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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended June 30, 2003

OR

For the transition period from                      to                     

Commission File Number 1-13582

SPEEDWAY MOTORSPORTS, INC.

(Exact name of registrant as specified in its charter)

(704) 455-3239

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x  No  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes  x  No  ¨

As of August 5, 2003, there were 42,487,475 shares of common stock outstanding.

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INDEX TO FORM 10-Q

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PART I—FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements.

SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(Unaudited)

See notes to consolidated financial statements.

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SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

See notes to consolidated financial statements.

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SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

See notes to consolidated financial statements.

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SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

See notes to consolidated financial statements.

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SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)

See notes to consolidated financial statements.

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The following Notes to Unaudited Consolidated Financial Statements, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Legal Proceedings contain “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements may include 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 relating to the Company’s future capital projects, hosting of races, broadcasting rights or sponsorships, and legal proceedings. Words such as “expects”, “anticipates”, “approximates”, “believes”, “estimates”, “hopes”, “intends”, “may”, 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 the Company’s fiscal 2002 Annual Report on Form 10-K.

Notes to Unaudited Consolidated Financial Statements

1. DESCRIPTION OF BUSINESS

The consolidated financial statements include the accounts of Speedway Motorsports, Inc. (SMI) and all of 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 (LMS), Nevada Speedway LLC d/b/a Las Vegas Motor Speedway (LVMS), Speedway Sonoma LLC a/k/a Infineon Raceway (IR), Texas Motor Speedway, Inc. (TMS), Speedway Systems LLC d/b/a SMI Properties and subsidiaries (SMIP), Motorsports By Mail LLC (MBM), Oil-Chem Research Corp. (Oil-Chem), SMI Trackside LLC (SMIT), Speedway Funding LLC, Speedway Properties LLC d/b/a Performance Racing Network (PRN) and Speedway Media LLC d/b/a Racing Country USA (RCU), (collectively, the Company).

Discontinued Operations and Disposal of Business—In March 2002, the Company committed to a formal plan to discontinue and dispose of the operations of SoldUSA, Inc., then a wholly-owned subsidiary, due to difficult market conditions for internet auction and e-commerce companies. Disposal occurred in the second quarter 2002. Certain SoldUSA net assets, which totaled approximately $1,514,000 as of March 31, 2002, were transferred to the previous owner in exchange primarily for elimination of a $1,069,000 note payable owed by the Company for acquiring SoldUSA. In the three months ended June 30, 2002, there were no SoldUSA revenues and losses from SoldUSA’s discontinued operations were insignificant. In the six months ended June 30, 2002, losses from SoldUSA’s discontinued operations were $99,000, after income taxes of $64,000, and total SoldUSA revenues were $249,000. Losses on disposal of $587,000, after income taxes of $381,000, were recognized in the first quarter 2002 and the six months ended June 30, 2002. See Note 2 on goodwill impairment recognition in the first quarter 2002 associated with SoldUSA. The Company accounted for the disposal of SoldUSA using Statement of Financial Accounting Standards (SFAS) No. 144 “Accounting for the Impairment or Disposal of Long-lived Assets”. There were no losses or revenues pertaining to SoldUSA in the three and six months ended June 30, 2003.

See Note 1 to the December 31, 2002 consolidated financial statements for further description of the Company’s business operations, properties and scheduled events.

2. SIGNIFICANT ACCOUNTING POLICIES

These unaudited consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements for the fiscal year ended December 31, 2002 included in its 2002 Annual Report on Form 10-K.

In management’s opinion, these unaudited consolidated financial statements contain all adjustments necessary for their fair presentation at interim periods. All such adjustments are of a normal recurring nature. The results of operations for interim periods are not necessarily indicative of operating results that may be expected for the entire year due to the seasonal nature of the Company’s motorsports business.

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Revenue Recognition—The Company recognizes admissions, NASCAR broadcasting and 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 and sales and admission taxes and credit card processing fees on advance revenues. Deferred race event income relates to scheduled events to be held in upcoming periods. If circumstances prevent a race from being held during the racing season: (1) generally advance revenue is refundable and (2) all deferred direct event expenses would be immediately recognized except for race purses and sanction fees which would be refundable from NASCAR or other sanctioning bodies, and for sales and admission taxes which would be refundable from taxing authorities. Management believes this accounting policy results in appropriate matching of revenues and expenses associated with the Company’s racing events and helps ensure comparability and consistency between its financial statements.

Quarterly Reporting—The Company currently recognizes revenues and operating expenses for all events in the calendar quarter in which conducted except for major NASCAR and other sanctioned racing events which occur on the last full weekend of a calendar quarter. When major racing events occur on the last full weekend of a calendar quarter, the race event revenues and operating expenses are recognized in the current or immediately succeeding calendar quarter that corresponds to the calendar quarter of the prior year in which the same major racing event was conducted. A major NASCAR-sanctioned racing event, consisting principally of one NASCAR Winston Cup and one Busch Series race, occurred at TMS on the weekend of March 29-30, 2003 which was held last year on the weekend of April 6-7, 2002. As such, the revenues and operating expenses of the 2003 race event were recognized in the second quarter 2003 corresponding with those of the 2002 race event recognized in the second quarter 2002.

Beginning in 2004, the Company intends to recognize revenues and operating expenses for all events in the calendar quarter in which conducted—including major NASCAR and other sanctioned racing events—because of the frequency of changes in race schedules in recent years. This change will have no impact on the reporting of full year operating results.

Changes in race schedules at the Company’s speedways from time to time lessen the comparability of operating results between quarterly financial statements of successive years.

Naming Rights—The Company presently has two long-term ten-year naming rights agreements which renamed Sears Point Raceway as Infineon Raceway and Charlotte Motor Speedway as Lowe’s Motor Speedway for combined gross fees aggregating approximately $69,000,000 over the respective ten-year agreement terms. Annual contracted fee revenues, net of associated expenses, are recognized as associated events are held each year in accordance with the respective agreement terms.

Long-Term Management Contract and Asset Sale—Certain Company subsidiaries and Levy Premium Foodservice Limited Partnership and Compass Group USA, Inc. (collectively, the Levy Group) executed a long-term food and beverage management agreement and an asset purchase agreement which closed in February 2002. The Levy Group has exclusive rights to provide on-site food, beverage, and hospitality catering services for essentially all events and operations of the Company’s six speedways and other outside venues. These services were previously provided by the Company’s subsidiary SMIP. The agreements provide for, among other items, specified annual fixed and periodic gross revenue based commission payments to the Company over the contract period. The management contract period is initially ten years with a renewal option for an additional ten-year period. The Levy Group also purchased certain food and beverage machinery and equipment of SMIP for approximately $10,003,000 in cash, which approximated net book value as of December 31, 2001. The Company’s operating profits associated with food, beverage and hospitality catering activities provided by the Levy Group are reported as net event related commission revenue and net other operating commission revenue.

Accounting Change in 2002 For Goodwill and Other Intangible Assets—The Company adopted Statement of Financial Accounting Standards (SFAS) No. 142 “Goodwill and Other Intangible Assets” as of January 1, 2002. SFAS No. 142 specifies, among other things, that goodwill and other intangible assets with indefinite useful lives will no longer be amortized, but instead evaluated for possible impairment at least annually. Under SFAS No. 142, the Company ceased amortizing goodwill as of January 1, 2002, including goodwill from past business combinations, and now periodically assesses goodwill at the reporting unit level for possible impairment. Such assessment is performed annually as of April 1 or when events or circumstances indicate possible impairment may have occurred.

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In the first quarter 2002, the Company evaluated the effects of SFAS No. 142 for possible initial goodwill impairment under transitional rules. The fair value of goodwill and other intangibles for each reporting unit of the Company was assessed primarily using expected present value of future cash flows and corroborated by quoted market prices or comparable transactions where available or applicable. Such impairment assessment indicated that goodwill associated with Oil-Chem of $3,815,000 and SoldUSA of $755,000, both non-motorsports related reporting units of the Company, was impaired under the new accounting guidelines. In accordance with SFAS No. 142, the Company recorded these impairments as a change in accounting principle as of January 1, 2002. The non-cash cumulative effect of the accounting change reduced net income in the first quarter 2002 and the six months ended June 30, 2002 by $4,273,000, after income taxes of $297,000, and basic and diluted earnings per share by $0.10. Goodwill associated with Oil-Chem is not deductible for tax reporting purposes and represents a permanent difference for which current or deferred income tax liabilities are appropriately not recognized. As such, no income tax benefit was recognized upon impairment writeoff.

All remaining goodwill and other intangible assets, after the impairment loss recognition, are associated with the Company’s motorsports related operating segment and are not subject to amortization. As of June 30, 2003 and December 31, 2002, these intangible assets had carrying values aggregating approximately $51,900,000, including other intangible assets of approximately $2,900,000 associated with race event sanctioning arrangements and relationships. Management’s annual assessment of goodwill as of April 1, 2003 indicated there has been no impairment, and there have been no events or circumstances which might indicate possible impairment of goodwill and other intangible assets as of June 30, 2003.

Recently Issued Accounting Standards—In December 2002, SFAS No. 148 “Accounting for Stock-Based Compensation—Transition and Disclosure – an amendment of FASB No. 123” was issued to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The transition guidance and annual disclosure provisions of SFAS No. 148 are effective for financial statements issued for fiscal years ending after December 15, 2002. The interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 15, 2002. As further discussed in “Stock-Based Compensation” below, the Company applied the disclosure provisions of SFAS No. 148 in these financial statements and accompanying notes.

In January 2003, Financial Accounting Standards Board (FASB) Interpretation No. 46 (FIN 46), “Consolidation of Variable Interest Entities” was issued which, among other things, provides guidance on identifying variable interest entities (VIE) and determining when assets, liabilities, noncontrolling interests, and operating results of a VIE should be included in a company’s consolidated financial statements, and also requires additional disclosures by primary beneficiaries and other significant variable interest holders. The provisions of FIN 46 became effective upon issuance, and did not impact the Company’s financial statements or disclosures.

In April 2003, SFAS No. 149 “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” was issued which amends and clarifies the accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities under SFAS No. 133. It requires, among other things, that contracts with comparable characteristics be accounted for similarly and clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative and when a derivative contains a financing component that warrants special reporting in the statement of cash flows. SFAS No. 149 is effective generally for contracts entered into and modified after June 30, 2003. The Company had no derivative instruments at June 30, 2003, and will assess the impact, if any, adoption would have on its financial statements or disclosures upon entering into any derivative instruments.

In May 2003, SFAS No. 150 “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” was issued to improve the accounting for certain financial instruments that, under previous guidance, issuers could account for as equity, and requires classification of those instruments as liabilities in statements of financial position. It affects, among other things, the accounting for generally three types of freestanding financial instruments: mandatory redeemable shares, put options and forward purchase contracts, and obligations that can be settled with shares, the monetary value of which is fixed,

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tied solely or predominately to a variable such as a market index, or varies inversely with the value of a company’s shares. SFAS No. 150 does not apply to features embedded in financial instruments that are not derivatives in entirety. SFAS No. 150 is effective generally for all financial instruments entered into or modified after May 31, 2003, and otherwise is effective for the first interim period beginning after June 15, 2003. The Company had no freestanding financial instruments at June 30, 2003, and will assess the impact, if any, adoption would have on its financial statements or disclosures upon entering into any such instruments.

Stock-Based Compensation and Formula Stock Option Plan—The Company continues to account for stock-based employee compensation using Accounting Principles Board (APB) Opinion No. 25 “Accounting for Stock Issued to Employees” which recognizes compensation cost based on the intrinsic value of equity instruments awarded as permitted under SFAS No. 123 “Accounting for Stock-Based Compensation”. Effective January 2, 2003, the Company granted options to purchase 10,000 shares to each of its four outside directors at an exercise price per share of $26.06 at award date which equaled fair value at grant date. All stock options granted under the Company’s 1994 Stock Option Plan and the Formula Stock Option Plan for Directors have an exercise price equal to the market value of the underlying common stock at grant date. As such, no compensation cost has been reflected in net income for these plans. See Note 10 to the Company’s audited December 31, 2002 Consolidated Financial Statements for additional information on its stock option plans.

As discussed above in “Recently Issued Accounting Standards”, the Company has applied the disclosure provisions of SFAS No. 148 “Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of FASB No. 123”.

The following schedule illustrates the pro forma effect on net income and earnings per share had compensation cost for stock options been determined using the fair value recognition provisions of SFAS No. 123 (in thousands, except per share amounts):

The fair value of each option grant for both stock option plans is estimated on grant date using the Black-Scholes option-pricing model using the following assumptions:

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Reclassifications—Certain prior year accounts were reclassified to conform with current year presentation. Property held for sale previously reported at December 31, 2002, consisting of land for development of $12,252,000 was reclassified to noncurrent other assets, and condominiums located at two company speedways of $3,961,000 were reclassified to property and equipment, in the accompanying June 30, 2003 and December 31, 2002 balance sheets. Such land for development represents property foreclosed on by management in December 2001 which previously collateralized past due notes receivable. Independent appraised fair value less estimated selling costs supported reflecting the property based on note carrying values at foreclosure. Management is in the process of developing and marketing the property, which is adjacent to a regional outlet mall in the Charlotte metropolitan area. The speedway condominiums represent two condominiums at AMS and ten substantially completed condominiums at TMS which are being marketed. These assets were reclassified under SFAS No. 144 “Accounting for the Impairment or Disposal of Long-lived Assets” as management is presently unable to determine if sale of these assets is probable within one year.

3. INVENTORIES—Inventories as of June 30, 2003 and December 31, 2002 consist of the following components (in thousands):

4. LONG-TERM DEBT AND LOSS ON EARLY DEBT REDEMPTION AND REFINANCING

Replacement of Bank Credit Facility and Redemption of Senior Subordinated Notes—At March 31, 2003 and December 31, 2002, the Company had borrowings under a revolving bank credit facility (the Former Credit Facility) of $90,000,000 and outstanding 8½% senior subordinated notes in the aggregate principal amount of $250,000,000 (the Former Senior Subordinated Notes).

As further described below, in May 2003, the Company refinanced the Former Credit Facility with proceeds from issuance of new 6¾% senior subordinated notes and execution of a replacement credit facility, and in June 2003, redeemed and retired all outstanding Former Senior Subordinated Notes. The Company’s management, including the Board of Directors, believes such debt redemption and replacement transactions are in the Company’s long-term interest based on a current favorable interest rate environment and scheduled maturity of the Former Credit Facility in May 2004, and provides additional financial and operational flexibility. All borrowings outstanding under the Former Credit Facility and Former Senior Subordinated Notes were replaced and funded with the issuance of new long-term debt. Proceeds from the new debt arrangements were also used to fund the redemption premium and accrued interest of the Former Senior Subordinated Notes and loan and other transaction costs for the new senior subordinated notes and new credit facility. See “Loss on Early Debt Redemption and Refinancing in 2003” below for additional information on the related charge to earnings reflected in the three and six months ended June 30, 2003.

Former Credit Facility—The Company’s former long-term, senior revolving credit facility with a syndicate of banks led by Bank of America, N.A. as an agent and lender, had an overall borrowing limit of $250,000,000, with a sub-limit of $10,000,000 for standby letters of credit, was scheduled to mature in May 2004, and was secured by a pledge of the capital stock and other equity interests of all operative Company subsidiaries except Oil-Chem. Interest was based, at the Company’s option, upon LIBOR plus 0.75% to 1.25% or (ii) the greater of Bank of America’s prime rate or the Federal Funds rate plus 0.5%.

Former Senior Subordinated Notes—The Company’s 8½% Former Senior Subordinated Notes were scheduled to mature in August 2007, had semi-annual interest payments due February 15 and August 15, and were redeemable at varying prices at the Company’s option.

Bank Credit Facility Replacement—In May 2003, the Company obtained, from a syndicate of banks led by Bank of America, N.A. as an agent and lender, a long-term, senior revolving credit facility and term loan (the 2003 Credit Facility) to replace its Former Credit Facility (see “Former Credit Facility” above). The 2003 Credit Facility was used to repay outstanding

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borrowings under the Former Credit Facility, redeem a portion of the Former Senior Subordinated Notes, fund capital expenditures and for working capital needs. The 2003 Credit Facility consists of a revolving credit facility with an overall borrowing limit of $250,000,000, and separate sub-limits of $10,000,000 for standby letters of credit and for 15-day swing line loans, a $50,000,000 five-year term loan, an unused commitment fee of 0.375%, matures in May 2008, and is secured by pledged capital stock and other equity interests of all operative Company subsidiaries except Oil-Chem (Guarantors). The Company also agreed not to pledge its assets to any third party. At June 30, 2003, outstanding borrowings under the revolving credit facility amounted to $80,000,000 and under the term loan amounted to $50,000,000, and outstanding letters of credit amounted to $814,000. As of June 30, 2003, the Company could borrow up to an additional $170,000,000 under the 2003 Credit Facility. The Company was in compliance with all applicable covenants as of June 30, 2003.

Interest is based, at the Company’s option, upon (i) LIBOR plus 1.5% to 2.5% or (ii) the greater of Bank of America’s prime rate or the Federal Funds rate plus 0.5%. The margin applicable to LIBOR borrowings is adjustable periodically based upon certain ratios of funded debt to earnings before interest, taxes, depreciation and amortization (EBITDA). Also, among other items, the Company is required to meet certain financial covenants, including specified levels of net worth and ratios of (i) funded senior debt to EBITDA, (ii) funded debt to EBITDA and (iii) earnings before interest and taxes (EBIT) to interest expense and dividends. The 2003 Credit Facility also contains certain limitations on cash expenditures to acquire additional motor speedways without lender consent, and limits annual and aggregate consolidated capital expenditures over the loan term, and allows for payment of dividends and repurchase of SMI securities up to $17.5 million annually. The Company also agreed to certain other limitations or prohibitions concerning the incurrence of other indebtedness, transactions with affiliates, guarantees, asset sales, investments, dividends, distributions and redemptions.

New Senior Subordinated Notes—In May 2003, the Company completed a private placement of 6¾% senior subordinated notes (the 2003 Senior Subordinated Notes) in the aggregate principal amount of $230,000,000. The 2003 Senior Subordinated Notes mature in 2013, are redeemable at the Company’s option at varying prices after June 1, 2008, and are guaranteed by all operative Company subsidiaries except Oil-Chem. Interest payments are due semi-annually on June 1 and December 1, commencing December 1, 2003. The 2003 Senior Subordinated Notes are subordinated to all present and future senior secured indebtedness of the Company, including the 2003 Credit Facility (see “Bank Credit Facility Replacement” above). The Company plans to file a registration statement to register these notes within 90 days after issuance. The 2003 Senior Subordinated Notes were issued at par, and net proceeds, after commissions and fees, approximated $224,200,000. Such proceeds, along with expected borrowings under the 2003 Credit Facility, were used to fully redeem the Former Senior Subordinated Notes in June 2003. The Company was in compliance with all applicable covenants as of June 30, 2003.

The Indenture governing the 2003 Senior Subordinated Notes (the 2003 Senior Subordinated Notes Indenture) contains certain restrictive and required financial covenants. The Company agreed not to pledge its assets to any third party except under certain limited circumstances, and to certain other limitations or prohibitions concerning the incurrence of other indebtedness, issuance of capital stock, guarantees, asset sales, investments, dividends, distributions and redemptions. The 2003 Senior Subordinated Note Indenture and 2003 Credit Facility agreements contain cross-default provisions.

Loss on Early Debt Redemption and Refinancing in 2003—In May 2003, as further described above, the Company refinanced the Former Credit Facility with proceeds from issuance of new 2003 Senior Subordinated Notes and execution of a replacement 2003 Credit Facility, and in June 2003, redeemed and retired all outstanding Former Senior Subordinated Notes at 104.25% of par value. The net redemption premium, associated unamortized net deferred loan costs, unamortized original issuance premium and gain recognition of a previously deferred cash flow hedge interest rate swap termination and settlement payment and transaction costs, all associated with the former debt arrangements, and aggregating approximately $12,800,000, before income taxes of $5,030,000, were reflected as a charge to earnings in the second quarter 2003. The charge reduced basic and diluted earnings per share for the three and six months ended June 30, 2003 by $0.18.

Loss on Early Debt Redemption in 2002—In April 2002, the Company redeemed all then outstanding 5¾% convertible subordinated debentures aggregating $53.7 million at 101.64% of par value. At March 31, 2002, 1,726,000 shares of common stock would have been issuable upon conversion. Redemption reduced future interest expense and eliminated the associated dilution effect on earnings per share, and was funded entirely from available cash and cash investments on hand. The net redemption premium,

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associated unamortized net deferred loan costs, and transaction costs totaling approximately $1,237,000, before income taxes, were reflected as a charge to earnings in the second quarter 2002. The charge reduced basic and diluted earnings per share for the three and six months ended June 30, 2002 by $0.02.

The losses on early debt redemption for both 2003 and 2002 were reflected as a charge to earnings applying the provisions of SFAS No. 145 “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB No. 13, and Technical Corrections”.

Deferred Financing Costs—Deferred financing costs are included in other noncurrent assets and amortized over the associated debt terms. Deferred financing costs of $8,590,000 and $12,811,000, are reported net of accumulated amortization of $141,000 and $6,948,000, at June 30, 2003 and December 31, 2002. As discussed above in “Loss on Early Debt Redemption and Refinancing in 2003”, previously deferred loan costs associated with the Former Credit Facility and Former Senior Subordinated Notes were written off as a charge to earnings in the second quarter 2002 upon replacement and redemption.

Subsidiary Guarantees—Amounts outstanding under the 2003 Credit Facility and 2003 Senior Subordinated Notes are guaranteed by all of the Company’s operative subsidiaries except for one minor wholly-owned subsidiary, Oil-Chem. These guarantees are full and unconditional and joint and several. The parent company has no independent assets or operations.

Interest Expense, Net—Interest expense, net for the three months ended June 30, 2003 and 2002 includes interest expense of $7,013,000 and $5,507,000, and interest income of $541,000 and $511,000. The Company capitalized interest costs of $422,000 and $1,006,000 during the three months ended June 30, 2003 and 2002. The weighted-average interest rate on borrowings under the bank revolving credit facilities during the three months ended June 30, 2003 and 2002 was 2.5% and 2.7%.

Interest expense, net for the six months ended June 30, 2003 and 2002 includes interest expense of $12,510,000 and $11,932,000, and interest income of $932,000 and $1,140,000. The Company capitalized interest costs of $1,079,000 and $1,654,000 during the six months ended June 30, 2003 and 2002. The weighted-average interest rate on borrowings under the bank revolving credit facilities during the six months ended June 30, 2003 and 2002 was 2.3% and 2.7%.

The 2003 Senior Subordinated Notes aggregating $230,000,000 in principal were issued on May 16, 2003, and the Former Senior Subordinated Notes aggregating $250,000,000 in principal were fully redeemed on June 15, 2003. The new notes were issued before redemption of the former notes because of a favorable interest rate environment and required notice of redemption to note holders by the Company. Interest expense of $1,486,000, net of interest income earned on proceeds received of $180,000, hereafter referred to as “interim interest expense on debt redeemed, net”, was incurred on the Former Senior Subordinated Notes from May 16, 2003 through June 15, 2003, along with interest expense on the 2003 Senior Subordinated Notes. Until the Former Senior Subordinated Notes were redeemed, the Company utilized net proceeds from the sale of the 2003 Senior Subordinated Notes to repay outstanding borrowings and accrued interest under the Former Credit Facility and invested in short-term, fixed income securities.

As such, interest expense, net for the three and six months ended June 30, 2003 includes interim interest expense on debt redeemed, net of $1,486,000 or $902,000 after taxes, reducing basic and diluted earnings per share by $.02.

5. 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 prior to redemption on April 19, 2002 (see Note 4). Anti-dilutive common stock equivalents for stock options of 169,000 and 175,000 in the three months ended June 30, 2003 and 2002, and 233,000 and 216,000 in the six months ended June 30, 2003 and 2002 were excluded in computing diluted earnings per share.

The following schedule reconciles basic and diluted earnings per share (dollars and shares in thousands):

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6. RELATED PARTY TRANSACTIONS

Notes and other receivables from affiliates at June 30, 2003 and December 31, 2002 include $967,000 and $954,000 due from a partnership in which the Company’s Chairman and Chief Executive Officer is a partner, including accrued interest. The note is collateralized by certain partnership land. The Board of Directors, including SMI’s independent directors, have reviewed this transaction and determined it an appropriate use of available Company funds based on interest rates at the original transaction date, underlying note collateral and creditworthiness of the Company’s Chairman and his partnership.

Notes and other receivables from affiliates at June 30, 2003 and December 31, 2002 include $3,700,000 and $8,980,000 due from the Company’s Chairman and Chief Executive Officer. The amount due represents premiums paid by the Company before July 30, 2002 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 Board of Directors, including SMI’s independent directors, have reviewed this compensatory arrangement and determined it an appropriate use of available Company funds based on interest rates at the time of transaction and creditworthiness of the Chairman. As of July 30, 2002, the Company indicated to Mr. Smith that it would no longer make payments under the split-dollar life insurance trust arrangements for his benefit.

The Company has made loans to, and paid certain expenses on behalf of, Sonic Financial Corporation (Sonic Financial), a Company affiliate through common ownership by the Company’s Chairman and Chief Executive Officer for various corporate purposes. Notes and other receivables from affiliates at June 30, 2003 and December 31, 2002 include $6,142,000 and $6,224,000 due from Sonic Financial. The Board of Directors, including SMI’s independent directors, have reviewed these transactions and determined them to be an appropriate use of available Company funds based on interest rates at the time of transaction and creditworthiness of Sonic Financial and the Company’s Chairman.

The amounts due from affiliates discussed in the preceding three paragraphs all bear interest at 1% over prime, are payable on

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demand, and because the Company does not anticipate or require repayment before June 30, 2004, have been classified as noncurrent assets in the accompanying consolidated balance sheet. Changes reflected in the preceding paragraphs from December 31, 2002 primarily reflect increases in amounts due for accrued interest on outstanding balances, and decreases in amounts due from repayments by affiliates.

Notes and other receivables from affiliates at June 30, 2003 and December 31, 2002 include $295,000 due from a corporation which is a Company affiliate through common ownership by the Company’s Chairman and Chief Executive Officer. From time to time, the Company makes cash advances for various corporate purposes on behalf of the affiliate. The amount due is payable on demand, is collateralized by certain personal property, and because the Company does not anticipate or require repayment before June 30, 2004, has been classified as noncurrent assets in the accompanying consolidated balance sheet. The Board of Directors, including SMI’s independent directors, have reviewed these transactions and determined them to be an appropriate use of available Company funds based on the underlying collateral and creditworthiness of the Company’s Chairman and affiliate.

Amounts payable to affiliate at June 30, 2003 and December 31, 2002 consists of $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. The Company believes the terms of these loans and advances are more favorable than those that could be obtained in an arm’s-length transaction with an unrelated third party.

600 Racing and SMIP each lease an office and warehouse facility from Chartown, a Company affiliate through common ownership by the Company’s Chairman and Chief Executive Officer, under annually renewable lease agreements. Rent expense for 600 Racing approximated $49,000 each period for the three months ended June 30, 2003 and 2002, and $98,000 each period for the six months ended June 30, 2003 and 2002. Rent expense for SMIP approximated $48,000 each period for the three months ended June 30, 2003 and 2002, and $97,000 each period for the six months ended June 30, 2003 and 2002. The leases contain terms more favorable to the Company than would be obtained from unaffiliated third parties. Additionally, a special committee of independent and disinterested SMI directors on the Company’s behalf evaluated these leases, assisted by independent counsel and real estate experts, and concluded the leases are in the best interests of the Company and its stockholders. The economic terms of the leases were based on several factors, including projected earnings capacity of 600 Racing and SMIP, the quality, age, condition and location of the facilities, and rent paid for comparable commercial properties.

LVMS purchased new vehicles for employee use from Nevada Dodge, a subsidiary of Sonic Automotive, Inc. (SAI), an entity in which the Company’s Chairman and Chief Executive Officer is a controlling stockholder, for approximately $314,000 in the three months ended June 30, 2002, and $245,000 and $734,000 in the six months ended June 30, 2003 and 2002. No vehicles were purchased in the three months ended June 30, 2003. The Company believes the purchase terms approximate market value and are no less favorable than could be obtained in an arm’s-length transaction from an unrelated third party.

Oil-Chem sold zMax oil lubricant product to certain SAI dealerships for resale to service customers of the dealerships in the ordinary course of business. Total purchases from Oil-Chem by SAI dealerships approximated $473,000 and $635,000 for the three months ended June 30, 2003 and 2002, and $1,041,000 and $833,000 for the six months ended June 30, 2003 and 2002. At June 30, 2003 and December 31, 2002, Oil-Chem had $205,000 and $180,000 due from SAI. These sales occurred on terms no less favorable than could be obtained in an arm’s-length transaction with an unrelated third party.

SAI and its dealerships frequently purchase various apparel items, which are screenprinted or embroidered with SAI and dealership logos, for its employees as part of internal marketing and sales promotions. SAI and its dealerships purchase such items from several companies similar to SMIP and SMIT. Total purchases from SMIP and SMIT by SAI and its dealerships approximated $96,000 and $270,000 for the three months ended June 30, 2003 and 2002, and $664,000 and $644,000 for the six months ended June 30, 2003 and 2002. At June 30, 2003 and December 31, 2002, SMIP and SMIT had $79,000 and $18,000 due from SAI. The Company believes these sales occurred on terms no less favorable than could be obtained in an arm’s-length transaction with an unrelated third party.

Interest income of $149,000 and $228,000 for the three months ended June 30, 2003 and 2002, and $345,000 and $431,000 for

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the six months ended June 30, 2003 and 2002, was earned on amounts due from related parties. Interest expense of $28,000 and $29,000 for the three months ended June 30, 2003 and 2002, and $56,000 and $57,000 for the six months ended June 30, 2003 and 2002, was accrued on amounts payable to an affiliate.

7. LEGAL PROCEEDINGS AND CONTINGENCIES

The Company is involved in various lawsuits in the normal course of business, some of which involve material claims. The more significant of these lawsuits are described below. Management does not believe the outcome of any of these lawsuits or incidents will have a material adverse effect on the Company’s financial position or future results of operations.

On May 1, 1999, during the running of an IRL Series racing event at LMS, an on-track accident occurred that caused race debris to enter the spectator seating area. On February 13, 2001, the parents of Haley A. McGee filed a personal injury action related to this accident against SMI, LMS and IRL in the Superior Court of Mecklenburg County, North Carolina. This lawsuit seeks unspecified damages and punitive damages related to the injuries of their daughter, as well as the medical expenses incurred and wages lost by her parents. On April 23, 2001, the Company filed its answer in this action. The parties agreed to settle this case for an undisclosed amount, and management expects the court to approve the settlement terms in August 2003. Management does not expect this settlement to have a material adverse effect on the Company’s financial position or future results of operations. On April 24, 2002, Rodney Pyatte filed a personal injury action related to this accident against SMI, LMS and IRL in the Superior Court of Mecklenburg County, North Carolina. This lawsuit sought unspecified damages and punitive damages related to the injuries of Rodney Pyatte, as well as the medical expenses incurred and wages lost. On June 24, 2002, the Company filed its answer in this action. The court dismissed this lawsuit with prejudice on July 14, 2003.

On February 8, 2000, a lawsuit by Robert L. “Larry” Carrier against SMI and BMS was filed in the Chancery Court for Sullivan County, Tennessee. This suit alleges that SMI and BMS interfered with the use of a leasehold property rented to the plaintiff by BMS. The complaint sought $15 million in compensatory and $60 million in punitive damages as well as injunctive relief. On October 11, 2002, the trial court entered a judgment against SMI and BMS for approximately $1.4 million in damages plus costs. On February 19, 2003, the court entered into an amended judgment awarding approximately $2.4 million to the plaintiff, and awarding BMS exclusive possession of the leased premises. A charge to earnings of approximately $2.4 million was reflected in the six months ended December 31, 2002 for the litigation. The plaintiff and the Company have appealed this judgment. The Company believes that the plaintiff’s claim is without merit and intends to pursue its rights to appeal vigorously.

On May 20, 2000, near the end of a NASCAR-sanctioned event hosted at LMS, 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 resulted from excessive interior corrosion resulting from improperly manufactured bridge components. Tindall Corporation designed, manufactured and constructed the portion of the pedestrian bridge that failed. Tindall contends that a product that Tindall purchased from Anti-Hydro International, Inc. and that Tindall incorporated into the bridge caused the corrosion.

To date, 102 individuals claiming injuries from the bridge failure on May 20, 2000, have filed a total of 48 separate lawsuits, and of these, 41 plaintiffs’ cases have been resolved by the defendants. Generally, the plaintiffs filed these negligence lawsuits and a wrongful death lawsuit against SMI, LMS, Tindall Corporation and Anti-Hydro International, Inc., in the North Carolina Superior Courts of Cabarrus, Mecklenburg, Rowan, Union and Wake Counties, and in the United States District Courts for the Middle District and Western District of North Carolina, seeking unspecified compensatory and punitive damages. The following lawsuits were filed during the second quarter of 2003: James Mann and Shelly Mann on May 12, 2003; Joyce Million on May 12, 2003; Joel Kennedy on May 15, 2003; Mark Nash on May 15, 2003; David Prosser and Denise Prosser on May 15, 2003; Jerry Stephens on May 15, 2003; Roger Dunham on May 16, 2003; and John Taylor on May 19, 2003.

Fifteen plaintiffs in eight lawsuits previously filed in North Carolina state court settled in August 2002, four plaintiffs in two lawsuits settled in December 2002, two plaintiffs in a single lawsuit settled in January 2003, one plaintiff in a single lawsuit settled in February 2003, two plaintiffs in a single lawsuit settled in May 2003, eleven plaintiffs in seven lawsuits settled in June 2003 and three plaintiffs in two lawsuits settled in July 2003 with the claims being dismissed as to all defendants, including SMI

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and LMS. On January 20, 2003, the trial of the first of these cases (three plaintiffs) began. This trial resulted in a directed verdict and dismissal of SMI at the close of all of the evidence. On March 27, 2003, the jury returned a verdict finding that LMS was not negligent in connection with the collapse of the pedestrian bridge. However, LMS was determined by the Court to be responsible for the acts and omissions of Tindall and therefore LMS will be jointly and severally liable for future verdicts. Discovery is proceeding in the remaining cases. All of the state court lawsuits were consolidated before one judge and are pending in Mecklenburg County. The remaining federal lawsuit is progressing under the same discovery plan that the parties are following in the consolidated state court lawsuits. The Company is vigorously defending itself and denies the allegations of negligence as well as the related claims for punitive damages. Management believes that neither the dispositions that have occurred, nor dispositions that may occur in the future, in this matter will have a material adverse effect 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 by Yellow Flag Alliance, Tony Lilly and Nancy Lilly against Sonoma County and Sonoma County Board of Supervisors. This action challenges the Sonoma County Board of Supervisors’ authorization of an IR renovation project. In particular, the petitioners claim that the County board failed to follow California statutes requiring environmental assessments of the IR project on issues such as noise, traffic, visual impairments, land use and zoning. Although neither SMI nor IR is named in the action, an adverse outcome could impact the Company’s ability to expand the IR facility to the extent previously planned. Management has been advised that settlement negotiations are ongoing which, if successful, would have no material impact on IR’s operations and would not require any payments by SMI or IR to the parties to the action.

On August 23, 2000, a shareholder derivative complaint was filed against SMI and its directors in the 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 F. Kemp and Speedway Motorsports, Inc., 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, the 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 plaintiffs’ costs and attorney fees. The defendants filed an answer denying the allegations of the complaint. On July 16, 2003, the defendants filed a motion for summary judgment. Management believes that the complaint has no basis and is defending the action vigorously.

On January 31, 2001, the Federal Trade Commission (FTC) filed a complaint against SMI and Oil-Chem in the United States District Court, Middle District of North Carolina. The FTC sought to enjoin SMI and Oil-Chem from advertising zMax Power System for use in motor vehicles and to award equitable relief to address alleged injury to customers. On March 20, 2003, a settlement was reached resolving all FTC claims against SMI and Oil-Chem without any admission of liability by SMI and Oil-Chem. The FTC staff has confirmed the advertising claims SMI and Oil-Chem may make going forward and indicated that no compliance action would be merited as a result of such advertising claims. In order to avoid protracted litigation with the FTC, SMI and Oil-Chem, as a part of the settlement, are offering a pro rata purchase price refund to certain customers who purchased zMax Power System before January 31, 2001, not to exceed $1,000,000 in the aggregate. Based on customer refund requests received to date, management believes such requests will likely exceed the maximum settlement payment. As such, the Company expects to refund payments aggregating $1,000,000 once the customers 180-day deadline for affirmative acceptance of the Company’s offer has expired. The Company recorded a charge to earnings in the second quarter 2003 of $1,141,000 pre-tax, or $693,000 after income taxes, for the FTC refund claims settlement and associated costs of refund processing.

On April 18, 2001, Cracker Barrel Old Country Store, Inc. filed a complaint against AMS, SMI, NASCAR and Fox Entertainment Group, Inc., in the United States District Court for the Middle District of Tennessee. Cracker Barrel alleged that AMS breached its sponsorship contract for the March 11, 2001 Cracker Barrel 500 Winston Cup event at AMS, and alleged that SMI tortiously interfered with this contract. Cracker Barrel contended that as a result of the sponsorship contract, it was entitled to receive certain exposure from the national broadcast of the race. The complaint sought unspecified compensatory, treble and punitive damages, costs and attorney fees. On April 16, 2002, Cracker Barrel amended its complaint to include allegations of conspiracy. SMI and AMS denied the allegations. On November 22, 2002, the Court entered summary judgment in favor of all

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defendants and dismissed the case. The plaintiff then appealed to the United States Court of Appeals for the Sixth Circuit. On July 25, 2003, the Sixth Circuit dismissed the appeal. However, Cracker Barrel thereafter moved to dismiss its own appeal with prejudice, and AMS and SMI did not make any payment to Cracker Barrel.

On February 13, 2002, Francis Ferko, as a shareholder of SMI, filed a lawsuit in the United States Federal Court for the Eastern District of Texas against NASCAR and International Speedway Corporation (ISC) alleging, among other things, that NASCAR and ISC unlawfully refused to award SMI a NASCAR Winston Cup Series race date at TMS. The plaintiff demands judgment against defendants NASCAR and ISC for a Winston Cup race date at TMS, monetary damages and other relief. The Company was named as a necessary party to the lawsuit, since the lawsuit is being brought on behalf of the Company by a shareholder. The Company has not asserted any claim in this matter, which is currently in discovery.

LMS’s property includes areas used as solid waste landfills for many years. Landfilling of general categories of municipal solid waste on the LMS property ceased in 1992, but LMS currently allows certain property to be used for land clearing and inert debris landfilling (LCID). Landfilling for construction and demolition debris (C&D) has ceased on the LMS property. The Company believes that its operations, including the landfills on its property, comply with all applicable federal, state and local environmental laws and regulations. The Company is not aware of any situation related to landfill operations which would adversely affect its 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.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and associated Notes.

Overview

The Company classifies its revenues as admissions, event related revenue, NASCAR broadcasting revenue, and other operating revenue. “Admissions” includes ticket sales for all of the Company’s events. “Event related revenue” includes amounts received from sponsorship fees, naming rights fees, commissions from food and beverage sales, souvenir sales, promotional and hospitality revenues, luxury suite rentals, broadcasting rights other than NASCAR broadcasting revenue, track rentals, and other event and speedway related revenue. “NASCAR broadcasting revenue” includes rights fees obtained for domestic television broadcasts of NASCAR-sanctioned events held at the Company’s speedways. “Other operating revenue” includes revenues from The Speedway Club at LMS and The Texas Motor Speedway Club (together the “Speedway Clubs”), dining and entertainment facilities located at the respective speedways; from Legends Car operations of 600 Racing, Inc., a wholly-owned subsidiary of LMS; and industrial park rentals. The Company also derives additional revenue from Oil-Chem, which produces an environmentally-friendly micro-lubricant; and from SMIP and it wholly-owned subsidiaries, MBM, a wholesale and retail mail-order distributor of racing and other sports related souvenir merchandise and apparel, and SMIT, which provides event souvenir merchandising services at the Company’s and third-party speedway venues.

The Company classifies its expenses to include direct expense of events, NASCAR purse and sanction fees, and other direct operating expense, among other categories. “Direct expense of events” principally includes cost of souvenir sales, non-NASCAR race purses and sanctioning fees, property and event insurance, compensation of certain employees, advertising, sales and admission taxes, and outside event support services. “NASCAR purse and sanction fees” includes payments to NASCAR for associated events held at the Company’s speedways. “Other direct operating expense” includes the cost of Speedway Clubs’, Legends Car, industrial park rental, MBM, Oil-Chem, SMIP and SMIT revenues.

The Company sponsors and promotes outdoor motorsports events. Weather conditions surrounding these events affect sales of tickets, concessions and souvenirs, among other things. Although the Company sells a substantial number of tickets well in advance of its larger events, poor weather conditions can have a negative effect on the Company’s results of operations.

The Company does not believe that its financial performance has been materially affected by inflation. The Company has generally been able to mitigate the effects of inflation by increasing prices.

Seasonality and Quarterly Results

The Company plans to promote 17 major annual racing events in 2003 sanctioned by NASCAR, including ten Winston Cup and seven Busch Series racing events. The Company is also sponsoring two Indy Racing League (IRL) racing events, five NASCAR Craftsman Truck Series racing events, four major National Hot Rod Association (NHRA) racing events, and six World of Outlaws (WOO) racing events. As a result, the Company’s business has been, and is expected to remain, highly seasonal. In 2002, we derived a substantial portion of our total revenues from admissions, event related and NASCAR broadcasting revenue attributable to 17 major NASCAR-sanctioned racing events, two IRL racing events, three NASCAR Craftsman Truck Series racing events, four major NHRA racing events, and six WOO racing events.

The Company sometimes produces minimal operating income or losses during its third quarter when it hosts only one major NASCAR race weekend. Concentration of racing events in any particular 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 respective future quarters. Racing schedules may change from time to time which can lessen the comparability of operating results between quarters of successive years and increase or decrease the seasonal nature effect of the Company’s motorsports business.

The results of operations for the three and six months ended June 30, 2003 and 2002 are not indicative of results that may be

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expected for the entire year because of the seasonality discussed above.

Set forth below is certain comparative summary information with respect to the Company’s scheduled major NASCAR-sanctioned racing events for 2003 and 2002:

RESULTS OF OPERATIONS

The Company currently recognizes revenues and operating expenses for all events in the calendar quarter in which conducted except for major NASCAR and other sanctioned racing events which occur on the last full weekend of a calendar quarter. When major racing events occur on the last full weekend of a calendar quarter, the race event revenues and operating expenses are recognized in the current or immediately succeeding calendar quarter that corresponds to the calendar quarter of the prior year in which the same major racing event was conducted.

A major NASCAR-sanctioned racing event, consisting principally of one NASCAR Winston Cup and one Busch Series race, held at TMS on the weekend of March 29-30, 2003 was held last year on the weekend of April 6-7, 2002. Accordingly, the revenues and operating expenses of the 2003 race event were recognized in the second quarter 2003 corresponding with those of the 2002 race event recognized in the second quarter 2002.

Beginning in 2004, the Company intends to recognize revenues and operating expenses for all events in the calendar quarter in which conducted – including major NASCAR and other sanctioned racing events – because of the frequency of changes in race schedules in recent years. This change will have no impact on the reporting of full year operating results.

Non-GAAP Financial Information. The following financial information is presented below using other than generally accepted accounting principles (“non-GAAP”), and is reconciled to comparable information presented using GAAP. Non-GAAP net income and diluted earnings per share below are derived by adjusting GAAP basis amounts for certain items presented on the consolidated income statement net of income taxes based on applicable effective rates. The non-GAAP financial information below is presented nowhere else in this Quarterly Report on Form 10-Q. As the adjustments relate to charges for refinancing essentially all of the Company’s long-term debt and the FTC settlement, management believes such information is useful and meaningful, and is used by management to assess the Company’s core operations. This non-GAAP financial information may not be comparable to similarly titled measures used by other entities and should not be considered as alternatives to operating income, net income or diluted earnings per share, which are determined in accordance with GAAP.

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Three Months Ended June 30, 2003 Compared To Three Months Ended June 30, 2002

Total Revenues for the three months ended June 30, 2003 increased by $3.0 million, or 2.0%, over such revenues for the same period in 2002 for the factors discussed below.

Admissions for the three months ended June 30, 2003 decreased by $1.4 million, or 2.5%, from such revenue for the same period in 2002. This decrease was due primarily to lower attendance at NASCAR sanctioned racing events held at LMS, other than “The Winston”, and IR during the current period. The overall decrease was partially offset by increased attendance at LMS’s NASCAR-

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sanctioned “The Winston” and to LMS hosting a new NASCAR-sanctioned Craftsman Truck Series race in the current period.

The current period was negatively impacted by poor weather surrounding certain LMS, IR, and TMS racing events, as well as continuing challenges of economic conditions, the Iraq war and code orange terrorism alerts.

Event Related Revenue for the three months ended June 30, 2003 increased by $1.4 million, or 3.0%, over such revenue for the same period in 2002. The increase is due to increased sponsorship, track rentals, motorsports-related merchandise sales and other event related revenues, and to event related revenues associated with LMS hosting a new NASCAR-sanctioned Craftsman Truck Series race in the current period. The overall increase was partially offset by decreased event related revenues associated with lower attendance at NASCAR-sanctioned racing events held at LMS and IR.

The current period reflects lower corporate suite, hospitality, and other event related revenues as compared to the same period in 2002. Challenging economic conditions, the Iraq war, and code orange terrorism alerts continued to negatively impact event related revenues.

NASCAR Broadcasting Revenue for the three months ended June 30, 2003 increased by $5.4 million, or 16.2%, over such revenue for the same period in 2002. This increase is due to increases in annual contractual broadcast rights fees for NASCAR-sanctioned racing events held in the current period.

Other Operating Revenue for the three months ended June 30, 2003 decreased by $2.4 million, or 22.8%, from such revenue for the same period in 2002. This decrease is due primarily to lower Oil-Chem and non-motorsports related souvenir and merchandising SMIP revenues in the current period. The overall decrease was partially offset by current period revenues of SMIT acquired in November 2002.

Direct Expense of Events for the three months ended June 30, 2003 decreased by $1.3 million, or 4.7%, from such expense for the same period in 2002. This decrease is due to lower operating costs associated with lower attendance at NASCAR-sanctioned racing events held at LMS and IR. The decrease also reflects initial costs associated with IR’s expanded speedway facilities and new naming rights agreement obtained in the same period in 2002. The overall decrease was partially offset by increased operating costs associated with higher motorsports-related merchandise sales and with LMS hosting a new NASCAR-sanctioned Craftsman Truck Series race in the current period.

NASCAR Purse and Sanction Fees for the three months ended June 30, 2003 increased by $3.7 million, or 14.8%, over such expense for the same period in 2002. This increase is due primarily to higher annual contractual race purses and sanctioning fees for NASCAR-sanctioned racing events in the current period.

Other Direct Operating Expense for the three months ended June 30, 2003 decreased by $1.9 million, or 21.8%, from such expense for the same period in 2002. This decrease is due primarily to decreased advertising and operating costs associated with lower Oil-Chem and non-event SMIP souvenir and merchandising sales. The overall decrease was partially offset by operating costs associated with current period revenues of SMIT acquired in November 2002.

General and Administrative Expense for the three months ended June 30, 2003 increased by $579,000, or 3.6%, over such expense for the same period in 2002. This increase is due primarily to increased operating costs associated with growth and expansion at the Company’s speedways and operations, and with SMIT acquired in November 2002. The overall increase was partially offset by decreased legal costs associated with the FTC litigation with Oil-Chem, which was settled in March 2003, and with other legal matters.

Depreciation and Amortization Expense for the three months ended June 30, 2003 increased by $589,000, or 7.5%, over such expense for the same period in 2002. This increase is due primarily to increased depreciation expense from additions to property and equipment at the Company’s speedways, particularly at BMS and IR.

Interest Expense, Net for the three months ended June 30, 2003 was $6.5 million compared to $5.0 million for the same period in