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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended May 31, 2003

INTERNATIONAL SPEEDWAY CORPORATION

(Exact name of registrant as specified in its charter)

Registrant's telephone number, including area code: (386) 254-2700

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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date:

Class A Common Stock – 27,987,529 shares as of June 30, 2003.

Class B Common Stock – 25,230,842 shares as of June 30, 2003.

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

See accompanying notes.

See accompanying notes.

See accompanying notes.

See accompanying notes.

See accompanying notes.

See accompanying notes.

International Speedway Corporation
Notes to Condensed Consolidated Financial Statements
 May 31, 2003
(Unaudited)

1. Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in compliance with Rule 10-01 of Regulation S-X and generally accepted accounting principles but do not include all of the information and disclosures required for complete financial statements. The statements should be read in conjunction with the consolidated financial statements and notes thereto included in the latest annual report on Form 10-K for International Speedway Corporation and its wholly-owned subsidiaries (the "Company"). In management's opinion, the statements include all adjustments which are necessary for a fair presentation of the results for the interim periods. All such adjustments are of a normal recurring nature. Certain reclassifications have been made to conform to the financial presentation at May 31, 2003.

Because of the seasonal concentration of racing events, the results of operations for the three- and six-month periods ended May 31, 2002 and 2003 are not indicative of the results to be expected for the year.

Stock-Based Compensation: The Company has a long-term incentive stock plan which it accounts for under the recognition and measurement principles of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations.  The Company recognizes stock-based employee compensation cost on its restricted shares awarded over their vesting periods equal to the fair market value of these shares on the date of award.  No stock-based employee compensation cost is reflected in net income (loss) relating to stock options as all options granted under the plan have an exercise price equal to the market value of the underlying common stock on the date of grant.

The following table illustrates the effect on net income (loss) and earnings (loss) per share if the Company had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” to stock based employee compensation for the three- and six-month periods ended May 31 (in thousands, except per share amounts):

2. Accounting Change

The Company adopted Statement of Financial Accounting Standard (“SFAS”) No. 142, “Goodwill and Other Intangible Assets,” in the first quarter of 2002.  Based on an independent appraisal firm’s valuation of the reporting unit level fair value using discounted cash flows, which reflect changes in certain assumptions after the date of the acquisitions, and the identification of qualifying intangibles, the Company recorded a non-cash after-tax charge of $513.8 million as a cumulative effect of accounting change for the write-off of goodwill in the first quarter of 2002.

Raceway Associates, LLC (“Raceway Associates”) which owns and operates Chicagoland Speedway and Route 66 Raceway and in which the Company holds a 37.5% indirect equity interest, also adopted SFAS No. 142 in the first quarter of 2002.  During the second quarter of fiscal 2002, Raceway Associates completed the valuation of its Route 66 Raceway reporting unit using discounted cash flows, which reflect changes in certain assumptions after the date of Raceway Associates’ formation, that indicated impairment of the goodwill associated with Route 66 Raceway.  The Company’s proportionate share of Raceway Associates’ cumulative effect of accounting change related to the write-off of goodwill totaled approximately $3.4 million after-tax.  In accordance with SFAS No. 3 “Reporting Accounting Changes in Interim Financial Statements” the Company recognized this impairment in the first quarter of 2002.

3. New Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 143, “Accounting for Asset Retirement Obligations.”  SFAS No. 143 establishes accounting standards for the recognition and measurement of an asset retirement obligation and its associated asset retirement cost.  It also provides accounting guidance for legal obligations associated with the retirement of tangible long-lived assets.  The Company’s adoption of SFAS No. 143 in fiscal 2003 did not have a material impact on its financial position or results of operations.

In August 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long Lived Assets.”  Consistent with prior guidance SFAS No. 144 continues to require a three-step approach for recognizing and measuring the impairment of assets to be held and used.  Assets to be sold must be stated at the lower of the asset’s carrying amount or fair value, and depreciation is no longer recognized.  The Company’s adoption of SFAS No. 144 in fiscal 2003 did not have a material impact on its financial position or results of operations.

In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections as of April 2002.”  With the rescission of SFAS No. 4, gains and losses from the extinguishment of debt should be classified as extraordinary items only if they meet the criteria in APB Opinion No. 30.  Applying the provisions of APB Opinion No. 30 will distinguish transactions that are part of an entity’s recurring operations from those that are unusual or infrequent and that meet the criteria for classification as an extraordinary item.  SFAS No. 145 amends SFAS No. 13 to require that certain lease modifications that have economic effects similar to sale-leaseback transactions be accounted for in the same manner as sale-leaseback transactions.  This amendment is consistent with the FASB’s goal of requiring similar accounting treatment for transactions that have similar economic effects.  SFAS No. 145 also makes technical corrections to existing pronouncements.  While those corrections are not substantive in nature, in some instances, they may change accounting practice.  The Company’s adoption of SFAS No. 145 in fiscal 2003 did not have a material impact on its financial position or results of operations.

In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.”  SFAS No. 146 replaces current accounting literature and requires the recognition of costs associated with exit or disposal activities when they are incurred, rather than at the date of a commitment to an exit or disposal plan.  SFAS No. 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002.  The Company’s adoption of SFAS No. 146 in fiscal 2003 did not have a material impact on its financial position or results of operations.

In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.”  This interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued.  It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee.  The Company has applied the disclosure provisions of this interpretation in these condensed consolidated financial statements and the accompanying notes.  The Company’s adoption of this interpretation in fiscal 2003 did not have a material impact on its financial position or results of operations.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of FASB Statement No. 123.”  SFAS No. 148 amends SFAS No. 123, “Accounting for Stock-Based Compensation,” 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 Company has applied the disclosure provisions in SFAS No. 148 in these condensed consolidated financial statements and the accompanying notes.

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities.”  This interpretation of Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” addresses consolidation by business enterprises of variable interest entities.  Under current practice, two enterprises generally have been included in consolidated financial statements because one enterprise controls the other through voting interests.  This interpretation defines the concept of “variable interests” and requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse the risks among the parties involved.  This interpretation applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date.  It applies in the first fiscal year or interim period beginning after June 15, 2003, to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003.  If it is reasonably possible that an enterprise will consolidate or disclose information about a variable interest entity when this interpretation becomes effective, the enterprise shall disclose information about those entities in all financial statements issued after January 31, 2003.  The interpretation may be applied prospectively with a cumulative-effect adjustment as of the date on which it is first applied or by restating previously issued financial statements for one or more years with a cumulative-effect adjustment as of the beginning of the first year restated.  The Company is currently evaluating the impact, if any, of the adoption of this interpretation on its financial position and results of operations.

4. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share for the three- and six-month periods ending May 31 (in thousands, except share amounts):

During the periods presented shares that could potentially dilute future earnings per share were not included in the computation of diluted earnings per share as to do so would have been anti-dilutive.  These shares totaled 29,104 and 54,154 during the three months ended May 31, 2002 and 2003, respectively, and 25,650 and 50,787 for the six months ended May 31, 2002 and 2003, respectively.

5. Goodwill and Intangible Assets

The gross carrying value and accumulated amortization of the major classes of intangible assets relating to the Motorsports Events segment are as follows (in thousands):

The following table presents current and expected amortization expense of the existing intangible assets as of May 31, 2003 for each of the following periods (in thousands):

There were no changes in the carrying amount of goodwill for the six months ended May 31, 2003.

6. Long-Term Debt

Long-term debt consists of the following (in thousands):

The Company’s $225 million principal amount of unsecured senior notes (“Senior Notes”) bear interest at 7.875% and rank equally with all of the Company’s other senior unsecured and unsubordinated indebtedness. The Senior Notes require semi-annual interest payments through maturity on October 15, 2004. The Senior Notes may be redeemed in whole or in part, at the option of the Company, at any time or from time to time at a redemption price as defined in the indenture. The Company’s subsidiaries are guarantors of the Senior Notes. The Senior Notes also contain various restrictive covenants.

In January 1999, the Unified Government of Wyandotte County/Kansas City, Kansas ("Unified Government"), issued approximately $71.3 million in taxable special obligation revenue ("TIF") bonds in connection with the financing of construction of Kansas Speedway. At May 31, 2003, outstanding principal on the TIF bonds are comprised of a $20.5 million, 6.15% term bond due December 1, 2017 and a $49.7 million, 6.75% term bond due December 1, 2027. The TIF bonds are repaid by the Unified Government with payments made in lieu of property taxes (“Funding Commitment”) by the Company’s wholly-owned subsidiary, Kansas Speedway Corporation (“KSC”). Principal (mandatory redemption) payments per the Funding Commitment are payable by KSC on October 1 of each year. The semi-annual interest component of the Funding Commitment is payable on April 1 and October 1 of each year. KSC granted a mortgage and security interest in the Kansas project for its Funding Commitment obligation. The bond financing documents contain various restrictive covenants. The Company has agreed to guarantee KSC’s Funding Commitment until certain financial conditions have been met.

The Company has a $250 million revolving credit facility ("Credit Facility") which matures on March 31, 2004, and accrues interest at LIBOR plus 50 -100 basis points, based on certain financial criteria. At May 31, 2003, the Company did not have any borrowings outstanding under the Credit Facility. The Credit Facility contains various restrictive covenants.

The Company’s Miami subsidiary has a $15 million credit facility (“Miami Credit Facility”) and a $13.5 million term loan (“Term Loan”). The Miami Credit Facility and Term Loan are guaranteed by the Company and have the same interest terms and restrictive covenants as the Company’s Credit Facility. The Miami Credit Facility matures on December 31, 2004. At May 31, 2003, the Company did not have any borrowings outstanding under the Miami Credit Facility.  The Term Loan is payable in annual installments which range from $6.5 million to $7.0 million. The Company’s Miami subsidiary has an interest rate swap agreement that effectively fixes the floating rate on the outstanding balance under the Term Loan at 5.6% plus 50 –100 basis points, based on certain consolidated financial criteria of the Company, for the remainder of the loan period.

Total interest incurred by the Company was approximately $6.1 million and $5.9 million for the three months ended May 31, 2002 and 2003, respectively, and $12.5 million and $11.8 million for the six months ended May 31, 2002 and 2003, repectively. Total interest capitalized for the three months ended May 31, 2002 and 2003, was approximately $67,000 and $146,000 respectively, and approximately $190,000 and $238,000 for the six months ended May 31, 2003, respectively.

Financing costs of approximately $6.8 million, net of accumulated amortization, have been deferred and are included in other assets at May 31, 2003. These costs are being amortized on an effective yield method over the life of the related financing.

7. Related Party Disclosures and Transactions

9. Commitments and Contingencies

In October 2002, the Unified Government issued additional subordinate sales tax special obligation revenue bonds (“2002 STAR Bonds”) totaling approximately $6.3 million to reimburse the Company for certain construction already completed on the second phase of the Kansas Speedway project and to fund certain additional construction.  The 2002 STAR Bonds, which require annual debt service payments and are due December 1, 2022, will be retired with state and local taxes generated within the Kansas Speedway’s boundaries and are not the Company’s obligation.  KSC has agreed to guarantee the payment of principal, any required premium and interest on the 2002 STAR Bonds.  At May 31, 2003, the Unified Government had $6.3 million in 2002 STAR Bonds outstanding.  Under a keepwell agreement, the Company has agreed to provide financial assistance to KSC, if necessary, to support KSC’s guarantee of the 2002 STAR Bonds.

The Company is a member of Motorsports Alliance (owned 50% by the Company and 50% by Indianapolis Motor Speedway LLC) which owns 75% of Raceway Associates.  Raceway Associates owns and operates Chicagoland Speedway and Route 66 Raceway.  Raceway Associates has a term loan arrangement, which requires quarterly principal and interest payments and matures November 15, 2012, and a $15 million secured revolving credit facility, which matures September 15, 2005.  At May 31, 2003, Raceway Associates had approximately $45.2 million outstanding under its term loan and no borrowings outstanding under its credit facility.  Under a keepwell agreement, the members of Motorsports Alliance have agreed to provide financial assistance to Raceway Associates, if necessary, on a pro rata basis to support performance under its term loan and credit facility.

In connection with the Company’s automobile and workers’ compensation insurance coverages, in March 2003, the Company issued a standby letter of credit agreement in favor of the insurer.  The letter of credit, which expires on December 15, 2003, increases to a maximum of approximately $1.0 million and is automatically renewed on an annual basis.  At May 31, 2003, there are no amounts drawn on the standby letter of credit.

The Company is from time to time a party to routine litigation incidental to its business.  Management does not believe that the resolution of any or all of such litigation is likely to have a material adverse effect on the Company’s financial condition or results of operations.

In addition to such routine litigation incident to its business, the Company has been party to other legal proceedings. 

Current Litigation

In February 2002 the Company was served in a proceeding filed in the United States District Court for the Eastern District of Texas.  The complaint in the case has been amended twice and is presently styled Francis Ferko, and Russell Vaughn as Shareholders of Speedway Motorsports, Inc. vs. National Association of [sic] Stock Car Auto Racing, Inc., International Speedway Corporation, and Speedway Motorsports, Inc.  The overall gist of the suit is that Texas Motor Speedway should have a second NASCAR Winston Cup Series date annually and that NASCAR should be required by the court to grant Texas Motor Speedway a second NASCAR Winston Cup Series date annually.  The portion of this suit that is brought against the Company alleges that it conspired with NASCAR and members of the France Family to “refuse to offer a new Winston Cup race date to any non-ISC owned track whenever ISC has desired to host an additional Winston Cup race.”  The suit seeks unspecified monetary damages from the Company which are claimed to have resulted to Speedway Motorsports from the alleged conspiracy as well as treble damages under the anti-trust laws.  The Company believes the suit to be without merit and intends to vigorously pursue the defense of the matter.

10.Homestead-Miami Speedway Track Reconfiguration

In May 2003, the Company began a major track reconfiguration project at Homestead-Miami Speedway to increase the track banking to a maximum of 20 degrees in the turns through an innovative variable-degree banking system, which is expected to enhance the quality of the racing entertainment at this facility.  The reconfiguration project is anticipated to be completed for the NASCAR Winston Cup, Busch and Craftsman Truck series events in the fourth quarter of fiscal 2003.  In order to complete the track reconfiguration, certain assets, which were not fully depreciated, were removed.  As a result, the Company recorded a non-cash before-tax charge of approximately $2.8 million, representing the net book value of the assets which were removed, in the second quarter of fiscal 2003.

11.Segment Reporting

The following tables provide segment reporting of the Company for the three- and six-month periods ended May 31, 2002 and 2003 (in thousands):

Intersegment revenues were approximately $1.9 million and $2.3 million for the three months ended May 31, 2002 and 2003, respectively and approximately $4.6 million and $5.4 million for the six months ended May 31, 2002 and 2003, respectively.

As a result of the adoption of SFAS No. 142, the Motorsports Events segment recorded a non-cash after-tax charge of $517.2 million as a cumulative effect of accounting change for the write-off of goodwill in the first quarter of fiscal 2002.

12. Condensed Consolidating Financial Statements

In connection with the Senior Notes, the Company is required to provide condensed consolidating financial information for its subsidiary guarantors.  All of the Company’s subsidiaries have, jointly and severally, fully and unconditionally guaranteed, to each holder of Senior Notes and the trustee under the Indenture for the Senior Notes, the full and prompt performance of the Company’s obligations under the indenture and the Senior Notes, including the payment of principal of (or premium, if any, on) and interest on the Senior Notes, on an equal and ratable basis.

The subsidiary guarantees are unsecured obligations of each subsidiary guarantor and rank equally in right of payment with all senior indebtedness of that subsidiary guarantor and senior in right of payment to all subordinated indebtedness of that subsidiary guarantor.  The subsidiary guarantees are effectively subordinated to any secured indebtedness of the subsidiary guarantor with respect to the assets securing the indebtedness.

In the absence of both default and notice, there are no restrictions imposed by the Company’s Credit Facility, Senior Notes, or guarantees on the Company’s ability to obtain funds from its subsidiaries by dividend or loan.

Included are condensed consolidating balance sheets as of November 30, 2002 and May 31, 2003, the condensed consolidating statements of operations for the three- and six-month periods ended May 31, 2002 and 2003 and the condensed consolidating statements of cash flows for the six-month periods ended May 31, 2002 and 2003, of: (a) the Parent; (b) the guarantor subsidiaries; (c) elimination entries necessary to consolidate Parent with guarantor subsidiaries; and (d) the Company on a consolidated basis (in thousands).

PART I. FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

General

We derive revenues primarily from (i) admissions to racing events and motorsports activities held at our facilities, (ii) revenue generated in conjunction with or as a result of motorsports events and activities conducted at our facilities, and (iii) catering, concession and merchandising services during or as a result of these events and activities.

"Admissions" revenue includes ticket sales for all of our racing events, activities at DAYTONA USA and other motorsports activities and amusement.

"Motorsports related income" primarily includes television, radio and ancillary rights fees, promotion and sponsorship fees, hospitality rentals (including luxury suites, chalets and the hospitality portion of club seating), advertising revenues, royalties from licenses of our trademarks and track rentals. Our revenues from corporate sponsorships are paid in accordance with negotiated contracts, with the identities of sponsors and the terms of sponsorship changing from time to time.  Since 2001, NASCAR contracts directly with certain network providers for television rights to the entire NASCAR Winston Cup (NASCAR Nextel Cup starting in 2004) and Busch series schedules.  NASCAR’s current broadcast contracts with NBC Sports and Turner Sports extend through 2006 and through 2008 with FOX and its FX cable network.  Event promoters share in the television rights fees in accordance with the provision of the sanction agreement for each NASCAR Winston Cup and Busch Series event.  Under the terms of this arrangement, NASCAR retains 10% of the gross broadcast rights fees allocated to each NASCAR Winston Cup or Busch series event as a component of its sanction fees and remits the remaining 90% to the event promoter.  The event promoter pays 25% of the gross broadcast rights fees allocated to the event as part of awards to the competitors. 

"Food, beverage and merchandise income" includes revenues from concession stands, hospitality catering, direct sales of souvenirs, programs and other merchandise and fees paid by third party vendors for the right to occupy space to sell souvenirs and concessions at our facilities.

“Direct expenses” include (i) prize and point fund monies and NASCAR sanction fees, (ii) motorsports related expenses, which include costs of competition paid to sanctioning bodies other than NASCAR, labor, advertising and other expenses associated with the promotion of our motorsports events and activities, and (iii) food, beverage and merchandise expenses, consisting primarily of labor and costs of goods sold.

Critical Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management continually reviews its accounting policies, how they are applied and how they are reported and disclosed in the financial statements.  The following is a summary of our more significant accounting estimates and how they are applied in the preparation of the financial statements.

Advance tickets sales and event-related revenues for future events are deferred until earned.  The recognition of event-related expenses is matched with the recognition of event-related revenues.  Revenues and related expenses from the sale of merchandise to retail customers, catalog and internet sales and direct sales to dealers are recognized at the time of sale.  We believe that our revenue recognition policies follow guidance issued by the Securities and Exchange Commission in Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements.”

We review the valuation of our accounts receivable on a monthly basis.  The allowance for doubtful accounts is estimated based on historical experience of write-offs and future expectations of conditions that might impact the collectibility of accounts.

Our consolidated balance sheets include significant amounts of long-lived assets and goodwill.  Current accounting standards require testing these assets for impairment based on assumptions regarding our future business outlook.  While we continue to review and analyze many factors that can impact our business prospects in the future, our analyses are subjective and are based on conditions existing at and trends leading up to the time the assumptions are made.  Actual results could differ materially from these assumptions.  Our judgments with regard to our future business prospects could impact whether or not an impairment is deemed to have occurred, as well as the timing of the recognition of such an impairment charge.

We use a combination of insurance and self-insurance for a number of risks including general liability, workers’ compensation, vehicle liability and employee-related health care benefits.  Liabilities associated with the risks that we retain are estimated by considering various historical trends and forward looking assumptions.  The estimated accruals for these liabilities could be significantly affected if future occurrences and claims differ from these assumptions and historical trends.

From time to time we utilize derivative instruments in the form of interest rate swaps to assist in managing our interest rate risk.  We do not enter into any derivative instruments for trading purposes.  All of our derivative instruments qualify, or have qualified, for the use of the “short-cut” method of accounting to assess hedge effectiveness in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 133, as amended, and are recognized in our consolidated balance sheet at their fair value.  The fair value of our derivative investments are based on quoted market prices at the date of measurement.

Our estimates of deferred income taxes and the significant items giving rise to deferred tax liabilities reflect our assessment of actual future taxes to be paid on items reflected in our financial statements, giving consideration to both timing and probability of realization.  Actual income taxes could vary significantly from these estimates due to future changes in income tax law or changes or adjustments resulting from final review of our tax returns by taxing authorities, which could also adversely impact our cash flow.

Our determination of the treatment of contingent liabilities in the financial statements is based on our view of the expected outcome of the applicable contingency.  In the ordinary course of business we consult with legal counsel on matters related to litigation and other experts both within and outside our Company.  We accrue a liability if the likelihood of an adverse outcome is probable of occurrence and the amount is estimable.  We disclose the matter but do not accrue a liability if either the likelihood of an adverse outcome is only reasonably possible or an estimate is not determinable.

Future Trends in Operating Results

Our success has been, and is expected to remain, dependent on maintaining good working relationships with the organizations that sanction events at our facilities, particularly with NASCAR, whose sanctioned events at our wholly-owned facilities accounted for approximately 84% of our revenues in fiscal 2002. In June 2003, NASCAR announced that Nextel Communications will become the title sponsor of NASCAR’s premier national series under a ten-year agreement beginning in 2004.  NASCAR also announced that the NASCAR Nextel Cup Series will consist of 36 championship points races at 23 tracks in 19 states in 2004.  Nextel will replace R.J. Reynolds’ Winston brand as title sponsor of NASCAR’s Cup series.  R.J. Reynolds has sponsored the NASCAR Winston Cup Series since 1971.  We view this announcement as a positive development for the sport’s fans, promoters, teams, sponsors and broadcast partners. 

In January 2003, NASCAR announced it would entertain and discuss proposals from track operators regarding potential realignment of NASCAR Winston Cup Series dates to more geographically diverse and potentially more desirable markets where there may be greater demand resulting in an opportunity for increased revenues to the track operators.  In June 2003 we announced that NASCAR approved our proposal for realignment of NASCAR Nextel Cup (formerly Winston Cup) Series dates between our North Carolina, Darlington and California facilities for the 2004 season.  As a result of the realignment, California Speedway will host an additional NASCAR Nextel Cup Series event weekend during the Labor Day weekend, Darlington Raceway will host NASCAR Nextel Cup Series race weekends in March and November and North Carolina Speedway will host one NASCAR Nextel Cup Series event weekend in February.  We believe that this realignment will result in a net positive impact to our fiscal 2004 revenue and earnings and will provide an opportunity to increase the sport’s exposure in the highly desirable southern California market, which will benefit the sport’s fans, teams, sponsors and television broadcast partners as well.

Fiscal 2001 was our first year under NASCAR’s multi-year consolidated television broadcast rights agreements with NBC Sports, Turner Sports, FOX and FX.  These agreements cover the domestic broadcast of NASCAR’s entire Winston Cup (Nextel Cup starting in 2004) and Busch series racing seasons from 2001 through 2006.  As a result, our combined television broadcast and ancillary rights revenues increased approximately 84% in fiscal 2001, approximately 15% in fiscal 2002 and are expected to increase approximately 16% in fiscal 2003 as compared to the respective prior fiscal years.  We expect media rights revenues, as well as variable costs tied to the percentage of broadcast rights fees required to be paid to competitors as part of NASCAR Winston Cup (NASCAR Nextel Cup starting in 2004) and Busch series sanction agreements, to continue to increase based on NASCAR’s announcement that the annual increase in the domestic television rights fees will range between 15% and 21% from 2001 through 2006, with an average annual increase of 17%.

NASCAR prize and point fund monies, as well as sanction fees, ("NASCAR direct expenses") are outlined in the sanction agreement for each event and are negotiated in advance of an event.  As previously discussed, included in these NASCAR direct expenses are 25% of the television broadcast rights fees allocated to our NASCAR Winston Cup (NASCAR Nextel Cup starting in 2004) and Busch series events as part of prize and point fund money.   These annually-negotiated contractual amounts paid to NASCAR contribute to the support and growth of the sport of NASCAR stock car racing through payments to the teams and sanction fees paid to NASCAR.  As such, we do not expect these costs to decrease in the future as a percentage of admissions and motorsports related income.  We anticipate any operating margin improvement to come primarily from economies of scale and controlling costs in areas such as motorsports related and general and administrative expenses.

Current and future economic conditions may make it more difficult in the short term to increase our revenues from corporate marketing partnerships than it has been in recent years.  However, we believe that our presence in key markets and impressive portfolio of events are beneficial as we continue to pursue renewal and expansion of existing marketing partnerships and establishing new corporate marketing partners.  We believe that revenues from our corporate marketing partnerships will continue to grow over the long term.

An important component of our operating strategy has been our long-standing practice of focusing closely on supply and demand regarding additional capacity at our facilities.  We continually evaluate the demand for our most popular racing events in order to add capacity that we believe will provide an acceptable rate of return on invested capital.  Through prudent expansion, we attempt to keep demand at a higher level than supply, which stimulates ticket renewals and advance sales.  Advance ticket sales result in earlier cash flow and reduce the potential negative impact of actual and forecasted inclement weather on ticket sales.  While we will join with sponsors and offer promotions to generate additional ticket sales, we avoid rewarding last-minute ticket buyers by discounting tickets.  We believe it is more important to encourage advance ticket sales and maintain price integrity to achieve long-term growth than to recognize short-term incremental revenue.  We recognize that a number of factors relating to discretionary consumer spending, including economic conditions affecting disposable consumer income such as employment and other lifestyle and business conditions, can negatively impact attendance at our events.  Based upon current and potential future economic conditions we have instituted only modest increases in our weighted average ticket prices in fiscal 2003.  In addition, we have limited the expansion of capacity at our facilities for our 2003 events to a total of approximately 3,100 and 1,500 net additional grandstand seats at Richmond International Raceway (“Richmond”) and Kansas Speedway (“Kansas”), respectively, and six net additional luxury suites at Richmond.  These additional seats and suites have been sold on a season basis for fiscal 2003.  We will continue to evaluate expansion opportunities, as well as the pricing of our tickets and other products, on an ongoing basis.  Over the long term, we plan to continue to expand capacity at our speedways.

Our future operating results could be adversely impacted by the postponement or cancellation of a major motorsports event.  A postponement or cancellation could be caused by a number of factors, including inclement weather, a general postponement or cancellation of all major sporting events in this country (as occurred following the September 11, 2001 terrorist attacks), by a terrorist attack at any mass gathering or fear of such an attack, by conditions resulting from the recent war with Iraq or by other acts or prospects of war.

Seasonality and Quarterly Results

We derive most of our income from a limited number of NASCAR-sanctioned races.  As a result, our business has been, and is expected to remain, highly seasonal based on the timing of major racing events.  For example, one of our NASCAR Winston Cup Series (NASCAR Nextel Cup Series starting in 2004) races is traditionally held on the Sunday preceding Labor Day.  Accordingly, the revenues and expenses for that race and/or the related supporting events may be recognized in either the fiscal quarter ending August 31 or the fiscal quarter ending November 30.  Further, schedule changes as determined by NASCAR or other sanctioning bodies, as well as the acquisition of additional, or divestiture of existing, motorsports facilities could impact the timing of our major events in comparison to prior or future periods.

Because of the seasonal concentration of racing events, the results of operations for the three- and six-month periods ended May 31, 2002 and 2003 are not indicative of the results to be expected for the year.

Comparison of the Results for the Three and Six Months Ended May 31, 2003 to the Results for the Three and Six Months Ended May 31, 2002.

The following table sets forth, for each of the indicated periods, certain selected statement of operations data as a percentage of total revenues:

During our first quarter of 2003, inclement weather adversely impacted several events during Speedweeks, including the Daytona 500, and as well severely impacted the events at North Carolina Speedway (“North Carolina”).  During our second quarter of 2003, inclement weather resulted in the rescheduling of the Busch series event at Darlington Raceway (“Darlington”) from Saturday to Monday and severely impacted the Bikeweek motorcycle events at Daytona International Speedway (“Daytona”).  We believe that the threat of inclement weather for our second quarter events at Talladega Superspeedway (“Talladega”) adversely impacted tickets sales during the week preceding its events.  In addition, we believe that the ongoing economic downturn, coupled with ongoing geopolitical issues, has had a significant negative impact on attendance-related revenues year-to-date in fiscal 2003.

Our second quarter results were also impacted by the timing of the following events:

· California Speedway (“California”) conducted an Indy Racing League (“IRL”) event in the second quarter of fiscal 2002.  That event will be conducted in the fourth quarter of fiscal 2003.

· Nazareth Speedway (“Nazareth”) conducted an IRL event in the second quarter of fiscal 2002.  That event will be conducted in the third quarter of fiscal 2003.

Admissions revenue decreased from approximately $45.2 million to approximately $43.6 million, or 3.5%, for the three months ended May 31, 2003, as compared to the three months ended May 31, 2002.  This decrease was primarily attributable to the timing of the IRL events at California and Nazareth in fiscal 2003 as compared to fiscal 2002.   Attendance at the events conducted at Talladega, Daytona and Darlington also contributed to the decrease.  These decreases are partially offset by increased seating capacity and attendance for events conducted at Richmond, increased attendance at motorcycle events conducted at California and an increase in the weighted average price of tickets sold for many of the NASCAR events conducted during the period, including our sold out NASCAR Winston Cup Series events at California and Richmond.

Admissions revenue decreased from approximately $94.1 million to $90.7 million, or 3.6%, for the six months ended May 31, 2003, as compared to the six months ended May 31, 2002.  The decrease is primarily attributable to the previously discussed timing of IRL events at California and Nazareth and attendance at certain events conducted during Speedweeks at Daytona.  Attendance at events conducted at Talladega, North Carolina, the Daytona motorcycle events and Darlington also contributed to the decrease. These decreases are partially offset by increased seating capacity and attendance for events conducted at Richmond, increased attendance at motorcycle events conducted at California and an increase in the weighted average price of tickets sold for many of the NASCAR events conducted during the period including the Daytona 500 and our sold out NASCAR Winston Cup Series events at California and Richmond.

Motorsports related income increased approximately $3.9 million, or 7.1%, and approximately $10.2 million, or 8.8%, for the three months and six months ended May 31, 2003, respectively, as compared to the same periods of the prior year.  Substantially all of the increases during the three and six month periods are attributable to the television broadcast rights fees for the NASCAR Winston Cup and Busch series events conducted during the respective periods.  The addition of suites at Richmond and other hospitality related increases also contributed to the increase.  These increases are partially offset by decreases attributable to the previously discussed timing of IRL events at California and Nazareth.

Food, beverage and merchandise income increased approximately $486,000, or 3.3%, and approximately $942,000, or 3.1%, for the three months and six months ended May 31, 2003, respectively, as compared to the same periods of the prior year.  The increases are primarily related to our Americrown subsidiary assuming food concession and catering operations at California, which were operated by a third party vendor that paid California a commission in prior years.  Also, $1.6 million of non-recurring income related to our ongoing activities to audit third party vendors was recorded in our first quarter and significantly contributed to the increase during the six months ended May 31, 2003.  These increases were partially offset by the lower food, beverage and merchandise sales attributable to previously discussed decreased attendance as well as the timing of IRL events at California and Nazareth.

Prize and point fund monies and NASCAR sanction fees increased approximately $2.2 million, or 10.4%, and approximately $4.5 million, or 10.5%, for the three months and six months ended May 31, 2003, respectively, as compared to the same periods of the prior year. Over three-quarters of these increases were due to increased prize and point fund monies paid by NASCAR to participants in events during the periods.  Over one-half of these increases were attributable to the increased television broadcast rights fees for the NASCAR Winston Cup and Busch series events conducted during the three and six month periods, as standard NASCAR sanctioning agreements require that a specified percentage of broadcast rights fees be paid to competitors.

Motorsports related expenses decreased approximately $1.8 million, or 6.9%, and $208,000, or 0.5%, for the three months and six months ended May 31, 2003, respectively, as compared to the same periods of the prior year.  These decreases are primarily related to the previously discussed timing of IRL events at California and Nazareth.  These decreases are partially offset by costs associated with consumer marketing initiatives launched in mid fiscal 2002 and increases other event related costs, including insurance.  Motorsports related expenses as a percentage of combined admissions and motorsports related income decreased to approximately 24.3% and 20.5% for the three months and six months ended May 31, 2003, respectively, as compared to approximately 26.7% and 21.3% for the same periods in the prior year.  These decreases are attributable to the previously discussed timing of IRL events at California and Nazareth, which include non-NASCAR sanction fees recorded as part of motorsports related expenses, and the increase in television broadcast rights fees partially offset by the previously discussed increased costs.

Food, beverage and merchandise expense increased approximately $1.6 million, or 19.6%, and approximately $1.2 million, or 7.2%, respectively, for the three months and six months ended May 31, 2003, as compared to the same periods of the prior year. These increases are primarily attributable to our Americrown subsidiary assuming food concession and catering operations at California, which were operated by a third party vendor that paid California a commission in prior years.  These increases are partially offset by decreased product and other variable costs associated with decreased sales.  Food, beverage and merchandise expenses as a percentage of food, beverage and merchandise income increased to approximately 62.3% and 56.1% for the three months and six months ended May 31, 2003, respectively, as compared to approximately 53.8% and 53.9% for the same periods in the prior year. These increases are primarily attributable to the expenses related to the assumption of food concession and catering operations at California, holding certain retail price points constant despite increasing product costs and the relationship of decreased sales to certain fixed costs.  This decrease is partially offset for the six months ended May 31, 2003 by the previously discussed nonrecurring income related to our ongoing activities to audit third party vendors’ sales reports for prior years.

General and administrative expenses increased approximately $742,000, or 3.8%, and approximately $2.1 million, or 5.3%, for the three months and six months ended May 31, 2003, respectively, as compared to the same periods of the prior year. These increases are primarily attributable to costs associated with certain ongoing legal proceedings (see Part II – Other Information “Legal Proceedings”), expenses related to the expansion of our ongoing business, including strategic technology initiatives launched in mid fiscal 2002, and insurance costs.  These increases are partially offset by certain professional fees incurred in fiscal 2002 for which there are no comparable costs in the current period. General and administrative expenses as a percentage of total revenues increased to approximately 16.9% and 16.3% for the three months and six months ended May 31, 2003, as compared to approximately 16.7% and 16.0% for the same periods in the prior year. These slight increases are primarily the result of the previously discussed decreased revenues related to the timing of the California and Nazareth IRL events and increased legal and other costs, which were partially offset by the increased television broadcast rights fees for NASCAR Winston Cup and Busch series events.

Depreciation and amortization expense increased approximately $653,000, or 6.3%, and approximately $1.3 million, or 6.4%, for the three months and six months ended May 31, 2003, respectively, as compared to the same periods of the prior year.  These increases are primarily attributable to recently implemented strategic initiatives and additional capital spending at our facilities.

During the second quarter of fiscal 2003 we recorded a non-cash before-tax charge of approximately $2.8 million for the net book value of certain undepreciated assets removed in connection with a major track reconfiguration project at Homestead-Miami Speedway (“Miami”).  The project will increase the track banking to a maximum of 20 degrees in the turns through an innovative variable-degree banking system which is expected to enhance the quality of the racing entertainment at this facility.  We anticipate that the reconfiguration project will be completed for our fourth quarter NASCAR Winston Cup, Busch and Craftsman Truck series events.

Interest income increased by approximately $146,000, or 42.9%, and approximately $84,000, or 13.5%, for the three months and six months ended May 31, 2003, as compared to the same periods of the prior year. These increases are primarily due to higher cash balances in the current year.

Interest expense decreased by approximately $241,000, or 4.0%, and approximately $713,000, or 5.7%, for the three months and six months ended May 31, 2003, respectively, as compared to the same periods of the prior year.  These decreases are primarily attributable to the payoff of our revolving credit facilities in the prior year.

Equity in net loss from equity investments represents our pro rata share of the current losses from our 37.5% equity investment in Raceway Associates, LLC (“Raceway Associates”).  Raceway Associates owns and operates Chicagoland Speedway and Route 66 Raceway.  Due to the seasonal concentration of Raceway Associates’ motorsports events, the results for the three-month and six month-periods ended May 31, 2003 are not indicative of the results expected for the year.

The increases in our effective income tax rates for the three months and six months ended May 31, 2003, as compared to the same periods of the prior year, are primarily attributable to an increase in our blended state tax rate.

As a result of the foregoing, our net income for the three months ended May 31, 2003 decreased to approximately $12.5 million as compared to $14.4 million for the same period of the prior year.  Our income before cumulative effect of accounting change for the six months ended May 31, 2003, decreased to approximately $37.9 million as compared to approximately $39.7 million for the six months ended May 31, 2002.

The cumulative effect of accounting change recognized in the first quarter of fiscal 2002 consists of the non-cash after-tax charges associated with our write-off of goodwill, as well as the write-off of goodwill by Raceway Associates, upon adoption of SFAS No. 142 on December 1, 2001.

Liquidity and Capital Resources

General

We have historically generated sufficient cash flow from operations to fund our working capital needs and capital expenditures at existing facilities, as well as to pay an annual cash dividend. In addition, we have used the proceeds from offerings of our Class A Common Stock, the net proceeds from the issuance of senior notes (“Senior Notes”), borrowings under our credit facilities and state and local mechanisms to fund acquisitions and development projects. At May 31, 2003 we had $225.0 million principal amount of Senior Notes outstanding, total borrowings of approximately $13.5 million under a term loan, and a debt service funding commitment of approximately $68.8 million, net of discount, related to the taxable special obligation revenue (“TIF”) bonds issued by the Unified Government of Wyandotte County/Kansas City, Kansas (“Unified Government”). We had working capital of approximately $62.1 million and $12.1 million at May 31, 2003 and November 30, 2002, respectively.

Cash Flows

Net cash provided by operating activities was approximately $112.2 million for the six months ended May 31, 2003, compared to approximately $115.1 million for the six months ended May 31, 2002. The difference between our net income of approximately $37.9 million and the $112.2 million of operating cash flow was primarily attributable to:

· an increase in deferred income of $57.1 million;

· depreciation and amortization of $21.5 million;

· deferred income taxes of $13.3 million;

· an increase in income taxes payable of $3.6 million;

· an undistributed loss from equity investments of $3.0 million; and

· a pre-tax charge in connection with the Miami track reconfiguration of $2.8 million.

These differences are partially offset by a decrease in accounts payable and other current liabilities of $9.7 million, an increase in receivables of $9.4 million and an increase in inventories, prepaid expenses and other current assets of $8.9 million.

Net cash used in investing activities was approximately $19.5 million for the six months ended May 31, 2003, compared to approximately $21.6 million for the six months ended May 31, 2002. Our use of cash for investing activities reflects $22.8 million in capital expenditures partially offset by $4.1 million in proceeds from Raceway Associates as repayment of previous advances.

Net cash used in financing activities was approximately $5.8 million for the six months ended May 31, 2003, compared to approximately $79.9 million for the six months ended May 31, 2002. Our use of cash for financing activities reflects payments on our term loan of $5.5 million and $328,000 used to reaquire previously issued common stock.

Capital Expenditures

Capital expenditures totaled approximately $22.8 million for the six months ended May 31, 2003, compared to $23.0 million for the six months ended May 31, 2002. Capital expenditures during the six months ended May 31, 2003 related to increased grandstand seating capacity and six additional luxury suites at Richmond, increased grandstand seating capacity at Kansas, acquisition of land for expansion of parking capacity and other uses, purchase of equipment and other assets associated with our food, beverage and merchandising operations at California and a variety of other improvements and renovations to our facilities.

Based on capital projects currently approved we expect to make capital expenditures totaling approximately $60.1 million, subsequent to May 31, 2003, which are expected to be completed within the next 24 months.  These projects include a reconfiguration to increase track banking at Miami, track lighting at California, construction of a pedestrian/vehicle tunnel at Phoenix, acquisition of land for expansion of parking, camping capacity and other uses, installation of SAFER (steel and foam energy reduction) walls at Richmond and a variety of other improvements and renovations to our facilities. 

As a result of these currently approved projects and current year capital expenditures made through May 31, 2003, we expect our total fiscal 2003 capital expenditures will be approximately $75-80 million.

We review the capital expenditure program periodically and modify it as required to meet current business needs.

Future Liquidity

Our $225 million principal amount of unsecured Senior Notes bear interest at 7.875% and rank equally with all of our other senior unsecured and unsubordinated indebtedness. The Senior Notes require semi-annual interest payments through maturity on October 15, 2004. The Senior Notes may be redeemed in whole or in part, at our option, at any time or from time to time at a redemption price as defined in the indenture.  Our subsidiaries are guarantors of the Senior Notes.

In January 1999, the Unified Government issued approximately $71.3 million in TIF bonds in connection with the financing of construction of Kansas Speedway.  At May 31, 2003, outstanding principal on the TIF bonds are comprised of a $20.5 million, 6.15% term bond due December 1, 2017 and a $49.7 million, 6.75% term bond due December 1, 2027. The TIF bonds are repaid by the Unified Government with payments made in lieu of property taxes (“Funding Commitment”) by our wholly-owned subsidiary, Kansas Speedway Corporation.  Principal (mandatory redemption) payments per the Funding Commitment are payable by Kansas Speedway Corporation on October 1 of each year.  The semi-annual interest component of the Funding Commitment is payable on April 1 and October 1 of each year.  Kansas Speedway Corporation granted a mortgage and security interest in the Kansas project for its Funding Commitment obligation. We have agreed to guarantee Kansas Speedway Corporation’s Funding Commitment until certain financial conditions have been met.  In October 2002, the Unified Government issued additional subordinate sales tax special obligation revenue bonds (“2002 STAR Bonds”) totaling approximately $6.3 million to reimburse us for certain construction already completed on the second phase of the Kansas project and to fund certain additional construction.  The 2002 STAR Bonds, which require annual debt service payments and are due December 1, 2022, will be retired with state and local taxes generated within the Kansas Speedway’s boundaries and are not our obligation.  Kansas Speedway Corporation has agreed to guarantee the payment of principal, any required premium and interest on the 2002 STAR Bonds.  At May 31, 2003, the Unified Government had $6.3 million in 2002 STAR Bonds outstanding.  Under a keepwell agreement, we have agreed to provide financial assistance to Kansas Speedway Corporation, if necessary, to support it’s guarantee of the 2002 STAR Bonds.

Our $250 million senior revolving credit facility ("Credit Facility") matures on March 31, 2004, and accrues interest at LIBOR plus 50 -100 basis points, based on certain financial criteria. At May 31, 2003, we did not have any borrowings outstanding under the Credit Facility.

Our Miami subsidiary has a $15 million credit facility (“Miami Credit Facility”) and a $13.5 million term loan (“Term Loan”). The Miami Credit Facility and Term Loan are guaranteed by us and have the same interest terms and restrictive covenants as our Credit Facility. The Miami Credit Facility matures on December 31, 2004. At May 31, 2003, our Miami subsidiary did not have any borrowings outstanding under the Miami Credit Facility. The Term Loan is payable in annual installments which range from $6.5 million to $7.0 million.  Our Miami subsidiary has an interest rate swap agreement that effectively fixes the floating rate on the outstanding balance under the Term Loan at 5.60% plus 50-100 basis points, based on certain consolidated financial criteria, for the remainder of the loan period.

We are a member of Motorsports Alliance, LLC (“Motorsports Alliance”) (owned 50% by us and 50% by Indianapolis Motor Speedway LLC) which owns 75% of Raceway Associates.  Raceway Associates owns and operates Chicagoland Speedway and Route 66 Raceway.  Raceway Associates has a term loan arrangement, which requires quarterly principal and interest payments and matures November 15, 2012, and a $15 million secured revolving credit facility, which matures September 15, 2005.  At May 31, 2003, Raceway Associates had approximately $45.2 million outstanding under its term loan and no borrowings outstanding under its credit facility.  Under a keepwell agreement, the members of Motorsports Alliance have agreed to provide financial assistance to Raceway Associates on a pro rata basis, if necessary, to support performance under its term loan and credit facility.

At May 31, 2003, we had contractual cash obligations to repay debt, to make payments under operating agreements, leases and commercial commitments in the form of guarantees and unused lines of credit.

Payments due under these long-term obligations are as follows as of May 31, 2003 (in thousands):

Commercial commitment expirations are as follows as of May 31, 2003 (in thousands):