UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended August 31, 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, - 5,293,551 shares as of September 29, 1997
Class B Common Stock, - 33,203,411 shares as of September 29, 1997<PAGE>
<PAGE>
PART I. - FINANCIAL INFORMATION
Item 1. - Financial Statements
INTERNATIONAL SPEEDWAY CORPORATION
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
August 31, August 31,
1996 1997
(unaudited)
____________ _____________
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ................................... $ 9,042 $ 28,112
Short-term investments ...................................... 8,369 6,218
Receivables, less allowances of $35 ......................... 3,455 7,215
Inventories ................................................. 1,409 896
Prepaid expenses and other current assets ................... 2,410 3,729
____________ ____________
Total Current Assets ......................................... 24,685 46,170
Property and Equipment - at cost - less accumulated
depreciation of $51,219 ($36,912 at August 31, 1996)......... 98,835 155,615
Other Assets:
Equity investments (Notes 8 and 9) .......................... 27,256 45,354
Goodwill (Note 9) ........................................... 0 40,654
Cash surrender value of life insurance (Note 3).............. 1,214 2,450
Long-term investments ....................................... 500 500
Other ....................................................... 301 476
____________ ____________
29,271 89,434
____________ ____________
Total Assets ................................................. $152,791 $291,219
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable ............................................ $ 3,820 $ 5,830
Income taxes payable ........................................ 57 1,163
Deferred income ............................................. 25,963 42,196
Current portion of note payable ............................. 0 11,952
Other current liabilities ................................... 1,596 1,497
____________ ____________
Total Current Liabilities .................................... 31,436 62,638
Note payable ................................................. 0 2,039
Deferred income taxes ........................................ 14,688 18,759
Commitments and Contingencies (Note 7)
Shareholders' Equity (Notes 1 and 6)
Class A Common Stock, $.01 par value, 80,000,000 shares
authorized; 0 and 5,233,203 issued in 1996 and
1997, respectively ........................................ 0 52
Class B Common Stock, $.01 par value, 40,000,000 shares
authorized; 34,423,890 and 33,263,759 issued in 1996
and 1997, respectively .................................... 344 333
Additional paid-in capital .................................. 8,127 86,437
Retained earnings ........................................... 99,986 123,607
____________ ____________
108,457 210,429
Less unearned compensation-restricted stock (Note 5)......... 1,790 2,646
____________ ____________
Total Shareholders' Equity ................................... 106,667 207,783
____________ ____________
Total Liabilities and Shareholders' Equity ................... $152,791 $ 291,219
============ ============
</TABLE>
See accompanying notes and accountants' review report.
<PAGE>
<PAGE>
INTERNATIONAL SPEEDWAY CORPORATION
Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months ended
August 31, August 31,
1996 1997
(Unaudited) (Unaudited)
_________________________
(In Thousands, Except
Per Share Data)
<S> <C> <C>
REVENUES:
Admissions, net.................................... $12,405 $16,337
Motorsports related income......................... 6,373 11,159
Food, beverage and souvenir income................. 3,912 5,064
Other income....................................... 319 546
___________ __________
23,009 33,106
EXPENSES:
Direct expenses:
Prize and point fund monies
and NASCAR sanction fees....................... 3,708 5,718
Motorsports related expenses..................... 4,687 5,813
Food, beverage and souvenir expenses............. 2,185 2,941
General and administrative expenses................ 6,061 7,161
Depreciation....................................... 2,169 2,711
___________ __________
18,810 24,344
___________ __________
Operating income..................................... 4,199 8,762
Interest income, net ................................ 118 460
Equity in net income from equity investments......... 2,425 697
___________ __________
Income before income taxes........................... 6,742 9,919
Income taxes......................................... 1,947 3,934
___________ __________
Net Income........................................... $ 4,795 $5,985
=========== ==========
Earnings per share (Note 2).......................... $ 0.14 $0.16
=========== ==========
Dividends per share.................................. $ .05 $ .06
=========== ==========
</TABLE>
See accompanying notes and accountants' review report.<PAGE>
<PAGE>
INTERNATIONAL SPEEDWAY CORPORATION
Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
Nine Months ended
August 31, August 31,
1996 1997
(Unaudited) (Unaudited)
_________________________
(In Thousands, Except
Per Share Data)
<S> <C> <C>
REVENUES:
Admissions, net.................................... $46,514 $56,946
Motorsports related income......................... 24,404 37,033
Food, beverage and souvenir income................. 15,780 19,362
Other income....................................... 802 1,261
___________ __________
87,500 114,602
EXPENSES:
Direct expenses:
Prize and point fund monies
and NASCAR sanction fees....................... 12,423 16,831
Motorsports related expenses..................... 13,570 16,520
Food, beverage and souvenir expenses............. 9,023 11,264
General and administrative expenses................ 16,664 20,097
Depreciation....................................... 5,015 6,950
___________ __________
56,695 71,662
___________ __________
Operating income..................................... 30,805 42,940
Interest income, net ................................ 582 2,624
Equity in net income (loss) from equity investments.. 1,595 (95)
___________ __________
Income before income taxes........................... 32,982 45,469
Income taxes......................................... 12,281 17,523
___________ __________
Net Income........................................... $20,701 $27,946
=========== ==========
Earnings per share (Note 2).......................... $ 0.60 $ 0.73
=========== ==========
Dividends per share.................................. $ .05 $ .06
=========== ==========
</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 - 8/31/96:
Net income .......................... -- -- -- 19,681 -- 19,681
Cash dividends ......................
($.05 per share) ................... -- -- -- (1,836) -- (1,836)
Restricted stock granted (Note 5) ... -- 1 1,599 -- (1,600) --
Reacquisition of previously issued
common stock ....................... -- (1) (2) (1,705) -- (1,708)
Amortization of unearned compensation
(Note 5) ........................... -- -- -- -- 606 606
Recapitalization of equity investment -- -- 4,677 -- -- 4,677
-------- -------- -------- --------- ---------- ------------
BALANCE AT AUGUST 31, 1996 ............ -- 344 8,127 99,986 (1,790) 106,667
Activity 9/1/96 - 8/31/97:
Net income - unaudited................ -- -- -- 26,079 -- 26,079
Cash dividends ($.06 per share)
- unaudited........................... -- -- -- (2,310) -- (2,310)
Public offering -Class A Common Stock
(Notes 1 and 6) ...................... 40 -- 74,282 -- -- 74,322
Forfeiture of restricted shares -
unaudited........................... -- -- (218) -- 218 --
Increase in equity investment -
unaudited........................... -- -- 2,262 -- -- 2,262
Restricted stock granted - unaudited
(Note 5) ........................... -- 1 1,984 -- (1,985) --
Reacquisition of previously issued
common stock - unaudited............ -- -- -- (148) -- (148)
Conversion of Class B Common Stock to
Class A Common Stock - unaudited.... 12 (12) -- -- -- --
Amortization of unearned compensation-
unaudited (Note 5) ................. -- -- -- -- 911 911
-------- -------- -------- --------- ---------- ------------
Balance at August 31, 1997 - unaudited $ 52 $ 333 $86,437 $123,607 $(2,646) $207,783
======== ======== ======== ========= ========== ============
</TABLE>
See accompanying notes and accountants' review report.<PAGE>
<PAGE>
International Speedway Corporation
Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months ended
August 31, August 31,
1996 1997
(Unaudited) (Unaudited)
______________________________
(In Thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income...................................... $ 20,701 $ 27,946
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation................................ 5,015 6,950
Amortization of unearned compensation....... 526 789
Deferred income taxes....................... 1,948 3,325
Undistributed gain (loss) from .............
equity investments ....................... (1,557) 95
Gain on disposition of property and equipment (5) -
Changes in operating assets and liabilities:
Receivables................................. 201 (457)
Inventories................................. (378) 455
Prepaid expenses and other current assets... (409) (1,472)
Other assets................................ (133) (203)
Accounts payable............................ 1,236 2,212
Income taxes payable........................ (49) 1,076
Deferred income............................. 891 (351)
Other current liabilities................... 1,010 995
______________________________
Net cash provided by operating activities....... 28,997 41,360
INVESTING ACTIVITIES
Acquisition of investments.................... (70,515) (88,708)
Proceeds from maturities of investments....... 72,290 158,047
Capital expenditures.......................... (26,563) (25,467)
Cash surrender value of life insurance........ 15 (113)
Proceeds from sale of assets.................. 13 -
Acquisition of WGI interest, net of
cash acquired ............................... - (996)
Equity investments ........................... (312) (17,696)
Acquisition of PIR, net of cash acquired ..... - (43,868)
______________________________
Net cash used in investing activities........... (25,072) (18,801)
FINANCING ACTIVITIES
Reacquisition of previously issued common stock (1,708) (148)
Additional expense of Class A Common Stock
Offering..................................... - (46)
Cash dividends paid ........................... (1,836) (2,310)
______________________________
Net cash used in financing activities........... (3,544) (2,504)
______________________________
Net increase in cash and cash equivalents....... 381 20,055
Cash and cash equivalents at beginning of period 8,661 8,057
______________________________
Cash and cash equivalents at end of period ...... $ 9,042 $28,112
==============================
</TABLE>
See accompanying notes and accountants' review report.<PAGE>
<PAGE>
International Speedway Corporation
Notes to Condensed Consolidated Financial Statements
August 31, 1996 and August 31, 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 of
1996 information have been made to conform to the financial presentation at
August 31, 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 and nine-month periods ended August 31, 1996 and
August 31, 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 and nine-month periods ended August 31, 1996
were 34,423,890 and 34,455,364, respectively. Weighted average shares
outstanding for the three-month and nine-month periods ended August 31, 1997
were 38,496,962 and 38,486,404, 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 $3.3 million and $10.4 million for the three-
month and nine-month periods ended August 31, 1996, respectively, and
approximately $4.8 million and $13.8 million for the three-month and nine-month
periods ended August 31, 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 and nine-month periods
ended August 31, 1996, the Company recorded a net insurance expense of
approximately $200,000 and $369,000, respectively, representing the excess of
the premiums paid over the increase in cash surrender value of the policies
associated with these agreements. During the three-month and nine-month
periods ended August 31, 1997, premiums paid were approximately 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 nine months ended August 31,
1996 and August 31, 1997 are as follows:
1996 1997
________________________________
(Thousands of Dollars)
Income taxes paid $10,416 $12,985
================================
Interest paid $ -- $ 31
================================
<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 nine months
ended August 31, 1996 and 1997 was approximately $526,000 and $789,000,
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
million, after deduction of underwriting discounts and commissions and expenses
of the Offering. Approximately $7.8 million of the net proceeds of this
Offering was used to repay borrowings incurred under one of the Company's lines
of credit in September 1996. The Company used approximately $3.1 million of the
net proceeds to acquire the 50% interest it did not already own in Watkins Glen
International, Inc. ("WGI"), $43.8 million to acquire Phoenix International
Raceway ("PIR") and $16.1 million for equity investments in Homestead-Miami
Speedway, LLC ("HMS, LLC") and Grand Prix Association of Long Beach, Inc.
("GPLB"). The remaining net proceeds were used for working capital and other
general corporate purposes, including continued improvements to and expansion of
the Company's facilities and operations. Pending such uses, the Company had
invested the net proceeds of the Offering in short-term interest-bearing
obligations.
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 and the class certification process
are proceeding. Americrown disputes the allegations and intends to defend the
action fully and vigorously.
In March 1997, two purported class action companion lawsuits were filed in the
United States District Court, Northern District of Georgia, against the Company,
its indirect corporate subsidiary, Americrown Service Corporation, and a number
of other persons alleging, in substance, that the defendants unlawfully
conspired to fix prices of souvenirs and merchandise sold to consumers in
violation of federal antitrust laws. One suit was filed by Florida residents
and the other suit was filed by Georgia residents. Both suits seek damages and
injunctive relief on behalf of all persons who purchased souvenirs or
merchandise from certain vendors at any NASCAR Winston Cup stock car race or
supporting event in the United States during the period 1991 to present. The
two suits have been consolidated and the court has established a timetable to
consider class certification. Discovery is proceeding. The Company and
Americrown dispute the allegations and intend to defend the actions fully and
vigorously.
Management is presently unable to predict or quantify the outcome of these
matters.
8. Equity Investments
On May 19, 1997, Penske Motorsports, Inc. ("PMI") increased its ownership
interest in North Carolina Motor Speedway ("NCMS") from approximately 4.5% to
approximately 70% through the issuance of 906,542 shares of common stock valued
at $30 per share. As a result of PMI's increased investment in NCMS, the
Company recorded an increase in its equity investment in PSH Corp. of
approximately $3 million and recorded a corresponding increase in deferred
income taxes and additional paid in capital of approximately $1.2 million and
$1.8 million, respectively.
In July, 1997, the Company invested $11.8 million, plus related acquisition
costs, for a 40% interest in HMS, LLC, the operators of the Metro-Dade Homestead
Motorsports Complex.
On August 8, 1997, the Company invested $3.9 million, plus related acquisition
costs, for a 7.2% interest in GPLB, the operators of Grand Prix of Long Beach,
California, Gateway International Raceway in Madison, Illinois and Memphis
Motorsports Park in Millington, Tennessee.
The HMS, LLC and the GPLB transactions have been accounted for using the equity
method of accounting and are included in equity investments in the condensed
consolidated balance sheets, along with the Company's equity investment in PSH
Corp.
9. Acquisitions
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 was part of a shareholder agreement between the two companies in
place since 1988.
The Company's equity in WGI's net loss through March 31, 1997 is included in
equity in net income from equity investments at August 31, 1997. The
acquisition of the additional 50% interest was accounted for under the purchase
method. Subsequent to the acquisition on April 1, 1997, WGI is accounted for on
a consolidated basis.
On July 14, 1997, Phoenix Speedway Corporation ("PSC"), a newly formed wholly-
owned subsidiary of the Company, acquired substantially all of the assets
comprising the business and motorsports complex known as "Phoenix International
Raceway" from Phoenix International Raceway, Inc., Phoenix International
Raceway, L.L.C. and Phoenix International Raceway Limited Partnership for
consideration consisting of $46.4 million cash, notes payable and other
liabilities totaling $13.8 million, and related acquisition costs. PIR promotes
motorsports activities at its motorsports complex located outside of Phoenix,
Arizona. The PIR complex has a 1 mile oval track and a 1.51 mile road course.
PIR currently hosts an annual NASCAR Winston Cup Series and two NASCAR Craftsman
Truck Series events, an Indy Racing League event and a number of other events.
The PIR acquisition has been accounted for under the purchase method of
accounting, and accordingly, the results of operations have been included in the
Company's condensed consolidated statements of operations since the date of
acquisition. The purchase price was allocated to the assets and liabilities
acquired based on estimated fair values at the acquisition date. The excess of
the purchase price over the fair value of the net assets acquired was
approximately $40.8 million and has been recorded as goodwill, which is being
amortized on a straight line basis over 40 years.
The following unaudited pro forma financial information presents a summary of
consolidated results of operations as if the PIR transaction had occurred as of
December 1, 1995 after giving effect to certain adjustments, including
depreciation, amortization of goodwill, interest income, interest expense on
acquisition debt and related income tax effects. The pro forma results have
been prepared for comparative purposes only and do not purport to be indicative
of what would have occurred had the acquisition been made on that date, nor are
they necessarily indicative of results which may occur in the future.
(PRO FORMA)
(Unaudited)
Nine Months Ended
August 31,
1996 1997
____ ____
In Thousands
Total revenues $92,212 $119,363
Net income 18,935 25,635
Net income per share $ .55 $ .67
Because of the seasonal concentration of racing events, in particular the NASCAR
Winston Cup event which was held in October 1996 and will be held in November
1997, the pro forma results of operations for the nine months ended August 31,
1996 and 1997 are not indicative of the results to be expected for the year.
10. New Accounting Pronouncements
The Financial Accounting Standards Board has issued three new accounting
Standards which apply to the Company. Statement of Financial Accounting
Standards (SFAS) No. 128 "Earnings Per Share" is effective for financial
statements issued for periods ending after December 15, 1997. This statement
requires companies to present earnings per share on the face of the income
statement in two categories called "Basic" and "Diluted" and requires
restatement of all periods presented. The Company will adopt SFAS 128 during
the first quarter of 1998. Management believes the impact on earnings per share
will not be material.
In June 1997, SFAS No. 130, "Reporting Comprehensive Income" was issued. SFAS
No. 130 establishes standards for the reporting and display of comprehensive
income and its components in a full set of general-purpose financial statements
and is effective for fiscal years beginning after December 15, 1997. The
Company will adopt SFAS No. 130 in fiscal year 1999. SFAS No. 130 expands or
modifies disclosures and, accordingly, will have no impact on the Company's
reported financial position, results of operations or cash flows.
In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information" was issued. SFAS No. 131 establishes standards for the way
that public business enterprises report information about operating segments in
annual financial statements and reporting selected information about operating
segments in interim financial reports and is effective for fiscal years
beginning after December 15, 1997. The Company has not yet determined the
effect of SFAS No. 131 on its financial statement disclosures.
<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, admissions to the DAYTONA USA Velocitorium.
Admissions revenue for racing events is recorded upon completion of the related
motorsports event.
"Motorsports related income" includes television and radio broadcast rights
fees, promotion and sponsorship fees, advertising revenues, 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:
<TABLE>
<CAPTION>
Three Months ended Nine Months Ended
August 31, August 31,
1996 1997 1996 1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
_________________________ _________________________
<S> <C> <C> <C> <C>
Revenues:
Admissions, net............................. 53.9% 49.4% 53.2% 49.7%
Motorsports related income.................. 27.7 33.7 27.9 32.3
Food, beverage and souvenir income.......... 17.0 15.3 18.0 16.9
Other income................................ 1.4 1.6 .9 1.1
________ ________ ________ _______
Total revenues ........................... 100.0% 100.0% 100.0% 100.0%
Expenses:
Direct expenses:
Prize and point fund monies
and NASCAR sanction fees................ 16.1 17.3 14.2 14.7
Motorsports related expenses.............. 20.4 17.5 15.5 14.4
Food, beverage and souvenir expenses...... 9.5 8.9 10.3 9.8
General and administrative expenses......... 26.3 21.6 19.1 17.5
Depreciation................................ 9.4 8.2 5.7 6.1
________ ________ ________ _______
Total expenses ........................... 81.7 73.5 64.8 62.5
________ ________ ________ _______
Operating income.............................. 18.3 26.5 35.2 37.5
Interest income, net ......................... .5 1.4 .7 2.3
Equity in net income (loss) from equity
investments................................. 10.5 2.1 1.8 (.1)
________ ________ ________ _______
Income before income taxes.................... 29.3 30.0 37.7 39.7
Income tax expense............................ 8.5 11.9 14.0 15.3
________ ________ ________ _______
Net income.................................... 20.8% 18.1% 23.7% 24.4%
</TABLE>
The timing of events at the Company's facilities historically has been generally
consistent from year-to-year with the exception of the Labor Day events at
Darlington Raceway ("Darlington"). In the current year, however, schedule
changes at Talladega Superspeedway ("Talladega") and the acquisition of Watkins
Glen International ("Watkins Glen" or "WGI") also resulted in changes in certain
events conducted at the Company's facilities during the third fiscal quarter.
Darlington's Labor Day weekend schedule consists of a NASCAR Busch Series event
on Saturday and a NASCAR Winston Cup Series event on Sunday. These events
generally occur in September, however, from time-to-time, one or both of these
events may occur in August. In the current year, both Darlington Labor Day
Weekend events were held in August, while in the prior year, the NASCAR Busch
series event was conducted in August, and the NASCAR Winston Cup Series event
was held in September.
In the current year, scheduling changes related to certain events conducted at
Talladega Superspeedway shifted events between the second, third and fourth
quarters. In 1997, an ARCA event and a NASCAR Winston Cup event traditionally
run in the second and third fiscal quarters, respectively, were moved to the
fourth fiscal quarter, and a NASCAR Busch Series event traditionally run in the
third fiscal quarter was moved to the second fiscal quarter.
The increased ownership of Watkins Glen International ("Watkins Glen") and
related consolidation effective April 1, 1997 as discussed below under the
caption "Capital Expenditures" also resulted in additional events being
conducted in the third fiscal quarter of the current year as compared to the
prior year.
The net impact of these schedule changes, combined with increased attendance and
an increase in the weighted average price of tickets sold at the NASCAR Winston
Cup event held at Daytona International Speedway ("Daytona") during the third
quarter, accounted for substantially all of the $3.9 million, or 31.7%, increase
in admissions revenue for the three months ended August 31, 1997 as compared to
the three months ended August 31, 1996.
Admissions revenue increased approximately $10.4 million, or 22.4%, for the nine
months ended August 31, 1997 as compared to the same period of the prior year.
Increased seating capacity, attendance, and an increase in the weighted average
price of tickets sold for the February, March and May 1997 NASCAR events
conducted at Daytona, Darlington and Talladega, respectively, as well as
increased attendance and increases in certain ticket prices at the March 1997
motorcycle events conducted at Daytona, accounted for approximately half of the
increase. The remainder of the increase is attributable to the net impact of
the timing of events, as discussed above.
Motorsports related income increased approximately $4.8 million, or 75.1%,
during the three months ended August 31, 1997 as compared to the three months
ended August 31, 1996. The increase in motorsports related income is primarily
due to the net impact of the timing of events, as discussed above, hospitality
rentals related to the third quarter NASCAR Winston Cup event held at Daytona,
sponsorship fees related to DAYTONA USA and, to a lesser extent, advertising and
royalty revenue.
Motorsports related income increased approximately $12.6 million, or 51.7% for
the nine months ended August 31, 1997 as compared to the same period of the
prior year. The combined effect of the net impact of the timing of events, as
discussed above, and increases in TV and radio broadcast rights, promotion and
sponsorship fees, rentals of hospitality facilities and advertising related to
the February 1997 events conducted at Daytona accounted for approximately two
thirds of the increase. The remaining increase resulted primarily from
increased advertising revenue, promotion and sponsorship fees from DAYTONA USA
and royalties.
Food, beverage and souvenir income increased approximately $1.2 million, or
29.4%, for the quarter ended August 31, 1997 as compared to the same period of
the prior year. Increases due to third quarter events conducted at Watkins
Glen, the timing of the Labor Day NASCAR Winston Cup event held at Darlington
and increased attendance at the July 1997 event conducted at Daytona were
partially offset by the move of the NASCAR Winston Cup event at Talladega.
Food, beverage and souvenir income increased approximately $3.6 million, or
22.7%, for the nine months ended August 31, 1997 as compared to the same period
of the prior year. The net impact of the timing of events, as discussed above,
increased attendance at the February 1997 events conducted at Daytona, increased
attendance due to the rain out and rescheduling of the second quarter NASCAR
Winston Cup event conducted at Talladega and, to a lesser extent, increases in
certain prices accounted for over two-thirds of the increase. The remaining
increase resulted primarily from direct sales of souvenirs at the gift shop at
DAYTONA USA.
Prize and point fund monies and NASCAR sanction fees increased by approximately
$2 million, or 54.2%, during the quarter ended August 31, 1997 as compared to
the same period of the prior year. This increase is primarily attributable to
the net impact of third quarter events conducted at Watkins Glen, Darlington and
Talladega.
Prize and point fund monies and NASCAR sanction fees increased by approximately
$4.4 million, or 35.5%, for the nine months ended August 31, 1997 as compared to
the same period of the prior year. Over half of this increase is due to the net
impact of third quarter events conducted at Watkins Glen, Darlington and
Talladega. The remaining increase is primarily the result of increases in the
prize and point fund monies paid by NASCAR to participants in the Company's
events. This increase is 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 $1.1 million, or 24%,
during the three months ended August 31, 1997 as compared to the three months
ended May 31, 1996. This increase is attributable to direct race expenses
related to the third quarter events conducted at Watkins Glen, the timing of
Labor Day events at Darlington and increases in direct race expenses related to
the July 1997 NASCAR Winston Cup event at Daytona, partially offset by the
timing of the NASCAR Winston Cup event at Talladega.
Motorsports related expenses increased approximately $3 million, or 21.7%, for
the nine months ended August 31, 1997 as compared to the same period of the
prior year. This increase is primarily attributable to operating costs related
to the third quarter events held at Watkins Glen, increases in direct race
expenses related to the February events conducted at Daytona, increases in
operating costs related to the rainout and rescheduling of Talladega's second
quarter NASCAR Winston Cup event and, to a lesser extent, the operation of
DAYTONA USA.
As food, beverage and souvenir income increases, the Company experiences a
corresponding increase in related expenses. Food, beverage and souvenir
expenses remained relatively constant as a percentage of food, beverage and
souvenir income during the three and nine months ended August 31, 1997 with
increases of approximately $750,000, or 34.6%, and $2.2 million, or 24.8%,
respectively.
General and administrative expenses increased approximately $1.1 million, or
18.1%, and $3.4 million, or 20.6%, during the three months and nine months ended
August 31, 1997, respectively, as compared to the same periods of the prior
year. The increases are due to the acquisition of Phoenix International Raceway
("PIR"), the consolidation of Watkins Glen and compensation, professional fees
and a wide variety of other expenses related to the ongoing expansion of the
Company's business. These increases were partially offset by the timing of
certain incentive compensation which resulted in a decrease in general and
administrative expenses as a percentage of total revenue during these periods.
The Company's depreciation expense increased approximately $550,000, or 25%, and
$1.9 million, or 38.6%, during the three-month and nine-month periods ended
August 31, 1997 as compared to the same periods of the prior year, primarily as
a result of DAYTONA USA, the ongoing expansion of the Company's motorsports
facilities and, during the third quarter, amortization of goodwill related to
the acquisition of Phoenix International Raceway. This increase was partially
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 at the beginning of the current fiscal year.
The approximately $350,000 and $2.2 million increase in the Company's net
interest income during the three months and nine months ended August 31, 1997,
respectively, as compared to the same periods of the prior year is attributable
primarily to the investment of proceeds from the November 1996 Class A Common
Stock offering.
Equity in net income from equity investments represents the Company's prorata
share of the current income and losses from its 50% investment in Watkins Glen
through March 31, 1997, its 40% investment in Homestead-Miami Speedway, LLC
("HMS, LLC"), its 7% investment in the Grand Prix Association of Long Beach,
Inc. ("GPLB") and its 20% investment in PSH Corp. which are accounted for using
the equity method of accounting. Subsequent to the Company's April 1, 1997
acquisition of the 50% interest in WGI that it did not already own, WGI is
accounted for on a consolidated basis.
As a result of the foregoing, the Company's net income increased approximately
$1.2 million, or 24.8%, and $7.2 million, or 35%, during the three months and
nine months ended August 31, 1997, respectively, as compared to the same periods
of the prior year.
Liquidity and Capital Resources
General
The Company has historically generated sufficient cash flow from operations to
fund its working capital needs and capital expenditures at existing facilities,
as well as to pay annual cash dividends. At August 31, 1997, the Company had a
working capital deficit of $16.5 million, compared to a working capital deficit
of $6.7 million at August 31, 1996, which is primarily attributable to the
funding of the Company's purchase of Phoenix International Raceway and its
investments in HMS, LLC and GPLB as described below under the caption "Capital
Expenditures".
The Company also has a $10 million line of credit with a financial institution
which expires in December 1997. There were no borrowings under the Company's
credit facility at August 31, 1997.
Cash Flows
Net cash provided by operating activities was approximately $41.4 million for
the nine months ended August 31, 1997, as compared to $29.0 million for the nine
months ended August 31, 1996. The difference between the Company's August 31,
1997 net income of $27.9 million and the $41.4 million of operating cash flow
was primarily attributable to a combined increase of $4.3 million in accounts
payable, income taxes payable and other current liabilities, $7 million in
depreciation, and a $3.3 million increase in deferred income taxes, partially
offset by a $1.5 million increase in prepaid expenses and other current assets.
Net cash used in investing activities was $18.8 million for the nine months
ended August 31, 1997, compared to $25 million for the nine months ended August
31, 1996. The Company's use of cash for investing activities for the nine
months ended August 31, 1997 reflects $43.8 million for the purchase of PIR,
$25.5 million in capital expenditures, $16.1 million for the Company's
investments in HMS, LLC and GPLB, a $1.5 million investment in the stock of
Penske Motorsports, Inc. (PMI) and $1 million, net of cash acquired, for the
Company's acquisition of the 50% interest in WGI that it did not already own,
partially offset by net proceeds from maturities of investments of $69.3
million. See "Capital Expenditures".
Net cash used in financing activities was approximately $2.5 million for the
nine months ended August 31, 1997, compared to the nine months ended August 31,
1996. The use of cash in financing activities for the nine months ended August
31, 1997 is primarily attributable to $2.3 million in cash dividends.
Capital Expenditures
Capital expenditures totaled $25.5 million for the nine months ended August 31,
1997, compared to $26.6 million for the nine months ended August 31, 1996.
Capital expenditures during the nine months ended August 31, 1997 related
primarily to additions to spectator capacity at Daytona, Talladega and
Darlington and renovation of the Company's new corporate headquarters.
The Company expects to make approximately $38.7 million of additional capital
expenditures for approved projects within the next 24 months to increase seating
capacity at its superspeedways, to construct luxury suites and to add track
lighting at Daytona and for a number of other improvements to the Company's
motorsports facilities.
On April 1, 1997, the Company exercised its contractual option to acquire the
50% interest it did not already own in Watkins Glen from Corning, Inc. for
approximately $3.1 million. The transaction price represented the stock's book
value at December 31, 1996. The Company's option to purchase Corning's interest
for its book value was part of a shareholder agreement between the two companies
in place since 1988.
During the third quarter, the Company established its presence in South Florida,
as well as on the West Coast and in Midwestern markets through investments in
HMS, LLC and GPLB. In July of 1997, the Company invested $11.8 million for a
40% interest in HMS, LLC, the operators of the Metro-Dade Homestead Motorsports
Complex. The Company invested $3.9 million in August of 1997 for a 7.2%
interest in GPLB, the operators of Grand Prix of Long Beach, California, Gateway
International Raceway in Madison, Illinois and Memphis Motorsports Park in
Millington, Tennessee. PMI, in which the Company holds an 11% indirect
interest, also acquired interests of 40% and 7.2% in HMS, LLC and GPLB,
respectively.
The HMS, LLC and GPLB transactions have been accounted for using the equity
method of accounting and are included in equity investments along with the
Company's investment in PSH Corp.
Future Liquidity
The Company believes that funds generated from operations, along with funds
available under the existing line of credit, if necessary, 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
The change in income taxes payable at August 31, 1997, as compared to August 31,
1996, is due to the seasonal nature of the Company's business and the timing and
amount of estimated tax deposits.
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.
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. The timing of major events from
year-to-year, for example, or the move of a date from one quarter to another,
may impact these historical trends. 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.
Dependency Upon NASCAR
The Company's success has been and will primarily remain dependent upon
maintaining a good working relationship with NASCAR, the sanctioning body for
NASCAR Winston Cup, NASCAR Busch Series, and certain other races promoted by the
Company. The Company has sanctioning agreements to promote and market eight
NASCAR Winston Cup Series Championship races, five NASCAR Busch Series 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 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.
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. The tobacco industry has reached a widely publicized settlement of
pending liability lawsuits which would have an effect similar to the pending FDA
regulations. This proposed settlement would require legislative approval and
enabling legislation. However, the final outcome of the challenges to the FDA
regulations or the implementation of the proposed settlement 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
NASCAR's Busch 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 NASCAR Winston Cup, NASCAR Busch Series 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. 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 March Motorcycle Week at
Daytona, 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 in "Part II - Other
Information". 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>
<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 August 31, 1997, and the related
condensed consolidated statements of operations, shareholders' equity and cash
flows for the three-month and nine-month periods ended August 31, 1997 and
August 31, 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
October 7, 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 and the class certification process
are proceeding. Americrown disputes the allegations and intends to defend the
action fully and vigorously.
In March 1997, two purported class action companion lawsuits were filed in the
United States District Court, Northern District of Georgia, against the Company,
its indirect corporate subsidiary, Americrown Service Corporation, and a number
of other persons alleging, in substance, that the defendants unlawfully
conspired to fix prices of souvenirs and merchandise sold to consumers in
violation of federal antitrust laws. One suit was filed by Florida residents
and the other suit was filed by Georgia residents. Both suits seek damages and
injunctive relief on behalf of all persons who purchased souvenirs or
merchandise from certain vendors at any NASCAR Winston Cup stock car race or
supporting event in the United States during the period 1991 to present. The
two suits have been consolidated and the court has established a timetable to
consider class certification. Discovery is proceeding. The Company and
Americrown dispute the allegations and intend to defend the actions fully and
vigorously.
Management is presently unable to predict or quantify the outcome of these
matters.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
I. (27) - Article 5 Fin. Data Schedule for 3rd 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 October 14, 1997 /s/ James C. France
_____________________________________
James C. France, President
Date October 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 AUGUST 31, 1997, AND THE RELATED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS, SHAREHOLDERS' EQUITY AND CASH FLOWS FOR
THE NINE-MONTH PERIOD ENDED AUGUST 31, 1997, 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> Aug-31-1997
<PERIOD-TYPE> 9-MOS
<CASH> 28,112
<SECURITIES> 6,218
<RECEIVABLES> 7,250
<ALLOWANCES> 35
<INVENTORY> 896
<CURRENT-ASSETS> 46,170
<PP&E> 206,834
<DEPRECIATION> 51,219
<TOTAL-ASSETS> 291,219
<CURRENT-LIABILITIES> 62,638
<BONDS> 0
0
0
<COMMON> 385
<OTHER-SE> 207,398
<TOTAL-LIABILITY-AND-EQUITY> 291,219
<SALES> 113,341
<TOTAL-REVENUES> 114,602
<CGS> 44,615
<TOTAL-COSTS> 44,615
<OTHER-EXPENSES> 27,047
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 198
<INCOME-PRETAX> 45,469
<INCOME-TAX> 17,523
<INCOME-CONTINUING> 27,946
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,946
<EPS-PRIMARY> .73
<EPS-DILUTED> .73
</TABLE>
