FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-2384
INTERNATIONAL SPEEDWAY CORPORATION
(Exact name of registrant as specified in its charter)
FLORIDA 59-0709342
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1801 WEST INTERNATIONAL SPEEDWAY BOULEVARD, DAYTONA BEACH, FLORIDA 32114
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 904-254-2700
Securities registered pursuant to Section 12 (b) of the Act:
Title of each class Name of each exchange on which registered
Class A Common Stock - $.01 par value NASDAQ/National Market System
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock - $.10 par value
Class B Common Stock - $.01 par value
(Title of Class)
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. [x] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of January 31, 2000 was $1,342,375,015 based upon the last
reported sale price of the Class A Common Stock on the NASDAQ National Market
System on that date and the assumption that all directors and executive
officers of the Company, and their families, are affiliates.
At January 31, 2000, there were outstanding:
no shares of Common Stock, $.10 par value per share,
23,136,011 shares of Class A Common Stock, $.01 par value per share, and
29,965,142 shares of Class B Common Stock, $.01 par value per share.
DOCUMENTS INCORPORATED BY REFERENCE. Certain of the exhibits listed in Part IV
are incorporated by reference from the Joint Proxy Statement/Prospectus
included in the Company's Registration Statement on Form S-4 File No.
333-81165 and the Company's Registration Statement filed on Form S-4 File No.
333-94085.
<PAGE>
UNLESS OTHERWISE INDICATED OR THE CONTEXT OTHERWISE REQUIRES:
(I) ALL SHARE AND PER SHARE DATA FOR PERIODS PRIOR TO NOVEMBER 4, 1996 HAS
BEEN RETROACTIVELY ADJUSTED TO GIVE EFFECT TO A RECAPITALIZATION AND RELATED
15-1 STOCK SPLIT WHICH BECAME EFFECTIVE ON NOVEMBER 4, 1996.
(II) A REFERENCE TO A "FISCAL" YEAR FOR PERIODS PRIOR TO AND INCLUDING AUGUST
31, 1996 MEANS THE TWELVE MONTHS ENDED AUGUST 31 OF SUCH YEAR AND FOR PERIODS
SUBSEQUENT TO AUGUST 31, 1996 MEANS THE TWELVE MONTHS ENDED NOVEMBER 30 OF
SUCH YEAR. THE COMPANY CHANGED ITS FISCAL YEAR EFFECTIVE DECEMBER 1, 1996.
(III) ALL INFORMATION CONTAINED IN THIS REPORT GIVES EFFECT TO THE ACQUISITION
OF PENSKE MOTORSPORTS, INC. ("PMI"), CONSUMMATED ON JULY 26, 1999 (THE "PMI
ACQUISITION"). AND
(IV) ALL REFERENCES TO THE "COMPANY" OR "INTERNATIONAL SPEEDWAY" INTERNATIONAL
SPEEDWAY CORPORATION AND CONSOLIDATED SUBSIDIARIES AFTER GIVING EFFECT TO THE
PMI ACQUISITION.
PART I
ITEM 1. BUSINESS
GENERAL
International Speedway Corporation, a leading promoter of motorsports
activities in the United States, at November 30, 1999, owned and/or operated
ten of the nation's premier motorsports facilities:
-- Daytona International Speedway in Florida;
-- Michigan Speedway in Michigan;
-- Talladega Superspeedway in Alabama;
-- California Speedway in California;
-- Phoenix International Raceway in Arizona;
-- North Carolina Speedway in North Carolina;
-- Darlington Raceway in South Carolina;
-- Homestead-Miami Speedway in Florida;
-- Nazareth Speedway in Pennsylvania; and
-- Watkins Glen International road course facility in upstate New York.
In 1999 motorsports facilities now owned by the Company (including
Richmond International Raceway - see Recent Developments below) promoted well
over 100 stock car, sports car, truck, motorcycle and other racing events,
including:
-- 18 NASCAR Winston Cup Series events;
-- 14 NASCAR Busch Series, Grand National Division ("Busch Grand National
Series") events;
-- 7 NASCAR Craftsman Truck Series events;
-- 4 CART FedEx Championship Series events;
-- the premier sports car endurance event in the United States (the Rolex
24 at Daytona); and
-- a number of prestigious motorcycle races.
In addition to events sanctioned by NASCAR, in fiscal 1999 the Company
promoted other stock car, sports car, motorcycle and go-kart racing events
sanctioned by Championship Auto Racing Teams, Inc. ("CART"), the United States
Road Racing Championship ("USRRC"), the Automobile Racing Club of America
("ARCA"), the Indy Racing League ("IRL"), the United States Auto Club
("USAC"), the Sports Car Club of America ("SCCA"), the American Motorcyclist
Association ("AMA"), the World Karting Association ("WKA"), the Championship
Cup Series ("CCS"), the American Historic Racing Motorcycle Association
("AHRMA"), Historic Sportscar Racing ("HSR"), and the Sportscar Vintage Racing
Association ("SVRA").
The Company's operations consist principally of racing events at the
Company's ten premier motorsports facilities, which generate revenue primarily
through sales of admissions to racing events, television broadcast rights
fees, sponsorship fees, hospitality rentals (including luxury suites, chalets
and the hospitality portion of club seating), royalties from licenses of
trademarks and provides catering, souvenir and food concession services at
certain facilities. The Company also distributes and sells Goodyear brand
racing tires, owns and operates MRN Radio and the DAYTONA USA entertainment
complex and produces and markets collectibles and other motorsports
merchandise.
THE PMI ACQUISITION
On July 26, 1999, the Company consummated the PMI Acquisition, in which
the Company acquired the approximately 88% of PMI it did not already own for
approximately $129.8 million in cash and approximately 10.0 million shares of
the Company's Class A Common Stock. PMI, a leading promoter and marketer of
professional motorsports in the United States, owned and operated Michigan
Speedway, California Speedway, North Carolina Speedway and Nazareth Speedway.
Other motorsports interests included a 45% interest in the Homestead-Miami
Speedway near Miami, Florida. Through its subsidiaries, PMI also produced and
marketed motorsports-related merchandise, including apparel, souvenirs and
collectibles, and distributed and sold Goodyear brand racing tires in the
midwestern and southern regions of the United States. In connection with the
PMI Acquisition, the Company obtained a new $300 million senior credit
facility ("Credit Facility") to finance a portion of the PMI Acquisition and
refinance PMI's debt. On October 6, 1999 the Company sold $225 million
principal amount of Senior Notes due 2004 in a private placement. The
unsecured Senior Notes bear interest at 7.875%. The Company used
approximately $176 million of the net proceeds from the Senior Notes
transaction to repay the outstanding borrowings under the Credit Facility,
which were related to a portion of the cash consideration paid in the PMI
Acquisition. Pursuant to the Credit Facility agreement, the size of the Credit
Facility was automatically reduced from $300 million to $200 million upon the
Company's receipt of the proceeds from the Senior Notes private placement. In
December 1999, the Company increased the maximum availability under its Credit
Facility from $200 million to $250 million. On January 24, 2000 the Company
commenced an offer to exchange the Senior Notes issued in the private
placement for registered Senior Notes with substantially identical terms. The
exchange offer will expire on February 28, 2000.
RECENT DEVELOPMENTS
On December 1, 1999, the Company acquired Richmond International Raceway
("Richmond"), a 3/4-mile intermediate speedway located approximately 10 miles
from downtown Richmond, Virginia, for approximately $215 million in cash.
Richmond seats over 94,000 grandstand spectators and offers luxury
accommodations in its 34 suites. Richmond hosts several major NASCAR events
annually, including two NASCAR Winston Cup Series events, two NASCAR Busch
Series, Grand National events and one NASCAR Craftsman Truck Series event. The
Company financed the acquisition through approximately $160 million in
borrowings under its Credit Facility. The Company utilized cash resources for
the remaining $55 million.
----------------
The Company was incorporated in 1953 under the laws of the State of
Florida under the name "Bill France Racing, Inc." and changed its name to
"International Speedway Corporation" in 1968. Principal executive offices are
located at 1801 West International Speedway Boulevard, Daytona Beach, Florida
32114, and its telephone number is (904) 254-2700.
OPERATIONS
The Company's operations consist principally of racing events at its ten
premier motorsports facilities which generate revenue primarily through sales
of admissions to racing events, television broadcast rights fees, sponsorship
fees, hospitality rentals (including luxury suites, chalets and the
hospitality portion of club seating) and royalties from licenses of
trademarks. The Company also conducts, either through operations of the
facility or through its wholly-owned subsidiaries Americrown Service
Corporation and Motorsports International Corp., souvenir merchandising
operations at its Daytona, Talladega, California, North Carolina, Darlington,
Miami, Nazareth and Watkins Glen facilities, food and beverage concession
operations at its Daytona, Talladega, North Carolina, Darlington, Nazareth,
and Watkins Glen facilities and provides catering services to corporate
customers both in suites and chalets at its Daytona, Talladega, Darlington,
Miami and Watkins Glen facilities.
Motorsports International Corp. also produces and markets motorsports-
related merchandise such as apparel, souvenirs and collectibles to retail
customers through catalogue sales and trackside operations (unrelated to the
souvenir merchandising operations described above) at certain motorsports
facilities, including many of those owned and/or operated by the Company, as
well as through direct sales to dealers.
The Company's proprietary MRN radio network produces and syndicates
NASCAR Winston Cup Series, NASCAR Busch Series, Grand National Division,
NASCAR Craftsman Truck Series and other races promoted by the Company and
others. MRN Radio also produces daily and weekly NASCAR racing programs.
The Company owns and operates DAYTONA USA--The Ultimate Motorsports
Attraction, a motorsports themed-entertainment complex that includes
interactive media, theaters, historical memorabilia and exhibits, tours and
riding/driving experiences of Daytona International Speedway.
Competition Tire, one of the Company's wholly-owned subsidiaries, engages
in the wholesale and retail sale and distribution of Goodyear brand racing
tires for certain types of racing events.
Approximately $234.8 million, or 79%, of the Company's fiscal 1999
revenues were attributable to NASCAR-sanctioned races at the Company's
facilities, including applicable admissions, luxury suite rentals,
sponsorship, television and MRN Radio broadcast rights fees, food and beverage
concession and catering, souvenir, advertising and other revenues.
The Company's fiscal 1999 revenues that were not attributable to
NASCAR-sanctioned races at the Company's facilities were derived from a number
of sources, including (i) admission and luxury suite rental revenue from
racing events sanctioned by bodies other than NASCAR, (ii) admissions and
sponsorship fees attributable to DAYTONA USA, (iii) MRN Radio's revenues from
the sale of advertising and rights fees paid by broadcast affiliates with
respect to events other than NASCAR-sanctioned races at the Company's
facilities, (iv) Americrown's catering, merchandising and concession revenues
for the Company's non-NASCAR racing events,(v) merchandising, food and
beverage revenues from the gift shop and snackbar adjacent to DAYTONA USA,
(vi) sale of Goodyear racing tires with respect to events other than NASCAR-
sanctioned races at the Company's facilities, (vii) broadcast and sponsorship
fees for such non-NASCAR racing events, and (viii) other revenues unrelated to
racing events such as hangar rentals and gas sales at the Talladega Municipal
Airport. None of the foregoing non-NASCAR revenue sources accounted for over
5% of the Company's fiscal 1999 revenues.
Racing events compete not only with other sports and other recreational
events scheduled at the same dates, but with other racing events sanctioned by
various racing bodies such as NASCAR, IRL, CART, USAC, SCCA, USRRC, ARCA and
others. Racing events sanctioned by different organizations are often held on
the same dates at separate tracks. Management believes that the type and
caliber of promoted racing events, facility location, sight lines, pricing and
level of customer conveniences are the principal factors that distinguish
competing motorsports facilities.
OTHER ACTIVITIES
The Company from time to time uses its track facilities for car shows,
auto fairs, vehicle testing and settings for television commercials, print
advertisements and motion pictures. For example, Harley Davidson uses
Talladega Superspeedway as a test facility for its motorcycles. The Company
also rents "show cars" for promotional events. Other motorsports interests
include the operation of Tucson Raceway Park in Arizona. The Company also
operates Talladega Municipal Airport, which is located adjacent to the
Talladega Superspeedway.
As of November 30, 1999, the Company had approximately 760 full-time
employees. The Company also engages a significant number of temporary
personnel to assist during periods of peak attendance at its events. For
example, the Daytona International Speedway engages over 2,800 persons during
Speedweeks, some of whom are volunteers. None of the Company's
employees are represented by a labor union. Management believes that the
Company enjoys a good relationship with its employees.
ITEM 2. PROPERTIES
MOTORSPORTS FACILITIES
The following table sets forth certain information relating to each of
the Company's principal motorsports facilities as of November 30, 1999:
<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF
GRANDSTAND APPROXIMATE
TRACK NAME LOCATION SEATS ACREAGE TRACK LENGTH
- -------------------------------- ---------------------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Daytona International Speedway Daytona Beach, Florida 157,000 440 2.5 miles
Michigan Speedway Brooklyn, Michigan 125,000 1,000 2.0 miles
Talladega Superspeedway Talladega, Alabama 131,000 1,365 2.6 miles
California Speedway Fontana, California 86,000 529 2.0 miles
Phoenix International Raceway Phoenix, Arizona 79,000 598 1.0 miles
North Carolina Speedway Rockingham, North Carolina 60,000 300 1.0 miles
Darlington Raceway Darlington, South Carolina 59,000 230 1.3 miles
Homestead-Miami Speedway Homestead, Florida 72,000 344 1.5 miles
Nazareth Speedway Nazareth, Pennsylvania 44,000 230 1.0 miles
Watkins Glen International Watkins Glen, New York 39,000 1,377 3.4 miles
</TABLE>
DAYTONA INTERNATIONAL SPEEDWAY. The Daytona International Speedway is a
high banked, lighted, asphalt tri-oval superspeedway which also includes a 3.6
mile road course. Daytona International Speedway is located on approximately
440 acres of leased land in Daytona Beach, Florida. The Company's lease with
the Daytona Beach Racing and Recreational Authority expires in 2032, including
renewal options. The Company also owns various parcels of real property
aggregating approximately 250 acres near the Daytona International Speedway
which are used for parking and other ancillary purposes.
MICHIGAN SPEEDWAY. The Michigan Speedway is a moderately banked asphalt
tri-oval superspeedway located in Brooklyn, Michigan, approximately 70 miles
southwest of Detroit and 18 miles southeast of Jackson.
TALLADEGA SUPERSPEEDWAY. The Talladega Superspeedway is a high banked,
asphalt, tri-oval superspeedway with an infield road course. The facility is
located about 90 minutes from Atlanta, Georgia and 45 minutes from Birmingham,
Alabama.
THE CALIFORNIA SPEEDWAY. The California Speedway is a moderately banked
asphalt tri-oval superspeedway located 40 miles east of Los Angeles in San
Bernadino County.
PHOENIX INTERNATIONAL RACEWAY. The Phoenix International Raceway is an
asphalt oval superspeedway which also includes a 1.5 mile road course located
near Phoenix, Arizona.
NORTH CAROLINA SPEEDWAY. The North Carolina Speedway is a moderately
banked asphalt oval superspeedway located in Rockingham, North Carolina,
approximately 90 miles south of Raleigh, North Carolina.
DARLINGTON RACEWAY. The Darlington Raceway is a high banked egg-shaped
asphalt oval superspeedway located in Darlington, South Carolina.
HOMESTEAD-MIAMI SPEEDWAY. The Homestead-Miami Speedway is a low banked
asphalt oval superspeedway located in Homestead, Florida
WATKINS GLEN INTERNATIONAL. Watkins Glen International facility includes
3.4 mile and 2.4 mile road course tracks and is located near Watkins Glen, New
York.
TUCSON RACEWAY PARK. Tucson Raceway Park includes a progressively
banked, 3/8 mile asphalt oval track, grandstands providing seating for
approximately 5,000 spectators, a luxury suite and other spectator facilities
located on part of the Pima County Fairgrounds. The Company's sublease with
the fairground manager expires in 2013, including renewals.
OTHER FACILITIES. The Company owns approximately 42 acres of real
property across International Speedway Boulevard from Daytona International
Speedway Boulevard on which is located a total of 5 buildings containing an
aggregate of approximately 300,000 square feet. The Company's corporate
headquarters and other offices and facilities are located in a portion of
these facilities. The Company also owns concession facilities in Daytona Beach
and in Talladega. The Company leases real estate and office space in
Talladega, and the property and premises at the Talladega Municipal Airport.
The lease for the Company's Talladega business offices, located within the
International Motorsports Hall of Fame, expires in 2002, including renewals.
The Company's lease for the Talladega Municipal Airport expires in 2022,
including renewals. The Company's wholly-owned subsidiaries Phoenix Speedway
Corporation, ISC Properties and Kansas International Speedway Corporation
lease office space in Phoenix, Arizona, Charlotte, North Carolina and Kansas
City, Kansas, respectively.
TRADEMARKS. The Company has various registered and common law trademark
rights, including "DAYTONA USA", the "Daytona 500", "Daytona International
Speedway", "California Speedway", "Talladega Superspeedway", "Darlington",
"World Center of Racing", "Watkins Glen International", "Phoenix International
Raceway", "Grand Prix of Miami", "Michigan Speedway", "Nazareth Speedway",
"North Carolina Motor Speedway", "The Rock", "RIR", "The Action Track" and
related logos. The Company also has licenses from NASCAR, various drivers and
other businesses to use names and logos for merchandising programs and product
sales. Management's policy is to protect its intellectual property rights
vigorously, through litigation if necessary, chiefly because of their
proprietary value in merchandise and promotional sales.
ITEM 3. 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.
As described below, the Company and certain subsidiaries are parties to
legal proceedings alleging price-fixing activities in connection with the sale
of souvenirs and merchandise. These matters are collectively referred to as
the Souvenir Litigation. While the Company disputes the allegations, neither
the cost of defending the suits nor the potential damages or other remedies
for which the Company might be liable is insured.
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. A class consisting of persons who purchased racing souvenirs at
Talladega Superspeedway since September 1992 was certified by the court on
July 30, 1998. 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. Americrown has moved for reconsideration of the
class certification decision. Americrown has disputed the allegations and has
defended 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 (including Motorsports
International Corp., previously a subsidiary of PMI which was acquired by the
Company in the Penske acquisition). Both suits sought 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 class certification has not yet been decided by the court.
Discovery has been concluded. The Company, Americrown and Motorsports
International Corp. have disputed the allegations and have defended the
actions fully and vigorously.
Recently Americrown, Motorsports International Corp. and the Company have
entered into Confidential Memoranda of Understanding ("MOU") to completely
settle the Souvenir Litigation, without any admission of wrongdoing on their
part. Under the terms of the MOU's (which have been filed under seal with the
respective courts) the Company, Americrown and Motorsports International Corp.
have agreed to pay approximately $4.6 million in cash and to distribute
souvenir merchandise discount coupons to settle with classes which would
encompass all purchasers of souvenirs and merchandise at NASCAR Winston Cup
events during the period from January 1, 1991 to the present. The parties are
in the process of attempting to agree on the terms of formal Settlement
Agreements, including the terms of the coupon program. Such Settlement
Agreements will then be subject to review and approval by both the state and
federal courts. If the Settlement Agreements are not successfully finalized,
the Company, Americrown and Motorsports International Corp. intend to resume
the vigorous defense of the actions.
The financial statements for fiscal 1999 include an accrual of
approximately $2.8 million representing Americrown's cash portion of the
proposed Souvenir Litigation settlement. The remaining $1.8 million is
attributable to Motorsports International Corp. and was recorded as a part of
the PMI acquisition purchase price. The effects of the discount coupon
program will be recognized in future periods as coupons are redeemed.
In connection with PMI's acquisition of North Carolina Speedway in 1997,
certain North Carolina Speedway stockholders (constituting more than 5% of the
North Carolina Speedway shares outstanding prior to the acquisition) exercised
their right under North Carolina law to dissent to the price paid for the
common stock of North Carolina Speedway. These dissenting shareholders were
paid $16.77 per share. These dissenters have requested $55.00 per share and
have sued PMI, Penske Acquisition, Inc. and North Carolina Speedway in North
Carolina Superior Court, Mecklenburg County, North Carolina. Under PMI's
agreement with Mrs. DeWitt (the former majority stockholder of North Carolina
Speedway), if a dissenting stockholder, which represents more than five
percent of the North Carolina Speedway stock, receives more consideration in a
dissenters' action than PMI paid in connection with the acquisition of North
Carolina Speedway, all stockholders of North Carolina Speedway at the time of
the acquisition, other than PMI and its affiliates, would receive a per share
amount equal to the award in dissenter's court less the per share amount paid
in the acquisition ($19.61 per share to stockholders other than the dissenting
shareholders). Because PMI acquired Mrs. DeWitt's shares prior to the
completion of this acquisition, Mrs. DeWitt would not be entitled to receive
additional consideration for her shares. A negative decision with respect to
the dissenters' proceeding could materially increase the purchase price paid
for North Carolina Speedway by PMI, which the Company would have to pay.
Management is presently unable to predict or quantify the outcome of
these matters
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of the fiscal year
covered by this report to vote of security holders.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
At November 30, 1999 International Speedway Corporation had two issued
classes of capital stock: Class A Common Stock, $.01 par value per share and
Class B Common Stock, $.01 par value per share. The Class A Common Stock is
traded on the NASDAQ National Market System under the symbol "ISCA". The Class
B Common Stock is traded on NASDAQ's Over-The-Counter Bulletin Board under the
symbol "ISCB" and, at the option of the holder, is convertible to Class A
Common Stock at any time. As of November 30, 1999 there were approximately
3,600 record holders of both classes of stock.
The reported high and low sales prices or high and low bid information as
applicable for each quarter indicated are as follows:
<TABLE>
<CAPTION>
ISCA ISCB(1)
------------------------- -------------------------
QUARTER ENDING: HIGH LOW HIGH LOW
- ---------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
February 1998 ......... $29.75 $21.25 $29.13 $21.50
May 1998 .............. 37.75 27.13 37.50 27.38
August 1998 ........... 36.63 27.00 36.38 27.50
November 1998 ......... 36.00 23.94 35.50 23.75
February 1999 ......... 45.88 34.00 45.38 34.00
May 1999 .............. 56.38 44.00 56.00 44.00
August 1999 ........... 52.88 46.00 52.00 46.75
November 1999 ......... 71.13 47.38 69.00 47.25
</TABLE>
- - ----------------
(1) ISCB quotations were obtained from the OTC Bulletin Board and represent
prices between dealers and do not include mark-up, mark-down or
commission. Such quotations do not necessarily represent actual
transactions.
DIVIDENDS
Annual dividends of 6 cents per share were declared in the quarter ending
in May and paid in June in fiscal years 1998 and 1999 on all classes of common
stock which existed at the time.
ITEM 6. SELECTED FINANCIAL DATA
For comparability, certain prior period results have been reclassified to
conform to the presentation adopted in fiscal 1999. The following selected
financial data should be read in conjunction with the Company's Consolidated
Financial Statements, including the notes thereto, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Report.
<TABLE>
<CAPTION>
Three Months Twelve Months Year Ended
Year Ended Ended Nov. 30, Ended Nov. 30, (1) Nov. 30,
August 31, (1) (Unaudited)
------------------ ------------- ------------- ----------------------------------
1995 1996 1996 1996 1997 1998 1999
---- ---- ---- ----- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Admissions, net .................... $ 43,274 $ 50,140 $ 4,191 $ 50,705 $ 69,487 $ 86,946 $ 134,174
Motorsports related income ......... 24,033 27,433 3,972 28,376 46,650 71,793 116,241
Food, beverage and merchandise
income ........................... 14,442 17,505 1,943 17,723 23,408 28,597 46,453
Other income ....................... 423 964 390 1,192 1,829 1,632 1,854
--------- --------- -------- --------- --------- --------- --------
Total revenues .................... 82,172 96,042 10,496 97,996 141,374 188,968 298,722
Expenses:
Direct expenses:
Prize and point fund monies and
NASCAR sanction fees .......... 11,765 13,865 1,301 13,724 20,567 28,767 45,615
Motorsports related expenses ...... 11,604 15,336 2,814 16,384 23,075 33,283 51,031
Food, beverage and merchandise
expenses ...................... 8,107 10,278 1,536 10,559 13,435 15,025 23,988
General and administrative expenses. 18,202 20,930 5,057 21,721 29,486 37,842 57,066
Depreciation and amortization ...... 4,798 6,302 2,353 7,368 9,910 13,137 25,066
--------- --------- -------- --------- --------- --------- --------
Total expenses .................... 54,476 66,711 13,061 69,756 96,473 128,054 202,766
--------- --------- -------- --------- --------- --------- --------
Operating income (loss).............. 27,696 29,331 (2,565) 28,240 44,901 60,914 95,956
Interest income ..................... 1,436 872 330 912 3,196 4,414 8,780
Interest expense .................... -- -- (69) (69) (509) (582) (6,839)
Equity in net income (loss) from
equity investments ................. 285 1,441 (304) 1,291 366 (905) (1,819)
Gain on sale of equity investment ... -- -- -- -- -- 1,245 --
Minority interest ................... -- -- -- -- -- -- (796)
--------- --------- -------- --------- --------- --------- --------
Income (loss) before income taxes ... 29,417 31,644 (2,608) 30,374 47,954 65,086 95,282
Income taxes (benefit) .............. 11,054 11,963 (741) 11,540 18,158 24,894 38,669
--------- --------- -------- --------- --------- --------- --------
Net income (loss) ................... $ 18,363 $ 19,681 $ (1,867) $ 18,834 $ 29,796 $ 40,192 $ 56,613
========= ========= ========= ========= ========= ========= ========
Basic earnings (loss) per share (2).. $ .54 $ .58 $ (.05) $ .55 $ .78 $ 1.00 $ 1.22
========= ========= ========= ========= ========= ========= ========
Diluted earnings (loss) per share (2) $ .54 $ .57 $ (.05) $ .54 $ .78 $ 1.00 $ 1.22
========= ======== ========= ========= ========= ========= ========
Dividends per share ................. $ .05 $ .05 $ -- $ .05 $ .06 $ .06 $ .06
========= ========= ========= ========= ========= ========= ========
BALANCE SHEET DATA (END OF PERIOD):
Working capital (deficit) ........... $ 20,821 $ (6,751) $ 52,922 $ 52,922 $ (24,976) $ 25,514 $ (51,897)
Total assets ........................ 119,571 152,791 234,069 234,069 302,823 476,818 1,599,127
Long-term debt ...................... -- -- -- -- 1,007 2,775 496,067
Total shareholders' equity .......... 85,247 106,667 179,289 179,289 209,907 366,855 902,470
</TABLE>
- ----------------------
(1) The Company changed its fiscal year end to November 30 effective
December 1, 1996. This resulted in a three-month transition period
commencing September 1, 1996 and ending November 30, 1996. The unaudited
results of the 12-month period ended November 30, 1996 are presented for the
purpose of comparison to the fiscal year ended November 30, 1997.
(2) Earnings per share amounts prior to 1998 have been restated as required
to comply with Statement of Financial Accounting Standards No. 128. See Note
1 of Notes to the Company's audited financial statements.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND 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 conducted at its
facilities, and (iii) catering, concession and merchandise services during or
as a result of such events and activities.
"Admissions" revenue includes ticket sales from all of the Company's events
and activities at DAYTONA USA. Admissions revenue for racing events is
recorded upon completion of the related motorsports event.
"Motorsports related income" primarily includes television and radio broadcast
rights fees, promotion and sponsorship fees, hospitality rentals (including
luxury suites, chalets and the hospitality portion of club seating),
advertising revenues, royalties from licenses of the Company's trademarks, and
track rentals. 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. The Company has historically
negotiated directly with television and cable networks for coverage of
substantially all of its NASCAR televised motorsports events. NASCAR retained
these television and ancillary media rights in sanction agreements beginning
with the 2000 racing season, but agreed to allow existing agreements with
television and cable networks to be honored. NASCAR recently announced
agreement with all of the television broadcasters of these events to release
their contractual rights beginning with the 2001 racing season. Then, in
November 1999, NASCAR announced that it had reached an agreement on a six-year
television contract with NBC Sports and Turner Sports, with the two media
companies combining to develop a joint venture. In addition, NASCAR announced
that it had reached an agreement on an eight-year television contract with FOX
and its FX cable network. Both agreements relate solely to the domestic
broadcast television rights to NASCAR's Winston Cup Series and Busch Grand
National Series events, and are effective beginning with the 2001 racing
season. In January 2000, NASCAR announced that the total current estimate for
net television revenue in the year 2001 is approximately $244 million with
increases, on average, of approximately 17% per year through the 2006 season.
This net television revenue estimate for 2001 is based on the entire 2000
NASCAR Winston Cup Series and NASCAR Busch Series, Grand National Division
schedules. The percentage of television broadcast rights fees that the Company
currently retains from each contract will be the same under the future
arrangement.
"Food, beverage and merchandise income" includes revenues from concession
stands, hospitality catering and direct sales of souvenirs, programs and other
merchandise, fees paid by third party vendors for the right to sell souvenirs
and concessions at the Company's facilities, and the wholesale and retail sale
of Goodyear brand racing tires for various types of racing events.
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 merchandise 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>
Year Ended Year Ended Year Ended
Nov. 30, Nov. 30. Nov. 30
----------- ----------- ----------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Revenues:
Admissions, net ...................................... 49.1% 46.0% 44.9%
Motorsports related income ........................... 33.0 38.0 38.9
Food, beverage and merchandise income ................ 16.6 15.1 15.6
Other income ......................................... 1.3 0.9 0.6
-------- ------ ------
Total revenues ...................................... 100.0% 100.0% 100.0%
Expenses:
Direct expenses:
Prize and point fund monies and NASCAR sanction fees 14.5 15.2 15.3
Motorsports related expenses ........................ 16.3 17.6 17.1
Food, beverage and merchandise expenses ............. 9.5 8.0 8.0
General and administrative expenses .................. 20.9 20.0 19.1
Depreciation and amortization ........................ 7.0 7.0 8.4
-------- ------ ------
Total expenses ...................................... 68.2 67.8 67.9
-------- ------ ------
Operating income ...................................... 31.8 32.2 32.1
Interest income ....................................... 2.3 2.3 3.0
Interest expense ...................................... (0.4) (0.3) (2.3)
Equity in net income (loss)from equity investments ... 0.2 (0.5) (0.6)
Gain on sale of equity investment ..................... -- 0.7 --
Minority interest ..................................... -- -- (0.3)
-------- ------ ------
Income before income taxes ............................ 33.9 34.4 31.9
Income taxes .......................................... 12.8 13.1 12.9
-------- ------ ------
Net income ............................................ 21.1% 21.3% 19.0%
======== ======= ======
<?TABLE>
COMPARISON OF FISCAL 1999 TO FISCAL 1998
On July 26, 1999, the Company acquired the approximately 88% interest it did
not already own in Penske Motorsports, Inc. ("PMI"). Motorsports facilities
acquired in the transaction include Michigan Speedway in Brooklyn, Michigan
("Michigan"); Nazareth Speedway in Nazareth, Pennsylvania; California
Speedway in San Bernardino County, California ("California"); and North
Carolina Speedway in Rockingham, North Carolina. The Company also acquired
PMI's 45% interest in Homestead-Miami Speedway, LLC ("Miami"), bringing the
Company's ownership in the operations of that facility to 90%, as well as
other wholly-owned PMI merchandising subsidiaries. As a result of the
transaction at the end of fiscal 1999, the Company operated 10 major
motorsports facilities across the United States with more than 800,000 seats
and 400 suites (See "Acquisition"). The Company has recognized revenues and
expenses associated with the acquired operations on a consolidated basis
subsequent to July, 26, 1999, including three NASCAR Winston Cup Series
events, three NASCAR Busch Series, Grand National Division events, one NASCAR
Craftsman Truck Series event, and one CART FedEx Championship Series event.
As a result of the acquisition of PMI and the addition of a Busch Series,
Grand National Division event to the race schedule at Phoenix International
Raceway ("Phoenix") in fiscal 1999, the Company conducted thirteen NASCAR
Winston Cup Series events, nine NASCAR Busch Series, Grand National Division
events, three NASCAR Craftsman Truck Series events, and one CART FedEx
Championship Series event in fiscal 1999 compared to ten NASCAR Winston Cup
Series events, five NASCAR Busch Series, Grand National Division events, three
NASCAR Craftsman Truck Series events, and no CART FedEx Championship Series
events in fiscal 1998. Accordingly, the Company's results of operations, as
well as the margins of certain expenses in relation to certain revenues, are
not necessarily comparable on a period-to-period basis.
Admissions revenue increased approximately $47.2 million, or 54.3%, in fiscal
1999 as compared to fiscal 1998. The increase was primarily attributable to
the events conducted subsequent to July 26, 1999 at the facilities acquired in
the PMI acquisition and at Miami, as well as the increase in the weighted
average price of tickets sold and increased seating capacity and attendance at
events held at Daytona International Speedway ("Daytona") and, to a lesser
extent, events conducted at Talladega Superspeedway ("Talladega"), Phoenix and
Darlington Raceway ("Darlington").
Motorsports related income increased approximately $44.4 million, or 61.9%, in
fiscal 1999 as compared to fiscal 1998. Over one-half of the increase was
attributable to the events conducted subsequent to July 26, 1999 at the
facilities acquired in the PMI acquisition and at Miami. The remaining
increase was primarily related to increased television broadcast rights,
luxury suite and hospitality rentals associated with events held at Daytona
and, to a lesser extent, events conducted at the Company's other facilities.
Food, beverage and merchandise revenue increased approximately $17.9 million,
or 62.4%, in fiscal 1999 as compared to fiscal 1998. Events conducted
subsequent to July 26, 1999 at the facilities acquired in the PMI acquisition
and at Miami, combined with the activities of certain merchandising
subsidiaries acquired from PMI (which included sales of Goodyear brand racing
tires), accounted for over three-quarters of the increase. The remaining
increase was primarily attributable to catering revenues from expanded luxury
suite and hospitality facilities and increased attendance and seating capacity
for events conducted at the Company's other facilities.
Prize and point fund monies and NASCAR sanction fees increased by
approximately $16.8 million, or 58.6%, in fiscal 1999 as compared to fiscal
1998. Over one-half of the increase was attributable to the events conducted
subsequent to July 26, 1999 at the facilities acquired in the PMI acquisition
and at Miami. The remaining increase is related to growth in the Company's
television broadcast rights revenues for the Company's other facilities, as
standard NASCAR sanctioning agreements require that a specified percentage of
broadcast rights fees be paid as part of prize money, and, to a lesser extent,
the addition of a Busch Series, Grand National Division event at Phoenix in
1999. Over three-quarters of the increase in fiscal 1999 as compared to
fiscal 1998 was due to increased prize and point fund monies paid by NASCAR to
participants in NASCAR events.
Motorsports related expenses increased approximately $17.7 million, or 53.3%,
in fiscal 1999 as compared to fiscal 1998. Over one-half of the increase was
attributable to the operating expenses for events conducted subsequent to July
26, 1999 at the facilities acquired in the PMI acquisition and the
consolidation of Miami. The remaining increase was primarily related to
hospitality services and supplies, personnel costs and a variety of other fan
amenities and operating costs for events at Daytona and, to a lesser extent,
the Company's other facilities. Motorsports related expenses as a percentage
of combined admissions and motorsports related income remained relatively
constant for fiscal 1999 as compared to fiscal 1998.
Food, beverage and merchandise expenses increased approximately $9.0 million,
or 59.7%, in fiscal 1999 as compared to fiscal 1998 primarily due to expenses
associated with merchandising operations acquired in the PMI acquisition and
product and personnel costs associated with increased revenues at the
Company's other facilities. Food, beverage and merchandise expenses as a
percentage of food, beverage and merchandise revenue decreased from 52.5% in
fiscal 1998 to 51.6% in fiscal 1999 due to economies of scale and cost
containment as well as fees from third party vendors at Michigan, Miami and
California for which there are no associated costs, partially offset by lower
margin activities of certain merchandising subsidiaries acquired in the PMI
merger.
General and administrative expenses increased approximately $19.2 million, or
50.8%, in fiscal 1999 as compared to fiscal 1998. Over one-half of the
increase was due to the general and administrative expenses associated with
operations acquired in the PMI acquisition and the consolidation of Miami
subsequent to July 26, 1999. The remaining increase was primarily
attributable to increased personnel costs associated with the ongoing
expansion of the Company's business, exclusive of the personnel costs
associated with operations acquired in the PMI acquisition and the
consolidation of Miami, and a charge of approximately $2.8 million related to
the cash portion of a proposed settlement in the souvenir litigation (See
"Legal Proceedings"). General and administrative expenses as a percentage of
total revenues decreased from 20.0% in fiscal 1998 to 19.1% in fiscal 1999
primarily as a result of the growth in the Company's revenues exceeding the
growth in general and administrative expenses, partially offset by the charge
related to the souvenir litigation.
Depreciation and amortization expense increased $11.9 million, or 90.8%, in
fiscal 1999 as compared to fiscal 1998. The depreciation of assets acquired
and amortization of goodwill recorded as a result of the PMI acquisition
accounted for over three-quarters of the increase. The remaining increase was
a result of the ongoing expansion of the Company's facilities.
Interest income for fiscal 1999 increased approximately $4.4 million as
compared to fiscal 1998. This increase was primarily due to the investment of
the remaining proceeds of the July 1998 Class A Common Stock Offering,
including the Company's investments restricted to the funding of the speedway
in Kansas, and investment of the proceeds from the sale of taxable special
obligation revenue ("TIF") bonds issued in January 1999 by the Unified
Government of Wyandotte County/Kansas City, Kansas ("Unified Government"), to
partially fund the Kansas project (See "Future Liquidity").
Interest expense for fiscal 1999 increased approximately $6.3 million as
compared to fiscal 1998. Interest expense in fiscal 1999 was primarily
attributable to interest on the $225 million principal amount of Senior Notes
issued in October 1999, borrowings under the Company's five-year revolving
Credit Facility and interest expense related to the TIF bond debt service
funding commitment, net of capitalized interest (See "Acquisition" and "Future
Liquidity"). Interest expense in fiscal 1998 was primarily related to the
note payable associated with the acquisition of Phoenix.
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 fiscal 1999, this included the
Company's approximately 12% indirect investment in PMI and its 45% investment
in Miami through July 26, 1999, and its 50% investment in Motorsports
Alliance, LLC, which is pursuing development of a major motorsports facility
in the Chicago area (See "Future Liquidity"). For fiscal 1998, this included
the Company's approximately 12% indirect investment in PMI, its 40% investment
in Miami, which increased to 45% in March of 1998, and its approximately 7%
investment in Grand Prix Association of Long Beach ("Long Beach"), which was
sold in March of 1998.
In March of 1998 the Company recorded an approximately $1.2 million gain on
the sale of its equity investment in Long Beach. 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.
Minority interest consists of the 10% interest in Miami that is not owned by
the Company. This interest resulted in an approximately $796,000 reduction of
pre-tax income in fiscal 1999.
Income taxes increased approximately $13.8 million in fiscal 1999 as compared
to fiscal 1998. The Company's effective tax rate has increased compared to
historical levels, and is expected to remain above historical levels,
primarily due to the amortization of non-deductible goodwill created in the
PMI acquisition.
As a result of the foregoing, the Company's net income increased approximately
$16.4 million, or 40.9%, in fiscal 1999 as compared to fiscal 1998.
COMPARISON OF FISCAL 1998 TO FISCAL 1997
During the year ended November 30, 1997, the Company acquired the 50% interest
it did not already own in Watkins Glen International ("Watkins Glen") and
purchased 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 when comparing fiscal 1998 with fiscal 1997.
Accordingly, the Company's results of operations are not necessarily
comparable on a period to period basis.
Admissions revenue increased approximately $17.5 million, or 25.1%, for fiscal
1998 as compared to fiscal 1997. This increase was primarily attributable to
increased seating capacity and attendance, and an increase in the weighted
average price of tickets sold for the events conducted at Daytona, Talladega,
Phoenix, Darlington and Watkins Glen.
Motorsports related income increased approximately $25.1 million, or 53.9%,
during fiscal 1998 as compared to fiscal 1997. Approximately one-half of this
increase was a result of increases in television broadcast rights fees. The
remaining increase was primarily attributable to promotion and sponsorship
fees, luxury suite and hospitality rentals, and to a lesser extent, events
conducted at Phoenix for which there were no comparable events in fiscal 1997.
Food, beverage and merchandise income increased approximately $5.2 million, or
22.2%, during fiscal 1998 as compared to fiscal 1997. This increase was
primarily attributable to increased attendance and hospitality at the
Company's racing events, as well as strong sales of souvenirs at the gift shop
adjacent to DAYTONA USA
Prize and point fund monies and NASCAR sanction fees increased by
approximately $8.2 million, or 39.9%, during fiscal 1998 as compared to fiscal
1997. Approximately three-quarters of this increase was the result of
increases in the prize and point fund monies paid by NASCAR to participants in
the Company's events. This increase was primarily related to increased
television broadcast rights fees because standard NASCAR sanctioning
agreements require that a specified percentage of television broadcast rights
fees be paid as part of the prize money.
Motorsports related expenses increased approximately $10.2 million, or 44.2%,
during fiscal 1998 as compared to fiscal 1997. Approximately two-thirds of
the increase was primarily attributable to increases in personnel costs,
advertising, hospitality and other operating costs. The remaining increase
was attributable to expenses for Phoenix and Watkins Glen for which there were
no comparable expenses in fiscal 1997 due to the timing of the acquisitions.
Motorsports related expenses as a percentage of combined admissions and
motorsports related income increased from approximately 19.9% to 21.0%, when
comparing fiscal 1997 with fiscal 1998. This increase was primarily due to
lower margin events conducted at Phoenix for which there were no comparable
events in fiscal 1997.
Food, beverage and merchandise expense increased approximately $1.6 million,
or 11.8%, during fiscal 1998, as compared to fiscal 1997. These increased
expenses were primarily related to increased product and personnel costs.
Food, beverage and merchandise expenses as a percentage of food, beverage and
merchandise income decreased from 57.4% to 52.5% for fiscal 1998 as compared
to fiscal 1997. This decrease was due to economies of scale and cost
containment, fees from third party vendors at Phoenix for which there are no
associated costs, discontinuation of lower margin events conducted at
facilities not operated by the Company and the impact of additional expense
associated with the rain out and rescheduling of a NASCAR Winston Cup Series
event at Talladega in the prior year.
General and administrative expenses increased $8.4 million, or 28.3%, for
fiscal 1998 as compared to fiscal 1997. The increase was primarily
attributable to personnel costs and professional fees, with over one-quarter
of the increase related to the timing of the acquisitions of Phoenix and
Watkins Glen in the prior year. General and administrative expenses as a
percentage of total revenues remained relatively constant for fiscal 1998 as
compared to fiscal 1997.
Depreciation and amortization expense increased approximately $3.2 million, or
32.6%, for fiscal 1998 as compared to fiscal 1997. Approximately 45% of this
increase was attributable to Phoenix, including the amortization of goodwill,
and to Watkins Glen for which there was no comparable expense in fiscal 1997.
The remaining increase was attributable to ongoing improvements at the
Company's other facilities.
The approximately $1.1 million increase in the Company's net interest income
for fiscal 1998 as compared to fiscal 1997, is attributable primarily to the
investment of the proceeds of the Class A Common Stock Offering in July 1998.
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 fiscal 1998 this included the
Company's approximately 12% indirect investment in PMI, its 40% investment in
Miami which was increased to 45% in March 1998, and its approximately 7%
investment in Long Beach, which was sold in March 1998. Fiscal 1997 included
the Company's approximately 11% indirect investment in PMI, its 40% investment
in Miami acquired in July of 1997, its approximately 7% investment in Long
Beach acquired in August of 1997, 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 sale of the Company's 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 increased approximately
$10.4 million, or 34.9%, for fiscal 1998 as compared to fiscal 1997.
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. In addition, the
Company has used the proceeds from offerings of its Class A Common Stock and,
more recently, the net proceeds from the issuance of Senior Notes, borrowings
under its Credit Facility and state and local mechanisms to fund acquisitions
and development projects. The Company had $225 million principal amount of
Senior Notes outstanding, total borrowings of approximately $200 million under
its credit facility and term loan arrangements, a debt service funding
commitment of approximately $69 million, net of discount, related to the TIF
bonds issued by the Unified Government and a working capital deficit of $51.9
million at November 30, 1999, compared to working capital of approximately
$25.5 million at November 30, 1998. This is primarily due to the acquisition
of the approximately 88% interest the Company did not already own in PMI in
July of 1999 and funds restricted at November 30, 1999 for the purchase of
Richmond International Raceway ("Richmond") and the development of the
speedway in Kansas. (See "Acquisition" and "Future Liquidity")
CASH FLOWS
Net cash provided by operating activities was approximately $99 million in
fiscal 1999. The difference between the Company's net income of $56.6 million
and the $99 million of operating cash flow is primarily attributable to $25.1
million in depreciation and amortization, as well as a $14.5 million increase
in deferred income taxes, net of the increase in deferred income taxes
recorded as a result of the PMI acquisition and consolidation of Miami.
Net cash used in investing activities for fiscal 1999 was approximately $468.5
million. The Company's use of cash in investing activities reflects a $242.4
million increase in investments restricted to the purchase of Richmond and the
development of the speedway in Kansas, $133.4 million for the cash portion of
the purchase price of PMI, $126.6 million in capital expenditures and $17.7
million mainly for the Company's investment in the Chicago project, partially
offset by the net proceeds from the sale of short-term investments of $53.9
million.
Net cash provided by financing activities for fiscal 1999 of approximately
$368.7 million is related primarily to the net proceeds of the issuance of
$225 million principal amount of Senior Notes, borrowings under the Company's
five-year revolving Credit Facility (See "Acquisition") and the issuance of
the TIF bonds related to the Kansas project, partially offset by repayment of
a portion of the Company's borrowings under the Credit Facility and, to a
lesser extent, the debt service funding commitment associated with the TIF
bonds.
CAPITAL EXPENDITURES
Capital expenditures totaled approximately $126.6 million for fiscal 1999 as
compared to $71.9 million for fiscal 1998. Approximately 66% of these
expenditures were related to expenditures at the Company's existing
facilities, including increased seating capacity at Daytona, Talladega,
Phoenix, Darlington, Michigan and Miami, land purchased for expansion of
parking capacity and a variety of other improvements. The remaining capital
expenditures were primarily related to the construction of the speedway in
Kansas.
The Company expects to make approximately $55.1 million of additional capital
expenditures for approved projects at existing facilities, including Richmond,
within the next 24 months to increase grandstand seating capacity, acquire
land for expansion of parking capacity and for a variety of additional
improvements. The Company also expects to spend an additional $10.1 million
for 36 additional luxury suites at the Kansas facility, which is currently
under construction. The balance of the Company's capital expenditures related
to the construction of the Kansas facility will be funded from restricted
investments, as discussed below.
ACQUISITION
On July 26, 1999, the Company, 88 Corp.(a merger subsidiary wholly-owned by
the Company), and PMI consummated an Agreement and Plan of Merger. Pursuant
to the PMI Merger Agreement, PMI merged into 88 Corp. ("the PMI Merger") and
became a wholly-owned subsidiary of the Company.
In connection with and immediately preceding the PMI Merger, the Company,
Penske Performance, Inc., Penske Corporation, (the sole shareholder of Penske
Performance, Inc.), and PSH Corp., (which owned approximately 56% of the
issued and outstanding shares of PMI), consummated a separate Agreement and
Plan of Merger which resulted in the merger of PSH Corp. into the Company.
Pursuant to the Merger Agreements, the Company acquired the approximately 88%,
or 12.2 million outstanding common shares, of PMI stock that it did not
already own for approximately $129.8 million and 10,029,861 shares of the
Company's Class A Common Stock. Transaction costs, net of cash acquired in
the transaction, totaled approximately $3.6 million. The total cash and stock
consideration issued in the transaction was approximately $611.1 million.
The acquisition has been accounted for under the purchase method of accounting
and, accordingly, the results of operations of the former PMI, as well as
Miami, have been included in the Company's consolidated statements of income
since the date of acquisition.
The transaction purchase price has been allocated to the assets and
liabilities of PMI and Miami based upon preliminary estimates of their fair
market value. Management does not believe the final valuation will differ
materially from the preliminary valuation. The excess of the purchase price
over the fair value of the net assets acquired of approximately $108.2 million
has been allocated, based upon the preliminary valuation, as goodwill of
approximately $507.4 million and assembled workforce of approximately
$900,000, which are being amortized on a straight line basis over 40 years and
five years, respectively. The amount amortized during fiscal 1999 was
approximately $4.4 million.
The Company financed a portion of the aforementioned mergers and refinanced
PMI's outstanding indebtedness through a new $250 million fully-underwritten
five-year revolving Credit Facility ("Credit Facility") syndicated to a select
group of lenders (See "Future Liquidity"). This Credit Facility replaced the
Company's existing $100 million facility. Borrowings under the Credit
Facility bear interest at the applicable LIBOR rate plus 50-100 basis points
depending on certain financial criteria. At November 30, 1999, the Company's
outstanding borrowings on this Credit Facility were $160 million related to
the December 1, 1999 purchase of Richmond (See "Future Liquidity").
FUTURE LIQUIDITY
On October 6, 1999, the Company sold $225 million principal amount of Senior
Notes due 2004 in a private placement. The unsecured Senior Notes will bear
interest at 7.875%. The Company used approximately $176 million of the net
proceeds from the transaction to repay the outstanding borrowings under the
Credit Facility, which were related to a portion of the cash consideration
paid in the PMI acquisition (See "Acquisition"). The Company intends to use
the remaining net proceeds of approximately $47 million to partially fund the
completion of certain additions and improvements to the Company's motorsports
facilities and for working capital and other general corporate purposes.
Pending such uses, the Company invested the remaining proceeds in money market
funds and other interest-bearing obligations. Pursuant to the Credit Facility
agreement, the size of the Credit Facility was automatically reduced from $300
million to $200 million upon the Company's receipt of the proceeds from the
private placement. In December 1999, the Company increased the maximum
availability under its Credit Facility from $200 million to $250 million. On
January 19, 2000 the Company commenced an offer to exchange the Senior Notes
issued in the private placement for registered Senior Notes with substantially
identical terms. The exchange offer will expire on February 28, 2000.
In addition to the Credit Facility described above, at November 30, 1999 the
Company had a $20 million credit facility, with outstanding borrowings of $9.5
million, and a $30 million term loan outstanding. Both the $20 million credit
facility and $30 million term loan are collateralized by the assets of the
Company's Miami subsidiary.
During the first quarter of 1999, the financing for the first phase of the
development of the Kansas facility, which is currently estimated to cost in
excess of $224 million, was substantially completed. In January 1999, the
Unified Government issued approximately $71.3 million in TIF bonds and
approximately $24.3 million in sales tax special obligation revenue ("STAR")
bonds. The STAR bonds are retired with state and local taxes generated within
the project's boundaries, and are not an obligation of the Company. The TIF
bonds will be serviced through payments by the Unified Government escalating
from an annual rate of approximately $4.8 million to $7.7 million, including
interest at 6.15% to 6.75%, which are funded by payments made by the Company
to the Unified Government in lieu of property taxes. In addition, the Company
initially committed equity of approximately $77.9 million of which $24.4
million was funded during fiscal 1998, with the remaining $53.5 million funded
in the first quarter of fiscal 1999. The net TIF and STAR bond proceeds and
the Company's initial equity contribution were deposited into trustee
administered accounts for the benefit of the construction of the Kansas
facility which will be owned and operated by the Company. At November 30,
1999, the Company's restricted investments include $80.7 million of the funds
remaining from the Company's equity contribution and the TIF bond proceeds.
On May 5, 1999, the Motorsports Alliance, LLC ("MSA") (owned 50% by the
Company and 50% by Indianapolis Motor Speedway Corp.) and the owners of Route
66 Raceway, LLC ("Route 66"), formed a new company, Raceway Associates, LLC,
("Raceway Associates") which is owned 75% by MSA and 25% by the former owners
of Route 66. As a result of this transaction, Raceway Associates owns the 240
acre Route 66 Raceway motorsports complex located in Joliet, Illinois,
approximately 35 miles from downtown Chicago. Raceway Associates also
purchased 930 acres adjacent to the existing Route 66 complex on which it has
commenced construction of a 1.5 mile oval motor speedway, which will initially
accommodate approximately 75,000 spectators. The current estimate for the new
superspeedway development is $125 to $130 million, $100 million of which will
be financed through equity of approximately $50 million from MSA and
approximately $50 million in future borrowings by Raceway Associates. The
members of MSA will guarantee up to $50 million of these borrowings of Raceway
Associates on a pro rata basis until such time as the operations of Raceway
Associates meet certain financial criteria. Further, in December 1999 the
City of Joliet, Illinois sold approximately $9 million in 6.75% municipal
bonds (which are to be repaid by Raceway Associates through property tax
assessments over twelve years) to help fund a portion of the project costs
that relate to public infrastructure for the speedway development project. In
addition, the Company (through MSA) may commit additional equity to fund a
portion of additional project costs in excess of $109 million. During fiscal
1999, the Company contributed approximately $17.2 million to MSA,
approximately $14.6 million of which has been applied towards the Company's
portion of MSA's $50 million equity commitment.
On December 1, 1999, the Company acquired the Richmond facility, a 3/4 mile
intermediate speedway located approximately 10 miles from downtown Richmond,
Virginia, for approximately $215 million in cash. Richmond seats over 94,000
grandstand spectators and offers luxury accommodations in 34 suites. Richmond
hosts several major NASCAR events annually, including two NASCAR Winston Cup
Series events, two NASCAR Busch Series, Grand National Division events and one
NASCAR Craftsman Truck Series event. The Company financed the acquisition
through $160 million in borrowings under its Credit Facility and approximately
$55 million of its existing cash resources.
During fiscal 1999, the Company announced its intention to search for a site
for a major motorsports facility in the New York metro area. In January 2000,
the Company announced that, through its wholly-owned subsidiary New York
International Speedway Corporation, it had entered into an agreement with the
New Jersey Sports and Exposition Authority to conduct a feasibility study on
the development of a motorsports facility at the Meadowlands Sports Complex in
New Jersey. The feasibility study covers a twelve month period. The
Meadowlands Sports Complex, located five miles west of the Lincoln Tunnel, is
the site of Giants Stadium, Continental Airlines Arena and Meadowlands
Racetrack and is the home of several professional sports franchises, horse
racing, college athletics, concerts and family shows. The Company has not yet
determined the feasibility of the Meadowlands (or any other) site, formulated
an estimate of the costs to construct a major motorsports facility in the New
York metropolitan area, nor established a timetable for completion, or even
commencement, of such a project.
The Company believes that cash flow from operations, along with existing cash
and short-term investment balances, proceeds from the Senior Notes and
available borrowings under the Company's credit facilities, will be sufficient
to fund i) operations and approved capital projects at existing facilities for
the foreseeable future, ii) payments required in connection with the funding
of the Unified Government's debt service requirements related to the TIF
bonds, iii) payments related to other currently existing debt service
requirements, and iv) the Company's expected equity funding requirements for
the Chicago project. The Company intends to pursue further development and/or
acquisition opportunities (including the possible development of new
motorsports facilities in Denver and the New York metropolitan area) the
timing, size and success as well as associated potential capital commitments
of which are unpredictable. Accordingly, a material acceleration in our
growth strategy could require the Company to obtain additional capital through
debt and/or equity financings. Although there can be no assurance, the
Company believes that adequate debt and equity financing will be available on
satisfactory terms.
SEASONALITY AND QUARTERLY RESULTS
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
Winston Cup Series events is traditionally held on the Sunday preceding Labor
Day. Accordingly, the revenue and expenses for that race and/or the related
supporting events may be recognized in either the fiscal quarter ending August
31 or the fiscal quarter ending November 30. Further, in July 1998 the Company
announced the postponement of the NASCAR Winston Cup Series Pepsi 400 at
Daytona, historically conducted in the Company's third quarter, 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 resulted 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 1999.
On July 26, 1999, the Company acquired the 88% interest it did not already own
in PMI. As a result of the transaction, the Company also acquired PMI's 45%
interest in Miami, bringing the Company's ownership in that facility to 90%.
The Company has recognized revenues and expenses associated with acquired
operations on a consolidated basis subsequent to July 26, 1999, including
three NASCAR Winston Cup Series events and three NASCAR Busch Series, Grand
National Division events, one NASCAR Craftsman Truck Series event and one CART
FedEx Championship Series event.
Accordingly, the Company's results of operations are not necessarily
comparable on a period-to-period basis.
The following table presents certain unaudited financial data for each
fiscal quarter of fiscal 1998 and fiscal 1999 (in thousands, except per share
amounts):
</TABLE>
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED
------------------------------------------------------------
FEBRUARY 28, MAY 31, AUGUST 31, NOVEMBER 30,
1998 1998 1998 1998
-------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Total Revenues ................. $ 68,284 $ 38,191 $ 17,822 $ 64,671
Operating Income (loss) ........ 33,000 7,784 (4,687) 24,817
Net Income (loss) .............. 20,149 6,046 (1,944) 15,941
Basic earnings (loss) per share 0.53 0.16 (0.05) 0.37
Diluted earnings (loss) per share 0.53 0.16 (0.05) 0.37
</TABLE>
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED
------------------------------------------------------------
FEBRUARY 28, MAY 31, AUGUST 31, NOVEMBER 30,
1999 1999 1999 1999
-------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Total Revenues ................. $83,236 $44,635 $66,226 $104,625
Operating Income ............... 40,233 9,587 16,822 29,314
Net Income ..................... 25,939 6,844 9,635 14,195
Basic earnings per share ....... 0.61 0.16 0.21 0.27
Diluted earnings per share ..... 0.60 0.16 0.20 0.27
</TABLE>
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 could recognize a date using "00" as the year 1900
rather than the year 2000, which potentially could result in system failure or
disruption of operations.
The Company diligently addressed the potential Year 2000 issue through
remediation projects relating to its information technology systems, non-
information technology systems and material third party relationships. The
Company completed these initiatives at an estimated cost of $600,000.
Previously disclosed as such, most of the Company's major information
technology systems were updated or replaced with Year 2000 compliant
applications in the normal course of business.
As of this date, the Company has not experienced any significant business
disruptions or system failures as a result of the Year 2000 issue. There have
been no substantial Year 2000 related issues reported from our major business
partners.
Although the Year 2000 event has occurred, and while there can be no assurance
that there will be no problems related to the Year 2000 for a period of time
after January 1, 2000, the Company believes it will not be adversely impacted
by the Year 2000 issue.
FACTORS THAT MAY AFFECT OPERATING RESULTS
Statements contained in this document 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 these, or
other, factors which could cause actual results to differ materially from
those in the forward-looking statements is contained from time to time in the
Company's other 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 Series - Grand National Division and certain
other races promoted by the Company. The Company has sanctioning agreements to
promote and market eleven NASCAR Winston Cup Series championship point races,
two NASCAR Winston Cup Series non-championship point races, nine NASCAR Busch
Series - Grand National Division races and a number of other NASCAR races for
the 1999 racing season. Each NASCAR event sanctioning agreement is awarded on
an annual basis. In fiscal 1999, NASCAR-sanctioned races at the Company's
facilities accounted for approximately 79% 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 Kansas
International Speedway and the 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 NASCAR Winston Cup, NASCAR Busch Series - Grand National
Division 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
regulatory and legislative 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. Recently major United States
companies engaged in the manufacture of cigarettes and smokeless tobacco
(collectively the "tobacco industry") entered into various agreements with the
Attorneys General of all 50 states to settle certain state initiated
litigation against the tobacco industry. These settlement agreements will,
among other things, place limits upon the sponsorship of motorsports
activities by the tobacco industry. The actual impact of these settlement
agreements upon the Company's future revenues has not yet been determined.
Even more recently the executive branch of the United States government has
publicly stated its intention to initiate certain litigation against the
tobacco industry which would be similar to that initiated by the states which
was recently settled. The exact parameters of the proposed litigation and the
impact, if any, of this proposed litigation upon the Company's future revenues
is presently 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 1.6% and 1.5% of the Company's total
revenues in fiscal 1998 and fiscal 1999, 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 Series and Busch Series - Grand
National Division.
LEGAL PROCEEDINGS
The Company and its indirect subsidiary, Americrown Service Corporation, are
parties to certain legal proceedings alleging price-fixing activities in
connection with the sale of racing souvenirs and merchandise as described in
"Part II - Other Information". While the Company and Americrown dispute the
allegations and intend 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 and Americrown might be liable is 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.
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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company's interest income and expense are most sensitive to changes in the
general level of U.S. interest rates. In this regard, changes in U. S.
interest rates affect the interest earned on the Company's cash equivalents,
short term investments and restricted investments, as well as interest paid on
its debt.
The objective of the Company's asset management activities is to provide an
adequate level of interest income and liquidity to fund operations and capital
expansion, while minimizing market risk. The Company utilizes short term
investments consisting of certificates of deposit and obligations of U.S.
Government agencies and municipal securities to minimize the interest rate
risk. The Company does not believe that its interest rate risk related to its
cash equivalents and short term investments is material due to the short term
nature of the investments.
Additionally, the Company maintained a significant certificate of deposit with
one financial institution at November 30, 1998, and a significant amount in a
repurchase agreement with one financial institution at November 30, 1999
related to the December 1, 1999 purchase of Richmond (See "Future Liquidity").
The Company believes that it was not exposed to any significant credit risk on
these investments due to the strength of the financial institutions and the
short term nature of the investments.
In January 1999, the Unified Government issued approximately $71.3 million in
TIF bonds in connection with the financing of the construction of the speedway
in Kansas (See "Future Liquidity"). The TIF bonds are serviced through
payments by the Unified Government, which are funded through payments made by
the Company to the Unified Government in lieu of property taxes. The TIF
bonds are comprised of a $21.6 million, fixed rate (6.15%) term bond due
December 1, 2017 and a $49.7 million fixed rate (6.75%) term bond due December
1, 2027. The proceeds from the TIF bonds, along with the Company's initial
equity commitment to the Kansas City track, were deposited in a trust account
and are classified as restricted investments on the Company's balance sheet.
The trust account has invested the funds in a guaranteed investment contract
earning an interest rate of approximately 4.75%.
On October 6, 1999, the Company completed an offering of $225 million
principal amount of Senior Notes due October 15, 2004 in a private placement.
The unsecured Senior Notes bear interest at 7.875% and rank equally with all
of the Company's other senior unsecured and unsubordinated indebtedness. The
Senior Notes require semi-annual interest payments beginning on April 15, 2000
through maturity on October 15, 2004. The Senior Notes may be redeemed in
whole or in part, at the option of the Company, at any time or from time to
time at a redemption price as defined in the indenture. Certain of the
Company's subsidiaries are guarantors of the Senior Notes. The Senior Notes
also contain various restrictive covenants. On January 19, 2000, the Company
commenced an offer to exchange the Senior Notes issued in the private
placement for registered Senior Notes with substantially identical terms. The
exchange offer will expire on February 28, 2000.
The Company is exposed to market risks related to fluctuations in interest
rates on its variable rate debt, which consists of borrowings of $199.5
million at November 30, 1999 under the Company's $250 million Credit Facility,
$20 million credit facility and $30 million term debt. The Company has an
interest swap agreement covering the $20 million credit facility and the $30
million term loan to fix the interest rate through the remainder of the
agreement.
Generally, fixed rate debt changes in interest rates affect the fair market
value, but not earnings or cash flows. Conversely, for variable rate debt,
changes in interest rates generally do not influence fair market value, but do
affect future earnings and cash flows. The Company manages its interest
exposure by using a combination of fixed and variable rate debt. The Company
does not expect changes in interest rates to have a material effect on the
Company's results of operations or cash flows, although there can be no
assurances that interest rates will not significantly change.
<PAGE>
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders
International Speedway Corporation
We have audited the accompanying consolidated balance sheets of
International Speedway Corporation and subsidiaries as of November 30, 1998
and 1999, and the related consolidated statements of income, shareholders'
equity and cash flows for the years ended November 30, 1997, 1998 and 1999.
Our audits also included the financial statement schedule listed in the index
at Item 14(a). These financial statements and schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of International Speedway Corporation and subsidiaries at November 30, 1998
and 1999, and the consolidated results of their operations and their cash
flows for the years ended November 30, 1997, 1998 and 1999, in conformity with
accounting principles generally accepted in the United States. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
Ernst & Young LLP
Jacksonville, Florida
January 21, 2000
<PAGE>
<PAGE>
INTERNATIONAL SPEEDWAY CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
NOVEMBER 30,
______________________
1998 1999
______________________
(IN THOUSANDS)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents ......................... $ 38,676 $ 37,811
Short-term investments (Note 5) ................... 54,127 690
Receivables, less allowance of $100 and $1,000,
respectively .................................... 9,445 15,312
Inventories ....................................... 953 3,466
Prepaid expenses and other current assets ......... 3,267 7,696
------- ------------
Total Current Assets ................................ 106,468 64,975
Property and Equipment, net (Note 2) ................ 225,831 657,682
Other Assets:
Equity investments (Note 3) ....................... 44,087 17,423
Goodwill, less accumulated amortization of $1,386
and $6,753, respectively (Note 1)................ 38,927 542,583
Restricted investments (Note 1) ................... 53,500 295,929
Other ............................................. 8,005 20,535
-------- ------------
144,519 876,470
-------- ------------
Total Assets ........................................ $ 476,818 $ 1,599,127
======== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable .................................. $ 10,367 $ 17,655
Deferred income (Note 1) .......................... 62,253 77,119
Current portion of long-term debt (Note 6) ........ 598 2,655
Other current liabilities ......................... 7,736 19,443
--------- ------------
Total Current Liabilities ........................... 80,954 116,872
Long-Term Debt (Note 6) ............................. 2,775 496,067
Deferred Income Taxes (Note 7) ...................... 26,234 72,291
Long Term Deferred Income (Note 1) .................. -- 8,376
Minority Interest (Note 1) .......................... -- 3,051
Commitments and Contingencies (Note 9)............... -- --
Shareholders' Equity (Notes 1 and 8):
Class A Common Stock, $.01 par value, 80,000,000 shares
authorized; 11,529,590 and 22,876,075 issued and outstanding
in 1998 and 1999, respectively .................. 115 229
Class B Common Stock, $.01 par value, 40,000,000 shares
authorized; 31,573,043 and 30,248,639 issued and outstanding
in 1998 and 1999, respectively .................. 316 302
Additional paid-in capital ........................ 205,089 687,321
Retained earnings ................................. 163,201 216,432
--------- ------------
368,721 904,284
Less unearned compensation--restricted stock (Note 12) 1,866 1,814
--------- ------------
Total Shareholders' Equity .......................... 366,855 902,470
--------- ------------
Total Liabilities and Shareholders' Equity .......... $476,818 $ 1,599,127
========= ============
</TABLE>
See accompanying notes.
<PAGE>
<PAGE>
INTERNATIONAL SPEEDWAY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-------------- -------------- -------------
1997 1998 1999
-------------- -------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues:
Admissions, net ................................... $ 69,487 $ 86,946 $ 134,174
Motorsports related income ........................ 46,650 71,793 116,241
Food, beverage and merchandise income ............. 23,408 28,597 46,453
Other income ...................................... 1,829 1,632 1,854
----------- ----------- -----------
141,374 188,968 298,722
Expenses:
Direct expenses:
Prize and point fund monies and NASCAR
sanction fees .................................. 20,567 28,767 45,615
Motorsports related expenses ..................... 23,075 33,283 51,031
Food, beverage and merchandise expenses .......... 13,435 15,025 23,988
General and administrative expenses ............... 29,486 37,842 57,066
Depreciation and amortization ..................... 9,910 13,137 25,066
----------- ----------- -----------
96,473 128,054 202,766
----------- ----------- -----------
Operating income ................................... 44,901 60,914 95,956
Interest income .................................... 3,196 4,414 8,780
Interest expense ................................... (509) (582) (6,839)
Equity in net income (loss) from
equity investments ............................... 366 (905) (1,819)
Gain on sale of equity investment .................. - 1,245 --
Minority interest .................................. - - (796)
----------- ----------- -----------
Income before income taxes ......................... 47,954 65,086 95,282
Income taxes (Note 7) .............................. 18,158 24,894 38,669
----------- ----------- -----------
Net income ......................................... $ 29,796 $ 40,192 $ 56,613
=========== =========== ===========
Basic earnings per share (Note 1) .................. $ 0.78 $ 1.00 $ 1.22
=========== =========== ===========
Diluted earnings per share (Note 1) ................ $ 0.78 $ 1.00 $ 1.22
=========== =========== ===========
Dividends per share (Note 1) ....................... $ 0.06 $ 0.06 $ 0.06
=========== =========== ===========
Basic weighted average shares outstanding (Note 1). 38,185,473 40,025,643 46,394,614
=========== =========== ===========
Diluted weighted average shares outstanding (Note 1) 38,339,978 40,188,800 46,518,977
=========== =========== ===========
</TABLE>
See accompanying notes.
<PAGE>
<PAGE>
INTERNATIONAL SPEEDWAY CORPORATION
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) $179,289
Net income ................................. -- -- -- 29,796 -- 29,796
Cash dividends ($.06 per share) ............ -- -- -- (2,310) -- (2,310)
Change in equity investments (Note 3) ...... -- -- 2,263 -- -- 2,263
Additional expense of Class A
Common Stock Offering .................... -- -- (46) -- -- (46)
Restricted stock granted (Note 12) ......... -- 1 1,984 -- (1,985) --
Reacquisition of previously issued
common stock ............................. -- -- -- (148) -- (148)
Conversion of Class B Common Stock to
Class A Common Stock ..................... 13 (13) -- -- -- --
Amortization of unearned
compensation (Note 12) ................... -- -- -- -- 1,063 1,063
---- ----- -------- -------- -------- --------
BALANCE AT NOVEMBER 30, 1997 ................ 53 332 86,437 125,457 (2,372) 209,907
Net income ................................ -- -- -- 40,192 - 40,192
Public offering - Class A Common Stock
(Note 8) ................................ 46 - 117,654 -- -- 117,700
Cash dividends ($.06 per share) ........... - -- -- (2,310) -- (2,310)
Change in equity investment (Note 3) ...... - -- (7) -- -- (7)
Restricted stock granted (Note 12) ........ -- -- 680 -- (680) --
Reacquisition of previously issued
common stock ............................ -- -- (57) (138) -- (195)
Conversion of Class B Common Stock to
Class A Common Stock .................... 16 (16) -- -- -- --
Forfeiture of restricted shares ........... -- -- (110) -- 110 --
Income tax benefit related to restricted
stock plan (Note 12) .................... -- -- 492 -- -- 492
Amortization of unearned
compensation (Note 12) .................. -- -- -- -- 1,076 1,076
---- ----- --------- --------- -------- ---------
BALANCE AT NOVEMBER 30, 1998 ................ 115 316 205,089 163,201 (1,866) 366,855
Net income ................................ -- -- -- 56,613 -- 56,613
Issuance of Common Stock for PMI acquisition 100 - 480,472 -- -- 480,572
Cash dividends ($.06 per share) ........... -- -- -- (2,586) -- (2,586)
Change in equity investment (Note 3) ...... -- -- (90) -- (90)
Restricted stock granted (Note 12) ........ -- -- 1,035 -- (1,035) --
Reacquisition of previously issued
common stock ............................. -- -- (314) (796) -- (1,110)
Conversion of Class B Common Stock to Class
A Common Stock ........................... 14 (14) -- -- -- --
Income tax benefit related to restricted
stock plan (Note 12)...................... -- -- 1,129 -- -- 1,129
Amortization of unearned compensation (Note 12) -- -- -- -- 1,087 1,087
---- ----- --------- -------- -------- ---------
BALANCE AT NOVEMBER 30, 1999 ................ $229 $302 $687,321 $216,432 $(1,814) $902,470
==== ===== ========= ======== ======== =========
</TABLE>
See accompanying notes.
<PAGE>
<PAGE>
INTERNATIONAL SPEEDWAY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
------------ ------------ -----------
1997 1998 1999
------------ ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income ........................................... $ 29,796 $ 40,192 $ 56,613
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization ........................ 9,910 13,137 25,066
Amortization of unearned compensation ................ 1,063 1,076 1,087
Deferred income taxes ................................ 4,425 5,545 14,458
Undistributed (income) loss from
equity investments. ................................ (366) 905 1,819
Minority interest .................................... -- -- 796
Gain on sale of equity investment .................... - (1,245) --
Changes in Operating Assets and Liabilities:
Receivables ......................................... (667) (2,020) 6,413
Inventories, prepaid expenses and other current assets (204) 723 3,549
Other assets ........................................ (204) (2,152) (1,000)
Accounts payable .................................... 2,278 4,471 593
Deferred income ..................................... 6,791 12,915 (16,789)
Other current liabilities ........................... 2,112 5,965 6,358
--------- --------- ---------
Net Cash Provided by Operating Activities ............. 54,934 79,512 98,963
INVESTING ACTIVITIES
Change in short-term investments ...................... 51,956 (84,026) 53,937
Capital expenditures .................................. (38,627) (71,858) (126,596)
Other, net ............................................ (1,253) (1,323) (2,245)
Equity investments .................................... (17,725) (410) (17,723)
Increase in restricted investments, net ............... -- - (242,429)
Proceeds from sale of equity investment ............... - 5,270 --
Acquisition of Penske Motorsports, Inc., net of cash
acquired ............................................. -- -- (133,440)
Acquisition of Watkins Glen International interest,
net of cash acquired ................................ (996) -- --
Acquisition of Phoenix International Raceway,
net of cash acquired ................................ (43,868) -- --
--------- --------- ---------
Net Cash Used in Investing Activities ................. (50,513) (152,347) (468,496)
FINANCING ACTIVITIES
Proceeds from long-term debt .......................... -- -- 638,786
Payment of long-term debt ............................. - (13,658) (254,560)
Deferred financing costs, net ......................... -- -- (11,862)
Reacquisition of previously issued common stock ....... (148) (195) (1,110)
Additional expense of Class A
Common Stock Offering ............................... (46) -- --
Cash dividends paid ................................... (2,310) (2,310) (2,586)
Issuance of Class A Common Stock ...................... -- 117,700 --
--------- --------- ---------
Net Cash Provided by (Used in) Financing Activities.... (2,504) 101,537 368,668
--------- --------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents ... 1,917 28,702 (865)
Cash and Cash Equivalents at Beginning of Period ....... 8,057 9,974 38,676
--------- --------- ---------
Cash and Cash Equivalents at End of Period ............. $ 9,974 $ 38,676 $ 37,811
========= ========= =========
</TABLE>
See accompanying notes.
<PAGE>
<PAGE>
INTERNATIONAL SPEEDWAY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1999
NOTE 1 - DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS: International Speedway Corporation and its
majority-owned subsidiaries (the "Company") is a leading promoter of
motorsports activities in the United States. As of November 30, 1999, the
Company owned and/or operated ten premier motorsports facilities as follows:
Track Name Location Track Length
- ------------------------------------------------------------------------------
Daytona International Speedway Daytona Beach, Florida 2.5 Miles
Michigan Speedway Brooklyn, Michigan 2.0 Miles
Talladega Superspeedway Talladega, Alabama 2.6 Miles
California Speedway Fontana, California 2.0 Miles
Phoenix International Raceway Phoenix, Arizona 1.0 Miles
North Carolina Speedway Rockingham, North Carolina 1.0 Miles
Darlington Raceway Darlington, South Carolina 1.3 Miles
Homestead-Miami Speedway Homestead, Florida 1.5 Miles
Nazareth Speedway Nazareth, Pennsylvania 1.0 Miles
Watkins Glen International Watkins Glen, New York 3.4 Miles
The Company also operates Tucson Raceway Park in Pima County Arizona.
At these facilities the Company promoted over one hundred stock car,
sports car, truck, motorcycle and other racing events in 1999, including
eleven NASCAR Winston Cup Series championship point races, two NASCAR Winston
Cup Series non-championship point races, nine NASCAR Busch Series, Grand
National Division races, three NASCAR Craftsman Truck Series races, one CART
FedEx Championship Series race, one Indy Racing League Series race, and a
number of prestigious sports car and motorcycle races. The Company also
conducts, either through operations of the facility or through its wholly-
owned subsidiaries Americrown Service Corporation and Motorsports
International Corp. (See Note 4), souvenir merchandising operations at its
Daytona, Talladega, California, North Carolina, Darlington, Miami, Nazareth
and Watkins Glen facilities, food and beverage concession operations at its
Daytona, Talladega, North Carolina, Darlington, Nazareth, and Watkins Glen
facilities and provides catering services to corporate customers both in
suites and chalets at its Daytona, Talladega, Darlington, Miami and Watkins
Glen facilities.
Motorsports International Corp. also produces and markets motorsports-
related merchandise such as apparel, souvenirs and collectibles to retail
customers through catalogue sales and trackside operations (unrelated to the
souvenir merchandising operations described above) at certain motorsports
facilities, including many of those owned and/or operated by the Company, as
well as through direct sales to dealers.
The Company's proprietary MRN radio network produces and syndicates
NASCAR Winston Cup Series, NASCAR Busch Series, Grand National Division,
NASCAR Craftsman Truck Series and other races promoted by the Company and
others. MRN Radio also produces daily and weekly NASCAR racing programs.
The Company owns and operates DAYTONA USA--The Ultimate Motorsports
Attraction, a motorsports-themed entertainment complex that includes
interactive media, theaters, historical memorabilia and exhibits, tours and
riding/driving experiences of Daytona International Speedway.
Competition Tire (See Note 4), one of the Company's wholly-owned
subsidiaries, engages in the wholesale and retail sale and distribution of
Goodyear brand racing tires for certain types of racing events.
The Company has a 50% equity investment in the Motorsports Alliance, LLC
("MSA"), which is owned 50% by the Company and 50% by Indianapolis Motor
Speedway Corp. MSA owns a 75% interest in Raceway Associates, LLC, ("Raceway
Associates") which owns the 240 acre Route 66 Raceway motorsports complex
located in Joliet, Illinois, approximately 35 miles from downtown Chicago and
930 acres adjacent to the existing Route 66 Raceway motorsports complex (See
Note 3).
SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial
statements include the accounts of International Speedway Corporation, its
wholly-owned subsidiaries, and Homestead-Miami Speedway, LLC, ("Miami"), a 90%
owned subsidiary. All material intercompany accounts and transactions have
been eliminated in consolidation.
CASH AND CASH EQUIVALENTS: For purposes of reporting cash flows, cash
and cash equivalents include cash on hand, bank demand deposit accounts,
repurchase agreements and money market accounts at investment firms. Cash and
cash equivalents exclude certificates of deposit, obligations of U.S.
Government Agencies, U.S. Treasury Notes and U.S. Treasury Bills, regardless
of original maturity.
INVESTMENTS (NOTE 5): The Company accounts for investments in accordance
with Statement of Financial Accounting Standard (SFAS) No. 115, "Accounting
for Certain Investments in Debt and Equity Securities."
The Company determines the appropriate classification of investments at
the time of purchase and reevaluates such designation as of each balance sheet
date. Debt securities are classified as held-to-maturity based on the
Company's positive intent and ability to hold the securities to maturity.
These securities are stated at cost. Interest and dividends are included in
interest income.
Short-term investments consist of certificates of deposit and securities
held-to-maturity which are due in one year or less. Certificates of deposit
are readily convertible to cash and are stated at cost.
Long-term investments consist of securities held-to-maturity which are
due after one year and are stated at cost.
INVENTORIES: Inventories of items for resale are stated at the lower of
cost, determined on the first-in, first-out basis, or market.
PROPERTY AND EQUIPMENT (NOTE 2): Property and equipment, including
improvements to existing facilities, are stated at cost. Depreciation is
provided for financial reporting purposes using the straight-line method over
the estimated useful lives as follows:
Buildings, grandstands and tracks ......... 5-34 years
Furniture and equipment ................... 3-20 years
The carrying values of property and equipment are evaluated for impairment
based upon expected future undiscounted cash flows. If events or circumstances
indicate that the carrying value of an asset may not be recoverable, an
impairment loss would be recognized equal to the difference between the
carrying value of the asset and its fair value.
EQUITY INVESTMENTS (NOTE 3): Equity investments are accounted for using
the equity method of accounting. The Company's equity in the net income from
equity investments is recorded as income with a corresponding increase in the
investment. Dividends received and amortization of the Company's investment in
excess of its pro rata share of the underlying assets reduce the investment.
The Company's investment in excess of its pro rata share of the underlying
assets is amortized by the straight-line method over 20-40 years. The Company
recognizes the effects of transactions involving the sale or distribution by
an equity investee of its common stock as capital transactions.
GOODWILL (NOTE 4): Goodwill resulting from acquisitions is being
amortized by the straight-line method over 40 years. Recoverability of
intangibles is assessed using estimated undiscounted cash flows of related
operations. Annual amortization expense for the years ended November 30,
1997, 1998 and 1999 was approximately $382,000, $1.0 million and $5.4 million,
respectively. In fiscal 1999, approximately $4.3 million of this amortization
is related to the acquisition of Penske Motorsports, Inc. ("PMI"),
approximately $4.0 million of which is not deductible for tax purposes.
MINORITY INTEREST: Minority interest consists of the 10% interest in
Miami that is not owned by the Company.
RESTRICTED INVESTMENTS: Restricted investments at November 30, 1999
included approximately $ 80.7 million deposited in trustee administered
accounts for the benefit of the Kansas speedway project (See Note 6) and
approximately $215.2 million in cash held in escrow for the Company's purchase
of Richmond International Raceway (See Note 16). The funds held in trust for
the Kansas speedway project have been invested in a guaranteed investment
contract with a maturity date of April 2001 accruing interest at a rate of
approximately 4.75%.
Restricted investments at November 30, 1998 included approximately $53.5
million in short-term investments designated for the Company's equity
commitment to the Kansas speedway project (See Note 6).
DEFERRED FINANCING FEES: Deferred financing fees are amortized over the
term of the related debt and are included in other non-current assets.
DERIVATIVE FINANCIAL INSTRUMENTS: The Company uses interest rate swap
agreements to minimize the impact of interest rate fluctuations on certain
floating interest rate long-term borrowings. The differential paid or
received on interest rate swap agreements is recognized as an adjustment to
interest expense.
INCOME TAXES (NOTE 7): Income taxes have been provided using the
liability method in accordance with SFAS No. 109, "Accounting for Income
Taxes." Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
REVENUE RECOGNITION/DEFERRED INCOME: Admission income and all
race-related revenue is earned upon completion of an event and is stated net
of admission and sales taxes collected. Advance ticket sales and all
race-related revenue on future events are deferred until earned. Revenues
from the sale of tires and merchandise to retail customers, catalogue sales
and direct sales to dealers are recognized at the time of the sale.
In 1999, Kansas Speedway Corporation ("KSC") began offering Founding Fan
Preferred Access Speedway Seating ("PASS") agreements whereby purchasers are
provided the exclusive right and obligation to purchase annual KSC season-
ticket packages for sanctioned racing events for a period of thirty years
under specified terms and conditions. Among other items, licensees are
required to purchase all season-ticket packages when and as offered each year.
Founding Fan PASS agreements automatically terminate without refund should
owners not purchase any offered season tickets. KSC Founding Fan PASS fee
deposits of $8.4 million at November 30, 1999 are included in long-term
deferred income in the consolidated balance sheet.
Fees received under PASS agreements are being deferred prior to KSC hosting
its first major motorsports event for the 2001 season. The Company will
amortize net PASS fee revenues into income over the life of the PASS.
ADVERTISING EXPENSE: Advertising costs are expensed as incurred or, as
in the case of race-related advertising, upon the completion of the event.
Advertising expense was approximately $2.4 million, $3.8 million and $5.8
million for the years ended November 30, 1997, 1998 and 1999, respectively.
AMORTIZATION OF UNEARNED COMPENSATION (NOTE 12): The Company accounts for
its long-term incentive stock plans in accordance with APB 25.
EARNINGS PER SHARE: Basic and diluted earnings per share are calculated
in accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share". 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.
USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS: During 1999, the Company adopted SFAS No.
130, "Reporting Comprehensive Income". 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. The Company has no items of
other comprehensive income and therefore no additional disclosure
requirements.
The Company also adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", in 1999. 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. (See Note
15)
COMPARABILITY: For comparability, certain 1997 and 1998 amounts have
been reclassified where appropriate to conform with the presentation adopted
in 1999.
NOTE 2 -- PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of November 30:
1998 1999
(In Thousands)
Land and leasehold improvements $ 32,651 $192,136
Buildings, grandstands and tracks 198,636 418,157
Furniture and equipment 36,726 67,875
Construction in progress 23,347 64,423
------- --------
291,360 742,591
Less accumulated depreciation 65,529 84,909
_______ ________
$225,831 $657,682
======== ========
Depreciation expense was approximately $9.5 million, $12.1 million and $19.7
million for the years ended November 30, 1997, 1998 and 1999, respectively.
NOTE 3--EQUITY INVESTMENTS
Equity investments includes the following:
<TABLE>
<CAPTION>
% %
1998 OWNERSHIP 1999 OWNERSHIP
---------------- ----------- --------------- ----------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
PSH Corp. ............................. $31,470 20% $ -- --%
Homestead-Miami Speedway, LLC ......... 12,617 45 -- --
Motorsports Alliance, Inc. ............ -- 17,364 50
Competition Tire Canada ............... -- 59 50
------- -------
$44,087 $17,423
======= =======
</TABLE>
As a result of the PMI acquisition on July 26, 1999, the Company's
investments in PSH Corp. (which held a 56% interest in PMI) and Miami are no
longer included in equity investments. Subsequent to July 26, 1999, PMI and
Miami are included in consolidated operations. (See Note 4)
On May 5, 1999, MSA and the owners of Route 66 Raceway, LLC, formed a new
company, Raceway Associates, which is owned 75% by MSA and 25% by the former
owners of the Route 66 Raceway, LLC. As a result of this transaction, Raceway
Associates owns the 240 acre Route 66 Raceway motorsports complex located in
Joliet, Illinois, approximately 35 miles from downtown Chicago. Raceway
Associates has also purchased 930 acres adjacent to the existing Route 66
complex on which it has commenced construction of a 1.5 mile oval motor
speedway, which will initially accommodate approximately 75,000 spectators.
The current estimate for the new superspeedway development is $125 to $130
million, $100 million of which will be financed through equity of
approximately $50 million from MSA and approximately $50 million in future
borrowings by Raceway Associates. The members of MSA will guarantee up to $50
million of these borrowings of Raceway Associates on a pro rata basis until
such time as the operations of Raceway Associates meet certain financial
criteria. Further, in December 1999, the City of Joliet, Illinois sold
approximately $9 million in 6.75% municipal bonds (which are to be repaid by
Raceway Associates through property tax assessments over twelve years) to help
fund a portion of the project costs that relate to public infrastructure for
the speedway development project. In addition, the Company (through MSA) may
commit additional equity to fund a portion of additional project costs in
excess of $109 million. During fiscal 1999, the Company contributed
approximately $17.2 million to MSA, approximately $14.6 million of which has
been applied towards the Company's portion of MSA's $50 million equity
commitment.
The Company's investment in excess of its share of underlying net assets
in equity investments, net of amortization, amounted to $8.0 million in 1998.
There was no investment in excess of its share of underlying net assets in
equity investments at November 30, 1999 due to the acquisition of PMI and the
consolidation of Miami's operating activities. Amortization of the excess
over the Company's share of the underlying net assets for the years ended
November 30, 1997, 1998 and 1999, was approximately $416,000, $444,000 and
$316,000, respectively.
The Company's share of undistributed equity in the earnings from equity
investments included in retained earnings at November 30, 1998 and 1999 was
approximately $2.1 million and $736,000, respectively.
Summarized financial information for the Company's affiliated companies
accounted for by the equity method is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1998
-------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Current assets ................. $ 22,400 $ 14,907
Noncurrent assets .............. 379,900 359,213
Current liabilities ............ 44,100 33,516
Noncurrent liabilities ......... 116,200 117,785
Minority interests ............. 84,900 86,812
Net revenues ................... 126,800 119,007
Operating income ............... 29,200 18,281
Net income ..................... 8,900 739
</TABLE>
NOTE 4--ACQUISITIONS
On April 1, 1997, the Company exercised its contractual option to acquire
the 50% interest it did not already own in Watkins Glen International, Inc.
("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 equity in Watkins Glen's net loss through March 31, 1997 is
included in equity in net income from equity investments at November 30, 1997.
The acquisition of the additional 50% interest was accounted for under the
purchase method. Subsequent to the acquisition on April 1, 1997, Watkins Glen
is accounted for on a consolidated basis.
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" for consideration consisting of $46.4 million in cash,
notes payable of $13.8 million, and related acquisition costs. Interest was
accrued on the note payable to the former principal and shareholder at an
annual rate of 9%. The note payable was paid in full as of December 1998.
The Phoenix 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 income 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 was recorded as goodwill. During fiscal 1998,
a reduction of the purchase price in accordance with the original purchase
agreement resulted in an approximately $469,000 adjustment to goodwill and
notes payable. In fiscal 1999 an adjustment to the purchase price in
accordance with the original purchase agreement resulted in an increase to
goodwill of approximately $867,000, with a corresponding payment to the
principal and shareholder.
On July 26, 1999, the Company, 88 Corp., (a merger subsidiary wholly-
owned by the Company), and PMI consummated an Agreement and Plan of Merger
(the "PMI Merger Agreement"). Pursuant to the PMI Merger Agreement, PMI
merged into 88 Corp. ("the PMI Merger") and became a wholly-owned subsidiary
of the Company.
In connection with and immediately preceding the PMI Merger, the Company,
Penske Performance, Inc., Penske Corporation, (the sole shareholder of Penske
Performance, Inc.), and PSH Corp., (which owned approximately 56% of the
issued and outstanding shares of PMI), consummated a separate Agreement and
Plan of Merger which resulted in the merger of PSH Corp. into the Company.
Pursuant to the merger agreements, the Company acquired the approximately
88%, or 12.2 million outstanding common shares, of PMI stock that it did not
already own for approximately $129.8 million and 10,029,861 shares of the
Company's Class A Common Stock. Transaction costs, net of cash acquired in
the transaction, totaled approximately $3.6 million. The total cash and stock
consideration issued in the transaction was approximately $611.1 million.
Motorsports facilities acquired in the transaction include Michigan
Speedway in Brooklyn, Michigan; Nazareth Speedway in Nazareth, Pennsylvania;
California Speedway in San Bernardino County, California; and North Carolina
Speedway in Rockingham, North Carolina. The Company also acquired PMI's 45%
interest in Homestead-Miami Speedway, LLC ("Miami"), bringing the Company's
ownership in that facility to 90%, as well as other PMI merchandising
subsidiaries. As a result of the transaction, the Company operates 10 major
motorsports facilities across the United States at November 30, 1999.
The acquisition has been accounted for under the purchase method of
accounting and, accordingly, the results of operations of the former PMI, as
well as Miami, have been included in the Company's consolidated statements of
income as of the date of acquisition.
The transaction purchase price has been allocated to the assets and
liabilities of PMI and Miami based upon preliminary estimates of their fair
market value. Management does not believe the final valuation will differ
materially from the preliminary valuation. The excess of the purchase price
over the fair value of the net assets acquired of approximately $108.2 million
has been allocated, based upon the preliminary valuation, as goodwill of
approximately $507.4 million and assembled workforce of approximately $900,000
which are being amortized on a straight line basis over 40 years and five
years, respectively.
The following unaudited pro forma financial information presents a
summary of consolidated results of operations as if the PMI acquisition had
occurred as of the beginning of the year for each period presented, after
giving effect to certain adjustments, including depreciation, amortization of
goodwill, interest income, interest expense, equity earnings, minority
interest and the 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.
<TABLE>
<CAPTION>
PRO FORMA
--------------------------------------------
YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
1998 1999
---------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Total revenues ................... $ 320,181 $ 382,807
Net income ....................... 35,596 48,460
Basic earnings per share ......... 0.71 0.92
Diluted earnings per share ....... 0.71 0.91
</TABLE>
NOTE 5--INVESTMENTS
The following is a summary of investments:
<TABLE>
<CAPTION>
NOVEMBER 30, 1998
-----------------------------------------------------
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---------- ------------ ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Held-to-maturity securities
Obligations of U.S. Government
agencies ...................... $ 5,978 $-- $ -- $ 5,978
Municipal securities ........... 1,149 4 -- 1,153
------- --- --- --------
7,127 4 -- 7,131
Certificates of deposit ............ 101,000 -- -- 101,000
------- --- --- ---------
$108,127 $ 4 $ -- $108,131
======== === === ========
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 30, 1999
-----------------------------------------------------
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---------- ------------ ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Held-to-maturity securities
Municipal securities ........... $ 690 $ -- $ -- $ 690
====== ====== ====== ======
</TABLE>
At November 30, 1998, approximately $53.5 million of $101 million
invested in certificates of deposit were designated for the Company's
investment in the Kansas speedway project. (See Note 6)
The cost and market values of held-to-maturity securities include accrued
investment income of approximately $25,000 and $10,000 at November 30, 1998
and 1999, respectively.
The cost and estimated market value of the held-to-maturity securities at
November 30, 1999, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because the issuers of
certain securities have the right to prepay obligations.
<TABLE>
<CAPTION>
NOVEMBER 30, 1999
---------------------------
ESTIMATED
COST MARKET VALUE
------------ -------------
(IN THOUSANDS)
<S> <C> <C>
Held-to-maturity securities
Due in one year or less ........................ $ 690 $ 690
====== ======
</TABLE>
NOTE 6 -- LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
November 30, November 30,
1998 1999
------------ ------------
<S> <C> <C>
Senior Notes, net of discount of $338 $ -- $ 224,662
Credit facilities -- 169,500
TIF bond debt service funding
commitment, net of discount of $1,645 -- 69,010
Term debt -- 30,000
Notes payable 3,373 5,550
-------- ----------
3,373 498,722
Less current portion 598 2,655
-------- ----------
$ 2,775 $ 496,067
======== ==========
</TABLE>
Schedule of Payments:
2000 $ 2,655
2001 5,165
2002 9,225
2003 5,775
2004 391,890
Thereafter 85,995
---------
500,705
Discount 1,983
---------
$ 498,722
=========
On October 6, 1999, the Company completed an offering of $225 million
principal amount of Senior Notes due October 15, 2004 in a private placement.
The unsecured Senior Notes bear interest at 7.875% and rank equally with all
of the Company's other senior unsecured and unsubordinated indebtedness. The
Senior Notes require semi-annual interest payments beginning on April 15, 2000
through maturity on October 15, 2004. The Senior Notes may be redeemed in
whole or in part, at the option of the Company, at any time or from time to
time at a redemption price as defined in the indenture. Certain of the
Company's subsidiaries are guarantors of the Senior Notes. The Senior Notes
also contain various restrictive covenants. On January 19, 2000, the Company
commenced an offer to exchange the Senior Notes issued in the private
placement for registered Senior Notes with substantially identical terms. The
exchange offer will expire on February 28, 2000.
The total gross proceeds from the sale of the Senior Notes were $225
million, net of $349,000 discount and approximately $4.7 million of deferred
financing fees. The deferred financing fees will be treated as additional
interest related to the Senior Notes and amortized over the life of the Senior
Notes on an effective yield method. The Company used approximately $176
million of the net proceeds from the transaction to repay outstanding
borrowings under its $250 million Credit Facility
In July 1999, the Company entered into a $300 million fully-underwritten
five-year revolving credit facility ("Credit Facility") in order to finance a
portion of the cash consideration in the PMI acquisition (Note 4) and to
refinance PMI's outstanding indebtedness. Pursuant to the Credit Facility
agreement, the size of the Credit Facility was automatically reduced from $300
million to $200 million upon the Company's receipt of the proceeds from the
Senior Notes. In December, 1999, the Credit Facility was increased from $200
million to $250 million. The Credit Facility matures on March 31, 2004, and
pays interest at LIBOR plus 50 to 100 basis points. At November 30, 1999, the
Company had borrowings of $160 million under this Credit Facility, all of
which related to the financing of the Company's December 1999 purchase of
Richmond International Raceway (See Note 16). The Credit Facility contains
various restrictive covenants.
In addition, the Company's Miami subsidiary also has an agreement with a
group of banks for a $20 million credit facility, letter of credit and a $30
million term loan. The credit facility and term loan are collateralized by
all of the assets of the Company's Miami subsidiary. The $20 million credit
facility, which is automatically reduced to $15 million on December 31, 2002,
matures on December 31, 2004. At November 30, 1999, the Company had $10.5
million available under this credit facility. The term loan is payable in six
annual installments, which range from $2.5 million on December 31, 1999 to
$7.0 million on December 31, 2004. Interest on this credit facility and term
loan is paid based on calendar quarters and accrues interest at LIBOR plus 150
basis points. The Company has entered into an interest rate swap agreement
that effectively fixes the floating rate on the outstanding balances under the
term loan at 6.0% through December 31, 1999, 6.6% through December 31, 2000
and 7.1% for the remainder of the loan period. This credit facility and the
term loan contain various restrictive covenants.
In January 1999, the Unified Government of Wyandotte County/Kansas City,
Kansas ("Unified Government"), issued approximately $71.3 million in taxable
special obligation revenue ("TIF") bonds and approximately $24.3 million in
sales tax special obligation revenue ("STAR") bonds, in connection with the
financing of phase I construction of the speedway in Kansas. The net proceeds
were deposited into separate interest-bearing trust accounts. The STAR bonds
will be retired with state and local taxes generated within the project's
boundaries and are not an obligation of the Company. The TIF bonds are
comprised of a $21.6 million, 6.15% term bond due December 1, 2017 and a $49.7
million, 6.75% term bond due December 1, 2027. The TIF bonds are serviced
through payments by the Unified Government, which are funded through payments
made by the Company to the Unified Government in lieu of property taxes
("Funding Commitment"). Principal (mandatory redemption) payments per the
Funding Commitment are payable by the Company on October 1 of each year
beginning in 1999. The semi-annual interest component of the Funding
Commitment is payable annually on April 1 and October 1, beginning on April 1,
1999. The Company has granted a mortgage and security interest in the Kansas
project for its Funding Commitment obligation.
Simultaneous with the issuance of the STAR and TIF bonds in January 1999,
the Company deposited into a trust account the unexpended portion of its
initial $77.9 million equity commitment to the Kansas project. Prior to the
issuance of the STAR and TIF bonds, the Company had spent approximately $29.9
million related to the construction of the speedway in Kansas. The unexpended
portion of the TIF bond proceeds and the Company's equity contribution
remaining in the trust accounts are classified as restricted investments on
the Company's balance sheet. The funds held in trust have been invested in a
guaranteed investment contract earning an interest rate of approximately 4.75%
with a maturity date of April 2001.
Total interest incurred by the Company was approximately $500,000,
$600,000 and $6.8 million for the years ended November 30, 1997, 1998 and
1999, respectively. Total interest capitalized for the year ended November
30, 1999 was approximately $3.3 million. No interest was capitalized for the
years ended November 30, 1997 and 1998.
Financing costs of approximately $11.9 million, net of accumulated
amortization, have been deferred and are included in other assets at November
30, 1999. These costs are being amortized on an effective yield method over
the life of the related financing.
NOTE 7--FEDERAL AND STATE INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Substantially all of the deferred tax liability results from the excess of tax
accelerated depreciation over depreciation for financial reporting purposes
and from different bases in the equity investments for tax and financial
reporting purposes.
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
----------- ------------ ------------
1997 1998 1999
----------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Current tax expense:
Federal ........................... $ 12,973 $ 15,864 $ 20,921
State ............................. 2,042 1,869 3,030
Deferred tax expense (benefit):
Federal ........................... 2,181 6,158 14,843
State ............................. 962 1,003 (125)
-------- --------- ---------
Provision for income taxes ......... $ 18,158 $ 24,894 $ 38,669
======== ========= =========
</TABLE>
The reconciliation of income tax computed at the federal statutory tax
rates to income tax expense is as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
NOVEMBER 30, 1997 NOVEMBER 30, 1998 NOVEMBER 30, 1999
----------------- ----------------- -----------------
% OF % OF % OF
PRE-TAX PRE-TAX PRE-TAX
AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME
------------------ --------------------- ------------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Income tax computed at
federal statutory rates .... $ 16,784 35.0% $ 22,780 35.0% $ 33,349 35.0%
State income taxes, net of
federal tax benefit ........ 2,053 4.3 2,010 3.1 3,420 3.6
Nondeductible goodwill ...... -- -- -- -- 1,387 1.5
Non-taxable share of
(income) loss from
unconsolidated affiliates... (238) (0.5) (212) (0.3) 58 0.1
Officers' life insurance
expense .................... 23 -- (20) - (99) (0.1)
Other, net .................. (464) (0.9) 336 0.4 554 0.5
-------- ----- --------- ------ ------- -----
$ 18,158 37.9% $ 24,894 38.2% $ 38,669 40.6%
======== ====== ========= ===== ========= ======
</TABLE>
NOTE 8--CAPITAL STOCK
The Company's authorized capital includes 80 million shares of Class A
Common Stock, par value $.01 ("Class A Common Stock"), 40 million shares of
Class B Common Stock, par value $.01 ("Class B Common Stock"), and one million
shares of Preferred Stock, par value $.01 (the "Preferred Stock"). The shares
of Class A Common Stock and Class B Common Stock are identical in all
respects, except for voting rights and certain dividend and conversion rights
as described below. Each share of Class A Common Stock entitles the holder to
one-fifth (1/5) vote on each matter submitted to a vote of the Company's
shareholders and each share of Class B Common Stock entitles the holder to one
(1) vote on each such matter, in each case including the election of
directors. Holders of Class A Common Stock and Class B Common Stock are
entitled to receive dividends at the same rate if and when declared by the
Board of Directors out of funds legally available therefrom, subject to the
dividend and liquidation rights of any Preferred Stock that may be issued and
outstanding. Class A Common Stock has no conversion rights. Class B Common
Stock is convertible into Class A Common Stock, in whole or in part, at any
time at the option of the holder on the basis of one share of Class A Common
Stock for each share of Class B Common Stock converted. Each share of Class B
Common Stock will also automatically convert into one share of Class A Common
Stock if, on the record date of any meeting of the shareholders, the number of
shares of Class B Common Stock then outstanding is less than 10% of the
aggregate number of shares of Class A Common Stock and Class B Common Stock
then outstanding.
The Board of Directors of the Company is authorized, without further
shareholder action, to divide any or all shares of the authorized Preferred
Stock into series and fix and determine the designations, preferences and
relative rights and qualifications, limitations, or restrictions thereon of
any series so established, including voting powers, dividend rights,
liquidation preferences, redemption rights and conversion privileges. No
shares of Preferred Stock are outstanding. The Board of Directors has not
authorized any series of Preferred Stock, and there are no plans, agreements
or understandings for the authorization or issuance of any shares of Preferred
Stock.
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 expenses of the offering. As of November 30,
1998, the Company had used approximately $24.4 million of the net proceeds for
the acquisition of land and preliminary construction related to the Kansas
speedway and designated an additional $53.5 million for the further funding of
its investment in that facility. The Company used the remaining proceeds to
partially fund completion of additions and improvements to the Company's
existing motorsports facilities, and for working capital and other corporate
purposes, including the pursuit of further expansion opportunities.
NOTE 9--COMMITMENTS AND CONTINGENCIES
A. In 1985, International Speedway Corporation ("ISC") established a
salary incentive plan designed to qualify under Section 401(k) of the Internal
Revenue Code. Employees of ISC and certain participating subsidiaries who have
completed 1,000 hours and 12 months continuous service are eligible to
participate in the plan. Matching contributions are made to a savings trust
(subject to certain limits) concurrent with employees' contributions. The
level of the matching contribution depends upon the amount of the employee
contribution. Employees become 100% vested upon entrance to the plan.
The contribution expense for the plan was approximately $376,000,
$523,000 and $580,000, for the years ended November 30, 1997, 1998, and 1999,
respectively.
As a result of the PMI acquisition, the Company assumed the PMI non-
contributory profit-sharing plan, which covers employees who meet certain
length of service requirements and the PMI defined contribution plan under
Section 401(k) of the Internal Revenue Code. Contributions of approximately
$158,000 were made to the plans for the fiscal year ended November 30, 1999.
B. The estimated cost to complete construction in progress at November
30, 1999 for existing facilities is approximately $52.0 million. At November
30, 1999, approximately $296 million is restricted for the Company's
development of the Kansas speedway (See Note 6) and the purchase of Richmond
International Raceway (See Note 16).
The Company is a member of MSA which is owned 50% by the Company and 50%
by Indianapolis Motor Speedway Corp. MSA owns a 75% interest in Raceway
Associates which is constructing a major motorsports facility in Joliet,
Illinois. Financing of the speedway development will include equity of
approximately $50 million from the members of MSA on a pro rata basis, of
which approximately $20.8 million remains to be committed at November 30,
1999, and borrowings of approximately $50 million by Raceway Associates. The
members of MSA will guarantee up to $50 million in borrowings of Raceway
Associates on a pro rata basis until such time as the operations of Raceway
Associates meet certain financial criteria. At November 30, 1999, Raceway
Associates had no outstanding borrowings under which the members of MSA were
subject to the aforementioned guarantee. In addition, the Company, through
MSA, may commit additional equity to fund a portion of additional speedway
development project costs. (See Note 3)
C. The Company leases its Homestead-Miami facility under an operating
lease which expires December 31, 2032 and provides for subsequent renewal
terms through December 31, 2075. The future minimum rental payments under
such lease are as follows:
Fiscal Year Ending
November 30, Amount
------------------ ------------
2000 $ 2,215,000
2001 2,215,000
2002 2,215,000
2003 2,215,000
2004 2,215,000
Thereafter 42,215,000
-----------
Total $53,290,000
===========
Rental expense for the Homestead-Miami facility for the year ended
November 30, 1999 totaled $2,215,000.
D. 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.
As described below, the Company and certain subsidiaries are parties to
legal proceedings alleging price-fixing activities in connection with the sale
of souvenirs and merchandise. These matters are collectively referred to as
the Souvenir Litigation. While the Company disputes the allegations, neither
the cost of defending the suits nor the potential damages or other remedies
for which the Company might be liable is insured.
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. A class consisting of persons who purchased racing souvenirs at
Talladega Superspeedway since September 1992 was certified by the court on
July 30, 1998. 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. Americrown has moved for reconsideration of the
class certification decision. Americrown has disputed the allegations and has
defended 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 (including Motorsports
International Corp., previously a subsidiary of PMI which was acquired by the
Company in the PMI acquisition). Both suits sought 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 class certification has not yet been decided by the court.
Discovery has been concluded. The Company, Americrown and Motorsports
International Corp. have disputed the allegations and have defended the
actions fully and vigorously.
Recently Americrown, Motorsports International Corp. and the Company have
entered into Confidential Memoranda of Understanding ("MOU") to completely
settle the Souvenir Litigation, without any admission of wrongdoing on their
part. Under the terms of the MOU's (which have been filed under seal with the
respective courts) the Company, Americrown and Motorsports International Corp.
have agreed to pay approximately $4.6 million in cash and to distribute
souvenir merchandise discount coupons to settle with classes which would
encompass all purchasers of souvenirs and merchandise at NASCAR Winston Cup
events during the period from January 1, 1991 to the present. The parties are
in the process of attempting to agree on the terms of formal Settlement
Agreements, including the terms of the coupon program. Such Settlement
Agreements will then be subject to review and approval by both the state and
federal courts. If the Settlement Agreements are not successfully finalized,
the Company, Americrown and Motorsports International Corp. intend to resume
the vigorous defense of the actions.
The financial statements for fiscal 1999 include an accrual of
approximately $2.8 million representing Americrown's cash portion of the
proposed Souvenir Litigation settlement. The remaining $1.8 million is
attributable to Motorsports International Corp. and was recorded as a part of
the PMI acquisition purchase price. The effects of the discount coupon
program will be recognized in future periods as coupons are redeemed.
In connection with PMI's acquisition of North Carolina Speedway in 1997,
certain North Carolina Speedway stockholders (constituting more than 5% of the
North Carolina Speedway shares outstanding prior to the acquisition) exercised
their right under North Carolina law to dissent to the price paid for the
common stock of North Carolina Speedway. These dissenting shareholders were
paid $16.77 per share. These dissenters have requested $55.00 per share and
have sued PMI, Penske Acquisition, Inc. and North Carolina Speedway in North
Carolina Superior Court, Mecklenburg County, North Carolina. Under PMI's
agreement with Mrs. DeWitt (the former majority stockholder of North Carolina
Speedway), if a dissenting stockholder, which represents more than five
percent of the North Carolina Speedway stock, receives more consideration in a
dissenters' action than PMI paid in connection with the acquisition of North
Carolina Speedway, all stockholders of North Carolina Speedway at the time of
the acquisition, other than PMI and its affiliates, would receive a per share
amount equal to the award in dissenter's court less the per share amount paid
in the acquisition ($19.61 per share to stockholders other than the dissenting
shareholders). Because PMI acquired Mrs. DeWitt's shares prior to the
completion of this acquisition, Mrs. DeWitt would not be entitled to receive
additional consideration for her shares. A negative decision with respect to
the dissenters' proceeding could materially increase the purchase price paid
for North Carolina Speedway by PMI, which the Company would have to pay.
Management is presently unable to predict or quantify the outcome of
these matters
NOTE 10--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 Auto
Racing Teams ("CART"), the Championship Cup Series ("CCS"), the Federation
Internationale de l'Automobile ("FIA"), the Federation Internationale
Motocycliste ("FIM"), Historic Sportscar Racing ("HSR"), the International
Race of Champions ("IROC"), the Indy Racing League ("IRL"), the National
Association for Stock Car Auto Racing, Inc. ("NASCAR"), the Sports Car Club
of America ("SCCA"), the Sportscar Vintage Racing Association ("SVRA"), the
United States Auto Club ("USAC"), the United States Road Racing Championship
("USRRC"), and the World Karting Association ("WKA"). NASCAR, which sanctions
some of the Company's principal racing events, is a member of the France
Family Group which controls in excess of 60% of the combined voting power 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 $17
million, $23.1 million and $36.2 million for the years ended November 30,
1997, 1998 and 1999, respectively.
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 in October 1995. 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. The Company records a net insurance
expense representing the excess of the premiums paid over the increase in cash
surrender value of the policies associated with these agreements.
Brown & Brown, Inc., the servicing agent for the split-dollar insurance
agreements, received a commission from an insurance company for its
participation in the transactions. J. Hyatt Brown, President and Chief
Executive Officer of Brown & Brown, Inc., is a Director of the Company.
On May 5, 1999, MSA and the former owners of Route 66 Raceway, LLC formed
a new company, Raceway Associates, which is owned 75% by MSA and 25% by the
former owners of the Route 66 Raceway, LLC (See Note 3 - - Equity
Investments). Route 66 Raceway, LLC owns the 240 acre Route 66 Raceway
motorsports complex located in Joliet, Illinois, approximately 35 miles from
downtown Chicago. As a result of this transaction the new Raceway Associates
now owns the Route 66 Raceway, LLC and the Route 66 Raceway motorsports
complex. Edward H. Rensi, a director of the Company, was one of the former
owners of the Route 66 Raceway, LLC. Mr. Rensi owned approximately 5.13% of
the Route 66 Raceway, LLC and as a result of the transaction now owns
approximately 1.28% of Raceway Associates.
Pursuant to the merger agreement for the PMI acquisition (See Note 4) the
Company is currently obligated to place three individuals designated by Penske
Performance, Inc. on its board of directors and to include such designees as
nominees recommended by the Company's board of directors at future elections
of directors by shareholders. Messrs. Roger S. Penske, Gregory W. Penske and
Walter P. Czarnecki are presently the designees of Penske Performance, Inc.
serving on the Company's board of directors. Penske Performance, Inc. is
wholly-owned by Penske Corporation which beneficially owns more than five
percent of the outstanding stock of the Company. Messrs. Penske, Penske and
Czarnecki are also officers and directors of Penske Performance, Inc. and
other Penske Corporation affiliates. Roger S. Penske beneficially owns a
majority of the voting stock of and controls Penske Corporation and its
affiliates. During fiscal 1999 subsequent to the PMI acquisition, Penske
Corporation provided the Company with certain executive and legal services at
a cost of approximately $313,000. Also, the Company, through certain
subsidiaries acquired in the PMI acquisition, sold admissions to the Company's
events, hospitality suite occupancy and related services, merchandise, apparel
and racing tires and accessories to Penske Corporation and its affiliates. In
fiscal 1999 subsequent to the PMI acquisition, Penske Corporation and its
affiliates paid approximately $759,000 for the aforementioned goods and
services. The Company has outstanding receivables and payables/accrued
expenses related to Penske Corporation and its affiliates of approximately
$186,000 and $433,000, respectively, at November 30, 1999.
NOTE 11--SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for income taxes and interest for respective periods is
summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED
NOVEMBER 30,
___________________________________________
1997 1998 1999
________ ________ ________
(IN THOUSANDS)
<S> <C> <C> <C>
Income taxes paid ......... $13,652 $13,618 $28,645
======= ======= =======
Interest paid ............. $ 31 $ 982 $ 7,005
======= ======= =======
</TABLE>
See Note 3 for discussion of non-cash equity investment transactions.
NOTE 12--LONG-TERM INCENTIVE STOCK PLANS
In November 1993, the Company's Board of Directors and a majority of the
Company shareholders approved the "International Speedway Corporation 1994
Long-Term Incentive Plan" (the "1994 Plan") for certain officers and managers
of the Company. Under the 1994 Plan, up to 750,000 shares of the Company's
Class B Common Stock were authorized to be granted as restricted stock at no
cost to 1994 Plan participants. Awards were granted under the 1994 Plan
based upon the Company's performance in fiscal years 1994, 1995 and 1996. The
ability to issue additional shares under the 1994 Plan expired with the grants
based on fiscal 1996 results, which were granted January 1, 1997.
In 1996, the Company's Board of Directors and a majority of the Company
shareholders approved the "1996 Long-Term Incentive Plan" (the "1996 Plan")
for certain officers, employees and consultants of the Company. The 1996 Plan
authorizes the grant of stock options (incentive and nonstatutory), stock
appreciation rights ("SARs") and restricted stock. The Company has reserved an
aggregate of 1,000,000 shares (subject to adjustment for stock splits and
similar capital changes) of the Company's Class A Common Stock for grants
under the 1996 Plan. In April 1998 and 1999, awards of restricted stock under
the 1996 Plan were made at no cost to Plan participants based upon fiscal 1997
and 1998 results. There have been no grants of stock options or SARs under
the 1996 Plan.
Shares of restricted stock awarded under the 1994 and 1996 Plans vest at
the rate of 50% of each award on the third anniversary of the award date and
the remaining 50% on the fifth anniversary of the award date. Shares awarded
under the 1994 and 1996 Plans generally are subject to forfeiture in the event
of termination of employment prior to the vesting dates. Prior to vesting,
the 1994 and 1996 Plan participants own the shares and may vote and receive
dividends, but are subject to certain restrictions. Restrictions include the
prohibition of the sale or transfer of the shares during the period prior to
vesting of the shares. The Company also has the right of first refusal to
purchase any shares of stock issued under the 1994 and 1996 Plans which are
offered for sale subsequent to vesting.
On January 1, 1997 a total of 98,010 restricted shares of the Company's
Class B Common Stock was awarded to certain officers and managers under the
1994 Plan. On April 1, 1998 and 1999, 22,236 and 19,633 restricted shares of
the Company's Class A Common Stock, respectively, were awarded to certain
officers and managers under the 1996 Plan. The market value of shares awarded
on January 1, 1997 and April 1, 1998 and 1999 amounted to approximately $2.0
million, $680,000 and $1.0 million, respectively, and has been recorded as
"Unearned compensation - restricted stock", which is shown as a separate
component of shareholders' equity in the accompanying consolidated balance
sheets. The unearned compensation is being amortized over the vesting periods
of the shares. In accordance with APB 25, the Company will recognize a
compensation charge over the vesting periods equal to the fair market value of
these shares on the date of the award. The expense measured under SFAS No.
123 does not differ from that measured under APB25.
The tax effect of income tax deductions that differ from expense under
these plans is credited or charged to additional paid-in capital.
NOTE 13 -- FINANCIAL INSTRUMENTS
The carrying values of cash and cash equivalents, accounts receivable,
short- and long-term investments, restricted investments, accounts payable,
and accrued liabilities approximate fair value due to the short-term
maturities of these assets and liabilities.
Fair values of long-term debt and interest rate swaps are based on quoted
market prices at the date of measurement. The Company's Credit Facilities
approximate fair value as they bear interest rates that approximate market.
At November 30, 1999, the fair value of the remaining long-term debt, which
includes the Senior Notes, TIF bond debt service funding commitment and the
term loan, as determined by quotes from financial institutions, was $311.9
million compared to the carrying amount of $323.7 million.
The Company entered into an interest rate swap agreement to limit the
impact of the variable interest rate of certain long-term debt. The Company
periodically utilizes interest rate swap agreements to limit the impact of the
variable interest rate of certain long-term debt. The differential between
fixed and variable rates to be paid or received on swaps is accrued as
interest rates change in accordance with the agreements and is included in
current interest expense. Credit risk arises from the possible inability of
counterparties to meet the terms of their contracts on a net basis. The
Company's interest rate swap agreement was entered into with a major financial
institution which is expected to fully perform under the terms of the
agreement. This agreement, with a principal notional amount of $30 million
and an estimated fair value of $985,700, expires at December 31, 2004.
The Company maintained its certificates of deposit with one financial
institution at November 30, 1998, and a significant amount in a repurchase
agreement with one financial institution at November 30, 1999 related to the
December 1, 1999 purchase of Richmond International Raceway (Note 16). The
Company believes that it was not exposed to any significant credit risk on its
investments due to the strength of the financial institutions and the short-
term nature of the investments.
NOTE 14--QUARTERLY DATA (UNAUDITED)
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
Winston Cup Series events is traditionally held on the Sunday preceding Labor
Day. Accordingly, the revenue and expenses for that race and/or the related
supporting events may be recognized in either the fiscal quarter ending August
31 or the fiscal quarter ending November 30. Further, in July 1998 the Company
announced the postponement of the NASCAR Winston Cup Series Pepsi 400 at
Daytona, historically conducted in the Company's third quarter, 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 resulted 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 1999.
On July 26, 1999, the Company acquired the approximately 88% interest it did
not already own in PMI. As a result of the transaction, the Company also
acquired PMI's 45% interest in Miami, bringing the Company's ownership in that
facility to 90%. The Company has recognized revenues and expenses associated
with acquired operations on a consolidated basis subsequent to July 26, 1999,
including three NASCAR Winston Cup Series events, three NASCAR Busch Series,
Grand National Division events, one NASCAR Craftsman Truck Series event and
one CART FedEx Championship Series event. (See Note 4)
Accordingly, the Company's results of operations are not necessarily
comparable on a period-to-period basis.
The following table presents certain unaudited financial data for each
fiscal quarter of fiscal 1998 and fiscal 1999 (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED
------------------------------------------------------------
FEBRUARY 28, MAY 31, AUGUST 31, NOVEMBER 30,
1998 1998 1998 1998
-------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Total Revenues ................. $ 68,284 $ 38,191 $ 17,822 $ 64,671
Operating Income (loss) ........ 33,000 7,784 (4,687) 24,817
Net Income (loss) .............. 20,149 6,046 (1,944) 15,941
Basic earnings (loss) per share 0.53 0.16 (.05) 0.37
Diluted earnings (loss) per share 0.53 0.16 (.05) 0.37
</TABLE>
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED
------------------------------------------------------------
FEBRUARY 28, MAY 31, AUGUST 31, NOVEMBER 30,
1999 1999 1999 1999
-------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Total Revenues ................. $83,236 $44,635 $66,226 $104,625
Operating Income ............... 40,233 9,587 16,822 29,314
Net Income ..................... 25,939 6,844 9,635 14,195
Basic earnings per share ....... 0.61 0.16 0.21 0.27
Diluted earnings per share ..... 0.60 0.16 0.20 0.27
</TABLE>
NOTE 15 -- SEGMENT REPORTING
Effective November 30, 1999, the Company adopted Statement of Financial
Accounting Standards No. 131, Disclosures about Segments of an Enterprise and
Related Information. This statement establishes standards for the way public
business enterprises report information about operating segments in annual
financial statements.
The Company's primary business is the promotion of motorsports events at its
race facilities. The Company's remaining business units, which are comprised
of the radio network production and syndication of numerous NASCAR sanctioned
events and daily and weekly NASCAR racing programs, the operation of a
motorsports-themed entertainment complex, the wholesale and retail
distribution of Goodyear brand racing tires and other auto accessories,
certain souvenir merchandising operations not associated with the promotion of
motorsports events at the Company's facilities, construction management
services and leasing operations are included in the "All Other" segment. The
Company evaluates financial performance of the business units on operating
profit after allocation of corporate selling, general and administrative
(SG&A) expenses. Corporate SG&A expenses are allocated to business units
based on each business unit's net revenues to total net revenues.
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. Intersegment revenues were
approximately $1.0 million, $1.6 million and $3.9 million for the years ended
November 30, 1997, 1998 and 1999, respectively.
<TABLE>
<CAPTION>
Year Ended November 30,
1997 1998 1999
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Net Revenues:
Motorsports Events $121,393 $166,737 $ 267,130
All Other 20,995 23,805 35,494
--------- --------- -----------
Total $142,388 $190,542 $ 302,624
========= ========= ===========
Operating Income:
Motorsports Events $ 43,430 $ 57,833 $ 91,913
All Other 1,471 3,081 4,043
--------- --------- -----------
Total $ 44,901 $ 60,914 $ 95,956
========= ========= ===========
Total Assets
Motorsports Events $283,007 $459,401 $1,547,510
All Other 19,816 17,417 51,617
--------- --------- -----------
Total $302,823 $476,818 $1,599,127
========= ========= ===========
</TABLE>
NOTE 16 -- SUBSEQUENT EVENTS
On December 1, 1999, the Company acquired Richmond International Raceway
("Richmond"). Located ten miles from downtown Richmond, Virginia, the mile
intermediate speedway seats over 94,000 grandstand spectators and offers
luxury accommodations in the facility's thirty-four suites. Richmond hosts
several major NASCAR events annually including two Winston Cup Series points
events, two Busch Series, Grand National Division events, and one NASCAR
Craftsman Truck Series event.
The Company financed the $215 million transaction through $160 million in
borrowings under its $250 million Credit Facility. Immediately following the
transaction, the Company had $90 million available under the $250 million
Credit Facility. The Company utilized its cash resources for the remaining
$55 million. The Company will account for the transaction under the purchase
method of accounting in its first quarter of fiscal 2000.
NOTE 17 - - CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
In connection with the sale of the Senior Notes (Note 6), the Company has
entered into a registration rights agreement pursuant to which the Company has
agreed to exchange the outstanding Senior Notes for registered Senior Notes in
a registered exchange offer. Pursuant to the registered exchange offer, the
Company is required to provide condensed consolidating financial information
for its subsidiary guarantors. The Company has not presented separate
financial statements for each of the guarantors, because it has deemed that
such financial statements would not provide the investors with any material
additional information.
Included are condensed consolidating balance sheets as of November 30, 1998
and 1999 and the consolidated statements of income and cash flows for the
years ended November 30, 1997, 1998 and 1999, respectively, of: (a) the
Parent; (b) the guarantor subsidiaries; (c) the non-guarantor subsidiaries;
(d) elimination entries necessary to consolidate Parent with guarantor and
non-guarantor subsidiaries; and (e) the Company on a consolidated basis. In
the 1997 condensed consolidated financial statements all subsidiaries were
guarantors.
<PAGE>
INTERNATIONAL SPEEDWAY CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
November 30, 1999
(Audited)
<TABLE>
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ------------ ------------ ------------ ------------
(in thousands)
ASSETS
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents ......................... $ 11,768 $ 25,120 $ 923 $ - $ 37,811
Short-term investments ............................ 690 - -- - 690
Receivables, net................................... 17,747 8,075 1,718 (12,228) 15,312
Other current assets .............................. 8,258 857 2,047 - 11,162
------------- ------------ ------------ ------------ ------------
Total Current Assets ................................ 38,463 34,052 4,688 (12,228) 64,975
Property and Equipment, net.......................... 174,726 377,107 105,849 - 657,682
Other Assets:
Investment in Subsidiaries......................... 925,834 2,662 - (928,496) -
Equity investments......... ....................... - 17,423 - - 17,423
Goodwill........................................... - 510,635 31,948 - 542,583
Restricted investments............................. 215,250 - 80,679 - 295,929
Other ............................................. 13,172 1,132 6,231 - 20,535
------------- ------------ ------------ ------------ ------------
1,154,256 531,852 118,858 (928,496) 876,470
------------- ------------ ------------ ------------ ------------
Total Assets ........................................ $ 1,367,445 $ 943,011 $ 229,395 $ (940,724) $ 1,599,127
============= ============ ============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and other current liabilities..... $ 14,102 $ 31,317 $ 6,634 $ (12,300) $ 39,753
Deferred income ................................... 66,068 9,504 1,547 - 77,119
------------- ------------ ------------ ------------ ------------
Total Current Liabilities ........................... 80,170 40,821 8,181 (12,300) 116,872
Long Term Debt ...................................... 384,662 90,300 157,784 (136,679) 496,067
Deferred Income Taxes ............................... 34,743 38,320 (772) - 72,291
Other Long Term Liabilities ......................... - - 8,376 - 8,376
Minority Interest ................................... - - 3,051 - 3,051
Shareholders' Equity:
Class A Common Stock............................... 229 - - - 229
Class B Common Stock............................... 302 - - - 302
Additional paid-in capital ........................ 687,321 - - - 687,321
Intercompany capital............................... - 737,971 46,196 (784,167) -
Retained earnings ................................. 181,832 35,599 6,579 (7,578) 216,432
------------- ------------ ------------ ------------ ------------
869,684 773,570 52,775 (791,745) 904,284
Less unearned compensation......................... (1,814) - - - (1,814)
------------- ------------ ------------ ------------ ------------
Total Shareholders' Equity .......................... 867,870 773,570 52,775 (791,745) 902,470
------------- ------------ ------------ ------------ ------------
Total Liabilities and Shareholders' Equity .......... $ 1,367,445 $ 943,011 $ 229,395 $ (940,724) $ 1,599,127
============= ============ ============ ============ ============
</TABLE>
<PAGE>
INTERNATIONAL SPEEDWAY CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
November 30, 1998
(Audited)
<TABLE>
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ------------ ------------ ------------ ------------
(in thousands)
ASSETS
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents ......................... $ 27,000 $ 11,543 $ 133 $ - $ 38,676
Short-term investments ............................ 54,127 - - - 54,127
Receivables, net................................... 8,469 1,998 - (1,022) 9,445
Other current assets............................... 5,561 1,272 (637) - 6,196
------------- ------------ ------------ ------------ ------------
Total Current Assets ................................ 95,157 14,813 (504) (1,022) 108,444
Property and Equipment, net.......................... 144,006 60,311 21,514 - 225,831
Other Assets:
Investment in Subsidiaries......................... 128,544 2,661 - (131,205) -
Equity investments......... ....................... - 44,087 - - 44,087
Goodwill........................................... - 38,927 - - 38,927
Restricted investments............................. 53,500 - - - 53,500
Other ............................................. 5,937 92 - - 6,029
------------- ------------ ------------ ------------ ------------
187,981 85,767 - (131,205) 142,543
------------- ------------ ------------ ------------ ------------
Total Assets ........................................ $ 427,144 $ 160,891 $ 21,010 $ (132,227) $ 476,818
============= ============ ============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and other current liabilities..... $ 14,400 $ 5,246 $ 77 $ (1,022) $ 18,701
Deferred income ................................... 56,742 5,511 - - 62,253
------------- ------------ ------------ ------------ ------------
Total Current Liabilities ........................... 71,142 10,757 77 (1,022) 80,954
Long Term Debt ...................................... - 71,696 13 (68,934) 2,775
Deferred Income Taxes ............................... 21,251 5,013 (30) - 26,234
Shareholders' Equity:
Class A Common Stock............................... 115 - - - 115
Class B Common Stock............................... 316 - - - 316
Additional paid-in capital ........................ 198,156 6,933 - - 205,089
Intercompany capital............................... - 40,109 21,284 (61,393) -
Retained earnings ................................. 138,030 26,383 (334) (878) 163,201
------------- ------------ ------------ ------------ ------------
336,617 73,425 20,950 (62,271) 368,721
Less unearned compensation......................... (1,866) - - - (1,866)
------------- ------------ ------------ ------------ ------------
Total Shareholders' Equity .......................... 334,751 73,425 20,950 (62,271) 366,855
------------- ------------ ------------ ------------ ------------
Total Liabilities and Shareholders' Equity .......... $ 427,144 $ 160,891 $ 21,010 $ (132,227) $ 476,818
============= ============ ============ ============ ============
</TABLE>
<PAGE>
INTERNATIONAL SPEEDWAY CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED NOVEMBER 30, 1999
(Audited)
<TABLE>
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ------------ ------------ ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Revenues:
Admissions, net.................................... $ 79,841 $ 46,602 $ 7,745 $ (14) $ 134,174
Motorsports related income......................... 65,912 41,899 10,803 (2,373) 116,241
Food, beverage and merchandise income.............. 9,601 43,971 1,129 (8,248) 46,453
Other income....................................... 1,545 6,857 4 (6,552) 1,854
------------- ------------ ------------ ------------ ------------
Total Revenues................................... 156,899 139,329 19,681 (17,187) 298,722
Expenses:
Direct Expenses:
Prize and point fund monies and NASCAR sanction fees 21,333 19,775 4,507 - 45,615
Motorsports related expenses....................... 31,559 20,774 3,163 (4,465) 51,031
Food, beverage and merchandise expenses............ 2,642 32,275 - (10,929) 23,988
General and administrative expenses.................. 30,300 24,798 3,761 (1,793) 57,066
Depreciation and amortization........................ 10,297 13,817 952 - 25,066
------------- ------------ ------------ ------------ ------------
Total Expenses.................................. 96,131 111,439 12,383 (17,187) 202,766
------------- ------------ ------------ ------------ ------------
Operating Income..................................... 60,768 27,890 7,298 - 95,956
Interest Income...................................... 17,554 716 4,120 (13,610) 8,780
Interest Expense..................................... (4,674) (4,716) (4,359) 6,910 (6,839)
Equity in net income (loss ) from equity investments. - (1,819) - - (1,819)
Minority interest.................................... - - (796) - (796)
------------- ------------ ------------ ------------ ------------
Income (loss) before income taxes 73,648 22,071 6,263 (6,700) 95,282
Income taxes (benefit) 26,716 12,602 (649) - 38,669
------------- ------------ ------------ ------------ ------------
Net income (loss).................................... $ 46,932 $ 9,469 $ 6,912 $ (6,700) $ 56,613
============= ============ ============ ============ ============
</TABLE>
<PAGE>
INTERNATIONAL SPEEDWAY CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE YEAR ENDED NOVEMBER 30, 1998
(Audited)
<TABLE>
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ------------ ------------ ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Revenues:
Admissions, net.................................... $ 66,653 $ 20,295 $ - $ (2) $ 86,946
Motorsports related income......................... 52,348 20,412 - (967) 71,793
Food, beverage and merchandise income.............. 8,727 27,058 - (7,188) 28,597
Other income....................................... 1,174 5,369 - (4,911) 1,632
------------- ------------ ------------ ------------ ------------
Total Revenues................................... 128,902 73,134 - (13,068) 188,968
Expenses:
Direct Expenses:
Prize and point fund monies and NASCAR sanction fees 18,289 10,478 - - 28,767
Motorsports related expenses....................... 24,283 12,019 25 (3,044) 33,283
Food, beverage and merchandise expenses............ 2,393 21,434 - (8,802) 15,025
General and administrative expenses.................. 26,415 12,312 337 (1,222) 37,842
Depreciation and amortization........................ 8,342 4,795 - - 13,137
------------- ------------ ------------ ------------ ------------
Total Expenses.................................. 79,722 61,038 362 (13,068) 128,054
------------- ------------ ------------ ------------ ------------
Operating Income..................................... 49,180 12,096 (362) - 60,914
Interest Income...................................... 15,758 565 - (11,909) 4,414
Interest Expense..................................... - (4,304) (1) 3,723 (582)
Equity in net income (loss ) from equity investments. - (905) - - (905)
Gain on sale of equity investments................... - 1,245 - - 1,245
------------- ------------ ------------ ------------ ------------
Income (loss) before income taxes 64,938 8,697 (363) (8,186) 65,086
Income taxes (benefit) 24,472 452 (30) - 24,894
------------- ------------ ------------ ------------ ------------
Net income (loss).................................... $ 40,466 $ 8,245 $ (333) $ (8,186) $ 40,192
============= ============ ============ ============ ============
</TABLE>
<PAGE>
INTERNATIONAL SPEEDWAY CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE YEAR ENDED NOVEMBER 30, 1997
(Audited)
<TABLE>
<CAPTION>
COMBINED
PARENT GUARANTOR
COMPANY SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ------------ ------------ ------------
(in thousands)
<S> <C> <C> <C> <C>
Revenues:
Admissions, net.................................... $ 53,245 $ 16,244 $ (2) $ 69,487
Motorsports related income......................... 35,911 11,490 (751) 46,650
Food, beverage and merchandise income.............. 6,915 22,774 (6,281) 23,408
Other income....................................... 1,030 4,772 (3,973) 1,829
------------- ------------ ------------ ------------
Total Revenues................................... 97,101 55,280 (11,007) 141,374
Expenses:
Direct Expenses:
Prize and point fund monies and NASCAR sanction fees 12,388 8,179 - 20,567
Motorsports related expenses....................... 18,373 6,745 (2,043) 23,075
Food, beverage and merchandise expenses............ 2,124 19,189 (7,878) 13,435
General and administrative expenses.................. 21,623 8,949 (1,086) 29,486
Depreciation and amortization........................ 6,912 2,998 - 9,910
------------- ------------ ------------ ------------
Total Expenses.................................. 61,420 46,060 (11,007) 96,473
------------- ------------ ------------ ------------
Operating Income..................................... 35,681 9,220 - 44,901
Interest Income...................................... 4,873 448 (2,125) 3,196
Interest Expense..................................... (28) (2,056) 1,575 (509)
Equity in net income (loss ) from equity investments. - 366 - 366
------------- ------------ ------------ ------------
Income (loss) before income taxes 40,526 7,978 (550) 47,954
Income taxes (benefit) 17,472 686 - 18,158
------------- ------------ ------------ ------------
Net income (loss).................................... $ 23,054 $ 7,292 $ (550) $ 29,796
============= ============ ============ ============
</TABLE>
<PAGE>
INTERNATIONAL SPEEDWAY CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED NOVEMBER 30, 1999
(Audited)
<TABLE>
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ------------ ------------ ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income ........................................... $ 46,932 $ 9,469 $ 6,912 $ (6,700) $ 56,613
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation and amortization ........................ 10,297 13,817 952 - 25,066
Amortization of unearned compensation ................ 1,087 - - - 1,087
Deferred income taxes ................................ 13,493 1,707 (742) - 14,458
Undistributed (income) loss from
equity investment................................... - 1,819 - - 1,819
Minority interest..................................... - - 796 - 796
Changes in Operating Assets and Liabilities:
Receivables, net.................................... (9,278) 4,905 (421) 11,207 6,413
Other current assets................................ 4,648 1,585 (2,684) - 3,549
Other assets ....................................... 320 (1,040) (280) - (1,000)
Accounts payable and other current liabilities...... 831 14,224 3,175 (11,279) 6,951
Deferred income .................................... 9,326 (25,072) (1,043) - (16,789)
------------- ------------ ------------ ------------ ------------
Net Cash Provided by (Used in) Operating Activities ... 77,656 21,414 6,665 (6,772) 98,963
INVESTING ACTIVITIES
Change in short term investments, net................. 53,437 500 - - 53,937
Capital expenditures ................................. (40,932) (31,381) (54,283) - (126,596)
Equity investments ................................... - (17,723) - - (17,723)
Increase in restricted investments, net............... (161,750) - (80,679) - (242,429)
Acquisition net of cash acquired ..................... - (133,440) - - (133,440)
Intercompany investing, net........................... (243,669) 182,527 61,070 72 -
Other, net............................................ (1,518) (727) - - (2,245)
------------- ------------ ------------ ------------ ------------
Net Cash Used in Investing Activities ................. (394,432) (244) (73,892) 72 (468,496)
FINANCING ACTIVITIES
Payment of long term debt............................. (249,480) (1,395) (3,685) - (254,560)
Proceeds from long term debt.......................... 560,661 - 78,125 - 638,786
Deferred financing costs, net ........................ (5,941) - (5,921) - (11,862)
Reacquisition of previously issued common stock ...... (1,110) - - - (1,110)
Cash dividends paid .................................. (2,586) (6,700) - 6,700 (2,586)
------------- ------------ ------------ ------------ ------------
Net Cash Provided by (Used in) Financing Activities.... 301,544 (8,095) 68,519 6,700 368,668
------------- ------------ ------------ ------------ ------------
Net Increase in Cash and Cash Equivalents ............. (15,232) 13,075 1,292 - (865)
Cash and Cash Equivalents at Beginning of Period ...... 27,000 11,543 133 - 38,676
------------- ------------ ------------ ------------ ------------
Cash and Cash Equivalents at End of Period ............ $ 11,768 $ 24,618 $ 1,425 $ - $ 37,811
============= ============ ============ ============ ============
</TABLE>
<PAGE>
INTERNATIONAL SPEEDWAY CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED NOVEMBER 30, 1998
(Audited)
<TABLE>
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ------------ ------------ ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income ........................................... $ 40,466 $ 8,245 $ (333) $ (8,186) $ 40,192
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation and amortization ........................ 8,342 4,795 - - 13,137
Amortization of unearned compensation ................ 1,076 - - - 1,076
Deferred income taxes ................................ 5,746 (171) (30) - 5,545
Undistributed (income) loss from
equity investment................................... - 905 - - 905
Gain on sale of equity investment..................... - (1,245) - - (1,245)
Changes in Operating Assets and Liabilities:
Receivables, net.................................... (2,453) (180) - 613 (2,020)
Other current assets ............................... (2,010) 120 637 - (1,253)
Other assets ....................................... (376) 200 - - (176)
Accounts payable and other current liabilities...... 8,504 2,468 77 (613) 10,436
Deferred income .................................... 12,308 607 - - 12,915
------------- ------------ ------------ ------------ ------------
Net Cash Provided by (Used in) Operating Activities .. 71,603 15,744 351 (8,186) 79,512
INVESTING ACTIVITIES
Change in short term investments, net................. (86,021) 7,265 - - (78,756)
Capital expenditures ................................. (38,220) (12,124) (21,514) - (71,858)
Equity investments ................................... - (410) - - (410)
Intercompany investing, net........................... (37,628) 16,332 21,296 - -
Other, net............................................ (1,323) - - - (1,323)
------------- ------------ ------------ ------------ ------------
Net Cash Provided by (Used in) Investing Activities.... (163,192) 11,063 (218) - (152,347)
FINANCING ACTIVITIES
Payment of long term debt............................. (13,658) - - (13,658)
Reacquisition of previously issued common stock ...... (195) - - - (195)
Cash dividends paid .................................. (2,310) (8,186) - 8,186 (2,310)
Issuance of Class A Common Stock...................... 117,700 - - - 117,700
------------- ------------ ------------ ------------ ------------
Net Cash Provided by (Used in) Financing Activities.... 115,195 (21,844) - 8,186 101,537
------------- ------------ ------------ ------------ ------------
Net Increase in Cash and Cash Equivalents ............. 23,606 4,963 133 - 28,702
Cash and Cash Equivalents at Beginning of Period ...... 3,394 6,580 - - 9,974
------------- ------------ ------------ ------------ ------------
Cash and Cash Equivalents at End of Period .............$ 27,000 $ 11,543 $ 133 $ - $ 38,676
============= ============ ============ ============ ============
</TABLE>
<PAGE>
INTERNATIONAL SPEEDWAY CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED NOVEMBER 30, 1997
(Audited)
<TABLE>
<CAPTION>
COMBINED
PARENT GUARANTOR
COMPANY SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ------------ ------------ ------------
(in thousands)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income ........................................... $ 23,054 $ 7,292 $ (550) $ 29,796
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation and amortization ........................ 6,912 2,998 - 9,910
Amortization of unearned compensation ................ 1,063 - - 1,063
Deferred income taxes ................................ 1,138 3,287 - 4,425
Undistributed (income) loss from
equity investment................................... 3,290 (3,656) - (366)
Changes in Operating Assets and Liabilities:
Receivables, net.................................... (1,357) 367 323 (667)
Other current assets ............................... (609) 530 (125) (204)
Other assets ....................................... (3) (201) - (204)
Accounts payable and other current liabilities...... 2,370 2,218 (198) 4,390
Deferred income .................................... 10,809 (4,018) - 6,791
------------- ------------ ------------ ------------
Net Cash Provided by (Used in) Operating Activities ... 46,667 8,817 (550) 54,934
INVESTING ACTIVITIES
Change in short term investments, net................. 52,836 (880) - 51,956
Capital expenditures ................................. (30,194) (8,433) - (38,627)
Equity investments ................................... (112) (17,613) - (17,725)
Acquisition of PIR, net of cash acquired.............. - (43,868) - (43,868)
Acquisition of WGI, net of cash acquired.............. - (996) - (996)
Intercompany investing, net........................... (66,667) 66,667 - -
Other, net............................................ (1,253) - - (1,253)
------------- ------------ ------------ ------------
Net Cash Used in Investing Activities ................ (45,390) (5,123) - (50,513)
FINANCING ACTIVITIES
Reacquisition of previously issued common stock ...... (148) - - (148)
Additional expense of Class A Common Stock offering... (46) - - (46)
Cash dividends paid .................................. (2,310) (550) 550 (2,310)
------------ ------------ ------------ ------------
Net Cash Provided by (Used in) Financing Activities... (2,504) (550) 550 (2,504)
------------ ------------ ------------ ------------
Net Increase (Decrease) in Cash and Cash Equivalents .. (1,227) 3,144 - 1,917
Cash and Cash Equivalents at Beginning of Period ....... 4,621 3,436 - 8,057
------------ ------------ ------------ ------------
Cash and Cash Equivalents at End of Period ............. $ 3,394 $ 6,580 - 9,974
============ ============ ============ ============
</TABLE>
<PAGE>
<PAGE>
Schedule II Valuation and Qualifying Accounts
Additions
Balance Charged to Balance
Beginning Costs and Deductions at End
Description of Period Expenses (A) Period
_____________________________________________
(Thousands of Dollars)
For the year ended
November 30, 1999
Allowance for
doubtful accounts $ 100 $ 950 (B) $ 50 $ 1,000
For the year ended
November 30, 1998
Allowance for
doubtful accounts $ 100 $ 79 $ 79 $ 100
For the year ended
November 30, 1997
Allowance for
doubtful accounts $ 35 $ 170 $ 105 $ 100
(A) Uncollectible accounts written off, net of recoveries.
(B) $57 was acquired as part of the PMI acquisition.
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers, directors and nominees for directors of the Company
are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
<S> <C> <C>
William C. France 66 Chairman of the Board, Chief Executive Officer and Director
Roger S. Penske 63 Vice-Chairman and Director
James C. France 55 President, Chief Operating Officer and Director
Lesa D. Kennedy 38 Executive Vice President and Director
H. Lee Combs 46 Senior Vice President -Corporate Development and Director
John R. Saunders 43 Senior Vice President -Operations
Gregory W. Penske 37 Senior Vice President -Western Operations
Susan G. Schandel 36 Vice President, Chief Financial Officer, and Treasurer
W. Garrett Crotty 36 Vice President, Secretary and General Counsel
Gregory J. Sullivan 44 Vice President--Marketing
Robert E. Smith 67 Vice President--Administration
John E. Graham, Jr. 51 Vice President
W. Grant Lynch, Jr. 46 Vice President
James H. Hunter 60 Vice President
Les Richter 69 Vice President Special Projects
J. Hyatt Brown 62 Director
John R. Cooper 67 Director
Walter P. Czarnecki 56 Director
Robert R. Dyson 53 Director
James H. Foster 73 Director
Brian Z. France 37 Director
Christy F. Harris 54 Director
Raymond K. Mason, Jr. 44 Director
Edward H. Rensi 55 Director
Lloyd E. Reuss 63 Director
Chapman Root, II 50 Director
Thomas W. Staed 68 Director
</TABLE>
The Company's Articles provide that the Board of Directors be divided
into three classes, with regular three year staggered terms. Ms. Kennedy and
Messrs. Brown, Czarnecki, Dyson, Rensi and Staed will hold office until the
annual meeting of shareholders to be held in 2000, Messrs. William C. France,
Combs, Foster, Harris, Gregory W. Penske and Root will hold office until the
annual meeting of shareholders to be held in 2001, and Messrs. James C.
France, Cooper, Brian Z. France, Mason, Roger S. Penske and Reuss will hold
office until the annual meeting of shareholders to be held in 2002. Pursuant
to the merger agreement for the PMI Acquisition the Company is currently
obligated to place three individuals designated by Penske Performance, Inc. on
its board of directors and to include such designees as nominees recommended
by the Company's board of directors at future elections of directors by
shareholders. Messrs. Roger S. Penske, Gregory W. Penske and Walter P.
Czarnecki are presently the designees of Penske Performance, Inc. serving on
the Company's board of directors.
William C. France and James C. France are brothers. Lesa D. Kennedy and
Brian Z. France are the children of William C. France. Gregory W. Penske is
the son of Roger S. Penske. There are no other family relationships among the
Company's executive officers and directors.
Mr. William C. France, a director since 1958, has served as Chairman of
the Board of the Company since 1987 and as Chief Executive Officer since 1981.
Mr. Roger S. Penske, has served as a director and Vice Chairman since
July 1999. Mr. Penske was Chairman of the Board of PMI from March of 1996
until its acquisition by the Company in 1999. Prior to March 1996, Mr. Penske
was Chairman of the Board of Michigan International Speedway, Inc. ("Michigan
Speedway") since 1973, Chairman of the Board and President of Pennsylvania
International Raceway, Inc. ("Nazareth Speedway") since 1986, and Chairman of
the Board of California Speedway Corporation ("California Speedway") since
1994. Mr. Penske is also Chairman of the Board and Chief Executive Officer of
Penske Corporation. Penske Corporation is a privately-owned diversified
transportation services company which (among other things) holds, through its
subsidiaries, interests in a number of businesses, including the Company. Mr.
Penske is also a member of the Boards of Directors of General Electric
Company, Detroit Diesel Corporation, United Auto Group, Inc., and Delphi
Automotive Systems, Inc. Mr. Penske is also a founder of Penske Racing, Inc.
and Penske Racing South, Inc.
Mr. James C. France, a director since 1970, has served as President and
Chief Operating Officer of the Company since 1987.
Ms. Lesa D. Kennedy, a director since 1984, was appointed Executive Vice
President of the Company in January 1996. Ms. Kennedy served as the Company's
Secretary from 1987 until January 1996 and served as its Treasurer from 1989
until January 1996.
Mr. H. Lee Combs, a director since 1987, was appointed the Company's
Senior Vice President-Corporate Development in July 1999. He served as Senior
Vice President-Operations since January 1996 until that date. Mr. Combs served
as a Vice President and the Company's Chief Financial Officer from 1987 until
January 1996.
Mr. John R. Saunders has served as Senior Vice President-Operations,
since July 1999. He had served as a Vice President since 1997 and was
President of Watkins Glen International from 1983 until 1997.
Mr. Gregory W. Penske has served as Senior Vice President-Western
Operations and a director since July 1999. Mr. Penske had been a director of
PMI since its formation and President and Chief Executive Officer since July
1, 1997. Prior to July 1, 1997, Mr. Penske served as an Executive Vice
President of PMI since February 1996. In addition, Mr. Penske served as
President of the California Speedway Corporation from January 1997 to January
1999. Mr. Penske is also the President of Penske Automotive Group, Inc., which
owns and operates five automobile dealerships in Southern California, and has
served in that position since December 1993. From July 1992 to the present,
Mr. Penske served as the President of D. Longo, Inc., which owns and operates
a Toyota dealership in El Monte, California and is a subsidiary of Penske
Automotive Group, Inc.
Ms. Susan G. Schandel became a Vice President in July 1999 and since
January 1996 has continued to serve as the Company's Treasurer and Chief
Financial Officer. From November 1992 until January 1996, Ms. Schandel served
as the Company's Controller.
Mr. W. Garrett Crotty became a Vice President in July 1999 and since 1996
has served as Secretary and General Counsel. Prior to that time he had been
in the private practice of law for more than five years.
Mr. Gregory J. Sullivan, has served as the Company's Vice
President-Marketing since November 1994.
Mr. Robert E. Smith has served as Vice President--Administration of the
Company for more than five years.
Mr. John E. Graham, Jr., has served as a Vice President and as President
of Daytona International Speedway since November 1994.
Mr. W. Grant Lynch, Jr. has served as a Vice President and as President
of Talladega Superspeedway since joining the Company in November 1993.
Mr. James H. Hunter has served as a Vice President and as President of
Darlington Raceway since joining the Company in November 1993.
Mr. Les Richter has served as Vice President of the Company since
February 2000. Mr. Richter has served as the Executive Vice President of the
California Speedway since November 1994.
Mr. J. Hyatt Brown, a director since 1987, serves as the President and
Chief Executive Officer of Brown & Brown, Inc. and has been in the insurance
business since 1959. Mr. Brown also serves as a director of Rock Tenn Co.,
SunTrust Banks, Inc., BellSouth Corporation, and FPL Group, Inc.
Mr. John R. Cooper, a director since 1987, served as Vice President -
Corporate Development of the Company from December 1987 until July 1994.
Beginning January 1996 Mr. Cooper rejoined the Company staff.
Mr. Walter P. Czarnecki has been a director since July 1999. Mr.
Czarnecki had served as Vice Chairman of the Board of PMI since January 1996,
and, prior thereto, served as PMI's President. Mr. Czarnecki had also served
as a senior executive of the Penske Speedway Group since 1979. Mr. Czarnecki
is the Executive Vice President of Penske Corporation, has been a member of
the Board of Directors of Penske Corporation since 1979 and serves as a
director of Penske Truck Leasing Corporation, which is the general
partner of Penske Truck Leasing Co., L.P.
Mr. Robert R. Dyson, a director since January 1997, has served as
Chairman and Chief Executive Officer of the Dyson-Kissner-Moran Corporation
(DKM) since November 1992.
Mr. James H. Foster, a director since 1968, served as the Company's
Senior Vice President - Special Projects from January 1994 until his
retirement in 1997. Mr. Foster served as President of Daytona International
Speedway from 1988 until 1994.
Mr. Brian Z. France, a director since 1994, has served as NASCAR's Vice
President of Marketing and Corporate Communications since December 1992 and as
the Company's Manager--Group Projects since February 1994.
Mr. Christy F. Harris, a director since 1984, has been engaged in the
private practice of business and commercial law with Harris, Midyette & Darby
P.A. for more than twenty years.
Mr. Raymond K. Mason, Jr., a director since 1981, had served as Chairman
and President of American Banks of Florida, Inc., Jacksonville, Florida, from
1978 until its sale in 1998.
Mr. Edward H. Rensi, a director since January 1997, is currently Chairman
& CEO of Team Rensi Motorsports. Mr Rensi was an executive consultant with
McDonald's Corporation from 1997 to 1998. He served as President and Chief
Executive Officer of McDonald's USA from 1991 until his retirement in 1997. He
is also a director of Snap-On Tools.
Mr. Lloyd E. Reuss, a director since January 1996, served as President of
General Motors Corporation from 1990 until his retirement in January 1993. Mr.
Reuss also serves as a director of Handleman Co., Detroit Mortgage and Realty,
Co. and United States Sugar Company.
Mr. Chapman Root, II, a director since 1992, has served as Chairman of
the Root Company, a private investment company, since 1989. Mr. Root also
serves as a director of First Financial Corp., and Terre Haute First National
Bank.
Mr. Thomas W. Staed, a director since 1987, is currently Chairman of
Staed Family Associates and had served as President of Oceans Eleven Resorts,
Inc., a hotel/motel business, from 1968 to 1999.
DIRECTOR COMPENSATION
In 1999 the Company paid each non-employee director a monthly retainer of
$750, a $1,500 fee for each meeting of the Board of Directors attended and a
$750 fee for each Board committee meeting attended. The aggregate retainers
and fees paid to directors with respect to fiscal 1999 services totaled
approximately $192,000. The Company also reimburses directors for all expenses
incurred in connection with their activities as directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon a review of Forms 3 and 4 and amendments thereto furnished to
the Company during the fiscal year ended November 30, 1999, Forms 5 and
amendments thereto furnished to the Company with respect to the fiscal year
ended November 30, 1999, and written representations furnished to the Company,
John R. Cooper, Christy F. Harris, Chapman J. Root, II, and Thomas W. Staed
have been identified as failing to file on a timely basis reports required by
section 16(a) of the Exchange Act during the fiscal year ended November 30,
1999. Each had one or more transactions reported on a single Form 4 for which
the Form 4 was filed late. Based solely on the review, there is no other
person who, at any time during the fiscal year, was a director, officer,
beneficial owner of more than ten percent of any class of the Company's
securities that failed to file on a timely basis reports required by section
16(a) of the Exchange Act during the fiscal year ended November 30, 1999.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid by the
Company, for services rendered during the last three fiscal years, to the
Company's Chief Executive Officer and the Company's other four most highly
compensated executive officers during fiscal 1999 (collectively the "Named
Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
----------------------------- -------------
Name and Fiscal Restricted All Other
Principal Position Year Salary Bonus (3) Stock Awards(1) Compensation(2)
- ------------------- ----------------------------- -------------- ------ ---------
<S> <C> <C> <C> <C> <C>
William C. France 1999 $423,485 $204,625 $ 0 $768,920
Chairman and Chief 1998 $380,513 $153,622 $ 0 $774,441
Executive Officer 1997 $330,538 $150,282 $ 0 $769,351
James C. France 1999 $383,025 $150,390 $ 0 $472,183
President and Chief 1998 $341,342 $111,168 $ 0 $477,319
Operating Officer 1997 $264,644 $ 96,231 $ 0 $474,575
Lesa D. Kennedy 1999 $232,940 $197,634 $174,972 $ 11,122
Executive Vice 1998 $222,977 $ 71,295 $121,000 $ 9,559
President 1997 $213,488 $ 75,837 $372,398 $ 8,355
H. Lee Combs 1999 $227,967 $179,727 $174,972 $ 14,377
Sr Vice President 1998 $218,161 $ 70,018 $121,000 $ 13,156
Corporate Development 1997 $208,335 $ 69,672 $372,398 $ 12,373
John R. Saunders 1999 $191,178 $153,958 $ 93,157 $ 13,470
Sr Vice President 1998 $158,336 $ 40,320 $ 64,406 $ 12,675
Operations 1997 $ 93,392 $ 14,009 $ 77,152 $ 5,880
</TABLE>
(1) For fiscal year 1997, reflects the aggregate market value of shares
awarded under the Company's 1994 Long-Term Incentive Plan (calculated as
of the date of the award). The indicated awards were made in January
1997 with respect to services rendered in fiscal year 1996. For fiscal
years after 1997, reflects the aggregate market value of shares awarded
under the Company's 1996 Long-Term Incentive Plan (calculated as of the
date of the award). The indicated awards were made in April with
respect to services rendered in the prior fiscal year. See Note 12 of
Notes to the Company's Consolidated Financial Statements.
(2) The compensation reported in this column consists of (i) payments for
insurance, including premium payments and related expense for
split-dollar and other life insurance, accidental death and
dismemberment insurance, group health insurance, and long and short term
disability insurance, (ii) medical expense reimbursements, and (iii)
contributions to the Company's 401(k) plan. The amounts applicable to
each Named Officer for each category for fiscal 1999 are as follows:
William C. France ($764,966, $3,954 and $0, respectively); James C.
France ($464,293, $1,490 and $6,400, respectively); Lesa D. Kennedy
($4,722, $0 and $6,400, respectively); H. Lee Combs ($4,693, $3,284 and
$6,400, respectively); and John R. Saunders ($4,362, $2,708 and $6,400,
respectively). Pursuant to the Company's split-dollar life insurance
arrangements, the premiums will be repaid to the Company in future
periods. See Note 10 of Notes to the Company's Consolidated Financial
Statements.
(3) The bonus for the Chairman/CEO and President COO are the Company's
estimates for fiscal 1999, which have not yet been approved by the Board
of Directors of the Company.
COMMITTEE REPORT ON EXECUTIVE OFFICER COMPENSATION
The Company's Executive Officer Compensation is overseen by the
Compensation Committee of the Board of Directors which is composed entirely of
independent directors.
PHILOSOPHY AND POLICIES. Executive Officer Compensation is structured
and administered to offer competitive compensation based on the Executive
Officer's contribution and personal performance in support of the Company's
strategic plan and business mission.
In 1989, based upon recommendation of the Compensation Committee, the
Company retained TPF&C to perform a salary study to determine benchmark salary
ranges. TPF&C made recommendations to the Company concerning salary ranges and
a bonus structure. The recommendations were followed in establishing the
corporate compensation plan which is reviewed and reevaluated every year. As
part of the overall compensation plan the Company's Executive Officers are
grouped in structured pay grades based upon job responsibility and
description. Each grade has an established range for annual salary. The
salary ranges for each grade were originally established based upon the TPF&C
salary study and have been reevaluated and adjusted annually by the
Compensation Committee based upon changes in market conditions and Company
performance factors.
CORPORATE PERFORMANCE MEASURES USED TO DETERMINE EXECUTIVE OFFICER
COMPENSATION. Based on Company performance (determined subjectively by the
Committee in accordance with the sound business judgment of its members after
consideration of earnings per share, revenue growth and established salary
ranges), the Committee established a total pool of dollars which was used to
provide for increases in annual salary compensation to all employees including
the Executive Officers other than the Chairman/CEO and President/COO. The
Compensation Committee recommended a proposed salary for the Chairman/CEO and
President/COO to the entire Board of Directors (other than the Chairman/CEO
and President/COO) which approved the salaries as recommended.
SALARY COMPENSATION. All other Executive Officers' annual salaries were
set by the Chairman/CEO and President/COO who were given the authority to set
all salaries other than their own so long as (1) the total pool of available
dollars allocated for annual salary compensation for Executive Officers was
not exceeded and (2) provided each Executive Officer's annual salary was
within the established range for the salary grade. In setting Executive
Officer salaries the Chairman/CEO and President/COO considered (1) Company
performance as measured against management goals approved by the Board of
Directors, (2) personal performance in support of Company goals as measured by
annual evaluation criteria, and (3) intangible factors and criteria such as
payments by competitors for similar positions although no particular weighting
of the factors or formula was used.
In recommending the annual salaries of the Chairman/CEO and
President/COO, the Committee considered similar criteria as well as the
Committee members' assessment of the Company's financial size and condition.
INCENTIVE COMPENSATION. The Company has an Annual Incentive Compensation
Plan for Management in which the Executive Officers participate. As a result
Executive Officer Compensation is significantly at risk. Planned incentive
compensation for Executive Officers can be as high as 55% of total annual
compensation.
Each Executive Officer is assigned a target bonus opportunity based on
corporate and personal goals for the year. The actual bonus for each
Executive Officer will range from 0% to more than 150% of the target depending
upon results of corporate and personal performance during the year. The
current corporate financial measurements are earnings per share, revenue
growth and operating margin. These may vary from year to year as established
by the Compensation Committee. Personal performance factors are based on
individual (functional) objectives and are tailored for each Executive
Officer. A portion of each Executive Officer's incentive award will be based
upon the Chairman/CEO and President/COO's discretionary judgment of the
individual's overall performance during the plan year.
The incentive compensation for the Chairman/CEO and President/COO is,
again, proposed by the Compensation Committee and presented to the full Board
of Directors for ratification.
LONG TERM INCENTIVE PLAN COMPENSATION
1994 LONG-TERM INCENTIVE PLAN. In 1993, based upon recommendation of the
Compensation Committee, the Company retained the HayGroup to assist in the
design of a long term incentive compensation plan for specified key employees,
which is known as the "International Speedway Corporation 1994 Long-Term
Incentive Plan" (the "1994 Plan"). The 1994 Plan was recommended by the
Compensation Committee of the Board of Directors, unanimously approved by all
outside directors and ratified by the entire Board of Directors on November
17, 1993. It was approved by the written consent of the holders of a majority
of the outstanding shares of the Company on the same date. The purpose of the
1994 Plan was to attract and retain qualified and competent executives by
providing significant opportunities for capital accumulation and to enhance
the growth and profitability of International Speedway Corporation (the
"Company") by focusing on long-term goals and creation of increases in
shareholder value. The 1994 Plan set aside restricted stock in the amount of
50,000 old pre 15-1 split shares of common stock for its implementation, which
were converted, on the 15-1 basis, into 750,000 shares of Class B Common
Stock. Awards of restricted shares of stock were assigned to officers and key
employees who were capable of having a significant impact on the performance
of the Company. The amount of shares for each initial participant was based
primarily on an analysis and recommendations by compensation specialists of
the HayGroup. Awards were granted based upon Company performance in fiscal
years 1994, 1995 and 1996. The ability to issue additional shares under the
1994 Plan expired after the grants based on fiscal 1996 results. The
restricted shares were granted to participants each year based upon the
Company's performance as measured against annual financial goals established
in advance by the Board of Directors. Several aspects of the 1994 Plan and
its implementation are subject to the discretion of the Compensation
Committee.
The shares which were granted under the 1994 Plan are initially
restricted and do not immediately vest to the participant, but, instead carry
a continued employment restriction of 3 years on 50% of the grant and 5 years
on the other 50% of the grant. If employment ends prior to the expiration of
the vesting period for reasons acceptable to the Compensation Committee
(death, disability, retirement, etc.) the Company may determine to vest all or
a portion of the unvested and unearned restricted shares. Termination of
employment for any other reason will result in forfeiture of all unvested and
unearned shares.
Prior to vesting the participant may vote the shares and receive
dividends on the restricted shares as granted. Prior to vesting the
certificates for the restricted shares are held in escrow by the Company.
After vesting the certificates for the restricted shares are delivered to the
participant. The Company has the right of first refusal to buy any stock
issued (and vested) under the 1994 Plan which any participant wishes to sell.
1996 LONG-TERM INCENTIVE PLAN. The Company's 1996 Long-term Incentive
Plan (the "1996 Plan") was adopted by the Board of Directors in September
1996. It was approved by the written consent of the holders of a majority of
the outstanding shares of the Company in November 1996. The purpose of the
1996 Plan is to attract and retain key employees and consultants of the
Company, to provide an incentive for them to achieve long-range performance
goals, and to enable them to participate in the long-term growth of the
Company.
The 1996 Plan authorizes the grant of stock options (incentive and
nonstatutory), stock appreciation rights ("SARs") and restricted stock to
employees and consultants of the Company capable of contributing to the
Company's performance. The Company has reserved an aggregate of 1,000,000
shares (subject to adjustment for stock splits and similar capital changes) of
Class A Common Stock for grants under the 1996 Plan. Incentive Stock Options
may be granted only to employees eligible to receive them under the Internal
Revenue Code of 1996, as amended.
The Board of Directors has designated the Compensation Committee (the
"Committee") to administer the 1996 Plan. Awards under the 1996 Plan will
contain such terms and conditions consistent with the 1996 Plan as the
Committee in its discretion approves.
The Committee has discretion to administer the 1996 Plan in the manner
which it determines, from time to time, is in the best interest of the
Company. For example, the Committee will fix the terms of stock options, SARs
and restricted stock grants and determine whether, in the case of options and
SARs, they may be exercised immediately or at a later date or dates. Awards
may also be granted subject to conditions relating to continued employment and
restrictions on transfer. In addition, the Committee may provide, at the time
an award is made or at any time thereafter, for the acceleration of a
participant's rights or cash settlement upon a change in control of the
Company. The terms and conditions of awards need not be the same for each
participant. The foregoing examples illustrate, but do not limit, the manner
in which the Committee may exercise its authority in administering the 1996
Plan. In addition, all questions of interpretation of the 1996 Plan will be
determined by the Committee. Awards under the 1996 Plan were made in April
1998 and 1999, based upon fiscal 1997 and 1998 results. The amount of the
awards was based upon the Company's performance as measured against annual
financial goals established in advance by the Board of Directors. These awards
were restricted shares of Class A Common Stock and are initially restricted
and will not immediately vest to the participant, but, instead carry a
continued employment restriction of 3 years on 50% of the grant and 5 years on
the other 50% of the grant. If employment ends prior to the expiration of the
vesting period for reasons acceptable to the Compensation Committee (death,
disability, retirement, etc.) the Company may determine to vest all or a
portion of the unvested and unearned restricted shares. Termination of
employment for any other reason will result in forfeiture of all unvested and
unearned shares. Awards under the 1996 Plan are to be made in April 2000,
based upon fiscal 1999 results and will carry restrictions equivalent to those
imposed on the awards in 1998 and 1999.
Prior to vesting the participant may vote the shares and receive
dividends on the restricted shares as granted. Prior to vesting the
certificates for the restricted shares will be held in escrow by the Company.
After vesting the certificates for the restricted shares will be delivered to
the participant. The Company has the right of first refusal to buy any stock
issued (and vested) under the 1996 Plan which any participant wishes to sell.
COLLATERAL ASSIGNMENT SPLIT-DOLLAR INSURANCE
In October 1995, based upon evaluation and recommendation of the
Compensation Committee, the Company entered into collateral assignment split-
dollar insurance agreements covering the lives of the Chairman/CEO, the
President/COO and their respective spouses. Pursuant to the agreements, the
Company will advance 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 the repayment of an
amount equal to the cumulative premiums paid by the Company. Although
Securities and Exchange Commission (SEC) rules require disclosure of the
entire premium advanced by the Company in the Summary Compensation Table, the
Compensation Committee determined the compensation aspect of the plan was
actually less than the total premium because of the repayment requirement and
represented reasonable and appropriate compensation to the covered executives,
when considered in light of their total compensation package.
CHAIRMAN/CEO COMPENSATION BASES. The Compensation Committee determined a
11% increase in Chairman/CEO compensation was appropriate in light of the
continued growth in earnings per share in 1998.
Thomas W. Staed
Chapman J. Root, II
Lloyd E. Reuss
PERFORMANCE GRAPH
The rules of the Securities and Exchange Commission ("SEC") require the
Company to provide a line graph covering at least the last five fiscal years
and comparing the yearly percentage change in the Company's total shareholder
return on common stock with the cumulative total return of a broad equity
index assuming reinvestment of dividends and the cumulative total return,
assuming reinvestment of dividends, of a published industry or
line-of-business index; peer issuers selected in good faith; or issuers with
similar market capitalization. The graph below compares the cumulative total
five year return of the Company's common stock (upon the assumption that an
original $100 investment was made in pre-split common stock which
automatically converted to Class B Common Stock on November 4, 1996) with that
of the NASDAQ Stock Market Index (U.S. Companies) and with the 40 NASDAQ
issues (U.S. companies) listed in SIC codes 7900-7999, which encompasses
service businesses in the amusement, sports and recreation industry, which
includes indoor operations which are not subject to the impact of weather on
operations and pari-mutual and other wagering operations. The Company conducts
large outdoor sporting and entertainment events which are subject to the
impact of weather, and is not involved in pari-mutual or other wagering. The
stock price shown has been estimated from the high and low prices for each
quarter for which the close is not available. Because of the unique nature of
the Company's business and the fact that only short-term public information is
available concerning a limited number of companies involved in the same line
of business, and no public information is available concerning other companies
in that line of business, the Company does not believe that the information
presented below is meaningful.
COMPARISON OF FIVE YEAR CUMULATIVE RETURN AMONG
INTERNATIONAL SPEEDWAY CORP., NASDAQ Market Index and NASDAQ SIC 7900 Index
[The line graph on the information statement furnished to shareholders depicts
the plotting of the following information.]
Measurement Period ISC NASDAQ NASDAQ
(Fiscal Year Covered) Market SIC 7900
Index Index
Measurement Pt - 11/30/94 $100.00 $100.00 $100.00
FYE* 11/30/95 $239.42 $142.53 $ 80.68
FYE* 11/30/96 $300.07 $174.58 $ 72.04
FYE 11/30/97 $308.36 $216.34 $ 92.24
FYE 11/30/98 $518.73 $266.60 $ 81.42
FYE 11/30/99 $960.42 $447.56 $126.55
* Adjusted to reflect current fiscal year end for comparability purposes.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of January 31, 2000, the Company had 23,136,011 shares of Class A Common
Stock and 29,965,142 shares of Class B Common Stock issued and outstanding.
Each share of the Class A Common Stock is entitled to one-fifth of one vote on
matters submitted to shareholder approval or a vote of shareholders. Each
share of the Class B Common Stock is entitled to one vote on matters submitted
to shareholder approval or a vote of shareholders. The following table sets
forth certain information as of January 31, 2000 with respect to the
beneficial ownership of each class of the Company's common stock by: (i) each
person known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of each class of common stock, (ii) each director of the
Company who beneficially owns any such shares, (iii) each of the Company's
executive officers who beneficially owns any such shares, and (iv) all
directors and executive officers of the Company as a group. As described in
the notes to the table, voting and/or investment power with respect to certain
shares of common stock is shared by the named individuals. Consequently, such
shares may be shown as beneficially owned by more than one person.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF PERCENTAGE OF
OF COMMON STOCK COMMON STOCK COMBINED VOTING
BENEFICIALLY OWNED (2) BENEFICIALLY OWNED POWER OF ALL
------------------------------------- -------------------------- CLASSES OF
NAME OF BENEFICIAL OWNER (1) CLASS A CLASS B TOTAL CLASS A CLASS B TOTAL COMMON STOCK
- ----------------------------- ------------------------------------- -------------------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
France Family Group(3) ..... 23,352 21,158,081 21,181,433 * 70.61% 39.89% 61.18%
James C. France(4) .......... 4,042 15,352,721 15,356,763 * 51.24% 28.92% 44.38%
William C. France(5) ........ 2,642 15,340,501 15,343,143 * 51.19% 28.89% 44.35%
Roger S. Penske(6)........... 4,577,663 0 4,577,663 19.91% * 8.62% 2.65%
Penske Corp(7)............... 4,552,621 0 4,552,621 19.80% * 8.57% 2.63%
Penske Performance Inc(8).... 4,552,621 0 4,552,621 19.80% * 8.57% 2.63%
Putnam Investments, Inc.(9).. 2,059,145 0 2,059,145 8.95% * 3.88% 1.19%
Lesa D. Kennedy (10)......... 1,979 634,568 636,547 * 2.12% 1.20% 1.84%
Brian Z. France.............. 1,500 495,711 497,211 * 1.65% * 1.43%
Raymond K. Mason, Jr.(11).... 1,042 196,740 197,782 * * * *
James H. Foster(12). ........ 20,277 165,372 185,649 * * * *
H. Lee Combs................. 9,418 42,070 51,488 * * * *
Thomas W. Staed(13).......... 5,992 44,000 49,992 * * * *
Robert R. Dyson(14).......... 19,500 29,500 49,000 * * * *
John E. Graham, Jr........... 6,135 23,934 30,069 * * * *
James H. Hunter.............. 3,977 25,205 29,182 * * * *
W. Grant Lynch, Jr........... 3,827 19,529 23,356 * * * *
John R. Saunders............. 5,108 16,895 22,003 * * * *
Chapman J. Root, II ......... 3,542 13,500 17,042 * * * *
Susan G. Schandel............ 3,823 10,692 14,515 * * * *
Robert E. Smith(15) ......... 4,432 8,939 13,371 * * * *
Gregory J. Sullivan.......... 5,282 7,388 12,670 * * * *
J. Hyatt Brown(16) .......... 2,400 9,000 11,400 * * * *
Walter P. Czarnecki.......... 8,230 0 8,230 * * * *
W. Garrett Crotty(17)........ 4,027 3,653 7,680 * * * *
John R. Cooper .............. 6,042 1,500 7,542 * * * *
Gregory W. Penske............ 6,210 0 6,210 * * * *
Lloyd E. Reuss............... 5,000 0 5,000 * * * *
Christy F. Harris(18)........ 4,842 150 4,992 * * * *
Edward H. Rensi.............. 0 1,500 1,500 * * * *
All directors and
executive officers as a
group (26 persons)(19) .... 4,716,932 20,902,945 25,619,877 20.39% 69.76% 48.25% 63.16%
</TABLE>
- -------------------------------
* Less than 1%.
(1) Unless otherwise indicated the address of each of the beneficial
owners identified is c/o the Company, 1801 West International Speedway
Boulevard, Daytona Beach, Florida 32114.
(2) Unless otherwise indicated, each person has sole voting and investment
power with respect to all such shares.
(3) Reflects the aggregate of 18,852 Class A and 20,325,448 Class B shares
indicated in the table as beneficially owned by James C. France, William
C. France, Lesa D. Kennedy and Brian Z. France, as well as 4,500 Class A
shares held of record and 832,633 Class B shares held beneficially by
the adult children of James C. France. See footnotes (4), (5) and (9).
(4) Includes (i) 1,500 Class A shares held of record and 304,725 Class B
shares held beneficially by Sharon M. France, his spouse, (ii) 9,115,125
Class B shares held of record by Western Opportunity Limited
Partnership ("Western Opportunity"), (iii) 4,052,369 Class B shares
held of record by Carl Investment Limited Partnership ("Carl"), and
(iv) 1,880,502 Class B shares held of record by White River Investment
Limited Partnership ("White River"). James C. France is the sole
shareholder and director of (x) Principal Investment Company, one of the
two general partners of Western Opportunity, (y) Quaternary Investment
Company, the general partner of Carl, and (z) Secondary Investment
Company, one of the two general partners of White River. Also see
footnote (5). Does not include shares held of record by the adult
children of James C. France.
(5) Includes (i) 1,121 Class A shares held of record by Betty Jane France,
his spouse, (ii) 9,115,125 Class B shares held of record by Western
Opportunity, (iii) 4,344,874 Class B shares held of record by Polk City
Limited Partnership ("Polk City"), and (iv) 1,880,502 Class B shares
held of record by White River. William C. France is the sole shareholder
and director of each of (x) Sierra Central Corp., one of the two
general partners of Western Opportunity, (y) Boone County Corporation,
the general partner of Polk City, and (z) Cen Rock Corp., one of the
two general partners of White River. Also see footnote (4). Does not
include the shares shown in the table as beneficially owned by Lesa D.
Kennedy and Brian Z. France, adult children of William C. France.
(6) This owner's address is 13400 West Outer Drive, Detroit, MI 48239-4001.
Includes 4,552,621 Class A shares shown in the table as beneficially
owned by Penske Corp. and Penske Performance, Inc.
(7) This owner's address is 13400 West Outer Drive, Detroit, MI 48239-4001.
Shares shown are also beneficially owned by Roger S. Penske and Penske
Performance, Inc.
(8) This owner's address is 1100 North Market Street, Suite 780, Wilmington,
DE 19801. Shares shown are also beneficially owned by Roger S. Penske
and Penske Corp.
(9) This owner's address is One Post Office Square, Boston, Massachusetts
02109. Shares reported are also included in those reported for Putnam
Investments, Inc.
(10) Includes (i) 1,500 Class A shares held of record by Ms. Kennedy as
custodian for her minor son, Benjamin, (ii) 1,500 Class A shares held
jointly with her spouse, and (iii) 343,950 Class B shares held of record
by BBL Limited Partnership. Mrs. Kennedy is the sole shareholder and a
director of BBL Company, the sole general partner of BBL Limited
Partnership.
(11) Includes 75 Class B shares owned by The Raymond K. Mason, III Trust,
as to which Mr. Mason disclaims beneficial ownership.
(12) Includes (i) 16,682 Class B shares held of record by BEEJA Limited
Partnership and (ii) 140,000 Class B shares held of record by Mountain-
Ocean Limited Partnership.
(13) Owned jointly with Barbara Staed, his spouse.
(14) Includes 5,000 Class A shares held in the Robert R. Dyson 1987 Family
Trust and 9,500 Class A Shares held as Trustee of the Charles H. Dyson
Trust No. 2, U/A dated 4/15/76.
(15) Includes 1,837 Class A shares held of record as joint tenants with his
spouse.
(16) Held of record as joint tenants with Cynthia R. Brown, his spouse.
(17) Includes 100 Class B shares held by Mr. Crotty as Trustee for his son
and 1,500 shares held by Bellows Falls Investment, Inc. Also includes
208 Class A shares held by the Black, Sims & Hubka profit sharing plan
as to which Mr. Crotty disclaims beneficial ownership.
(18) Includes 500 Class A shares held by M. Dale Harris, his spouse, and
1,500 Class A shares held by Mr. Harris as trustee of The Harris,
Midyette, Geary, & Darby P.A. Profit Sharing Plan and Trust.
(19) See footnotes (4) through (8), and (10) through (18).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
NASCAR, which sanctions most of the Company's major racing events, is
controlled by William C. France and James C. France. Standard NASCAR sanction
agreements require racetrack operators to pay various monies to NASCAR for
each sanction event conducted. Included are sanction fees and prize and point
fund monies. The prize and point fund monies are distributed by NASCAR to
participants in the events. The aggregate NASCAR sanction fees and prize and
point fund monies paid by the Company with respect to fiscal 1997, 1998 and
1999 were $20.6 million, $28.8 million and $45.6 million, respectively.
In addition, NASCAR and the Company share a variety of expenses in the
ordinary course of business. NASCAR pays rent to the Company for office space
based upon estimated fair market lease rates for comparable facilities. NASCAR
also reimburses the Company for 50% of the compensation paid to personnel
working in the Company's legal and risk management departments, as well as 50%
of the compensation expense associated with receptionists and the Company's
archive departments. The Company's payments to NASCAR for MRN Radio's
broadcast rights to Craftsman Truck Series races represents an agreed-upon
percentage of the Company's advertising revenues attributable to such race
broadcasts. NASCAR's reimbursement for use of the Company's mail room,
graphics and publications departments, and the Company's reimbursement of
NASCAR for use of corporate aircraft, is based on actual usage. The aggregate
amount paid by the Company to NASCAR for shared expenses, net of the amounts
received from NASCAR for shared expenses, totaled approximately $720,000,
$160,000 and $356,000 during fiscal 1997, 1998 and 1999, respectively. 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
could be obtained in arms'-length negotiations.
J. Hyatt Brown, a director of the Company, serves as President and Chief
Executive Officer of Brown & Brown, Inc. ("Brown"). Brown has received
commissions for serving as the Company's insurance broker for several of the
Company's insurance policies, including its property and casualty policy,
certain employee benefit programs and the split-dollar arrangements
established for the benefit of William C. France, James C. France and their
respective spouses. The aggregate commissions received by Brown in connection
with Company policies were approximately $166,000, $240,000 and $185,000
during fiscal 1997, 1998 and 1999, respectively.
Pursuant to the merger agreement for the PMI acquisition the Company is
currently obligated to place three individuals designated by Penske
Performance, Inc. on its board of directors and to include such designees as
nominees recommended by the Company's board of directors at future elections
of directors by shareholders. Messrs. Roger S. Penske, Gregory W. Penske and
Walter P. Czarnecki are presently the designees of Penske Performance, Inc.
serving on the Company's board of directors. Penske Performance, Inc. is
wholly-owned by Penske Corporation which beneficially owns more than five
percent of the outstanding stock of the Company. Messrs. Penske, Penske and
Czarnecki are also officers and directors of Penske Performance, Inc. and
other Penske Corporation affiliates. Roger S. Penske beneficially owns a
majority of the voting stock of and controls Penske Corporation and its
affiliates. During fiscal 1999 subsequent to the PMI acquisition, Penske
Corporation provided the Company with certain executive and legal services at
a cost of approximately $313,000. Also, the Company, through certain
subsidiaries acquired in the PMI acquisition, sold admissions to the Company's
events, hospitality suite occupancy and related services, merchandise, apparel
and racing tires and accessories to Penske Corporation and its affiliates. In
fiscal 1999 subsequent to the PMI acquisition, Penske Corporation and its
affiliates paid approximately $759,000 for the aforementioned goods and
services. The Company has outstanding receivables and payables/accrued
expenses related to Penske Corporation and its affiliates of approximately
$186,000 and $433,000, respectively, at November 30, 1999.
All of the above transactions, payments and exchanges are considered
normal in the ordinary course of business. Transactions, payments and
exchanges similar to all of the above are planned during the Company's current
fiscal year.
On May 5, 1999, MSA and the former owners of Route 66 Raceway, LLC formed
a new company, Raceway Associates, which is owned 75% by MSA and 25% by the
former owners of the Route 66 Raceway, LLC (See Note 3 - - Equity
Investments). Route 66 Raceway, LLC owns the 240 acre Route 66 Raceway
motorsports complex located in Joliet, Illinois, approximately 35 miles from
downtown Chicago. As a result of this transaction the new Raceway Associates
now owns the Route 66 Raceway, LLC and the Route 66 Raceway motorsports
complex. Edward H. Rensi, a director of the Company, was one of the former
owners of the Route 66 Raceway, LLC. Mr. Rensi owned approximately 5.13% of
the Route 66 Raceway, LLC and as a result of the transaction now owns
approximately 1.28% of Raceway Associates.
<PAGE>
PART IV
ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) Documents filed as a part of this report
1. Consolidated Financial Statements listed below:
Consolidated Balance Sheets
- November 30, 1998 and 1999
Consolidated Statements of Income
- Years ended November 30, 1997, 1998, and 1999
Consolidated Statements of Shareholders' Equity
- Years ended November 30, 1997, 1998, and 1999
Consolidated Statements of Cash Flows
- Years ended November 30, 1997, 1998, and 1999
Notes to Consolidated Financial Statements
2. Consolidated Financial Statement Schedules listed below:
II - Valuation and qualifying accounts
All other schedules are omitted since the required information is not present
or is not present in amounts sufficient to require submission of the schedule,
or because the information required is included in the financial statements
and notes thereto.
3. Exhibits:
Exhibit
Number Description of Exhibit
2.1 - Agreement and Plan of Merger, dated as of May 10, 1999, among
the Company, 88 Corp. and PMI, as amended by Amendment No. 1
thereto dated as of June 21, 1999 (A)**
2.2 - Agreement and Plan of Merger, dated as of May 10, 1999, among
the Company, Penske Performance, Inc., PSH Corp. and Penske
Corporation (B)**
3.1 - Articles of Amendment of the Restated and Amended Articles of
Incorporation of the Company, as filed with the Florida
Department of State on July 26, 1999 (3.1)***
3.2 - Conformed Copy of Amended and Restated Articles of
Incorporation of the Company, as amended as of July 26, 1999
(3.2)***
3.3 - Conformed Copy of Amended and Restated By-Laws of the Company.
(3)(ii)****
4.1 - Indenture, dated October 6, 1999, between the Company, its
subsidiaries, and First Union National Bank, as Trustee. (2)*****
4.2 - Registration Rights Agreement, dated October 6, 1999, among
Salomon Smith Barney and First Union Securities, Inc. and the
Company (4.3)******
4.3 - Form of Registered Note (included in Exhibit 4.1). (2)*****
4.4 - $300,000,000 Credit Agreement, dated as of July 21, 1999, as
amended, among the Company, certain subsidiaries and the lenders
party thereto. (1)*****
10.1 - Daytona Property Lease (3)****
10.2 - 1994 Long-Term Incentive Plan (4)****
10.3 - 1996 Long-Term Incentive Plan (5)****
10.4 - Split-Dollar Agreement (WCF)* (6)****
10.5 - Split-Dollar Agreement (JCF)* (7)****
22 - Subsidiaries of the Registrant - filed herewith
23 - Consent of Ernst & Young LLP relating to the Company's
Registration Statement on Form S-4
(Commission File No. 333-94085) - filed herewith
27 - Financial Data Schedule - filed herewith
*Compensatory Plan required to be filed as an exhibit pursuant to Item
14(c).
**Incorporated by reference to the Annex shown in parentheses and filed
with the Joint Proxy Statement/Prospectus included in the Company's
Registration Statement on Form S-4 File No. 333-81165
***Incorporated by reference to the exhibit shown in parentheses and filed
with the Company's Report on Form 8-K dated July 26, 1999
****Incorporated by reference to the exhibit shown in parentheses and filed
with the Company's Report on Form 10-K for the year ended November 30,
1998.
*****Incorporated by reference to the exhibit shown in parentheses and filed
with the Company's report on Form 10-Q for the quarter ended August 31,
1999.
******Incorporated by reference to the exhibit shown in parentheses and filed
with the Company's Registration Statement filed on Form S-4 File No.
333-94085.
(b) Reports on Form 8-K
During the fourth quarter of the period covered by this report the
Company filed the following reports on Form 8-K:
The Company filed a report on Form 8-K dated September 24, 1999 which
reported under Item 5. the issuance of a press release announcing the
Company's intention to offer in a private placement up to $200 million
principal amount of intermediate term Senior Notes.
The Company filed a report on Form 8-K dated October 1, 1999 which
reported under Item 5, the issuance of a press release on October 1, 1999
announcing the pricing of $225 million principal amount of Senior Notes due
2004 and the issuance of a press release on October 5, 1999 announcing the
financial results for the third quarter and nine months ended August 31, 1999.
The Company filed a report on Form 8-K dated October 8, 1999 which
reported under Item 5, the issuance of a press release on October 8, 1999
announcing the completion of the previously announced sale of $225 million
principal amount of Senior Notes due 2004 in a private placement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
INTERNATIONAL SPEEDWAY CORPORATION
DATE: February 23, 2000 /s/ William C. France
William C. France, Chairman,
Chief Executive Officer & Director
DATE: February 23, 2000 /s/ Susan G. Schandel
Susan G. Schandel
Chief Financial Officer
DATE: February 23, 2000 /s/ James C. France
James C. France
Director
DATE: February 23, 2000 /s/ Lesa D. Kennedy
Lesa D. Kennedy
Director
DATE: February 23, 2000 /s/ H. Lee Combs
H. Lee Combs
Director
DATE: February 23, 2000 /s/ James H. Foster
James H. Foster
Director
DATE: February 23, 2000 /s/ J. Hyatt Brown
J. Hyatt Brown
Director
DATE: February 23, 2000 /s/ Brian Z. France
Brian Z. France
Director
DATE: February 23, 2000 /s/ Raymond K. Mason, Jr.
Raymond K. Mason, Jr.
Director
DATE: February 23, 2000 /s/ Thomas W. Staed
Thomas W. Staed
Director
DATE: February 23, 2000 /s/ Chapman J. Root, II
Chapman J. Root, II
Director
DATE: February 23, 2000 /s/ Daniel W. Houser
Daniel W. Houser
Controller
SUBSIDIARIES OF THE REGISTRANT
Americrown Service Corporation,
a South Carolina Corporation
The California Speedway Corporation,
a Delaware Corporation
d/b/a California Speedway
Chicago Holdings, Inc.,
a Nevada Corporation
Competition Tire South, Inc.,
a Delaware Corporation
Competition Tire West, Inc.
a Michigan Corporation
Event Equipment Leasing, Inc.,
a Florida Corporation
Event Support Corporation,
a Florida Corporation
Great Western Sports, Inc.,
an Arizona Corporation,
d/b/a Tucson Raceway Park
Homestead-Miami Speedway, LLC
a Delaware LLC
d/b/a Homestead-Miami Speedway
ISC Properties, Inc.
a Florida Corporation
ISC Publications, Inc.
a Florida Corporation
Kansas Speedway Corporation,
a Kansas Corporation
Kansas Speedway Development Corp.
a Kansas Corporation
Miami Speedway Corp.,
a Nevada Corporation
Michigan International Speedway, Inc.
a Michigan Corporation
d/b/a Michigan Speedway
Motor Racing Network, Inc.,
a Florida Corporation
Motorsports Alliance, LLC
a Delaware LLC
Motorsports International Corp.
a Pennsylvania Corporation
New York International Speedway Corporation
a Delaware Corporation
North American Testing Company,
a Florida Corporation
North Carolina Speedway, Inc.,
a North Carolina Corporation
d/b/a North Carolina Speedway
Pennsylvania International Raceway, Inc.
a Pennsylvania Corporation
d/b/a Nazareth Speedway
Phoenix Speedway Corp.,
a Delaware Corporation
d/b/a/ Phoenix International Raceway
Regiment, Inc.
a North Carolina Corporation
Richmond International Raceway, Inc.
a Delaware Corporation
Rocky Mountain Speedway Corporation
a Colorado Corporation
Seasonal Services, Inc.,
a Florida Corporation
South Carolina International Speedway Corporation,
a South Carolina Corporation,
d/b/a Darlington International Raceway
Watkins Glen International, Inc.,
a New York Corporation
d/b/a Watkins Glen International
88 Corp.
a Delaware Corporation
Consent of Independent Certified Public Accounts
We consent to the reference to our firm under the caption "Experts" in Amendment
No. 1 to the Registration Statement (Form S-4 No. 333-94085) and related
Prospectus of International Speedway Corporation for the registration of $225
million in 7.875% Senior Notes due 2004 and to the inclusion of our report dated
[January 19, 2000] with respect to the consolidated financial statements and
schedules of International Speedway Corporation included in its Annual Report
(Form 10-K) for the year ended November 30, 1999, filed with the Securities and
Exchange Commission.
ERNST & YOUNG LLP
- - - - - - - - - - - - - - -
Jacksonville, Florida
February __, 2000
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEETS OF INTERNATIONAL SPEEDWAY CORPORATION AS OF NOVEMBER 30, 1999 AND
THE RELATED CONSOLIDATED STATEMENTS OF INCOME, SHAREHOLDERS' EQUITY AND CASH
FLOWS FOR THE YEAR ENDED NOVEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-END> NOV-30-1999
<CASH> 37,811
<SECURITIES> 690
<RECEIVABLES> 16,312
<ALLOWANCES> 1,000
<INVENTORY> 3,466
<CURRENT-ASSETS> 64,975
<PP&E> 742,591
<DEPRECIATION> 84,909
<TOTAL-ASSETS> 1,599,127
<CURRENT-LIABILITIES> 116,872
<BONDS> 0
0
0
<COMMON> 531
<OTHER-SE> 902,470
<TOTAL-LIABILITY-AND-EQUITY> 1,599,127
<SALES> 296,868
<TOTAL-REVENUES> 298,722
<CGS> 120,634
<TOTAL-COSTS> 120,634
<OTHER-EXPENSES> 82,132
<LOSS-PROVISION> 843
<INTEREST-EXPENSE> 6,839
<INCOME-PRETAX> 95,282
<INCOME-TAX> 38,669
<INCOME-CONTINUING> 56,613
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 56,613
<EPS-BASIC> 1.22
<EPS-DILUTED> 1.22
</TABLE>
