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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended December 31, 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 (IRS Employer
of Incorporation or Organization) Identification No.)
5555 Concord Parkway South
Concord, North Carolina 28027
(Address of principal (Zip Code)
executive offices)
(704) 455-3239
(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class On Which Registered
$.01 Par Value Common Stock New York Stock Exchange
Securities registered pursuant to section 12(g) of the Act: None
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 [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant was approximately $325,005,184 based upon the closing sales
price of the registrant's Common Stock on March 9, 2001 of $25.57 per share. At
March 9, 2001, 41,741,810 shares of registrant's Common Stock, $.01 par value
per share, were outstanding.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
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(This Page Intentionally Left Blank)
FORM 10-K TABLE OF CONTENTS
Page
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PART I
Item 1. Business ................................................................................. 4
Item 2. Properties ............................................................................... 13
Item 3. Legal Proceedings. ....................................................................... 14
Item 4. Submission of Matters to a Vote of Security Holders. ..................................... 16
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters. ............... 16
Item 6. Selected Financial Data. ................................................................. 17
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation ..... 19
Item 7a. Quantitative and Qualitative Disclosures About Market Risk ............................... 27
Item 8. Financial Statements and Supplementary Data. ............................................. 28
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ..... 28
PART III
Item 10. Directors and Executive Officers of the Registrant ....................................... 29
Item 11. Executive Compensation ................................................................... 29
Item 12. Security Ownership of Certain Beneficial Owners and Management ........................... 29
Item 13. Certain Relationships and Related Transactions ........................................... 29
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ......................... 30
EXHIBIT INDEX ..................................................................................... 30
SIGNATURES ........................................................................................ 33
INDEX TO FINANCIAL STATEMENTS ..................................................................... F-1
The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements, including the Notes thereto, appearing
elsewhere herein. Statements in this Annual Report on Form 10-K that reflect
projections or expectations of future financial or economic performance of the
Company, and statements of the Company's plans and objectives for future
operations, including those contained in "Business", "Properties", "Legal
Proceedings", and "Management's Discussion and Analysis of Financial Condition
and Results of Operations", or relating to the Company's future capital
projects, hosting of races, broadcasting rights or sponsorships, are
"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", "hopes", "intends", and "plans", and
variations of such words and similar expressions are intended to identify such
forward- looking statements. 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 filed with
the SEC as an exhibit to this Form 10-K.
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PART I
Item 1. Business
Speedway Motorsports, Inc. (the "Company"), the owner and operator of
Atlanta Motor Speedway ("AMS"), Bristol Motor Speedway ("BMS"), Lowe's Motor
Speedway at Charlotte (formerly known as Charlotte Motor Speedway) ("LMSC"),
Las Vegas Motor Speedway ("LVMS"), Sears Point Raceway ("SPR"), and Texas Motor
Speedway ("TMS"), is a leading promoter, marketer and sponsor of motorsports
activities in the United States. The Company also provides event food,
beverage, and souvenir merchandising services through its Finish Line Events
("FLE") subsidiary, and manufactures and distributes smaller-scale, modified
racing cars and parts through its 600 Racing subsidiary. The Company currently
will sponsor 17 major annual racing events in 2001 sanctioned by the National
Association for Stock Car Auto Racing, Inc. ("NASCAR"), including ten races
associated with the Winston Cup professional stock car racing series ("Winston
Cup") and seven races associated with the Busch Grand National series. The
Company will also sponsor three Indy Racing Northern Light Series ("IRL")
racing events, one Fed-Ex Championship Auto Racing Teams ("CART") Series racing
event, three NASCAR Craftsman Truck Series racing events, four major National
Hot Rod Association ("NHRA") racing events, seven World of Outlaws ("WOO")
racing events, and three UDTRA Pro Dirt Car Series ("UDTRA") racing events in
2001. The Company was incorporated in the State of Delaware in 1994.
Recent Developments
Television Broadcasting Rights. Beginning with the 2001 racing season, the
domestic television broadcast rights for NASCAR Winston Cup and Busch Grand
National Series events have been consolidated for the Company, NASCAR and
others in the motorsports industry. The Company historically has negotiated
directly with network and cable television companies for live coverage of its
NASCAR-sanctioned races. For seasons starting in 2001, NASCAR has negotiated
industry-wide television media rights agreements for all Winston Cup and Busch
Grand National Series racing events. These domestic television broadcast rights
agreements are for six years with NBC Sports and Turner Sports, and eight years
with FOX and FX cable networks. NASCAR has announced that industry-wide total
net television broadcast revenues for the domestic rights will approximate $257
million in 2001, increasing to approximately $534 million in 2006. Annual
increases will range from approximately 15% to 21%, averaging 17% annually,
over the agreement terms.
Ancillary Broadcasting Rights. In February 2001, the Company announced
that an ancillary rights package for, among other items, NASCAR.com, the NASCAR
Channel, international broadcasting, satellite radio broadcasting, NASCAR
images, SportsVision, FanScan, and specialty pay-per-view telecasts, has been
reached with the Company, NASCAR and others in the motorsports industry.
Ancillary rights package fees begin in 2001 with industry-wide totals estimated
to approximate $245 million over a 12 year period, excluding a profit
participation aspect. Industry-wide total fees are estimated to approximate
$8.5 million in 2001, increasing to approximately $38 million in 2006. Annual
increases will average approximately 35% from 2001 to 2006.
These revenue estimates are based on NASCAR Winston Cup and Busch Grand
National Series races as scheduled for the 2001 racing season, and would be
impacted by future changes in race schedules.
General Overview
At December 31, 2000, the Company's total permanent speedway seating
capacity was approximately 712,000, one of the largest in the motorsports
industry. Management believes that spectator demand for its largest events
exceeds existing permanent seating capacity at each of its speedways. In 2000,
the Company added more than 33,000 permanent seats, including approximately
12,000 at BMS, 14,000 at LMSC, and 7,000 at LVMS. At December 31, 2000, AMS,
BMS, LMSC, LVMS and TMS had permanent seating capacities of approximately
124,000, 146,000, 171,000, 114,000, and 157,000, respectively, in each case
excluding infield admission, temporary seats, general admission, and dragway
and dirt track seats. Also at December 31, 2000, the Company had a total of 663
luxury suites, with 141 at AMS, 106 at BMS, 120 at LMSC, 102 at LVMS, and 194
at TMS, in each case excluding dragway and dirt track suites. SPR currently
does not have permanent seating capacity but provides temporary seating and
suites for approximately 24,000 spectators in addition to other general
admission seating arrangements along its 2.52 mile road course. The Company
plans to continue a multi-year renovation of SPR, including the ongoing
reconfiguration and modernization into a "stadium-style" road racing course,
adding up to 25,000 new grandstand seats, 64,000 new hillside terrace seats,
and 19 new luxury suites.
The Company derives revenues principally from the sale of tickets to
automobile races and other events held at its speedways, from the sale of food,
beverages and souvenirs during such events, from the licensing of television,
cable network and radio rights to broadcast such events, and from the sale of
sponsorships to companies that desire to advertise or
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sell their products or services at such events. In 2000, the Company derived
approximately 72% of its total revenues from NASCAR sanctioned events. The
Company has experienced substantial growth in revenues and profitability as a
result of its continued improvement, expansion and investments in facilities,
its consistent marketing and promotional efforts and the overall increase in
popularity of Winston Cup, Busch Grand National, Indy Racing League, National
Hot Rod Association, World Of Outlaws and other motorsports events in the
United States.
As described above, television broadcast and ancillary rights values have
risen significantly. Published NASCAR Winston Cup and Busch Grand National
television ratings indicate that so far the average ratings for the 2001 racing
season have increased significantly over 2000. Although early in the season,
these strong increases under the new television broadcasting contract are
positive indications that the popularity of NASCAR racing is growing and is
appealing to an ever-widening demographic audience. The Company is currently
strategically positioned with speedways in six of the premier markets in the
United States, including three of the top ten television markets. Similar to
many televised sports, overall seasonal averages for motorsports may increase
or decrease from year to year, while ratings for certain individual events may
decline one year and increase the next for any number of reasons.
Industry Overview
Motorsports is currently the fastest growing spectator sport in the United
States, with NASCAR the fastest growing industry segment. In 2000, NASCAR
sanctioned 94 Winston Cup, Busch Grand National and Craftsman Truck Series
races. Races are generally heavily promoted, with a number of supporting events
surrounding the main event, for a total weekend experience.
In recent years, television coverage and corporate sponsorship have
increased for NASCAR-sanctioned and other motorsports events. All NASCAR
Winston Cup and Busch Grand National, Indy Racing League, Championship Auto
Racing Teams, and major National Hot Rod Association events, as well as several
World Of Outlaws and other events sponsored by the Company are currently
televised nationally. According to NASCAR, major national corporate sponsorship
of NASCAR-sanctioned events (which currently includes over 70 Fortune 500
companies) also continues to increase significantly. Sponsors include such
companies as Coca-Cola, Dodge, General Motors, DaimlerChrysler, Cracker Barrel,
Harrah's Casino, NAPA, Save Mart, United Auto Workers, Food City, Sharpie and
RJR Nabisco. The Company intends to increase the exposure of its current
Winston Cup, Busch Grand National, Indy Racing League, Championship Auto Racing
Teams, National Hot Rod Association and World of Outlaw events. The Company
also intends to add television coverage to other speedway events, increase
broadcast and sponsorship revenues and schedule additional racing and other
events at each of its speedway facilities.
Management believes the historic consolidation of domestic television
broadcast and ancillary rights for NASCAR Winston Cup and Busch Grand National
Series events, which commences in 2001 (see "Recent Developments"), will
significantly increase the media's interest, while expanding sponsorship,
merchandising and attendance revenues. An important aspect of these rights
packages is that increased contracted revenue streams begin in fiscal 2001 and
continue for several years. Management also believes that the ancillary rights
packages for internet, specialty pay-per-view, foreign distribution and other
international television broadcast rights will intensify corporate and fan
interest and create increased demand for NASCAR racing and related
merchandising in foreign and other untapped markets.
Although somewhat common in other major sports venues, the Company's
facility naming rights agreement with Lowe's Home Improvement Warehouse was the
first in the motorsports industry. This ten year agreement, as well as other
sponsorships similar to the Company's three year comprehensive marketing
agreement with Nationwide Insurance focusing on safety and customer assistance,
illustrates not only the increasingly broad spectrum of major national
corporate sponsorship interest, but also the long-term confidence being placed
in first-class facilities in premium markets. In 2001, Dodge is reentering
NASCAR racing. This country's "big three" automakers will now be competing
against each other for the first time since 1985, bringing many Chrysler
loyalists back to motorsports. In addition, corporate sponsorships from
industries somewhat new to NASCAR, and motorsports in general, are another
strong indicator of the increasing marketing appeal to widening demographics.
For example, entertainment and service-oriented companies such as Harrah's
Casino, Federal Express, Northern Lighting Technology, a leading Internet
search engine, and others have recently become major sponsors.
The dramatic increase in corporate interest in the sport has been driven
by the attractive advertising demographics of stock car and other motorsports
racing fans. A recent Street & Smith's Business Journal survey shows NASCAR
continues as the leader in sponsor satisfaction in the eyes of national sports
sponsors. In addition, brand loyalty (as measured by fan's usage of sponsors'
products) is the highest of any nationally televised sport according to a study
published by Performance
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Research in 2000. Fueled by popular and accessible drivers, strong fan brand
loyalty, a widening demographic reach, increasing appeal to corporate sponsors
and rising broadcast revenues, industry competitors are actively pursuing
internal growth and industry consolidation. Speedway operations generate high
operating margins and are protected by high barriers to competitive entry,
including capital requirements for new speedway construction, marketing,
promotional and operational expertise, and license agreements with NASCAR and
other sanctioning bodies.
Operating Strategy
The Company's operating strategy is to increase revenues and profitability
through the promotion and production of racing and related events at modern
facilities, which serve to enhance customer loyalty. The Company markets its
scheduled events throughout the year both regionally and nationally via
television, radio and newspaper advertising, facility tours, satellite links
for media outlets, direct mail campaigns, pre-race promotional activities and
other innovative marketing activities. The key components of this strategy are
as follows:
Commitment to Quality and Customer Satisfaction. Since the 1970's,
management has embarked upon a series of capital improvements, including the
construction and expansion of additional premium permanent grandstand seating,
new luxury suites, first- class trackside dining and entertainment facilities,
and condominium complexes overlooking three of the Company's speedways. In
1992, LMSC became the first and only superspeedway in North America to offer
nighttime racing, and now all of the Company's speedways, except SPR, offer it.
The Company continues to improve and construct new food concessions, restrooms
and other fan amenities at its speedways to increase spectator comfort and
enjoyment. For example, BMS and LMSC have recently added unique mezzanine level
concourses with convenient souvenir, concessions and restroom facilities, and
permanent seating featuring new stadium-style terrace sections to increase
spectator convenience and accessibility. Because excess demand for premium
seating continues, in 2000, BMS and LMSC added 12,000 and 14,000 stadium-style
seats, respectively, both featuring outstanding views, convenient elevator
access and popular food courts. The Company continues to reconfigure traffic
patterns, entrances, and expand on-site roads and available parking at its
speedways to ease congestion caused by the increases in attendance. For
example, in recent years LMSC, SPR and TMS have acquired adjoining land to
provide additional entrances and significantly expand spectator parking areas.
These improvements complement the Company's plans to significantly upgrade and
modernize SPR's facilities over the next few years with expanded seating,
suites, fan amenities and pedestrian infrastructure. Lastly, TMS has
significantly expanded its parking areas and improved traffic control
dramatically reducing travel congestion. Both LVMS and TMS were designed to
maximize spectator comfort and enjoyment, and the Company continues to make
improvements as management acquires further operating experience with these new
facilities.
Innovative Marketing and Event Promotion. Management believes that it is
important to market the Company's scheduled events throughout the year, both
regionally and nationally. The Company markets its events by offering tours of
its facilities, providing satellite links for media outlets, conducting direct
mail campaigns and staging pre-race promotional activities such as live music,
skydivers and daredevil stunts. The Company's marketing program also includes
the solicitation of prospective event sponsors. Sponsorship provisions for a
typical NASCAR-sanctioned event include luxury suite rentals, block ticket
sales and Company-catered hospitality, as well as souvenir race program and
track signage advertising. The Company's innovative marketing is exemplified by
progressive programs such as offering Preferred Seat Licenses at TMS -- a first
in the motorsports industry, and obtaining a ten-year facility naming rights
agreement with Lowe's Home Improvement Warehouse -- another industry first. The
Company's three year comprehensive marketing agreement with Nationwide
Insurance focusing on safety and customer assistance is yet another example of
its successful efforts in marketing the widening demographic reach of
motorsports.
The Company constructed and operates The Speedway Club at LMSC and The
Texas Motor Speedway Club, both featuring exclusive dining and entertainment
facilities and executive offices adjoining the main grandstands and overlooking
the main super speedways. These VIP clubs contain first-class
restaurant-entertainment clubs, and TMS includes a health-fitness membership
club, and offer top quality catering and corporate meeting facilities. Open
year-round, these two VIP clubs are focal points of the Company's ongoing
efforts to improve amenities, attract corporate and other clientele, and
provide enhanced facility comfort for the benefit of spectators. The Texas
Motor Speedway Club opened in March 1999.
The Company has constructed 46 trackside condominiums at AMS and 76
condominiums at TMS above turn two of the speedway, of which 44 and 68,
respectively, have been sold or contracted for sale as of December 31, 2000.
The Company has also built and sold 40 trackside condominiums at LMSC in the
1980's and another 12 units at LMSC from 1991 to 1994. Many are used by team
owners and drivers, which is believed to enhance their commercial appeal.
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Utilization of Media. As discussed above, the Company no longer negotiates
directly with network and cable television companies for live coverage of its
NASCAR-sanctioned races. The Company, NASCAR and others in the motorsports
industry have consolidated the domestic television and ancillary broadcast
rights for NASCAR Winston Cup and Busch Grand National Series events beginning
in 2001. Management believes the media's increased overall attention focused on
motorsports will result in expanding sponsorship, merchandising and attendance
revenues. Management also believes the ancillary rights package with the NASCAR
Channel, NASCAR.com, international broadcasting, satellite radio broadcasting,
SportsVision, FanScan, and specialty pay-per-view telecasts, will appeal to a
broadening demographic base, including younger and foreign racing enthusiasts,
thereby intensifying corporate and fan interest and creating increased demand
for NASCAR racing and related merchandising in foreign and other new untapped
markets.
The Company also broadcasts substantially all of its NASCAR Winston Cup
and Busch Grand National Series racing events, as well as other events at each
of its speedways, over its proprietary radio Performance Racing Network
("PRN"). PRN is syndicated nationwide to more than 500 stations, and along with
the broadcasting of Company racing events, sponsors four weekly racing-oriented
programs throughout the NASCAR season. In 2000, the Company acquired Racing
Country USA, a national radio show syndicated to more than 300 affiliates
nationwide. Its combination with PRN provides the Company with access to more
than 11 million listeners nationwide plus over 800 radio stations throughout
North America -- offering sponsors a very powerful and expansive promotional
network. The Company plans to carry additional events at each of its speedways
over PRN and Racing Country USA in 2001.
Management also seeks to increase the visibility of its racing events and
facilities through local and regional media interaction. For example, each
January the Company sponsors a four-day media tour at LMSC to promote the
upcoming Winston Cup season. In 2001, this event featured Winston Cup drivers
and attracted media personnel representing television networks and stations
from throughout the United States. TMS also stages a similar media tour each
year before the racing season begins featuring Winston Cup drivers and is
attended by numerous media personnel from throughout the United States.
Growth Strategy
Management believes that the Company can achieve its growth objectives by
increasing attendance and broadcasting, sponsorship and other revenues at
existing facilities and by expanding its promotional and marketing expertise to
take advantage of opportunities in attractive new markets. It intends to
continue implementing this growth strategy through the following means:
Expansion and Improvement of Existing Facilities. Management believes that
spectator demand for its largest events exceeds existing permanent seating
capacity. The Company plans to continue expanding permanent grandstand seating
and luxury suites, and making other significant renovations and improvements at
its speedways in 2001, as further described in "Properties" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Capital Expenditures." The Company completed major renovations at AMS in 1997,
including reconfiguration into a state-of-the-art 1.54-mile, lighted, quad-oval
superspeedway, adding approximately 22,000 permanent seats, including 58 new
suites, and changing the start-finish line location. AMS installed lighting for
its inaugural IRL night race in 1998, and now all of the Company's speedways,
except SPR, offer nighttime racing. In 1998, BMS continued its expansion by
adding approximately 19,000 permanent seats, including 42 new luxury suites,
and LMSC added approximately 12,000 permanent seats, including 12 new luxury
suites. SPR was partially reconfigured in 1998 into a stadium-style road course
featuring "The Chute" which provides spectators improved sight lines and
expanded viewing areas for increased spectator comfort and enjoyment. In 1999,
BMS completed the reconstruction and expansion of its dragstrip into a
state-of-the-art dragway with permanent grandstand seating, luxury suites, and
extensive fan amenities and facilities. BMS currently hosts an annual
NHRA-sanctioned Nationals event and other bracket racing events, as well as
various auto shows. Also in 1999, the Company added approximately 10,000
permanent seats at LMSC and 4,000 at TMS. In recent years, LMSC, SPR and TMS
have purchased adjoining land to provide additional entrances and further
expand its parking areas to improve traffic flow and ease congestion caused by
the growth in attendance.
In 2000, the Company added approximately 12,000 permanent seats at BMS,
14,000 at LMSC, and 7,000 at LVMS. Construction of 4/10-mile, modern, lighted,
dirt track facilities at LMSC and TMS was completed in 2000, where
nationally-televised events such as World of Outlaws and UDTRA Pro Dirt Car
Series, as well as American Motorcycle Association ("AMA") and other racing
events are held annually. Also in 2000, LVMS completed reconstruction and
expansion of one of its dragstrips into a state-of-the-art dragway with
permanent grandstand seating, luxury suites, and extensive fan amenities and
facilities. The Strip at Las Vegas is currently hosting two NHRA Nationals
events in 2001. The Company plans to continue reconfiguring and modernizing SPR
into a "stadium-style" road racing course, adding up to 25,000 new grandstand
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bleacher seats, 64,000 new hillside terrace seats, and 19 new luxury suites. As
in recent years, the Company will continue to improve and expand concessions,
restroom and other fan amenities facilities at its speedways, as well as
reconfiguring traffic patterns, entrances, and expanding on-site roads and
available parking to ease congestion caused by the increases in attendance,
consistent with management's commitment to quality and customer satisfaction.
Management believes that the expansion and improvements will generate
additional admissions and event related revenues. In 2002, after planning to
add up to 89,000 new seats at SPR, the Company's total permanent speedway
seating capacity would exceed 800,000.
Maximization of Media Exposure and Enhancement of Broadcast and
Sponsorship Revenues. NASCAR-sanctioned stock car racing has experienced
significant growth in television viewership and spectator attendance during the
past several years. This growth has allowed the Company to expand its
television coverage to include more races and to negotiate more favorable
broadcast rights fees with television networks, as well as to negotiate more
favorable contract terms with sponsors. Management believes that spectator
interest in stock car racing will continue to grow, thereby increasing
broadcast media and sponsors' interest in the sport. The Company intends to
increase media exposure of its current NASCAR, IRL and NHRA events, to add
television coverage to other speedway events and to further increase broadcast
and sponsorship revenues. For instance, with over 30 million people visiting
Las Vegas annually, management believes the newly acquired LVMS has the
potential to significantly increase broadcasting and sponsorship revenues.
The LVMS acquisition was a major strategic transaction for the Company.
Also, the acquisition of SPR marked the Company's entry into the Northern
California television market, which is currently the fifth largest television
market in the United States. These acquisitions achieve a critical mass west of
the Mississippi River that enhances the Company's overall operations, as well
as broadcast and sponsorship opportunities. The Company intends to capitalize
on its top market entertainment value to further grow LVMS, the sport of NASCAR
and other racing series.
The Company is currently strategically positioned with speedways in six of
the premier markets in the United States, including three of the top ten
television markets. Published NASCAR Winston Cup and Busch Grand National
television ratings indicate that so far the average ratings for the 2001 racing
season have increased significantly over 2000. These strong increases, although
early in the season, are positive indicators of NASCAR's continuing growth in
popularity and appeal to an ever-widening demographic audience. In addition,
the Company's first facility naming rights agreement with Lowe's Motor Speedway
contains gross fees aggregating approximately $35,000,000 over the ten year
agreement term. Management believes these positive developments bode well for
the Company's future naming rights possibilities and other innovative marketing
opportunities.
Further Development of Finish Line Events, 600 Racing Legends Car and
Performance Racing Network Businesses. In 1998, the Company restructured and
consolidated its food, beverage and souvenir operations into Finish Line
Events. FLE provides event food, beverage, and souvenir merchandising services,
as well as expanded ancillary support services, to all of the Company's
facilities and other unaffiliated sports-related venues. The Company believes
this restructuring provides better products and expanded services to its
customers, enhancing their overall entertainment experience, while allowing the
Company to achieve substantial operating efficiencies.
Introduced by the Company in 1992, the Company developed the Legends
Circuit for which it manufactures and sells cars and parts used in Legends
Circuit racing events and is the official sanctioning body. Legends Cars are
5/8-scale versions of the modified classic sedans and coupes driven by
legendary early NASCAR racers, and are designed primarily to race on "short"
tracks of 3/8-mile or less. In late 1997, as an extension of the Legends Car
concept, 600 Racing released a new "Bandolero" line of smaller, lower-priced,
entry level stock cars, which appeals to younger racing enthusiasts. Then in
late 2000, the Company released a new faster "Thunder Roadster" stock car
modeled after older-style roadsters that competed in past Indianapolis 500's in
the early 1960's.
Management believes that the Legends Car is one of only a few complete
race cars manufactured in the United States for a retail price of less than
$13,000. With retail prices of less than $7,000 for the Bandolero and $17,000
for the Thunder Roadster, management believes these cars are affordable by a
new and expanding group of racing enthusiasts who otherwise could not race on
an organized circuit. The Legends Car, the Bandolero, and the Thunder Roadster
(hereafter referred to collectively as "Legends Cars") are not designed for
general road use. Cars and parts are currently marketed and sold through
approximately 50 distributors doing business throughout the United States,
Canada, and Europe. Since 1995, Legends Cars have been manufactured by 600
Racing at a leased 92,000-square-foot facility located approximately two miles
from LMSC. Legends Car revenues from this business have grown from $5.7 million
in 1994 to $9.4 million in 2000.
Legends Circuit races continue to be the fastest growing short track
racing division in motorsports. More than 1,900 sanctioned races were held
nationwide in 2000, and 600 Racing is the third largest short track sanctioning
body in terms of membership behind NASCAR and IMCA. Currently, sanctioned
Legends Car races are conducted at all of the Company's
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speedways except BMS. The Company plans to continue broadening the Legends Car
Circuit, increasing the number of sanctioned races and tracks at which Legends
Car races are held.
The Company broadcasts substantially all of its NASCAR Winston Cup and
Busch Grand National Series racing events over its proprietary radio
Performance Racing Network. PRN also sponsors four weekly racing-oriented
programs throughout the NASCAR season, which along with event broadcasts, are
nationally syndicated to more than 500 stations. In 2000, the Company acquired
Racing Country USA, a national radio show syndicated to more than 300
affiliates nationwide. Founded in 1990, Racing Country USA is a two-hour radio
show featuring country music hits and NASCAR-related programming. This combined
programming with PRN provides the Company access to more than 11 million
listeners nationwide, plus over 800 radio stations throughout North America. It
also allows the Company to further promote its events and facilities on a
weekly basis and offer sponsors a very powerful and expansive promotional
network. The Company plans to carry other events at each of its speedways over
PRN and Racing Country USA in 2001.
Increased Daily Usage of Existing Facilities. Management constantly seeks
revenue-producing uses for the Company's speedway facilities on days not
committed to racing events. Such other uses include car and truck shows,
supercross motorcycle racing, auto fairs, driving schools, vehicle testing,
settings for television commercials, concerts, holiday season festivities,
print advertisements and motion pictures. In recent years, the Company began
hosting a summer Legends Car series at each of its speedways except BMS. BMS
and LVMS have recently reconstructed and expanded their dragways with permanent
grandstand seating and luxury suites. Also, BMS and LVMS combined are currently
hosting three annual NHRA Nationals events, other NHRA and bracket racing
events, as well as various auto shows throughout the year.
In 2000, LMSC and TMS completed construction of 4/10-mile, modern,
lighted, dirt track facilities where nationally-televised events such as World
of Outlaws and UDTRA Pro Dirt Car Series, as well as AMA and other racing
events are held annually. The Pennzoil World of Outlaws Sprint Car Series is
the fifth most popular motorsports series in the United States. Other examples
of increased usage include LMSC's hosting of a major country music concert in
2000, and TMS's spring Autofest featuring Pate Swap Meets. The Company is also
hosting a major country music concert at LVMS in 2001 and is attempting to
schedule music concerts at certain other facilities. Non-race-day track rental
revenues were $3,919,000 in 1998, $7,802,000 in 1999, and $10,034,000 in 2000.
Along with such increased daily usage of its facilities, the Company is
scheduled to host an inaugural CART racing event at TMS, and three IRL racing
events company-wide in 2001. With more than twelve different track
configurations at LVMS, including a 2.5 mile road course, 1/4 mile dragstrip,
1/8 mile dragstrip, 1/2 mile clay oval, 3/8 mile paved oval and several other
race courses, the Company plans to capitalize on its top market entertainment
value to further grow the speedway and other racing series, and to promote new
expanded venues. With the addition of CART racing to its season schedule, TMS
currently promotes the largest number of major motorsports racing series in the
world.
Acquisition and Development of Additional Motorsports Facilities. The
Company also considers growth by acquisition and development of motorsports
facilities as appropriate opportunities arise. The Company acquired Bristol
Motor Speedway in January 1996, Sears Point Raceway in November 1996, and Las
Vegas Motor Speedway in December 1998. In 1997, the Company completed
construction of Texas Motor Speedway. The Company continuously seeks to locate,
acquire, develop and operate venues which the Company feels are underdeveloped
or underutilized and to capitalize on markets where the pricing of sponsorships
and television rights are considerably more lucrative.
Operations
The Company's operations consist principally of racing and related events.
The Company also conducts various other activities that generally are ancillary
to its core business of racing as further described in "Other Operating
Revenue" below.
Racing and Related Events
NASCAR-sanctioned races are held annually at each of the Company's
speedways. The following are summaries of racing events scheduled in 2001 at
each speedway. Management constantly pursues the scheduling of additional
motorsports racing and other events.
9
AMS. In March 2001, AMS conducted the Cracker Barrel Old Country Store 500
Winston Cup race and the Aaron's 312 Busch Grand National race. AMS is
scheduled to hold the last Winston Cup race of the season, as well as several
other races and events. Its NASCAR-sanctioned racing schedule is as follows:
Date Event Circuit
- ---- ----- -------
March 10 "Aaron's 312" Busch Grand National
March 11 "Cracker Barrel Old Country Store 500" Winston Cup
November 18 "NAPA 500" Winston Cup
In 2001, AMS is also scheduled to hold one IRL event and one ARCA race.
BMS. In March 2001, BMS conducted the Food City 500 Winston Cup race and
the Cheez-It 250 Busch Grand National race. BMS is scheduled to hold an
additional Winston Cup race and Busch Grand National race, as well as several
other races and events. Its NASCAR-sanctioned racing schedule is as follows:
Date Event Circuit
- ---- ----- -------
March 24 "Cheez-It 250" Busch Grand National
March 25 "Food City 500" Winston Cup
August 24 "Food City 250" Busch Grand National
August 25 "Sharpie 500" Winston Cup
In 2001, BMS is also scheduled to hold one NHRA Nationals event, one UDTRA
event, and one WOO event.
LMSC. In 2001, LMSC is scheduled to hold three Winston Cup races and two
Busch Grand National races, as well as several other races and events. Its
NASCAR-sanctioned racing schedule is as follows:
Date Event Circuit
- ---- ----- -------
May 19 "The Winston" Winston Cup (all-star race)
May 26 "CARQUEST Auto Parts 300" Busch Grand National
May 27 "Coca-Cola 600" Winston Cup
October 6 "Charlotte 300" Busch Grand National
October 7 "UAW-GM Quality 500" Winston Cup
In 2001, LMSC is also scheduled to hold two ARCA races, two WOO events,
one American LeMans event, and one AMA event.
LVMS. In March 2001, LVMS conducted the UAW-DaimlerChrylser 400 Winston
Cup race and the Sam's Town 300 Busch Grand National race, as well as other
races and events. Its NASCAR-sanctioned racing schedule is as follows:
Date Event Circuit
- ---- ----- -------
March 3 "Sam's Town 300" Busch Grand National
March 4 "UAW-DaimlerChrysler 400" Winston Cup
In 2001, LVMS is also scheduled to hold one NASCAR Craftsman Truck Series
race, two NHRA Nationals events, two WOO events, two NASCAR Winston West and
two Winston Southwest Series events, and various other racing events.
SPR. In 2001, SPR is scheduled to hold one Winston Cup race, as well as
several other races and events. Its NASCAR-sanctioned racing schedule is as
follows:
Date Event Circuit
- ---- ----- -------
June 24 "Dodge/Save Mart 350" Winston Cup
In 2001, SPR is also scheduled to hold one NHRA Nationals event, one
NASCAR Winston Southwest Series event, one American LeMans event, and various
AMA, Sports Car Club of America and other racing events.
10
TMS. In 2001, TMS is scheduled to hold one Winston Cup race and one Busch
Grand National race, as well as several other races and events. Its
NASCAR-sanctioned racing schedule is as follows:
Date Event Circuit
- ---- ----- -------
March 31 "Jani-King 300" Busch Grand National
April 1 "Harrah's 500" Winston Cup
In 2001, TMS is also scheduled to hold two NASCAR Craftsman Truck Series
races, two IRL events, one CART event, two WOO events and one American LeMans
event.
The following table shows selected revenues for the three years ended
December 31, 2000. All amounts for 1998 exclude information for LVMS before the
December 1998 acquisition.
2000 1999 1998
----------- ----------- -----------
(in thousands)
Admissions ....................... $142,160 $132,694 $107,601
Broadcast revenue ................ 34,495 28,547 20,014
Sponsorship revenue .............. 33,977 29,202 18,346
Other event related revenue ...... 95,162 90,567 67,099
Other operating revenue .......... 48,503 36,483 16,736
-------- -------- --------
Total .......................... $354,297 $317,493 $229,796
======== ======== ========
Admissions. Grandstand ticket prices at the Company's NASCAR-sanctioned
events in 2000 range from $10.00 to $130.00. In general, the Company
establishes ticket prices based on spectator demand and cost of living
increases.
Broadcast Revenue. The Company has negotiated contracts with NASCAR for
television station and network broadcast coverage of all of its
NASCAR-sanctioned events. The Company also broadcasts substantially all of its
NASCAR Winston Cup and Busch Grand National Series races over its proprietary
Performance Racing Network, which also sponsors four weekly racing-oriented
programs throughout the NASCAR season. The Company derives revenue from the
sale of commercial time on PRN, which is syndicated nationwide to more than 500
stations. None of the Company's broadcast contracts accounted for as much as 5%
of total revenues in 2000.
Sponsorship Revenue. The Company's revenue from corporate sponsorships is
paid in accordance with negotiated contracts. The identities of sponsors and
the terms of sponsorship change from time to time. The Company currently has
sponsorship contracts with such major manufacturing and consumer products
companies as Coca-Cola, DaimlerChrysler, Dodge, General Motors, Miller Brewing
Company, Anheuser-Busch, RJ Nabisco, NAPA, Cracker Barrel, Harrah's Casino,
Save Mart, Food City, Sharpie, Chevrolet and Ford. Some contracts allow
sponsors to name a particular racing event, as in the "Coca-Cola 600", "UAW-
DaimlerChrylser 400", and the "UAW-GM Quality 500." Other considerations range
from "Official Car" or "Official Truck" designations at Company speedways
including Ford, Chevrolet, Dodge, and Pontiac, to exclusive advertising and
promotional rights in sponsor product categories such as Anheuser-Busch and
Miller. Also, the Company's ten-year facility naming rights agreement renamed
Charlotte Motor Speedway as Lowe's Motor Speedway at Charlotte. None of the
Company's event sponsors accounted for as much as 5% of total revenues in 2000.
Other Event Related Revenue. The Company derives other revenue from the
sale of food, beverages, and souvenirs, from fees paid for catering
"hospitality" receptions and private parties at its speedways and from parking.
As of December 31, 2000, the Company's speedways had a total of approximately
663 luxury suites available for leasing to corporate sponsors or others at
current 2000 annual rates ranging from $20,000 to $100,000. LMSC has also
constructed 40 open-air boxes, each containing 32 seats, which are currently
available for renting by corporate sponsors or others at annual rates of up to
$38,000. The Company's tracks and related facilities are leased frequently to
others for use in driving schools, testing, research and development of race
cars and racing products, settings for commercials and motion pictures, and
other outdoor events.
Other Operating Revenue. The Company also derives other operating 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. The Company also derives other 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 Research Corp.
("Oil-Chem"), which produces an environmentally-friendly metal-energizer, from
SoldUSA, Inc., an internet auction and
11
e-commerce company, 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, Oil-Chem and SoldUSA are substantially
wholly-owned subsidiaries of SMI, and WMI is a division of FLE.
Competition
The Company is the leading motorsports promoter in the local and regional
markets served by its six speedways, and competes regionally and nationally
with other speedway owners to sponsor events, especially NASCAR, IRL, CART,
NHRA and WOO sanctioned events. The Company also competes for spectator
interest with all forms of professional and amateur spring, summer and fall
sports, and with a wide range of other available entertainment and recreational
activities, conducted in and near Atlanta, Bristol, Charlotte, Las Vegas, Fort
Worth, and Sonoma.
Employees
As of December 31, 2000, the Company had approximately 803 full-time
employees and 248 part-time employees. The Company hires temporary employees to
assist during periods of peak attendance at its events. None of the Company's
employees are represented by a labor union. Management believes that the
Company enjoys a good relationship with its employees.
Environmental Matters
Solid waste landfilling has occurred on and around the Company's property
at LMSC for many years. Landfilling of general categories of municipal solid
waste on the LMSC property ceased in 1992. However, there is one landfill
currently being permitted at LMSC to receive inert debris and waste from land
clearing activities ("LCID" landfill), and one LCID landfill that was closed in
1999. Two other LCID landfills on the LMSC property were closed in 1994. LMSC
intends to allow similar LCID landfills to be operated on the LMSC property in
the future. Prior to 1999, LMSC leased a portion of its property to Allied
Waste Industries, Inc. ("Allied") for use as a construction and demolition
debris landfill (a "C & D" landfill), which can receive solid waste resulting
solely from construction, remodeling, repair or demolition operations on
pavement, buildings or other structures, but cannot receive inert debris,
land-clearing debris or yard debris. In addition, Allied owns and operates an
active solid waste landfill adjacent to LMSC. Management believes that the
active solid waste landfill was constructed in such a manner as to minimize the
risk of contamination to surrounding property.
Portions of the inactive solid waste landfill areas on the LMSC property
are subject to a groundwater monitoring program and data are submitted to the
North Carolina Department of Environment and Natural Resources ("DENR"). DENR
has noted that data from certain groundwater sampling events have indicated
levels of certain regulated compounds that exceed acceptable trigger levels and
organic compounds that exceed regulatory groundwater standards. DENR has not
acted to require any remedial action by the Company at this time with respect
to this situation. In the future, DENR could possibly require the Company to
take certain actions with respect to this situation that could result in
material costs being incurred by the Company.
Management believes that the Company's operations, including the landfills
on its property, are in substantial compliance with all applicable federal,
state and local environmental laws and regulations. Nonetheless, if damage to
persons or property or contamination of the environment is determined to have
been caused by the conduct of the Company's business or by pollutants,
substances, contaminants or wastes used, generated or disposed of by the
Company, or which may be found on the property of the Company, the Company may
be held liable for such damage and may be required to pay the cost of
investigation or remediation, or both, of such contamination or damage caused
thereby. The amount of such liability, as to which the Company is self-insured,
could be material. Changes in federal, state or local laws, regulations or
requirements, or the discovery of previously unknown conditions, could require
additional expenditures by the Company.
Patents and Trademarks
The Company has trademark rights in "Speedway Motorsports", "Atlanta Motor
Speedway", "Charlotte Motor Speedway", "Las Vegas Motor Speedway", "Sears Point
Raceway", "Finish Line Events" and "Z - Max". It also has trademark rights
concerning its "Legends Cars", "600 Racing", "The Speedway Club", "AutoFair",
and its corporate logos. Trademark and service mark registrations are pending
with respect to "Bristol Motor Speedway", "Motorsports By Mail", "WildMan",
"Bandolero", and "Texas Motor Speedway". The Company also has six patents and
five patent applications pending with respect to its Legends Car and Bandolero
Car design and technology. Management's policy is to protect its intellectual
property rights zealously, including through litigation, to protect their
proprietary value in souvenir sales and market recognition.
12
Item 2. Properties
The Company's principal executive offices are located at 5555 Concord
Parkway South, Concord, North Carolina, 28027, and its telephone number is
(704) 455-3239. A description of each Company speedway follows:
Atlanta Motor Speedway. AMS is located on 870 acres of Company-owned land
in Hampton, Georgia, approximately 30 miles south of downtown Atlanta. Built in
1960, and owned by the Company since 1990, today AMS is a modern, attractive
facility. In 1996, the Company completed 17 new suites at AMS, reconfigured
AMS's main entrances and expanded on-site roads to ease congestion caused by
the increases in attendance. In November 1997, the Company completed major
renovations at AMS, including its reconfiguration into a "state-of-the-art"
1.54-mile, lighted, quad-oval superspeedway, the addition of approximately
22,000 permanent seats, including 58 new suites, and changing the start-finish
line location. Other significant improvements in 1997 included new scoreboards,
new garage areas, and new infield media and press box centers. Lighting was
installed for its inaugural IRL night race in August 1998. At December 31,
2000, AMS had permanent seating capacity of approximately 124,000, including
141 luxury suites. AMS has constructed 46 condominiums overlooking the Atlanta
speedway and is marketing the two remaining unsold condominiums. Similar to
2000, AMS plans to continue improving and expanding its on-site roads and
available parking in 2001 to ease congestion and improve traffic flow.
Bristol Motor Speedway. The Company acquired BMS in January 1996. BMS is
located on approximately 550 acres in Bristol, Tennessee and is a one-half
mile, lighted, 36-degree banked concrete oval. BMS also owns and operates a
one-quarter mile lighted dragstrip. BMS is the most popular facility in the
Winston Cup circuit among race fans due to its 36 degree banked turns and
lighted nighttime races. Management believes that spectator demand for its
Winston Cup events at BMS exceeds existing permanent seating capacity. In 1996,
BMS added approximately 6,000 permanent grandstand seats and relocated various
souvenir, concessions and restroom facilities to the mezzanine level to
increase spectator convenience and accessibility. In 1997, BMS added
approximately 39,000 permanent grandstand seats and constructed 55 new suites
for a net increase of 31. In 1998, BMS added approximately 19,000 permanent
grandstand seats, including 42 new luxury suites, again featuring a new
stadium-style terrace section and mezzanine level facilities for enhanced
spectator convenience and accessibility, and made other site improvements. In
1999, BMS completed reconstruction and expansion of its dragstrip into a
state-of-the-art dragway with permanent grandstand seating, luxury suites, and
extensive fan amenities and facilities. In 2000, BMS added 12,000 stadium-style
seats, featuring outstanding views, convenient elevator access and popular food
courts. At December 31, 2000, BMS had permanent seating capacity of
approximately 146,000, including 106 luxury suites. In 2001, BMS plans to
continue improving and expanding fan amenities, and make other site
improvements.
Lowe's Motor Speedway (formerly known as Charlotte Motor Speedway). LMSC
is located in Concord, North Carolina, approximately 12 miles northeast of
uptown Charlotte. On Winston Cup race days it uses more than 1,000 acres of
land, some of which is leased from others. LMSC was among the first
superspeedways built and today is a modern, attractive facility. The principal
track is a 1.5- mile banked asphalt quad-oval facility, and was the first
superspeedway in North America lighted for nighttime racing. LMSC also has four
lighted "short" tracks (a 1/5-mile asphalt oval, a 1/4-mile asphalt oval and a
1/5-mile dirt oval), as well as a 2.25-mile asphalt road course. The Company
has consistently improved and increased spectator seating arrangements at LMSC,
and is now the second largest capacity sports facility in the United States. In
1997, LMSC added a state-of-the-art 25,000 seat grandstand, featuring a unique
mezzanine level concourse and 26 new suites, among other site improvements. In
1998, LMSC added approximately 12,000 permanent seats, including 12 new luxury
suites, again featuring a new stadium-style terrace section and mezzanine level
facilities for enhanced spectator convenience and accessibility. In 1999, LMSC
added approximately 10,000 permanent seats, and further expanded parking areas
to accommodate the increases in attendance and to ease congestion. In 2000,
LMSC added 14,000 stadium-style terrace seats, featuring outstanding views,
convenient elevator access and popular food courts. Also in 2000, LMSC
completed construction of a 4/10-mile, modern, lighted, dirt track facility. At
December 31, 2000, LMSC had permanent seating capacity of approximately
171,000, including 120 luxury suites. In 2001, LMSC plans to continue improving
and expanding concessions, restroom and other fan amenities, expand its
available parking to ease congestion and improve traffic flow, and make other
site improvements.
Las Vegas Motor Speedway. The Company acquired LVMS in December 1998.
LVMS, located on approximately 1,300 acres in Las Vegas, Nevada, is a 1.5-mile,
lighted, asphalt superspeedway, and includes several other on-site race tracks.
The other race tracks include a 1/4-mile dragstrip, 1/8-mile dragstrip,
2.5-mile road course, 1/2-mile clay oval, 3/8-mile paved oval, motocross and
other off-road race courses. Construction of LVMS was substantially completed
in 1997, and its first major NASCAR Winston Cup race was held in March 1998.
The superspeedway's configuration readily allows for significant future
expansion. In 1999, LVMS expanded concessions, restroom and other fan amenities
facilities, and made other site improvements. In 2000, LVMS added approximately
7,000 permanent seats, expanded concessions, restroom and other fan amenities,
and made other site improvements. LVMS also completed reconstruction and
expansion of one of
13
its dragstrips into a state-of-the-art dragway, The Strip at Las Vegas, with
permanent grandstand seating, luxury suites, and extensive fan amenities. At
December 31, 2000, LVMS had permanent seating capacity of approximately
114,000, including 102 luxury suites. In 2001, LVMS plans to continue improving
and expanding fan amenities and make other site improvements.
Sears Point Raceway. The Company acquired SPR in November 1996. SPR,
located on approximately 1,500 acres in Sonoma, California, consists of a
2.52-mile, twelve-turn road course, a one-quarter mile dragstrip, and a 157,000
square foot industrial park. SPR currently does not have permanent seating
capacity but provides temporary seating and suites for approximately 24,000
spectators in addition to other general admission seating arrangements along
its 2.52-mile road course. In 1997, SPR made various parking, road improvements
and grading changes to improve spectator sight lines, and to increase and
improve seating and facilities for spectator and media amenities. In 1998, SPR
acquired adjoining land to provide an additional entrance and expanded
spectator parking areas to accommodate the increases in attendance and to ease
congestion. Also in 1998, SPR was partially reconfigured into a 1.9-mile
stadium-style road course featuring "The Chute" which provides spectators with
improved sight lines and expanded viewing areas. The Chute provides multiple
configurations within SPR's overall 2.52-mile road coarse. The Company plans to
continue major renovations at SPR, including its ongoing reconfiguration and
modernization into a "stadium-style" road racing course, adding up to 25,000
new grandstand seats, 64,000 new hillside terrace seats, and 19 new luxury
suites. In addition, SPR plans to continue improving and expanding its on-site
roads and available parking, and reconfiguring traffic patterns and entrances
to ease congestion and improve traffic flow.
Texas Motor Speedway. TMS, located on approximately 1,360 acres in Fort
Worth, Texas, is a 1.5-mile, lighted, banked, asphalt quad-oval superspeedway
with permanent seating capacity of approximately 157,000, including 194 suites,
and 76 condominiums. TMS, one of the largest sports facilities in the United
States in terms of permanent seating capacity, hosted its first major NASCAR
Winston Cup race in April 1997, preceded by a Busch Grand National race. TMS
was designed to maximize spectator comfort and enjoyment, and further design
improvements are expected at TMS as management acquires operating experience
with this new facility. The TMS facilities are subject to a lease transaction
with the Fort Worth Sports Authority as of December 31, 2000. See Note 2 to the
Consolidated Financial Statements for information on the terms and conditions
of the lease transaction. In 1999, TMS added approximately 4,000 permanent
seats and, among other site improvements, expanded its parking areas and
improved traffic control dramatically reducing travel congestion. In addition,
TMS has an executive office tower adjoining the main grandstand and overlooking
the speedway which houses The Texas Motor Speedway Club. In 2000, TMS completed
construction of a 4/10-mile, modern, lighted, dirt track facility. At December
31, 2000, TMS had permanent seating capacity of approximately 157,000,
including 194 luxury suites. In 2001, TMS plans to convert approximately 50
suites to speedway club-style seating areas. Although these suites are
currently unleased, management believes excess demand for premium seating and
services at TMS's largest events exceeds current availability, and that
conversion will generate additional operating profits. Similar to 2000, TMS
plans to continue improving and expanding its on-site roads and available
parking in 2001 to ease congestion and improve traffic flow.
Item 3. Legal Proceedings
On April 23, 1996, the Northwest Independent School District (the "Texas
School District"), within whose borders TMS is located, filed a complaint
against TMS, among others, in a case styled Northwest Independent School
District v. City of Fort Worth, F Sports Authority, Inc., the Governor of
Texas, the Comptroller of Public Accounts of Texas, the Attorney General and
Texas Motor Speedway, Inc. (the "School District Litigation"). The School
District Litigation was filed in State District Court of Thrives County, Texas
seeking a judgement that the statutory basis for any claimed tax exemption for
TMS was unconstitutional under the Texas Constitution and that TMS would be
required to pay ad valorem taxes on the TMS facility. In January 2000, the
Texas School District settled this matter after affiliates of SMI conveyed
approximately three acres of land to the Texas School District.
On May 1, 1999, during the running of an IRL event at LMSC, an on-track
accident occurred that caused race car debris to enter the spectator seating
area (the "May 1999 IRL Accident"). Three deaths and injuries to others
resulted. The 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.
These lawsuits were settled in May 2000 without any admission of wrongdoing or
liability on the part of SMI. Settlement had no material adverse affect on the
Company's financial position or results of operations.
14
On February 13, 2001, the parents of Haley A. McGee filed a personal
injury action related to the May 1999 IRL Accident against SMI, LMSC and IRL in
the Superior Court of Mecklenburg County, North Carolina. This lawsuit seeks
unspecified damages and punitive damages related to the injuries of the minor,
Haley A. McGee, as well as the medical expenses incurred and wages lost by her
parents. SMI intends to file an answer in this action. SMI intends to defend
itself and to deny the allegations of negligence as well as related claims for
punitive damages. Management does not believe the outcome of this lawsuit will
have a material adverse affect on the Company's financial position or future
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.
All personal injury claims resulting from this incident are currently being
handled by the bridge's manufacturer, Tindall Corporation, and its insurer.
To date, fifteen separate lawsuits have been filed by individuals claiming
injuries from the bridge failure on May 20, 2000. All fifteen lawsuits seek
unspecified compensatory and punitive damages. SMI has filed or will file
shortly answers in all of the actions and preliminary discovery has begun in
many of the cases but is not complete. SMI intends to defend itself and denies
the allegations of negligence as well as related claims for punitive damages.
Additional lawsuits involving this incident may be filed in the future.
Management does not believe the outcome of these lawsuits or this incident will
have a material adverse affect on the Company's financial position or future
results of operations.
The fifteen lawsuits that have been filed are as follows: Bryan Heath
Baker, Susan D. Baker, John A. Hepler, III, Tammy L. Hepler, Curtis D. Hepler
and Patricia B. Hepler vs. Speedway Motorsports, Inc., Charlotte Motor
Speedway, Inc., Tindall Corporation and Anti-Hydro International, Inc., Rowan
County, North Carolina, filed October 12, 2000; Richard F. Brenner and Eileen
M. Brenner vs. Speedway Motorsports, Inc., Charlotte Motor Speedway, Inc.,
Tindall Corporation and Anti-Hydro International, Inc., Mecklenburg County,
North Carolina, filed November 13, 2000; Kenneth Michael Brown, Sandra D.
Melton, Robert Morris Melton, Jr., Robert Christopher Melton, Cammie L.
Yarborough, Charles Lynn Yarborough, Cammie Yarborough as parent and natural
guardian of Alexandria V. Yarborough vs. Speedway Motorsports, Inc., Tindall
Corporation and Anti-Hydro International, Inc., Rowan County, North Carolina,
filed May 31, 2000; Thomas A. Joyner, Jr. and Cathy B. Joyner vs. Speedway
Motorsports, Inc., Tindall Corporation and Anti-Hydro International, Inc.,
Cabarrus County, North Carolina, filed August 24, 2000; William A. Malesich vs.
Speedway Motorsports, Inc., Charlotte Motor Speedway, Inc., Tindall Corporation
and Anti-Hydro International, Inc., Mecklenburg County, North Carolina, filed
November 13, 2000; Hugh E. Merchant and Dallas B. Merchant vs. Speedway
Motorsports, Inc., Charlotte Motor Speedway, Inc., Tindall Corporation, and
Anti-Hydro International, Inc., Rowan County, North Carolina, filed December 4,
2000; James H. Merchant, Melissa K. Merchant, James Shelby Merchant, and
Melissa K. Merchant as parent and Guardian Ad Litem for Logan A. Merchant,
minor, vs. Speedway Motorsports, Inc., Charlotte Motor Speedway, Inc., Tindall
Corporation and Anti-Hydro International, Inc., Wake County, North Carolina,
filed December 27, 2000; Alexander Watson vs. Speedway Motorsports, Inc.,
Charlotte Motor Speedway, Inc., Tindall Corporation and Anti-Hydro
International, Inc., Mecklenburg County, North Carolina, filed November 13,
2000; Matthew T. Watson vs. Speedway Motorsports, Inc., Charlotte Motor
Speedway, Inc., Tindall Corporation and Anti-Hydro International, Inc.,
Mecklenburg County, North Carolina, filed November 13, 2000; David G. Yetter
and Ruth M. Yetter vs. Speedway Motorsports, Inc., Charlotte Motor Speedway,
Inc., Tindall Corporation and Anti-Hydro International, Inc., Mecklenburg
County, North Carolina, filed November 13, 2000; Henry Stevenson Crawford and
Carolyn E. Crawford vs. Speedway Motorsports, Inc., Tindall Corporation, and
Anti-Hydro International, Inc., Cabarrus County, North Carolina, filed December
18, 2000; Michael L. Propes and Susan Propes vs. Speedway Motorsports, Inc.,
Tindall Corporation, and Anti-Hydro International, Inc., Cabarrus County, North
Carolina, filed December 18, 2000; Terrell Kearse, Deborah Kearse, Michael
Kearse and Pam Kearse vs. Charlotte Motor Speedway, Inc., Tindall Corporation
and Anti-Hydro International, Inc., Cabarrus County, North Carolina, filed
February 16, 2001; John Emery v. Speedway Motorsports, Inc., Charlotte Motor
Speedway, Inc. and Tindall Corporation, United States District Court for the
Middle District of North Carolina, filed February 23, 2001; and Tracy Foster v.
Speedway Motorsports, Inc., Charlotte Motor Speedway, Inc. and Tindall
Corporation, United States District Court for the Middle District of North
Carolina, filed February 23, 2001.
On May 24, 2000, a Petition for Writ of Mandate, Declaratory Relief and
Injunctive Relief was filed in the Superior Court of California, Sonoma County
styled Yellow Flag Alliance, Tony Lilly and Nancy Lilly vs. Sonoma County and
Sonoma County Board of Supervisors. This action was brought to challenge the
Sonoma County Board of Supervisors' decision to authorize SPR to proceed with a
renovation project. In particular, the petitioners claim that the Board failed
to follow certain California's environmental statutes requiring evaluation of
the impact the renovation would have on the environment such as noise, traffic,
visual impairments, land use and zoning issues. Although neither SMI nor SPR is
named in the action,
15
an adverse outcome could impact our ability to expand the facility as planned.
SMI believes that the Petition has no basis and will defend itself vigorously.
Management does not believe the outcome of this incident will have a material
adverse affect on the Company's financial position or future results of
operations.
On August 23, 2000, a shareholder derivative complaint was filed against
SMI and its directors in Delaware Chancery Court for New Castle County. The
complaint, styled Crandon Capital Partners v. O. Bruton Smith, H.A. "Humpy"
Wheeler, William R. Brooks, Edwin R. Clark, William P. Benton, Mark M. Gambill,
Jack L. Kemp and Speedway Motorsports, Inc. (the "Crandon Complaint"), alleges
that in February 2000, SMI sold the Las Vegas Industrial Park -- R&D Industrial
Campus and approximately 300 acres of undeveloped adjacent land to O. Bruton
Smith, SMI's Chief Executive Officer, Chairman and majority stockholder, at
less than these properties' fair market value, which transaction allegedly
constituted a breach of fiduciary duties and corporate waste. Plaintiffs are
seeking unspecified damages, SMI's establishment of a system of internal
controls and procedures, rescission of the transaction with Mr. Smith or,
alternatively, unspecified rescissory damages from Mr. Smith, and plaintiff's
costs and attorney fees. On September 13, 2000, a second complaint, styled
Kathy Mayo v. O. Bruton Smith, H.A. "Humpy" Wheeler, William R. Brooks, Mark M.
Gambill, Jack L. Kemp and Speedway Motorsports, Inc., was filed in Delaware
Chancery Court raising the same allegations and seeking the same relief as the
Crandon Complaint. The Delaware court has consolidated the two cases. SMI
believes that the consolidated complaints have no basis and will defend the
action vigorously. SMI has filed an answer denying the allegations, and
preliminary discovery has begun but is not yet complete.
On January 31, 2001, the Federal Trade Commission (the "FTC") filed a
complaint against SMI and its subsidiary, Oil-Chem, in the United States
District Court, Middle District of North Carolina. The FTC is seeking a
judgment to enjoin SMI and Oil-Chem from advertising zMax Power System for use
in motor vehicles and to award equitable relief to redress alleged injury to
consumers. SMI has filed an answer in this action denying the allegations and
intends to defend itself. Management does not believe the outcome of this
lawsuit will have a material adverse effect on the Company's financial position
or future results of operations.
The Company's property at LMSC includes areas that were used as solid
waste landfills for many years. Landfilling of general categories of municipal
solid waste on the LMSC property ceased in 1992, but LMSC currently allows
certain property to be used for land clearing and inert debris landfilling and
for construction and demolition debris landfilling. Management believes that
the Company's operations, including the landfills on its property, are in
compliance with all applicable federal, state and local environmental laws and
regulations. Company management is not aware of any situation related to
landfill operations which would adversely affect the Company's financial
position or future results of operations.
The Company is a party to other litigation incidental to its business.
Management does not believe that the resolution of any or all of such
litigation is likely to have a material adverse effect on the Company's
financial condition or future results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of 2000, no matters were submitted to a vote of
security holders.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The common stock of SMI, $.01 per share par value (the "Common Stock"), is
traded on the New York Stock Exchange ("NYSE") under the symbol "TRK." The
Common Stock has traded on the NYSE since the Company's initial public offering
(the "IPO") in February 1995. As of March 9, 2001, 41,741,810 shares of Common
Stock were outstanding and there were approximately 3,040 record holders of
Common Stock.
The Company intends to retain future earnings to provide funds for the
operation and expansion of its business. As a holding company, the Company will
depend on dividends and other payments from each of its speedways and its other
subsidiaries to pay cash dividends to stockholders, as well as to meet debt
service and working capital requirements. 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 other factors as the Board of Directors, in its sole
discretion, may consider relevant. Furthermore, the Company's Credit Facility
and Senior Subordinated Notes (as described in Note 5 to the Consolidated
Financial Statements) include covenants which preclude the payment of
dividends.
16
The following table sets forth the high and low closing sales prices for
the Company's Common Stock, as reported by the NYSE Composite Tape for each
calendar quarter during the periods indicated.
2000 High Low
----- ------------ ------------
First Quarter ........... $ 35.000 $ 23.750
Second Quarter .......... 24.438 19.875
Third Quarter ........... 26.250 20.813
Fourth Quarter .......... 24.375 16.875
1999
----
First Quarter ........... 41.250 24.625
Second Quarter .......... 44.750 38.000
Third Quarter ........... 46.313 35.000
Fourth Quarter .......... 46.125 25.500
Item 6. Selected Financial Data
The following selected financial data for the five years ended December
31, 2000 have been derived from audited financial statements. The financial
statements for each of the three years ended December 31, 2000 were audited by
Deloitte & Touche LLP, and these financial statements and independent auditors'
report are contained elsewhere herein. All of the data set forth below are
qualified by this reference to, and should be read in conjunction with, the
Company's Consolidated Financial Statements (including the Notes thereto), and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere herein.
17
Year Ended December 31:
-------------------------------------------------------------
2000 1999 1998 1997 1996
----------- ----------- ----------- ------------ ------------
Income Statement Data (1) (in thousands, except per share data)
Revenues:
Admissions ............................................. $ 142,160 $ 132,694 $ 107,601 $ 94,032 $ 52,451
Event related revenue. ................................. 163,634 148,316 105,459 83,177 36,414
Other operating revenue ................................ 48,503 36,483 16,736 14,917 13,248
--------- --------- --------- -------- --------
Total revenues ........................................ 354,297 317,493 229,796 192,126 102,113
--------- --------- --------- -------- --------
Operating Expenses:
Direct expense of events ............................... 117,229 110,650 83,046 65,347 30,173
Other direct operating expense ......................... 44,432 32,241 10,975 9,181 8,005
General and administrative ............................. 53,794 47,375 34,279 31,623 16,995
Depreciation and amortization .......................... 31,192 28,536 21,701 15,742 7,598
Preoperating expense of new facility (2) ............... -- -- -- 1,850 --
--------- --------- --------- -------- --------
Total operating expenses ............................... 246,647 218,802 150,001 123,743 62,771
--------- --------- --------- -------- --------
Operating income ......................................... 107,650 98,691 79,795 68,383 39,342
Interest income (expense), net ........................... (26,973) (27,686) (12,228) (5,313) 1,316
Concession contract rights resolution (3) ................ (3,185) -- -- -- --
Acquisition loan cost amortization (4) ................... -- (3,398) (752) -- --
Other income ............................................. 1,740 959 3,202 991 2,399
--------- --------- --------- -------- --------
Income before income taxes and cumulative effect of
accounting change ...................................... 79,232 68,566 70,017 64,061 43,057
Provision for income taxes ............................... 31,100 27,123 27,646 25,883 16,652
--------- --------- --------- -------- --------
Income before cumulative effect of accounting change ..... 48,132 41,443 42,371 38,178 26,405
Cumulative effect of accounting change for club
membership fees (5) .................................... (1,257) -- -- -- --
--------- --------- --------- -------- --------
Net income ............................................... $ 46,875 $ 41,443 $ 42,371 $ 38,178 $ 26,405
========= ========= ========= ======== ========
Basic Earnings Per Share:
Before cumulative effect of accounting change .......... $ 1.16 $ 1.00 $ 1.02 $ 0.92 $ 0.65
========= ========= ======== ========
Accounting change for club membership fees (5) ......... (0.03)
---------
Basic earnings per share ............................... $ 1.13 $ 1.00 $ 1.02 $ 0.92 $ 0.65
========= ========= ========= ======== ========
Weighted average shares outstanding .................... 41,663 41,569 41,482 41,338 40,476
========= ========= ========= ======== ========
Diluted Earnings Per Share:
Before cumulative effect of accounting change .......... $ 1.13 $ 0.97 $ 1.00 $ 0.89 $ 0.64
========= ========= ======== ========
Accounting change for club membership fees (5) ......... (0.03)
---------
Diluted earnings per share ............................. $ 1.10 $ 0.97 $ 1.00 $ 0.89 $ 0.64
========= ========= ========= ======== ========
Weighted average shares outstanding .................... 44,715 44,960 44,611 44,491 41,911
========= ========= ========= ======== ========
Pro forma Amounts Assuming Retroactive Application Of
Accounting Change (5): .................................
Net income ............................................. $ 48,132 $ 40,601 $ 42,294 $ 38,104 $ 26,334
Basic earnings per share ............................... $ 1.16 $ 0.98 $ 1.02 $ 0.92 $ 0.65
Diluted earnings per share ............................. $ 1.13 $ 0.95 $ 1.00 $ 0.89 $ 0.64
Balance Sheet Data (1)
Total assets ............................................. $ 991,957 $ 995,982 $ 904,877 $597,168 $409,284
Long-term debt, including current maturities:
Revolving credit facility and other (6) ................ 91,000 130,975 254,714 1,433 23,465
Senior subordinated notes .............................. 252,788 253,208 124,708 124,674 --
Convertible subordinated debentures .................... 66,000 74,000 74,000 74,000 74,000
Capital lease obligations .............................. 309 377 502 19,433 18,165
Stockholders' equity ..................................... $ 379,341 $ 331,708 $ 287,120 $244,114 $204,735
18
- ---------
(1) These data for 1998 include LVMS acquired in December 1998, for 1997
include TMS which hosted its first racing event in April 1997, and for
1996 include AMS, LMSC and BMS acquired in January 1996 and SPR acquired
in November 1996.
(2) Preoperating expenses consist of non-recurring and non-event related costs
to develop, organize and open TMS, which hosted its first racing event in
April 1997.
(3) Concession contract rights resolution represents costs to reacquire the
contract rights to provide event food, beverage and souvenir merchandising
services at SPR from a previous provider whose original contract term was
to expire in 2004, including legal and other transaction costs. The
present value of estimated net future benefits to operations under the
contract rights is anticipated to exceed its costs. See Note 2 to the
Consolidated Financial Statements.
(4) Acquisition loan cost amortization results from financing costs incurred in
amending the Company's Credit Facility and Acquisition Loan to fund the
December 1998 acquisition of LVMS. Associated deferred financing costs of
$4,050,000 were amortized over the Acquisition Loan term which matured May
28, 1999. See Note 5 to the Consolidated Financial Statements.
(5) The Company changed its revenue recognition policies for Speedway Club
membership fees in the fourth quarter of 2000. Net revenues from
membership fees previously were recognized as income when billed and
associated expenses were incurred. Under the change, net membership
revenues are deferred when billed and amortized into income over ten
years. The cumulative effect of the accounting change as of January 1,
2000 reduced fiscal year 2000 net income by $1,257,000 after income taxes.
The pro forma amounts reflected above have been adjusted for the effect of
retroactive application of the accounting change on net membership fee
revenues, and related income taxes, had the new method been in effect for
the periods presented. See Note 2 to the Consolidated Financial
Statements.
(6) Other debt includes principally notes payable outstanding for the
acquisition of SoldUSA of $1,000,000 and $941,000 at December 31, 2000 and
1999, respectively, and for road construction of $647,000, $983,000 and
$1,465,000 at December 31, 1998, 1997 and 1996, respectively.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis of the results of operations and
financial condition as of December 31, 2000 should be read in conjunction with
the Consolidated Financial Statements (including the Notes thereto) appearing
elsewhere herein.
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 licensing of
television, cable network and radio rights to broadcast 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 rental of luxury suites
during such events and other track facilities. The Company derives additional
revenue from the operations of The Speedway Clubs at LMSC and TMS, 600 Racing,
Motorsports By Mail, Oil-Chem, Racing Country USA, and SoldUSA. See Item 1 --
"Other Operating Revenue" and Note 1 to the Consolidated Financial Statements
for descriptions of these businesses.
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, broadcast rights fees, sponsorship fees, and luxury suite and track
rentals. "Other operating revenue" includes the two Speedway Clubs, Legends
Car, industrial park rental, MBM, Oil-Chem, SoldUSA and certain FLE revenues.
The Company's revenue items produce different operating margins. Broadcast
rights, sponsorships, ticket sales, and luxury suite and track rentals produce
higher margins than concessions and souvenir sales, as well as sales of Legends
Cars, MBM, Oil-Chem, 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 Clubs, Legends
Car, industrial park rental, MBM, Oil-Chem, SoldUSA and certain FLE 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 a negative effect on the
Company's results of operations.
19
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.
Results of Operations
In 2000, the Company derived a substantial portion of its total revenues
from admissions and event related revenue attributable to 17 major
NASCAR-sanctioned racing events, four IRL racing events, two NASCAR Craftsman
Truck Series racing events, three major NHRA racing events, seven WOO racing
events, and three Hav-A-Tampa Dirt Late Model Series ("HAT") racing events. 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 IRL racing events, four NASCAR Craftsman Truck Series
racing events, two major NHRA racing events, and two WOO racing events. In
1998, the Company derived a substantial portion of its total revenues from
admissions and event related revenue attributable to 15 major NASCAR-sanctioned
racing events, four IRL racing events, three NASCAR Craftsman Truck Series
racing events, and one NHRA Nationals racing event.
The table below shows the relationship of income and expense items
relative to total revenue for the three years ended December 31, 2000.
Percentage of Total Revenue
for Year Ended December 31:
----------------------------------
2000 1999 1998
---------- ---------- ----------
Revenues:
Admissions ............................................ 40.1% 41.8% 46.8%
Event related revenue ................................. 46.2 46.7 45.9
Other operating revenue ............................... 13.7 11.5 7.3
----- ----- -----
Total revenues ........................................ 100.0% 100.0% 100.0%
----- ----- -----
Operating Expenses:
Direct expense of events .............................. 33.1 34.9 36.1
Other direct operating expense ........................ 12.5 10.1 4.8
General and administrative ............................ 15.2 14.9 14.9
Depreciation and amortization ......................... 8.8 9.0 9.5
----- ----- -----
Total operating expenses .............................. 69.6 68.9 65.3
----- ----- -----
Operating income ........................................ 30.4 31.1 34.7
Interest expense, net ................................... ( 7.6) ( 8.7) ( 5.3)
Other income (expense), net ............................. ( 0.4) ( 0.8) 1.0
----- ----- -----
Income before income taxes and accounting change ........ 22.4 21.6 30.4
Income tax provision .................................... ( 8.8) ( 8.5) (12.0)
----- ----- -----
Income before accounting change ......................... 13.6 13.1 18.4
Accounting change for club membership fees .............. ( 0.4) -- --
----- ----- -----
Net income .............................................. 13.2% 13.1% 18.4%
===== ===== =====
Year Ended December 31, 2000 Compared to Year Ended December 31, 1999
Total Revenues for 2000 increased by $36.8 million, or 11.6%, to $354.3
million, over such revenues for 1999. This improvement was due to increases in
all revenue items.
Admissions for 2000 increased by $9.5 million, or 7.1%, over such revenue
for 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 seating
capacity, and to a lesser extent, increases in ticket prices. In 2000,
admissions were negatively impacted by a convergence of uncontrollable factors
including poor weather at several major racing events and an early substantial
lead in and winning of the Winston Cup Series point race.
20
Event Related Revenue for 2000 increased by $15.3 million, or 10.3%, over
such revenue for 1999. This increase was due primarily to increases in
broadcast rights and sponsorship fees for NASCAR-sanctioned racing events. The
increase also reflects hosting a new NHRA-sanctioned Nationals racing event at
LVMS, and new WOO and HAT racing events at BMS, LMSC, and TMS, and the growth
in attendance, including related increases in concessions and souvenir sales.
In 2000, poor weather at several major racing events, and an early substantial
lead in and winning of the Winston Cup Series point race, negatively impacted
attendance with related effects on event related revenues.
Other Operating Revenue for 2000 increased by $12.0 million, or 32.9%,
over such revenue for 1999. This increase was due primarily 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 apparel and other merchandise sold through outside venues, including MBM
acquired in July 1999, from the LMSC Speedway Club and the TMS Speedway Club
opened in March 1999.
The overall increase was partially offset by decreased Legends Car sales,
in connection with the delayed release of a new "Thunder Roadster" line of
entry level stock car. The overall increase was also offset by revenues derived
from the Las Vegas Industrial Park which was sold in January 2000.
Direct Expense of Events for 2000 increased by $6.6 million, or 5.9%, over
such expense for 1999. This increase was due to higher race purses and
sanctioning fees required for NASCAR-sanctioned racing events held during the
current period. The increase also reflects hosting a new NHRA racing event at
LVMS, and hosting 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. The overall increases were
partially offset by the restructured IRL racing event at AMS whereby net event
results are included in event related revenue. As a percentage of admissions
and event related revenues combined, direct expense of events for 2000 was
38.3% compared to 39.4% for 1999.
Other Direct Operating Expense for 2000 increased by $12.2 million, or
37.8%, over such expense for 1999. This increase is due primarily to expenses
associated with commencement of Oil-Chem's media and other promotional
campaigns. The increase includes expenses associated with other operating
revenues derived from apparel and other merchandise sold through outside venues
including MBM, and with the increase in Oil-Chem, LMSC Speedway Club, and TMS
Speedway Club revenues. The overall increase was partially offset by decreased
Legends Car sales.
General and Administrative for 2000 increased by $6.4 million, or 13.5%,
over such expense for 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 and MBM which was acquired
in July 1999. As a percentage of total revenues, general and administrative
expense for 2000 was 15.2% and for 1999 was 14.9%.
Depreciation and Amortization Expense for 2000 increased by $2.7 million,
or 9.3%, over such expense for 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 1999 on certain LVMS property which was
sold in January 2000.
Operating Income for 2000 increased by $9.0 million, or 9.1%, to $107.7
million, over such income for 1999. This increase was due to the factors
discussed above.
Interest Expense, Net for 2000 was $27.0 million compared to $27.7 million
for 1999. This decrease was due primarily to higher interest income earned on
notes receivable and a reduction in outstanding borrowings under the Credit
Facility during the current period. The decrease was partially offset by higher
interest rates on the revolving Credit Facility and the Senior Subordinated
Notes issued in May 1999.
Concession Contract Rights Resolution of $3.2 million for 2000 represents
costs to reacquire the contract rights to provide event food, beverage and
souvenir merchandising services at SPR from a previous provider whose original
contract term expired in 2004, including legal and other transaction costs. The
present value of estimated net future benefits to operations under the contract
rights is anticipated to exceed its costs. Notwithstanding this expected future
benefit, their cost has been reflected as a current period expense because
acquisition was beyond Accounting Principles Board Opinion No. 16's one year
allocation period.
Acquisition Loan Cost Amortization of $3.4 million for 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.
21
Other Income for 2000 increased by $781,000 over such income for 1999.
This increase results primarily from larger gains from sales of marketable
equity securities and other investments in 2000 compared to 1999, and from
gains on repurchases of convertible debentures in 2000.
Income Tax Provision. The Company's effective income tax rate for 2000 was
39.3% and for 1999 was 39.6%.
Income Before Accounting Change for 2000 increased by $6.7 million, or
16.1%, to $48.1 million, over such income for 1999. This increase was due to
the factors discussed above.
Cumulative Effect of Accounting Change for Club Membership Fees of $1.3
million for 2000 represents the cumulative effect, net of income taxes, as of
January 1, 2000 of the Company's change in revenue recognition policies for
Speedway Club membership fees. Net revenues from membership fees previously
were recognized as income when billed and associated expenses were incurred.
Under the change, net membership revenues are deferred when billed and
amortized into income over ten years.
Net Income for 2000 increased by $5.4 million, or 13.1%, to $46.9 million,
over such income for 1999. This increase was due to the factors discussed
above.
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Total Revenues for 1999 increased by $87.7 million, or 38.2%, to $317.5
million, over such revenues for 1998. This improvement was due to increases in
all revenue items, particularly admissions and event related revenue.
Admissions for 1999 increased by $25.1 million, or 23.3% to $132.7
million, over admissions for 1998. This increase was primarily due to hosting
NASCAR-sanctioned and IRL racing events at newly acquired LVMS, and to
continued growth in NASCAR-sanctioned racing events held at the Company's other
speedways during 1999. The growth in admissions reflects the continued
increases in attendance and in ticket prices, and additions to permanent
seating capacity. The increase was also due, to a lesser extent, to hosting a
new NHRA racing event at BMS in 1999.
Event Related Revenue for 1999 increased by $42.9 million, or 40.6% to
$148.3 million, over such revenue for 1998. This increase was primarily due to
hosting NASCAR-sanctioned and IRL racing events at the Company's newly acquired
LVMS. The increase also results from increases in sponsorship fees, including
LMSC facility naming rights fees, in broadcast rights fees, and to growth in
attendance, resulting in related increases in concessions and souvenir sales,
at NASCAR-sanctioned racing events.
Other Operating Revenue for 1999 increased by $19.7 million, or 118.0% to
$36.5 million, over such revenue for 1998. This increase was due to growth in
revenues of Oil-Chem associated with the commencement of media and other
promotional campaigns, and to revenues derived from apparel and other
merchandise sold through outside venues, including FLE, MBM and WMI, and from
The Texas Motor Speedway Club which opened in March 1999.
Direct Expense of Events for 1999 increased by $27.6 million, or 33.2%,
over such expense for 1998. This increase was due primarily to hosting
NASCAR-sanctioned and IRL racing events at the Company's newly acquired LVMS.
The increase also was due to higher race purses and sanctioning fees required
for NASCAR-sanctioned racing events held during 1999, and to increased
operating costs associated with the growth in attendance, including related
increases in concessions and souvenir sales. The increase was also due to
hosting a new NHRA racing event at BMS in 1999. Operating expenses associated
with inaugural events or newly acquired speedways are typically higher than
historical events or operations.
Other Direct Operating Expense for 1999 increased by $21.3 million, or
193.8%, over such expense for 1998. 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,
including FLE, MBM and WMI, from The Texas Motor Speedway Club, and with the
increase in Oil-Chem revenues.
General and Administrative Expense for 1999 increased by $13.1 million, or
38.2%, over such expense for 1998. The increase was primarily attributable to
costs associated with the Company's newly acquired LVMS, and to increases in
operating costs associated with the growth and expansion at the Company's other
speedways and operations. As a percentage of total revenues, general and
administrative expense was 14.9% for both 1999 and 1998.
22
Depreciation and Amortization Expense for 1999 increased by $6.8 million,
or 31.5%, over such expense for 1998. This increase was primarily due to
property and equipment and intangible assets related to the LVMS acquisition,
and to additions to property and equipment at the Company's other speedways.
Operating Income for 1999 increased by $18.9 million, or 23.7%, over such
income for 1998. This increase was due to the factors discussed above.
Interest Expense, Net for 1999 was $27.7 million compared to $12.2 million
for 1998. This increase was due primarily to higher average borrowings
outstanding during 1999 as compared to 1998. The increase reflects additional
borrowings to fund the LVMS acquisition, and a higher interest rate on the
senior subordinated notes issued in May 1999.
Acquisition Loan Cost Amortization of $3.4 million for 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 for 1999 decreased by $2.2 million compared to such income
for 1998. This decrease results primarily from gains on sales of thirteen TMS
condominiums in 1998. The gain on sale of two TMS condominiums was recognized
in 1999.
Income Tax Provision. The Company's effective income tax rate for 1999 was
39.6% and for 1998 was 39.5%.
Net Income for 1999 decreased by $928,000, or 2.2%, compared to such
income for 1998. This decrease was due to the factors discussed above.
Seasonality and Quarterly Results
The Company currently will sponsor 17 major annual racing events in 2001
sanctioned by NASCAR, including ten Winston Cup and seven Busch Grand National
Series racing events. The Company will also sponsor three IRL racing events,
one CART racing event, three NASCAR Craftsman Truck Series racing events, four
major NHRA racing events, seven WOO racing events, and three UDTRA Pro Dirt Car
Series racing events. As a result, the Company's business has been, and is
expected to remain, highly seasonal.
In 2000 and 1999, the Company's second and fourth quarters accounted for
67% and 68%, respectively, of its total annual revenues and 86% and 89%,
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. In 1999, the Company's operating
results for the first and third quarters were significantly impacted by the
additional racing events held at LVMS. The concentration of racing events in
the second quarter, and the growth in the Company's operations with attendant
increases in overhead expenses, may tend to increase operating losses or
minimize operating income in future first and third quarters.
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 more significant racing schedule changes that have occurred during the last
three years include the following: LVMS hosted an IRL racing event in the
second quarter of 2000 which, along with a NASCAR Craftsman Truck Series racing
event, was held in the third quarter of 1999. Also in the second quarter of
2000, LVMS hosted an inaugural NHRA Nationals racing event, and BMS, LMSC and
TMS hosted inaugural WOO and HAT racing events. In the third quarter of 2000,
AMS hosted an IRL racing event under a restructured sanctioning agreement
whereby net event results are included in event related revenue. In the third
quarter of 1999, revenues and expenses associated with the IRL event are
included in admissions and event related revenues and direct expense of events.
The table below shows excerpted results from the Company's Quarterly
Reports on Form 10-Q filed in the years ended December 31, 2000 and 1999. As
further described in Note 2 to the Consolidated Financial Statements, the
Company changed its revenue recognition policies for Speedway Club membership
fees in the fourth quarter of 2000. The quarterly operating results for the
year ended December 31, 2000 below reflect restatement for retroactive
application of the accounting change on club membership fees. Previously
reported amounts for fiscal 2000 included: total revenues of $66.3 million for
the first quarter, $160.8 million for the second quarter, and $51.7 million for
the third quarter; operating income of $13.6 million for the first quarter,
$76.7 million for the second quarter, and $2.3 million for the third quarter;
and net income of $4.4 million for the first quarter and $41.9 million for the
second quarter, and net loss of $4.6 million for the third quarter. The
cumulative effect of the accounting change reduced fiscal year 2000 net income
by $1,257,000 after income taxes, and is reflected below as of January 1, 2000
in the first quarter of 2000.
23
The pro forma amounts for fiscal year 1999 reflected below have been
adjusted for the effect of retroactive application of the accounting change on
net membership fee revenues, and related income taxes, had the new method been
in effect for the periods presented. Previously reported amounts for fiscal
1999 included: total revenues of $53.1 million for the first quarter, $140.1
million for the second quarter, $48.6 million for the third quarter, and $75.7
million for the fourth quarter; operating income of $11.9 million for the first
quarter and $69.2 million for the second quarter, operating loss of $657,000
for the third quarter, and operating income of $18.3 million for the fourth
quarter; and net income of $2.0 million for the first quarter and $37.4 million
for the second quarter, net loss of $4.8 million for the third quarter, and net
income of $6.8 million for the fourth quarter. Pro forma amounts for fiscal
year 1999 are presented to provide comparability with restated amounts for
fiscal year 2000.
Where computations are anti-dilutive, reported basic and diluted per share
amounts below are the same. As such, individual quarterly per share amounts may
not be additive. Also, individual quarterly amounts may not be additive due to
rounding.
(In thousands, except NASCAR-Sanctioned
Events and Per Share Amounts)
---------------------------------------------------------------
2000 (Unaudited/Restated)
---------------------------------------------------------------
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total
----------- ------------- ------------ ------------ -----------
Total revenues ........................... $ 65,525 $ 160,454 $51,604 $ 76,714 $354,297
Operating income (loss) .................. 12,873 76,344 2,138 16,295 107,650
Net income (loss) before cumulative
effect of accounting change, as
restated for 2000 and pro forma
for 1999 ................................ 3,960 41,718 (4,641) 7,097 48,132
Cumulative effect of accounting
change .................................. (1,257) -- -- -- (1,257)
-------- --------- ------- -------- --------
Net income (loss) as restated for 2000
and pro forma for 1999 .................. $ 2,703 $ 41,718 $(4,641) $ 7,097 $ 46,875
======== ========= ======= ======== ========
Basic earnings (loss) per share before
accounting change as previously
reported ................................ $ 0.11 $ 1.01 $ 0.11) $ 0.17 $ 1.18
Accounting change ........................ (0.04) (0.01) -- -- (0.05)
-------- --------- ------- -------- --------
Basic earnings (loss) per share as
restated for 2000 and pro forma
for 1999 ................................ $ 0.07 $ 1.00 $ 0.11) $ 0.17 $ 1.13
======== ========= ======= ======== ========
Diluted earnings (loss) per share
before accounting change as
previously reported ..................... $ 0.11 $ 0.95 $ 0.11) $ 0.17 $ 1.15
Accounting change ........................ (0.05) -- -- -- (0.05)
-------- --------- ------- -------- --------
Diluted earnings (loss) per share as
restated for 2000 and pro forma
for 1999 ................................ $ 0.06 $ 0.95 $ 0.11) $ 0.17 $ 1.10
======== ========= ======= ======== ========
NASCAR-sanctioned events ................. 4 8 2 3 17
(In thousands, except NASCAR-Sanctioned
Events and Per Share Amounts)
------------------------------------------------------------------
1999 (Unaudited/Pro forma)
------------------------------------------------------------------
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total
------------ ------------- ------------ ------------ -------------
Total revenues ........................... $ 53,029 $ 139,999 $47,908 $ 75,162 $ 316,099
Operating income (loss) .................. 11,814 69,100 (1,369) 17,751 97,297
Net income (loss) before cumulative
effect of accounting change, as
restated for 2000 and pro forma
for 1999 ................................ 1,963 37,379 (5,208) 6,467 40,601
Cumulative effect of accounting
change .................................. -- -- -- -- --
-------- --------- ------- -------- ---------
Net income (loss) as restated for 2000
and pro forma for 1999 .................. $ 1,963 $ 37,379 $(5,208) $ 6,467 $ 40,601
======== ========= ======= ======== =========
Basic earnings (loss) per share before
accounting change as previously
reported ................................ $ 0.05 $ 0.90 $ 0.11) $ 0.16 $ 1.00
Accounting change ........................ -- -- ( 0.02) -- (0.02)
-------- --------- ------- -------- ---------
Basic earnings (loss) per share as
restated for 2000 and pro forma
for 1999 ................................ $ 0.05 $ 0.90 $ 0.13) $ 0.16 $ 0.98
======== ========= ======= ======== =========
Diluted earnings (loss) per share
before accounting change as
previously reported ..................... $ 0.05 $ 0.84 $ 0.11) $ 0.16 $ 0.97
Accounting change ........................ -- -- ( 0.02) -- (0.02)
-------- --------- ------- -------- ---------
Diluted earnings (loss) per share as
restated for 2000 and pro forma
for 1999 ................................ $ 0.05 $ 0.84 $ 0.13) $ 0.16 $ 0.95
======== ========= ======= ======== =========
NASCAR-sanctioned events ................. 4 8 2 3 17
Near-Term Operating Trends
There are many factors that affect the Company's growth potential, future
operations and financial results. Fiscal 2001 will be the Company's first year
under the multi-year consolidated domestic television broadcast and ancillary
rights agreements for NASCAR Winston Cup and Busch Grand National Series
events. These new agreements are expected to provide the Company with future
increases in contracted broadcasting and other ancillary revenues. Total
combined revenues under the domestic broadcast and ancillary rights agreements
could approximate up to $68 million in 2001, representing a $38 million
increase over 2000. While economic conditions and competitive racing can affect
ticket sales, management believes ticket demand should continue to grow.
However, to help bolster fan interest in challenging economic conditions,
management has decided not to increase many ticket and concession prices at
least for 2001.
Significant Factors in 2000
SPR Concession Contract Rights Resolution. In November 1996, the Company
acquired certain tangible and intangible assets and the operations of Sears
Point Raceway. At that time, a third party enjoyed the contract rights to
provide event food, beverage and souvenir merchandising services at SPR whose
original contract was to expire in 2004. The Company's subsidiary Finish Line
Events has provided such services since 1998. In September 2000, the Company
reacquired such contract rights for approximately $3.2 million, including legal
and other transaction costs. Because fair value was not readily ascertainable
until reaching final agreement in September 2000, the contract rights were not
reflected in SPR's original purchase price allocation nor recorded until their
value was established. Management anticipates the present value of estimated
24
net future benefits under the contract rights will exceed its costs.
Notwithstanding this expected future benefit, their cost has been reflected as
a current period expense because acquisition was beyond Accounting Principles
Board Opinion No. 16's one year allocation period.
May 2000 Bridge Collapse after LMSC Race Event. 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. All personal injury claims resulting
from this incident are currently being handled by the bridge's manufacturer,
Tindall Corporation, and its insurer. To date, fifteen lawsuits resulting from
this incident have been filed, all seeking unspecified compensatory and
punitive damages. SMI has filed, or will file shortly, answers in all of the
actions and preliminary discovery has begun in many of the cases but is not yet
complete. See Item 3 -- "Legal Proceedings" for additional information on these
legal matters. Additional lawsuits involving this incident may be filed in the
future. SMI intends to defend itself and denies the allegations of negligence
as well as related claims for punitive damages. Management does not believe the
outcome of these lawsuits or this incident will have a material adverse affect
on 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 appraisal and approximates the Company's net carrying value as of
December 31, 2000 and selling costs. The sale proceeds were used to reduce
outstanding borrowings under the Credit Facility. See Item 3 -- "Legal
Proceedings" for information on related legal matters.
Complaint Against Oil-Chem Research Corp. In January 2001, the Federal
Trade Commission filed a complaint against SMI and Oil-Chem seeking a judgment
to enjoin SMI and Oil-Chem from advertising zMax Power System for use in motor
vehicles and to award equitable relief to redress alleged injury to consumers.
See Item 3 -- "Legal Proceedings" for additional information on this legal
matter. SMI has filed an answer in this action. SMI intends to defend itself
and denies the allegations. Management does not believe the outcome of this
lawsuit will have a material adverse effect on the Company's financial position
or future results of operations.
May 1999 IRL Race Event Accident at LMSC. 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 and other injuries resulted. The settled wrongful death
lawsuits sought unspecified compensatory and punitive damages. This settlement
had no material adverse affect on the Company's financial position or results
of operations. A personal injury lawsuit was filed in February 2001 against
SMI, IRL and others seeking unspecified compensatory and punitive damages. SMI
has filed an answer in this pending action and preliminary discovery is
underway but not yet completed. See Item 3 -- "Legal Proceedings" for
additional information on these legal matters. SMI intends to defend itself and
denies the allegations of negligence as well as related claims for punitive
damages. Management does not believe the outcome of this lawsuit will have a
material adverse affect on the Company's financial position or future results
of operations.
Other Significant Factors in Fiscal 2000. The operating results for fiscal
2000, and more specifically the three months ended December 31, 2000, were
negatively impacted by less than expected attendance and event related revenues
at several of the Company's major racing events due to a convergence of
uncontrollable factors including poor weather and an early substantial lead in
and winning of the Winston Cup Series point race.
Liquidity and Capital Resources
The Company has historically met its working capital and capital
expenditure 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 2000 for improvements and expansion at its
speedway facilities. Significant changes in the Company's financial condition
and liquidity during 2000 resulted primarily from: (1) net cash generated by
operations amounting to $75.6 million, (2) capital expenditures amounting to
$85.5 million, and (3) reducing outstanding borrowings under the Credit
Facility by $40.0 million with proceeds from the sale of the LVMS Industrial
Park, and reducing outstanding Convertible Subordinated Debentures by $8.0
million. Cash flows from operations in 2000 were negatively impacted by a
decrease in deferred race event income of $21.3 million between December 31,
2000 and 1999 due primarily to changes in billing and payment terms of advance
ticket sales and suites rentals and slower ticket sales for the upcoming 2001
racing season. At December 31, 2000, the Company had $90.0 million in
outstanding borrowings under the $250.0 million Credit Facility.
25
Management anticipates that cash from operations, and funds available
through the Credit Facility, will be sufficient to meet the Company's operating
needs through 2001, 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. The
Company may, from time to time, redeem or retire convertible subordinated
debentures and other debt, and purchase its other securities, depending on
liquidity, prevailing market conditions, 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. 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 continued improving and expanding its on-site roads and
available parking and made other site improvements. In 2000, the Company added
approximately 12,000 permanent seats at BMS, 14,000 at LMSC, and 7,000 at LVMS,
all featuring stadium-style premium seating. At BMS, LMSC and LVMS, the Company
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 also completed reconstruction and
expansion of one of its dragstrips into a state-of-the-art dragway with
permanent grandstand seating, luxury suites, and extensive fan amenities and
facilities.
In 2001, the Company plans to continue major renovations at SPR, including
its ongoing reconfiguration and modernization into a "stadium-style" road
racing course, adding up to 25,000 new grandstand seats, 64,000 new hillside
terrace seats, and 19 new luxury suites. Also, SPR plans to continue improving
and expanding its on-site roads and available parking, and reconfiguring
traffic patterns and entrances to ease congestion and improve traffic flow. In
2001, TMS plans to convert approximately 50 suites to speedway club-style
seating areas. Although these suites are currently unleased, management
believes excess demand for premium seating and services at TMS's largest events
exceeds current availability, and that conversion will generate additional
operating profits. Similar to 2000, the Company plans to further expand
concessions, restroom and other fan amenities for the convenience, comfort and
enjoyment of fans, and to continue improving and expanding its on-site roads
and available parking to ease congestion and improve traffic flow at each of
its speedways in 2001.
The estimated aggregate cost of capital expenditures in 2001 will
approximate $55 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 addition, the actual cost could vary materially
from the Company's estimates if the Company's 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.
26
Recently Issued Accounting Standards
The Company will adopt Statement of Financial Accounting Standards
("SFAS") No. 133 "Accounting for Derivative Instruments and Hedging Activities"
as of January 1, 2001. SFAS No. 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires, among
other things, that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
Because the Company does not have any derivative instruments, adoption is
expected to have no effect on the Company's financial statements or
disclosures.
The Company periodically evaluates the possible effects of SFAS No. 131
"Disclosures about Segments of an Enterprise and Related Information" on its
financial statement disclosures. The combined operations of the Company's
speedways comprise one operating segment, and encompass all admissions and
event related revenues and associated expenses. Other Company operations
presently are not significant relative to those of the speedways. As such, at
this time, SFAS No. 131 continues to have no effect on the Company's financial
statement disclosures.
Environmental Matters
The Company's property at LMSC includes areas that were used as solid
waste landfills for many years. Landfilling of general categories of municipal
solid waste on the LMSC property ceased in 1992. There is one LCID landfill
currently being permitted at LMSC, however, to receive inert debris and waste
from land clearing activities, and one LCID landfill that was closed in 1999.
Two other LCID landfills on the LMSC property were closed in 1994. LMSC intends
to allow similar LCID landfills to be operated on the LMSC property in the
future. Prior to 1999, LMSC leased certain LMSC property to Allied Waste
Industries, Inc. for use as C&D landfill, which can receive solid waste
resulting solely from construction, remodeling, repair or demolition operations
on pavement, buildings or other structures, but cannot receive inert debris,
land-clearing debris or yard debris. In addition, Allied Waste Industries owns
and operates an active solid waste landfill adjacent to LMSC. Management
believes that the active solid waste landfill was constructed in such a manner
as to minimize the risk of contamination to surrounding property. Management
also believes that the Company's operations, including the landfills and
facilities on its property, are in substantial compliance with all applicable
federal, state and local environmental laws and regulations. Management is not
aware of any situations related to landfill operations which it expects would
materially adversely affect the Company's financial position or future results
of operations.
Item 7A. 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 December 31, 2000 would cause a change in
annual interest expense of approximately $900,000. The Company's Senior
Subordinated Notes and Convertible Subordinated Debentures are fixed interest
rate debt obligations. See Note 5 to the Consolidated Financial Statements for
information on the terms and conditions, including redemption and conversion
features, of the Company's debt obligations. The table below presents the
principal balances outstanding, fair values, interest rates and maturity dates
as of December 31, 2000 and 1999 (in thousands):
Carrying Value Fair Value
---------------------- ----------------------
Maturity
2000 1999 2000 1999 Dates
---------- ----------- ---------- ----------- ---------------
Floating rate revolving credit facility (1) .. $ 90,000 $130,000 $ 90,000 $130,000 May 2004
8.5% Senior subordinated notes payable ....... 252,788 253,208 243,125 238,750 August 2007
5.75% Convertible subordinated debentures .... 66,000 74,000 63,030 77,330 September 2003
- ---------
(1) The weighted-average interest rate on borrowings under the revolving Credit
Facility was 7.6% in 2000 and 6.5% in 1999.
27
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. The table below presents the aggregate cost and fair market
value of marketable equity securities as of December 31, 2000 and 1999 (in
thousands):
December 31,
-------------------
2000 1999
--------- --------
Aggregate cost ............ $1,615 1,637
Fair market value ......... 864 1,181
Item 8. Financial Statements and Supplementary Data
See Index to Financial Statements which appears on page F-1 herein.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
28
PART III
Item 10. Directors and Executive Officers of the Registrant
Information required by this item with respect to compliance by SMI's
directors, executive officers and certain beneficial owners of SMI's Common
Stock with Section 16(a) of the Securities Exchange Act of 1934, and with
respect to Committees of the Board of Directors, including the Audit Committee
and the Compensation Committee, is furnished by incorporation by reference to
all information under the captions entitled "Ownership of Capital Securities,"
"Election of Directors," and "Section 16(a) Beneficial Ownership Reporting
Compliance" in the Proxy Statement (to be filed hereafter) for SMI's Annual
Meeting of the Stockholders to be held on May 3, 2001 (the "Proxy Statement").
Item 11. Executive Compensation
The information required by this item is furnished by incorporation by
reference to all information under the captions entitled "Election of
Directors" and "Executive Compensation" in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is furnished by incorporation by
reference to all information under the caption "General -- Owner of Capital
Securities" in the Proxy Statement.
Item 13. Certain Relationships and Related Transactions
The information required by this item is furnished by incorporation by
reference to all information under the caption "Certain Transactions" in the
Proxy Statement.
29
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
The exhibits and other documents filed as a part of this Annual Report on
Form 10-K, including those exhibits which are incorporated by reference herein
are:
(a) (1) Financial Statements:
See the Index to Financial Statements which appears on page F-1
hereof.
(2) Financial Statement Schedules:
None.
(3) Exhibits:
Exhibits required in connection with this Annual Report on Form 10-K
are listed below. Certain exhibits, indicated by an asterisk, are
hereby incorporated by reference to other documents on file with the
Securities and Exchange Commission with which they are physically
filed, to be a part hereof as of their respective dates.
EXHIBIT INDEX
Exhibit
Number Description
- -------- ----------------------------------------------------------------------------------------------------------
*3.1 Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Registration
Statement on Form S-1 (File No. 33-87740) of the Company (the "Form S-1")).
*3.2 Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Form S-1).
*3.3 Amendment to Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.3 to
the Registration Statement on Form S-3 (File No. 333-13431) of the Company (the "November 1996
Form S-3")).
*3.4 Amendment to Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.4 to
the Registration Statement on Form S-4 (File No. 333-35091) of the Company (the "September 1997
Form S-4")).
*4.1 Form of Stock Certificate (incorporated by reference to Exhibit 4.1 to the Form S-1).
*4.2 Indenture dated as of September 1, 1996 between the Company and First Union National Bank of North
Carolina, as Trustee (the "First Union Indenture") (incorporated by reference to Exhibit 4.1 to the
November 1996 Form S-3).
*4.3 Form of 5 3/4% Convertible Subordinated Debenture due 2003 (included in the First Union Indenture).
*4.4 Indenture dated as of August 4, 1997 between the Company and First Trust National Association, as
Trustee (the "First Trust Indenture") (incorporated by reference to Exhibit 4.1 to the September 1997
Form S-4).
*4.5 Form of 8 1/2% Senior Subordinated Notes Due 2007 (included in the First Trust Indenture).
*4.6 First Supplemental Indenture to the First Trust Indenture, dated as of April 1, 1999 (incorporated by
reference to Exhibit 4.6 to the Registration Statement on Form S-3 (File No. 333-80021) of the Company
(the "June 1999 Form S-4").
*4.7 Second Supplemental Indenture to the First Trust Indenture, dated as of June 1, 1999 (incorporated by
reference to Exhibit 4.7 to the June 1999 Form S-4).
4.8 Third Supplemental Indenture to the First Trust Indenture, dated as of December 31, 1999.
4.9 Fourth Supplemental Indenture to the First Trust Indenture, dated as of December 31, 2000.
*4.10 Indenture dated as of May 11, 1999 between the Company, the Guarantors named therein and US Bank
Trust National Association, as Trustee (the "US Bank Trust Indenture") (incorporated by reference to
Exhibit 4.8 to the June 1999 Form S-4).
*4.11 Form of 8 1/2% Senior Subordinated Notes Due 2007 (included in the US Bank Trust Indenture).
*4.12 First Supplemental Indenture to the US Bank Trust Indenture, dated as of June 1, 1999 (incorporated by
reference to Exhibit 4.10 to the June 1999 Form S-4).
4.13 Second Supplemental Indenture to the US Bank Trust Indenture, dated as of December 31, 1999.
4.14 Third Supplemental Indenture to the US Bank Trust Indenture, dated as of December 31, 2000.
30
Exhibit
Number Description
- ---------- ---------------------------------------------------------------------------------------------------------
*10.7 Deferred Compensation Plan and Agreement by and between Atlanta Motor Speedway, Inc. and Edwin R.
Clark, dated as of January 22, 1993 (incorporated by reference to Exhibit 10.43 to the Form S-1).
*10.8 Deferred Compensation Plan and Agreement by and between Charlotte Motor Speedway, Inc. and
H.A. "Humpy" Wheeler, dated as of March 1, 1990 (incorporated by reference to Exhibit 10.44 to the
Form S-1).
*10.9 Speedway Motorsports, Inc. 1994 Stock Option Plan (incorporated by reference to Exhibit 10.45 to the
Form S-1).
*10.10 Speedway Motorsports, Inc. Formula Stock Option Plan (incorporated by reference to Exhibit 10.13 to the
Annual Report on Form 10-K of the Company for the year ended December 31, 1995 (the "1995
Form 10-K")).
*10.11 Speedway Motorsports, Inc. Employee Stock Purchase Plan amended and restated as of July 1, 1996
(incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-8 (File No. 333-17687)
of the Company).
*10.13 Promissory Note made by Atlanta Motor Speedway, Inc. in favor of Sonic Financial Corporation in the
amount of $1,708,767, dated as of December 31, 1993 (incorporated by reference to Exhibit 10.51 to
Form S-1).
*10.14 Non-Negotiable Promissory Note dated April 24, 1995 by O. Bruton Smith in favor of the Company
(incorporated by reference to Exhibit 10.20 to the 1995 Form 10-K).
*10.15 Asset Purchase Agreement dated October 24, 1996 between the Company, as buyer, and Sears Point
Raceway (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K of the Company
filed as of December 4, 1996 (the "SPR Form 8-K")).
*10.16 Master Ground Lease dated November 18, 1996 by and between Brenda Raceway Corporation and the
Company (incorporated by reference to Exhibit 99.2 to the SPR Form 8-K).
*10.17 Deed of Trust, Security Agreement and Fixture Filing with Assignment of Rents and Agreements dated as
of November 18, 1996 by Brenda Raceway Corporation to First American Title Insurance Company for
the benefit of Sonoma Funding Corporation (incorporated by reference to Exhibit 99.3 to the SPR
Form 8-K).
*10.18 Promissory Note secured by Deed of Trust dated November 18, 1996 by Brenda Raceway Corporation in
favor of Sonoma Funding Corporation (incorporated by reference to Exhibit 99.4 to the SPR Form 8-K).
*10.19 Purchase Contract dated December 18, 1996 between Texas Motor Speedway, Inc., as seller, and FW
Sports Authority, Inc., as purchaser (incorporated by reference to Exhibit 10.23 to the Annual Report on
Form 10-K of the Company for the year ended December 31, 1996 (the "1996 Form 10-K")).
*10.20 Lease Agreement dated as of December 18, 1996 between FW Sports Authority, Inc., as lessor, and Texas
Motor Speedway, Inc., as lessee (incorporated by reference to Exhibit 10.24 to the 1996 Form 10-K).
*10.21 Guaranty Agreement dated as of December 18, 1996 among the Company, the City of Fort Worth, Texas
and FW Sports Authority, Inc. (incorporated by reference to Exhibit 10.25 to the 1996 Form 10-K).
*10.30 Asset Purchase Agreement and Escrow Instructions dated November 17, 1998 between Speedway
Motorsports, Inc., as buyer, and Las Vegas Motor Speedway, Inc., as seller (incorporated by reference to
Exhibit 99.1 to the Company's current Report on Report 8-K filed as of December 15, 1998 ("the LVMS
Form 8-K").
*10.33 Naming Rights Agreement dated as of February 9, 1999 by and between Speedway Motorsports, Inc.,
Charlotte Motor Speedway, Inc., Lowe's Home Center's, Inc., Lowe's HIW, Inc. and Sterling Advertising
Ltd. (incorporated by reference to Exhibit 10.1 to SMI's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999).
*10.34 Registration Rights Agreement dated as of May 11, 1999 among the Company, NationsBank Montgomery
Securities LLC, First Union Capital Markets Corp. and JC Bradford & Co., LLC (incorporated by
reference to Exhibit 10.34 to the June 1999 Form S-4).
*10.35 Purchase Agreement dated as of May 4, 1999 among the Company, NationsBank Montgomery Securities
LLC, First Union Capital Markets Corp. and JC Bradford & Co., LLC (incorporated by reference to
Exhibit 10.35 to the June 1999 Form S-4).
*10.36 Credit Agreement dated as of May 28, 1999 (the "Credit Agreement") among the Company and
Speedway Funding Corp., as borrowers, certain subsidiaries of the Company, as guarantors, and the
lenders named therein, including NationsBank, N.A., as agent for the lenders and a lender (incorporated
by reference to Exhibit 10.36 to the June 1999 Form S-4).
31
Exhibit
Number Description
- ----------- ------------------------------------------------------------------------------------------------------
*10.37 Pledge Agreement dated as of May 28, 1999 among the Company and the subsidiaries of the Company
that are guarantors under the Credit Agreement, as pledgors, and, NationsBank, N.A., as agent for the
lenders under the Credit Agreement (incorporated by reference to Exhibit 10.37 to the June 1999
Form S-4).
*10.38 Contract for Sale of Real Estate dated as of December 23, 1999 between Las Vegas Motor Speedway,
LLC and Las Vegas Industrial Park, LLC (incorporated by reference to Exhibit 10.1 to SMI's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2000 (the "March 2000 Form 10-Q")).
*10.39 Subordinated Promissory Note dated January 12, 2000 by Las Vegas Industrial Park, LLC in favor of Las
Vegas Motor Speedway, LLC (incorporated by reference to Exhibit 10.2 to the March 2000 Form 10-Q).
*10.40 Deed of Trust, Assignment of Rents and Fixture Filing dated as of January 12, 2000 among Las Vegas
Industrial Park, LLC, National Title Co. and Las Vegas Motor Speedway, LLC (incorporated by reference
to Exhibit 10.3 to the March 2000 Form 10-Q).
*10.41 Guaranty dated as of January 12, 2000 by O. Bruton Smith to and in favor of Las Vegas Motor
Speedway, LLC (incorporated by reference to Exhibit 10.4 to the March 2000 Form 10-Q).
21.1 Subsidiaries of the Company.
23.0 Independent Auditors' Consent for Registration Statements No. 33-99942, No. 333-17687, and
No. 333-49027 of Speedway Motorsports, Inc. on Form S-8.
99.1 Risk Factors regarding "forward-looking" statements.
- ---------
*Previously filed.
(b) Reports on Form 8-K
No reports were filed on Form 8-K during the fourth quarter of 2000.
32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of
Charlotte, State of North Carolina, on the 28th day of March, 2001.
SPEEDWAY MOTORSPORTS, INC.
By: /S/ O. BRUTON SMITH
--------------------------------------
O. Bruton Smith
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, the
report has been signed below by the following persons in the capacities and on
the dates indicated.
Signature Title Dates
- ------------------------------------------------------ ---------------------------------------- ---------------
/S/ O. BRUTON SMITH Chief Executive Officer (principal March 28, 2001
---------------------------------- executive officer) and Chairman
O. Bruton Smith
/S/ H.A. "HUMPY" WHEELER President, Chief Operating Officer and March 28, 2001
---------------------------------- Directory
H.A. "Humpy" Wheeler
/S/ WILLIAM R. BROOKS Vice President, Treasurer, Chief March 28, 2001
---------------------------------- Financial Officer (principal financial
William R. Brooks officer and accounting officer) and
Director
/S/ EDWIN R. CLARK Executive Vice President and Director March 28, 2001
----------------------------------
Edwin R. Clark
/S/ WILLIAM P. BENTON Director March 28, 2001
----------------------------------
William P. Benton
/S/ MARK M. GAMBILL Director March 28, 2001
----------------------------------
Mark M. Gambill
/S/ TOM E. SMITH Director March 28, 2001
----------------------------------
Tom E. Smith
/S/ JACK L. KEMP Director March 28, 2001
----------------------------------
Jack L. Kemp
33
EXHIBIT INDEX
Exhibit
Number Description
- ---------- ----------------------------------------------------------------------------------------------------------
* 3.1 Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Registration
Statement on Form S-1 (File No. 33-87740) of the Company (the "Form S-1")).
* 3.2 Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Form S-1).
* 3.3 Amendment to Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.3 to
the Registration Statement on Form S-3 (File No. 333-13431) of the Company (the "November 1996
Form S-3")).
* 3.4 Amendment to Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.4 to
the Registration Statement on Form S-4 (File No. 333-35091) of the Company (the "September 1997
Form S-4")).
* 4.1 Form of Stock Certificate (incorporated by reference to Exhibit 4.1 to the Form S-1).
* 4.2 Indenture dated as of September 1, 1996 between the Company and First Union National Bank of North
Carolina, as Trustee (the "First Union Indenture") (incorporated by reference to Exhibit 4.1 to the
November 1996 Form S-3).
* 4.3 Form of 5 3/4% Convertible Subordinated Debenture due 2003 (included in the First Union Indenture).
* 4.4 Indenture dated as of August 4, 1997 between the Company and First Trust National Association, as
Trustee (the "First Trust Indenture") (incorporated by reference to Exhibit 4.1 to the September 1997
Form S-4).
* 4.5 Form of 8 1/2% Senior Subordinated Notes Due 2007 (included in the First Trust Indenture).
* 4.6 First Supplemental Indenture to the First Trust Indenture, dated as of April 1, 1999 (incorporated by
reference to Exhibit 4.6 to the Registration Statement on Form S-3 (File No. 333-80021) of the Company
(the "June 1999 Form S-4").
* 4.7 Second Supplemental Indenture to the First Trust Indenture, dated as of June 1, 1999 (incorporated by
reference to Exhibit 4.7 to the June 1999 Form S-4).
4.8 Third Supplemental Indenture to the First Trust Indenture, dated as of December 31, 1999.
4.9 Fourth Supplemental Indenture to the First Trust Indenture, dated as of December 31, 2000.
* 4.10 Indenture dated as of May 11, 1999 between the Company, the Guarantors named therein and US Bank
Trust National Association, as Trustee (the "US Bank Trust Indenture") (incorporated by reference to
Exhibit 4.8 to the June 1999 Form S-4).
* 4.11 Form of 8 1/2% Senior Subordinated Notes Due 2007 (included in the US Bank Trust Indenture).
* 4.12 First Supplemental Indenture to the US Bank Trust Indenture, dated as of June 1, 1999 (incorporated by
reference to Exhibit 4.10 to the June 1999 Form S-4).
4.13 Second Supplemental Indenture to the US Bank Trust Indenture, dated as of December 31, 1999.
4.14 Third Supplemental Indenture to the US Bank Trust Indenture, dated as of December 31, 2000.
*10.7 Deferred Compensation Plan and Agreement by and between Atlanta Motor Speedway, Inc. and Edwin R.
Clark, dated as of January 22, 1993 (incorporated by reference to Exhibit 10.43 to the Form S-1).
*10.8 Deferred Compensation Plan and Agreement by and between Charlotte Motor Speedway, Inc. and
H.A. "Humpy" Wheeler, dated as of March 1, 1990 (incorporated by reference to Exhibit 10.44 to the
Form S-1).
*10.9 Speedway Motorsports, Inc. 1994 Stock Option Plan (incorporated by reference to Exhibit 10.45 to the
Form S-1).
*10.10 Speedway Motorsports, Inc. Formula Stock Option Plan (incorporated by reference to Exhibit 10.13 to the
Annual Report on Form 10-K of the Company for the year ended December 31, 1995 (the "1995
Form 10-K")).
*10.11 Speedway Motorsports, Inc. Employee Stock Purchase Plan amended and restated as of July 1, 1996
(incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-8 (File No. 333-17687)
of the Company).
*10.13 Promissory Note made by Atlanta Motor Speedway, Inc. in favor of Sonic Financial Corporation in the
amount of $1,708,767, dated as of December 31, 1993 (incorporated by reference to Exhibit 10.51 to
Form S-1).
*10.14 Non-Negotiable Promissory Note dated April 24, 1995 by O. Bruton Smith in favor of the Company
(incorporated by reference to Exhibit 10.20 to the 1995 Form 10-K).
34
Exhibit
Number Description
- ----------- ---------------------------------------------------------------------------------------------------------
*10.15 Asset Purchase Agreement dated October 24, 1996 between the Company, as buyer, and Sears Point
Raceway (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K of the Company
filed as of December 4, 1996 (the "SPR Form 8-K")).
*10.16 Master Ground Lease dated November 18, 1996 by and between Brenda Raceway Corporation and the
Company (incorporated by reference to Exhibit 99.2 to the SPR Form 8-K).
*10.17 Deed of Trust, Security Agreement and Fixture Filing with Assignment of Rents and Agreements dated as
of November 18, 1996 by Brenda Raceway Corporation to First American Title Insurance Company for
the benefit of Sonoma Funding Corporation (incorporated by reference to Exhibit 99.3 to the SPR
Form 8-K).
*10.18 Promissory Note secured by Deed of Trust dated November 18, 1996 by Brenda Raceway Corporation in
favor of Sonoma Funding Corporation (incorporated by reference to Exhibit 99.4 to the SPR Form 8-K).
*10.19 Purchase Contract dated December 18, 1996 between Texas Motor Speedway, Inc., as seller, and FW
Sports Authority, Inc., as purchaser (incorporated by reference to Exhibit 10.23 to the Annual Report on
Form 10-K of the Company for the year ended December 31, 1996 (the "1996 Form 10-K")).
*10.20 Lease Agreement dated as of December 18, 1996 between FW Sports Authority, Inc., as lessor, and Texas
Motor Speedway, Inc., as lessee (incorporated by reference to Exhibit 10.24 to the 1996 Form 10-K).
*10.21 Guaranty Agreement dated as of December 18, 1996 among the Company, the City of Fort Worth, Texas
and FW Sports Authority, Inc. (incorporated by reference to Exhibit 10.25 to the 1996 Form 10-K).
*10.30 Asset Purchase Agreement and Escrow Instructions dated November 17, 1998 between Speedway
Motorsports, Inc., as buyer, and Las Vegas Motor Speedway, Inc., as seller (incorporated by reference to
Exhibit 99.1 to the Company's current Report on Report 8-K filed as of December 15, 1998 ("the LVMS
Form 8-K").
*10.33 Naming Rights Agreement dated as of February 9, 1999 by and between Speedway Motorsports, Inc.,
Charlotte Motor Speedway, Inc., Lowe's Home Center's, Inc., Lowe's HIW, Inc. and Sterling Advertising
Ltd. (incorporated by reference to Exhibit 10.1 to SMI's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999).
*10.34 Registration Rights Agreement dated as of May 11, 1999 among the Company, NationsBank Montgomery
Securities LLC, First Union Capital Markets Corp. and JC Bradford & Co., LLC (incorporated by
reference to Exhibit 10.34 to the June 1999 Form S-4).
*10.35 Purchase Agreement dated as of May 4, 1999 among the Company, NationsBank Montgomery Securities
LLC, First Union Capital Markets Corp. and JC Bradford & Co., LLC (incorporated by reference to
Exhibit 10.35 to the June 1999 Form S-4).
*10.36 Credit Agreement dated as of May 28, 1999 (the "Credit Agreement") among the Company and
Speedway Funding Corp., as borrowers, certain subsidiaries of the Company, as guarantors, and the
lenders named therein, including NationsBank, N.A., as agent for the lenders and a lender (incorporated
by reference to Exhibit 10.36 to the June 1999 Form S-4).
*10.37 Pledge Agreement dated as of May 28, 1999 among the Company and the subsidiaries of the Company
that are guarantors under the Credit Agreement, as pledgors, and, NationsBank, N.A., as agent for the
lenders under the Credit Agreement (incorporated by reference to Exhibit 10.37 to the June 1999
Form S-4).
*10.38 Contract for Sale of Real Estate dated as of December 23, 1999 between Las Vegas Motor Speedway,
LLC and Las Vegas Industrial Park, LLC (incorporated by reference to Exhibit 10.1 to SMI's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2000 (the "March 2000 Form 10-Q")).
*10.39 Subordinated Promissory Note dated January 12, 2000 by Las Vegas Industrial Park, LLC in favor of Las
Vegas Motor Speedway, LLC (incorporated by reference to Exhibit 10.2 to the March 2000 Form 10-Q).
*10.40 Deed of Trust, Assignment of Rents and Fixture Filing dated as of January 12, 2000 among Las Vegas
Industrial Park, LLC, National Title Co. and Las Vegas Motor Speedway, LLC (incorporated by reference
to Exhibit 10.3 to the March 2000 Form 10-Q).
*10.41 Guaranty dated as of January 12, 2000 by O. Bruton Smith to and in favor of Las Vegas Motor
Speedway, LLC (incorporated by reference to Exhibit 10.4 to the March 2000 Form 10-Q).
21.1 Subsidiaries of the Company.
23.0 Independent Auditors' Consent for Registration Statements No. 33-99942, No. 333-17687, and
No. 333-49027 of Speedway Motorsports, Inc. on Form S-8.
99.1 Risk Factors regarding "forward-looking" statements.
- ---------
*Previously filed.
35
(This Page Intentionally Left Blank)
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
-----
INDEPENDENT AUDITORS' REPORT ............................................................. F-2
AUDITED CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets at December 31, 2000 and 1999 ............................... F-3
Consolidated Statements of Income for the Years Ended December 31, 2000, 1999 and 1998 .. F-5
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2000,
1999 and 1998........................................................................... F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and
1998.................................................................................... F-7
Notes to Consolidated Financial Statements .............................................. F-8
F-1
INDEPENDENT AUDITORS' REPORT
BOARD OF DIRECTORS
SPEEDWAY MOTORSPORTS, INC.
CHARLOTTE, NORTH CAROLINA
We have audited the accompanying consolidated balance sheets of Speedway
Motorsports, Inc. and subsidiaries (the Company) as of December 31, 2000 and
1999, and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 2000 and 1999, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2000 in
conformity with accounting principles generally accepted in the United States
of America.
As discussed in Note 2 to the consolidated financial statements, the
Company changed its method of accounting for club membership fees in 2000.
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
February 14, 2001
F-2
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2000 and 1999
2000 1999
----------- -----------
(Dollars in thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................. $ 30,737 $ 56,270
Accounts and notes receivable (Notes 2 and 8) ......... 30,433 28,695
Prepaid income taxes (Note 7) ......................... 2,946 4,137
Inventories (Note 3) .................................. 16,487 15,287
Prepaid expenses (Note 2) ............................. 2,700 3,900
-------- --------
Total Current Assets ................................ 83,303 108,289
-------- --------
PROPERTY HELD FOR SALE (Note 4) ........................ -- 53,254
PROPERTY AND EQUIPMENT, NET (Notes 2 and 4) ............ 798,481 741,580
GOODWILL AND OTHER INTANGIBLE ASSETS, NET (Note 2) ..... 59,105 58,987
OTHER ASSETS:
Speedway condominiums held for sale (Note 2) .......... 4,419 5,359
Marketable equity securities (Note 2) ................. 864 1,181
Notes and other receivables from affiliates (Note 8) .. 21,214 2,950
Notes receivable, other (Note 2) ...................... 11,645 10,068
Other assets (Note 2) ................................. 12,926 14,314
-------- --------
Total Other Assets .................................. 51,068 33,872
-------- --------
TOTAL ............................................... $991,957 $995,982
======== ========
See notes to consolidated financial statements.
F-3
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
December 31, 2000 and 1999
2000 1999
------------ ------------
(Dollars in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 5) .......................................... $ 168 $ 160
Accounts payable ....................................................................... 9,683 17,771
Deferred race event income, net (Note 2) ............................................... 72,052 93,349
Accrued interest ....................................................................... 9,591 10,897
Accrued expenses and other liabilities ................................................. 13,689 9,805
-------- --------
Total Current Liabilities ............................................................. 105,183 131,982
LONG-TERM DEBT (Notes 2 and 5) ........................................................... 409,929 458,400
PAYABLE TO AFFILIATES (Note 8) ........................................................... 3,911 4,320
DEFERRED INCOME, NET (Note 2) ............................................................ 17,130 15,262
DEFERRED INCOME TAXES (Note 7) ........................................................... 74,106 51,680
OTHER LIABILITIES ........................................................................ 2,357 2,630
-------- --------
Total Liabilities ..................................................................... 612,616 664,274
-------- --------
COMMITMENTS AND CONTINGENCIES (Notes 4 and 9)
STOCKHOLDERS' EQUITY (Notes 2, 5, 6 and 10):
Preferred stock, $.10 par value, 3,000,000 shares authorized, no shares issued ......... -- --
Common stock, $.01 par value, 200,000,000 shares authorized, 41,739,000 and 41,647,000
shares issued and outstanding in 2000 and 1999 ........................................ 417 416
Additional paid-in capital ............................................................. 161,159 160,225
Retained earnings ...................................................................... 218,215 171,340
Accumulated other comprehensive loss -- unrealized loss on marketable equity securities (450) (273)
-------- --------
Total Stockholders' Equity ............................................................ 379,341 331,708
-------- --------
TOTAL ................................................................................. $991,957 $995,982
======== ========
See notes to consolidated financial statements.
F-4
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 2000, 1999 and 1998
2000 1999 1998
----------- ----------- -----------
(In thousands, except per share
amounts)
REVENUES (Note 2):
Admissions .................................................................. $ 142,160 $ 132,694 $ 107,601
Event related revenue ....................................................... 163,634 148,316 105,459
Other operating revenue ..................................................... 48,503 36,483 16,736
--------- --------- ---------
Total Revenues ............................................................ 354,297 317,493 229,796
--------- --------- ---------
OPERATING EXPENSES:
Direct expense of events .................................................... 117,229 110,650 83,046
Other direct operating expense .............................................. 44,432 32,241 10,975
General and administrative .................................................. 53,794 47,375 34,279
Depreciation and amortization ............................................... 31,192 28,536 21,701
--------- --------- ---------
Total Operating Expenses .................................................. 246,647 218,802 150,001
--------- --------- ---------
OPERATING INCOME ............................................................. 107,650 98,691 79,795
Interest expense, net (Notes 5 and 8) ....................................... (26,973) (27,686) (12,228)
Concession contract rights resolution (Note 2) .............................. (3,185) -- --
Acquisition loan cost amortization (Note 2) ................................. -- (3,398) (752)
Other income, net ........................................................... 1,740 959 3,202
--------- --------- ---------
INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE ........ 79,232 68,566 70,017
Provision for Income Taxes (Note 7) .......................................... (31,100) (27,123) (27,646)
--------- --------- ---------
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE ......................... 48,132 41,443 42,371
Cumulative Effect of Accounting Change For Club Membership Fees (Note 2) ..... (1,257) -- --
--------- --------- ---------
NET INCOME ................................................................... $ 46,875 $ 41,443 $ 42,371
========= ========= =========
BASIC EARNINGS PER SHARE (Note 6):
Before Cumulative Effect of Accounting Change ............................... $ 1.16 $ 1.00 $ 1.02
Accounting Change ........................................................... (0.03) -- --
--------- --------- ---------
Basic Earnings Per Share .................................................... $ 1.13 $ 1.00 $ 1.02
========= ========= =========
Weighted average shares outstanding ......................................... 41,663 41,569 41,482
DILUTED EARNINGS PER SHARE (Note 6):
Before Cumulative Effect of Accounting Change ............................... $ 1.13 $ 0.97 $ 1.00
Accounting Change ........................................................... (0.03) -- --
--------- --------- ---------
Diluted Earnings Per Share .................................................. $ 1.10 $ 0.97 $ 1.00
========= ========= =========
Weighted average shares outstanding ......................................... 44,715 44,960 44,611
PRO FORMA AMOUNTS ASSUMING RETROACTIVE APPLICATION OF ACCOUNTING
CHANGE (Note 2):
Net Income .................................................................. $ 48,132 $ 40,601 $ 42,294
Basic Earnings Per Share .................................................... $ 1.16 $ 0.98 $ 1.02
Diluted Earnings Per Share .................................................. $ 1.13 $ 0.95 $ 1.00
See notes to consolidated financial statements.
F-5
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 2000, 1999 and 1998
(In thousands)
Accumulated Total
Common Stock Additional Other Stock-
----------------- Paid-In Retained Comprehensive holders'
Shares Amount Capital Earnings Loss Equity
-------- -------- ------------ ---------- --------------- -----------
BALANCE, JANUARY 1, 1998 ..................... 41,433 $414 $156,477 $ 87,526 $ (303) $244,114
Net income ................................. -- -- -- 42,371 -- 42,371
Issuance of stock under employee stock
purchase plan (Note 10) ................... 16 -- 340 -- -- 340
Exercise of stock options (Note 10) ........ 53 1 399 -- -- 400
Net unrealized loss on marketable equity
securities ................................ -- -- -- -- (105) (105)
------ ---- -------- -------- ------ --------
BALANCE, DECEMBER 31, 1998 ................... 41,502 415 157,216 129,897 (408) 287,120
Net income ................................. -- -- -- 41,443 -- 41,443
Issuance of stock under employee stock
purchase plan (Note 10) ................... 60 -- 1,535 -- -- 1,535
Exercise of stock options (Note 10) ........ 85 1 1,474 -- -- 1,475
Net unrealized gain on marketable equity
securities ................................ -- -- -- -- 135 135
------ ---- -------- -------- ------ --------
BALANCE, DECEMBER 31, 1999 ................... 41,647 416 160,225 171,340 (273) 331,708
Net income ................................. -- -- -- 46,875 -- 46,875
Issuance of stock under employee stock
purchase plan (Note 10) ................... 13 -- 274 -- -- 274
Exercise of stock options (Note 10) ........ 79 1 660 -- -- 661
Net unrealized loss on marketable equity
securities ................................ -- -- -- -- (177) (177)
------ ---- -------- -------- ------ --------
BALANCE, DECEMBER 31, 2000 ................... 41,739 $417 $161,159 $218,215 $ (450) $379,341
====== ==== ======== ======== ====== ========
See notes to consolidated financial statements.
F-6
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2000, 1999 and 1998
2000 1999 1998
------------ ------------- -------------
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .............................................................................. $ 46,875 $ 41,443 $ 42,371
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ......................................................... 31,192 28,536 21,701
Amortization of acquisition loan costs ................................................ -- 3,398 752
Amortization of deferred income ....................................................... (1,179) (1,366) (891)
Deferred income tax provision ......................................................... 22,426 16,383 16,256
Cumulative effect of accounting change ................................................ 1,257 -- --
Changes in operating assets and liabilities, net of effects of business acquisitions:
Accounts receivable .................................................................. (796) (5,825) (7,262)
Prepaid and accrued income taxes ..................................................... 1,191 6,219 (5,707)
Inventories .......................................................................... (1,200) (4,447) (1,384)
Condominiums held for sale ........................................................... 290 (429) 17,978
Accounts payable ..................................................................... (8,088) 11,179 (15,335)
Deferred race event income ........................................................... (21,297) 8,636 16,258
Accrued expenses and other liabilities ............................................... 2,578 5,680 672
Deferred income ...................................................................... 1,790 376 3,243
Other assets and liabilities ......................................................... 583 (2,289) (2,256)
---------- ---------- -----------
Net Cash Provided by Operating Activities ........................................... 75,622 107,494 86,396
---------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under long-term debt ......................................................... -- 128,750 254,253
Principal payments on long-term debt .................................................... (47,234) (124,805) (18,565)
Payments of debt issuance costs ......................................................... -- (6,446) (4,053)
Issuance of stock under employee stock purchase plan .................................... 274 1,535 340
Exercise of common stock options ........................................................ 661 1,475 400
---------- ---------- -----------
Net Cash Provided (Used) by Financing Activities .................................... (46,299) 509 232,375
---------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures .................................................................... (85,538) (90,616) (98,574)
Proceeds from sale of property held for sale to affiliate ............................... 40,008 -- --
Purchase of Las Vegas Motor Speedway .................................................... -- -- (210,400)
Purchase of marketable equity securities and other investments .......................... (2,318) (1,645) (933)
Proceeds from sales of marketable equity securities and other investments ............... 21 1,435 692
Distribution from equity method investee ................................................ -- -- 1,300
Increase in notes and other receivables ................................................. (8,484) (5,185) (13,394)
Repayment of notes and other receivables ................................................ 1,455 8,879 9,789
---------- ---------- -----------
Net Cash Used by Investing Activities ............................................... (54,856) (87,132) (311,520)
---------- ---------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ..................................... (25,533) 20,871 7,251
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ........................................... 56,270 35,399 28,148
---------- ---------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR ................................................. $ 30,737 $ 56,270 $ 35,399
========== ========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest, net of amounts capitalized ...................................... $ 32,788 $ 24,942 $ 14,951
SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES INFORMATION:
Increase in notes receivable for sale of Las Vegas Industrial Park and land (Note 4) .... 13,254 -- --
Net liabilities assumed and incurred in Las Vegas Motor Speedway acquisition (Note 12) .. -- -- 8,783
See notes to consolidated financial statements.
F-7
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2000, 1999 and 1998
1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
Basis of Presentation -- 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 LLC and subsidiaries a/k/a Lowe's Motor Speedway at
Charlotte (LMSC), Nevada Speedway LLC d/b/a Las Vegas Motor Speedway (LVMS),
Sears Point Raceway LLC (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).
Current Year Business 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.
The Company may be required to pay additional consideration contingent upon
RCU's operations exceeding certain targeted levels. However, the Company does
not believe the final purchase price allocation will differ significantly from
the preliminary allocation. The acquisition was not significant and, therefore,
unaudited pro forma financial information is not presented.
Description of Business -- AMS owns and operates a 1.54-mile lighted,
quad-oval, asphalt superspeedway located on approximately 870 acres in Hampton,
Georgia. AMS currently hosts two major National Association for Stock Car Auto
Racing (NASCAR) Winston Cup Series events annually, one in March and one in
November. Additionally, one Busch Grand National race and one Automobile Racing
Club of America (ARCA) race is held annually, each preceding a Winston Cup
event. AMS also hosts an annual Indy Racing Northern Light Series (IRL) racing
event. AMS has constructed 46 condominiums overlooking the Atlanta speedway and
is in the process of marketing the 2 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 550 acres in Bristol, Tennessee. BMS currently hosts two major
NASCAR Winston Cup events annually. Additionally, two NASCAR-sanctioned Busch
Grand National races are held annually, each preceding a Winston Cup event. BMS
also owns and operates a state-of-the-art dragway with permanent grandstand
seating, luxury suites, and extensive fan amenities and facilities. BMS
currently conducts an annual National Hot Rod Association (NHRA) sanctioned
Nationals racing event and other bracket racing events, as well as various auto
shows. BMS also conducts major World of Outlaws (WOO) and UDTRA Pro Dirt Car
(UDTRA) Series racing events annually.
LMSC owns and operates a 1.5-mile lighted quad-oval, asphalt superspeedway
located in Concord, North Carolina. LMSC hosts 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. The Charlotte facility 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, LMSC has constructed 52 condominiums overlooking the main speedway,
all of which have been sold. In 2000, LMSC completed construction of a
4/10-mile, modern, lighted, dirt track facility where nationally-televised
events such as WOO, UDTRA, American Motorcycle Association (AMA) Series, and
other racing events are held annually.
LMSC also owns and operates an entertainment and office complex
overlooking the main speedway, d/b/a The Speedway Club, which generates rental,
membership, catering and dining revenues.
LVMS owns and operates a 1.5-mile, lighted, asphalt superspeedway, and
several other on-site race tracks, located on approximately 1,300 acres in Las
Vegas, Nevada. LVMS currently hosts several annual NASCAR-sanctioned racing
events, including a Winston Cup Series, Busch Grand National Series, two
Winston West Series, and two Winston Southwest Series racing events. Additional
major events held annually include WOO and drag racing events, as well as
various other motorsports events conducted at the on-site paved and dirt
tracks. The racetrack is also rented throughout the year for non-racing
activities such as driving schools and automobile testing.
In 2000, LVMS completed reconstruction and expansion of one of its
dragstrips into a state-of-the-art dragway with permanent grandstand seating,
luxury suites, and extensive fan amenities and facilities. The Strip at Las
Vegas hosted an
F-8
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS -- (Continued)
inaugural NHRA-sanctioned Nationals event in 2000, and is scheduled to host two
Nationals events in 2001, as well as other NHRA and bracket racing events.
SPR, located on approximately 1,500 acres in Sonoma, California, owns and
operates a 2.52-mile, twelve-turn road course, a one-quarter mile dragstrip,
and a 157,000 square foot industrial park. SPR currently holds one major NASCAR
Winston Cup racing event annually. Additional events held annually include a
NASCAR-sanctioned Winston Southwest Series, NHRA Winston Drag Racing Series
National, as well as AMA and Sports Car Club of America (SCCA) racing events.
The racetrack is also rented throughout the year by various organizations,
including the SCCA, driving schools, major automobile manufacturers, and other
car clubs. Significant renovations and expansion are currently underway at SPR
(see Note 4).
TMS, located on approximately 1,360 acres in Fort Worth, Texas, is a
1.5-mile lighted, banked, asphalt quad-oval superspeedway. TMS currently hosts
one major NASCAR Winston Cup event annually, preceded by a Busch Grand National
racing event. TMS also hosts two NASCAR-sanctioned Craftsman Truck and two IRL
Series racing events, and will host an inaugural Fed-Ex Championship Auto
Racing Teams (CART) Series racing event in 2001. TMS has constructed 76
condominiums above turn two overlooking the speedway, 68 of which have been
sold or contracted for sale as of December 31, 2000. In 2000, TMS substantially
completed construction of a 4/10-mile, modern, lighted, dirt track facility
where nationally- televised events such as WOO, UDTRA, AMA Series, and other
racing events are held annually.
TMS also owns and operates an entertainment and office complex overlooking
the main speedway, d/b/a The Texas Motor Speedway Club, which generates rental,
membership, catering and dining revenues. The TMS Club opened in March 1999.
FLE provides event food, beverage, and souvenir merchandising services at
each of the Company's speedways and to other third party sports-oriented
venues.
MBM, a wholly-owned subsidiary of FLE, is a wholesale and retail
distributor of racing and other sports related souvenir merchandise and
apparel.
ORC produces an environmentally-friendly, metal-energizer that is promoted
and distributed by direct-response and other advertising to wholesale and
retail customers.
RCU is a nationally-syndicated radio show with racing-oriented
programming.
SoldUSA is an internet auction and e-commerce company.
WMI, a division of FLE, is a screen printing and embroidery manufacturer
and distributor of wholesale and retail apparel.
600 Racing, Inc., a wholly-owned subsidiary of LMSC, developed, operates
and is the official sanctioning body of the Legends Racing Circuit. 600 Racing
also manufactures and sells 5/8-scale cars (Legends Cars) modeled after
older-style coupes and sedans, a line of smaller-scale cars (the Bandolero),
and a newly released line (the Thunder Roadster) modeled after older-style
roadsters. Revenue is principally derived from the sale of vehicles and vehicle
parts.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation -- All significant intercompany accounts and
transactions have been eliminated in consolidation.
Revenue Recognition -- Admissions revenue consists of ticket sales. Event
related revenues consist of amounts received from broadcasting rights,
sponsorships, concessions, luxury suite rentals, commissions and souvenirs, and
other event and speedway related revenue. Other operating revenue consists of
Speedway Clubs' restaurant, catering and membership income, Legends Car and
parts sales, and industrial park rentals, MBM, Oil-Chem, SoldUSA and certain
FLE revenues.
The Company recognizes admissions and other event related revenues when an
event is held. Advance revenues and certain related direct expenses pertaining
to specific events are deferred until the event is held. Deferred expenses
primarily include race purses and sanctioning fees remitted to NASCAR or other
sanctioning bodies.
F-9
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
2. SIGNIFICANT ACCOUNTING POLICIES -- (Continued)
Deferred race event income relates to scheduled events to be held in the
upcoming year. If circumstances prevent a race from being held during the
racing season, advance revenue is refundable and all deferred direct event
expenses would be immediately recognized except for race purses which would be
refundable from NASCAR or other sanctioning bodies.
Accounting Change For Club Membership Fees -- The Company reassessed and
changed its revenue recognition policies for Speedway Club membership fees in
the fourth quarter of 2000. The LMSC and TMS Speedway Clubs have sold extended
memberships since their opening which entitle members to certain dining, other
club and racing event seating privileges, and require upfront fees and monthly
assessments.
Before the change, net revenues from membership fees were recognized as
income when billed and associated expenses were incurred. Under the new policy,
net membership revenues are deferred when billed and amortized into income over
an estimated average membership term of ten years. The cumulative effect of the
accounting change as of January 1, 2000 reduced fiscal year 2000 net income by
$1,257,000 after income taxes of $824,000, and basic and diluted earnings per
share by $0.03. The change also reduced fiscal year 2000 other operating
revenue by $1,346,000, net income by $813,000 after income taxes, and basic and
diluted earnings per share by $0.02. The pro forma amounts on the consolidated
income statement reflect the effect of retroactive application on net
membership fee revenues, and related income taxes, had the new method been in
effect for all periods presented.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the financial
statement date, and reported amounts of revenues and expenses. Actual future
results could differ from those estimates.
Cash and Cash Equivalents -- The Company classifies as cash equivalents
all highly liquid investments with original maturities of three months or less.
Cash equivalents principally consist of commercial paper and United States
Treasury securities.
Accounts and Notes Receivable -- Accounts receivable are reported net of
allowance for doubtful accounts of $1,351,000 and $951,000 at December 31, 2000
and 1999. Bad debt expense amounted to $1,134,000 in 2000, $660,000 in 1999,
and $29,000 in 1998, and allowance for doubtful accounts reductions for actual
write-offs and recoveries of specific accounts receivable amounted to $734,000
in 2000, $0 in 1999, and $291,000 in 1998. Notes and other receivables are
collateralized principally by property and other assets which management
believes sufficient to ensure full collectibility. As such, no allowance for
uncollectible amounts has been recorded.
Inventories -- Inventories consist of souvenirs, finished vehicles, parts
and accessories, and food costs determined on a first-in, first-out basis, and
apparel and metal-energizer product costs determined on an average current cost
basis, all of which are stated at the lower of cost or market.
Speedway Condominiums Held for Sale -- The Company has constructed 46
condominiums at AMS and 76 condominiums at TMS, of which 44 and 68,
respectively, have been sold or contracted for sale as of December 31, 2000.
Speedway condominiums held for sale are recorded at cost, and represent 2
condominiums at AMS and 8 condominiums at TMS which are substantially complete
and are being marketed.
Property and Equipment -- Property and equipment are recorded at cost less
accumulated depreciation. Depreciation is provided using the straight-line
method over the estimated useful lives of the respective assets. Expenditures
for repairs and maintenance are charged to expense when incurred. Construction
in progress includes all direct costs and capitalized interest on fixed assets
under construction. Under Statement of Financial Accounting Standards (SFAS)
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of", management periodically evaluates long-lived assets
for possible impairment based on expected future undiscounted operating cash
flows attributable to such assets. Fully depreciated assets relieved from
property and equipment amounted to approximately $4,100,000 in 2000 and
$700,000 in 1999. Depreciation expense amounted to $29,286,000 in 2000,
$26,758,000 in 1999, and $19,564,000 in 1998.
In connection with the development and completed construction of TMS in
1997, the Company entered into arrangements with the FW Sports Authority, a
non-profit corporate instrumentality of the City of Fort Worth, Texas, whereby
the
F-10
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
2. SIGNIFICANT ACCOUNTING POLICIES -- (Continued)
Company conveyed the speedway facility, excluding its on-site condominiums and
office and entertainment complex, to the sports authority and is leasing the
facility back over a 30-year period. Because of the Company's responsibilities
under these arrangements, the speedway facility and related liabilities are
included in the accompanying consolidated balance sheets.
Goodwill and Other Intangible Assets -- Goodwill and other intangible
assets represent the excess of business acquisition costs over the fair value
of net assets acquired and are being amortized on a straight-line basis
principally over 40 years for speedway acquisitions and 10 to 15 years for
others. Goodwill and other intangible assets are reported net of accumulated
amortization of $7,390,000 and $5,615,000 at December 31, 2000 and 1999.
Management periodically evaluates the recoverability of goodwill and other
intangible assets based on expected future profitability and undiscounted
operating cash flows of acquired businesses.
Marketable Equity Securities -- The Company's marketable equity securities
are classified as "available for sale" and are not bought and held principally
for the purpose of selling them in the near term. Accordingly, these securities
are reported at fair value, with unrealized gains and losses, net of tax,
excluded from earnings and reported as a separate component of stockholders'
equity. Management intends to hold these securities through at least fiscal
2001, and accordingly, they are reflected as non-current assets. Realized gains
and losses on sales of marketable equity securities are determined using the
specific identification method.
Valuation allowances for unrealized losses of $450,000 and $273,000, net
of $301,000 and $183,000 in tax benefits, are reflected as a charge to
stockholders' equity to reduce the carrying amount of long-term marketable
equity securities to market value as of December 31, 2000 and 1999,
respectively. Sales of marketable equity securities resulted in realized losses
of $7,000 in 2000, and realized gains of $415,000 in 1999 and $150,000 in 1998.
Deferred Financing Costs and Acquisition Loan Cost Amortization --
Deferred financing costs are included in other noncurrent assets and 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
(see Notes 5 and 12). Associated deferred financing costs of $4,050,000 were
amortized over the loan term which matured May 28, 1999. Deferred financing
costs of $14,381,000 and $14,636,000 are reported net of accumulated
amortization of $4,912,000 and $3,132,000 at December 31, 2000 and 1999.
Deferred Income -- Deferred income as of December 31, 2000 and 1999
consists of the following (in thousands):
2000 1999
---------- ----------
TMS Preferred Seat License fees, net .............. $11,067 $11,802
Deferred gain on TMS condominium sales. ........... 2,438 2,957
Deferred Speedway Club membership income .......... 3,616 464
Other ............................................. 9 39
------- -------
Total ............................................ $17,130 $15,262
======= =======
TMS offers Preferred Seat License agreements whereby licensees are
entitled to purchase annual TMS season-ticket packages for sanctioned racing
events under specified terms and conditions. Among other items, licensees are
required to purchase all season-ticket packages when and as offered each year.
License agreements automatically terminate without refund should licensees not
purchase any offered ticket. Also, licensees are not entitled to refunds for
postponements or cancellation of events due to weather or certain other
conditions. After May 31, 1999, license agreements became transferrable once
each year subject to certain terms and conditions. Net PSL fees are deferred
when received and amortized into income over the estimated useful life of TMS's
facility.
Certain condominium sales contracts, aggregating approximately $16,700,000
as of December 31, 2000, provide buyers the right to require the Company to
repurchase real estate within three years from the purchase date. Gain
recognition has been deferred until the buyer's right expires. Management
believes the likelihood of buyers exercising such rights, in amounts that at
any one time or in the aggregate would be significant, is remote.
F-11
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
2. SIGNIFICANT ACCOUNTING POLICIES -- (Continued)
The LMSC and TMS Speedway Clubs sell extended memberships which entitle
members to certain dining, other club and racing event seating privileges, and
require upfront fees and monthly assessments. The Company changed its
accounting policy for these Speedway Club membership fees in fiscal 2000 (see
"Accounting Change For Club Membership Fees" above). The LMSC Speedway Club has
also sold lifetime memberships which entitle individual members to certain
private dining and racing event seating privileges. Net revenues from these
lifetime membership fees are being amortized into income principally over 15
years ending in 2001. Net membership income recognized for these extended and
lifetime memberships was $1,261,000 in 2000, $1,934,000 in 1999, and $500,000
in 1998. On a pro forma basis, had the new policy been in effect, these fees
would have been $540,000 in 1999 and $373,000 in 1998.
Advertising Expenses -- Event related advertising costs are expensed when
an event is held and included principally in direct expense of events.
Non-event related advertising costs, including direct-response advertising once
primary media promotion has commenced, are expensed as incurred and included
principally in other direct operating expense. Advertising expense amounted to
$21,187,000 in 2000, $15,144,000 in 1999, and $7,626,000 in 1998. Prepaid
expense at December 31, 1999 included $1,407,000 of deferred direct-response
advertising costs related to then future media promotion of certain ORC
products. These costs were amortized into expense in 2000 and no
direct-response advertising costs are deferred at December 31, 2000.
Concession Contract Rights Resolution -- In November 1996, the Company
acquired certain tangible and intangible assets and the operations of Sears
Point Raceway. At that time, a third party enjoyed the contract rights to
provide event food, beverage and souvenir merchandising services at SPR whose
original contract was to expire in 2004. Since 1998, the Company's subsidiary
Finish Line Events has provided such services. In September 2000, the Company
reacquired such contract rights for approximately $3.2 million, including legal
and other transaction costs. Because fair value was not readily ascertainable
until reaching final agreement in September 2000, the contract rights were not
reflected in SPR's original purchase price allocation nor recorded until their
value was established. Management anticipates the present value of estimated
net future benefits under the contract rights will exceed its costs.
Notwithstanding this expected future benefit, the cost has been reflected as a
current period expense because acquisition was beyond Accounting Principles
Board (APB) Opinion No. 16's one year allocation period.
Income Taxes -- The Company recognizes deferred tax assets and liabilities
for the future income tax effect of temporary differences between financial and
income tax bases of assets and liabilities assuming they will be realized and
settled at amounts reported in the financial statements.
Stock-Based Compensation -- The Company continues to apply APB Opinion No.
25 which recognizes compensation cost based on the intrinsic value of the
equity instrument awarded as permitted under Statement of Financial Accounting
Standards (SFAS) No. 123 "Accounting for Stock-Based Compensation." The pro
forma effect on net income and earnings per share under the provisions of SFAS
No. 123 is disclosed in Note 10.
Fair Value of Financial Instruments -- Fair value estimates are based on
relevant market information at a specific point in time, and changes in
assumptions or market conditions could significantly affect estimates. The
carrying values of cash, accounts receivable, and accounts payable approximate
fair value because of the short maturity of these financial instruments.
Marketable equity securities are carried at fair value. Notes receivable and
bank revolving credit facility borrowings are frequently repriced variable
interest rate financial instruments, and therefore, carrying values approximate
fair value. Fixed rate senior subordinated notes and convertible subordinated
debentures have carrying and fair values as of December 31, 2000 and 1999 as
follows (in thousands):
Carrying Value Fair Value
----------------------- -----------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
8.5% Senior subordinated notes payable ..... $252,788 $253,208 $243,125 $238,750
5.75% Convertible subordinated debentures .. 66,000 74,000 63,030 77,330
Concentrations of Credit Risk -- Financial instruments that potentially
subject the Company to concentrations of credit risk consist principally of
cash and cash equivalents, accounts and notes receivable, and marketable equity
securities. The Company places its cash and cash equivalents with major
high-credit qualified financial institutions, limiting its exposure to
concentrations of credit risk. Concentrations of credit risk with respect to
accounts receivable are limited due to the large
F-12
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
2. SIGNIFICANT ACCOUNTING POLICIES -- (Continued)
numbers of customers, wide variety of customers and customer industries, and
their broad geographical dispersion. The Company generally requires sufficient
collateral equal or exceeding note amounts, and accepts notes only from
high-credit quality companies or high net-worth individuals, limiting its
exposure to concentrations of credit risk. Concentrations of credit risk with
respect to marketable equity securities are limited through portfolio
diversification.
Impact of New Accounting Standards -- The Company will adopt SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities" as of January 1,
2001. SFAS No. 133 establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires, among other things,
that an entity recognize all derivatives as either assets or liabilities in the
balance sheet and measure those instruments at fair value. Because the Company
does not have any derivative instruments, adoption is expected to have no
effect on the Company's financial statements or disclosures.
Segment Disclosures -- The Company periodically evaluates the possible
effects of SFAS No. 131 "Disclosures about Segments of an Enterprise and
Related Information" on its financial statement disclosures. The combined
operations of the Company's speedways comprise one operating segment, and
encompass all admissions and event related revenues and associated expenses.
Other Company operations presently are not significant relative to those of the
speedways. As such, at this time, SFAS No. 131 continues to have no effect on
the Company's financial statement disclosures.
Reclassifications -- Certain prior year accounts were reclassified to
conform with current year presentation.
3. INVENTORIES
Inventories as of December 31, 2000 and 1999 consist of the following
components (in thousands):
2000 1999
--------- ---------
Souvenirs and apparel ............................. $ 9,421 $ 8,490
Finished vehicles, parts and accessories .......... 4,212 4,310
Oil additives, food and other ..................... 2,854 2,487
------- -------
Total ........................................... $16,487 $15,287
======= =======
4. PROPERTY AND EQUIPMENT AND PROPERTY HELD FOR SALE
Property and equipment as of December 31, 2000 and 1999 is summarized as
follows (dollars in thousands):
Estimated
Useful Lives 2000 1999
-------------- ------------- -----------
Land and land improvements .......... 5-25 $ 210,649 $ 202,692
Racetracks and grandstands .......... 5-45 392,495 333,037
Buildings and luxury suites ......... 5-40 236,472 215,163
Machinery and equipment ............. 3-20 41,002 39,409
Furniture and fixtures .............. 5-20 16,347 15,034
Autos and trucks .................... 3-10 4,756 4,282
Construction in progress ............ 28,852 39,111
---------- ----------
Total ............................. 930,573 848,728
Less accumulated depreciation ..... (132,092) (107,148)
---------- ----------
Net .............................. $ 798,481 $ 741,580
========== ==========
Construction In Progress -- At December 31, 2000, the Company had various
construction projects underway to increase and improve facilities for fan
amenities and make other site improvements at each of its speedways. In
addition, the Company plans to continue major renovations at SPR, including its
ongoing reconfiguration into a "stadium-style" road racing course, adding a
significant number of grandstand and hillside terrace seats, adding luxury
suites, and improving and expanding concessions, restroom and other fan
amenities and facilities. SPR also plans to continue improving and expanding
its
F-13
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
4. PROPERTY AND EQUIPMENT AND PROPERTY HELD FOR SALE -- (Continued)
on-site roads and available parking, reconfiguring traffic patterns and
entrances to ease congestion and improve traffic flow. The estimated aggregate
cost of capital expenditures in 2001 is approximately $55,000,000.
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 8). 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 approximated
the Company's net carrying value as of December 31, 1999 and selling costs.
5. LONG-TERM DEBT
Long-term debt as of December 31, 2000 and 1999 consists of the following
(in thousands):
2000 1999
------------ -----------
Revolving bank credit facility ............... $ 90,000 $130,000
Senior subordinated notes .................... 252,788 253,208
Convertible subordinated debentures .......... 66,000 74,000
Other notes payable .......................... 1,309 1,352
-------- --------
Total ...................................... 410,097 458,560
Less current maturities ................... (168) (160)
-------- --------
$409,929 $458,400
======== ========
Bank Credit Facility -- In May 1999, the Company obtained a long-term,
secured, senior revolving credit facility with a syndicate of banks led by Bank
of America, 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. The Company also agreed not to pledge its assets to any
third party. The Credit Facility was used to fully repay and retire then
outstanding borrowings under the Acquisition Loan (as described below) after
reduction for the application of proceeds from the 1999 Senior Notes offering,
and for working capital and general corporate purposes. At December 31, 2000,
outstanding letters of credit amounted to $106,000.
Interest is based, at the Company's option, upon (i) LIBOR plus .5% to
1.25% or (ii) the greater of Bank of America's prime rate or the Federal Funds
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). In addition, among
other items, the Company is required to meet certain financial covenants,
including specified levels of net worth and ratios of (i) debt to EBITDA and
(ii) 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 and $500 million in the aggregate over the loan term. The
Company also has agreed to certain other limitations or prohibitions concerning
the incurrence of other indebtedness, transactions with affiliates, guaranties,
asset sales, investments, dividends, distributions and redemptions.
Senior Subordinated Notes -- In May 1999, the Company completed a private
placement of 8 1/2% senior subordinated notes (the 1999 Senior Notes) in the
aggregate principal amount of $125,000,000. These notes were registered in July
1999. Net proceeds, after issuance at 103% of face value, commissions and
discounts, approximated $125,737,000 and were used to repay a portion of the
outstanding borrowings under the Acquisition Loan. The Company's 8 1/2% senior
subordinated notes of $125,000,000 issued in 1997, and the 1999 Senior Notes
(hereafter referred to collectively as the Senior Notes), are substantially
identical and governed by similar Indentures. 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.
The Senior Notes are subordinated to all present and future senior secured
indebtedness of the Company.
F-14
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
5. LONG-TERM DEBT -- (Continued)
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 Indentures governing the Senior Notes contain 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 Indentures and Credit Facility agreements
contain cross-default provisions.
Convertible Subordinated Debentures -- In 1996, the Company completed a
private placement of 5 3/4% convertible subordinated debentures in the
aggregate principal amount of $74,000,000. These debentures and the underlying
equity securities were registered in 1996. In 2000, the Company repurchased
debentures aggregating $8,000,000 in principal at a discount resulting in a
$460,000 gain, net of income taxes, which is included in other income due to
immateriality. The debentures are unsecured, mature on September 30, 2003, are
convertible into Company common stock at the holder's option after December 1,
1996 at $31.11 per share until maturity, and are redeemable at the Company's
option. Interest payments are due semi-annually on March 31 and September 30.
The debentures are subordinated to all present and future secured indebtedness
of the Company. Redemption prices in fiscal year periods ending September 30
are 101.64% in 2001 and 100.82% in 2002. After September 30, 2002, the
debentures are redeemable at par. As of December 31, 2000 and 1999, 2,122,000
and 2,379,000 shares of common stock would be issuable upon conversion (see
Note 6).
Acquisition Loan -- In November 1998, the Company's former credit facility
was amended and restated (the Acquisition Loan) to fund the Company's December
1998 acquisition of LVMS (see Note 12). The Acquisition Loan was retired and
repaid on May 28, 1999 concurrently with the issuance of senior subordinated
notes and bank credit facility proceeds as described above.
Annual maturities of debt at December 31, 2000 are as follows (in
thousands):
2001 ................... $ 168
2002 ................... 1,085
2003 ................... 66,028
2004 ................... 90,028
2005 ................... --
Thereafter ............. 252,788
--------
$410,097
========
Interest expense, net includes interest expense of $31,482,000 in 2000,
$30,083,000 in 1999, and $15,258,000 in 1998, and includes interest income of
$4,509,000 in 2000, $2,397,000 in 1999, and $3,030,000 in 1998. The Company
capitalized interest costs of $2,912,000 in 2000, $4,667,000 in 1999, and
$3,846,000 in 1998. The weighted-average interest rate on borrowings under bank
revolving credit facilities was 7.6% in 2000, 6.5% in 1999, and 6.4% in 1998.
6. CAPITAL STRUCTURE AND PER SHARE DATA
Preferred Stock -- At December 31, 2000, SMI has authorized 3,000,000
shares of preferred stock with a par value of $.10 per share. Shares of
preferred stock may be issued in one or more series with rights and
restrictions as may be determined by the Company's Board of Directors. No
preferred shares were issued and outstanding at December 31, 2000 or 1999.
F-15
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
6. CAPITAL STRUCTURE AND PER SHARE DATA -- (Continued)
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):
Weighted
Net Average Earnings
Year Ended: Income Shares Per Share
- ------------------------------------------------------------------------------ ----------- --------- ----------
December 31, 2000:
Basic earnings per share before cumulative effect of accounting change
for club membership fees (Note 2) ......................................... $ 48,132 41,663 $ 1.16
Accounting change, net of taxes ............................................. (1,257) 41,663 (0.03)
-------- -------
Basic earnings per share .................................................... $ 46,875 41,663 $ 1.13
======== =======
Basic earnings per share before accounting change ........................... $ 48,132 41,663 $ 1.16
Dilution adjustments:
Common stock equivalents -- stock options ................................. -- 699
5 3/4% Convertible debentures ............................................. 2,321 2,353
-------- ------
Diluted earnings per share before cumulative effect of accounting change .... 50,453 44,715 $ 1.13
Accounting change, net of taxes ............................................. (1,257) 44,715 (0.03)
-------- -------
Diluted earnings per share .................................................. $ 49,196 44,715 $ 1.10
======== =======
December 31, 1999:
Basic earnings per share .................................................... $ 41,443 41,569 $ 1.00
Dilution adjustments:
Common stock equivalents -- stock options ................................. -- 1,012
5 3/4% Convertible debentures ............................................. 2,200 2,379
-------- ------
Diluted earnings per share .................................................. $ 43,643 44,960 $ 0.97
======== ======
December 31, 1998:
Basic earnings per share .................................................... $ 42,371 41,482 $ 1.02
Dilution adjustments:
Common stock equivalents -- stock options ................................. -- 750
5 3/4% Convertible debentures ............................................. 2,108 2,379
-------- ------
Diluted earnings per share .................................................. $ 44,479 44,611 $ 1.00
======== ======
7. INCOME TAXES
The components of the provision for income taxes are as follows (in
thousands):
2000 1999 1998
--------- ---------- ----------
Current ........... $ 8,674 $10,740 $11,390
Deferred .......... 22,426 16,383 16,256
------- ------- -------
Total ........... $31,100 $27,123 $27,646
======= ======= =======
The reconciliation of the statutory federal income tax rate and the
effective income tax rate is as follows:
2000 1999 1998
-------- -------- --------
Statutory federal tax rate .................................... 35% 35% 35%
State and local income taxes, net of federal income tax effect 3 4 4
Other, net .................................................... 1 -- --
-- -- --
Total ........................................................ 39% 39% 39%
== == ==
F-16
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
7. INCOME TAXES -- (Continued)
The tax effect of temporary differences resulting in deferred income taxes
are as follows (in thousands):
2000 1999
----------- ------------
Deferred tax liabilities:
Property and equipment ........................................ $ 107,889 $ 82,023
Expenses deducted for tax purposes and other .................. 768 1,055
--------- ---------
Subtotal ..................................................... 108,657 83,078
--------- ---------
Deferred tax assets:
Income previously recognized for tax purposes ................. (1,210) (1,107)
Stock option compensation expense ............................. (632) (933)
PSL and other deferred income recognized for tax purposes ..... (5,276) (4,511)
State and federal net operating loss carryforwards ............ (7,201) (8,932)
Alternative minimum tax credit ................................ (20,232) (15,915)
--------- ---------
Subtotal ..................................................... (34,551) (31,398)
--------- ---------
Total net deferred tax liability ................................ $ 74,106 $ 51,680
========= =========
The Company made income tax payments during 2000, 1999, and 1998 totaling
approximately $13,149,000, $15,375,000, and $16,328,000, respectively. At
December 31, 2000, the Company has approximately $21,780,000 of federal net
operating loss carryforwards which expire in 2018 and 2019, and $72,650,000 of
state net operating loss carryforwards which expire in 2003 through 2019. The
Company's alternative minimum tax credits do not expire. No valuation allowance
against deferred tax assets has been recorded for any year presented.
8. RELATED PARTY TRANSACTIONS
Notes and other receivables at December 31, 2000 and 1999 include $886,000
and $848,000 due from a partnership in which the Company's Chairman and Chief
Executive Officer is a partner, including accrued interest. 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 or require
repayment during 2001, the balance has been classified as a noncurrent asset in
the accompanying consolidated balance sheet.
Notes and other receivables at December 31, 2000 and 1999 include
$4,945,000 and $2,103,000 due from the Company's Chairman and Chief Executive
Officer. The amount due represents premiums paid by the Company under a
split-dollar life insurance trust arrangement on behalf of the Chairman, cash
advances and expenses paid by the Company on behalf of the Chairman, and
accrued interest. The amount due bears interest at 1% over prime and is payable
on demand. Because the Company does not anticipate or require repayment during
2001, the balance has been classified as a noncurrent asset in the accompanying
consolidated balance sheet.
Notes and other receivables at December 31, 2000 include $15,383,000 due
from Las Vegas Industrial Park, LLC, an entity owned by the Company's Chairman
and Chief Executive Officer, including accrued interest. 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 collateralized by the
underlying sold property, and is scheduled to mature in July 2002. Because the
Company does not anticipate or require repayment during 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), a Company affiliate through common ownership, and of Las
Vegas Industrial Park, LLC. At December 31, 2000, accounts receivable include
$940,000 due from Sonic Financial and $1,643,000 due from Las Vegas Industrial
Park, LLC. The amounts are classified as short-term based on expected repayment
dates. There were no amounts outstanding due from Sonic Financial or Las Vegas
Industrial Park, LLC at December 31, 1999.
F-17
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
8. RELATED PARTY TRANSACTIONS -- (Continued)
Interest income of $1,568,000 in 2000, $179,000 in 1999, and $115,000 in
1998 was earned on amounts due from related parties.
Amounts payable to affiliates at December 31, 2000 and 1999 includes
$2,594,000 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
prime plus 1%. The entire amount is classified as long-term based on expected
repayment dates. Amounts payable to affiliates at December 31, 2000 and 1999
also include $1,317,000 and $1,726,000 owed to a former LVMS shareholder and
executive officer in equal monthly payments through December 2003 at 6.4%
imputed interest.
Interest expense of $308,000 in 2000, $266,000 in 1999, and $151,000 in
1998 was accrued on amounts payable to affiliates.
9. LEGAL PROCEEDINGS AND CONTINGENCIES
On May 1, 1999, during the running of an IRL event at LMSC, an on-track
accident occurred that caused race car debris to enter the spectator seating
area (the "May 1999 IRL Accident"). Three deaths and injuries to others
resulted. The 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.
These lawsuits were settled in May 2000 without any admission of wrongdoing or
liability on the part of SMI. Settlement had no material adverse affect on the
Company's financial position or results of operations.
On February 13, 2001, the parents of Haley A. McGee filed a personal
injury action related to the May 1999 IRL Accident against SMI, LMSC and IRL in
the Superior Court of Mecklenburg County, North Carolina. This lawsuit seeks
unspecified damages and punitive damages related to the injuries of the minor,
Haley A. McGee, as well as the medical expenses incurred and wages lost by her
parents. SMI intends to file an answer in this action. SMI intends to defend
itself and to deny the allegations of negligence as well as related claims for
punitive damages. Management does not believe the outcome of this lawsuit will
have a material adverse affect on the Company's financial position or future
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.
All personal injury claims resulting from this incident are currently being
handled by the bridge's manufacturer, Tindall Corporation, and its insurer. To
date, fifteen separate lawsuits have been filed by individuals claiming
injuries from the bridge failure on May 20, 2000. All fifteen lawsuits were
filed against SMI, LMSC, Tindall Corporation and Anti-Hydro International, Inc.
in Cabarrus, Mecklenburg, Rowan and Wake Counties of North Carolina, and in the
United States District Court for the Middle District of North Carolina, seeking
unspecified compensatory and punitive damages. SMI has filed or will file
shortly answers in all of the actions and preliminary discovery has begun in
many of the cases but is not complete. SMI intends to defend itself and denies
the allegations of negligence as well as related claims for punitive damages.
Additional lawsuits involving this incident may be filed in the future.
Management does not believe the outcome of these lawsuits or this incident will
have a material adverse affect on the Company's financial position or future
results of operations.
On May 24, 2000, a Petition for Writ of Mandate, Declaratory Relief and
Injunctive Relief was filed in the Superior Court of California, Sonoma County
styled Yellow Flag Alliance, Tony Lilly and Nancy Lilly vs. Sonoma County and
Sonoma County Board of Supervisors. This action was brought to challenge the
Sonoma County Board of Supervisors' decision to authorize SPR to proceed with a
renovation project. In particular, the petitioners claim that the Board failed
to follow certain of California's environmental statutes requiring evaluation
of the impact the renovation would have on the environment such as noise,
traffic, visual impairments, land use and zoning issues. Although neither SMI
nor SPR is named in the action, an adverse outcome could impact the Company's
ability to expand the facility as planned. SMI believes that the Petition has
no basis and will defend itself vigorously. Management does not believe the
outcome of this incident will have a material adverse affect on the Company's
financial position or future results of operations.
F-18
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
9. LEGAL PROCEEDINGS AND CONTINGENCIES -- (Continued)
On August 23, 2000, a shareholder derivative complaint was filed against
SMI and its directors in Delaware Chancery Court for New Castle County. The
complaint, styled Crandon Capital Partners v. O. Bruton Smith, H.A. "Humpy"
Wheeler, William R. Brooks, Edwin R. Clark, William P. Benton, Mark M. Gambill,
Jack L. Kemp and Speedway Motorsports, Inc. (the "Crandon Complaint"), alleges
that in February 2000, SMI sold the Las Vegas Industrial Park -- R&D Industrial
Campus and approximately 300 acres of undeveloped adjacent land to O. Bruton
Smith, SMI's Chief Executive Officer, Chairman and majority stockholder, at
less than these properties' fair market value, which transaction allegedly
constituted a breach of fiduciary duties and corporate waste. Plaintiffs are
seeking unspecified damages, SMI's establishment of a system of internal
controls and procedures, rescission of the transaction with Mr. Smith or,
alternatively, unspecified rescissory damages from Mr. Smith, and plaintiff's
costs and attorney fees. On September 13, 2000, a second complaint, styled
Kathy Mayo v. O. Bruton Smith, H.A. "Humpy" Wheeler, William R. Brooks, Mark M.
Gambill, Jack L. Kemp and Speedway Motorsports, Inc., was filed in Delaware
Chancery Court raising the same allegations and seeking the same relief as the
Crandon Complaint. The Delaware court has consolidated the two cases. SMI
believes that the consolidated complaints have no basis and will defend the
action vigorously. SMI has filed an answer denying the allegations, and
preliminary discovery has begun.
On January 31, 2001, the Federal Trade Commission (the "FTC") filed a
complaint against SMI and its subsidiary, Oil-Chem Research Corp., in the
United States District Court, Middle District of North Carolina. The FTC is
seeking a judgment to enjoin SMI and Oil-Chem Research Corp. from advertising
zMax Power System for use in motor vehicles and to award equitable relief to
redress alleged injury to consumers. SMI has filed an answer in this action
denying the allegations and intends to defend itself. Management does not
believe the outcome of this lawsuit will have a material adverse effect on the
Company's financial position or future results of operations.
The Company's property at LMSC includes areas that were used as solid
waste landfills for many years. Landfilling of general categories of municipal
solid waste on the LMSC property ceased in 1992, but LMSC currently allows
certain property to be used for land clearing and inert debris landfilling and
for construction and demolition debris landfilling. Management believes that
the Company's operations, including the landfills on its property, are in
compliance with all applicable federal, state and local environmental laws and
regulations. Company management is not aware of any situation related to
landfill operations which would adversely affect the Company's financial
position or future results of operations.
The Company is a party to other litigation incidental to its business.
Management does not believe that the resolution of any or all of such
litigation is likely to have a material adverse effect on the Company's
financial condition or future results of operations.
10. STOCK OPTION PLANS
1994 Stock Option Plan -- The Board of Directors and stockholders of SMI
adopted the Company's 1994 Stock Option Plan in order to attract and retain key
personnel. Under the stock option plan, options to purchase up to an aggregate
of 3,000,000 shares of common stock may be granted to directors, officers and
key employees of SMI and its subsidiaries. All options to purchase shares under
this plan expire ten years from grant date. Such options provide for the
purchase of common stock at a price as determined by the Compensation Committee
of the Board of Directors.
F-19
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
10. STOCK OPTION PLANS -- (Continued)
The exercise price of all stock options granted in 1998 through 2000 was
the fair or trading value of the Company's common stock at grant date. Other
option information regarding the 1994 Stock Option Plan for 1998 through 2000
is summarized as follows:
Weighted
Exercise Average
Shares in Price Exercise
Thousands Per Share Price
------------ ----------------- ----------
Outstanding, January 1, 1998 ....... 1,331 $ 3.75-$23.50 $ 10.40
Granted ............................ 200 25.63 25.63
Exercised .......................... (53) 3.75-9.00 7.71
------ --------------- --------
Outstanding, December 31, 1998 ..... 1,478 3.75-25.63 12.56
Granted ............................ 490 29.13-41.13 36.23
Cancelled .......................... (5) 23.50 23.50
Exercised .......................... (85) 9.00-23.50 17.67
------ --------------- --------
Outstanding, December 31, 1999 ..... 1,878 3.75-41.13 18.49
Granted ............................ 455 22.38-33.81 26.04
Cancelled .......................... (23) 33.81-41.13 36.99
Exercised .......................... (79) 3.75-9.00 8.39
------ --------------- --------
Outstanding, December 31, 2000 ..... 2,231 $ 3.75-$41.13 $ 20.19
====== =============== ========
As of December 31, 2000, 1999, and 1998, options aggregating 2,057,000,
1,618,000, and 1,438,000 were exercisable at weighted average exercise prices
of $18.97, $16.04, and $12.27 per share, and had weighted average remaining
contractual lives of 6.64, 6.59, and 7.06 years, respectively.
Formula Stock Option Plan -- The Company's Board of Directors and
stockholders adopted the Formula Stock Option Plan for the benefit of the
Company's outside directors. The plan authorizes options to purchase up to an
aggregate of 800,000 shares of common stock. Under the plan, before February 1
of each year, each outside director is awarded an option to purchase 20,000
shares of common stock at an exercise price equal to the fair market value per
share at award date. Other option information regarding the Formula Option Plan
for 1998 through 2000 is summarized as follows:
Weighted
Exercise Average
Shares in Price Exercise
Thousands Per Share Price
----------- ------------------ ---------
Outstanding, January 1, 1998 ....... 60 $ 14.94-$20.63 18.73
Granted ............................ 40 24.81 24.81
Exercised .......................... -- -- --
--- --------------- ------
Outstanding, December 31, 1998 ..... 100 14.94-24.81 21.16
Granted ............................ 55 26.88-27.88 27.60
Exercised .......................... -- -- --
--- ---------------- ------
Outstanding, December 31, 1999 ..... 155 14.94-27.88 23.45
Granted ............................ 60 27.13 27.13
Exercised .......................... -- -- --
--- ---------------- ------
Outstanding, December 31, 2000 ..... 215 $ 14.94-$27.88 $ 24.47
=== ================ =======
All options outstanding as of December 31, 2000, 1999, and 1998 were
exercisable, and had weighted average remaining contractual lives of 7.51,
7.94, and 8.20 years, respectively. Effective January 2, 2001, the Company
granted options to purchase an additional 20,000 shares to each of the then
three outside directors at an exercise price per share of $22.31 at award date.
Stock-Based Compensation Information -- As discussed in Note 2, the
Company has adopted the disclosure-only provisions of SFAS No. 123, "Accounting
for Stock-Based Compensation". The Company granted 515,000, 545,000, and
F-20
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
10. STOCK OPTION PLANS -- (Continued)
240,000 options in 2000, 1999, and 1998 with weighted average grant-date fair
values of $10.38, $12.56, and $7.91, respectively, under both stock option
plans. No compensation cost has been recognized for the stock option plans. Had
compensation cost for the stock options been determined based on the fair value
method as prescribed by SFAS No. 123, the Company's pro forma net income and
basic and diluted earnings per share would have been $43,631,000 or $1.05 and
$1.03 per share for 2000, $37,308,000 or $0.90 and $0.88 per share for 1999,
and $41,233,000 or $0.99 and $0.97 per share for 1998.
The fair value of each option grant is estimated on the grant date using
the Black-Scholes option-pricing model with the following assumptions: expected
volatility of 50.1% in 2000, 44.7% in 1999, and 37.8% in 1998; risk-free
interest rates of 6.0% in 2000, 5.5% in 1999, and 4.6% in 1998; and expected
lives of 3.0 years in 1998 through 2000. The model reflects that no dividends
were declared in 1998 through 2000.
Options outstanding and exercisable for both stock option plans as of
December 31, 2000 are as follows (shares in thousands):
Options Outstanding Options Exercisable
------------------------------------------ -----------------------------------------
Weighted Average Weighted Average
-------------------------- -------------------------
Average Remaining Remaining
Range of Contractual Contractual
Exercise Number Exercise Life Number Exercise Life
Prices Outstanding Price (in years) Exercisable Price (in years)
- ---------------- ------------- ---------- ------------- ------------- ---------- ------------
$ 3.75 623 $ 3.75 4.0 623 $ 3.75 4.0
9.00 141 9.00 4.2 141 9.00 4.2
14.94-20.63 110 17.21 5.4 110 17.21 5.4
22.38 235 22.38 9.8 235 23.38 9.8
23.00-25.63 625 24.19 7.3 625 24.19 7.3
26.88-29.13 315 28.48 8.9 221 28.21 8.9
33.81 117 33.81 9.2 117 33.81 9.2
41.13 280 41.13 8.5 200 41.13 8.5
- ------------- --- ------- --- --- ------- ---
$3.75-$41.13 2,446 $ 20.57 6.9 2,272 $ 19.49 6.7
============= ===== ======= === ===== ======= ===
Employee Stock Purchase Plan -- The Company's Board of Directors and
stockholders adopted the SMI Employee Stock Purchase Plan to provide employees
the opportunity to acquire stock ownership. An aggregate total of 400,000
shares of common stock have been reserved for purchase under the 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 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. Participating employees designate a limited percentage of
their annual compensation or may directly contribute an amount for deferral as
contributions to the Plan. 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 expire at the end of each calendar year.
In 2000, 1999, and 1998, employees purchased approximately 13,000, 60,000,
and 16,000 shares granted under the Plan on January 1, 2000, 1999, and 1998 at
an average purchase price of $20.47, $25.48, and $21.79 per share,
respectively.
11. EMPLOYEE BENEFIT PLAN
The Speedway Motorsports, Inc. 401(k) Plan and Trust is available to all
Company employees meeting certain eligibility requirements. The Plan allows
participants to elect contributions of up to 15% of their annual compensation
within certain prescribed limits, of which the Company will match 25% of the
first 4% of employee contributions. Participants are fully vested in Company
matching contributions after five years. The Company's contributions to the
Plan were $243,000 in 2000, $161,000 in 1999, and $151,000 in 1998.
F-21
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
12. LAS VEGAS MOTOR SPEEDWAY ACQUISITION
On December 1, 1998, the Company acquired certain tangible and intangible
assets, including the real and personal property and operations of LVMS, an
industrial park and certain adjacent unimproved land for approximately $215.0
million, consisting principally of net cash outlay of $210.4 million and
assumed associated deferred revenue. The LVMS acquisition was accounted for
using the purchase method in accordance with APB No. 16. Accordingly, the
results of operations after the acquisition date are included in the Company's
consolidated statements of income.
The following unaudited pro forma financial information presents a summary
of consolidated results of operations as if the LVMS acquisition had occurred
as of January 1, 1998, 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 acquisition been made on that date, nor are they necessarily indicative
of results which may occur in the future.
Pro forma
(in thousands, except
per share amounts)
Year Ended
December 31, 1998
----------------------
Total revenues ..................... $ 264,583
Net income ......................... $ 40,672
Basic earnings per share ........... $ 0.98
Diluted earnings per share ......... $ 0.96
F-22
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
13. CONDENSED GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION
The Company's Credit Facility and Senior Subordinated Notes are joint and
severally guaranteed by all of the Company's wholly-owned subsidiaries except
for certain minor wholly-owned subsidiaries. The following table presents
condensed consolidating financial information of the Company's guarantor and
non-guarantor subsidiaries as of December 31, 2000 and 1999 and for each of the
three years ended December 31, 2000 (in thousands):
Condensed Consolidating Balance Sheets As Of December 31, 2000 and 1999
2000
-------------------------------------------------------------------
Parent Non-
Only Guarantors Guarantors Eliminations Consolidated
---------- ------------- ------------ -------------- --------------
Current assets ................. $ 15,423 $ 63,008 $ 7,280 $ (2,408) $ 83,303
Property and equipment, net 10,640 784,506 2,685 650 798,481
Goodwill and other
intangible assets, net ........ 5,066 49,314 4,725 -- 59,105
Other assets ................... 27,017 24,608 108 (665) 51,068
Advances to and investments
in subsidiaries, net .......... 805,871 (227,732) (14,837) (563,302) --
-------- ----------- ---------- ---------- --------
Total assets ................... $864,017 $ 693,704 $ (39) $ (565,725) $991,957
======== =========== ========== ========== ========
Current liabilities ............ $ 15,694 $ 86,972 $ 1,983 $ 534 $105,183
Long-term debt ................. 408,788 305 1,000 (164) 409,929
Other liabilities .............. 60,194 37,348 (27) (11) 97,504
-------- ----------- ---------- ---------- --------
Total liabilities .............. 484,676 124,625 2,956 359 612,616
Total stockholders' equity ..... 379,341 569,079 (2,995) (566,084) 379,341
-------- ----------- ---------- ---------- --------
Total liabilities and
stockholders' equity .......... $864,017 $ 693,704 $ (39) $ (565,725) $991,957
======== =========== ========== ========== ========
1999
------------------------------------------------------------------
Parent Non-
Only Guarantors Guarantors Eliminations Consolidated
---------- ------------- ------------ -------------- -------------
Current assets ................. $ 43,350 $ 61,769 $ 5,690 $ (2,520) $108,289
Property and equipment, net 9,340 782,392 3,102 -- 794,834
Goodwill and other
intangible assets, net ........ 5,181 48,925 4,881 -- 58,987
Other assets ................... 24,252 9,529 91 -- 33,872
Advances to and investments
in subsidiaries, net .......... 758,124 (219,256) (11,542) (527,326) --
-------- ----------- ---------- ---------- --------
Total assets ................... $840,247 $ 683,359 $ 2,222 $ (529,846) $995,982
======== =========== ========== ========== ========
Current liabilities ............ $ 13,681 $ 116,930 $ 961 $ 410 $131,982
Long-term debt ................. 457,208 404 941 (153) 458,400
Other liabilities .............. 37,650 36,272 (19) (11) 73,892
-------- ----------- ---------- ---------- --------
Total liabilities .............. 508,539 153,606 1,883 246 664,274
Total stockholders' equity ..... 331,708 529,753 339 (530,092) 331,708
-------- ----------- ---------- ---------- --------
Total liabilities and
stockholders' equity .......... $840,247 $ 683,359 $ 2,222 $ (529,846) $995,982
======== =========== ========== ========== ========
F-23
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
13. CONDENSED GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION -- (CONTINUED)
Condensed Consolidating Statements Of Operations
For the Years Ended December 31, 2000, 1999 and 1998
2000
------------------------------------------------------------------
Parent Non-
Only Guarantors Guarantors Eliminations Consolidated
---------- ------------ ------------ -------------- --------------
Total revenues ............ $ 3,455 $ 332,357 $ 18,485 -- $ 354,297
Total expenses ............ 3,650 218,518 24,479 -- 246,647
------- --------- -------- -- ---------
Operating income
(loss) ................... (195) 113,839 (5,994) -- 107,650
Interest and other
expense, net ............. 4,609 (33,530) 504 -- (28,417)
Equity in net income
(loss) of
subsidiaries ............. 45,453 -- -- $ (45,453) --
Net income (loss) ......... $46,875 $ 48,788 $ (3,335) $ (45,453) $ 46,875
======= ========= ======== ========= =========
1999 1998
------------------------------------------------------------------- ------------------------
Parent Non- Parent
Only Guarantors Guarantors Eliminations Consolidated Only Guarantors
----------- ------------ ------------ -------------- -------------- ----------- ------------
Total revenues ............ $ 641 $ 309,179 $ 7,673 -- $ 317,493 -- $ 229,456
Total expenses ............ 4,009 202,358 12,435 -- 218,802 $ 4,619 144,968
-------- --------- -------- -- --------- -------- ---------
Operating income
(loss) ................... (3,368) 106,821 (4,762) -- 98,691 (4,619) 84,488
Interest and other
expense, net ............. 3,236 (32,618) (743) -- (30,125) 3,516 (13,049)
Equity in net income
(loss) of
subsidiaries ............. 41,521 -- -- $ (41,521) -- 43,042 --
Net income (loss) ......... $ 41,443 $ 44,848 $ (3,327) $ (41,521) $ 41,443 $ 42,371 $ 43,235
======== ========= ======== ========= ========= ======== =========
1998
----------------------------------------
Non-
Guarantors Elimnations Consolidated
------------ ------------- -------------
Total revenues ............ $ 340 -- $229,796
Total expenses ............ 414 -- 150,001
------ -- --------
Operating income
(loss) ................... (74) -- 79,795
Interest and other
expense, net ............. (245) -- (9,778)
Equity in net income
(loss) of
subsidiaries ............. -- $ (43,042) --
Net income (loss) ......... $ (193) $ (43,042) $ 42,371
====== ========= ========
Condensed Consolidating Statements Of Cash Flows
For the Years Ended December 31, 2000, 1999 and 1998
2000
-----------------------------------------------------
Parent Non-
Only Guarantors Guarantors Consolidated
------------ ------------ ------------ --------------
Net cash provided by operations ......... $ 33,528 $ 41,831 $ 263 $ 75,622
Net cash provided (used) by
financing activities, including
LVMS acquisition loan
borrowings in 1998 ..................... (55,159) 8,860 -- (46,299)
Net cash provided (used) by
investing activities, including
purchase of LVMS in 1998 ............... (8,032) (46,378) (446) (54,856)
1999 1998
--------------------------------------------------- --------------------------
Parent Non- Parent
Only Guarantors Guarantors Consolidated Only Guarantors
---------- ------------ ------------ -------------- ------------ -------------
Net cash provided by operations ......... $12,658 $ 92,304 $ 2,532 $ 107,494 $ 13,087 $ 73,187
Net cash provided (used) by
financing activities, including
LVMS acquisition loan
borrowings in 1998 ..................... 1,296 (787) -- 509 17,140 215,235
Net cash provided (used) by
investing activities, including
purchase of LVMS in 1998 ............... 3,432 (88,417) (2,147) (87,132) (11,670) (299,731)
1998
------------------------------
Non-Guarantors Consolidated
---------------- -------------
Net cash provided by operations ......... $ 122 $ 86,396
Net cash provided (used) by
financing activities, including
LVMS acquisition loan
borrowings in 1998 ..................... -- 232,375
Net cash provided (used) by
investing activities, including
purchase of LVMS in 1998 ............... (119) (311,520)
F-24