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 June 30, 2000
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 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 August 9, 2000, there were 41,654,809 shares of common stock outstanding.
<PAGE>
INDEX TO FORM 10-Q
PAGE
----
PART I - FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements - Unaudited 3
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 15
ITEM 3. Quantitative and Qualitative Disclosures About 21
Market Risk
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings 23
ITEM 4. Submission of Matters to a Vote of Security Holders 23
ITEM 6. Exhibits and Reports on Form 8-K 23
SIGNATURES 24
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
June 30, December 31,
2000 1999
----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ......................... $ 34,098 $ 56,270
Restricted cash ................................... 529 278
Accounts and notes receivable ..................... 32,068 28,695
Prepaid income taxes .............................. -- 4,137
Inventories ....................................... 17,430 15,287
Prepaid expenses .................................. 4,306 3,900
-------- --------
Total Current Assets ............................ 88,431 108,567
-------- --------
Property Held For Sale ............................. -- 53,254
Property and Equipment, Net ........................ 782,658 741,580
Goodwill and Other Intangible Assets, Net .......... 60,060 58,987
Other Assets:
Speedway condominiums held for sale ............... 4,733 5,359
Marketable equity securities ...................... 1,078 1,181
Notes receivable .................................. 28,620 13,018
Other assets ...................................... 13,616 14,036
-------- --------
Total Other Assets .............................. 48,047 33,594
-------- --------
TOTAL ........................................... $979,196 $995,982
======== ========
See notes to consolidated financial statements.
3
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
June 30, December 31,
2000 1999
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt ............. $ 160 $ 160
Accounts payable ................................. 14,393 17,771
Deferred race event income, net .................. 49,773 93,349
Accrued income taxes.............................. 25,440 --
Accrued interest ................................. 9,572 10,897
Accrued expenses and other liabilities............ 10,697 9,805
-------- --------
Total Current Liabilities ..................... 110,035 131,982
Long-Term Debt .................................... 418,156 458,400
Payable to Affiliates ............................. 4,115 4,320
Deferred Income, Net .............................. 14,445 15,262
Deferred Income Taxes ............................. 51,644 51,680
Other Liabilities ................................. 2,639 2,630
-------- --------
Total Liabilities ............................. 601,034 664,274
-------- --------
Commitments and Contingencies (Notes 4 and 9)......
STOCKHOLDERS' EQUITY:
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 - 41,655,000
in 2000 and 41,647,000 in 1999................... 416 416
Additional paid-in capital ....................... 160,392 160,225
Retained earnings ................................ 217,681 171,340
Accumulated other comprehensive loss - unrealized
loss on marketable equity securities ............ (327) (273)
-------- --------
Total Stockholders' Equity .................... 378,162 331,708
-------- --------
TOTAL ......................................... $979,196 $995,982
======== ========
See notes to consolidated financial statements.
4
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
(Unaudited)
Three Months Ended
------------------
June 30,
2000 1999
-------- -------
REVENUES:
Admissions ................................... $ 70,906 $ 63,051
Event related revenue ........................ 77,353 69,377
Other operating revenue ...................... 12,555 7,626
-------- --------
Total Revenues ............................ 160,814 140,054
-------- --------
OPERATING EXPENSES:
Direct expense of events ..................... 52,691 46,558
Other direct operating expense ............... 10,420 5,683
General and administrative ................... 13,129 11,518
Depreciation and amortization ................ 7,870 7,140
-------- --------
Total Operating Expenses .................. 84,110 70,899
-------- --------
OPERATING INCOME .............................. 76,704 69,155
Interest Expense, Net ......................... (6,778) (6,325)
Acquisition Loan Cost Amortization............. -- (1,135)
Other Income, Net ............................. 220 121
-------- --------
INCOME BEFORE INCOME TAXES .................... 70,146 61,816
Income Tax Provision .......................... 28,211 24,404
-------- --------
NET INCOME .................................... $ 41,935 $ 37,412
======== ========
PER SHARE DATA:
Basic Earnings Per Share .................... $ 1.01 $ 0.90
======== ========
Weighted Average Shares Outstanding ........ 41,656 41,549
Diluted Earnings Per Share .................. $ 0.95 $ 0.84
======== ========
Weighted Average Shares Outstanding ........ 44,714 44,993
See notes to consolidated financial statements.
5
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
(Unaudited)
Six Months Ended
-------------------
June 30,
2000 1999
------- -------
REVENUES:
Admissions ................................... $ 91,800 $ 82,877
Event related revenue ........................ 110,496 97,333
Other operating revenue ...................... 24,782 12,948
-------- --------
Total Revenues ............................ 227,078 193,158
-------- --------
OPERATING EXPENSES:
Direct expense of events ..................... 73,917 66,327
Other direct operating expense ............... 20,972 9,210
General and administrative ................... 26,253 22,318
Depreciation and amortization ................ 15,620 14,259
-------- --------
Total Operating Expenses .................. 136,762 112,114
-------- --------
OPERATING INCOME .............................. 90,316 81,044
Interest Expense, Net ......................... (13,251) (12,652)
Acquisition Loan Cost Amortization............. -- (3,398)
Other Income, Net ............................. 424 295
-------- --------
INCOME BEFORE INCOME TAXES .................... 77,489 65,289
Income Tax Provision .......................... 31,148 25,869
-------- --------
NET INCOME .................................... $ 46,341 $ 39,420
======== ========
PER SHARE DATA:
Basic Earnings Per Share .................... $ 1.11 $ 0.95
======== ========
Weighted Average Shares Outstanding ........ 41,652 41,528
Diluted Earnings Per Share .................. $ 1.06 $ 0.90
======== ========
Weighted Average Shares Outstanding ........ 44,788 44,932
See notes to consolidated financial statements.
6
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Accumulated Total
Common Stock Additional Other Stock-
------------- Paid-In Retained Comprehensive holders'
Shares Amount Capital Earnings Loss Equity
------ ------ ---------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE - JANUARY 1, 2000 .............. 41,647 $416 $160,225 $171,340 $(273) $331,708
Net income.............................. -- -- -- 46,341 -- 46,341
Issuance of stock under employee stock
purchase plan.......................... 8 -- 167 -- -- 167
Net unrealized loss on marketable
equity securities ..................... -- -- -- -- (54) (54)
------ ---- -------- -------- ------ --------
BALANCE - JUNE 30, 2000................. 41,655 $416 $160,392 $217,681 $(327) $378,162
====== ==== ======== ======== ===== ========
</TABLE>
See notes to consolidated financial statements.
7
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
-----------------
June 30,
2000 1999
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ........................................... $ 46,341 $ 39,420
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ..................... 15,620 14,259
Amortization of acquisition loan costs............. -- 3,398
Amortization of deferred income.................... (790) (748)
Changes in operating assets and liabilities:
Restricted cash.................................. (251) (347)
Accounts receivable.............................. (3,562) (34)
Prepaid and accrued income taxes................. 29,577 24,785
Inventories ..................................... (2,143) (1,663)
Condominiums held for sale....................... 626 (603)
Accounts payable................................. (3,378) 6,067
Deferred race event income....................... (43,576) (33,821)
Accrued expenses and other liabilities........... (433) 4,429
Deferred income.................................. (27) 247
Other assets and liabilities..................... (133) (638)
-------- --------
Net Cash Provided By Operating Activities ..... 37,871 54,751
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt.................. (40,062) (124,315)
Issuance of long-term debt............................ -- 128,750
Payment of debt issuance costs........................ (6,235)
Issuance of stock under employee stock purchase plan.. 167 410
Exercise of common stock options...................... -- 1,019
-------- --------
Net Cash Used By Financing Activities.......... (39,895) (371)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................. (55,693) (54,069)
Proceeds from sale of property held for sale.......... 40,000 --
Purchases of marketable equity securities and other
investments.......................................... (2,311) (716)
Proceeds from sales of marketable equity securities
and other investments................................ 15 532
Increase in notes and other receivables............... (3,233) (1,936)
Repayment of notes and other receivables.............. 1,074 2,160
-------- --------
Net Cash Used By Investing Activities.......... (20,148) (54,029)
-------- --------
Net Increase (Decrease) In Cash and Cash Equivalents... (22,172) 351
Cash and Cash Equivalents At Beginning Of Period....... 56,270 35,399
-------- --------
Cash and Cash Equivalents At End Of Period............. $ 34,098 $ 35,750
======== ========
SUPPLEMENTAL INFORMATION OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Increase in notes receivable for sale of property
held for sale - LVMS Industrial Park.............. $ 13,254 $ --
======== ========
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 "forward-looking" statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Words such as "expects", "anticipates",
"approximates", "believes", "estimates", "intends", and "hopes", and variations
of such words and similar expressions are intended to identify such
forward-looking statements. 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 result in such
differences, in addition to other factors noted with such forward-looking
statements, include those discussed in Exhibit 99.1 to the Company's 1999 Annual
Report on Form 10-K.
Notes to Unaudited Consolidated Financial Statements
----------------------------------------------------
1. 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 a/k/a Lowe's Motor Speedway at Charlotte (LMSC),
Las Vegas Motor Speedway LLC (LVMS), SPR Acquisition Corp. d/b/a Sears Point
Raceway (SPR), Texas Motor Speedway, Inc. (TMS), Speedway Systems LLC d/b/a
Finish Line Events and subsidiaries (FLE), Oil-Chem Research Corp. (ORC),
Speedway Media LLC d/b/a Racing Country USA (RCU), SoldUSA, Inc., and Speedway
Funding Corp. (collectively, the Company).
See Note 1 to the December 31, 1999 Consolidated Financial Statements for
further description of the Company's business operations, properties and
scheduled events.
Current Year Acquisition - In January 2000, the Company acquired certain
tangible and intangible assets and operations of Racing Country USA, a
nationally-syndicated radio show, for $2,000,000 in cash. The acquisition was
accounted for using the purchase method, and the results of operations after
acquisition are included in the Company's consolidated statements of income.
2. SIGNIFICANT ACCOUNTING POLICIES
These unaudited consolidated financial statements should be read in
conjunction with the Company's consolidated financial statements for the fiscal
year ended December 31, 1999 included in its 1999 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 nature of the Company's motorsports business.
9
<PAGE>
Revenue Recognition - The Company recognizes revenues and operating
expenses for all events in the calendar quarter in which conducted except for
major NASCAR racing events which occur on the last weekend of a calendar
quarter. When major NASCAR racing events occur on the last weekend of a calendar
quarter, the race event revenues and operating expenses are recognized in the
current or immediately succeeding calendar quarter that corresponds to the
calendar quarter of the prior year in which the same major NASCAR racing event
was conducted. The Company has adopted this accounting policy to help ensure
comparability and consistency between quarterly financial statements of
successive years.
A major NASCAR-sanctioned racing event occurred at BMS on the weekends of
March 25-26, 2000 and April 10-11, 1999. A major NASCAR-sanctioned racing event
occurred at TMS on the weekends of April 1-2, 2000 and March 27-28, 1999. Also,
a major NASCAR-sanctioned racing event occurred at SPR on the weekends of June
24-25, 2000 and June 26-27, 1999. Accordingly, the revenues and direct expenses
of these race events are recognized in the second quarter of both calendar
years, and the reporting periods are comparable.
Speedway Condominiums Held for Sale - The Company has constructed 46
condominiums at AMS and 76 condominiums at TMS, of which 42 and 70,
respectively, have been sold or contracted for sale as of June 30, 2000.
Speedway condominiums held for sale represent 4 condominiums at AMS and 6
condominiums at TMS which are substantially complete and are being marketed.
Deferred Financing Costs and Acquisition Loan Cost Amortization - Deferred
financing costs are included in other noncurrent assets and are amortized over
the term of the related debt. Acquisition loan cost amortization resulted from
financing costs incurred in obtaining an amended credit facility and acquisition
loan to fund the Company's acquisition of LVMS in December 1998. Associated
deferred financing costs of $4,050,000 were amortized over the loan term which
matured May 28, 1999.
3. INVENTORIES
Inventories as of June 30, 2000 and December 31, 1999 consisted of the
following components (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
--------- -----------
<S> <C> <C>
Souvenirs and apparel................................... $10,377 $ 8,490
Finished vehicles, parts and accessories................ 4,772 4,310
Oil additives, food and other........................... 2,281 2,487
------- -------
Total................................................ $17,430 $15,287
======= =======
</TABLE>
4. PROPERTY AND EQUIPMENT AND PROPERTY HELD FOR SALE
Construction In Progress - At June 30, 2000, the Company had various
construction projects underway to increase and improve facilities for fan
amenities, and make various other site improvements at each of its speedways.
Construction of 4/10-mile, modern, lighted, dirt track facilities at LMSC and
TMS was substantially completed, with the hosting of inaugural,
nationally-televised World of Outlaws (WOO) and Hav-A-Tampa Dirt Late Model
(HAT) Series racing events, in the current quarter. Construction of The Strip at
Las Vegas, a "state-of-the-art" dragway with permanent grandstand seating,
luxury suites, and extensive fan amenities and facilities was substantially
completed, with the hosting of its inaugural National Hot Rod
10
<PAGE>
Association (NHRA)-sanctioned Nationals racing event, in April 2000. The
estimated aggregate cost of capital expenditures in 2000 will approximate
$90,000,000.
Property Held For Sale - In January 2000, the Company sold the 1.4 million
square-foot Las Vegas Industrial Park and 280 acres of undeveloped land to Las
Vegas Industrial Park, LLC, an entity owned by the Company's Chairman and Chief
Executive Officer, for approximately $53.3 million (see Note 7). The Company
acquired the industrial park then under construction and land in connection with
its acquisition of LVMS in December 1998. Construction was completed and rental
operations commenced in 1999. The sales price was based on an independent fair
value appraisal and approximates the Company's net carrying value as of December
31, 1999 and selling costs.
5. LONG-TERM DEBT
Bank Credit Facility -- The Company has a long-term, secured, senior
revolving credit facility with a syndicate of banks led by NationsBank, N.A. as
an agent and lender (the Credit Facility). The Credit Facility has an overall
borrowing limit of $250,000,000, with a sub-limit of $10,000,000 for standby
letters of credit, matures in May 2004, and is secured by a pledge of the
capital stock and other equity interests of all material Company subsidiaries.
Interest is based, at the Company's option, upon (i) LIBOR plus .5% to 1.25% or
(ii) the greater of NationsBank's prime rate or the Federal Funds rate plus .5%.
At June 30, 2000 and December 31, 1999, the Company had $90,000,000 and
$130,000,000, respectively, in outstanding borrowings under the Credit Facility.
Senior Subordinated Notes - At June 30, 2000 and December 31, 1999, the
Company had outstanding 8 1/2% senior subordinated notes in the aggregate
principal amount of $250,000,000 (the Senior Notes). The Senior Notes are
unsecured, mature in August 2007, and are redeemable at the Company's option
after August 15, 2002. Semi-annual interest payments are due February 15 and
August 15.
Convertible Subordinated Debentures - At June 30, 2000 and December 31,
1999, the Company had outstanding 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 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
are issuable (see Note 6). Semi-annual interest payments are due March 31 and
September 30.
See Note 5 to the December 31, 1999 Consolidated Financial Statements for
additional discussion of the terms and conditions of the bank credit facility,
senior subordinated notes and convertible subordinated debentures.
Interest Expense - Interest expense, net for the three months ended June
30, 2000 and 1999 includes interest expense of $7,734,000 and $6,969,000, and
interest income of $956,000 and $644,000. The Company capitalized interest costs
of $784,000 and $1,466,000 during the three months ended June 30, 2000 and 1999.
The weighted-average interest rate on borrowings under the bank revolving credit
facility during the three months ended June 30, 2000 and 1999 was 7.6% and 6.2%.
11
<PAGE>
Interest expense, net for the six months ended June 30, 2000 and 1999
includes interest expense of $15,314,000 and $14,006,000, and interest income of
$2,063,000 and $1,354,000. The Company capitalized interest costs of $1,797,000
and $2,409,000 during the six months ended June 30, 2000 and 1999. The
weighted-average interest rate on borrowings under bank revolving credit
facilities during the six months ended June 30, 2000 and 1999 was 7.4% and 6.3%.
6. PER SHARE DATA
Diluted earnings per share assumes conversion of the convertible debentures
into common stock and elimination of associated interest expense, net of taxes,
on such debt (see Note 5). The following schedule reconciles basic and diluted
earnings per share(dollars and shares in thousands):
<TABLE>
<CAPTION>
Weighted
Average Earnings
Three Months Ended: Net Income Shares Per Share
------------------- ---------- -------- ---------
June 30, 2000:
<S> <C> <C> <C>
Basic earnings per share................... $41,935 41,656 $1.01
Dilution adjustments:
Common stock equivalents - stock options. -- 679
5 3/4% Convertible debentures ........... 578 2,379
------- ------
Diluted earnings per share................. $42,513 44,714 $0.95
======= ======
June 30, 1999:
Basic earnings per share................... $37,412 41,549 $0.90
Dilution adjustments:
Common stock equivalents - stock options. -- 1,065
5 3/4% Convertible debentures ........... 524 2,379
------- ------
Diluted earnings per share................. $37,936 44,993 $0.84
======= ======
Six Months Ended:
-----------------
June 30, 2000:
Basic earnings per share................... $46,341 41,652 $1.11
Dilution adjustments:
Common stock equivalents - stock options. -- 757
5 3/4% Convertible debentures ........... 1,140 2,379
------- ------
Diluted earnings per share................. $47,481 44,788 $1.06
======= ======
June 30, 1999:
Basic earnings per share................... $39,420 41,528 $0.95
Dilution adjustments:
Common stock equivalents - stock options. -- 1,025
5 3/4% Convertible debentures ........... 1,087 2,379
------- ------
Diluted earnings per share................. $40,507 44,932 $0.90
======= ======
</TABLE>
7. RELATED PARTY TRANSACTIONS
Notes receivable at June 30, 2000 and December 31, 1999 include a note
receivable of $873,000 and $848,000, 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 June 30, 2001, 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 $2,497,000 at June 30, 2000 and
12
<PAGE>
$2,103,000 at December 31, 1999. The principal balance of the note represents
primarily 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 and is payable upon demand. Because the
Company does not anticipate repayment of the note before June 30, 2001, the
balance has been classified as a noncurrent asset in the accompanying
consolidated balance sheets.
Notes receivable at June 30, 2000 include a note receivable of $14,781,000,
including accrued interest, due from Las Vegas Industrial Park, LLC, an entity
owned by the Company's Chairman and Chief Executive Officer. In January 2000,
the Company sold the 1.4 million square-foot Las Vegas Industrial Park and 280
acres of undeveloped land to Las Vegas Industrial Park, LLC for approximately
$53.3 million paid in cash of $40.0 million and a note receivable of $13.3
million. The note bears interest at LIBOR plus 2.00%, is payable upon demand,
and is collateralized by the underlying sold property. Because the Company does
not anticipate repayment of the note before June 30, 2001, the balance has been
classified as a noncurrent asset in the accompanying consolidated balance sheet.
From time to time, the Company paid certain expenses and made cash advances
for various corporate purposes on behalf of Sonic Financial Corp. (Sonic
Financial), an affiliate of the Company through common ownership. There were no
amounts outstanding due from Sonic Financial at June 30, 2000 and December 31,
1999.
Amounts payable to affiliates at June 30, 2000 and December 31, 1999
includes $2,592,000 for acquisition and other expenses paid on behalf of AMS by
Sonic Financial prior to 1996. Of this amount, approximately $1,800,000 bears
interest at 3.83% per annum. The remainder of the amount bears interest at 1%
over prime. The entire amount is classified as long-term based on expected
repayment dates. Amounts payable to affiliates at June 30, 2000 and December 31,
1999 also include $1,531,000 and $1,729,000 owed to a former LVMS shareholder
and executive officer, who is now a LVMS employee, in equal monthly payments
through December 2003 at 6.4% imputed interest.
8. STOCK OPTION PLANS
1994 Stock Option Plan - In 2000, the Company granted options to
non-executive officer employees to purchase an aggregate of 140,000 and 89,000
shares at exercise prices per share of $33.81 and $24.38, respectively, at award
dates under the 1994 Stock Option Plan.
Formula Stock Option Plan - In 2000, the Company granted options to three
outside directors to purchase an aggregate of 60,000 shares at an exercise price
per share of $27.13 at award date under the Formula Stock Option Plan.
9. LEGAL PROCEEDINGS AND CONTINGENCIES
In May 2000, SMI settled three wrongful death lawsuits arising from the May
1, 1999 on-track accident during an IRL event at LMSC causing race car debris to
enter the spectator seating area. Three deaths resulted, and all three
decedents' estates filed separate wrongful death lawsuits against SMI, IRL and
others in the Superior Court of Mecklenburg County, North Carolina. The Estate
of Dexter Mobley lawsuit was filed on May 28, 1999, and the Estates of Randy
Pyatte and Jeffrey Patton lawsuits were filed on August 26,
13
<PAGE>
1999. These suits sought unspecified compensatory and punitive damages. This
settlement had no material adverse affect on the Company's financial position or
results of operations.
On May 20, 2000, near the end of a NASCAR-sanctioned event hosted at LMSC,
a portion of a pedestrian bridge leading from its track facility to a parking
area failed. In excess of 100 people were injured to varying degrees.
Preliminary investigations indicate the failure was the result of excessive
interior corrosion resulting from improperly manufactured bridge components. At
this time, all personal injury claims resulting from this incident are being
handled by the bridge's manufacturer, Tindall Corporation, and its insurer. On
May 31, 2000, a lawsuit resulting from this incident was filed in the Superior
Court of Rowan County, North Carolina on behalf of seven plaintiffs. This
lawsuit, styled Kenneth Brown, Sandra Melton, Robert Melton,Jr., Robert Melton,
Cammie Yarborough, Charles Yarborough, Charles Yarborough and Alexandria
Yarborough v. Speedway Motorsports, Inc. and Tindall Corporation, seeks
unspecified compensatory and punitive damages. SMI has filed an answer to this
action, and preliminary discovery is underway. SMI intends to defend itself and
denies the allegation of negligence as well as related claims for punitive
damages. Management does not believe the outcome of this lawsuit or this
incident will have a material adverse affect on the Company's financial position
or future results of operations.
10. SUMMARIZED PARENT COMPANY ONLY FINANCIAL INFORMATION
The following table presents summarized parent company only financial
information as of June 30, 2000 and December 31, 1999 and for the three and six
months ended June 30, 2000 and 1999 (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------- -----------
<S> <C> <C>
Current assets........................................... $ 16,506 $ 43,842
Noncurrent assets, including investment in and advances
to subsidiaries, net................................... 859,266 796,896
Total Assets............................................. 875,772 840,738
Current liabilities...................................... 42,962 14,172
Noncurrent liabilities................................... 454,648 494,858
Total Liabilities ....................................... 497,610 509,030
Total Stockholders' Equity............................... $378,162 $331,708
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
June 30,
-------------------
2000 1999
------ -----
<S> <C> <C>
Total revenues .......................................... $ 1,798 $ 869
Total expenses........................................... (1,886) (2,734)
Income (loss) from operations............................ (88) (1,865)
Net income (loss) before equity in subsidiaries.......... (53) (1,119)
Net income .............................................. $41,935 $37,412
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------
2000 1999
------ ------
<S> <C> <C>
Total revenues .......................................... $ 3,685 $ 1,705
Total expenses........................................... (5,870) (5,469)
Loss from operations..................................... (2,185) (3,764)
Net loss before equity in subsidiaries................... (1,311) (2,258)
Net income .............................................. $46,341 $39,420
</TABLE>
14
<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 its speedway facilities, from the sale
of food, beverage 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 derives additional revenue
from The Speedway Club at LMSC and The Texas Motor Speedway Club, dining and
entertainment facilities located at the respective speedways, and from Legends
Car operations of 600 Racing, Inc., a wholly-owned subsidiary of LMSC. The
Company also derives additional revenue from Motorsports By Mail LLC (MBM), a
wholesale and retail distributor of racing and other sports related souvenir
merchandise and apparel, from Oil-Chem, which produces environmentally friendly
motor oil additives, from Racing Country USA, a nationally syndicated radio
show, from SoldUSA, an internet auction and e-commerce company under
development, and from Wild Man Industries (WMI), a screen printing and
embroidery manufacturer and distributor of wholesale and retail apparel. MBM is
a wholly-owned subsidiary of FLE, and WMI is a division of FLE.
The Company classifies its revenues as admissions, event related revenue
and other operating revenue. "Admissions" includes ticket sales for all of the
Company's events. "Event related revenue" includes food, beverage and souvenir
sales, luxury suite rentals, sponsorship fees and broadcast rights fees. "Other
operating revenue" includes the two Speedway Clubs, Legends Car, industrial park
rental, MBM, Oil-Chem, SoldUSA and WMI 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, Oil-Chem sales or other operating
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 food, beverage
and souvenir sales, compensation of certain employees and advertising. "Other
direct operating expense" includes the cost of Speedway Club revenues, Legends
Car sales, and industrial park rentals, MBM, Oil-Chem, SoldUSA and WMI revenues.
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 larger 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. The Company has several capital projects underway at
each of its speedways.
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
In 1999, the Company derived a substantial portion of its total revenues
from admissions and event related revenue attributable to 17 major
NASCAR-sanctioned racing events, five Indy Racing Northern Light Series (IRL)
racing events, four NASCAR Craftsman Truck Series racing events, two major NHRA
racing events, and two WOO racing events. In 2000, the Company currently will
sponsor 17 major annual
15
<PAGE>
racing events sanctioned by NASCAR, including ten Winston Cup and seven Busch
Grand National Series racing events. The Company will also sponsor four IRL
racing events, two NASCAR Craftsman Truck Series racing events, three major NHRA
racing events, and seven WOO racing events in 2000. As a result, the Company's
business has been, and is expected to remain, highly seasonal.
In 1999 and 1998, the Company's second and fourth quarters accounted for
68% and 74%, respectively, of its total annual revenues and 80% and 97%,
respectively, of its total annual operating income. The Company sometimes
produces minimal operating income or losses during its third quarter when it
hosts only one major NASCAR race weekend. The concentration of racing events in
the second quarter, and the growth in the Company's operations with attendant
increases in overhead expenses, will tend to increase operating losses or
minimize operating income in future first and third quarters.
Also, racing schedules may be changed from time to time and can lessen the
comparability of operating results between quarters of successive years and
increase or decrease the seasonal nature of the Company's motorsports business.
The results of operations for the three and six months ended June 30, 2000
and 1999 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 2000 and 1999:
Number of scheduled major
NASCAR-sanctioned events
------------------------
2000 1999
---- ----
1st Quarter....................... 4 4
2nd Quarter....................... 8 8
3rd Quarter....................... 2 2
4th Quarter....................... 3 3
-- --
Total........................... 17 17
== ==
RESULTS OF OPERATIONS
LVMS hosted an Indy Racing Northern Light Series racing event in the second
quarter of 2000 which was held in the third quarter of 1999. Also in the second
quarter of 2000, LVMS hosted an inaugural NHRA-sanctioned Nationals racing
event, and BMS, LMSC and TMS hosted inaugural World of Outlaws and Hav-A-Tampa
Dirt Late Model Series racing events.
Three Months Ended June 30, 2000 Compared To Three Months Ended June 30, 1999
Total Revenues. Total revenues for the three months ended June 30, 2000
increased by $20.8 million, or 14.8%, to $160.8 million, over such revenues for
the same period in 1999. This improvement was due to increases in all revenue
items, particularly admissions and event related revenue.
Admissions. Admissions for the three months ended June 30, 2000 increased
by $7.9 million, or 12.5%, over admissions for the same period in 1999. This
increase was due to growth in NASCAR-sanctioned racing events, and to hosting
inaugural World of Outlaws and Hav-A-Tampa Dirt Late Model Series racing events
at BMS, LMSC, and TMS, in the current quarter. The growth in admissions at
NASCAR-sanctioned racing events reflects the continued increases in attendance
and additions to permanent seating capacity, and to a lesser extent, increases
in ticket prices.
Event Related Revenue. Event related revenue for the three months ended
June 30, 2000 increased by $8.0 million, or 11.5%, over such revenue for the
same period in 1999. This increase was due primarily to increases in broadcast
rights and
16
<PAGE>
sponsorship fees for NASCAR-sanctioned racing events. The increase was also due
to LVMS hosting an inaugural NHRA-sanctioned Nationals racing event and an IRL
racing event in the current quarter which was held in the third quarter of 1999.
The increase also reflects the hosting of new WOO and HAT racing events at BMS,
LMSC, and TMS, and the growth in attendance, including related increases in
concessions and souvenir sales.
Other Operating Revenue. Other operating revenue for the three months ended
June 30, 2000 increased by $4.9 million, or 64.6%, over such revenue for the
same period in 1999. This increase was due to growth in revenues of Oil-Chem
associated with the commencement of media and other promotional campaigns. The
increase was also attributable to revenues derived from the LMSC and TMS
Speedway Clubs, and from apparel and other merchandise sold through outside
venues of MBM, which was acquired in July 1999.
Direct Expense of Events. Direct expense of events for the three months
ended June 30, 2000 increased by $6.1 million, or 13.2%, over such expense for
the same period in 1999. This increase was due to higher race purses and
sanctioning fees required for NASCAR-sanctioned racing events, and to LVMS
hosting a new NHRA-sanctioned Nationals racing event and an IRL racing event in
the current quarter which was held in the third quarter of 1999. The increase
also reflects the hosting of new WOO and HAT racing events at BMS, LMSC, and
TMS, and the increased operating costs associated with the growth in attendance,
including related increases in concessions and souvenir sales.
As a percentage of admissions and event related revenues combined, direct
expense of events for the three months ended June 30, 2000 was 35.5% compared to
35.2% for the same period in 1999. Such increase results primarily from
proportionately higher operating expenses associated with hosting NHRA, IRL, WOO
and HAT racing events relative to operating margins historically achieved with
NASCAR-sanctioned events.
Other Direct Operating Expense. Other direct operating expense for the
three months ended June 30, 2000 increased by $4.7 million, or 83.4%, over such
expense for the same period in 1999. This increase includes expenses associated
with commencement of Oil-Chem's media and other promotional campaigns. The
increase also includes expenses associated with other operating revenues derived
from the LMSC and TMS Speedway Clubs, and from apparel and other merchandise
sold through outside venues of MBM.
General and Administrative. General and administrative expense for the
three months ended June 30, 2000 increased by $1.6 million, or 14.0%, over such
expense for the same period in 1999. This increase was attributable to increases
in operating costs associated with the growth and expansion at the Company's
speedways and operations. As a percentage of total revenues, general and
administrative expense for the three months ended June 30, 2000 and 1999 was
8.2%.
Depreciation and Amortization. Depreciation and amortization expense for
the three months ended June 30, 2000 increased by $730,000, or 10.2%, over such
expense for the same period in 1999. This increase results primarily from
additions to property and equipment at the Company's speedways. The overall
increase was offset by depreciation in the same period of 1999 on certain LVMS
property which was sold in January 2000.
Operating Income. Operating income for the three months ended June 30, 2000
increased by $7.5 million, or 10.9%, over such income for 1999. This increase
was due to the factors discussed above.
Interest Expense, Net. Interest expense, net for the three months ended
June 30, 2000 was $6.8 million compared to $6.3 million for the same period in
1999. This increase was due primarily to higher interest rates on the revolving
Credit Facility and the Senior Subordinated Notes issued in May 1999. Those
increases were offset by a reduction in outstanding borrowings under the Credit
Facility during the current
17
<PAGE>
period.
Acquisition Loan Cost Amortization. Acquisition loan cost amortization of
$1.1 million for the three months ended June 30, 1999 represents financing costs
incurred in obtaining interim financing to fund the LVMS acquisition. Associated
deferred financing costs of $4.1 million were amortized over the loan term which
matured May 28, 1999.
Other Income. Other income for the three months ended June 30, 2000
increased by $99,000 over such income for the same period in 1999. This increase
was due primarily to larger gains recognized on sales of marketable equity
securities and other investments in the three months ended June 30, 2000
compared to the same period in 1999.
Income Tax Provision. The Company's effective income tax rate for the three
months ended June 30, 2000 and 1999 was 40% and 39%, respectively.
Net Income. Net income for the three months ended June 30, 2000 increased
by $4.5 million, or 12.1%, over such income for the same period in 1999. This
increase was due to the factors discussed above.
Six Months Ended June 30, 2000 Compared To Six Months Ended June 30, 1999
Total Revenues. Total revenues for the six months ended June 30, 2000
increased by $33.9 million, or 17.6%, to $227.1 million, over such revenues for
the same period in 1999. This improvement was due to increases in all revenue
items.
Admissions. Admissions for the six months ended June 30, 2000 increased by
$8.9 million, or 10.8%, over admissions for the same period in 1999. This
increase was due to growth in NASCAR-sanctioned racing events, and to hosting
inaugural WOO and HAT racing events at BMS, LMSC, and TMS, in the current
period. The growth in admissions at NASCAR-sanctioned racing events reflects the
continued increases in attendance and additions to permanent seating capacity,
and to a lesser extent, increases in ticket prices.
Event Related Revenue. Event related revenue for the six months ended June
30, 2000 increased by $13.2 million, or 13.5%, over such revenue for the same
period in 1999. This increase was due primarily to increases in broadcast rights
and sponsorship fees for NASCAR-sanctioned racing events. The increase was also
due to LVMS hosting an inaugural NHRA-sanctioned Nationals racing event and an
IRL racing event in the second quarter of 2000 which was held in the third
quarter of 1999. The increase also reflects the hosting of new WOO and HAT
racing events at BMS, LMSC, and TMS, and the growth in attendance, including
related increases in concessions and souvenir sales.
Other Operating Revenue. Other operating revenue for the six months ended
June 30, 2000 increased by $11.8 million, or 91.4%, over such revenue for the
same period in 1999. This increase was due to growth in revenues of Oil-Chem
associated with the commencement of media and other promotional campaigns. The
increase was also attributable to revenues derived from the LMSC Speedway Club,
TMS Speedway Club, which opened March 26, 1999, and from apparel and other
merchandise sold through outside venues, including MBM, which was acquired in
July 1999, and WMI.
Direct Expense of Events. Direct expense of events for the six months ended
June 30, 2000 increased by $7.6 million, or 11.4%, over such expense for the
same period in 1999. This increase was due to higher race purses and sanctioning
fees required for NASCAR-sanctioned racing events held during the current
period, and to LVMS hosting a new NHRA racing event and an IRL racing event in
the second quarter of 2000 which was held in the third quarter of 1999. The
increase also reflects the hosting of new WOO and HAT racing events at BMS,
LMSC, and TMS, and the increased operating costs associated with the growth in
attendance, including related increases in concessions and souvenir sales. As a
percentage of admissions and event
18
<PAGE>
related revenues combined, direct expense of events for the six months ended
June 30, 2000 was 36.5% compared to 36.8% for the same period in 1999.
Other Direct Operating Expense. Other direct operating expense for the six
months ended June 30, 2000 increased by $11.8 million, or 127.7%, over such
expense for the same period in 1999. This increase includes expenses associated
with commencement of Oil-Chem's media and other promotional campaigns. The
increase also includes expenses associated with other operating revenues derived
from apparel and other merchandise sold through outside venues of MBM, with the
increase in Oil-Chem revenues, and from the LMSC and TMS Speedway Clubs.
General and Administrative. General and administrative expense for the six
months ended June 30, 2000 increased by $3.9 million, or 17.6%, over such
expense for the same period in 1999. The increase was attributable to increases
in operating costs associated with the growth and expansion at the Company's
speedways. The increase also reflects the operating costs associated with The
Texas Motor Speedway Club which opened in March 1999. As a percentage of total
revenues, general and administrative expense for the six months ended June 30,
2000 and 1999 was 11.6%.
Depreciation and Amortization. Depreciation and amortization expense for
the six months ended June 30, 2000 increased by $1.4 million, or 9.5%, over such
expense for the same period in 1999. This increase was primarily due to
additions to property and equipment at the Company's speedways. The overall
increase was offset by depreciation in the same period of 1999 on certain LVMS
property which was sold in January 2000.
Operating Income. Operating income for the six months ended June 30, 2000
increased by $9.3 million, or 11.4%, over such income for the same period in
1999. This increase was due to the factors discussed above.
Interest Expense, Net. Interest expense, net for the six months ended June
30, 2000 was $13.3 million compared to $12.7 million for the same period in
1999. This increase was due primarily to higher interest rates on the revolving
Credit Facility and the Senior Subordinated Notes issued in May 1999. Those
increases were offset by a reduction in outstanding borrowings under the Credit
Facility during the current period.
Acquisition Loan Cost Amortization. Acquisition loan cost amortization of
$3.4 million for the six months ended June 30, 1999 represents financing costs
incurred in obtaining the Acquisition Loan to fund the LVMS acquisition.
Associated deferred financing costs of $4.1 million were amortized over the loan
term which matured May 28, 1999.
Other Income. Other income for the six months ended June 30, 2000 increased
by $129,000 over such income for the same period in 1999. This increase results
primarily from gains on sales of two TMS condominiums in the six months ended
June 30, 2000. No gains on sales of TMS condominiums were recognized in the six
months ended June 30, 1999. To a lesser extent, this increase was also due to
larger gains recognized on sales of marketable equity securities and other
investments in the three months ended June 30, 2000 compared to the same period
in 1999.
Income Tax Provision. The Company's effective income tax rate for the six
months ended June 30, 2000 and 1999 was 40%.
Net Income. Net income for the six months ended June 30, 2000 increased by
$6.9 million, or 17.6%, over such income for the same period in 1999. This
increase was due to the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically met its working capital and capital
expenditure
19
<PAGE>
requirements through a combination of cash flow from operations, bank borrowings
and other debt and equity offerings. The Company expended significant amounts of
cash in the first half of 2000 for improvements and expansion at its speedway
facilities. Significant changes in the Company's financial condition and
liquidity during the six months ended June 30, 2000 resulted primarily from: (1)
net cash generated by operations amounting to $37.9 million, (2) capital
expenditures amounting to $55.7 million, and (3) reducing outstanding borrowings
under the Credit Facility by $40.0 million with proceeds from the sale of the
LVMS Industrial Park. At June 30, 2000, the Company had $90.0 million in
outstanding borrowings under the $250.0 million Credit Facility.
Management anticipates that cash from operations and funds available
through the Credit Facility will be sufficient to meet the Company's operating
needs through 2000, including planned capital expenditures at its speedway
facilities. Based upon anticipated future growth and financing requirements,
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 generally experienced improvement in its financial
condition, liquidity and credit availability, 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.
Capital Expenditures
Significant growth in the Company's revenues depends, in large part, on
consistent investment in facilities. Therefore, the Company expects to continue
to make substantial capital improvements in its facilities to meet increasing
demand and to increase revenue. Currently, a number of significant capital
projects are underway.
In 2000, AMS plans to continue improving and expanding its on-site roads
and available parking and make other site improvements. In 2000, BMS added
approximately 13,000 permanent seats, further expanded concessions, restroom and
other fan amenities, and made other site improvements. LMSC added approximately
13,000 permanent seats, again featuring stadium-style terrace seating, and
further expanded concessions, restroom and other fan amenities, and made other
site improvements. Also, LMSC and TMS completed construction of 4/10-mile,
modern, lighted, dirt track facilities. LVMS added approximately 8,000 permanent
seats, further expanded concessions, restroom and other fan amenities, and made
other site improvements. LVMS also reconstructed and expanded one of its
dragstrips into a "state-of-the-art" dragway with permanent grandstand seating,
luxury suites, and extensive fan amenities and facilities. Subject to
governmental approval, SPR plans to continue improving and expanding its on-site
roads and available parking, reconfiguring traffic patterns and entrances to
ease congestion and improve traffic flow, as well as make other site
improvements. Pending governmental approvals, in 2000 or 2001, the Company
expects to begin major renovations at SPR, including its ongoing reconfiguration
into a "stadium-style" road racing course, the addition of up to 35,000
grandstand bleacher seats, and improving and expanding concessions, restroom and
other fan amenities facilities. TMS plans to continue improving and expanding
its on-site roads and available parking and making other site improvements. In
2000, after adding approximately 34,000 permanent seats, exclusive of SPR, the
Company's total permanent seating capacity will exceed 713,000 and the total
number of luxury suites will be approximately 663.
The estimated aggregate cost of capital expenditures in 2000 will
approximate $90 million. Numerous factors, many of which are beyond the
Company's control, may influence the ultimate costs and timing of various
capital improvements at the Company's facilities, including undetected soil or
land conditions, additional land acquisition costs, increases in the cost of
construction materials and labor, unforeseen changes in the design, litigation,
accidents or natural disasters affecting the construction site and national or
regional economic changes. In
20
<PAGE>
addition, actual costs could vary materially from Company estimates if Company
assumptions about the quality of materials or workmanship required or the cost
of financing such construction were to change. Construction is also subject to
state and local permitting processes, which if changed, could materially affect
the ultimate cost.
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
acquisition and construction of new speedway facilities, the expansion and
development of its existing Legends Cars and Oil-Chem products and markets and
the expansion into complementary businesses.
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 Subordinated Notes and as
the Board of Directors, in its sole discretion, may consider relevant. The
Credit Facility and Senior Subordinated Notes preclude the payment of any
dividends.
Impact of New Accounting Standards
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101 "Revenue Recognition in Financial
Statements" which summarizes certain of the staff's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
SAB No. 101, as amended, where applicable, provides for restatement of prior
financial statements or reporting a change in accounting principle no later than
the fourth quarter of fiscal years beginning after December 15, 1999. The
Company has assessed its revenue recognition policies for Speedway Club
membership fees, and expects to report a change in accounting principle under
SAB No. 101 in the fourth quarter of 2000. However, the change is not expected
to materially impact the Company's financial position or future results of
operations.
Sale of Las Vegas Industrial Park
In January 2000, the Company sold the Las Vegas Industrial Park and 280
acres of undeveloped land to Las Vegas Industrial Park, LLC, an entity owned by
the Company's Chairman and Chief Executive Officer, for approximately $53.3
million paid in cash of $40.0 million and a note receivable of $13.3 million.
The sales price was based on an independent fair value appraisal and
approximates the Company's net carrying value as of December 31, 1999 and
selling costs.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk. The Company's financial instruments with market risk
exposure consist only of bank revolving credit facility borrowings which are
sensitive to changes in interest rates. A change in interest rates of one
percent on the balance outstanding at June 30, 2000 would cause a change in
annual interest expense of approximately $900,000. The Company's senior
subordinated notes payable and convertible subordinated debentures are fixed
interest rate debt obligations.
Equity Price Risk. The Company has marketable equity securities, all
classified as "available for sale." Such investments are subject to price risk,
which the Company attempts to minimize generally through portfolio
diversification.
As of and during the six months ended June 30, 2000, borrowings under the
bank revolving credit facility decreased $40.0 million to $90.0 million. See
Note 5 to the accompanying June 30, 2000 financial statements for additional
information on
21
<PAGE>
the terms and conditions of the Company's debt obligations. There have been no
other significant changes in the Company's interest rate risk or equity price
risk as of and during the six months ended June 30, 2000.
22
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In May 2000, SMI settled three wrongful death lawsuits arising from the May
1, 1999 on-track accident during an IRL event at LMSC causing race car debris to
enter the spectator seating area. Three deaths resulted, and all three
decedents' estates filed separate wrongful death lawsuits against SMI, IRL and
others in the Superior Court of Mecklenburg County, North Carolina. The Estate
of Dexter Mobley lawsuit was filed on May 28, 1999, and the Estates of Randy
Pyatte and Jeffrey Patton lawsuits were filed on August 26, 1999. These suits
sought unspecified compensatory and punitive damages. This settlement had no
material adverse affect on the Company's financial position or results of
operations.
On May 20, 2000, near the end of a NASCAR-sanctioned event hosted at LMSC,
a portion of a pedestrian bridge leading from its track facility to a parking
area failed. In excess of 100 people were injured to varying degrees.
Preliminary investigations indicate the failure was the result of excessive
interior corrosion resulting from improperly manufactured bridge components. At
this time, all personal injury claims resulting from this incident are being
handled by the bridge's manufacturer, Tindall Corporation, and its insurer. On
May 31, 2000, a lawsuit resulting from this incident was filed in the Superior
Court of Rowan County, North Carolina on behalf of seven plaintiffs. This
lawsuit, styled Kenneth Brown, Sandra Melton, Robert Melton,Jr., Robert Melton,
Cammie Yarborough, Charles Yarborough, Charles Yarborough and Alexandria
Yarborough v. Speedway Motorsports, Inc. and Tindall Corporation, seeks
unspecified compensatory and punitive damages. SMI has filed an answer to this
action, and preliminary discovery is underway. SMI intends to defend itself and
denies the allegation of negligence as well as related claims for punitive
damages. Management does not believe the outcome of this lawsuit or this
incident will have a material adverse affect on the Company's financial position
or future results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders held on May 3, 2000, H.A. Wheeler and
Edwin R. Clark were elected directors by the Company's stockholders. Directors
whose terms of office continued after the meeting were O. Bruton Smith, William
R. Brooks, William P. Benton, Mark M. Gambill, Edwin R. Clark and Jack L. Kemp.
In addition to election of two directors, the stockholders ratified the
amendment of the May 5, 1998 Amended and Restated Speedway Motorsports, Inc.
Employee Stock Purchase Plan and the selection of Deloitte & Touche LLP as the
principal auditors of the Company.
<TABLE>
<CAPTION>
Votes Votes
Votes For Against Abstained Unvoted
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Election of H.A. Wheeler......... 39,044,064 0 49,581 2,561,164
Election of Edwin R. Clark....... 39,044,058 0 49,587 2,561,164
Approval of Amendment to SMI
Employee Stock Purchase Plan.... 38,464,305 600,126 29,214 2,561,164
Ratification of Deloitte & Touche
LLP as principal auditors....... 39,065,687 13,208 14,750 2,561,164
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27.0 Financial data schedule for the six month period ended June 30, 2000.
(b) No reports were filed on Form 8-K during the fiscal quarter covered by
this Form 10-Q.
23
<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: August 9, 2000 By: /s/ O. Bruton Smith
------------------ -----------------------
O. Bruton Smith
Chairman and Chief Executive Officer
Date: August 9, 2000 By: /s/ William R. Brooks
------------------ -------------------------
William R. Brooks
Vice President, Chief Financial
Officer, Treasurer and Director
(principal financial and accounting officer)
24
<PAGE>
INDEX TO EXHIBITS TO
QUARTERLY REPORT ON FORM 10-Q FOR
SPEEDWAY MOTORSPORTS, INC.
FOR THE QUARTER ENDED JUNE 30, 2000
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
27.0 Financial data schedule for the six month period ended June 30, 2000.
25
