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, 1998.
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, - 10,867,947 shares as of September 30, 1998
Class B Common Stock, - 32,234,686 shares as of September 30, 1998
<PAGE>
PART I. - FINANCIAL INFORMATION
Item 1. - Financial Statements
INTERNATIONAL SPEEDWAY CORPORATION
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
November 30, August 31,
1997 1998
(Unaudited)
-------------- -------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ................................... $ 9,974 $ 151,364
Short-term investments ...................................... 23,601 7,738
Receivables, less allowances of $100 ........................ 7,425 13,532
Inventories ................................................. 866 1,706
Prepaid expenses and other current assets ................... 4,077 12,356
------------ ------------
Total Current Assets ......................................... 45,943 $ 186,696
Property and Equipment - at cost - less accumulated
depreciation of $53,917 and $62,614 at November 30
and August 31, respectively ................................. 166,078 194,940
Other Assets:
Cash surrender value of life insurance ...................... 3,590 3,732
Equity investments .......................................... 45,844 45,079
Goodwill, less accumulated amortization of $382 and
$1,148 at November 30 and August 31, respectively ........... 40,400 39,634
Long-term investments ....................................... 500 500
Other ....................................................... 468 799
------------ ------------
90,802 89,744
------------ ------------
Total Assets ................................................. $302,823 $ 471,380
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable ............................................ $ 6,898 $ 5,921
Deferred income ............................................. 49,338 82,053
Current portion of note payable ............................. 13,295 1,656
Other current liabilities ................................... 1,388 3,330
------------ ------------
Total Current Liabilities .................................... 70,919 92,960
Notes payable ................................................ 1,007 2,775
Deferred income taxes ........................................ 20,990 24,904
Commitments and Contingencies (Note 5)
Shareholders' Equity
Class A Common Stock, $.01 par value, 80,000,000 shares
authorized; 5,342,042 and 10,460,100 issued at November 30
and August 31, respectively ............................... 53 105
Class B Common Stock, $.01 par value, 40,000,000 shares
authorized; 33,154,920 and 32,642,533 issued at November 30
and August 31, respectively ............................... 332 326
Additional paid-in capital .................................. 86,437 205,211
Retained earnings ........................................... 125,457 147,260
------------ ------------
212,279 352,902
Less unearned compensation-restricted stock ................. 2,372 2,161
------------ ------------
Total Shareholders' Equity ................................... 209,907 350,741
------------ ------------
Total Liabilities and Shareholders' Equity ................... $302,823 $ 471,380
============ ============
</TABLE>
See accompanying notes.
<PAGE>
<PAGE>
INTERNATIONAL SPEEDWAY CORPORATION
Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months ended
August 31, August 31,
1997 1998
(Unaudited) (Unaudited)
_________________________
(In Thousands, Except
Per Share Data)
<S> <C> <C>
REVENUES:
Admissions, net.................................... $16,337 $ 5,184
Motorsports related income......................... 11,159 9,187
Food, beverage and souvenir income................. 5,064 3,054
Other income....................................... 546 397
___________ __________
33,106 17,822
EXPENSES:
Direct expenses:
Prize and point fund monies
and NASCAR sanction fees....................... 5,718 2,443
Motorsports related expenses..................... 5,813 5,449
Food, beverage and souvenir expenses............. 2,941 2,288
General and administrative expenses................ 7,161 9,020
Depreciation and amortization ..................... 2,711 3,309
___________ __________
24,344 22,509
___________ __________
Operating income (loss).............................. 8,762 (4,687)
Interest income, net ................................ 460 1,385
Equity in net income from equity investments ........ 697 131
___________ __________
Income (loss) before income taxes.................... 9,919 (3,171)
Income taxes (benefit) .............................. 3,934 (1,227)
___________ __________
Net income (loss) ................................... $ 5,985 $(1,944)
=========== ==========
Basic net income (loss) per share (Note 2) .......... $ 0.16 $( .05)
=========== ==========
Diluted net income (loss) per share (Note 2) ........ $ 0.16 $( .05)
=========== ==========
Dividends per share.................................. $ 0.00 $ 0.00
=========== ==========
</TABLE>
See accompanying notes.
<PAGE>
<PAGE>
INTERNATIONAL SPEEDWAY CORPORATION
Condensed Consolidated Statements of Income
<TABLE>
<CAPTION>
Nine Months ended
August 31, August 31,
1997 1998
(Unaudited) (Unaudited)
_________________________
(In Thousands, Except
Per Share Data)
<S> <C> <C>
REVENUES:
Admissions, net.................................... $ 56,946 $ 54,432
Motorsports related income......................... 37,033 50,104
Food, beverage and souvenir income................. 19,362 18,666
Other income....................................... 1,261 1,095
___________ ___________
114,602 124,297
EXPENSES:
Direct expenses:
Prize and point fund monies
and NASCAR sanction fees....................... 16,831 19,727
Motorsports related expenses..................... 16,520 22,119
Food, beverage and souvenir expenses............. 11,264 10,396
General and administrative expenses................ 20,097 26,365
Depreciation and amortization ..................... 6,950 9,593
___________ ___________
71,662 88,200
___________ ___________
Operating income..................................... 42,940 36,097
Interest income, net ................................ 2,624 2,013
Equity in net loss from equity investments........... (95) (111)
Gain on sale of equity investment ................... -- 1,245
___________ ___________
Income before income taxes........................... 45,469 39,244
Income taxes......................................... 17,523 14,993
___________ ___________
Net income........................................... $ 27,946 $ 24,251
=========== ===========
Basic net income per share (Note 2) ................. $ 0.73 $ 0.62
=========== ===========
Diluted net income per share (Note 2) ............... $ 0.73 $ 0.62
=========== ===========
Dividends per share.................................. $ 0.06 $ 0.06
=========== ===========
</TABLE>
See accompanying notes.
<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 NOVEMBER 30, 1996 ........... $ 40 $344 $82,236 $ 98,119 $(1,450) $179,289
Activity 12/1/96 - 8/31/97 - unaudited:
Net income ........................... -- -- -- 27,946 -- 27,946
Cash dividends ($.06 per share) -- -- -- (2,310) -- (2,310)
Additional expense of Class A Common
Stock Offering ..................... -- -- (46) -- -- (46)
Increase in equity investment ........ -- -- 2,263 -- -- 2,263
Restricted stock granted ............. -- 1 1,984 -- (1,985) --
Reacquisition of previously issued
common stock ....................... -- -- -- (148) -- (148)
Conversion of Class B Common Stock to
Class A Common Stock ............... 12 (12) -- -- -- --
Amortization of unearned compensation. -- -- -- -- 789 789
-------- -------- -------- --------- ---------- ------------
BALANCE AT AUGUST 31, 1997 - UNAUDITED 52 333 86,437 123,607 (2,646) 207,783
Activity 9/1/97 - 11/30/97 - unaudited:
Net income ........................... -- -- -- 1,850 -- 1,850
Conversion of Class B Common Stock to
Class A Common Stock ............... 1 (1) -- -- -- --
Amortization of unearned compensation. -- -- -- -- 274 274
-------- -------- -------- --------- ---------- ------------
BALANCE AT NOVEMBER 30, 1997 ........... 53 332 86,437 125,457 (2,372) 209,907
Activity 12/1/97 - 8/31/98 - unaudited:
Net income ........................... -- -- -- 24,251 24,251
Public offering - Class A Common Stock 46 - 117,654 -- -- 117,700
Cash dividends ($.06 per share) - -- -- (2,310) -- (2,310)
Increase in equity investment ........ - -- 115 -- -- 115
Restricted stock granted ............. -- -- 680 -- (680) --
Reacquisition of previously issued
common stock ....................... -- -- (57) (138) -- (195)
Conversion of Class B Common Stock to
Class A Common Stock ............... 6 (6) -- -- -- --
Forfeiture of restricted shares ...... -- -- (110) -- 110 --
Income tax benefit related to restricted
stock plan ......................... -- -- 492 -- -- 492
Amortization of unearned compensation. -- -- -- -- 781 781
-------- -------- --------- --------- ---------- ------------
BALANCE AT AUGUST 31, 1998 - UNAUDITED $ 105 $326 $205,211 $147,260 $(2,161) $350,741
======== ======== ========= ========= ========== ============
</TABLE>
See accompanying notes.
<PAGE>
<PAGE>
International Speedway Corporation
Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months ended
August 31, August 31,
1997 1998
(Unaudited) (Unaudited)
______________________________
(In Thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income...................................... $ 27,946 $ 24,251
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization .............. 6,950 9,593
Amortization of unearned compensation....... 789 781
Deferred income taxes....................... 3,325 4,138
Undistributed loss from equity investments . 95 111
Gain on sale of equity investment .......... (1,245)
Changes in Operating Assets and Liabilities:
Receivables................................. (457) (6,107)
Inventories................................. 455 (840)
Prepaid expenses and other current assets... (1,472) (8,279)
Other assets................................ (203) (351)
Accounts payable............................ 2,212 (978)
Deferred income............................. (351) 32,715
Other current liabilities................... 2,071 2,549
______________________________
Net Cash Provided by Operating Activities....... 41,360 56,338
INVESTING ACTIVITIES
Acquisition of investments.................... (88,708) (142,058)
Proceeds from maturities of investments....... 158,047 157,921
Capital expenditures.......................... (25,467) (37,667)
Cash surrender value of life insurance........ (113) (142)
Proceeds from sale of equity investment....... -- 5,270
Acquisition of Watkins Glen interest,
net of cash.................................. (996)
Acquisition of Phoenix, net of cash .......... (43,868)
Additional investments in equity investments.. (17,696) (410)
________________________________
Net Cash Used in
Investing Activities.......................... (18,801) (17,086)
FINANCING ACTIVITIES
Payment of notes payable -- (13,057)
Reacquisition of previously issued
common stock................................. (148) (195)
Issuance of Class A Common Stock 117,700
Additional expense of Class A Common Stock
Offering..................................... (46) -
Cash dividends paid ........................... (2,310) (2,310)
________________________________
Net Cash (Used in) Provided by
Financing Activities......................... (2,504) 102,138
________________________________
Net Increase in Cash and Cash Equivalents ...... 20,055 141,390
Cash and Cash Equivalents at Beginning of Period 8,057 9,974
________________________________
Cash and Cash Equivalents at End of Period ...... $ 28,112 $151,364
================================
</TABLE>
See accompanying notes.<PAGE>
<PAGE>
International Speedway Corporation
Notes to Condensed Consolidated Financial Statements
August 31, 1998
(Unaudited)
NOTE 1. -- BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been prepared
in compliance with Rule 10-01 of Regulation S-X and generally accepted
accounting principles but do not include all of the information and disclosures
required for complete financial statements. The statements should be read in
conjunction with the consolidated financial statements and notes thereto
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 August 31, 1998.
Because of the seasonal concentration of racing events, the results of
operations for the three-month and nine-month periods ended August 31, 1997 and
August 31, 1998 are not indicative of the results to be expected for the year.
Note 2. -- EARNINGS PER SHARE
The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share", during the first quarter of fiscal 1998. This statement
requires the Company to present "Basic" and "Diluted" earnings per share on the
face of the income statement for current periods and to restate earnings per
share for prior periods. Weighted average shares outstanding for the periods
presented are:
Basic Diluted
---------- ----------
Three months ended August 31, 1997 38,189,652 38,329,197
Nine months ended August 31, 1997 38,184,085 38,314,226
Three months ended August 31, 1998 40,864,391 40,864,391
Nine months ended August 31, 1998 39,100,175 39,259,164
The difference between basic weighted average shares and diluted weighted
average shares is related to shares issued under the Company's Long-term
Incentive Stock Plans, using the treasury stock method as prescribed by the
standard.
NOTE 3. -- RELATED PARTY DISCLOSURES AND TRANSACTIONS
All of the racing events that take place during the Company's fiscal year are
sanctioned by various racing organizations such as the American Historic Racing
Motorcycle Association ("AHRMA"), the American Motorcyclist Association ("AMA"),
the Automobile Racing Club of America ("ARCA"), the Championship Cup Series
("CCS"), the Federation Internationale de l'Automobile ("FIA"), the Federation
Internationale Motocycliste ("FIM"), the International Race of Champions
("IROC"), the Indy Racing League ("IRL"), the Sports Car Club of America
<PAGE>
("SCCA"), the Sportscar Vintage Racing Association ("SVRA"), the United States
Auto Club ("USAC"), the United States Road Racing Championship ("USRRC"), the
World Karting Association ("WKA"), and the National Association for Stock Car
Auto Racing, Inc. ("NASCAR"). NASCAR, which sanctions some of the Company's
principal racing events, is a member of the France Family Group which controls
in excess of 55% of the combined voting power of both classes of Common 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 $4.8 million and $13.8 million for the
three-month and nine-month periods ended August 31, 1997, respectively, and
approximately $1.9 million and $15.8 million for the three-month and nine-month
periods ended August 31, 1998, respectively.
NOTE 4. -- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for income taxes and interest for the nine months ended August 31,
1997 and August 31, 1998 is as follows:
1997 1998
________________________________
(Thousands of Dollars)
Income taxes paid $12,985 $12,385
================================
Interest paid $ 31 $ 926
================================
NOTE 5. -- LEGAL PROCEEDINGS
The Company is from time to time a party to routine litigation incidental to its
business. Management does not believe that the resolution of any or all of such
litigation is likely to have a material adverse effect on the Company's
financial condition or results of operations. In addition to such routine
litigation incident to its business the Company faces exposure from other legal
proceedings as described below.
The Company's indirect corporate subsidiary, Americrown Service Corporation
("Americrown"), is the sole defendant in a class action proceeding in the
Circuit Court of Talladega County, Alabama which was filed in October 1996. The
plaintiffs allege, 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 suit seeks to recover at least $500 for each
member of the class but does not otherwise seek to recover compensatory or
punitive damages or statutory attorneys' fees. A class consisting of persons
who purchased racing souvenirs at Talladega Superspeedway since September 1992
was certified on July 30, 1998 by the court. Americrown has moved for
reconsideration and intends to appeal the ruling to the Alabama Supreme Court.
Americrown disputes the allegations and intends to defend the action fully and
vigorously.
In March 1997, two purported class action companion lawsuits were filed in the
United States District Court, Northern District of Georgia, against the Company,
Americrown, and a number of other persons alleging, in substance, that the
defendants unlawfully conspired to fix prices of souvenirs and merchandise sold
to consumers in violation of federal antitrust laws. One suit was filed by
Florida residents and the other suit was filed by Georgia residents. Both suits
seek damages and injunctive relief on behalf of all persons who purchased
souvenirs or merchandise from certain vendors at any NASCAR Winston Cup 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
NOTE 6. -- ACQUISITION
On July 14, 1997, Phoenix Speedway Corporation, a newly formed wholly-owned
subsidiary of the Company, acquired substantially all of the assets comprising
the business and motorsports complex known as "Phoenix International Raceway"
from Phoenix International Raceway, Inc., Phoenix International Raceway,
L.L.C. and Phoenix International Raceway Limited Partnership. The acquisition
has been accounted for under the purchase method of accounting, and accordingly,
the results of operations have been included in the Company's consolidated
statements of operations since the date of acquisition.
The following unaudited pro forma financial information presents a summary of
consolidated results of operations as if the acquisition had occurred as of
December 1, 1996 after giving effect to certain adjustments, including
depreciation, amortization of goodwill, interest income, interest expense on
acquisition debt and related income tax effects. The pro forma results have
been prepared for comparative purposes only and do not purport to be indicative
of what would have occurred had the acquisition been made on that date, nor are
they necessarily indicative of results which may occur in the future.
Pro forma - unaudited
for the nine months
ended August 31, 1997
________________________
Total revenues $ 119,363
Net income 25,635
Basic net income per share .67
Diluted net income per share .67
NOTE 7. -- EQUITY INVESTMENTS
In March, 1998, the Company sold its entire equity interest in Grand Prix
Association of Long Beach, Inc. ("Long Beach") for approximately $5.3 million.
The Company acquired its position in Long Beach through a series of transactions
during 1997. The Company recorded a pre-tax gain of approximately $1.2 million
from the sale.
In March of 1998, the Company acquired an additional 5% ownership interest in
the Metro-Dade Homestead Motorsports Complex ("Homestead") for approximately
$2.8 million, which was substantially financed by a 7.5% interest bearing note,
payable on December 31, 2001. The borrower has the option of calling $500,000
of this Note on December 31, 2000. This acquisition increased the Company's
ownership of Homestead to 45%.
NOTE 8. -- LONG-TERM INCENTIVE STOCK PLANS
On April 1, 1998 a total of 22,236 restricted shares of the Company's Class A
Common Stock were awarded to certain officers and managers under the Company's
Long-term Incentive Plan (the "1996 Plan"). The market value of shares awarded
amounted to approximately $680,000, 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 period of the
shares. The total expense for restricted stock awards charged against
operations during the nine months ended August 31, 1997 and August 31, 1998 was
approximately $789,000 and $781,000, respectively.
NOTE 9. -- CREDIT FACILITY
In May of 1998, the Company entered into a five-year, unsecured, $100 million
revolving line of credit facility. Borrowings under the Credit Facility will
bear interest at the applicable LIBOR rate plus 40-80 basis points depending on
certain financial criteria. The Credit Facility includes customary
representations and warranties, covenants, defaults and conditions. At August
31, 1998 there were no borrowings under the Credit Facility.
NOTE 10 -- CLASS A COMMON STOCK OFFERING
During July of 1998 the Company sold an additional 4,600,000 shares of Class A
Common Stock in a primary offering, including the Underwriters' over-allotment,
at a price to the public of $27.00. The net proceeds to the Company were
approximately $117.7 million, after deduction of underwriting discounts and
commissions and estimated expenses of the offering. The Company intends to use
the net proceeds of the offering to fund its estimated investment in the
proposed Kansas International Speedway, as well as to partially fund completion
of additions and improvements to the Company's existing motorsports facilities,
and for working capital and other corporate purposes.
<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 and
motorsports activities held at its facilities, (ii) revenue generated in
conjunction with or as a result of motorsports events and activities conducted
at the Company's facilities, and (iii) catering, concession and souvenir sales
made during or as a result of such events and activities.
"Admissions" revenue includes ticket sales from all of the Company's events,
track tours and the DAYTONA USA Velocitorium. Admissions revenue for racing
events is recorded upon completion of the related motorsports event.
"Motorsports related income" includes television and radio broadcast rights
fees, promotion and sponsorship fees, hospitality rentals (including luxury
suites and chalets), advertising revenues, royalties from licenses of the
Company's trademarks, and track rentals. The Company negotiates directly with
television and cable networks for coverage of substantially all of its televised
motorsports events. The Company's revenues from corporate sponsorships are paid
in accordance with negotiated contracts, with the identities of sponsors and the
terms of sponsorship changing from time to time.
"Food, beverage and souvenir income" includes revenues from concession stands,
hospitality catering and direct sales of souvenirs, programs and other
merchandise, as well as fees paid by third party vendors for the right to sell
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,
1997 1998 1997 1998
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
_________________________ _________________________
<S> <C> <C> <C> <C>
Revenues:
Admissions, net............................. 49.4% 29.1% 49.7% 43.8%
Motorsports related income.................. 33.7 51.6 32.3 40.3
Food, beverage and souvenir income.......... 15.3 17.1 16.9 15.0
Other income................................ 1.6 2.2 1.1 0.9
________ ________ ________ _______
Total revenues ........................... 100.0% 100.0% 100.0% 100.0%
Expenses:
Direct expenses:
Prize and point fund monies
and NASCAR sanction fees................ 17.3 13.7 14.7 15.9
Motorsports related expenses.............. 17.5 30.6 14.4 17.8
Food, beverage and souvenir expenses...... 8.9 12.8 9.8 8.4
General and administrative expenses......... 21.6 50.6 17.5 21.2
Depreciation and amortization .............. 8.2 18.6 6.1 7.7
________ ________ ________ _______
Total expenses ........................... 73.5 126.3 62.5 71.0
________ ________ ________ _______
Operating income (loss) ...................... 26.5 (26.3) 37.5 29.0
Interest income, net ......................... 1.4 7.8 2.3 1.7
Equity in net income (loss) from equity
investments................................. 2.1 .7 (0.1) (0.1)
Gain on sale of equity investment ............ -- -- -- 1.0
________ ________ ________ _______
Income (loss) before income taxes ............ 30.0 (17.8) 39.7 31.6
Income tax expense (benefit) ................. 11.9 (6.9) 15.3 12.1
________ ________ ________ _______
Net income (loss) ............................ 18.1% (10.9%) 24.4% 19.5%
</TABLE>
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 events. For example, one of Darlington Raceway's ("Darlington")
Winston Cup Series events is traditionally held on the Sunday preceding Labor
Day. Accordingly, the timing of the Labor Day holiday in 1997 and 1998 resulted
in the revenue and expenses for that race and the related supporting events
being recognized in the quarter ended August 31 in fiscal 1997, while not being
recognized until the quarter ending November 30 in fiscal 1998. Further, in
July 1998 the Company announced the postponement of the NASCAR Winston Cup
Series Pepsi 400 at Daytona from July 4, 1998 to October 17, 1998 as a result of
the nationally publicized forest fire emergency throughout the state of Florida.
The rescheduling of the Pepsi 400 at Daytona will result in event-related
revenues and expenses being recognized in the quarter ending November 30, 1998
while corresponding revenues and expenses were recognized in the quarter ended
August 31 in fiscal 1997. Accordingly, the Company's results of operations are
not necessarily comparable on a period-to-period basis. As Management does not
expect a material adverse impact related to the rescheduling of the Pepsi 400 at
Daytona, results for the three-month and nine-month periods of the current year,
as compared to the same periods of the prior year, are not indicative of the
results to be expected for fiscal year 1998 as compared to fiscal year 1997.
During fiscal 1997, the Company acquired the 50% it did not already own in
Watkins Glen International ("Watkins Glen") and purchased Phoenix International
Raceway ("Phoenix"). The consolidation of Watkins Glen, effective April 1,
1997, and the July 14, 1997 purchase of Phoenix resulted in increases in both
revenues and expenses in fiscal 1998, as compared to the periods prior to their
acquisitions in fiscal 1997.
Comparison of the Three and Nine Months Ended August 31, 1998 to the Three and
Nine Months Ended August 31, 1997
Admissions revenue decreased approximately $11.2 million, or 68.3%, for the
three months ended August 31, 1998 as compared to the three months ended August
31, 1997. The decrease was primarily attributable to the impact of the timing
of the NASCAR Winston Cup Series events at Daytona International Speedway
("Daytona") and Darlington, as described above, partially offset by increased
admissions for events at Watkins Glen.
Admissions revenue decreased approximately $2.5 million, or 4.4%, for the nine
months ended August 31, 1998 as compared to the nine months ended August 31,
1997. The decrease in admissions revenue associated with the timing of major
NASCAR events at Daytona and Darlington was largely offset by increased seating
capacity and attendance, as well as an increase in the weighted average price of
tickets sold, for the Speedweeks events conducted at Daytona. The remaining
offsetting increase was primarily attributable to the NASCAR events conducted at
Talladega Superspeedway ("Talladega"), Darlington and Watkins Glen and, to a
lesser extent, events held at Phoenix for which there were no comparable
revenues in 1997.
Motorsports related income decreased approximately $2.0 million, or 17.7%,
during the three months ended August 31, 1998 as compared to the three months
ended August 31, 1997. The decrease attributable to the timing of the NASCAR
Winston Cup Series events at Daytona and Darlington was partially offset by
increases in television broadcast rights fees and sponsorship revenues
associated with the NASCAR Winston Cup Series event at Watkins Glen and, to a
lesser extent, increases in track rental and royalty revenue.
Motorsports related income increased approximately $13.1 million, or 35.3%,
during the nine months ended August 31, 1998 as compared to the nine months
ended August 31, 1997. Exclusive of the impact of the timing of the NASCAR
Winston Cup Series events held in the third quarter in 1997 and the fourth
quarter in 1998, approximately three-quarters of this increase was attributable
to the Speedweeks events at Daytona and the NASCAR events conducted at
Talladega, Darlington and Watkins Glen. These increases were primarily related
to increased television broadcast rights fees and, to a lesser extent, increases
in sponsorship, luxury suite and hospitality rentals, and advertising revenues.
The majority of the remaining increase was attributable to events conducted at
Phoenix, for which there was no comparable revenue in 1997.
Food, beverage and souvenir income decreased approximately $2.0 million, or
39.7%, during the three months ended August 31, 1998, as compared to the three
months ended August 31, 1997. The decrease was primarily attributable to the
timing of major NASCAR events at Daytona and Darlington, as described above,
partially offset by the growth in sales of souvenirs at the gift shop adjacent
to DAYTONA USA.
Food, Beverage and Souvenir income decreased approximately $696,000, or 3.6%,
during the nine months ended August 31, 1998 as compared to the nine months
ended August 31, 1997. This decrease was primarily attributable to the impact
of the timing of NASCAR Winston Cup Series events at Daytona and Darlington. The
discontinuation of services to certain events conducted at facilities not owned
by the Company and the decrease in revenues for the second quarter NASCAR
Winston Cup Series event conducted at Talladega as compared to the rained out
and rescheduled event in the prior year, which experienced increased revenues as
a result of spectator attendance over multiple event days, further contributed
to the decrease in food, beverage and souvenir income during the period. These
decreases were partially offset by increased attendance and, to a lesser extent,
increases in certain prices at Daytona's Speedweeks events, strong sales of
souvenirs at the gift shop adjacent to DAYTONA USA and fees from third party
vendors at Phoenix.
Prize and point fund monies and NASCAR sanction fees decreased $3.3 million, or
57.3%, and increased $2.9 million, or 17.2%, for the three months and nine
months ended August 31, 1998, respectively, as compared to the same periods of
the prior year. For the three months ended August 31, 1998, the decrease was
attributable to the timing of the NASCAR events at Daytona and Darlington. For
the nine months ended August 31, 1998, excluding the impact in the third quarter
related to the timing of the certain events as discussed above, substantially
all of the increase was related to the NASCAR events conducted at Daytona,
Talladega, Darlington and Watkins Glen. These increases were primarily
attributable to increased television broadcast rights fees because standard
NASCAR sanctioning agreements require that a specified percentage of television
broadcast rights fees be paid as a part of prize money. The remaining increase
in the nine-month period was attributable to the NASCAR Craftsman Truck Series
event conducted at Phoenix in the second quarter, for which there was no
comparable event in fiscal 1997.
Motorsports related expenses decreased $364,000, or 6.3%, and increased $5.6
million, or 33.9%, for the three months and nine months ended August 31, 1998,
respectively, as compared to the same periods of the prior year. The decrease
during the three months ended August 31, 1998 was primarily due to the timing of
the NASCAR events at Daytona and Darlington, partially offset by an increase in
expenses associated with the rescheduling of the Pepsi 400 at Daytona as well as
increases in personnel related costs, advertising, non-NASCAR costs of
competition and other direct expenses. Over one-half of the increase for the
nine-month period was attributable to the timing of the acquisitions of Phoenix
and Watkins Glen in the prior year. The remaining increase was due to increases
in personnel related costs, advertising, non-NASCAR costs of competition and
other direct expenses as well as current period costs of rescheduling the Pepsi
400 at Daytona, partially offset by a decrease in expenses associated with the
timing of the NASCAR events at Daytona and Darlington.
Food, beverage and souvenir expense decreased approximately $653,000, or 22.2%,
and $868,000, or 7.7%, for the three-month and nine-month periods ended August
31, 1998, respectively, as compared to the same periods of the prior year.
These decreases were primarily attributable to the timing of the NASCAR events
at Daytona and Darlington, as discussed above, partially offset by increased
product costs at the gift shop adjacent to DAYTONA USA, increases in personnel
and other related expenses and the current period costs of rescheduling the
Pepsi 400 at Daytona. Further, expenses were lower during the nine-month
period, as compared to the same period of the prior year, due to the impact of
additional expenses associated with the rain out and rescheduling of a NASCAR
Winston Cup Series event at Talladega in the second quarter of fiscal 1997.
General and administrative expenses increased $1.9 million, or 26.0%, and $6.3
million, or 31.2%, for the three months and nine months ended August 31, 1998,
respectively, as compared to the same periods of the prior year. The increases
related to the timing of the acquisitions of Phoenix and Watkins Glen in the
prior year, as well as the expense of assisting in local fire fighting efforts,
accounted for approximately 30% and 40% of the increases for the three months
and nine months ended August 31, 1998, respectively. Exclusive of the expenses
of the fire fighting efforts and the timing of revenue recognition associated
with the Pepsi 400 at Daytona and the NASCAR Winston Cup Series event at
Darlington, general and administrative expenses as a percentage of total
revenues remained relatively constant for the three-month and nine-month periods
ended August 31, 1998 as compared to the same periods of the prior year.
Depreciation and amortization expense increased approximately $598,000, or
22.1%, and $2.6 million, or 38.0%, for the three months and nine months ended
August 31, 1998, respectively, as compared to the same periods of the prior
year. For the three months ended August 31, 1998, more than one-quarter of this
increase was attributable to Phoenix, including the amortization of goodwill,
for which there was no comparable expense in 1997. For the nine months ended
August 31, 1998, more than one-half of this increase was attributable to the
timing of the acquisitions of Phoenix and Watkins Glen in the prior year. The
remaining increases were attributable to ongoing improvements at the Company's
other facilities.
The Company experienced an approximately $925,000 increase and $611,000 decrease
in net interest income for the three months and nine months ended August 31,
1998, respectively, as compared to same periods of the prior year, as a result
of lower average investment balances prior to the investment of the proceeds of
the Class A Common Stock Offering in July 1998 and interest expense related to
the notes payable associated with the Phoenix acquisition and the second quarter
purchase of an additional 5% interest in Homestead-Miami Speedway, LLC
("Homestead").
Equity in net income (loss) from equity investments represents the Company's pro
rata share of the current income and losses from its equity investments and the
amortization of the Company's investment in excess of its share of the
investee's underlying net assets. During the three months and nine months
ended August 31, 1998 this included the Company's approximately 11% indirect
investment in Penske Motorsports ("PMI"), its 40% investment in Homestead, which
was increased to 45% in March 1998, and its approximately 7% investment in Grand
Prix Association of Long Beach ("Long Beach"), which was sold in March 1998. The
comparable periods of the prior year included net losses from PMI and the
Company's 50% investment in Watkins Glen through March 31, 1997.
The gain on sale of equity investments of approximately $1.2 million was a
result of the Company selling its equity investment in Long Beach in March of
1998. The Company sold its investment in conjunction with Dover Downs
Entertainment, Inc.'s announced plans to merge with Long Beach. The after tax
impact of this transaction was a gain of approximately $850,000.
As a result of the foregoing, the Company's net income decreased approximately
$7.9 million, or 132.5%, and $3.7 million, or 13.2%, for the three months and
nine months ended August 31, 1998, 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 an annual cash dividend. At August 31, 1998, the Company had
working capital of $93.7 million, compared to a working capital deficit of $25.0
million at November 30, 1997. This was primarily attributable to the Class A
Common Stock Offering discussed below under "Cash Flows". There were no
borrowings under the Company's credit facility at August 31, 1998.
Cash Flows
Net cash provided by operating activities was approximately $56.3 million for
the nine months ended August 31, 1998, as compared to $41.4 million for the nine
months ended August 31, 1997. The difference between the Company's August 31,
1998 net income of $24.3 million and the $56.3 million of operating cash flow
was primarily attributable to an increase in deferred income of $32.7 million,
depreciation and amortization of $9.6 million, an increase in deferred income
taxes of $4.1 and a net increase in other current liabilities and accounts
payable of $1.6, partially offset by an increase in prepaid expenses and other
current assets of $8.3 million, an increase in accounts receivable of $6.1
million, and the gain of $1.2 million from the sale of Grand Prix of Long Beach.
Investing activities included capital expenditures of approximately $37.7
million, partially offset by net proceeds from maturities of investments of
$15.9 million and approximately $5.3 million in proceeds from the sale of the
Company's investment in Long Beach.
Net cash provided by financing activities was $102.1 million for the nine months
ended August 31, 1998, compared to net cash used by financing activities of
$2.5 million for the nine months ended August 31, 1997. Net cash provided by
financing activities included the net proceeds from the July 1998 Class A Common
Stock of approximately $117.7 million, partially offset by payments totaling
approximately $13.1 million on the note payable related to the Phoenix
acquisition and dividends paid of $2.3 million.
Capital Expenditures
Capital expenditures totaled approximately $37.7 million for the nine months
ended August 31, 1998, compared to $25.5 million for the nine months ended
August 31, 1997. Capital expenditures during the nine months ended August 31,
1998 related primarily to increased seating capacity at the Company's
superspeedways, additional luxury suites at Daytona and Talladega and track
lighting at Daytona.
The Company expects to make approximately $56.9 million of additional capital
expenditures for approved projects within the next 24 months to increase
grandstand seating capacity, to construct luxury suites, and for a number of
other improvements to the Company's motorsports facilities, as well as for land
and preliminary construction at Kansas International Speedway as discussed
below.
Future Liquidity
In May 1998, the Company entered into a five-year, unsecured, $100 million
revolving line of credit facility with First Union National Bank, N.A. (the
"Credit Facility"). Borrowings under the Credit Facility will bear interest at
the applicable LIBOR rate plus 40-80 basis points depending on certain financial
criteria. The Credit Facility includes customary representations and
warranties, covenants, defaults and conditions. The Credit Facility is intended
to be used for short-term working capital and to finance the development and/or
acquisition of additional motorsports facilities. There were no borrowings
under the Credit Facility at August 31, 1998.
The Company is currently pursuing the development of facilities in several major
markets. In December 1997, the Company entered into an agreement with the
Unified Government of Wyandotte County/Kansas City, Kansas for the construction
of a 1.5-mile oval motor speedway near Kansas City, Kansas. The aggregate cost
of acquiring and developing the first phase of the Kansas International Speedway
land and facility (which will accommodate approximately 75,000 spectators) is
expected to be over $200 million, which is expected to be financed with (I)
approximately $58.8 million invested by the Company and funded with a portion of
the proceeds from the July 1998 Class A Common Stock offering, (ii)
approximately $75.0 million of proceeds from the sale of 30-year, taxable
special obligation "TIF" bonds that will be serviced through payments by the
Company escalating from an annual rate of approximately $4.8 million to $7.7
million, (iii) approximately $25.0 million of proceeds from the sale of tax-
exempt special obligation "STAR" bonds that will be retired with state and local
taxes generated within the project's boundaries, and (iv) a variety of other
mechanisms and governmental incentives. However, there currently are no firm
commitments from any person to purchase any of the contemplated bond
instruments, and there can be no assurance that the contemplated bond financings
will be consummated or that the expected terms of the bonds will not be
materially changed. Moreover, completion of the Kansas International Speedway
is subject to resolution of certain litigation and a number of other significant
conditions, including the Company's ability to acquire the land and secure
guaranteed maximum price construction contracts within the prescribed budget.
The Company believes that cash flow from operations, along with the remaining
net proceeds of the July 1998 Class A Common Stock offering, will be sufficient
to fund the Company's operations and approved capital expenditures for the
foreseeable future. In addition, the Company intends to pursue further
development and/or acquisition opportunities, the timing, size and success as
well as associated potential capital commitments of which are unpredictable.
Accordingly, a material acceleration in the Company's growth strategy could
require the Company to obtain additional capital through debt and/or equity
financings. Although there can be no assurance, management believes that
adequate debt or equity financing would be available on satisfactory terms.
Income Taxes
The deferred income tax liability increased from November 30, 1997 primarily as
a result of differences between financial and tax accounting treatments relating
to depreciation expense and different bases in the equity investments for tax
and financial reporting purposes.
Inflation
Management does not believe that inflation has had a material impact on
operating costs and earnings of the Company.
Factors That May Affect Operating Results
Statements contained in this Report to the effect of the Company's or
Management's anticipations, beliefs, expectations, intentions, strategies,
schedules and/or words of similar import which are not purely historical fact or
which apply prospectively are "forward-looking" statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. All forward-looking statements contained in this document
are based largely on the Company's expectations and are subject to a number of
risks and uncertainties, certain of which are beyond the Company's control.
Such statements are also 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 NASCAR's Winston Cup
Series, the Busch Grand National Series and certain other races promoted by the
Company. The Company has sanctioning agreements to promote and market eight
Winston Cup Series championship point races, two Winston Cup Series
non-championship point races, five Busch Grand National Series races and a
number of other NASCAR races for the 1998 racing season. Each NASCAR event
sanctioning agreement is awarded on an annual basis. In fiscal 1997,
NASCAR-sanctioned races at the Company's facilities accounted for approximately
78% of the Company's total revenues. Although William C. France and James C.
France presently control both the Company and NASCAR and management believes
that the Company will continue to maintain an excellent relationship with NASCAR
for the foreseeable future, NASCAR is under no obligation to continue to enter
into sanctioning agreements with the Company to promote any event. Failure to
obtain a sanctioning agreement for a major NASCAR event would have a material
adverse effect on the Company's financial condition and results of operations.
Moreover, although the Company's general growth strategy includes the possible
development and/or acquisition of additional motorsports facilities, there can
be no assurance that NASCAR will enter into sanctioning agreements with the
Company to promote races at such facilities.
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.
Uncertain Prospects of New Motorsports Facilities
The Company's growth strategy includes the potential acquisition and/or
development of new motorsports facilities, including the proposed Kansas
International Speedway and the possible development of a motorsports facility
near Chicago, Illinois. The Company's ability to implement successfully this
element of its growth strategy will depend on a number of factors, including (i)
the Company's ability to obtain one or more additional sanctioning agreements to
promote Winston Cup, Busch Grand National or other major events at these new
facilities, (ii) the cooperation of local government officials, (iii) the
Company's capital resources, (iv) the Company's ability to control construction
and operating costs, (v) the Company's ability to hire and retain qualified
personnel and (vi) with respect to the proposed Kansas International Speedway,
the resolution of certain pending litigation. The Company's inability to
implement its expansion plans for any reason could adversely affect its business
prospects. In addition, expenses associated with developing, constructing and
opening a new facility may have a negative effect on the Company's financial
condition and results of operations in one or more future reporting periods. The
cost of any such transaction will depend on a number of factors, including the
facility's location, the extent of the Company's ownership interest and the
degree of any municipal or other public support. Moreover, although management
believes that it will be able to obtain financing to fund the acquisition,
development and/or construction of additional motorsports facilities should the
Company implement this element of its growth strategy, there can be no assurance
that adequate debt or equity financing will be available on satisfactory terms.
Industry Sponsorships and Government Regulation
The motorsports industry generates significant recurring revenue from the
promotion, sponsorship and advertising of various companies and their products.
Actual or proposed 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 Corporations's events. Since August of 1996 there have been several thus
far unsuccessful governmental attempts to impose restrictions on the advertising
and promotion of cigarettes and smokeless tobacco, including sponsorship of
motorsports activities. These regulatory efforts if successfully implemented
would have prohibited the present practice of tobacco brand name sponsorship of,
or identification with, motorsports events, entries and teams. At this point
the ultimate outcome of these or future government efforts to regulate the
advertising and promotion of cigarettes and smokeless tobacco is uncertain and
the impact, if any, on the motorsports industry is unclear.
The Company is not aware of any proposed governmental regulation which would
materially limit the availability to motorsports of promotion, sponsorship or
advertising revenue from the alcoholic beverage industry. The combined
advertising and sponsorship revenue from the tobacco and alcoholic beverage
industries accounted for approximately 1.5% of the Company's total revenues in
both the fiscal year ended August 31, 1996 ("fiscal 1996") and fiscal 1997. In
addition, the tobacco and alcoholic beverage industries provide financial
support to the motorsports industry through, among other things, their purchase
of advertising time, their sponsorship of racing teams and their sponsorship of
racing series such as NASCAR's Winston Cup Series and Busch Series, Grand
National Division.
Legal Proceedings
The Company is a party to certain legal proceedings alleging price-fixing
activities in connection with the sale of racing souvenirs and merchandise.
While the Company disputes the allegations and intends to defend the actions
fully and vigorously, neither the cost of defending the suits nor the potential
damages or other remedies for which the Company could be liable is insured. In
addition, management is presently unable to predict or quantify the outcome of
these matters. Accordingly, there can be no assurance the defense of the suits,
or a possible adverse resolution, will not require material expenditures by the
Company.
Potential Conflicts of Interest
William C. France and James C. France beneficially own all of NASCAR's capital
stock, and each of the France Family Executives, the Company's Vice
President--Administration, the Company's General Counsel and certain other
non-officer employees (collectively the "Shared Employees") devote portions of
their time to NASCAR's affairs. Each of the Shared Employees devotes substantial
time to the Company's affairs and all of the Company's other executive officers
are available to the Company on a full-time basis. In addition, the Company
strives to ensure, and management believes, that the terms of the Company's
transactions with NASCAR are no less favorable to the Company than those which
could be obtained in arms'-length negotiations. Nevertheless, certain potential
conflicts of interest between the Company and NASCAR exist with respect to,
among other things, (i) the terms of any sanctioning agreements that may be
awarded to the Company by NASCAR, (ii) the amount of time devoted by the Shared
Employees and certain other Company employees to NASCAR's affairs, and (iii) the
amounts charged or paid to NASCAR for office rental, transportation costs,
shared executives, administrative expenses and similar items.
Competition
The Company's racing events face competition from other spectator-oriented
sporting events and other leisure and recreational activities, including
professional football, basketball and baseball. As a result, the Company's
revenues will be affected by the general popularity of motorsports, the
availability of alternative forms of recreation and changing consumer
preferences. The Company's racing events also compete with other racing events
sanctioned by various racing bodies such as NASCAR, Championship Auto Racing
Teams, Inc. ("CART"), Indy Racing League ("IRL"), the United States Auto Club
("USAC"), the National Hot Rod Association ("NHRA"), the Sports Car Club of
America ("SCCA"), the United States Road Racing Championship ("USRRC"), the
Automobile Racing Club of America ("ARCA") and others. Management believes that
the primary elements of competition in attracting motorsports spectators and
corporate sponsors to a racing event and facility are the type and caliber of
promoted racing events, facility location, sight lines, pricing and customer
conveniences that contribute to a total entertainment experience. Many sports
and entertainment businesses have resources that exceed those of the Company.
Impact of Consumer Spending on Results
The success of the Company's operations depends to a significant extent upon a
number of factors relating to discretionary consumer spending, including
economic conditions affecting disposable consumer income such as employment,
business conditions, interest rates and taxation. These factors can impact both
attendance at the Company's events and the financial results of the motorsports
industry's principal sponsors. There can be no assurance that consumer spending
will not be adversely affected by economic conditions, thereby impacting the
Company's growth, revenue and profitability.
Financial Impact of Bad Weather
The Company promotes outdoor motorsports events. Weather conditions affect sales
of, among other things, tickets, concessions and souvenirs at these events.
Although the Company sells tickets well in advance of its most popular events,
poor weather conditions could have a material adverse effect on the Company's
results of operations, particularly any interruption of the Company's February
"Speedweeks" events.
Liability for Personal Injuries
Motorsports can be dangerous to participants and to spectators. The Company
maintains insurance policies that provide coverage within limits that management
believes should generally be sufficient to protect the Company from material
financial loss due to liability for personal injuries sustained by persons on
the Company's premises in the ordinary course of Company business.
Nevertheless, there can be no assurance that such insurance will be adequate or
available at all times and in all circumstances. The Company's financial
condition and results of operations would be adversely affected to the extent
claims and associated expenses exceed insurance recoveries.
Other Regulatory Matters
Management believes that the Company's operations are in substantial compliance
with all applicable federal, state and local environmental laws and regulations.
Nonetheless, if damage to persons or property or contamination of the
environment is determined to have been caused or exacerbated by the conduct of
the Company's business or by pollutants, substances, contaminants or wastes
used, generated or disposed of by the Company, or which may be found on the
property of the Company, the Company may be held liable for such damage and may
be required to pay the cost of investigation and/or remediation of such
contamination or any related damage. The amount of such liability as to which
the Company is self-insured could be material. State and local laws relating to
the protection of the environment also include noise abatement laws that may be
applicable to the Company's racing events. Changes in the provisions or
application of federal, state or local environmental laws, regulations or
requirements, or the discovery of theretofore unknown conditions, could also
require additional material expenditures by the Company.
In addition, the development of new motorsports facilities (and, to a lesser
extent, the expansion of existing facilities) requires compliance with
applicable federal, state and local land use planning, zoning and environmental
regulations. Regulations governing the use and development of real estate may
prevent the Company from acquiring or developing prime locations for motorsports
facilities, substantially delay or complicate the process of improving existing
facilities, and/or materially increase the costs of any of such activities.
Impact of the Year 2000
The Year 2000 issue is the result of computer programs and other business
systems being written using two digits rather than four to represent the year.
Many of the time sensitive applications and business systems of the Company and
its business partners may recognize a date using "00" as the year 1900 rather
than the year 2000, which could result in system failure or disruption of
operations. The Year 2000 problem will impact the Company and its business
partners.
An assessment of the Year 2000 exposure related to information technology
systems has been made and the plans to resolve the related issues are being
implemented. Most major information technology systems have already been
updated or replaced with applications that are Year 2000 compliant in the normal
course of business. The Company believes it will be able to achieve Year 2000
compliance with regard to information technology systems by the end of fiscal
1998.
The Company suspects that some of its non-information technology systems, such
as exhibit controllers, elevators, heating and air-conditioning systems, etc.,
with date sensitive software and embedded microprocessors may be affected, and
evaluation is underway. An estimate of the costs of correcting or replacing
critical non-information technology systems is incomplete.
The Company has also developed a plan of communication with significant business
partners to identify and minimize disruptions to the Company's operations
resulting from the Year 2000 issue. There can be no certainty that the computer
programs and business systems of third parties on which the Company relies will
not have an adverse effect on the Company's operations. However, because of the
nature of its business, the Company believes at this time that a failure of the
Company's vendors, sponsors or customers to resolve issues involving the Year
2000 problem will not be material.
The Company anticipates completing substantially all of its Year 2000
preparation during fiscal 1999. In the event the Company falls behind on its
timetable for achieving Year 2000 compliance, additional internal resources will
be focused on completing critical projects and developing contingency plans.
The Company at this time believes that it will satisfactorily resolve all
significant Year 2000 problems and that the related costs will not be material.
Estimates of Year 2000 related costs are based on numerous assumptions,
including the continued availability of certain resources, the ability to
correct all relevant information and non-information technology systems and
third party modification plans. There is no guarantee that the estimates will
be achieved and actual costs could differ materially from those anticipated.<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is from time to time a party to routine litigation incidental to its
business. Management does not believe that the resolution of any or all of such
litigation is likely to have a material adverse effect on the Company's
financial condition or results of operations. In addition to such routine
litigation incident to its business the Company faces exposure from other legal
proceedings as described below.
The Company's indirect corporate subsidiary, Americrown Service Corporation
("Americrown"), is the sole defendant in a class action proceeding in the
Circuit Court of Talladega County, Alabama which was filed in October 1996. The
plaintiffs allege, 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 suit seeks to recover at least $500 for each
member of the class but does not otherwise seek to recover compensatory or
punitive damages or statutory attorneys' fees. A class consisting of persons
who purchased racing souvenirs at Talladega Superspeedway since September 1992
was certified on July 30, 1998 by the court. Americrown has moved for
reconsideration and intends to appeal the ruling to the Alabama Supreme Court.
Americrown disputes the allegations and intends to defend the action fully and
vigorously.
In March 1997, two purported class action companion lawsuits were filed in the
United States District Court, Northern District of Georgia, against the Company,
Americrown, and a number of other persons alleging, in substance, that the
defendants unlawfully conspired to fix prices of souvenirs and merchandise sold
to consumers in violation of federal antitrust laws. One suit was filed by
Florida residents and the other suit was filed by Georgia residents. Both suits
seek damages and injunctive relief on behalf of all persons who purchased
souvenirs or merchandise from certain vendors at any NASCAR Winston Cup 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 5. Exhibits and Reports on Form 8-K
a. Exhibits
I. (27) - Article 5 Fin. Data Schedule for 3rd Qtr 10-Q
b. Reports on Form 8-K
On July 6, 1998, the Company filed a report on Form 8-K which reported the
following "Other Events" pursuant to Item 5:
On July 2, 1998, International Speedway Corporation issued press releases
announcing its financial results for the second quarter and six months ended May
31, 1998 and the rescheduling of the Pepsi 400 to October 17, 1998 from July 4,
1998.
Copies of the press releases were attached to the report as Exhibit 99.1 and
Exhibit 99.2, respectively.<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, 1998 /s/ James C. France
_____________________________________
James C. France, President
Date October 14, 1998 /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, 1998, AND THE RELATED CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS, SHAREHOLDERS' EQUITY AND CASH FLOWS FOR THE NINE-MONTH
PERIOD ENDED AUGUST 31, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> Nov-30-1998
<PERIOD-START> Dec-01-1997
<PERIOD-END> Aug-31-1998
<PERIOD-TYPE> 9-MOS
<CASH> 151,364
<SECURITIES> 7,738
<RECEIVABLES> 13,632
<ALLOWANCES> 100
<INVENTORY> 1,706
<CURRENT-ASSETS> 186,696
<PP&E> 257,554
<DEPRECIATION> 62,614
<TOTAL-ASSETS> 471,380
<CURRENT-LIABILITIES> 92,960
<BONDS> 0
0
0
<COMMON> 431
<OTHER-SE> 350,310
<TOTAL-LIABILITY-AND-EQUITY> 471,380
<SALES> 123,202
<TOTAL-REVENUES> 124,297
<CGS> 52,242
<TOTAL-COSTS> 52,242
<OTHER-EXPENSES> 35,958
<LOSS-PROVISION> 55
<INTEREST-EXPENSE> 518
<INCOME-PRETAX> 39,244
<INCOME-TAX> 14,993
<INCOME-CONTINUING> 24,251
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,251
<EPS-PRIMARY> .62
<EPS-DILUTED> .62
</TABLE>
