antitrust laws. One suit was filed by Florida residents
and the other suit was filed by Georgia residents. Both suits seek damages and
injunctive relief on behalf of all persons who purchased souvenirs or
merchandise from certain vendors at any NASCAR Winston Cup stock car race or
supporting event in the United States during the period 1991 to present. The
Company and Americrown dispute the allegations and intend to defend the actions
fully and vigorously.
Management is presently unable to predict or quantify the outcome of these
matters.
8. Subsequent Event
On April 1, 1997, the Company exercised its contractual option to acquire the
50% interest it did not already own in WGI from Corning, Inc. for approximately
$3.1 million. The transaction price represented the stock's book value at
December 31, 1996. The Company's option to purchase Corning's interest for its
book value is part of a shareholder agreement between the two companies in place
since 1988.
<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
General
The Company derives revenues primarily from (i) admissions to racing events held
at its motorsports facilities, (ii) revenue generated in conjunction with or as
a result of motorsports events conducted at the Company's facilities, and (iii)
catering, concession and souvenir sales made during or as a result of such
events.
"Admissions" revenue includes ticket sales from all of the Company's events,
track tours and, since July 1996, DAYTONA USA. Admissions revenue for racing
events is recorded upon completion of the related motorsports event.
"Motorsports related income" includes television and radio broadcast rights
fees, promotion and sponsorship fees, advertising revenues and royalties from
licenses of the Company's trademarks, hospitality rentals (including luxury
suites and chalets) and track rentals. The Company negotiates directly with
television and cable networks for coverage of substantially all of its televised
motorsports events. The Company's revenues from corporate sponsorships are paid
in accordance with negotiated contracts, with the identities of sponsors and the
terms of sponsorship changing from time to time.
"Food, beverage and souvenir income" includes revenues from concession stands,
hospitality catering and direct sales of souvenirs, programs and other
merchandise, as well as fees paid by third party vendors for the right to sell
souvenirs and concessions at the Company's facilities.
Expenses include (i) prize and point fund monies and NASCAR sanction fees, (ii)
motorsports related expenses, which include costs of competition paid to
sanctioning bodies other than NASCAR, labor, advertising and other expenses
associated with the Company's promotion of its racing events, and (iii) food,
beverage and souvenir expenses, consisting primarily of labor and costs of goods
sold.
The following table sets forth, for each of the indicated periods, certain
selected income statement data as a percentage of total revenues:
Three Months ended
February 29, February 28,
1996 1997
(Unaudited) (Unaudited)
_______________________
Revenues:
Admissions, net.................................... 54.6% 50.8%
Motorsports related income......................... 27.9 33.2
Food, beverage and souvenir income................. 17.0 15.6
Other income....................................... .5 .4
___________ ___________
Total revenues .................................. 100.0% 100.0%
Expenses:
Direct expenses:
Prize and point fund monies
and NASCAR sanction fees....................... 13.9 13.4
Motorsports related expenses..................... 9.7 9.9
Food, beverage and souvenir expenses............. 9.3 8.7
General and administrative expenses................ 13.2 12.0
Depreciation....................................... 3.4 3.8
___________ ___________
Total expenses .................................. 49.5 47.8
___________ ___________
Operating income..................................... 50.5 52.2
Interest income, net ................................ .4 1.9
Equity in net loss from equity investments........... (1.7) (.8)
___________ ___________
Income before income taxes........................... 49.2 53.3
Income tax expense................................... 19.3 19.6
___________ ___________
Net income........................................... 29.9% 33.7%
Admissions revenue increased approximately $4.4 million, or 19.8%, for the three
months ended February 28, 1997 as compared to the three months ended February
29, 1996. Increased seating capacity and attendance and increases in certain
ticket prices related to the February 1997 NASCAR Winston Cup and Busch Grand
National events conducted at the Company's Daytona facility accounted for
approximately 80% of the increase. DAYTONA USA accounted for the remainder of
the increase.
Motorsports related income increased approximately $6 million, or 52.9%, during
the three months ended February 28, 1997 as compared to the three months ended
February 29, 1996. Increases in TV and radio broadcast rights, promotion and
sponsorship fees and advertising related to the February 1997 events conducted
at the Company's Daytona facility accounted for over half of the increase. The
remaining increase resulted primarily from rentals of the Company's hospitality
facilities and promotion and sponsorship fees from DAYTONA USA.
Food, beverage and souvenir income increased approximately $1.2 million, or
17.8%, during the three months ended February 28, 1997 as compared to the three
months ended February 29, 1996. Increased attendance at the February events
conducted at the Company's Daytona facility and, to a lesser extent, increases
in certain prices accounted for approximately 60% of the increase. The
remaining increase resulted primarily from direct sales of souvenirs at the gift
shop adjacent to DAYTONA USA.
Prize and point fund monies and NASCAR sanction fees increased by approximately
$1.4 million, or 24.2%, during the quarter ended February 28, 1997 as compared
to the quarter ended February 29, 1996. Approximately 70% of this increase was
due to increases in the prize and point fund monies paid by NASCAR to
participants in the Company's February motorsports events. This increase was
primarily attributable to increases in the Company's TV broadcast rights as
standard NASCAR sanctioning agreements require that a specified percentage of TV
broadcast rights be paid as part of prize money.
Motorsports related expenses increased approximately $1.2 million, or 31.4%, for
the three months ended February 28, 1997 as compared to the three months ended
February 29, 1996. The increase is due primarily to increases in labor,
advertising and other costs related to the February events held at the Company's
Daytona facility and, to a lesser extent, the operation of DAYTONA USA.
Motorsports related expenses remained relatively constant as a percentage of
combined admissions and motorsports related income during the three months ended
February 28, 1997 and February 29, 1996, as increases in promotions and
advertising costs related to supporting events at the Company's Daytona facility
and costs associated with expanded hospitality were offset by event related
economies of scale.
As food, beverage and souvenir income increases, the Company experiences a
corresponding increase in related expenses. Food, beverage and souvenir
expenses increased approximately $800,000, or 21.1%, during the three months
ending February 28, 1997 as compared with the same period of the prior year.
Increased personnel related expenses accounted for approximately half of the
increase. The remaining increase is due primarily to the incremental increase
in product costs at margins consistent with the same period of the prior year.
Food, beverage and souvenir expenses remained relatively constant as a
percentage of food, beverage and souvenir revenue during the three months ended
February 28, 1997 and February 29, 1996.
General and administrative expenses increased approximately $900,000, or 16.4%,
during the three months ended February 28, 1997, as compared to the three months
ended February 29, 1996. The increase was primarily due to increases in wages
and other compensation as well as a wide variety of other expense items.
General and administrative expenses remained relatively constant as a percentage
of total revenue during the three months ended February 28, 1997 and February
29, 1996.
The Company's depreciation expense increased approximately $600,000, or 42.2%,
during the three months ended February 28, 1997, as compared to the same period
of the prior year, primarily as a result of the new DAYTONA USA facility and the
ongoing expansion of the Company's motorsports facilities. This increase was
mitigated by the lengthening of the estimated service lives of grandstands and
other significant assets as a result of Management's review of actual service
lives of these types of assets.
The approximately $800,000 increase in the Company's net interest income was
primarily attributable to the investment of proceeds from the November 1996
Class A Common Stock offering.
Equity in net loss from equity investments represents the Company's prorata
share of the current losses from its 50% investment in Watkins Glen
International, Inc. ("WGI") and its 20% investment in PSH Corp. which are
accounted for using the equity method of accounting.
As a result of the foregoing, the Company's net income increased approximately
$5.4 million, or 44.6%, for the three months ended February 28, 1997 as compared
to the same period of the prior year.
Liquidity and Capital Resources
General
The Company has historically generated sufficient cash flow from operations to
fund its capital expenditures, investments and working capital needs, as well as
to pay annual cash dividends. At February 28, 1997, the Company had working
capital of $62.7 million, compared to a working capital deficit of $6.7 million
at August 31, 1996, which is primarily attributable to the November 4, 1996
offering of 4 million shares of the Company's newly authorized Class A Common
Stock. The Company expects to experience a decrease in working capital as it
utilizes the net proceeds of the Offering for capital projects as described
below under the caption "Capital Expenditures", and other general corporate
purposes.
The Company also has two lines of credit with financial institutions totaling
$18 million. The $8.0 million line of credit expires in September 1997, and the
$10 million line expires in December 1997. There were no borrowings under the
credit facilities during the quarter ended February 28, 1997.
Cash Flows
Net cash provided by operating activities was approximately $20.6 million for
the three months ended February 28, 1997, as compared to $18.4 million for the
three months ended February 29, 1996. The difference between the Company's
February 28, 1997 net income of $17.5 million and the $20.3 million of operating
cash flow was primarily attributable to an $8 million increase in income taxes
payable, a combined increase of $6.4 million in accounts payable and other
current liabilities, $1.9 million in depreciation, and a $1.4 million increase
in deferred income taxes, partially offset by a $7.2 million decrease in
deferred income, a $7 million increase in receivables and an $800,000 increase
in prepaid expenses and other current assets.
Net cash used in investing activities was $13.7 million for the three months
ended February 28, 1997, compared to $11.1 million for the three months ended
February 29, 1996. The Company's use of cash for investing activities for the
three months ended February 28, 1997 reflects $10.3 million in capital
expenditures and $3.4 million of net acquisitions of investments. See "Capital
Expenditures".
Capital Expenditures
Capital expenditures totaled $10.3 million for the three months ended February
28, 1997, compared to $7.6 million for the three months ended February 29, 1996.
Capital expenditures during the three months ended February 28, 1997 related
primarily to additions to spectator capacity at the Company's Daytona, Talladega
and Darlington facilities, renovation of the Company's new corporate
headquarters and completion of the Daytona facility's Winston Tower addition.
On April 1, 1997, the Company exercised its contractual option to acquire the
50% interest it did not already own in WGI from Corning, Inc. for approximately
$3.1 million. The transaction price represented the stock's book value at
December 31, 1996. The Company's option to purchase Corning's interest for its
book value is part of a shareholder agreement between the two companies in place
since 1988.
The Company expects to make approximately $30.6 million of additional capital
expenditures for approved projects within the next 24 months including
approximately $15.4 million to increase seating and construct luxury suites
along the "Superstretch" between turns two and three at Daytona International
Speedway, approximately $7.6 million to increase seating capacity and construct
luxury suites at the Company's Talladega and Darlington facilities, and
approximately $2 million attributable to the current renovation and furnishing
of the Company's new corporate headquarters.
Future Liquidity
The Company believes that the remaining $56.2 million in net proceeds of the
Class A Common Stock offering together with funds generated from operations will
be sufficient to satisfy the Company's working capital requirements through at
least fiscal 1997, as well as the Company's planned capital expenditures
described above.
The Company also believes that it will be able to obtain financing to fund the
acquisition, development and/or construction of additional motorsports
facilities, if necessary, should the Company implement this element of its
growth strategy. However, there can be no assurance that adequate debt or
equity financing will be available on satisfactory terms.
Income Taxes
Due to the seasonal fluctuation of the Company's business, Federal estimated tax
deposits historically have not been required until May 15th of each year. As a
result, income taxes payable at February 28, 1997 have increased since August
31, 1996.
As a result of a Winston Cup schedule change for one of the events conducted at
the Company's Talladega facility, management expects that quarterly estimated
tax deposits will be required in fiscal 1998.
The deferred income tax liability increased from August 31, 1996 primarily as a
result of differences between financial and tax accounting treatments relating
to depreciation expense and different bases in the equity investments for tax
and financial reporting purposes.
Inflation
Management does not believe that inflation has had a material impact on
operating costs and earnings of the Company.
Factors That May Affect Operating Results
Statements contained in this Report that state the Company's or Management's
anticipations, beliefs, expectations, hopes, intentions, predictions and/or
strategies which are not purely historical fact or which apply prospectively are
"forward-looking" statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21 of the Securities Exchange Act of 1934. All forward-
looking statements contained in this document are based on information available
to the Company on the date hereof, and the Company assumes no obligation to
update any such forward-looking statements. It is important to note that the
Company's actual results could differ materially from those contained or
projected in, or even implied by, such forward-looking statements. Some of the
factors that could cause the actual results to differ materially are set forth
below. Additional information concerning factors that could cause actual
results to differ materially from those in the forward-looking statements is
contained from time to time in the Company's SEC filings. Copies of those
filings are available from the Company and/or the SEC.
Dependency Upon NASCAR
The Company's success has been and will remain dependent upon maintaining a
good working relationship with NASCAR, the sanctioning body for Winston Cup,
Busch Series, Grand National Division ("Busch Grand National") and certain other
races promoted by the Company. The Company has sanctioning agreements to promote
and market seven Winston Cup races, five Busch Grand National races and a number
of other NASCAR races for the 1997 racing season. Each NASCAR event sanctioning
agreement is awarded on an annual basis. In the fiscal years ended August 31,
1995 and 1996, NASCAR-sanctioned races at the Company's facilities accounted for
approximately 79.5% and 78.3%, respectively, of the Company's total revenues.
Although William C. France and James C. France presently control both the
Company and NASCAR, and management believes that the Company will continue to
maintain an excellent relationship with NASCAR for the foreseeable future,
NASCAR is under no obligation to continue to enter into sanctioning agreements
with the Company to promote any event. Failure to obtain a sanctioning agreement
for a major NASCAR event would have a material adverse effect on the Company's
financial condition and results of operations. Moreover, although the Company's
general growth strategy includes the possible development and/or acquisition of
additional motorsports facilities, there can be no assurance that NASCAR will
enter into sanctioning agreements with the Company to promote races at such
facilities.
<PAGE>
Dependence on Key Personnel
The Company's continued success will depend upon the availability and
performance of its senior management team, particularly William C. France, the
Company's Chairman of the Board and Chief Executive Officer, James C. France,
its President and Chief Operating Officer, and Lesa D. Kennedy, its Executive
Vice President (collectively the "France Family Executives"), each of whom
possesses unique and extensive industry knowledge and experience. While the
Company believes that its senior management team has significant depth, the loss
of any of the Company's key personnel or its inability to attract and retain key
employees in the future could have a material adverse effect on the Company's
operations and business plans.
Industry Sponsorships And Government Regulation
The motorsports industry and the Company generate significant recurring
revenue from the promotion, sponsorship and advertising of various companies and
their products. Government regulation can adversely impact the availability to
motorsports of this promotion, sponsorship and advertising revenue. Advertising
by the tobacco and alcoholic beverage industries is generally subject to greater
governmental regulation than advertising by other sponsors of the Company's
events. In August 1996, the U.S. Food and Drug Administration (the "FDA") issued
regulations concerning advertising and sales of cigarettes and smokeless tobacco
to minors which would, in part, restrict tobacco industry sponsorship of all
sporting events, including motorsports, effective August 1998. The FDA
regulations prohibit the present practice of tobacco product brand name
sponsorship of, or identification with, motorsports events, entries and teams.
If these rules become effective, no assurance can be given that suitable
alternative sponsors for the events, entries and teams could be located.
Management is aware of pending legal challenges, as well as legislative
initiatives, which could change or prevent the scheduled implementation of these
regulations. However, the final outcome of the challenges to the regulations is
uncertain, and the ultimate impact on the motorsports industry and the Company,
if any, is unclear. The Company is not aware of any proposed governmental
regulation which would materially limit the availability to motorsports of
promotion, sponsorship or advertising revenue from the alcoholic beverage
industry. Advertising and sponsorship revenue from the tobacco and alcoholic
beverage industries accounted for approximately 1.6% and 1.5% of the Company's
total revenues in fiscal 1995 and 1996, respectively. In addition, the tobacco
and alcoholic beverage industries provide financial support to the motorsports
industry through, among other things, their purchase of advertising time, their
sponsorship of racing teams and their sponsorship of racing series such as
NASCAR's Winston Cup and Busch Grand National series.
Competition
The Company's racing events face competition from other spectator-oriented
sporting events and other leisure and recreational activities. As a result, the
Company's revenues will be affected by the general popularity of motorsports,
the availability of alternative forms of recreation and changing consumer
preferences. The Company's racing events also compete with other racing events
sanctioned by various racing bodies such as NASCAR, Championship Auto Racing
Teams, Inc. ("CART"), the United States Auto Club ("USAC"), the National Hot Rod
Association ("NHRA"), the Sports Car Club of America ("SCCA"), Professional
Sports Car Racing, Inc., the Automobile Racing Club of America ("ARCA") and
others. Management believes that the primary elements of competition in
attracting motorsports spectators and corporate sponsors to a racing event and
facility are the type and caliber of promoted racing events, facility location,
sight lines, pricing and customer conveniences that contribute to a total
entertainment experience. Many sports and entertainment businesses have
resources that exceed those of the Company.
Impact of Consumer Spending on Results
The success of the Company's operations depends to a significant extent upon a
number of factors relating to discretionary consumer spending, including
economic conditions affecting disposable consumer income such as employment,
business conditions, interest rates and taxation. These factors can impact both
attendance at the Company's events and the financial results of the motorsports
industry's principal sponsors. There can be no assurance that consumer spending
will not be adversely affected by economic conditions, thereby impacting the
Company's growth, revenue and profitability.
Uncertain Prospects of New Motorsports Facilities
The Company's growth strategy includes the potential acquisition and/or
development of new motorsports facilities. The Company's ability to implement
successfully this element of its growth strategy will depend on a number of
factors, including (i) the Company's ability to obtain one or more additional
sanctioning agreements to promote Winston Cup, Busch Grand National or other
major events at these new facilities, (ii) the cooperation of local government
officials, (iii) the Company's capital resources and the availability of debt or
equity financing on satisfactory terms, (iv) the Company's ability to control
construction and operating costs, and (v) the Company's ability to hire and
retain qualified personnel. The Company's inability to implement its expansion
plans for any reason would adversely affect its business prospects. In addition,
expenses associated with developing, constructing and opening a new facility may
have a negative effect on the Company's financial condition and results of
operations in one or more future reporting periods. At the present time, the
Company does not have any arrangement or understanding with respect to any new
facility acquisition or development project. The cost of any such transaction
will depend on a number of factors, including the facility's location, the
extent of the Company's ownership interest and the degree of any municipal or
other public support. Moreover, although management believes that it will be
able to obtain financing if necessary to fund the acquisition, development
and/or construction of additional motorsports facilities should the Company
implement this element of its growth strategy, there can be no assurance that
adequate debt or equity financing will be available on satisfactory terms.
Financial Impact of Bad Weather
The Company promotes outdoor motorsports events. Weather conditions affect
sales of, among other things, tickets, concessions and souvenirs at these
events. Although the Company sells tickets well in advance of its most popular
events, poor weather conditions could have a material adverse effect on the
Company's results of operations, particularly any interruption of the Company's
February "Speedweeks" events. For example, bad weather required the rescheduling
of certain racing events during the Company's 1996 Camel Motorcycle Week,
resulting in reduced revenues and increased expenses.
Liability for Personal Injuries
Motorsports can be dangerous to participants and to spectators. The Company
maintains insurance policies that provide coverage within limits that management
believes should generally be sufficient to protect the Company from material
financial loss due to liability for personal injuries sustained by persons on
the Company's premises in the ordinary course of Company business. Nevertheless,
there can be no assurance that such insurance will be adequate or available at
all times and in all circumstances. The Company's financial condition and
results of operations would be adversely affected to the extent claims and
associated expenses exceed insurance recoveries.
Environmental and Zoning Matters
Management believes that the Company's operations are in substantial
compliance with all applicable federal, state and local environmental laws and
regulations. Nonetheless, if damage to persons or property or contamination of
the environment is determined to have been caused or exacerbated by the conduct
of the Company's business or by pollutants, substances, contaminants or wastes
used, generated or disposed of by the Company, or which may be found on the
property of the Company, the Company may be held liable for such damage and may
be required to pay the cost of investigation and/or remediation of such
contamination or any related damage. The amount of such liability as to which
the Company is self-insured could be material. State and local laws relating to
the protection of the environment also include noise abatement laws that may be
applicable to the Company's racing events. Changes in the provisions or
application of federal, state or local environmental laws, regulations or
requirements, or the discovery of theretofore unknown conditions, could also
require additional material expenditures by the Company.
In addition, the development of new motorsports facilities (and, to a lesser
extent, the expansion of existing facilities) requires compliance with
applicable federal, state and local land use planning, zoning and environmental
regulations. Regulations governing the use and development of real estate may
prevent the Company from acquiring or developing prime locations for motorsports
facilities, substantially delay or complicate the process of improving existing
facilities, and/or materially increase the costs of any of such activities.
Legal Proceedings
The Company and its indirect subsidiary, Americrown Service Corporation, are
parties to certain Legal Proceedings (described below). While the Company and
Americrown dispute the allegations and intend to defend the actions fully and
vigorously, the cost of defending the suits is not insured. Management is
presently unable to predict or quantify the outcome of these matters.
But, there can be no assurance the defense of the suits, or a possible adverse
resolution, will not require material expenditures by the Company.
<PAGE>
Seasonality and Variability of Quarterly Results
The Company derives most of its income from event admissions and related
revenue from a limited number of NASCAR-sanctioned races. As a result, the
Company's business has been, and is expected to remain, highly seasonal based on
the timing of major race events. Historically, the Company has incurred net
losses in the fiscal quarter ending November 30, and achieved its highest net
income in the fiscal quarter ending February 28. Partly in response to this
seasonality and the desire to better conform to the traditional racing season,
the Company changed its fiscal year-end from August 31 to November 30
effective December 1, 1996.
<PAGE>
<PAGE>
Review Report of Independent Certified Public Accountants
The Board of Directors
International Speedway Corporation
We have reviewed the accompanying condensed consolidated balance sheet of
International Speedway Corporation as of February 28, 1997, and the related
condensed consolidated statements of operations, shareholders' equity and cash
flows for the three-month periods ended February 28, 1997 and February 29, 1996.
These financial statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, which
will be performed for the full year with the objective of expressing an
opinion regarding the financial statements taken as a whole. Accordingly, we
do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial
statements referred to above for them to be in conformity with generally
accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of International Speedway
Corporation as of August 31, 1996, and the related consolidated statements of
income, shareholders' equity and cash flows for the year then ended (not
presented separately herein) and in our report dated September 27, 1996, except
as to the fifth paragraph of Note 1, as to which the date is October 31, 1996,
and as to Note 8D, as to which the date is October 21, 1996, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of August 31, 1996, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
/s/ Ernst & Young LLP
Jacksonville, Florida
April 3, 1997
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On October 21, 1996, the Company's indirect corporate subsidiary, Americrown
Service Corporation ("Americrown"), was served with a Class Action Complaint
filed in the Circuit Court of Talladega County, Alabama by Howard Padgett, Bill
Lutz and Tommy Jones. The complaint was filed in September 1996 and alleged,
among other things, that Americrown engaged in price-fixing activities in
connection with the sale of racing souvenirs and merchandise at the Talladega
Superspeedway. The complaint seeks at least $500 for each member of the class
(persons buying racing souvenirs at Talladega Superspeedway since September
1992), but does not otherwise seek to recover compensatory or punitive damages
or statutory attorneys' fees. Although Americrown attempted to remove the suit
to Federal District Court, it has been remanded to the Circuit Court of
Talladega County, Alabama, where discovery is proceeding. Americrown disputes
the allegations and intends to defend the action fully and vigorously.
In March 1997, two purported class action companion lawsuits were filed in the
United States District Court, Northern District of Georgia, against the Company,
its indirect corporate subsidiary, Americrown Service Corporation, and a number
of other persons alleging, in substance, that the defendants unlawfully
conspired to fix prices of souvenirs and merchandise sold to consumers in
violation of federal antitrust laws. One suit was filed by Florida residents
and the other suit was filed by Georgia residents. Both suits seek damages and
injunctive relief on behalf of all persons who purchased souvenirs or
merchandise from certain vendors at any NASCAR Winston Cup stock car race or
supporting event in the United States during the period 1991 to present. The
Company and Americrown dispute the allegations and intend to defend the actions
fully and vigorously.
Management is presently unable to predict or quantify the outcome of these
matters.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
I. (27) - Article 5 Fin. Data Schedule for 1st Qtr 10-Q
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERNATIONAL SPEEDWAY CORPORATION
(Registrant)
Date April 14, 1997 /s/ James C. France
_____________________________________
James C. France, President
Date April 14, 1997 /s/ Susan G. Schandel
_____________________________________
Susan G. Schandel,
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE ACCOMPANYING CONDENSED CONSOLIDATED BALANCE SHEET OF INTERNATIONAL
SPEEDWAY CORPORATION AS OF FEBRUARY 28, 1997, AND THE RELATED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS, SHAREHOLDERS' EQUITY AND CASH FLOWS FOR
THE THREE-MONTH PERIODS ENDED FEBRUARY 28, 1997 AND FEBRUARY 29, 1996, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> Nov-30-1997
<PERIOD-START> Dec-01-1996
<PERIOD-END> Feb-28-1997
<PERIOD-TYPE> 3-MOS
<CASH> 14,743
<SECURITIES> 78,936
<RECEIVABLES> 11,926
<ALLOWANCES> 35
<INVENTORY> 1,596
<CURRENT-ASSETS> 109,723
<PP&E> 160,918
<DEPRECIATION> 41,175
<TOTAL-ASSETS> 259,902
<CURRENT-LIABILITIES> 47,053
<BONDS> 0
0
0
<COMMON> 385
<OTHER-SE> 196,843
<TOTAL-LIABILITY-AND-EQUITY> 259,902
<SALES> 51,647
<TOTAL-REVENUES> 51,866
<CGS> 16,644
<TOTAL-COSTS> 16,644
<OTHER-EXPENSES> 8,119
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 27,654
<INCOME-TAX> 10,179
<INCOME-CONTINUING> 17,475
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<NET-INCOME> 17,475
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