UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-13582
SPEEDWAY MOTORSPORTS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 51-0363307
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
U.S. Highway 29 North, Concord, North Carolina 28026
(Address of principal executive offices) (Zip Code)
(704) 455-3239
(Registrant's telephone number, including area code)
----------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes __X__ No _____
As of November 11, 1997, there were 41,401,267 shares of $0.01 par value common
stock outstanding.
<PAGE>
INDEX TO FORM 10-Q
PAGE
----
PART I - FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements 3
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 17
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 24
SIGNATURES 25
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
December 31, September 30,
1996 1997
------------ -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ...................... $ 22,252 $ 22,952
Restricted cash ................................ 14,624 4,215
Trade accounts receivable ...................... 11,919 21,061
Prepaid income taxes ........................... 4,784 --
Inventories (Note 4) ........................... 6,218 8,325
Speedway condominiums held for sale ........... 3,535 17,762
Prepaid expenses ............................... 526 556
-------- --------
Total current assets ......................... 63,858 74,871
-------- --------
PROPERTY AND EQUIPMENT, NET (Note 5) ............. 288,361 408,542
GOODWILL AND OTHER INTANGIBLE ASSETS (Note 7) .... 48,314 51,374
OTHER ASSETS:
Marketable equity securities ................... 2,447 1,862
Notes receivable (Note 8) ...................... 2,148 5,603
Other assets ................................... 4,156 10,061
-------- --------
Total other assets ........................... 8,751 17,526
-------- --------
TOTAL ...................................... $409,284 $552,313
======== ========
See notes to consolidated financial statements.
3
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
December 31, September 30,
1996 1997
------------ -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 6)... $ 383 $ 406
Accounts payable ............................... 11,363 7,345
Deferred race event income, net ................ 36,393 43,627
Income taxes payable ........................... -- 3,858
Accrued expenses and other liabilities.......... 12,075 11,382
-------- --------
Total current liabilities .................... 60,214 66,618
LONG-TERM DEBT (Note 6)........................... 115,247 218,566
PAYABLE TO AFFILIATED COMPANY (Note 8) ........... 2,603 2,603
DEFERRED INCOME, NET ............................. 9,732 14,038
DEFERRED INCOME TAXES ............................ 13,742 13,142
OTHER LIABILITIES ................................ 3,011 3,481
-------- --------
Total liabilities .......................... 204,549 318,448
-------- --------
COMMITMENTS (Note 5)..............................
STOCKHOLDERS' EQUITY (Note 3):
Preferred stock, $.10 par value, shares
authorized - 3,000,000, no shares issued ..... -- --
Common stock, $.01 par value, shares authorized
-- 200,000,000, issued and outstanding
-- 41,305,000 in 1996 and 41,381,000 in 1997 . 413 414
Additional paid-in capital ..................... 155,156 155,988
Retained earnings .............................. 49,348 77,621
Deduct:
Unrealized loss on marketable
equity securities .......................... (182) (158)
-------- --------
Total stockholders' equity ................. 204,735 233,865
-------- --------
TOTAL ...................................... $409,284 $552,313
======== ========
See notes to consolidated financial statements.
4
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands except per share amounts)
(Unaudited)
Three Months Ended
September 30,
-----------------------
1996 1997
-------- --------
REVENUES:
Admissions .................................... $ 6,296 $ 13,935
Event related revenue ......................... 4,511 9,093
Other operating revenue ....................... 2,698 3,356
-------- --------
Total revenues .......................... 13,505 26,384
-------- --------
OPERATING EXPENSES:
Direct expense of events ...................... 4,983 11,077
Other direct operating expense ................ 1,391 2,053
General and administrative .................... 4,586 7,893
Depreciation and amortization ................. 2,107 4,593
-------- --------
Total operating expenses ................ 13,067 25,616
-------- --------
OPERATING INCOME ................................ 438 768
INTEREST INCOME (EXPENSE) ....................... 369 (2,588)
OTHER INCOME .................................... 401 255
-------- --------
INCOME (LOSS) BEFORE INCOME TAXES ............... 1,208 (1,565)
INCOME TAX PROVISION (BENEFIT) .................. 523 (584)
-------- --------
NET INCOME (LOSS) ............................... $ 685 $ (981)
======== ========
PRIMARY EARNINGS (LOSS) PER SHARE AND COMMON
STOCK EQUIVALENTS ............................. $ 0.02 $ (0.02)
======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING
(Note 3) ...................................... 42,130 42,091
EARNINGS (LOSS) PER SHARE ASSUMING FULL
DILUTION ...................................... $ 0.02 $ (0.02)
======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING
(Note 3) ...................................... 44,508 44,470
See notes to consolidated financial statements.
5
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands except per share amounts)
(Unaudited)
Nine Months Ended
September 30,
------------------------
1996 1997
--------- ---------
REVENUES:
Admissions .................................... $ 33,602 $ 70,390
Event related revenue ......................... 23,551 64,210
Other operating revenue ....................... 9,498 11,378
--------- ---------
Total revenues .......................... 66,651 145,978
--------- ---------
OPERATING EXPENSES:
Direct expense of events ...................... 20,116 50,970
Other direct operating expense ................ 5,724 6,903
General and administrative .................... 13,208 23,685
Depreciation and amortization ................. 5,904 11,712
Preoperating expense of new facility (Note 1) -- 1,850
--------- ---------
Total operating expenses ................ 44,952 95,120
--------- ---------
OPERATING INCOME ................................ 21,699 50,858
INTEREST INCOME (EXPENSE), NET .................. 818 (2,970)
OTHER INCOME .................................... 1,367 277
--------- ---------
INCOME BEFORE INCOME TAXES ...................... 23,884 48,165
INCOME TAX PROVISION ............................ 9,520 19,892
--------- ---------
NET INCOME ...................................... $ 14,364 $ 28,273
========= =========
PRIMARY EARNINGS PER SHARE AND COMMON STOCK
EQUIVALENTS ................................... $ 0.35 $ 0.67
========= =========
WEIGHTED AVERAGE SHARES OUTSTANDING
(Note 3) ...................................... 41,046 42,093
EARNINGS PER SHARE ASSUMING FULL DILUTION ....... $ 0.33 $ 0.65
========= =========
WEIGHTED AVERAGE SHARES OUTSTANDING
(Note 3) ...................................... 43,424 44,471
See notes to consolidated financial statements.
6
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Dollars and shares in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Unrealized
Loss
Common Stock Additional on Marketable Total
------------------------ Paid-In Retained Equity Stockholders'
Shares Amount Capital Earnings Securities Equity
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE - DECEMBER 31, 1996 ..... 41,304 $ 413 $155,156 $ 49,348 $ (182) $204,735
Net income ...................... -- -- -- 28,273 -- 28,273
Issuances of stock under employee
stock purchase plan (Note 10) .. 7 -- 127 -- -- 127
Exercise of stock options ....... 70 1 705 -- -- 706
Net unrealized gain on marketable
equity securities .............. -- -- -- -- 24 24
-------- -------- -------- -------- -------- --------
BALANCE - SEPTEMBER 30, 1997 .... 41,381 $ 414 $155,988 $ 77,621 $ (158) $233,865
======== ======== ======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
7
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------
1996 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ........................................... $ 14,364 $ 28,273
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ................... 5,904 11,712
Equity in operations of equity method investee .. (85) 315
Gain on sale of marketable equity securities and
investments ..................................... (544) (186)
Amortization of deferred income ................. (206) (471)
Changes in operating assets and liabilities:
Restricted cash .............................. -- 10,409
Trade accounts receivable .................... 489 (1,433)
Inventories .................................. (904) (2,107)
Other current assets and liabilities ......... (1,551) (30)
Condominiums held for sale ................... (657) (14,227)
Prepaid and accrued income taxes ............. (2,742) 3,318
Accounts payable ............................. 5,027 (4,018)
Deferred race event income ................... 6,978 7,234
Accrued expenses and other liabilities ....... 290 1,249
Deferred income .............................. -- 4,777
Other assets and liabilities ................. 1,163 (777)
--------- ---------
Net cash provided by operating activities .. 27,526 44,038
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt ................. (32,848) (100,284)
Issuance of long-term debt ........................... 72,525 202,660
Payments of debt issuance costs ...................... -- (5,531)
Issuance of common stock to public ................... 78,354 --
Issuance of stock under employee stock purchase plan . -- 127
Exercise of stock options ............................ 723 706
--------- ---------
Net cash provided by financing activities .. 118,754 97,678
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................. (113,350) (130,680)
Purchases of marketable equity securities and
investments ......................................... (1,791) (412)
Proceeds from sales of marketable equity securities
and investments ..................................... 1,762 1,240
Purchase of Bristol Motor Speedway ................... (27,176) --
Purchase of Oil-Chem Research Corp. .................. (514) --
Increase in notes and other receivables .............. 287 (11,164)
--------- ---------
Net cash used in investing activities ...... (140,782) (141,016)
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS ............. 5,498 700
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ...... 10,132 22,252
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............ $ 15,630 $ 22,952
========= =========
</TABLE>
See notes to consolidated financial statements.
8
<PAGE>
The following Notes to Unaudited Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations, contain estimates and forward-looking statements as indicated herein
by use of such terms as "estimated", "anticipates", "approximate" or
"projected". Such statements reflect management's current views, are based on
certain assumptions and are subject to risks and uncertainties. No assurance can
be given that actual results or events will not differ materially from those
projected, estimated, assumed or anticipated in any such forward-looking
statements. Important factors that could cause actual results to differ from
those projected or estimated are discussed herein.
Notes to Unaudited Consolidated Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
These unaudited consolidated financial statements should be read in
conjunction with the consolidated financial statements of Speedway Motorsports,
Inc. for the fiscal year ended December 31, 1996 included in the Company's 1996
Annual Report on Form 10-K.
In management's opinion, these unaudited consolidated financial statements
contain all adjustments necessary for their fair presentation at interim
periods. All such adjustments are of a normal recurring nature.
The results of operations for interim periods are not necessarily
indicative of operating results that may be expected for the entire year due to
the seasonal aspect of event revenues.
The Company recognizes revenues and operating expenses for all events in
the calendar quarter in which the events are conducted except when a major
NASCAR racing event occurs at one of the Company's wholly-owned subsidiaries on
the last weekend of a calendar quarter ended March 31, June 30, or September 30
in which case the race event revenues and operating expenses are recognized
consistently in the immediately succeeding calendar quarter. The Company has
adopted this accounting policy to help ensure comparability between quarterly
financial statements. No major NASCAR racing events were held at wholly-owned
subsidiaries on the last weekend of the calendar quarters ended in fiscal 1997,
September 30, 1996 or June 30, 1996. As such, the reporting periods for the
three and nine months ended September 30, 1997 and 1996 are comparable.
Deferred Income - Deferred income includes Texas Motor Speedway (TMS)
Preferred Seat License (PSL) fee deposits of $8,402,000 and $12,927,000, net of
expenses of $843,000 and $1,023,000, at December 31, 1996 and September 30,
1997, respectively. See Note 2 to the December 31, 1996 Consolidated Financial
Statements for discussion of terms and conditions of the PSL's. Fees received
under PSL agreements were deferred prior to TMS hosting its first Winston Cup
race on April 6, 1997. The Company began amortizing net PSL fee revenues into
income over the estimated useful life of TMS's speedway facility upon its
opening. Amortization income recognized in the three and nine months ended
September 30, 1997 was $132,000 and $264,000, respectively.
Preoperating Expense Of New Facility -- Preoperating expenses consist of
non-recurring and non-event related costs to develop, organize and open the
Company's new superspeedway facility, Texas Motor Speedway, which hosted its
first racing event on April 6, 1997.
9
<PAGE>
Impact Of New Accounting Standards -- In February 1997, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
(SFAS) No. 128, "Earnings per Share". SFAS No. 128 specifies the computation,
presentation and disclosure requirements for earnings per share and is effective
for interim and annual periods ending after December 15, 1997. Under SFAS No.
128, the Company will compute and disclose both basic and diluted earnings per
share. Its adoption is not expected to significantly effect the Company's
computation, presentation and disclosure under current accounting standards.
In June 1997, SFAS No. 130 "Reporting Comprehensive Income" was issued
specifying that all components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. Adoption by the Company is not expected to result in
presentation of comprehensive income or financial statements significantly
different from that under current accounting standards for the foreseeable
future.
Reclassification - Certain prior year accounts were reclassified to conform
to current year presentation.
2. DESCRIPTION OF BUSINESS
The consolidated financial statements include the accounts of Speedway
Motorsports, Inc. (SMI), and its wholly-owned subsidiaries, Atlanta Motor
Speedway, Inc. (AMS), Bristol Motor Speedway, Inc. (BMS), Charlotte Motor
Speedway, Inc. and subsidiaries (CMS), Sears Point Raceway (SPR), Texas Motor
Speedway, Inc. (TMS), Oil-Chem Research Corp. and subsidiary (ORC), Speedway
Funding Corp. and Sonoma Funding Corp. (collectively, the Company).
AMS owns and operates a 1.5-mile lighted quad-oval, asphalt speedway
located on approximately 870 acres in Hampton, Georgia. Two major National
Association of Stock Car Auto Racing (NASCAR) Winston Cup events are held
annually, one in March and one in November. Additionally, a Busch Grand National
race and two Automobile Racing Club of America (ARCA) races are also held
annually, each preceding a Winston Cup event. All of these events are sanctioned
by NASCAR or ARCA. AMS has constructed 46 condominiums overlooking the Atlanta
speedway and is in the process of selling the nine remaining condominiums.
BMS owns and operates a one-half mile lighted, 36-degree banked concrete
oval speedway, and a one-quarter mile lighted dragstrip, located on
approximately 530 acres in Bristol, Tennessee. BMS currently holds two major
NASCAR Winston Cup events annually. Additionally, two Busch Grand National races
are held annually, each preceding a Winston Cup event. On January 22, 1996, the
Company acquired 100% of the outstanding capital stock of BMS for $27,176,000,
including direct acquisition costs of $146,000 (see Note 9).
CMS owns and operates a 1.5-mile lighted quad-oval, asphalt speedway
located in Concord, North Carolina. CMS stages three major NASCAR Winston Cup
events annually, two in May and one in October. Additionally, two Busch Grand
National and two ARCA races are held annually, each preceding a Winston Cup
event. In 1997, CMS hosted an International Race of Champions (IROC) race and an
Indy Racing League (IRL) racing event. All of these events are sanctioned by
NASCAR, IROC, IRL or ARCA. The Charlotte facility also
10
<PAGE>
includes a 2.25-mile road course, a one-quarter mile asphalt oval track, a
one-fifth mile asphalt oval track and a one-fifth mile dirt oval track, all of
which hold race events throughout the year. In addition, CMS has constructed 52
condominiums overlooking the main speedway, all of which have been sold.
CMS also owns an office and entertainment complex which overlooks the main
speedway. A wholly-owned subsidiary, The Speedway Club, Inc. (Speedway Club),
derives rental, catering and dining revenues from the complex.
SPR, located on approximately 800 acres in Sonoma, California, owns and
operates a 2.52-mile, twelve-turn road course, a one-quarter mile dragstrip, and
an 157,000 square foot industrial park. SPR currently holds one major
NASCAR-sanctioned Winston Cup racing event annually. Additional events held
annually include a NASCAR-sanctioned Craftsman Truck Series, a NHRA Winston Drag
Racing Series, as well as American Motorcycle Association and Sports Car Club of
America (SCCA), racing events. The racetrack is also rented throughout the year
by various organizations, including the SCCA, major automobile manufacturers,
and other car clubs. On November 18, 1996, the Company acquired certain assets
and the operations of Sears Point Raceway (see Notes 6 and 9).
TMS, located on 950 acres in Fort Worth, Texas, is a 1.5-mile lighted,
banked, asphalt quad-oval superspeedway. TMS construction was substantially
complete at March 31, 1997 with TMS hosting its first major NASCAR Winston Cup
race on April 6, 1997 preceded by a Busch Grand National race (see Note 5). In
June 1997, TMS also hosted a NASCAR-sanctioned Craftsman Truck Series event, an
IRL racing event, and two music concerts. Management is actively pursuing the
scheduling of additional motorsports racing and other events at TMS. Other
events will be announced as they are scheduled. In July 1996, TMS began
construction of 76 condominiums above turn-two overlooking the speedway, 70 of
which have been contracted for sale.
600 Racing, Inc., a wholly-owned subsidiary of CMS, developed, operates and
is the official sanctioning body of the Legends Circuit. 600 Racing also
manufactures and sells 5/8-scale cars (Legends Cars) modeled after older-style
coupes and sedans. In 1997, 600 Racing is releasing a new line of smaller-scale
cars (the Bandolero). Revenue is principally derived from the sale of vehicles
and vehicle parts.
ORC produces an environmentally friendly motor oil additive that the
Company intends to promote in conjunction with its speedways. On April 16, 1996,
the Company acquired 100% of the outstanding capital stock of ORC for $4,459,000
in Company stock and cash.
The Company's Chairman and CEO purchased approximately 24% of the
outstanding common stock of North Carolina Motor Speedway, Inc. (NCMS) in 1995.
The Chairman has offered to sell this stock to the Company at his cost. The
Company has declined to purchase the shares to date but may elect to do so in
the future. The Company submitted a merger proposal in April 1997 to the Board
of Directors of NCMS. The merger proposal consists of the purchase of all
outstanding NCMS capital stock for an aggregate of approximately $72 million in
cash or SMI common stock at the election of each NCMS stockholder. On July 7,
1997, the Company's merger proposal was recommended by a Special Committee of
the NCMS board of directors for approval by the NCMS board. On August 5, 1997,
the NCMS board of directors,
11
<PAGE>
however, rejected the Company's proposal. Subsequently, the Company's Chairman
and CEO filed a civil complaint against the directors of NCMS in his individual
capacity as a NCMS shareholder alleging, among other things, breach of director
duties.
In October 1996, the Company signed a joint management and development
agreement with Quad-Cities International Raceway Park. The Company will serve in
an advisory capacity for the development of a multi-use facility, which includes
a speedway located in northwest Illinois. The agreement also grants the Company
the option to purchase up to 40% equity ownership in the facility. The option
has not been exercised.
3. CAPITAL STRUCTURE, PUBLIC OFFERING OF COMMON STOCK AND PER SHARE DATA
Increase in Authorized Shares of Common Stock - On April 29, 1997, the
Company's Board of Directors and stockholders approved an increase in the
authorized common stock of SMI from 100,000,000 to 200,000,000 shares.
Stock Split - On February 9, 1996, the Company's Board of Directors
approved a two for one stock split for each share of the Company's common stock.
This stock split became effective March 15, 1996 in the form of a 100% common
stock dividend paid to stockholders of record on February 26, 1996. All shares
and per share information in the accompanying consolidated financial statements
take into account this stock split.
Public Offering of Common Stock - The Company completed an offering of
common stock on April 1, 1996 by issuing 3,000,000 shares of common stock at a
price of $27.625 per share. Net proceeds after offering expenses were
$78,354,000.
Per Share Data - For the three and nine month periods ended September 30,
1997, per share amounts reflect 42,091,000 and 42,093,000 weighted average
shares outstanding, including 762,000 and 779,000 common share equivalents
arising from stock options, during each respective period. For the three and
nine month periods ended September 30, 1996, per share amounts reflect
42,130,000 and 41,046,000 weighted average shares outstanding, including 858,000
and 878,000 common share equivalents arising from stock options, during each
respective period.
The computation of fully diluted net loss per share was antidilutive for
the three months ended September 30, 1997; therefore, the amounts reported for
primary and fully diluted net loss are the same. Fully diluted earnings per
share reflect the potential conversion of the subordinated convertible
debentures offered in October 1996 (see Note 6) as if fully converted on January
1, 1996, and the related interest expense on such debt not recorded in 1997 or
1996.
4. INVENTORIES
Inventories as of December 31, 1996 and September 30, 1997 consist of the
following components (dollars in thousands):
December 31, September 30,
1996 1997
------- -------
Souvenirs....................................... $ 2,359 $ 4,022
Finished vehicles, parts and accessories........ 3,753 4,133
Food and other.................................. 106 170
------- -------
Total $ 6,218 $ 8,325
======= =======
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5. PROPERTY AND EQUIPMENT - CONSTRUCTION IN PROGRESS
Texas Motor Speedway - In 1995, the Company began constructing TMS, a
1.5-mile, banked, asphalt quad-oval superspeedway, on a 950 acre site in Fort
Worth, Texas. Construction was substantially complete at March 31, 1997 with TMS
hosting its first major NASCAR Winston Cup race on April 6, 1997.
Construction In Progress - At September 30, 1997, the Company has various
construction projects underway to increase and improve grandstand seating
capacity, suites, facilities for fan amenities, and make various other site
improvements at AMS, BMS, CMS and SPR. In addition, AMS is converting its
speedway to a quad-oval configuration and changing the start-finish line
location in conjunction with the other improvements.
The estimated aggregate cost of capital expenditures in 1997, inclusive of
TMS, will approximate $155,000,000.
6. LONG-TERM DEBT
Bank Credit Facility Replacement - On August 4, 1997, the Company obtained,
from a syndicate of banks lead by NationsBank N.A., a long-term, unsecured,
senior revolving credit facility (the Credit Facility) with an overall borrowing
limit of $175,000,000 and a sub-limit of $10,000,000 for standby letters of
credit. The Credit Facility agreement replaces the Company's former credit
facility, which was repaid and retired with proceeds from the Senior Notes
described below. See Note 7 to the December 31, 1996 Consolidated Financial
Statements for discussion of the terms and conditions of the former credit
facility. At September 30, 1997, there were no outstanding borrowings under the
Credit Facility.
Interest will be based, at the Company's option, upon (i) LIBOR plus .5% to
1.125% or (ii) the greater of NationsBank's prime rate or the Federal fund rate
plus .5%. The margin applicable to LIBOR borrowings will be adjusted
periodically based upon certain ratios of funded debt to earnings before
interest, taxes, depreciation and amortization (EBITDA). The Credit Facility
will mature in August 2002 and is guaranteed by the Company's subsidiaries.
Although the Credit Facility is unsecured, the Company has agreed not to pledge
its assets to any third party. In addition, among other items, the Company must
meet certain financial covenants, including specified levels of net worth and
ratios of (i) debt to capitalization, (ii) debt to EBITDA, and (iii) earnings
before interest and taxes (EBIT) to interest expense. The Credit Facility also
contains certain limitations on cash expenditures to acquire additional motor
speedways without the consent of the lenders, and limits the Company's
consolidated capital expenditures to amounts not to exceed $125 million
annually, beginning for fiscal 1998, and $300 million in the aggregate over the
loan term. The Company also agreed to certain other limitations or prohibitions
concerning the incurrence of other indebtedness, transactions with affiliates,
guaranties, asset sales, investments, cash dividends to shareholders,
distributions and redemptions.
Senior Subordinated Notes - On August 4, 1997, the Company completed a
private placement of 8 1/2% senior subordinated notes (the Senior Notes) in the
aggregate principal amount of $125,000,000. The Senior Notes are unsecured,
mature in August 2007, and are redeemable at the Company's option after August
15, 2002. Interest payments are due semi-annually on February 15 and August 15
commencing February 15, 1998. The Senior Notes are
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<PAGE>
subordinated to all present and future senior secured indebtedness of the
Company, including the Credit Facility, and are guaranteed by the Company's
existing and future subsidiaries other than ORC. Redemption prices in fiscal
year periods ending August 15 are 104.25% in 2002, 102.83% in 2003, 101.42% in
2004 and 100% in 2005 and thereafter. The Company filed a registration statement
to register these notes during the third quarter of 1997. Net proceeds after
commissions and discounts were $121,548,000 which were used to retire and repay
then outstanding borrowings under the former credit facility, fund construction
costs and for working capital needs of the Company.
The Indenture governing the Senior Notes contains certain specified
restrictive and required financial covenants. The Company has agreed not to
pledge its assets to any third party except under certain limited circumstances.
The Company also has agreed to certain other limitations or prohibitions
concerning the incurrence of other indebtedness, capital stock, guaranties,
asset sales, investments, cash dividends to shareholders, distributions and
redemptions. The Indenture and Credit Facility agreements contain cross-default
provisions.
Convertible Subordinated Debentures - In October 1996, the Company issued 5
3/4% convertible subordinated debentures in the aggregate principal amount of
$74,000,000. The debentures are unsecured, mature on September 30, 2003, are
convertible into Common Stock at the holder's option after November 30, 1996 at
$31.11 per share until maturity, and are redeemable at the Company's option
after September 29, 2000. In conversion, 2,378,565 shares of common stock would
be issuable (see Note 3). Interest payments are due semi-annually on March 31
and September 30. See Note 7 to the December 31, 1996 Consolidated Financial
Statements for discussion of additional terms and conditions of the debentures.
Capital Lease Obligation And Purchase Option (Sears Point Raceway) - In
connection with the SPR asset acquisition by SMI on November 18, 1996, the
Company executed a 14 year capital lease with the seller for all of the real
property of the SPR complex. SMI has the option to purchase the real property
for $38.1 million during a six-month option period commencing November 1, 1999,
subject to acceleration at the election of the seller after March 31, 1997 and
through December 31, 1999 (the Purchase Option). SMI paid $3.5 million for the
Purchase Option and $3.0 million as a lease security deposit, and loaned the
seller approximately $13.45 million under a 4% promissory note receivable in
connection with the acquisition, with such amounts to be credited against the
purchase price of the real property upon exercise of the Purchase Option. In
management's opinion, it is probable that the Purchase Option will be exercised.
Because a legal right of offset exists under the lease obligation and note
receivable agreements, and because it is probable offset will occur upon
exercise of the Purchase Option, the note receivable of $13.45 million has been
netted against the capital lease obligation in the accompanying consolidated
balance sheets. See Note 7 to the December 31, 1996 Consolidated Financial
Statements for discussion of additional terms and conditions of the capital
lease obligation and Purchase Option.
7. INCOME TAXES
On October 31, 1997, the Company reached a final settlement with the
Internal Revenue Service (IRS) involving AMS liability, as the successor in
interest to BND, Inc. (BND), for deficient income taxes and interest related
14
<PAGE>
to BND's income tax returns for certain years. The IRS had alleged that, during
the acquisition of AMS in 1990, BND's merger into AMS, resulted in a taxable
gain to BND, and eliminated a net operating loss carryback to the tax return
filed for 1988. The settlement included taxes payable of approximately
$2,900,000 plus interest which have been reflected in the accompanying September
30, 1997 consolidated financial statements as an increase to goodwill arising
from the AMS acquisition and a charge to previously established accruals,
respectively.
8. RELATED PARTY TRANSACTIONS
Notes receivable at September 30, 1997 and December 31, 1996 include a note
receivable of $735,000 and $697,000, respectively, due from a partnership in
which the Company's Chairman and Chief Executive Officer is a partner. The note
bears interest at 1% over prime, is collateralized by certain partnership land
and is payable on demand. Because the Company does not anticipate repayment of
the note before September 30, 1998, the balance has been classified as a
noncurrent asset in the accompanying consolidated balance sheets.
Notes receivable also include a note receivable from the Company's Chairman
and Chief Executive Officer for $2,075,000 at September 30, 1997 and $1,131,000
at December 31, 1996. The principal balance of the note represents premiums paid
by the Company under a split-dollar life insurance trust arrangement on behalf
of the Chairman, in excess of cash surrender value. The note bears interest at
1% over prime.
Amounts payable to affiliated company of approximately $2,603,000 at
September 30, 1997 and December 31, 1996 represent acquisition and other
expenses paid on behalf of AMS by Sonic Financial Corporation in prior years. Of
such amounts, approximately $1.8 million bears interest at 3.83% per annum. The
remainder of the amount bears interest at 1% over prime. The entire account
balance is classified as long-term based on expected repayment dates.
9. BRISTOL MOTOR SPEEDWAY AND SEARS POINT RACEWAY ACQUISITIONS
As further described in Notes 1 and 17 of the December 31, 1996
Consolidated Financial Statements, the Company acquired Bristol Motor Speedway
on January 22, 1996 and Sears Point Raceway on November 18, 1996. The
acquisitions have been accounted for using the purchase method, and the results
of their operations after the acquisition dates are included in the Company's
consolidated statements of income. The purchase price has been allocated to the
assets and liabilities acquired at their appraised or estimated fair values at
acquisition date.
The following unaudited pro forma financial information presents a summary
of consolidated results of operations as if the transactions had occurred as of
January 1, 1996 after giving effect to certain adjustments, including
amortization of goodwill, interest expense on acquisition debt and related
income tax effects. The pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of what would have occurred
had the acquisitions been made on that date, nor are they necessarily indicative
of results which may occur in the future.
15
<PAGE>
Three Months Ended
------------------
September 30, 1996
(Pro forma)
-----------
Total revenues.............................. $14,839,000
Net income (loss)........................... 185,000
Net income per share........................ $0.00
===========
Nine Months Ended
-----------------
September 30, 1996
(Pro forma)
-----------
Total revenues.............................. $75,009,000
Net income ................................. 14,136,000
Net income per share........................ $0.34
===========
10. EMPLOYEE STOCK PURCHASE PLAN
Effective January 1, 1997, the Company's Board of Directors adopted the SMI
Employee Stock Purchase Plan to provide employees the opportunity to acquire
stock ownership. An aggregate total of 200,000 shares of common stock have been
reserved for purchase under the new plan. Each January 1, eligible employees
electing to participate will be granted an option to purchase shares of common
stock. Prior to each January 1, the Compensation Committee of the Board of
Directors determines the number of shares available for purchase under each
option, with the same number of shares to be available under each option granted
on the same grant date. No participant can be granted options to purchase more
than 500 shares in each calendar year, nor options which would allow an employee
to purchase stock under this or all other employee stock purchase plans in
excess of $25,000 of fair market value at the grant date in each calendar year.
The stock purchase price is 90% of the lesser of fair market value at grant date
or exercise date. Options granted may be exercised once at the end of each
calendar quarter, and will be automatically exercised to the extent of each
participant's contributions. Options granted that are unexercised will expire at
the end of each calendar year.
16
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements including the Notes thereto.
Overview
The Company derives revenues principally from the sale of tickets to
automobile races and other events held at each of its speedway facilities, from
the sale of food, beverages and souvenirs during such events, from the sale of
sponsorships to companies that desire to advertise or sell their products or
services at such events and from the licensing of television, cable network and
radio rights to broadcast such events. The Company has derived additional
revenue in recent years from the Speedway Club, a dining and entertainment
facility at CMS, and from Legends Car operations.
The Company classifies its revenues as admissions, event related revenues
and other operating revenue. "Admissions" includes ticket sales for all of the
Company's events. "Event related revenues" includes food and beverage and
souvenir sales, luxury suite rentals, sponsorship fees and broadcast right fees.
"Other operating revenue" includes the Speedway Club, Legends Car, SPR
industrial park rental and Oil-Chem revenues.
The Company classifies its expenses to include direct expense of events and
other direct operating expense, among other things. "Direct expense of events"
principally consists of race purses, sanctioning fees, cost of souvenir sales,
compensation of certain employees and advertising. "Other direct operating
expense" includes the cost of the Speedway Club and Legends Car sales, SPR
industrial park rentals and Oil-Chem revenues.
The Company's revenue items produce different operating margins.
Sponsorships, broadcast rights, ticket sales and luxury suite rentals produce
higher margins than concessions and souvenir sales, as well as Legends Car
sales.
The Company sponsors and promotes outdoor motorsports events. Weather
conditions affect sales of tickets, concessions and souvenirs, among other
things at these events. Although the Company sells tickets well in advance of
its events, poor weather conditions can have an effect on the Company's results
of operations.
Significant growth in the Company's revenues will depend on consistent
investment in facilities. In addition to several capital projects underway at
AMS, BMS, CMS and SPR, the construction of TMS was substantially completed with
the hosting of its first major NASCAR Winston Cup race on April 6, 1997.
The Company does not believe that its financial performance has been
materially affected by inflation. The Company has been able to mitigate the
effects of inflation by increasing prices.
Seasonality and Quarterly Results
The Company derived a substantial portion of its 1996 total revenues from
admissions and event-related revenue attributable to twelve major NASCAR-
17
<PAGE>
sanctioned races which are held in March, May, August, October and November. In
1997, the Company is hosting fifteen major NASCAR-sanctioned races, including a
major racing event at each of its new speedways, TMS and SPR, in April and May,
respectively. As a result, the Company's business has been, and is expected to
remain, seasonal. In 1995 and 1996, the Company's second and fourth quarters
accounted for approximately 80% and 75% of its total annual revenues, and
approximately 106% and 96%, respectively, of its total annual operating income.
The Company sometimes produces minimal operating income or operating losses
during its first and third quarters, when it sponsors only one NASCAR weekend,
including Winston Cup and Busch Grand National racing events, each quarter.
The results of operations for the three and nine months ended September 30,
1997 and 1996 are not indicative of the results that may be expected for the
entire year because of the seasonality discussed above.
Set forth below is certain comparative summary information with respect to
the Company's scheduled major NASCAR-sanctioned racing events for 1996 and 1997:
Number of scheduled major
NASCAR-sanctioned events
------------------------
1996 1997
---- ----
1st Quarter....................... 2 2
2nd Quarter....................... 5 8
3rd Quarter....................... 2 2
4th Quarter....................... 3 3
-- --
Total........................... 12 15
== ==
CHANGES IN RESULTS OF OPERATIONS
Three Months Ended September 30, 1997 Compared To Three Months Ended
September 30, 1996
Total Revenues. Total revenues for the three months ended September 30,
1997 increased by $12.9 million, or 95.4%, to $26.4 million, over such revenues
for the same year earlier period. This improvement was due to increases in all
revenue items, particularly admissions and event related revenues.
Admissions for the three months ended September 30, 1997 increased by
$7.6 million, or 121.3%, over admissions for the same year earlier period.
This increase was due primarily to growth in NASCAR sanctioned racing
events held at BMS, and to hosting an IRL racing event at CMS and a NHRA
Winston Drag Racing Series racing event at SPR, the Company's new speedway,
during the current quarter. The growth in admissions reflects the continued
increases in attendance, additions to permanent seating capacity and, to a
lesser extent, ticket prices.
Event related revenue for the three months ended September 30, 1997
increased by $4.6 million, or 101.6%, over such revenue for the same year
earlier period. The increase was due primarily to growth in attendance,
including related increases in concessions and souvenir sales, at BMS, and
to hosting an IRL racing event at CMS and a NHRA Winston Drag Racing Series
race event at SPR.
18
<PAGE>
Other operating revenue for the three months ended September 30, 1997
increased by $658,000, or 24.4%, over such revenue for the same year
earlier period. This increase was primarily attributable to operating
revenues derived from rental revenues of SPR, which was acquired in
November 1996, and to an increase in Legend Car and Oil-Chem revenues.
Direct Expense of Events. Direct expense of events for the three months
ended September 30, 1997 increased by $6.1 million, or 122.3%, over such expense
for the same year earlier period. This increase was due primarily to higher
operating costs associated with the growth in attendance and seating capacity at
BMS, and with hosting an IRL event at CMS and a NHRA Winston Drag Racing Series
race event at SPR, during the current quarter. As a percentage of admissions and
event related revenues combined, direct expense of events for the three months
ended September 30, 1997 was 48.1% compared to 46.1% for the same year earlier
period. Such increase, which was expected, results primarily from
proportionately higher operating expenses associated with hosting CMS's
inaugural IRL racing event, and at SPR, relative to operating margins
historically achieved at the Company's other speedways.
Other Direct Operating Expense. Other direct operating expense for the
three months ended September 30, 1997 increased by $662,000, or 47.6%, over such
expense for the same year earlier period. The increase occurred primarily due to
the expenses associated with the increase in other operating revenues derived
from SPR and Legend Cars.
General and Administrative. As a percentage of total revenues, general and
administrative expense decreased from 34.0% for the three months ended September
30, 1996 to 29.9% for the three months ended September 30, 1997. This
improvement reflects continuing scale efficiencies associated with revenue
increases outpacing increases in general and administrative expenses. General
and administrative expense for the three months ended September 30, 1997
increased by $3.3 million, or 72.1%, over such expense for the same year earlier
period. The increase was due primarily to general and administrative expenses
incurred during the three months ended September 30, 1997 by SPR, acquired in
November 1996, and at TMS.
Depreciation and Amortization. Depreciation and amortization expense for
the three months ended September 30, 1997 increased by $2.5 million, or 118.0%,
over such expense for the same year earlier period. This increase was due to
property and equipment of TMS placed into service upon hosting of its first
racing event in April 1997, to additions to property and equipment at AMS, BMS
and CMS, and from the property and equipment and goodwill and other intangible
assets related to the acquisition of SPR.
Operating Income. Operating income for the three month period ended
September 30, 1997 increased by $330,000, or 75.3%, over such income for the
same year earlier period. This increase was due to the factors discussed above.
Interest Income (Expense), Net. Interest expense, net for the three months
ended September 30, 1997 was $2.6 million compared to interest income, net for
the three months ended September 30, 1996 of $369,000. This change was due to
higher borrowings for construction funding and lower levels of cash invested in
the three months ended September 30, 1997 as compared to the same year earlier
period. The change was also due to capitalizing interest costs of $1.1 million
in the three months ended September 30, 1997 compared to
19
<PAGE>
$669,000 in the three months ended September 30, 1996.
Other Income. Other income for the three months ended September 30, 1997
was $255,000 compared to $401,000 for the same year earlier period. This change
was due to fewer gains recognized on sales of marketable equity securities
during the three months ended September 30, 1997 compared to the same year
earlier period.
Income Tax Provision (Benefit). The Company's effective income tax rate for
the three months ended September 30, 1997 and 1996 was 40%.
Net Income (Loss). Net loss for the three months ended September 30, 1997
was $981,000 compared to net income of $685,000 for the three months ended
September 30, 1996. This change was due to the factors discussed above.
Nine Months Ended September 30, 1997 Compared To Nine Months Ended September
30, 1996
Total Revenues. Total revenues for the nine months ended September 30, 1997
increased by $79.3 million, or 119.0%, to $146.0 million, over such revenues for
the same year earlier period. This improvement was due to increases in all
revenue items, particularly admissions and event related revenues.
Admissions for the nine months ended September 30, 1997 increased by
$36.8 million, or 109.5%, over admissions for the same year earlier period.
This increase was due primarily to hosting major NASCAR Winston Cup series
racing events at each of the Company's new speedways, TMS and SPR, to
hosting IRL racing events at TMS and CMS, to hosting a NASCAR Craftsman
Truck Series racing event at TMS, and to growth in NASCAR sanctioned racing
events held at AMS, BMS, and CMS during the current period. The growth in
admissions reflects the continued increases in attendance, additions to
permanent seating capacity and, to a lesser extent, ticket prices.
Event related revenue for the nine months ended September 30, 1997
increased by $40.7 million, or 172.6%, over such revenue for the same year
earlier period. The increase was due primarily to hosting major NASCAR
Winston Cup series racing events at the Company's new speedways, TMS and
SPR, to hosting IRL racing events at TMS and CMS, to hosting a NASCAR
Craftsman Truck Series racing event at TMS, to the growth in attendance,
including related increases in concessions and souvenir sales, and to
increases in broadcast rights and sponsorship fees.
Other operating revenue for the nine months ended September 30, 1997
increased by $1.9 million, or 19.8%, over such revenue for the same year
earlier period. This increase was primarily attributable to operating
revenues derived from Oil-Chem, and to rental revenues from SPR, which were
acquired in April and November 1996, respectively, and to an increase in
Legend Car and Speedway Club revenues.
Direct Expense of Events. Direct expense of events for the nine months
ended September 30, 1997 increased by $30.9 million, or 153.4%, over such
expense for the same year earlier period. This increase was due primarily to
hosting major NASCAR Winston Cup series racing events at TMS and SPR, IRL racing
events at TMS and CMS, and a NASCAR Craftsman Truck Series racing event at TMS,
to higher operating costs associated with the growth in
20
<PAGE>
attendance and seating capacity at AMS, BMS and CMS, and to increases in the
size of race purses required for NASCAR sanctioned racing events held during the
current period. As a percentage of admissions and event related revenues
combined, direct expense of events for the nine months ended September 30, 1997
was 37.9% compared to 35.2% for the same year earlier period. Such increase,
which was expected, results primarily from proportionately higher operating
expenses associated with TMS's inaugural race weekend, the inaugural IRL racing
events at TMS and CMS, and at SPR, relative to operating margins historically
achieved at the Company's other speedways.
Other Direct Operating Expense. Other direct operating expense for the nine
months ended September 30, 1997 increased by $1.2 million, or 20.6%, over such
expense for the same year earlier period. The increase occurred primarily due to
the expenses associated with the increase in other operating revenues derived
from SPR, Oil-Chem, Legend Cars and the Speedway Club.
General and Administrative. As a percentage of total revenues, general and
administrative expense decreased from 19.8% for the nine months ended September
30, 1996 to 16.2% for the nine months ended September 30, 1997. This improvement
reflects continuing scale efficiencies associated with revenue increases
outpacing increases in general and administrative expenses. General and
administrative expense for the nine months ended September 30, 1997 increased by
$10.5 million, or 79.3%, over such expense for the same year earlier period. The
increase was due primarily to general and administrative expenses incurred
during the nine months ended September 30, 1997 by Oil-Chem and SPR, acquired in
April 1996 and November 1996, respectively, and at TMS.
Depreciation and Amortization. Depreciation and amortization expense for
the nine months ended September 30, 1997 increased by $5.8 million, or 98.4%,
over such expense for the same year earlier period. This increase was due to
property and equipment of TMS placed into service upon hosting of its first
racing event in April 1997, to additions to property and equipment at AMS, BMS
and CMS, and from the property and equipment and goodwill and other intangible
assets related to the acquisitions of BMS and SPR.
Preoperating Expense Of New Facility. Preoperating expenses for the nine
months ended September 30, 1997 of $1.85 million consist of non-recurring and
non-event related costs to develop, organize and open TMS.
Operating Income. Operating income for the nine month period ended
September 30, 1997 increased by $29.2 million, or 134.4%, over such income for
the same year earlier period. This increase was due to the factors discussed
above.
Interest Income (Expense), Net. Interest expense, net for the nine months
ended September 30, 1997 was $3.0 million, compared to interest income, net for
the nine months ended September 30, 1996 of $818,000. This change was due to
higher borrowings for construction funding during the nine months ended
September 30, 1997 as compared to the same year earlier period. The change also
reflects the capitalizing of $4.6 million in interest costs incurred during the
nine months ended September 30, 1997 on TMS and other construction projects
compared to $1.2 million for the same year earlier period.
Other Income. Other income for the nine months ended September 30, 1997
21
<PAGE>
decreased by $1.1 million over such income for the same year earlier period.
This decrease was primarily due to fewer gains recognized on sales of marketable
equity securities during the nine months ended September 30, 1997 compared to
the same year earlier period. In addition, the decrease reflects recognition of
the Company's loss in equity method investee of $315,000 in the nine months
ended September 30, 1997 compared to equity income of $85,000 for the same year
earlier period. The decrease also reflects the expensing of unamortized debt
issuance costs of $242,000 in connection with replacing the bank Credit
Facility.
Income Tax Provision. The Company's effective income tax rate for the nine
months ended September 30, 1997 and 1996 was 41% and 40%, respectively.
Net Income. Net income for the nine months ended September 30, 1997
increased by $13.9 million, or 96.8%, compared to the nine months ended
September 30, 1996. This increase was due to the factors discussed above.
CHANGES IN FINANCIAL CONDITION AND LIQUIDITY
The Company has historically met its working capital and capital
expenditure requirements through a combination of cash flow from operations,
borrowings, particularly bank loans, and other debt and equity offerings. The
Company has expended significant amounts of cash in 1996 and in the first three
quarters of 1997 for the construction of TMS, the acquisitions of BMS and SPR,
and the improvement and expansion of AMS, BMS, and CMS. The Company's financial
condition and liquidity changed during the nine months ended September 30, 1997
principally due to:
(1) net cash generated by operations for the nine months ended September
30, 1997 amounting to $44.0 million;
(2) the Company increased its net long-term borrowings by $103.0 million
during the nine months ended September 30, 1997. In August 1997, the
Company received net cash proceeds of $121.5 million from the issuance of
the Senior Notes. Those proceeds were used to repay and retire the former
bank credit facility with then outstanding borrowings of $100.0 million and
provide additional working capital of $21.5 million; and
(3) the use of such funds for capital expenditures during the nine months
ended September 30, 1997 amounting to $130.7 million.
In August 1997, the Company obtained from NationsBank a long-term,
unsecured, senior revolving replacement credit facility with an overall
borrowing limit of $175,000,000. There were no outstanding borrowings under the
facility at September 30, 1997.
Company management anticipates that cash from operations and funds
available through the 1997 Credit Facility, will sustain the Company's operating
needs, including planned capital expenditures at its speedway facilities into
1998. Based upon the anticipated future growth and financing requirements of the
Company, management expects that the Company will, from time to time, engage in
additional financing of a character and in amounts to be determined. While the
Company expects to continue to generate positive cash flows from its existing
speedway operations, and has experienced improvement in its financial condition,
liquidity and credit availability,
22
<PAGE>
such resources, as well as possibly others, could be needed to fund the
Company's continued growth, including the continued expansion and improvement of
its speedway facilities.
Dividends
The Company does not anticipate paying any cash dividends in the
foreseeable future. Any decision concerning the payment of dividends on the
Common Stock will depend upon the results of operations, financial condition and
capital expenditure plans of the Company, as well as such factors as
permissibility under the Credit Facility, the Senior Notes and as the Board of
Directors, in its sole discretion, may consider relevant.
Capital Expenditures
Significant growth in the Company's revenues depends, in a large part, on
consistent investment in facilities. Therefore, the Company expects to continue
to make substantial capital expenditures. A variety of major capital projects
are underway. Construction of TMS was substantially completed upon hosting its
first major NASCAR Winston Cup race on April 6, 1997.
In 1997, at AMS, the Company expects to complete 58 new suites, add
approximately 22,000 permanent seats, and is converting AMS to a quad-oval
configuration, including changing the start-finish line location. In 1997, at
BMS, the Company expects to complete 31 net new suites, add approximately 39,000
permanent seats, and make other site improvements. In 1997, at CMS, the Company
expects to complete 26 new suites, add approximately 25,000 permanent seats, and
make other site improvements. In 1997, at SPR, the Company expects to complete
parking, road improvements, and grading to improve spectator sight lines, and to
increase and improve seating and amenity facilities for spectators and members
of the media. TMS has approximately 150,000 permanent seats and 194 suites. In
1997, after adding more than 236,000 seats, including the opening of TMS,
permanent seating capacity at all of the Company's speedways will exceed
520,000.
The estimated aggregate cost of capital expenditures in 1997, inclusive of
TMS, will approximate $155 million.
In addition to expansion and improvements of its existing speedway
facilities and business operations, the Company is continually evaluating new
opportunities that will add value for the Company's stockholders, including the
expansion and development of its existing Legends Cars and Oil-Chem products and
markets and the expansion into complementary businesses.
23
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27. Financial data schedule for the nine month period ended September
30, 1997.
(b) No reports were filed on Form 8-K during the fiscal quarter covered by
this Form 10-Q.
24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SPEEDWAY MOTORSPORTS, INC.
(Registrant)
Date: November 11, 1997 By: /s/ O. Bruton Smith
----------------- ---------------------------------
O. Bruton Smith
Chairman and Chief Executive Officer
Date: November 11, 1997 By: /s/ William R. Brooks
----------------- -----------------------------------
William R. Brooks
Vice President, Chief Financial
Officer, Treasurer and Director
25
<PAGE>
INDEX TO EXHIBITS TO
QUARTERLY REPORT ON FORM 10-Q FOR
SPEEDWAY MOTORSPORTS, INC.
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
27 Financial data schedule for the nine month period ended September 30,
1997.
26
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SPEEDWAY MOTORSPORTS, INC. FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 27,167
<SECURITIES> 1,862
<RECEIVABLES> 26,664
<ALLOWANCES> 0
<INVENTORY> 8,325
<CURRENT-ASSETS> 74,871
<PP&E> 408,542
<DEPRECIATION> 60,670
<TOTAL-ASSETS> 552,313
<CURRENT-LIABILITIES> 66,618
<BONDS> 218,566
0
0
<COMMON> 414
<OTHER-SE> 233,451
<TOTAL-LIABILITY-AND-EQUITY> 552,313
<SALES> 11,378
<TOTAL-REVENUES> 145,978
<CGS> 6,903
<TOTAL-COSTS> 95,120
<OTHER-EXPENSES> (277)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,970
<INCOME-PRETAX> 48,165
<INCOME-TAX> 19,892
<INCOME-CONTINUING> 28,273
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,273
<EPS-PRIMARY> .67
<EPS-DILUTED> .65
</TABLE>
