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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ------- to -------
Commission file number 1-13582
SPEEDWAY MOTORSPORTS, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 51-0363307
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
U.S. HIGHWAY 29 NORTH
CONCORD, NORTH CAROLINA 28026
(Address of Principal Executive Offices) (Zip Code)
(704) 455-3239
(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
$.01 Par Value Common Stock New York Stock Exchange
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant was approximately $325,885,316 based upon the closing sales
price of the registrant's Common Stock on March 16, 2000 of $25.81 per share.
At March 16, 2000, 41,646,997 shares of registrant's Common Stock, $.01 par
value per share, were outstanding. Unless otherwise indicated, all other share
and share price information contained herein takes into account the effect of
the two for one stock split effected as of March 15, 1996 in the form of a 100%
Common Stock dividend payable to stockholders of record as of February 26, 1996
(the "Stock Split").
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
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(This Page Intentionally Left Blank)
FORM 10-K TABLE OF CONTENTS
PAGE
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PART I
Item 1. Business ................................................................................. 4
Item 2. Properties ............................................................................... 13
Item 3. Legal Proceedings ........................................................................ 15
Item 4. Submission of Matters to a Vote of Security Holders ...................................... 16
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters ................ 16
Item 6. Selected Financial Data .................................................................. 16
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation ..... 18
Item 7a. Quantitative and Qualitative Disclosures About Market Risk ............................... 26
Item 8. Financial Statements and Supplementary Data .............................................. 26
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ..... 26
PART III
Item 10. Directors and Executive Officers of the Registrant ....................................... 27
Item 11. Executive Compensation ................................................................... 29
Item 12. Security Ownership of Certain Beneficial Owners and Management ........................... 34
Item 13. Certain Relationships and Related Transactions ........................................... 34
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ......................... 35
EXHIBIT INDEX ..................................................................................... 35
SIGNATURES ........................................................................................ 39
INDEX TO FINANCIAL STATEMENTS ..................................................................... F-1
The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements, including the Notes thereto, appearing
elsewhere herein. Statements in this Annual Report on Form 10-K that reflect
projections or expectations of future financial or economic performance of the
Company, and statements of the Company's plans and objectives for future
operations, including those contained in "Business", "Properties", "Legal
Proceedings", and "Management's Discussion and Analysis of Financial Condition
and Results of Operations", or relating to the Company's future capital
projects, hosting of races, broadcasting rights or sponsorships, are
"forward-looking" statements within the meaning of Section 27A of the
Securities Act of 1933, as amended and Section 21E of the Securities Exchange
Act of 1934, as amended. Words such as "expects", "anticipates",
"approximates", "believes", "estimates", "intends", and "hopes", and variations
of such words and similar expressions are intended to identify such
forward-looking statements. No assurance can be given that actual results or
events will not differ materially from those projected, estimated, assumed or
anticipated in any such forward-looking statements. Important factors that
could result in such differences, in addition to other factors noted with such
forward-looking statements, include those discussed in Exhibit 99.1 filed with
the SEC as an exhibit to this Form 10-K.
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PART I
ITEM 1. BUSINESS
Speedway Motorsports, Inc. (the "Company"), the owner and operator of
Atlanta Motor Speedway ("AMS"), Bristol Motor Speedway ("BMS"), Lowe's Motor
Speedway at Charlotte (formerly known as Charlotte Motor Speedway) ("LMSC"),
Las Vegas Motor Speedway ("LVMS"), Sears Point Raceway ("SPR"), and Texas Motor
Speedway ("TMS"), is a leading promoter, marketer and sponsor of motorsports
activities in the United States. The Company also provides event food,
beverage, and souvenir merchandising services through its Finish Line Events
("FLE") subsidiary, and manufactures and distributes smaller-scale, modified
racing cars and parts through its 600 Racing subsidiary. The Company currently
will sponsor 17 major annual racing events in 2000 sanctioned by the National
Association for Stock Car Auto Racing, Inc. ("NASCAR"), including ten races
associated with the Winston Cup professional stock car racing circuit ("Winston
Cup") and seven races associated with the Busch Grand National circuit. The
Company will also sponsor four Indy Racing Northern Light Series ("IRL") racing
events, two NASCAR Craftsman Truck Series racing events, three major National
Hot Rod Association ("NHRA") Racing Events, and seven World of Outlaws ("WOO")
racing events in 2000. The Company was incorporated in the State of Delaware in
1994.
RECENT DEVELOPMENTS
TELEVISION BROADCASTING RIGHTS. In January 2000, the Company, NASCAR and
others in the motorsports industry announced the consolidation of domestic
television broadcast rights for NASCAR Winston Cup and Busch Grand National
Series events beginning with the 2001 racing season. The Company has
historically negotiated directly with network and cable television companies
for live coverage of its NASCAR-sanctioned races. For seasons after 2000,
NASCAR is negotiating the industry-wide television and ancillary media rights
agreements for NASCAR-sanctioned events. The existing television agreements
will be honored through 2000. NASCAR has negotiated a six-year television
rights agreement with NBC Sports and Turner Sports, with both media companies
developing a combined joint venture. In addition, NASCAR has negotiated an
eight-year television rights agreement with FOX and FX cable networks. These
new consolidated agreements include only the domestic television broadcast
rights. NASCAR is in the process of negotiating the sale of ancillary rights
packages for, among other items, internet, specialty pay-per-view, NASCAR
channel, foreign distribution and other international television broadcast
rights.
In January 2000, NASCAR announced that these industry-wide total net
television broadcast revenues for the domestic rights will approximate $244
million in 2001, with annual increases averaging 17%. Annual increases will
range from approximately 15% to 21% throughout the agreement term, with
industry-wide total net domestic rights revenues in 2006 approximating $534
million. These revenue estimates are based on NASCAR Winston Cup and Busch
Grand National Series races as scheduled for the 2000 racing season, and would
be impacted by future changes in race schedules. There presently is no
available estimate for the value of the ancillary rights.
Management believes this consolidation of television broadcast and
ancillary rights will increase the overall media attention focused on
motorsports, expanding sponsorship, merchandising and attendance revenues.
These rights packages will provide significant contracted revenue streams
beginning in fiscal 2001. Management also believes that, once finalized, the
ancillary rights packages for internet, specialty pay-per-view, foreign
distribution and other international television broadcast rights will help
generate intensified interest and demand for NASCAR racing in foreign markets.
SALE OF LAS VEGAS INDUSTRIAL PARK. In December 1998, the Company acquired
LVMS, including a 1.4 million square foot industrial park then under
construction, and 280 acres of adjacent unimproved land. Construction was
completed and rental operations commenced in 1999. In January 2000, the Company
sold the Las Vegas Industrial Park and undeveloped land to Las Vegas Industrial
Park, LLC, an entity owned by the Company's Chairman and Chief Executive
Officer, for approximately $53.3 million. The sales price was based on an
independent fair value appraisal and approximates the Company's net carrying
value as of December 31, 1999. See "Item 2 -- Properties" for further
description and terms of the LVMS acquisition and property sale transaction.
FACILITY NAMING RIGHTS AGREEMENT. In February 1999, the Company obtained
the motorsports industry's first facility naming rights agreement whereby
Charlotte Motor Speedway has been renamed Lowe's Motor Speedway for gross fees
aggregating approximately $35,000,000 over the ten year agreement term.
GENERAL OVERVIEW
At December 31, 1999, the Company's total permanent seating capacity
exceeded 679,000, one of the largest in the motorsports industry. Management
believes that spectator demand for its largest events exceeds existing
permanent seating
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capacity at each of its speedways. In 1999, the Company added more than 14,000
permanent seats, including approximately 10,000 at LMSC and 4,000 at TMS. At
December 31, 1999, AMS, BMS, LMSC, LVMS and TMS had permanent seating capacity
of approximately 124,000, 134,000, 157,000, 107,000, and 157,000, respectively,
in each case excluding infield admission, temporary seats and general
admission. Also at December 31, 1999, the Company had a total of 666 luxury
suites, with 141 at AMS, 104 at BMS, 125 at LMSC, 102 at LVMS, and 194 at TMS.
SPR currently does not have permanent seating capacity but provides temporary
seating and suites for approximately 24,000 spectators in addition to other
general admission seating arrangements along its 2.52 mile road course.
The Company derives revenues principally from the sale of tickets to
automobile races and other events held at its speedway facilities, from the
sale of food, beverages and souvenirs during such events, from the sale of
sponsorships to companies that desire to advertise or sell their products or
services at such events, and from the licensing of television, cable network
and radio rights to broadcast such events. In 1999, the Company derived
approximately 73% of its total revenues from events sanctioned by NASCAR. The
Company has experienced substantial growth in revenues and profitability as a
result of its continued improvement, expansion and investments in facilities,
its consistent marketing and promotional efforts and the overall increase in
popularity of Winston Cup, Busch Grand National, Indy Racing League, National
Hot Rod Association, World Of Outlaws and other motorsports events in the
United States.
As described above, television broadcast and naming rights values are
rising. Published 1999 NASCAR Winston Cup television ratings indicated the
average ratings for Speedway Motorsports events, and the motorsports industry
as a whole, increased over 1998. Also, Speedway Motorsports achieved three of
the top six ratings for all Winston Cup events in 1999. Similar to many
televised sports, overall seasonal averages may increase year to year, while
ratings for certain individual events may decline one year and increase the
next for any number of reasons.
INDUSTRY OVERVIEW
Motorsports is currently the fastest growing spectator sport in the United
States, with NASCAR the fastest growing industry segment. In 1999, NASCAR
sanctioned 94 Winston Cup, Busch Grand National and Craftsman Truck Series
races. Races are generally heavily promoted, with a number of supporting events
surrounding the main event, for a total weekend experience.
In recent years, television coverage and corporate sponsorship have
increased for NASCAR-related events. All NASCAR Winston Cup and Busch Grand
National events sponsored by the Company are currently broadcast by ABC, CBS,
ESPN, FOX, TBS or TNN. Also, all Indy Racing League events sponsored by the
Company are currently broadcast. The Company has entered into television rights
contracts for all its NASCAR-sanctioned events. According to NASCAR, major
national corporate sponsorship of NASCAR-sanctioned events (which currently
includes over 80 Fortune 500 companies) also has increased significantly.
Sponsors include such companies as Coca-Cola, General Motors, Cracker Barrel,
NAPA, DIRECTV, goracing.com, CarsDirect.com, Save Mart, Kragen, Food City, and
RJR Nabisco. The Company intends to increase the exposure of its current
Winston Cup, Busch Grand National, Indy Racing League, National Hot Rod
Association and World of Outlaw events, add television coverage to other
speedway events, increase broadcast and sponsorship revenues and schedule
additional racing and other events at each of its speedway facilities.
Although somewhat common in other major sports venues, the Company's 1999
facility naming rights agreement involving Lowe's Home Improvement Warehouse
was the first in the motorsports industry. This ten year agreement, as well as
other sponsorships similar to the Company's three year comprehensive marketing
agreement with Nationwide Insurance focusing on safety and customer assistance,
illustrate not only the increasingly broad spectrum of major national corporate
sponsorship interest, but the long-term confidence being placed in first-class
facilities in premium markets. The Company is currently strategically
positioned with speedways in six of the premier markets in the United States,
including three of the top ten television markets. In addition, corporate
sponsorships from industries somewhat new to NASCAR, and motorsports in
general, are another strong indicator of the increasing marketing appeal to
widening demographics. For example, technology-related companies such as
CarsDirect.com, DIRECTV, goracing.com, Mall.com, and others have recently
become major sponsors. The four-year old Indy Racing League recently signed a
five-year series naming rights agreement with Northern Lighting Technology -- a
leading Internet search engine.
Management believes the historic consolidation of domestic television
broadcast rights for NASCAR Winston Cup and Busch Grand National Series events
announced in January 2000 (see "Recent Developments -- Television Broadcasting
Rights"), will significantly increase the media's overall attention focused on
motorsports, resulting in expanding sponsorship, merchandising and attendance
revenues. An important aspect of these rights packages is that significant
contract revenue streams will begin in fiscal 2001. Management also believes
that, once finalized, the ancillary rights packages for
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internet, specialty pay-per-view, foreign distribution and other international
television broadcast rights will intensify corporate and fan interest and
create increased demand for NASCAR racing and related merchandising in foreign
markets.
The dramatic increase in corporate interest in the sport has been driven
by the attractive advertising demographics of stock car and other motorsports
racing fans. In addition, brand loyalty (as measured by fans using sponsors'
products) is the highest of any nationally televised sport according to a study
published by Performance Research in 1999. Fueled by popular and accessible
drivers, strong fan brand loyalty, a widening demographic reach, increasing
appeal to corporate sponsors and rising broadcast revenues, industry
competitors are actively pursuing internal growth and industry consolidation.
Speedway operations generate high operating margins and are protected by high
barriers to competitive entry, including capital requirements for new speedway
construction, marketing, promotional and operational expertise, and license
agreements with NASCAR and other sanctioning bodies.
OPERATING STRATEGY
The Company's operating strategy is to increase revenues and profitability
through the promotion and production of racing and related events at modern
facilities, which serve to enhance customer loyalty. The Company markets its
scheduled events throughout the year both regionally and nationally via
television, radio and newspaper advertising, facility tours, satellite links
for media outlets, direct mail campaigns, pre-race promotional activities and
other innovative marketing activities. The key components of this strategy are
as follows:
COMMITMENT TO QUALITY AND CUSTOMER SATISFACTION. Since the 1970's,
management has embarked upon a series of capital improvements at LMSC,
including the construction of additional permanent grandstand seating, new
luxury suites, trackside dining and entertainment facilities and a condominium
complex overlooking the speedway. In 1992, LMSC became the first and only
superspeedway in North America to offer nighttime racing, and now all of the
Company's speedways, except SPR, offer it. Following the purchase of AMS in
1990, the Company began to implement a similar strategy of constructing
additional grandstand seating, luxury suites, and condominiums and the
installation of lighting. The Company continues to improve and construct new
food concessions, restroom and other fan amenities at each of its speedways to
increase spectator comfort and enjoyment. For example, BMS has relocated
various souvenir, concessions and restroom facilities to the mezzanine level,
and added new permanent seating, all of which feature new stadium-style terrace
sections to increase spectator convenience and accessibility. In 2000, BMS is
adding 13,000 stadium-style seats featuring convenient elevator access. In
1997, LMSC opened the Diamond Tower Terrace, a "state-of-the-art" 25,000 seat
grandstand, also featuring a unique mezzanine level concourse. In 2000, LMSC is
adding 11,000 stadium-style, terrace seats to help meet the continuing increase
in demand for premium seating. The Company continues to reconfigure traffic
patterns, entrances, and expand on-site roads and available parking at each of
its speedways to ease congestion caused by the increases in attendance. For
example, in recent years SPR has acquired adjoining land to provide an
additional entrance and significantly expand spectator parking areas. Also, TMS
has significantly expanded its parking areas and improved traffic control
dramatically reducing travel congestion. Finally, both LVMS and TMS were
designed to maximize spectator comfort and enjoyment, and continuing
improvements are expected as management acquires further operating experience
with these new facilities.
INNOVATIVE MARKETING AND EVENT PROMOTION. Management believes that it is
important to market the Company's scheduled events throughout the year, both
regionally and nationally. The Company markets its events by offering tours of
its facilities, providing satellite links for media outlets, conducting direct
mail campaigns and staging pre-race promotional activities such as live music,
skydivers and daredevil stunts. The Company's marketing program also includes
the solicitation of prospective event sponsors. Sponsorship provisions for a
typical NASCAR-sanctioned event include luxury suite rentals, block ticket
sales and Company-catered hospitality, as well as souvenir race program and
track signage advertising. As an example of its innovative marketing, in 1996,
the Company began offering Preferred Seat Licenses ("PSL") entitling licensees
to purchase annual TMS season-ticket packages for sanctioned racing events.
More recent examples include the Company's announcing its facility naming
rights agreement involving Lowe's Home Improvement Warehouse -- a first in the
motorsports industry -- and its three year comprehensive marketing agreement
with Nationwide Insurance focusing on safety and customer assistance. Another
industry first was the Company's joint venture with Turner Sports in which
LMSC's October 1998 NASCAR Winston Cup race was broadcast on pay-per-view
DIRECTV, as well as on TBS. Subscribers to DIRECTV received the full broadcast
of the race plus continuous broadcasts from four in-car cameras, along with
constantly updated graphics of various driver, car and race statistics.
The Company also owns The Speedway Club, an exclusive dining and
entertainment facility located on the fifth and sixth floors of Smith Tower at
LMSC. The Company has constructed a similar office tower adjoining the main
grandstand and overlooking turn one at TMS that houses The Texas Motor Speedway
Club. The club contains a first-class, year-round restaurant-entertainment and
health-fitness membership club. The Texas Motor Speedway Club celebrated its
grand opening
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in March 1999. Open year-round, these two VIP clubs are a focal point of the
Company's efforts to improve the amenities and enhance the comfort of its
facilities for the benefit of spectators.
UTILIZATION OF MEDIA. The Company currently negotiates directly with
network and cable television companies for live coverage of its
NASCAR-sanctioned races. In January 2000, the Company, NASCAR and others in the
motorsports industry announced the consolidation of domestic television
broadcast rights for NASCAR Winston Cup and Busch Grand National Series events
beginning with the 2001 racing season. See "Recent Developments -- Television
Broadcasting Rights" above for further details on the consolidation of
broadcasting and ancillary media rights arrangements. The existing television
agreements will be honored through 2000. Management believes consolidation of
these rights will significantly increase the media's overall attention focused
on motorsports, resulting in expanding sponsorship, merchandising and
attendance revenues. These rights packages will provide significant contracted
revenue streams beginning in fiscal 2001. Management also believes that, once
finalized, the ancillary rights packages for internet, specialty pay-per-view,
foreign distribution and other international television broadcast rights, will
intensify corporate and fan interest and create increased demand for NASCAR
racing and related merchandising in foreign markets.
As discussed in the preceding paragraph, existing television agreements
will be honored through 2000. AMS has a four-year television rights agreement
with ABC/ESPN for NASCAR seasons through 2000. BMS has a seven-year television
rights agreement with ESPN for NASCAR seasons previously through 2002. LMSC has
a four-year television rights agreement with Turner Sports, Inc. ("TSI")
covering its May and October NASCAR and Automobile Racing Club of America
("ARCA") races to be broadcast on TBS through NASCAR's season for 2000. LMSC
also has a five-year television rights agreement with TNN for "The Winston"
race and associated events previously through 2002. LVMS has a five-year
television rights agreement with ESPN covering the March NASCAR Winston Cup and
related races previously through 2002. SPR has a one year television rights
agreement with ESPN covering its June NASCAR Winston Cup race in 2000. TMS has
a four-year television rights agreement with CBS Sports for its NASCAR Winston
Cup and related races previously through 2002.
The Company also broadcasts all of its NASCAR Winston Cup and Busch Grand
National Series racing events, except at LVMS, over its proprietary radio
Performance Racing Network ("PRN"), which is syndicated to more than 500
stations. PRN also sponsors two weekly racing-oriented programs throughout the
NASCAR season, which are syndicated to more than 290 stations. In 2000, the
Company acquired Racing Country USA, a national radio show syndicated to more
than 300 affiliates nationwide. Its combination with PRN provides the Company
with access to more than 11 million listeners nationwide -- plus over 800 radio
stations throughout North America -- offering sponsors a very powerful and
expansive promotional network. The Company plans to begin broadcasting its
NASCAR Winston Cup and Busch Grand National Series and other racing events at
LVMS over PRN in 2001.
Management also seeks to increase the visibility of its racing events and
facilities through local and regional media interaction. For example, each
January the Company sponsors a four-day media tour at LMSC to promote the
upcoming Winston Cup season. In 2000, this event featured Winston Cup drivers
and attracted media personnel representing television networks and stations
from throughout the United States. A similar media tour was staged at TMS in
early 2000 also featuring Winston Cup drivers and was attended by numerous
media personnel from throughout the United States. The Company is planning to
carry other events at each of its speedways over PRN and Racing Country USA in
2000.
GROWTH STRATEGY
Management believes that the Company can achieve its growth objectives by
increasing attendance and broadcasting, sponsorship and other revenues at
existing facilities and by expanding its promotional and marketing expertise to
take advantage of opportunities in attractive new markets. It intends to
continue implementing this growth strategy through the following means:
EXPANSION AND IMPROVEMENT OF EXISTING FACILITIES. Management believes that
spectator demand for its largest events exceeds existing permanent seating
capacity. The Company plans to continue its expansion by adding permanent
grandstand seating and luxury suites, and making other significant renovations
and improvements at each of its speedways in 2000, as further described in
"Properties" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Capital Expenditures." The Company completed major
renovations at AMS in 1997, including reconfiguration into a "state-of-the-art"
1.54-mile, lighted, quad-oval superspeedway, adding approximately 22,000
permanent seats, including 58 new suites, and changing the start-finish line
location. AMS installed lighting for its inaugural IRL night race in 1998, and
now all of the Company's speedways, except SPR, offer nighttime racing. In
1998, BMS continued its expansion by adding approximately 19,000 permanent
seats, including 42 new luxury suites, and LMSC added approximately 12,000
permanent
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seats, including 12 new luxury suites. In 1999, BMS completed the
reconstruction and expansion of its dragstrip into a "state-of-the-art" dragway
with permanent grandstand seating, luxury suites, and extensive fan amenities
and facilities. BMS currently hosts an annual NHRA-sanctioned Winston Showdown
and other bracket racing events, as well as various auto shows. In 1999, the
Company added approximately 10,000 permanent seats at LMSC and 4,000 at TMS.
The Company also expanded its concessions, restroom and other fan amenities,
and made various site improvements for items such as better traffic control and
increased parking capacity at each of its speedways. Construction of The Texas
Motor Speedway Club was substantially completed with its opening in March 1999.
In recent years, SPR has purchased adjoining land to provide additional
entrances and further expand its parking areas to improve traffic flow and ease
congestion caused by the growth in attendance. SPR was partially reconfigured
in 1998 into a stadium-style road course featuring "The Chute" which provides
spectators improved sight lines and expanded viewing areas for increased
spectator comfort and enjoyment.
In 2000, after planning to add more than 31,000 permanent seats, exclusive
of SPR, the Company's total permanent seating capacity will exceed 710,000 and
the total number of luxury suites will be approximately 666. LMSC and TMS are
constructing 4/10-mile, modern, lighted, dirt track facilities where
nationally-televised events such as World of Outlaws and Hav-A-Tampa Dirt Late
Model Series, as well as American Motorcycle Association (AMA) and other racing
events will be held annually. Construction is expected to be completed in 2000.
In addition, LVMS is reconstructing and expanding one of its dragstrips into a
"state-of-the-art" dragway with permanent grandstand seating, luxury suites,
and extensive fan amenities and facilities. Construction of "The Strip at Las
Vegas" is expected to be completed in 2000, with its inaugural NHRA-sanctioned
SummitRacing.com Nationals event hosted in April 2000. Also in 2000 or 2001,
pending governmental approvals, the Company expects to begin major renovations
at SPR, including its ongoing reconfiguration into a stadium-style road racing
course, the addition of up to 35,000 grandstand bleacher seats, and further
improving and expanding concessions, restroom and other fan amenities
facilities. The Company continues to improve and expand concessions, restroom
and other fan amenities facilities at each of its speedways, as well as
reconfiguring traffic patterns, entrances, and expanding on-site roads and
available parking to ease congestion caused by the increases in attendance,
consistent with management's commitment to quality and customer satisfaction.
Management believes that the expansion and improvements will generate
additional admissions and event related revenues.
MAXIMIZATION OF MEDIA EXPOSURE AND ENHANCEMENT OF BROADCAST AND
SPONSORSHIP REVENUES. NASCAR-sanctioned stock car racing has experienced
significant growth in television viewership and spectator attendance during the
past several years. This growth has allowed the Company to expand its
television coverage to include more races and to negotiate more favorable
broadcast rights fees with television networks, as well as to negotiate more
favorable contract terms with sponsors. Management believes that spectator
interest in stock car racing will continue to grow, thereby increasing
broadcast media and sponsors' interest in the sport. The Company intends to
increase media exposure of its current NASCAR, IRL and NHRA events, to add
television coverage to other speedway events and to further increase broadcast
and sponsorship revenues. For instance, with over 30 million people visiting
Las Vegas annually, management believes the newly acquired LVMS has the
potential to significantly increase broadcasting and sponsorship revenues.
The LVMS acquisition is a major strategic transaction for the Company.
Also, the acquisition of SPR marked the Company's entry into the Northern
California television market, which is currently the 5th largest television
market in the United States. These acquisitions achieve a critical mass west of
the Mississippi River that enhances the Company's overall operations, as well
as broadcast and sponsorship opportunities. The Company intends to capitalize
on its top market entertainment value to further grow LVMS, the sport of NASCAR
and other racing series.
The Company is currently strategically positioned with speedways in six of
the premier markets in the United States, including three of the top ten
television markets. Published 1999 NASCAR Winston Cup television ratings
indicated the average ratings for Speedway Motorsports events, and the
motorsports industry as a whole, increased over 1998. Also, Speedway
Motorsports achieved three of the top six ratings for all Winston Cup events in
1999. Management believes these positive developments bode well for the
Company's future naming rights possibilities and other innovative marketing
opportunities.
FURTHER DEVELOPMENT OF FINISH LINE EVENTS, 600 RACING LEGENDS CAR AND
PERFORMANCE RACING NETWORK BUSINESSES. In January 1998, the Company
restructured and consolidated its food, beverage and souvenir operations into
Finish Line Events ("FLE"), a wholly-owned subsidiary of the Company. FLE
provides event food, beverage, and souvenir merchandising services, as well as
expanded ancillary support services, to all of the Company's facilities and
other unaffiliated sports-related venues. The Company believes this
restructuring will provide better products and expanded services to its
customers, enhancing their overall entertainment experience, while allowing the
Company to achieve substantial operating efficiencies.
8
In 1992, the Company developed the Legends Circuit for which it
manufactures and sells cars and parts used in Legends Circuit racing events and
is the official sanctioning body. At retail prices starting at less than
$12,500, management believes that Legends Cars are economically affordable to a
new group of racing enthusiasts who previously could not race on an organized
circuit. Legends Car revenues from this business have grown from $5.7 million
in 1994 to $10.9 million in 1999. As an extension of the Legends Car concept,
the Company released in late 1997 a new smaller, lower priced "Bandolero" stock
car, which appeals largely to younger racing enthusiasts. The Company further
broadened the Legends Car Circuit in 1999, increasing the number of sanctioned
races and tracks at which Legends and Bandolero Car races were held. In 1999,
600 Racing began conducting sanctioned Legends and Bandolero Car races at SPR
and LVMS, as well as again at AMS, LMSC, and TMS.
The Company broadcasts all of its NASCAR Winston Cup and Busch Grand
National Series racing events, except at LVMS, over its proprietary radio
Performance Racing Network. PRN also sponsors two weekly racing-oriented
programs throughout the NASCAR season, which are syndicated to more than 290
stations. In February 2000, the Company acquired Racing Country USA, a national
radio show syndicated to more than 300 affiliates nationwide. Founded in 1990,
Racing Country USA is a two-hour radio show featuring country music hits and
NASCAR-related programming. This combined programming with PRN provides the
Company access to more than 11 million listeners nationwide, plus over 800
radio stations throughout North America. It will allow the Company to further
promote its events and facilities on a weekly basis and offer sponsors a very
powerful and expansive promotional network. The Company plans to begin
broadcasting its NASCAR Winston Cup and Busch Grand National Series and other
racing events at LVMS over PRN in 2001.
INCREASED DAILY USAGE OF EXISTING FACILITIES. Management constantly seeks
revenue-producing uses for the Company's speedway facilities on days not
committed to racing events. Such other uses include car and truck shows,
supercross motorcycle racing, auto fairs, driving schools, vehicle testing,
settings for television commercials, concerts, holiday season festivities,
print advertisements and motion pictures. In 1998, the Company began hosting a
summer Legends Car series at AMS and TMS, and in 1999 began a similar series at
LVMS and SPR. In 1999, BMS completed reconstruction and expansion of its
"state-of-the-art" dragway with permanent grandstand seating and luxury suites.
BMS is currently hosting an annual NHRA-sanctioned Winston Showdown and other
bracket racing events, as well as various auto shows.
In 2000, LMSC and TMS will complete construction of 4/10-mile, modern,
lighted, dirt track facilities where nationally-televised events such as World
of Outlaws and Hav-A-Tampa Dirt Late Model Series, as well as AMA and other
racing events will be held annually. The Pennzoil World of Outlaws Sprint Car
Series is the fifth most popular motorsports series in the Untied States. LVMS
is also reconstructing and expanding one of its dragstrips into a
"state-of-the-art" dragway with permanent grandstand seating, luxury suites,
and extensive fan amenities. Construction is expected to be completed with its
inaugural NHRA-sanctioned SummitRacing.com Nationals event hosted in April
2000. The Strip at Las Vegas will hold various bracket racing events, as well
as auto shows, throughout the year. Other examples of increased usage include
LMSC's hosting of a country music concert in April 2000, and TMS's spring
Autofest featuring Pate Swap Meets. The Company is also currently attempting to
schedule music concerts at certain other facilities. Non-race-day track rental
revenues were $3,092,000 in 1997, $3,919,000 in 1998 and $7,802,000 in 1999.
Along with such increased daily usage of its facilities, the Company is
scheduled to host four IRL race events in 2000. Also in 1998, the IRL season
championship finale was moved to TMS coupled with a NASCAR Craftsman Truck
Series race. With more than twelve different track configurations at LVMS,
including a 2.5-mile road course, 1/4-mile dragstrip, 1/8- mile dragstrip,
1/2-mile clay oval, 3/8-mile paved oval and several other race courses, the
Company plans to capitalize on its top market entertainment value to further
grow the speedway and other racing series, and to promote new expanded venues.
ACQUISITION AND DEVELOPMENT OF ADDITIONAL MOTORSPORTS FACILITIES. The
Company also considers growth by acquisition and development of motorsports
facilities as appropriate opportunities arise. The Company acquired Bristol
Motor Speedway in January 1996, Sears Point Raceway in November 1996, and Las
Vegas Motor Speedway in December 1998. In 1997, the Company completed
construction of Texas Motor Speedway. The Company continuously seeks to locate,
acquire, develop and operate venues which the Company feels are underdeveloped
or underutilized and to capitalize on markets where the pricing of sponsorships
and television rights are considerably more lucrative.
OPERATIONS
The Company's operations consist principally of racing and related events.
The Company also sells Legends and Bandolero Cars and is the official
sanctioning body for the Legends and Bandolero Car Racing Circuits. Its other
activities are ancillary to its core business of racing.
9
RACING AND RELATED EVENTS
NASCAR-sanctioned races are held annually at each of the Company's
speedways. The following are summaries of racing events scheduled in 2000 at
each Company speedway. Management constantly pursues the scheduling of
additional motorsports racing and other events.
AMS. In March 2000, AMS conducted the Cracker Barrel Old Country Store 500
Winston Cup race and the Aaron's 312 Busch Grand National race. AMS is
scheduled to hold the last Winston Cup race of the season, as well as several
other races and events. Its NASCAR-sanctioned racing schedule is as follows:
DATE EVENT CIRCUIT
- ------------ ----- ---------------------
March 11 "Aaron's 312" Busch Grand National
March 12 "Cracker Barrel Old Country Store 500" Winston Cup
November 19 "NAPA 500" Winston Cup
In 2000, AMS is also scheduled to hold one IRL event and one ARCA race.
BMS. In 2000, BMS is scheduled to hold two Winston Cup races and two Busch
Grand National races, as well as several other races and events. Its
NASCAR-sanctioned racing schedule is as follows:
DATE EVENT CIRCUIT
- ---------- ----- ---------------------
March 25 "Cheez-It 250" Busch Grand National
March 26 "Food City 500" Winston Cup
August 25 "Food City 250" Busch Grand National
August 26 "goracing.com 500" Winston Cup
In 2000, BMS is also scheduled to hold the NHRA's "The Winston No-Bull
Showdown" all-star race and one WOO racing event.
LMSC. In 2000, LMSC is scheduled to hold three Winston Cup races and two
Busch Grand National races, as well as several other races and events. Its
NASCAR-sanctioned racing schedule is as follows:
DATE EVENT CIRCUIT
- ---------- ----- ----------------------------
May 20 "The Winston" Winston Cup (all-star race)
May 27 "CARQUEST Auto Parts 300" Busch Grand National
May 28 "Coca-Cola 600" Winston Cup
October 7 "All Pro Auto Parts Bumper to Bumper 300" Busch Grand National
October 8 "UAW-GM Quality 500" Winston Cup
In 2000, LMSC is also scheduled to hold two ARCA races, two WOO events,
and one American LeMans event.
LVMS. In March 2000, LVMS conducted the CarsDirect.com 400 Winston Cup
race and the Sam's Town 300 Busch Grand National race, among others. Its
NASCAR-sanctioned racing schedule is as follows:
DATE EVENT CIRCUIT
- --------- ------ ---------------------
March 4 "Sam's Town 300" Busch Grand National
March 5 "CarsDirect.com 400" Winston Cup
In 2000, LVMS is also scheduled to hold one IRL event, one NHRA Nationals
event, two WOO events, one American LeMans event, two NASCAR Winston West and
two Winston Southwest Series events, and various AMA, and other racing events.
SPR. In 2000, SPR is scheduled to hold one Winston Cup race, as well as
several other races and events. Its NASCAR-sanctioned racing schedule is as
follows:
DATE EVENT CIRCUIT
- -------- ----- ------------
June 25 "Save Mart/Kragen 350" Winston Cup
In 2000, SPR is also scheduled to hold one NHRA Nationals event, one
NASCAR Winston Southwest Series event, one American LeMans event, and various
AMA, Sports Car Club of America and other racing events.
10
TMS. In 2000, TMS is scheduled to hold one Winston Cup race and one Busch
Grand National race, as well as several other races and events. Its
NASCAR-sanctioned racing schedule is as follows:
DATE EVENT CIRCUIT
- --------- ----- ---------------------
April 1 "Albertson's 300 Presented by Pop Secret" Busch Grand National
April 2 "DIRECTV 500" Winston Cup
In 2000, TMS is also scheduled to hold two NASCAR Craftsman Truck Series
races, two IRL events, two WOO events and one American LeMans event.
The following table shows selected revenues for the years ended December
31, 1999, 1998 and 1997. All amounts for 1998 and 1997 exclude information for
LVMS before the December 1, 1998 acquisition.
1999 1998 1997
----------- ----------- -----------
(IN THOUSANDS)
Admissions .................. $132,694 $107,601 $ 94,032
Sponsorship revenue ......... 29,202 18,346 14,646
Broadcast revenue ........... 28,547 20,014 17,947
Other ....................... 127,050 83,835 65,501
-------- -------- --------
Total ................... $317,493 $229,796 $192,126
======== ======== ========
ADMISSIONS. Grandstand ticket prices at the Company's NASCAR-sanctioned
events in 2000 range from $15.00 to $130.00. In general, the Company is raising
ticket prices as the cost of living increases.
SPONSORSHIP REVENUE. The Company's revenue from corporate sponsorships is
paid in accordance with negotiated contracts. The identities of sponsors and
the terms of sponsorship change from time to time. The Company currently has
sponsorship contracts with such major manufacturing and consumer products
companies as Coca-Cola, General Motors, Miller Brewing Company, Anheuser-Busch,
RJR Nabisco, NAPA, Cracker Barrel, DIRECTV, goracing.com, CarsDirect.com, Save
Mart, Kragen, Chevrolet and Ford. Some contracts allow the sponsor to name a
particular racing event, as in the "Coca-Cola 600", "CarsDirect.com 400", and
the "UAW-GM Quality 500." Other consideration ranges from "Official Car"
designation (as with Ford at AMS, and Chevrolet at BMS, LMSC, LVMS, SPR and
TMS) to exclusive advertising and promotional rights in the sponsor's product
category (as with Anheuser-Busch at AMS, BMS, LVMS and TMS, Coors also at TMS,
and Miller at LMSC). Also, the Company has a facility naming rights agreement
whereby Charlotte Motor Speedway was renamed Lowe's Motor Speedway at
Charlotte. None of the Company's event sponsors accounted for as much as 5% of
total revenues in 1999.
BROADCAST REVENUE. The Company has negotiated contracts with television
networks and stations for the broadcast coverage of all of its
NASCAR-sanctioned events. The Company has contracts with ABC, CBS, ESPN, TBS
and TNN covering events at AMS, BMS, LMSC, LVMS, SPR and TMS. The Company also
broadcasts all of its NASCAR Winston Cup and Busch Grand National Series races,
except at LVMS, over its proprietary Performance Racing Network, which is
syndicated to more than 500 stations. PRN also sponsors two weekly
racing-oriented programs throughout the NASCAR season, which are syndicated to
more than 290 stations. The Company derives revenue from the sale of commercial
time on PRN. None of the Company's broadcast contracts accounted for as much as
5% of total revenues in 1999.
OTHER REVENUE. The Company derives other revenue from the sale of
souvenirs and concessions, from fees paid for catering "hospitality" receptions
and private parties at its speedways and from parking. As of December 31, 1999,
the Company's speedway facilities include a total of approximately 666 luxury
suites available for leasing to corporate sponsors or others at current 2000
annual rates ranging from $20,000 to $100,000. LMSC has also constructed 40
open-air boxes, each containing 32 seats, which are currently available for
renting by corporate sponsors or others at annual rates of up to $37,000. The
Company's tracks and related facilities often are leased to others for use in
driving schools, testing, research and development of race cars and racing
products, use as settings for commercials and motion pictures, and other
outdoor events. The Company also derives other revenue from The Speedway Club
at LMSC and The Texas Motor Speedway Club, dining and entertainment facilities
located at the respective speedways, and from Legends Car operations. The
Company also derives other revenue from Motorsports By Mail LLC ("MBM"), a
wholesale and retail distributor of racing and other sports related souvenir
merchandise and apparel, from Oil-Chem Research Corp. ("Oil-Chem"), which
produces environmentally friendly motor oil additives, from SoldUSA, Inc., an
internet auction and e-commerce company under development, and from Wild Man
Industries ("WMI"), a screen printing and embroidery manufacturer and
distributor of wholesale and retail apparel.
11
MBM is a wholly-owned subsidiary of FLE, Oil Chem and SoldUSA are substantially
wholly-owned subsidiaries of SMI, and WMI is a division of FLE.
600 RACING AND THE LEGENDS CARS CIRCUIT
Introduced by the Company in 1992, Legends Cars are 5/8-scale versions of
the modified cars driven by legendary early NASCAR racers. Designed primarily
to race on "short" tracks of 3/8-mile or less, they are currently available in
eight body styles modeled after classic sedans and coupes. Legends Circuit
races are sanctioned by 600 Racing and continue to be the fastest growing short
track racing division in motorsports. More than 1,800 sanctioned races were
held nationwide in 1999, and 600 Racing is the third largest short track
sanctioning body in terms of membership behind NASCAR and IMCA. Since 1995,
Legends Cars have been manufactured by 600 Racing at a leased
92,000-square-foot facility located approximately two miles from LMSC.
Management believes that the Legends Car is one of only a few complete
race cars manufactured in the United States for a retail price of less than
$12,500. At these retail prices, management believes that Legends Cars are
affordable by a new and expanding group of racing enthusiasts who otherwise
could not race on an organized circuit. Legends Cars are not designed for
general road use. Cars and parts are currently marketed and sold through
approximately 60 distributors doing business throughout the United States,
Canada, and Europe.
In late 1997, 600 Racing released a new "Bandolero" line of smaller,
lower-priced, entry level stock cars, which appeals to younger racing
enthusiasts. The Company further broadened the Legends Car Circuit in 1999,
increasing the number of sanctioned races and tracks at which Legends and
Bandolero Car races are held. In 1999, 600 Racing conducted sanctioned Legends
and Bandolero Car races at SPR and LVMS for the first time, as well as again at
AMS, LMSC, and TMS.
OTHER ACTIVITIES
The Company also owns Smith Tower, a seven-story, 135,000 square foot
building adjoining the main grandstand and overlooking the principal track at
LMSC. Smith Tower houses the Speedway Club, the corporate offices of LMSC and
office space leased to others. The Speedway Club is an exclusive dining and
entertainment facility located on the fifth and sixth floors of Smith Tower.
The Company has constructed a similar office tower adjoining the main
grandstand and overlooking the track at TMS. This TMS tower houses The Texas
Motor Speedway Club and corporate offices, and contains first class, year round
dining-entertainment and health-fitness membership clubs. The Texas Motor
Speedway Club opened in March 1999. Open year-round, these two VIP clubs are a
focal point of the Company's efforts to improve the amenities and enhance the
comfort of its facilities for the benefit of spectators.
The Company has built 46 trackside condominiums at AMS of which 42 were
sold as of December 31, 1999. Also, the Company completed construction of 76
condominiums at TMS above turn two of the speedway, 68 of which have been sold
or contracted for sale as of December 31, 1999. The Company has built and sold
40 trackside condominiums at LMSC in the 1980's and another 12 units at LMSC
from 1991 to 1994. Some are used by team owners and drivers, which is believed
to enhance their commercial appeal.
COMPETITION
The Company is the leading motorsports promoter in the local and regional
markets served by AMS, BMS, LMSC, LVMS, SPR and TMS, and competes regionally
and nationally with other speedway owners to sponsor events, especially NASCAR,
IRL, NHRA and WOO sanctioned events. The Company also must compete for
spectator interest with all forms of professional and amateur spring, summer
and fall sports conducted in and near Atlanta, Bristol, Charlotte, Las Vegas,
Fort Worth, and Sonoma. The Company also competes for attendance with a wide
range of other available entertainment and recreational activities.
EMPLOYEES
As of December 31, 1999, the Company had approximately 819 full-time
employees and 330 part-time employees. The Company hires temporary employees to
assist during periods of peak attendance at its events. None of the Company's
employees are represented by a labor union. Management believes that the
Company enjoys a good relationship with its employees.
12
ENVIRONMENTAL MATTERS
Solid waste landfilling has occurred on and around the Company's property
at LMSC for many years. Landfilling of general categories of municipal solid
waste on the LMSC property ceased in 1992. However, there is one landfill
currently operating at LMSC that is permitted to receive inert debris and waste
from land clearing activities ("LCID" landfills), and one LCID landfill that
was closed in 1999. Two other LCID landfills on the LMSC property were closed in
1994. LMSC intends to allow similar LCID landfills to be operated on the LMSC
property in the future. Prior to 1999, LMSC leased a portion of its property to
Allied Waste Industries, Inc. ("Allied") for use as a construction and
demolition debris landfill (a "C&D" landfill), which can receive solid waste
resulting solely from construction, remodeling, repair or demolition operations
on pavement, buildings or other structures, but cannot receive inert debris,
land-clearing debris or yard debris. In addition, Allied owns and operates an
active solid waste landfill adjacent to LMSC. Management believes that the
active solid waste landfill was constructed in such a manner as to minimize the
risk of contamination to surrounding property.
Portions of the inactive solid waste landfill areas on the LMSC property
are subject to a groundwater monitoring program and data are submitted to the
North Carolina Department of Environment and Natural Resources ("DENR"). DENR
has noted that data from certain groundwater sampling events have indicated
levels of certain regulated compounds that exceed acceptable trigger levels and
organic compounds that exceed regulatory groundwater standards. DENR has not
acted to require any remedial action by the Company at this time with respect
to this situation. In the future, DENR could possibly require the Company to
take certain actions with respect to this situation that could result in
material costs being incurred by the Company.
Management believes that the Company's operations, including the landfills
on its property, are in substantial compliance with all applicable federal,
state and local environmental laws and regulations. Nonetheless, if damage to
persons or property or contamination of the environment is determined to have
been caused by the conduct of the Company's business or by pollutants,
substances, contaminants or wastes used, generated or disposed of by the
Company, or which may be found on the property of the Company, the Company may
be held liable for such damage and may be required to pay the cost of
investigation or remediation, or both, of such contamination or damage caused
thereby. The amount of such liability, as to which the Company is self-insured,
could be material. Changes in federal, state or local laws, regulations or
requirements, or the discovery of previously unknown conditions, could require
additional expenditures by the Company.
PATENTS AND TRADEMARKS
The Company has trademark rights in "Speedway Motorsports", "Atlanta Motor
Speedway", "Charlotte Motor Speedway", "Sears Point Raceway" and "Finish Line
Events". It also has trademark rights concerning its "Legends Cars", "600
Racing", "The Speedway Club", "AutoFair", and its corporate logos. Trademark
and service mark registrations are pending with respect to "Bristol Motor
Speedway", "Motorsports By Mail", "WildMan", "Bandolero", "Las Vegas Motor
Speedway", "Texas Motor Speedway", and "Z -Max". The Company also has six
patents and five patent applications pending with respect to its Legends Car
and Bandolero Car design and technology. Management's policy is to protect its
intellectual property rights zealously, including through litigation, to
protect their proprietary value in souvenir sales and market recognition.
ITEM 2. PROPERTIES
The Company's principal executive offices are located at U.S. Highway 29
North, Concord, North Carolina, 28026, and its telephone number is (704)
455-3239. A description of each Company speedway follows:
ATLANTA MOTOR SPEEDWAY. AMS is located on 870 acres of Company-owned land
in Hampton, Georgia, approximately 30 miles south of downtown Atlanta. Built in
1960, and owned by the Company since 1990, today AMS is a modern, attractive
facility. In 1996, the Company completed 17 new suites at AMS, reconfigured
AMS's main entrances and expanded on-site roads to ease congestion caused by
the increases in attendance. In November 1997, the Company completed major
renovations at AMS, including its reconfiguration into a "state-of-the-art"
1.54-mile, lighted, quad-oval superspeedway, the addition of approximately
22,000 permanent seats, including 58 new suites, and changing the start-finish
line location. Other significant improvements in 1997 included new scoreboards,
new garage areas, and new infield media and press box centers. Lighting was
installed for its inaugural IRL night race in August 1998. At December 31,
1999, AMS had permanent seating capacity of approximately 124,000, including
141 luxury suites.
Similar to 1999, AMS plans to continue improving and expanding its on-site
roads and available parking in 2000, as well as reconfiguring traffic patterns
and entrances, to ease congestion and improve traffic flow. AMS has constructed
46 condominiums overlooking the Atlanta speedway and is marketing the four
remaining condominiums.
13
BRISTOL MOTOR SPEEDWAY. The Company acquired BMS in January 1996. BMS is
located on approximately 550 acres in Bristol, Tennessee and is a one-half
mile, lighted, 36-degree banked concrete oval. BMS also owns and operates a
one-quarter mile lighted dragstrip. BMS is the most popular facility in the
Winston Cup circuit among race fans due to its 36 degree banked turns and
lighted nighttime races. Management believes that spectator demand for its
Winston Cup events at BMS exceeds existing permanent seating capacity. In 1996,
BMS added approximately 6,000 permanent grandstand seats and relocated various
souvenir, concessions and restroom facilities to the mezzanine level to
increase spectator convenience and accessibility. In 1997, BMS added
approximately 39,000 permanent grandstand seats and constructed 55 new suites
for a net increase of 31. In 1998, BMS added approximately 19,000 permanent
grandstand seats, including 42 new luxury suites, again featuring a new
stadium-style terrace section and mezzanine level facilities for enhanced
spectator convenience and accessibility, and made other site improvements. In
1999, BMS completed reconstructing and expanding its dragstrip into a
"state-of-the-art" dragway with permanent grandstand seating, luxury suites,
and extensive fan amenities and facilities. At December 31, 1999, BMS had
permanent seating capacity of approximately 134,000, including 104 luxury
suites. In 2000, BMS plans to add approximately 13,000 permanent seats, further
expand concessions, restroom and other fan amenities, and make other site
improvements.
LOWE'S MOTOR SPEEDWAY (FORMERLY KNOWN AS CHARLOTTE MOTOR SPEEDWAY). LMSC
is located in Concord, North Carolina, approximately 12 miles northeast of
uptown Charlotte. On Winston Cup race days it uses more than 1,000 acres of
land, some of which is leased from others. LMSC was among the first
superspeedways built and today is a modern, attractive facility. The principal
track is a 1.5-mile banked asphalt quad-oval facility and was the first
superspeedway in North America lighted for nighttime racing. LMSC also has
three lighted "short" tracks (a 1/5-mile asphalt oval, a 1/4-mile asphalt
oval and a 1/5-mile dirt oval), as well as a 2.25-mile asphalt road course.
The Company has consistently improved and increased spectator seating
arrangements at LMSC. In 1997, LMSC added a "state-of-the-art" 25,000 seat
grandstand, featuring a unique mezzanine level concourse and 26 new suites,
among other site improvements. In 1998, LMSC added approximately 12,000
permanent seats, including 12 new luxury suites, again featuring a new
stadium-style terrace section and mezzanine level facilities for enhanced
spectator convenience and accessibility. In 1999, LMSC added approximately
10,000 permanent seats, and further expanded parking areas to accommodate the
increases in attendance and to ease congestion. At December 31, 1999, LMSC had
permanent seating capacity of approximately 157,000, including 125 luxury
suites.
In 2000, LMSC plans to add approximately 11,000 permanent seats, featuring
stadium-style terrace seating, and further expand concessions, restroom and
other fan amenities, and make other site improvements. Also, LMSC is
constructing a 4/10-mile, modern, lighted, dirt track facility where
nationally-televised events such as World of Outlaws and Hav-A-Tampa Dirt Late
Model Series, as well as AMA and other racing events will be held annually.
Construction is expected to be completed by May 2000.
LAS VEGAS MOTOR SPEEDWAY. LVMS, located on approximately 1,300 acres in
Las Vegas, Nevada, is a 1.5-mile, lighted, asphalt superspeedway, and includes
several other on-site race tracks. The other race tracks include a 1/4-mile
dragstrip, 1/8- mile dragstrip, 2.5-mile road course, 1/2-mile clay oval,
3/8-mile paved oval, motocross and other off-road race courses. Construction
of LVMS was substantially completed in 1997 and its first major NASCAR Winston
Cup race was held in March 1998. The superspeedway's configuration readily
allows for significant future expansion. The Company acquired LVMS in December
1998, including certain tangible and intangible assets, its operations, an
industrial park and certain adjacent unimproved land for approximately $215.0
million. Construction of the 1.4 million square foot industrial park was
completed and operations commenced in 1999. Also in 1999, LVMS expanded
concessions, restroom and other fan amenities facilities, and made other site
improvements. At December 31, 1999, LVMS had permanent seating capacity of
approximately 107,000, including 102 luxury suites.
As further described in Note 4 to the Consolidated Financial Statements,
the Company sold the industrial park and 280 acres of undeveloped land in
January 2000. In 2000, LVMS plans to add approximately 7,000 permanent seats,
further expand concessions, restroom and other fan amenities, and make other
site improvements. LVMS also is reconstructing and expanding one of its
dragstrips into a "state-of-the-art" dragway with permanent grandstand seating,
luxury suites, and extensive fan amenities and facilities. Construction of The
Strip at Las Vegas is expected to be completed in 2000, with its inaugural
NHRA-sanctioned SummitRacing.com Nationals event hosted in April 2000.
SEARS POINT RACEWAY. SPR, located on approximately 1,500 acres in Sonoma,
California, consists of a 2.52-mile, twelve-turn road course, a one-quarter
mile dragstrip, and a 157,000 square foot industrial park. SPR currently does
not have permanent seating capacity but provides temporary seating and suites
for approximately 24,000 spectators in addition to other general admission
seating arrangements along its 2.52-mile road course. In 1997, SPR made various
parking, road improvements and grading changes to improve spectator sight
lines, and to increase and improve seating and facilities for
14
spectator and media amenities. In 1998, SPR acquired adjoining land to provide
an additional entrance and expanded spectator parking areas to accommodate the
increases in attendance and to ease congestion. Also in 1998, SPR was partially
reconfigured into a 1.9-mile stadium-style road course featuring "The Chute"
which provides spectators with improved sight lines and expanded viewing areas.
The Chute provides multiple configurations within SPR's overall 2.52-mile road
coarse.
Subject to governmental approval, SPR plans to continue improving and
expanding its on-site roads and available parking in 2000, reconfiguring
traffic patterns and entrances to ease congestion and improve traffic flow, as
well as make other site improvements. Also pending governmental approvals, in
2000 or 2001, the Company expects to begin major renovations at SPR, including
its ongoing reconfiguration into a "stadium-style" road racing course, the
addition of up to 35,000 grandstand bleacher seats, and improving and expanding
concessions, restroom and other fan amenities facilities.
TEXAS MOTOR SPEEDWAY. TMS, located on approximately 1,360 acres in Fort
Worth, Texas, is a 1.5-mile, lighted, banked, asphalt quad-oval superspeedway
with a permanent seating capacity of approximately 157,000, including 194
suites, and 76 condominiums. TMS, one of the largest sports facility in the
United States in terms of permanent seating capacity, hosted its first major
NASCAR Winston Cup race in April, 1997, preceded by a Busch Grand National
race. TMS was designed to maximize spectator comfort and enjoyment, and further
design improvements are expected at TMS as management acquires operating
experience with this new facility. The TMS facilities are subject to a lease
transaction with the Fort Worth Sports Authority as of December 31, 1999. See
Note 2 to the Consolidated Financial Statements for information on the terms
and conditions of the lease transaction. In 1999, TMS added approximately 4,000
permanent seats and, among other site improvements, expanded its parking areas
and improved traffic control dramatically reducing travel congestion. In
addition, TMS has constructed an office tower adjoining the main grandstand and
overlooking the speedway, similar to The Speedway Club at LMSC. This TMS tower
houses The Texas Motor Speedway Club, which opened in March 1999, and corporate
offices. In 2000, similar to LMSC, TMS is constructing a 4/10-mile, modern,
lighted, dirt track facility where nationally-televised events such as World of
Outlaws and Hav-A-Tampa Dirt Late Model Series, as well as AMA and other racing
events will be held annually.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to 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.
On April 23, 1996, the Northwest Independent School District (the "Texas
School District"), within whose borders TMS is located, filed a complaint
against TMS, among others, in a case styled Northwest Independent School
District v. City of Fort Worth, FW Sports Authority, Inc., the Governor of
Texas, the Comptroller of Public Accounts of Texas, the Attorney General and
Texas Motor Speedway, Inc. (the "School District Litigation"). The School
District Litigation was filed in State District Court of Travis County, Texas
seeking a judgement that the statutory basis for any claimed tax exemption for
TMS was unconstitutional under the Texas Constitution and that TMS would be
required to pay ad valorem taxes on the TMS facility. The trial court dismissed
this case. In June 1997, the Texas Court of Appeals, an intermediate appellate
court in Austin, Texas denied the Texas School District's appeal and sustained
the dismissal. Subsequently, the Texas School District filed an administrative
protest with the Denton County, Texas Tax Appraisal District, which
substantially realleged the allegations expressed originally in the School
District Litigation and challenged the tax exempt status of the TMS facility.
By order entered on June 19, 1997, the Denton County, Texas Tax Appraisal
District confirmed the tax exempt status of the TMS properties. The Texas
School District appealed that order in state district court. In January 2000,
the Texas School District settled this matter after affiliates of SMI conveyed
approximately three acres of land to the Texas School District.
On May 1, 1999, during the running of an IRL event at LMSC, an on-track
accident occurred that caused race car debris to enter the spectator seating
area. Three deaths resulted, and all three decedents' estates filed separate
wrongful death lawsuits against SMI, IRL and others in the Superior Court of
Mecklenburg County, North Carolina. The Estate of Dexter Mobley lawsuit was
filed on May 28, 1999, and the Estates of Randy Pyatte and Jeffrey Patton
lawsuits were filed on August 26, 1999. These suits seek unspecified
compensatory and punitive damages. SMI has filed answers in all three pending
actions, and preliminary discovery has occurred. SMI intends to defend itself
and denies the allegations of negligence as well as related claims for punitive
damages. Management does not believe the outcome of these lawsuits will have a
material adverse affect on the Company's financial position or future results
of operations.
15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1999, no matters were submitted to a vote of
security holders.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The common stock of SMI, $.01 per share par value (the "Common Stock"), is
traded on the New York Stock Exchange ("NYSE") under the symbol "TRK." The
Common Stock has traded on the NYSE since the Company's initial public offering
(the "IPO") in February 1995. As of March 16, 2000, 41,646,997 shares of Common
Stock were outstanding and there were approximately 3,079 record holders of
Common Stock.
The Company intends to retain future earnings to provide funds for the
operation and expansion of its business. As a holding company, the Company will
depend on dividends and other payments from each of its speedways and its other
subsidiaries to pay cash dividends to stockholders, as well as to meet debt
service and operating expense requirements.
The Company does not anticipate paying any cash dividends in the
foreseeable future. Any decision concerning the payment of dividends on the
Common Stock will depend upon the results of operations, financial condition
and capital expenditure plans of the Company, as well as such other factors as
the Board of Directors, in its sole discretion, may consider relevant.
Furthermore, the 1999 Credit Facility and Senior Subordinated Notes (as
described in "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and "Dividends", and
in Note 5 to the Consolidated Financial Statements) includes covenants which
preclude the payment of dividends.
The following table sets forth the high and low closing sales prices for
the Company's Common Stock, as reported by the NYSE Composite Tape for each
calendar quarter during the periods indicated.
1998 HIGH LOW
---- ------------ ------------
First Quarter ........... $ 27.875 $ 23.063
Second Quarter .......... 29.188 23.188
Third Quarter ........... 26.000 16.250
Fourth Quarter .......... 29.563 16.313
1999
----
First Quarter ........... 41.250 24.625
Second Quarter .......... 44.750 38.000
Third Quarter ........... 46.313 35.000
Fourth Quarter .......... 46.125 25.500
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data for the five years ended December
31, 1999 have been derived from audited financial statements. The financial
statements for each of the three years ended December 31, 1999 were audited by
Deloitte & Touche LLP, independent auditors, and these financial statements and
auditors' report are contained elsewhere herein. All of the data set forth
below are qualified by this reference to, and should be read in conjunction
with, the Company's Consolidated Financial Statements (including the Notes
thereto), and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing elsewhere herein.
16
YEAR ENDED DECEMBER 31:
--------------------------------------------------------------
1995 1996 1997 1998 1999
------------ ------------ ------------ ----------- -----------
INCOME STATEMENT DATA (1) (IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues:
Admissions ............................................... $ 36,569 $ 52,451 $ 94,032 $ 107,601 $ 132,694
Event related revenue .................................... 27,783 36,414 83,177 105,459 148,316
Other operating revenue .................................. 11,221 13,248 14,917 16,736 36,483
-------- -------- -------- --------- ---------
Total revenues .......................................... 75,573 102,113 192,126 229,796 317,493
-------- -------- -------- --------- ---------
Operating Expenses:
Direct expense of events ................................. 19,999 30,173 65,347 83,046 110,650
Other direct operating expense ........................... 7,611 8,005 9,181 10,975 32,241
General and administrative ............................... 13,381 16,995 31,623 34,279 47,375
Depreciation and amortization ............................ 4,893 7,598 15,742 21,701 28,536
Preoperating expense of new facility (2) ................. -- -- 1,850 -- --
-------- -------- -------- --------- ---------
Total operating expenses ................................. 45,884 62,771 123,743 150,001 218,802
-------- -------- -------- --------- ---------
Operating income ........................................... 29,689 39,342 68,383 79,795 98,691
Interest income (expense), net ............................. (24) 1,316 (5,313) (12,228) (27,686)
Acquisition loan cost amortization (3) ..................... -- -- -- (752) (3,398)
Other income ............................................... 3,625 2,399 991 3,202 959
-------- -------- -------- --------- ---------
Income before income taxes.................................. 33,290 43,057 64,061 70,017 68,566
Provision for income taxes ................................. 13,700 16,652 25,883 27,646 27,123
-------- -------- -------- --------- ---------
Income before extraordinary item ........................... 19,590 26,405 38,178 42,371 41,443
Extraordinary item, net .................................... (133) -- -- -- --
-------- -------- -------- --------- ---------
Net income ................................................. $ 19,457 $ 26,405 $ 38,178 $ 42,371 $ 41,443
======== ======== ======== ========= =========
Income per share applicable to Common Stock -- basic ....... $ 0.53 $ 0.65 $ 0.92 $ 1.02 $ 1.00
======== ======== ======== ========= =========
Weighted average shares outstanding -- basic ............... 36,663 40,476 41,338 41,482 41,569
Income per share applicable to Common Stock -- diluted ..... $ 0.52 $ 0.64 $ 0.89 $ 1.00 $ 0.97
======== ======== ======== ========= =========
Weighted average shares outstanding -- diluted ............. 37,275 41,911 44,491 44,611 44,960
BALANCE SHEET DATA (1)
Total assets ............................................... $136,446 $409,284 $597,168 $ 904,877 $ 995,982
Long-term debt, including current maturities:
Revolving credit facility and other (4) .................. 1,806 23,465 1,433 254,714 130,975
Senior subordinated notes ................................ -- -- 124,674 124,708 253,208
Convertible subordinated debentures ...................... -- 74,000 74,000 74,000 74,000
Capital lease obligations ................................ -- 18,165 19,433 502 377
Stockholders' equity ....................................... $ 95,380 $204,735 $244,114 $ 287,120 $ 331,708
- ---------
(1) These data for 1995 include AMS and LMSC; for 1996 include BMS acquired in
January 1996 and SPR acquired in November 1996; for 1997 include TMS which
hosted its first racing event in April 1997; and for 1998 include LVMS
acquired in December 1998.
(2) Preoperating expenses consist of non-recurring and non-event related costs
to develop, organize and open TMS, which hosted its first racing event on
April 6, 1997.
(3) Acquisition loan cost amortization results from financing costs incurred in
amending the Company's bank credit facility and acquisition loan to fund
the December 1, 1998 acquisition of LVMS. See Note 5 to the Consolidated
Financial Statements. Associated deferred financing costs of $4,050,000
were amortized over the loan term which matured May 28, 1999.
(4) Other debt includes principally notes payable outstanding for road
construction of $1,465,000, $983,000 and $647,000 at December 31, 1996,
1997 and 1998, respectively, and the acquisition of SoldUSA of $941,000 at
December 31, 1999.
17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of the results of operations and
financial condition as of December 31, 1999 should be read in conjunction with
the Consolidated Financial Statements (including the Notes thereto) appearing
elsewhere herein.
OVERVIEW
The Company derives revenues principally from the sale of tickets to
automobile races and other events held at its speedway facilities, from the
sale of food, beverage and souvenirs during such events, from the sale of
sponsorships to companies that desire to advertise or sell their products or
services at such events, and from the licensing of television, cable network
and radio rights to broadcast such events. The Company derives additional
revenue from The Speedway Club at LMSC and The Texas Motor Speedway Club,
dining and entertainment facilities located at the respective speedways, and
from Legends Car operations. The Company also derives additional revenue from
MBM, a wholesale and retail distributor of racing and other sports related
souvenir merchandise and apparel, from Oil-Chem, which produces environmentally
friendly motor oil additives, from SoldUSA, an internet auction and e-commerce
company under development, and from WMI, a screen printing and embroidery
manufacturer and distributor of wholesale and retail apparel.
The Company classifies its revenues as admissions, event related revenues
and other operating revenue. "Admissions" includes ticket sales for all of the
Company's events. "Event related revenue" includes food, beverage and souvenir
sales, luxury suite rentals, sponsorship fees and broadcast rights fees. "Other
operating revenue" includes the two Speedway Clubs, Legends Car, industrial
park rental, MBM, Oil-Chem, SoldUSA and WMI revenues. The Company's revenue
items produce different operating margins. Sponsorships, broadcast rights,
ticket sales and luxury suite rentals produce higher margins than concessions
and souvenir sales, as well as Legends Car sales, Oil-Chem sales or other
operating revenues.
The Company classifies its expenses to include direct expense of events
and other direct operating expense, among other things. "Direct expense of
events" principally consists of race purses, sanctioning fees, cost of food,
beverage and souvenir sales, compensation of certain employees and advertising.
"Other direct operating expense" includes the cost of Speedway Club revenues,
Legends Car sales, and industrial park rentals, MBM, Oil-Chem, SoldUSA and WMI
revenues.
The Company sponsors and promotes outdoor motorsports events. Weather
conditions affect sales of tickets, concessions and souvenirs, among other
things, at these events. Although the Company sells tickets well in advance of
its larger events, poor weather conditions can have an effect on the Company's
results of operations.
Significant growth in the Company's revenues will depend on consistent
investment in facilities. The Company has several capital projects underway at
each of its speedways.
The Company does not believe that its financial performance has been
materially affected by inflation. The Company has been able to mitigate the
effects of inflation by increasing prices.
RESULTS OF OPERATIONS
In 1998, the Company began operating certain food and beverage concession
activities through its wholly-owned subsidiary Finish Line Events, which
previously had been procured from a third party. As a result, revenues and
expenses associated with such concession activities for the years ended
December 31, 1999 and 1998 are included in event related revenues, direct
expense of events and general and administrative expense. For the year ended
December 31, 1997, the Company's operating profits from such activities under
its arrangement with the outside vendor were reported as event related revenue.
18
The table below shows the relationship of income and expense items
relative to total revenue for the years ended December 31, 1999, 1998 and 1997.
PERCENTAGE OF TOTAL REVENUE
FOR YEAR ENDED DECEMBER 31:
----------------------------------
1999 1998 1997
---------- ---------- ----------
Revenues:
Admissions ................................... 41.8% 46.8% 48.9%
Event related revenue ........................ 46.7 45.9 43.3
Other operating revenue ...................... 11.5 7.8 7.8
----- ----- -----
Total revenues ............................... 100.0% 100.0% 100.0%
----- ----- -----
Operating Expenses:
Direct expense of events ..................... 34.9 36.1 34.0
Other direct operating expense ............... 10.1 4.8 4.8
General and administrative ................... 14.9 14.9 16.4
Depreciation and amortization ................ 9.0 9.5 8.2
Preoperating expense of new facility ......... -- -- 1.0
----- ----- -----
Total operating expenses ..................... 68.9 65.3 64.4
----- ----- -----
Operating income ............................... 31.1 34.7 35.6
Interest income (expense), net ................. ( 8.7) ( 5.3) ( 2.7)
Other income (expense), net .................... ( 0.8) 1.0 .5
Income tax provision ........................... ( 8.5) (12.0) (13.5)
----- ----- -----
Net income ..................................... 13.1% 18.4% 19.9%
===== ===== =====
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
TOTAL REVENUES for 1999 increased by $87.7 million, or 38.2%, to $317.5
million, over such revenues for 1998. This improvement was due to increases in
all revenue items, particularly admissions and event related revenue.
ADMISSIONS for 1999 increased by $25.1 million, or 23.3% to $132.7
million, over admissions for 1998. This increase was primarily due to hosting
NASCAR-sanctioned and IRL racing events at newly acquired LVMS, and to
continued growth in NASCAR-sanctioned racing events held at the Company's other
speedways during the current period. The growth in admissions reflects the
continued increases in attendance and in ticket prices, and additions to
permanent seating capacity. The increase was also due, to a lesser extent, to
hosting a new NHRA racing event at BMS in the current period.
EVENT RELATED REVENUE for 1999 increased by $42.9 million, or 40.6% to
$148.3 million, over such revenue for 1998. This increase was primarily due to
hosting NASCAR-sanctioned and IRL racing events at the Company's newly acquired
LVMS. The increase also results from increases in sponsorship fees, including
LMSC facility naming rights fees, in broadcast rights fees, and to growth in
attendance, resulting in related increases in concessions and souvenir sales,
at NASCAR-sanctioned racing events.
OTHER OPERATING REVENUE for 1999 increased by $19.7 million, or 118.0% to
$36.5 million, over such revenue for 1998. This increase was due to growth in
revenues of Oil-Chem associated with the commencement of media and other
promotional campaigns, and to revenues derived from apparel and other
merchandise sold through outside venues, including FLE, MBM and WMI, and from
The Texas Motor Speedway Club which opened March 26, 1999.
DIRECT EXPENSE OF EVENTS for 1999 increased by $27.6 million, or 33.2%,
over such expense for 1998. This increase was due primarily to hosting
NASCAR-sanctioned and IRL racing events at the Company's newly acquired LVMS.
The increase also was due to higher race purses and sanctioning fees required
for NASCAR-sanctioned racing events held during the current period, and to
increased operating costs associated with the growth in attendance, including
related increases in concessions and souvenir sales. The increase was also due
to hosting a new NHRA racing event at BMS in the current period. Operating
expenses associated with inaugural events or newly acquired speedways are
typically higher than historical events or operations.
OTHER DIRECT OPERATING EXPENSE for 1999 increased by $21.3 million, or
193.8%, over such expense for 1998. This increase includes expenses associated
with commencement of Oil-Chem's media and other promotional campaigns. The
increase also includes expenses associated with other operating revenues
derived from apparel and other merchandise sold
19
through outside venues, including FLE, MBM and WMI, from The Texas Motor
Speedway Club, and with the increase in Oil-Chem revenues.
GENERAL AND ADMINISTRATIVE EXPENSE for 1999 increased by $13.1 million, or
38.2%, over such expense for 1998. The increase was primarily attributable to
costs associated with the Company's newly acquired LVMS, and to increases in
operating costs associated with the growth and expansion at the Company's other
speedways and operations. As a percentage of total revenues, general and
administrative expense was 14.9% for both 1999 and 1998.
DEPRECIATION AND AMORTIZATION EXPENSE for 1999 increased by $6.8 million,
or 31.5%, over such expense for 1998. This increase was primarily due to
property and equipment and intangible assets related to the LVMS acquisition,
and to additions to property and equipment at the Company's other speedways.
OPERATING INCOME for 1999 increased by $18.9 million, or 23.7%, over such
income for 1998. This increase was due to the factors discussed above.
INTEREST EXPENSE, NET for 1999 was $27.7 million compared to $12.2 million
for 1998. This increase was due primarily to higher average borrowings
outstanding during 1999 as compared to 1998. The increase reflects additional
borrowings to fund the LVMS acquisition, and a higher interest rate on the
senior subordinated notes issued in May 1999.
ACQUISITION LOAN COST AMORTIZATION of $3.4 million for 1999 represents
financing costs incurred in obtaining the Acquisition Loan to fund the LVMS
acquisition. Associated deferred financing costs of $4.1 million were amortized
over the loan term which matured May 28, 1999.
OTHER INCOME for 1999 decreased by $2.2 million compared to such income
for 1998. This decrease results primarily from gains on sales of thirteen TMS
condominiums in 1998. The gain on sale of two TMS condominiums was recognized
in 1999.
INCOME TAX PROVISION. The Company's effective income tax rate was 39.6% in
1999 and 39.5% in 1998.
NET INCOME for 1999 decreased by $928,000, or 2.2%, compared to such
income for 1998. This decrease was due to the factors discussed above.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
TOTAL REVENUES for 1998 increased by $37.7 million, or 19.6%, to $229.8
million, over such revenues for 1997. This improvement was attributable to
increases in all revenue items, particularly admissions and event related
revenues.
ADMISSIONS for 1998 increased by $13.6 million, or 14.4%, over admissions
for 1997. This increase was due primarily to growth in NASCAR sanctioned racing
events, and to hosting new IRL racing events at AMS and TMS during the current
period. The growth in admissions reflects the continued increases in
attendance, additions to permanent seating capacity, and increases in ticket
prices.
EVENT RELATED REVENUE for 1998 increased by $22.3 million, or 26.8%, over
such revenue for 1997. This increase was due to the growth in attendance,
resulting in related increases in concessions and souvenir sales, to hosting
new IRL racing events at AMS and TMS, and to increases in broadcast rights and
sponsorship fees. The increase also reflects that the Company now operates
certain food and beverage concession activities previously procured from a
third party.
OTHER OPERATING REVENUE for 1998 increased by $1.8 million, or 12.2%, over
such revenue for 1997. This increase was primarily attributable to an increase
in Legends Car revenues of 600 Racing.
DIRECT EXPENSE OF EVENTS for 1998 increased by $17.7 million, or 27.1%,
over such expense for 1997. This increase was due to hosting new IRL events at
AMS and TMS, to increased operating costs associated with the growth in
attendance and seating capacity, including related increases in concessions and
souvenir sales, and to higher sanctioning fees and race purses required for
NASCAR-sanctioned racing events held during the current year. This increase
also reflects that the Company now operates certain food and beverage
concession activities previously procured from a third party.
As a percentage of admissions and event related revenues combined, direct
expense of events for 1998 was 39.0% compared to 36.9% for 1997. Such increase,
which was anticipated, results primarily from proportionately higher operating
expenses associated with hosting IRL racing events relative to operating
margins historically achieved with NASCAR sanctioned events. The increase also
results because operating profits from certain food and beverage concession
activities previously procured from a third party were reported as event
related revenue in 1997.
20
OTHER DIRECT OPERATING EXPENSE for 1998 increased by $1.8 million, or
19.5%, over such expense for 1997. The increase includes expenses associated
with the increase in other operating revenues derived from Legend Cars.
GENERAL AND ADMINISTRATIVE EXPENSE. As a percentage of total revenues,
general and administrative expense decreased from 16.5% for 1997 to 14.9% for
1998. This improvement reflects continuing scale efficiencies associated with
revenue increases outpacing increases in general and administrative expenses.
General and administrative expense for 1998 increased by $2.7 million, or 8.4%,
over such expense for 1997. The increase reflects costs associated with the
Company now operating certain food and beverage concession activities
previously procured from a third party. Increases in operating costs associated
with the growth and expansion at the Company's speedways, and to a lesser
extent, the LVMS acquisition in December 1998, also contributed to this
increase.
DEPRECIATION AND AMORTIZATION EXPENSE for 1998 increased by $6.0 million,
or 37.9%, over such expense for 1997. This increase was due to property and
equipment of TMS placed into service upon hosting of its first racing event in
April 1997, and to additions to property and equipment at AMS, BMS and LMSC.
The increase was also due, to a lesser extent, the LVMS acquisition in December
1998.
PREOPERATING EXPENSE OF NEW FACILITY for 1997 of $1.85 million consist of
non-recurring and non-event related costs to develop, organize and open TMS.
OPERATING INCOME for 1998 increased $11.4 million, or 16.7%, over such
income for 1997. This increase was due to the factors discussed above.
INTEREST EXPENSE, NET for 1998 was $12.2 million compared to $5.3 million
for 1997. This increase was due to higher average borrowings outstanding in
1998, including additional borrowings to fund the LVMS acquisition, as compared
to 1997. The change also reflects lower capitalized interest costs of $3.8
million during 1998 as compared to $5.8 million in 1997. The lower capitalized
interest results from property and equipment of TMS being placed into service
upon its opening in April 1997, and reduced capital expenditures for
construction projects in 1998 as compared to 1997.
ACQUISITION LOAN COST AMORTIZATION for 1998 of $752,000 represents
financing costs incurred in obtaining an amended bank credit facility and
bridge loan to fund the LVMS acquisition. Associated deferred financing costs
of $4,050,000 are being amortized over the loan term which matures May 18,
1999.
OTHER INCOME, NET for 1998 increased by $2.2 million over such income for
1997. This increase resulted from gains on sales of fifteen TMS condominiums
during 1998. No sales of TMS condominiums were recognized in 1997. The increase
also reflects a gain on exercise of the SPR purchase option.
INCOME TAX PROVISION. The Company's effective income tax rate was 39.5% in
1998 and 40.4% in 1997.
NET INCOME for 1998 increased by $4.2 million, or 11.0%, over such income
for 1997. This increase was due to the factors discussed above.
SEASONALITY AND QUARTERLY RESULTS
The Company derived a substantial portion of its 1999 total revenues from
admissions and event related revenue attributable to 17 major NASCAR-sanctioned
racing events, five IRL racing events, four NASCAR Craftsman Truck Series
racing events, two major NHRA racing events, and two WOO racing events. In
1998, the Company derived a substantial portion of its total revenues from
admissions and event related revenue attributable to 15 major NASCAR-sanctioned
racing events, four IRL racing events, three NASCAR Craftsman Truck Series
racing events, and one NHRA Nationals racing event. The Company currently will
sponsor 17 major annual racing events in 2000 sanctioned by NASCAR, including
ten Winston Cup and seven Busch Grand National Series racing events. The
Company will also sponsor four Indy Racing Northern Light Series racing events,
two NASCAR Craftsman Truck Series racing events, three major NHRA racing
events, and seven WOO racing events in 2000. As a result, the Company's
business has been, and is expected to remain, highly seasonal.
In 1999 and 1998, the Company's second and fourth quarters accounted for
68% and 74%, respectively, of its total annual revenues and 80% and 97%,
respectively, of its total annual operating income. The Company sometimes
produces minimal operating income or losses during its third quarter when it
hosts only one major NASCAR race weekend. In 1999, the Company's operating
results for the first and third quarters were significantly impacted by the
additional racing events held at LVMS. The concentration of racing events in
the second quarter, and the growth in the Company's operations with attendant
increases in overhead expenses, will tend to increase operating losses or
minimize operating income in future first and third quarters.
21
Also, racing schedules may be changed from time to time and can lessen the
comparability of operating results between quarterly results of successive
years and increase or decrease the seasonal nature of the Company's business.
The IRL and NASCAR-sanctioned Craftsman Truck Series racing events hosted at
TMS in the fourth quarter of 1999 were held in the third quarter of 1998. In
addition, the IRL racing event hosted at LMSC in the second quarter of 1999 was
held in the third quarter of 1998. The Busch Grand National Series race at AMS,
originally scheduled to be held in March 1998, was rescheduled to November 1998
due to poor weather conditions. Rescheduling did not materially impact revenues
and operating expenses as reported for the first and fourth quarters of 1998.
(IN THOUSANDS, EXCEPT NASCAR-SANCTIONED EVENTS AND PER SHARE
AMOUNTS)
-----------------------------------------------------------------
1999 (UNAUDITED)
-----------------------------------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER TOTAL
------------ ------------- ----------- ------------ -------------
Total revenues ........................ $ 53,104 $ 140,054 $48,620 $ 75,715 $ 317,493
Operating income (loss) ............... 11,889 69,155 (657) 18,304 98,691
Net income (loss) ..................... 2,008 37,412 (4,778) 6,801 41,443
NASCAR-sanctioned events .............. 4 8 2 3 17
Basic earnings (loss) per share ....... $ 0.05 $ 0.90 $ (0.11) $ 0.16 $ 1.00
Diluted earnings (loss) per share ..... $ 0.05 $ 0.84 $ (0.11) $ 0.16 $ 0.97
(IN THOUSANDS, EXCEPT NASCAR-SANCTIONED EVENTS AND PER SHARE
AMOUNTS)
-----------------------------------------------------------------
1998 (UNAUDITED)
-----------------------------------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER TOTAL
----------- ------------- ------------ ------------ -------------
Total revenues ........................ $17,960 $ 117,739 $ 41,748 $ 52,349 $ 229,796
Operating income (loss) ............... (3,147) 60,139 5,852 16,951 79,795
Net income (loss) ..................... (2,923) 34,614 1,895 8,785 42,371
NASCAR-sanctioned events .............. 1 8 2 4 15
Basic earnings (loss) per share ....... $ (0.07) $ 0.83 $ 0.05 $ 0.21 $ 1.02
Diluted earnings (loss) per share ..... $ (0.07) $ 0.79 $ 0.05 $ 0.21 $ 1.00
Where computations are anti-dilutive, reported basic and diluted per share
amounts are the same. As such, individual quarterly per share amounts may not
be additive.
MAY 1999 IRL RACE EVENT AT LMSC CANCELLED AFTER ACCIDENT
On May 1, 1999, during the running of an IRL event at LMSC, an on-track
accident occurred that caused race car debris to enter the spectator seating
area. Three deaths resulted, and all three decedents' estates filed separate
wrongful death lawsuits against SMI, IRL and others in the Superior Court of
Mecklenburg County, North Carolina. The Estate of Dexter Mobley lawsuit was
filed on May 28, 1999, and the Estates of Randy Pyatte and Jeffrey Patton
lawsuits were filed on August 26, 1999. These suits seek unspecified
compensatory and punitive damages. SMI has filed answers in all three pending
actions, and preliminary discovery has occurred. SMI intends to defend itself
and denies the allegations of negligence as well as related claims for punitive
damages. Management does not believe the outcome of these lawsuits will have a
material adverse affect on the Company's financial position or future results
of operations.
OTHER SIGNIFICANT FACTORS ARISING IN FISCAL 1999
The operating results for fiscal 1999, and more specifically the three
months ended September 30, 1999, were negatively impacted by less than expected
attendance and event related revenues for IRL racing events at AMS and LVMS,
less than expected attendance and increased direct event expenses due to poor
weather conditions at BMS's inaugural NHRA event, continued carrying costs of
LVMS's Industrial Park, and expenses for media and other promotional campaigns
of Oil-Chem. Management has taken corrective actions to lessen the risk of
financial exposure from IRL and NHRA events by renegotiating its agreements
with those sanctioning bodies and restructuring the events to improve their
profitability. As discussed more fully below in "Liquidity and Capital
Resources" and in Note 4 to the Consolidated Financial Statements, the Company
sold the Las Vegas Industrial Park in January 2000. In addition, Oil-Chem
commenced retail sales of its principal product line in early fiscal 2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically met its working capital and capital
expenditure requirements through a combination of cash flow from operations,
bank borrowings and other debt and equity offerings. The Company significantly
increased its outstanding borrowings to fund the acquisition of LVMS in
December 1998. The Company expended significant amounts of cash in 1999 for
improvements and expansion at BMS, LMSC and TMS. Significant changes in the
Company's financial condition and liquidity during 1999 resulted primarily
from: (1) net cash generated by operations amounting to $107.5 million and (2)
capital expenditures amounting to $90.6 million. Net borrowings in 1999 were
$3.9 million, including replacement of the Company's bank credit facility and
concurrent issuance of $125.0 million of senior subordinated notes, as further
described below.
ACQUISITION LOAN. On November 23, 1998, the Company's former credit
facility was amended and restated in connection with the Company's December
1998 acquisition of LVMS. The amended credit facility and acquisition loan (the
Acquisition Loan) increased the Company's overall borrowing limit from
$175,000,000 to $270,000,000 to fund the LVMS acquisition. The Acquisition Loan
was retired and repaid on May 28, 1999 concurrently with the issuance of senior
subordinated notes and bank credit facility replacement as described below. At
December 31, 1998, the Company had $254,050,000 in
22
outstanding borrowings under the Acquisition Loan. The former Acquisition Loan,
obtained from NationsBank N.A., was an unsecured, senior revolving credit
facility and term loan with a $10,000,000 borrowing sub-limit for standby
letters of credit. Interest was based, at the Company's option, upon (i) LIBOR
plus 1.125% or (ii) the greater of NationsBank's prime rate or the Federal fund
rate plus .5%.
While the retirement and repayment did not result in the use of
significant working capital, the outstanding borrowings of $254,050,000 were
classified as a current liability in the accompanying December 31, 1998 balance
sheet in accordance with generally accepted accounting principles.
SENIOR SUBORDINATED NOTES. On May 11, 1999, the Company completed a
private placement of 8 1/2% senior subordinated notes (the "1999 Senior Notes")
in the aggregate principal amount of $125,000,000. The Company filed a
registration statement to register these notes in June 1999. Net proceeds,
after issuance at 103% of face value, commissions and discounts, approximated
$125,737,000 and were used to repay a portion of the outstanding borrowings
under the Acquisition Loan. The 1999 Senior Notes are unsecured, mature in
August 2007, and are redeemable at the Company's option after August 15, 2002
at varying redemption prices. Interest payments are due semi-annually on
February 15 and August 15. The 1999 Senior Notes are subordinated to all
present and future senior secured indebtedness of the Company. Redemption
prices in fiscal year periods ending August 15 are 104.25% in 2002, 102.83% in
2003, 101.42% in 2004 and 100% in 2005 and thereafter. The Indentures governing
the 1999 Senior Notes contain certain specified restrictive and required
financial covenants. The Company has agreed not to pledge its assets to any
third party except under certain limited circumstances. The Company also has
agreed to certain other limitations or prohibitions concerning the incurrence
of other indebtedness, capital stock, guaranties, asset sales, investments,
cash dividends to shareholders, distributions and redemptions. The Indentures
and 1999 Credit Facility agreements contain cross-default provisions.
In August 1997, the Company issued 8 1/2% senior subordinated notes due
2007 (the "1997 Senior Notes") in the aggregate principal of $125,000,000. In
July 1999, the 1999 Senior Notes and all but $125,000 in aggregate principal
amount of the 1997 Senior Notes were exchanged, pursuant to the Company's
registration statement, for the Company's registered 8 1/2% senior subordinated
notes due 2007 (the "Senior Notes") in the aggregate principal amount of
$249,875,000. The Senior Notes are substantially identical to the 1999 Senior
Notes and the 1997 Senior Notes. The Senior Notes and the remaining outstanding
1997 Senior Notes rank equally as to payment and are governed by separate but
substantially similar indentures.
BANK CREDIT FACILITY REPLACEMENT. On May 28, 1999, the Company obtained a
long-term, secured, senior revolving credit facility with a syndicate of banks
led by NationsBank, N.A. as an agent and lender (the "1999 Credit Facility").
The 1999 Credit Facility has an overall borrowing limit of $250,000,000, with a
sub-limit of $10,000,000 for standby letters of credit, matures in May 2004,
and is secured by a pledge of the capital stock and other equity interests of
all material Company subsidiaries. Also, the Company agreed not to pledge its
assets to any third party. The 1999 Credit Facility was used to fully repay and
retire then outstanding borrowings under the Acquisition Loan after reduction
for the application of proceeds from the 1999 Senior Notes offering, and for
working capital and general corporate purposes. At December 31, 1999, the
Company had $130,000,000 in outstanding borrowings under the 1999 Credit
Facility.
Interest is based, at the Company's option, upon (i) LIBOR plus .5% to
1.25% or (ii) the greater of NationsBank's prime rate or the Federal Funds rate
plus .5%. The margin applicable to LIBOR borrowings will be adjusted
periodically based upon certain ratios of funded debt to earnings before
interest, taxes, depreciation and amortization ("EBITDA"). In addition, among
other items, the Company is required to meet certain financial covenants and
contains certain limitations on cash expenditures to acquire additional motor
speedways without the consent of the lenders, and on other consolidated capital
expenditures. See Note 5 to the Consolidated Financial Statements for
discussion of additional terms and restrictive covenants of the 1999 Credit
Facility.
SALE OF LAS VEGAS INDUSTRIAL PARK. In January 2000, the Company sold the
Las Vegas Industrial Park and 280 acres of undeveloped land to Las Vegas
Industrial Park, LLC, an entity owned by the Company's Chairman and Chief
Executive Officer, for approximately $53.3 million paid in cash of $40.0
million and a note receivable of $13.3 million. The sales price was based on an
independent fair value appraisal and approximates the Company's net carrying
value as of December 31, 1999 and selling costs. In fiscal 1999, rental
operations associated with property held for sale resulted in operating losses
and pro forma net losses, after taxes, of approximately $815,000 and $4.1
million, respectively. Management intends to use the sale proceeds principally
to reduce outstanding borrowings under the 1999 Credit Facility.
Management anticipates that cash from operations, and funds available
through the 1999 Credit Facility, will be sufficient to meet the Company's
operating needs through 2000, including planned capital expenditures at its
speedway facilities. Based upon anticipated future growth and financing
requirements, management expects that the Company will, from
23
time to time, engage in additional financing of a character and in amounts to
be determined. While the Company expects to continue to generate positive cash
flows from its existing speedway operations, and has generally experienced
improvement in its financial condition, liquidity and credit availability, such
resources, as well as possibly others, could be needed to fund the Company's
continued growth, including the continued expansion and improvement of its
speedway facilities.
CAPITAL EXPENDITURES
Significant growth in the Company's revenues depends, in large part, on
consistent investment in facilities. Therefore, the Company expects to continue
to make substantial capital improvements in its facilities to meet increasing
demand and to increase revenue. Currently, a number of significant capital
projects are underway.
In 1999, AMS and SPR continued to improve and expand on-site roads and
available parking, reconfiguring traffic patterns and entrances to ease
congestion and improve traffic flow, and made various site improvements. BMS
completed reconstructing and expanding its dragstrip into a "state-of-the-art"
dragway with permanent grandstand seating, luxury suites, and extensive fan
amenities and facilities, and made other site improvements. In 1999, LMSC added
approximately 10,000 permanent seats, expanded parking areas to accommodate the
increases in attendance and ease congestion, and made other site improvements.
LVMS expanded concessions, restroom and other fan amenities, and made other
site improvements. In 1999, TMS added approximately 4,000 permanent seats and,
among other site improvements, expanded its parking areas and improved traffic
control dramatically reducing travel congestion. In addition, TMS completed
construction of an office tower adjoining the main grandstand and overlooking
the speedway. The tower houses The Texas Motor Speedway Club and corporate
offices.
In 2000, AMS plans to continue improving and expanding its on-site roads
and available parking and make other site improvements. BMS plans to add
approximately 13,000 permanent seats, further expand concessions, restroom and
other fan amenities, and make other site improvements. LMSC plans to add
approximately 11,000 permanent seats, again featuring stadium-style terrace
seating, and further expand concessions, restroom and other fan amenities, and
make other site improvements. Also, LMSC and TMS are constructing 4/10-mile,
modern, lighted, dirt track facilities. LVMS plans to add approximately 7,000
permanent seats, further expand concessions, restroom and other fan amenities,
and make other site improvements. LVMS is also reconstructing and expanding one
of its dragstrips into a "state-of-the-art" dragway with permanent grandstand
seating, luxury suites, and extensive fan amenities and facilities. Subject to
governmental approval, SPR plans to continue improving and expanding its
on-site roads and available parking in 2000, reconfiguring traffic patterns and
entrances to ease congestion and improve traffic flow, as well as make other
site improvements. Pending governmental approvals, in 2000 or 2001, the Company
expects to begin major renovations at SPR, including its ongoing
reconfiguration into a "stadium-style" road racing course, the addition of up
to 35,000 grandstand bleacher seats, and improving and expanding concessions,
restroom and other fan amenities facilities. TMS plans to continue improving
and expanding its on-site roads and available parking and making other site
improvements. In 2000, after adding approximately 31,000 permanent seats,
exclusive of SPR, the Company's total permanent seating capacity will exceed
710,000 and the total number of luxury suites will be approximately 666.
The estimated aggregate cost of capital expenditures in 2000 will
approximate $90 million. Numerous factors, many of which are beyond the
Company's control, may influence the ultimate costs and timing of various
capital improvements at the Company's facilities, including undetected soil or
land conditions, additional land acquisition costs, increases in the cost of
construction materials and labor, unforeseen changes in the design, litigation,
accidents or natural disasters affecting the construction site and national or
regional economic changes. In addition, the actual cost could vary materially
from the Company's estimates if the Company's assumptions about the quality of
materials or workmanship required or the cost of financing such construction
were to change. Construction is also subject to state and local permitting
processes, which if changed, could materially affect the ultimate cost.
In addition to expansion and improvements of its existing speedway
facilities and business operations, the Company is continually evaluating new
opportunities that will add value for the Company's stockholders, including the
acquisition and construction of new speedway facilities, the expansion and
development of its existing Legends Cars and Oil-Chem products and markets and
the expansion into complementary businesses.
24
DIVIDENDS
The Company does not anticipate paying any cash dividends in the
foreseeable future. Any decision concerning the payment of dividends on the
Common Stock will depend upon the results of operations, financial condition
and capital expenditure plans of the Company, as well as such factors as
permissibility under the 1999 Credit Facility, the Senior Subordinated Notes
and as the Board of Directors, in its sole discretion, may consider relevant.
The 1999 Credit Facility and Senior Subordinated Notes preclude the payment of
any dividends.
IMPACT OF NEW ACCOUNTING STANDARDS
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101 "Revenue Recognition in Financial
Statements" which summarizes certain of the staff's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
SAB No. 101, where applicable, provides for restatement of prior financial
statements or reporting a change in accounting principle no later than the
first quarter of fiscal years beginning after December 15, 1999. The Company
has assessed its revenue recognition policies for Speedway Club membership
fees, and expects to report a change in accounting principle under SAB No. 101.
However, the change is not expected to materially impact the Company's
financial position or future results of operations.
ENVIRONMENTAL MATTERS
The Company's property at LMSC includes areas that were used as solid waste
landfills for many years. Landfilling of general categories of municipal solid
waste on the LMSC property ceased in 1992. There is one landfill currently
operating at LMSC, however, that is permitted to receive inert debris and waste
from land clearing activities ("LCID" landfills), and one LCID landfill that
was closed in 1999. Two other LCID landfills on the LMSC property were closed in
1994. LMSC intends to allow similar LCID landfills to be operated on the LMSC
property in the future. Prior to 1999, LMSC leased certain LMSC property to
Allied Waste Industries, Inc. for use as C&D landfill, which can receive solid
waste resulting solely from construction, remodeling, repair or demolition
operations on pavement, buildings or other structures, but cannot receive inert
debris, land-clearing debris or yard debris. In addition, Allied Waste
Industries owns and operates an active solid waste landfill adjacent to LMSC.
Management believes that the active solid waste landfill was constructed in such
a manner as to minimize the risk of contamination to surrounding property.
Management also believes that the Company's operations, including the landfills
and facilities on its property, are in substantial compliance with all
applicable federal, state and local environmental laws and regulations.
Management is not aware of any situations related to landfill operations which
it expects would materially adversely affect the Company's financial position or
future results of operations.
25
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK. The Company's financial instruments with market risk
exposure consist only of bank revolving credit facility borrowings which are
sensitive to changes in interest rates. A change in interest rates of one
percent on the balance outstanding at December 31, 1999 would cause a change in
interest expense of approximately $1.3 million. The Company's senior
subordinated notes payable and convertible subordinated debentures are fixed
interest rate debt obligations. See Note 5 to the Consolidated Financial
Statements for information on the terms and conditions, including redemption
and conversion features, of the Company's debt obligations. The table below
presents the principal balances outstanding, fair values, interest rates and
maturity dates as of December 31, 1999 and 1998 (dollars in thousands):
PRINCIPAL BALANCE FAIR VALUE(2)
--------------------- ---------------
INTEREST MATURITY
12/31/99 12/31/98 12/31/99 RATES DATES
---------- ---------- --------------- ---------------- ---------------
Revolving credit facility ............... $130,000 $254,050 $130,000 Variable (1) May 2004
Senior subordinated notes ............... 253,208 124,674 238,750 Fixed -- 8.5% August 2007
Convertible subordinated debentures ..... 74,000 74,000 77,330 Fixed -- 5.75% September 2003
- ---------
(1) The weighted-average interest rate on borrowings under the revolving credit
facility and acquisition loan was 6.5% in 1999 and 6.4% in 1998.
(2) The carrying values of short and long-term debt approximate their fair
value as of December 31, 1998.
EQUITY PRICE RISK. The Company has marketable equity securities, all
classified as "available for sale." Such investments are subject to price risk,
which the Company attempts to minimize generally through portfolio
diversification. The table below presents the aggregate cost and fair market
value of marketable equity securities as of December 31, 1999 and 1998 (dollars
in thousands):
DECEMBER 31,
--------------------
1999 1998
--------- ---------
Aggregate cost ............ $1,637 $2,119
Fair market value ......... 1,181 1,439
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements which appears on page F-1 herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
26
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors of SMI are elected at the Annual Meetings of stockholders of SMI
to serve staggered terms of three years and until their successors are elected
and qualified. The Board of Directors of SMI currently consists of seven (7)
directors. The terms of Messrs. Wheeler and Clark expire at the 2000 Annual
Meeting; the terms of Messrs. Smith and Benton expire at the 2001 Annual
Meeting; and the terms of Messrs. Brooks, Gambill and Kemp expire at the 2002
Annual Meeting. Messrs. Wheeler and Clark are standing for reelection at the
2000 Annual Meeting. Officers are elected by the Board of Directors to hold
office until the first meeting of the Board of Directors following the next
Annual Meeting of stockholders and until their successors are elected and
qualified. The directors and executive officers of the Company are as follows:
NAME AGE PRINCIPAL POSITION(S) WITH THE COMPANY
- ---- ----- --------------------------------------
O. Bruton Smith ............... 73 Chief Executive Officer and Chairman
President, Chief Operating Officer and Director of SMI;
H.A. "Humpy" Wheeler .......... 61 President and General Manager of LMSC
Vice President, Treasurer, Chief Financial Officer and
William R. Brooks ............. 50 Director
Executive Vice President and Director of SMI; President
Edwin R. Clark ................ 45 and General Manager of AMS
William P. Benton ............. 76 Director
Mark M. Gambill ............... 49 Director
Jack L. Kemp .................. 64 Director
The name, age, present principal occupation or employment and the material
occupations, positions, offices or employments for the past five years of each
SMI director and director-nominee are set forth below.
O. BRUTON SMITH, 73, has been Chief Executive Officer and a director of
Charlotte Motor Speedway, Inc. ("LMSC"), a wholly-owned subsidiary of SMI,
since 1975. He was a founder of LMSC in 1959 and was an executive officer and
director of LMSC until 1961, when it entered reorganization proceedings under
the bankruptcy laws. Mr. Smith became Chairman and Chief Executive Officer,
President and a director of AMS upon acquiring it in 1990. He became Chief
Executive Officer of SMI upon its organization in December 1994 and became the
Chairman and CEO of BMS upon its acquisition in January 1996, SPR upon its
acquisition in November 1996, and TMS in 1995. Mr. Smith became the President
of LVMS upon its acquisition in December 1998. Mr. Smith also is the Chairman,
Chief Executive Officer, a director and controlling stockholder of Sonic
Automotive, Inc. ("SAI"), (NYSE: symbol SAH), and serves as the president and a
director of each of SAI's operating subsidiaries. SAI is believed to be one of
the ten largest automobile retail dealership groups in the United States and is
engaged in the acquisition and operation of automobile dealerships principally
in the "Sunbelt" and southeastern United States. Mr. Smith has entered into an
employment agreement with SAI pursuant to which he has agreed to devote 50% of
his business time to the affairs of SAI. Mr. Smith also owns and operates Sonic
Financial Corporation ("Sonic Financial"), among other private businesses.
H.A. "HUMPY" WHEELER, 61, was hired by LMSC in 1975 and has been a
director and General Manager of LMSC since 1976. Mr. Wheeler was named
President of LMSC in 1980 and became a director of AMS upon its acquisition in
1990. He became President, Chief Operating Officer and a director of SMI upon
its organization in December 1994. Mr. Wheeler has been a Vice President and a
director of BMS and SPR since their acquisition in 1996, and of TMS since its
formation in 1995. Mr. Wheeler also became Vice President of LVMS upon its
acquisition in December 1998.
WILLIAM R. BROOKS, 50, joined Sonic Financial from PricewaterhouseCoopers
in 1983. Mr. Brooks has been Vice President of LMSC for more than five years and
has been Vice President and a director of AMS, BMS, and SPR since their
acquisition, and TMS since its formation. Mr. Brooks became Vice President of
LVMS upon its acquisition in December 1998. Mr. Brooks has been Vice President,
Treasurer, Chief Financial Officer and a director of SMI since its organization
in December 1994 and has been the President and a director of Speedway Funding
Corp., the Company's financing subsidiary, since 1995. Mr. Brooks has also
served as a director of SAI since its formation in 1997 and served as its Chief
Financial Officer from February to April 1997.
EDWIN R. CLARK, 45, became Vice President and General Manager of AMS in
1992 and was promoted to President and General Manager of AMS in 1995. Prior to
that appointment, he had been LMSC's Vice President of Events since 1981. Mr.
Clark became Executive Vice President of SMI upon its organization in December
1994 and became a director of SMI in 1995.
27
WILLIAM P. BENTON, 76, became a director of SMI in 1995. Since January
1997, Mr. Benton has been the Executive Director of Ogilvy & Mather, a
world-wide advertising agency. He is also a consultant to the Chairman and
Chief Executive Officers of TI Group and serves on the Board of Directors of
Allied Holdings, Inc. Prior to his appointment at Ogilvy & Mather, Mr. Benton
served as Vice Chairman of Wells, Rich, Greene/BDDP Inc., an advertising agency
with offices in New York and Detroit. Mr. Benton retired from Ford Motor
Company as its Vice President of Marketing Worldwide in 1984 after a 37-year
career with that company. In addition, Mr. Benton serves as a director of SAI.
MARK M. GAMBILL, 49, became a director of SMI in 1995 and is currently a
managing partner of McKenzie Holdings, LLC, a consulting firm. Mr. Gambill was
employed continuously from 1972 until 1999 by First Union Capital Markets and
its predecessor entities. First Union Capital Markets is an investment banking
firm and a wholly-owned subsidiary of First Union Corporation. In 1996, he was
named President of First Union Capital Markets. Previously, Mr. Gambill acted
as head of the Capital Markets division, including Corporate and Public
Finance, Taxable Fixed Income, Municipal Sales and Trading, Equity Sales,
Trading and Research. Mr. Gambill has served on the Board of Directors of First
Union Capital Markets since 1983.
JACK L. KEMP, 64, became a director of SMI in May 1999. Mr. Kemp is
co-director of Empower America, a public policy advocacy organization founded
in 1993. Prior to Empower America, Mr. Kemp served for four years as Secretary
of Housing and Urban Development and was a New York representative to the
United States House of Representatives. He served for seven years as Chairman
of the House Republican Conference after a 13-year career as a professional
football quarterback with the San Diego Chargers and the Buffalo Bills.
COMMITTEES OF THE BOARD OF DIRECTORS
There are two standing committees of the Board of Directors of SMI, the
Audit Committee and the Compensation Committee. The Audit Committee currently
consists of Messrs. Benton, Gambill and Kemp. The Compensation Committee is
comprised of Messrs. Benton, Gambill and Smith. Set forth below is a summary of
the principal functions of each committee and the number of meetings held
during 1999.
AUDIT COMMITTEE. The Audit Committee, which held two meetings in 1999,
recommends the appointment of the Company's independent auditors, determines
the scope of the annual audit to be made, reviews the conclusions of the
auditors and reports the findings and recommendations thereof to the Board of
Directors, reviews with the Company's auditors the adequacy of the Company's
system of internal control and procedures and the role of management in
connection therewith, reviews transactions between the Company and its
officers, directors and principal stockholders, and performs such other
functions and exercises such other powers as the Board of Directors from time
to time may determine.
COMPENSATION COMMITTEE. The Compensation Committee, which held two
meetings in 1999, administers compensation and employee benefit plans, annually
reviews and determines executive officer compensation, including annual
salaries, bonus performance goals, bonus plan allocations, stock option grants
and other benefits, direct and indirect, of all executive officers and other
senior officers. The Compensation Committee administers the SMI 1994 Stock
Option Plan and the Employee Stock Purchase Plan, and periodically reviews the
Company's executive compensation programs and takes action to modify programs
that yield payments or benefits not closely related to Company or executive
performance. The policy of the Compensation Committee's program for executive
officers is to link pay to business strategy and performance in a manner which
is effective in attracting, retaining and rewarding key executives while also
providing performance incentives and awarding equity-based compensation to
align the long-term interests of executive officers with those of Company
stockholders. The Compensation Committee's objective is to offer salaries and
incentive performance pay opportunities that are competitive in the
marketplace.
The Company currently has no standing nominating committee.
During 1999, there were five meetings of the Board of Directors of SMI,
with each director attending at least seventy-five percent of the meetings
(and, as applicable, committees thereof).
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the Company's knowledge, based solely on review of reports furnished to
it, all Section 16 (a) filing requirements applicable to its executive
officers, directors and more than 10% beneficial owners were complied with.
28
ITEM 11. EXECUTIVE COMPENSATION
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
1999 OFFICER COMPENSATION PROGRAM. The 1999 executive officer compensation
program of the Company had three primary components: (i) base salary, (ii)
short-term incentives under the Company's executive bonus plan, and (iii)
long-term incentives which consisted solely of stock option grants made under
the 1994 Stock Option Plan (for officers other than the Chief Executive
Officer). Executive officers (including the Chief Executive Officer) were also
eligible in 1999 to participate in various benefits plans similar to those
provided to other employees. Such benefits plans are intended to provide a
safety net of coverage against various events, such as death, disability and
retirement.
Base salaries (including that of the Chief Executive Officer) were
established on the basis of non-quantitative factors such as positions of
responsibility and authority, years of service and annual performance
evaluations. They were targeted to be competitive principally in relation to
other motorsports racing companies (such as some of those included in the Peer
Group Index in the performance graph elsewhere herein), although the
Compensation Committee also considered the base salaries of certain other
amusement, sports and recreation companies not included in the Peer Group Index
because the Compensation Committee considered those to be relatively comparable
industries.
The Company's executive bonus plan established a potential bonus pool for
the payment of year-end bonuses to Company officers and other key personnel
based on 1999 performance and operating results. Under this plan, aggressive
revenue and profit target levels were established by the Compensation Committee
as incentives for superior individual, group and Company performance. Each
executive officer was eligible to receive a discretionary bonus based upon
individually established subjective performance goals. The Compensation
Committee approved cash incentive bonuses in amounts ranging from 0.14% to .55%
of the Company's 1999 operating income.
Awards of stock options under SMI's 1994 Stock Option Plan are based on a
number of factors in the discretion of the Compensation Committee, including
various subjective factors primarily relating to the responsibilities of the
individual officers for and contribution to the Company's operating results (in
relation to the Company's other optionees), their expected future contributions
and the levels of stock options currently held by the executive officers
individually and in the aggregate. Stock option awards to executive officers
have been at then-current market prices in order to align a portion of an
executive's net worth with the returns to the Company's stockholders. For
details concerning the grant of options to the executive officers named in the
Summary Compensation Table below, see "Fiscal Year-End Option Values."
As noted above, the Company's compensation policy is primarily based upon
the practice of pay-for-performance. Section 162(m) of the Internal Revenue
Code imposes a limitation on the deductibility of nonperformance-based
compensation in excess of $1 million paid to named executive officers. The 1994
Stock Option Plan was created with the intention that all compensation
attributable to stock option exercises should qualify as deductible
performance-based compensation. The Compensation Committee currently believes
that, generally, the Company should be able to continue to manage its executive
compensation program to preserve federal income tax deductions.
CHIEF EXECUTIVE OFFICER COMPENSATION. The Compensation Committee's members
other than Mr. Smith annually review and approve the compensation of Mr. Smith,
the Company's Chief Executive Officer. Mr. Smith also participates in the
executive bonus plan, with his bonus tied to corporate revenue and profit
goals. His maximum possible bonus is 2.5% of the Company's 1999 operating
income. The Compensation Committee believes that Mr. Smith is paid a reasonable
salary. Mr. Smith is the only employee of the Company not eligible for stock
options. Since he is a significant stockholder, his rewards as Chief Executive
Officer reflect increases in value enjoyed by all other stockholders.
COMPENSATION COMMITTEE. William P. Benton, Chairman Mark M. Gambill O.
Bruton Smith
29
COMPENSATION OF OFFICERS
The following table sets forth compensation paid by or on behalf of the
Company to its Chief Executive Officer and other executive officers for
services rendered during fiscal years ended December 31, 1999, 1998 and 1997:
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION(1)
------------------------------------------ NUMBER OF
SHARES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) COMPENSATION OPTIONS(3) COMPENSATION(4)
- ------------------------------------ ------ ----------- ------------ ----------------- ------------- ----------------
O. Bruton Smith 1999 $375,000 $ 546,000 $ 118,163(5) -- 0
Chairman and Chief 1998 350,000 1,092,000 103,256(5) -- 0
Executive Officer of SMI 1997 350,000 1,039,000 108,313(5) -- 0
H.A. "Humpy" Wheeler 1999 275,000 488,000 (6) 50,000 $2,600
President and Chief Operating 1998 250,000 764,000 (6) -- 2,600
Officer of SMI; President and 1997 250,000 727,000 (6) -- 2,600
General Manager of CMS
William R. Brooks 1999 200,000 170,000 (6) 50,000 2,600
Vice President, Treasurer 1998 175,000 340,000 (6) -- 2,600
and Chief Financial Officer of SMI 1997 175,000 294,000 (6) -- 2,600
Edwin R. Clark 1999 102,500 141,000 (6) 20,000 2,600
Executive Vice President of SMI; 1998 102,500 150,000 (6) -- 2,600
President and General Manager 1997 102,500 309,600 (6) -- 2,600
of AMS
- ---------
(1) Does not include the dollar value of perquisites and other personal
benefits.
(2) The amounts shown are cash bonuses earned in the specified year and paid in
the first quarter of the following year.
(3) The 1994 Stock Option Plan was adopted in December 1994. The number of
shares underlying options is, in the case of each executive officer, the sum
of shares available upon exercise of incentive stock options and
non-statutory stock options, giving effect to the two for one stock split
effected as of March 15, 1996 in the form of a 100% Common Stock dividend
(the "Stock Split"). No options were granted to the Company's executive
officers in 1998 or 1997.
(4) Includes Company match to 401(k) plan.
(5) Amount represents share of split-dollar insurance premium treated as
compensation to Mr. Smith. See "Smith Life Insur ance Arrangements." Mr.
Smith also received certain perquisites and other personal benefits totaling
not more than $50,000.
(6) The aggregate amount of perquisites and other personal benefits received did
not exceed the lesser of $50,000 or 10% of the total annual salary and bonus
reported for such executive officer.
30
FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning outstanding options
to purchase Common Stock held by executive officers at December 31, 1999:
AGGREGATED OPTION EXERCISES IN LATEST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
SHARES ACQUIRED ON VALUE REALIZED ON
OPTIONS EXERCISED OPTIONS EXERCISED
NAME IN 1999 IN 1999
- ------------------------------ -------------------- ------------------
H.A. "Humpy" Wheeler ......... 25,150 $438,500
William R. Brooks ............ -- --
Edwin R. Clark ............... -- --
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
AT FISCAL YEAR-END(#) FISCAL YEAR-END($)(1)
-------------------------------- --------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------------ -------------------------------- --------------------------
H.A. "Humpy" Wheeler ......... 556,024/0 $13,058,000/0
William R. Brooks ............ 240,000/0 3,535,000/0
Edwin R. Clark ............... 80,000/20,000 1,715,000/0
- ---------
(1) Year-end value is based on the December 31, 1999 closing sales price for
the Company's common stock of $27.81 per share, less the applicable
aggregate option exercise price(s) of in-the-money options, multiplied by
the number of unexercised in-the-money options which are exercisable and
unexercisable, respectively.
STOCK OPTION PLANS
The Company currently has in place two stock option plans with respect to
the Common Stock: (i) its 1994 Stock Option Plan (the "1994 Stock Option
Plan"), and (ii) its Formula Stock Option Plan (the "Formula Option Plan"). The
1994 Stock Option Plan provides for the granting of options for up to an
aggregate of 3,000,000 shares of Common Stock. Options indicated above as held
by executive officers at December 31, 1999 were granted pursuant to the 1994
Stock Option Plan. The Formula Option Plan was adopted by the Board of
Directors as of January 1, 1996, for the benefit of the Company's outside
directors, which was approved by SMI's stockholders at their 1996 annual
meeting. It provides for the issuance of up to 800,000 shares of Common Stock.
The Company granted options to purchase 20,000 shares in each of 1996 through
1999, to each of Messrs. Benton and Gambill, and 15,000 shares in 1999 to Mr.
Kemp, under the Formula Option Plan. Effective January 3, 2000, the Company
granted options to purchase an additional 20,000 shares, to each of Messrs.
Benton, Gambill and Kemp under the Formula Option Plan. Effective January 1,
1997, the Company's Board of Directors and stockholders adopted the SMI
Employee Stock Purchase Plan. The SMI Employee Stock Purchase Plan was adopted
to provide employees the opportunity to acquire stock ownership. An aggregate
total of 400,000 shares of common stock have been reserved for purchase under
the plan. See Note 11 to the Consolidated Financial Statements for additional
information on stock options and the stock plans.
SMITH LIFE INSURANCE ARRANGEMENTS
In 1995, the Compensation Committee (excluding Mr. Smith) approved the
establishment of a "split-dollar" life insurance plan for the benefit of Mr.
Smith. Pursuant to such plan, the Company entered into split-dollar insurance
agreements whereby split-dollar life insurance policies in the total face
amount of $17,094,000 (individually, a "Policy" or together the "Policies")
would be purchased and held in trust for the benefit of Mr. Smith's lineal
descendants. The Company has agreed to pay the annual (or shorter period)
premium payments on the Policies.
Upon payment of the death benefit or upon the surrender of a Policy for
its cash value, the Company will receive an amount equal to the Company's
Split-Dollar Interest. The Company's Split-Dollar Interest equals, in the case
of the payment of the death benefit, the cumulative payments made by the
Company towards the premiums under a Policy less any portion of such payments
charged as compensation to Mr. Smith (the "Reimbursable Payment"). The
Company's Split-Dollar Interest equals, in the case of surrender of a Policy
for its cash value, the lesser of (i) the net cash value of such Policy and
(ii) the Reimbursable Payment.
In the event a Policy is surrendered or terminated prior to his death, Mr.
Smith has agreed to reimburse the Company for the positive amount, if any, by
which the Reimbursable Payment exceeds the net cash value of such Policy. Mr.
Smith's
31
promise is evidenced by a promissory note in favor of the Company, which note
includes a limited guaranty by Sonic Financial whereby it will permit amounts
owed by Mr. Smith to the Company to be offset by amounts owed to Sonic
Financial by AMS.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Benton, Gambill and Smith served on the Company's Compensation
Committee during 1999. Mr. Smith serves as the Chief Executive Officer of the
Company. Mark M. Gambill has been the President of First Union Capital Markets,
the investment banking firm which co-managed the Company's offering of 8 1/2%
senior subordinated notes in August 1997 and May 1999.
The Company pays the annual (or shorter period) premiums on split-dollar
life insurance policies for the benefit of Mr. Smith. See "Smith Life Insurance
Arrangements."
Mr. Smith is the only officer of SMI to have served on the compensation
committee of another entity during 1999. He served as a member of the Board of
Directors and the Compensation Committee for SAI during 1999. Mr. Smith
received aggregate salary and other annual compensation of $929,900 from SAI
during 1999. Mr. Brooks served as a member of the Board of Directors of SAI
during 1999.
DIRECTOR COMPENSATION
Members of the Board of Directors who are not employees of the Company
received options to purchase shares of the Company's common stock in 1999 as
follows: for Messrs. Benton and Gambill 20,000 shares each at $27.88, and for
Mr. Kemp 15,000 shares at $26.88. The Company also reimburses all directors for
their expenses incurred in connection with their activities as directors of
SMI. Directors who are also employees of the Company receive no additional
compensation for serving on the Board of Directors. For additional information
concerning the Formula Stock Option Plan for SMI's outside directors, see Note
11 to the Consolidated Financial Statements.
32
STOCKHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative stockholder
return on the Company's Common Stock against the cumulative total return of
each of the Standard & Poor's 500 Stock Index, the Russell 2000 Stock Index,
and a Peer Group Index for the period commencing February 24, 1995 and ending
December 31, 1999. The Russell 2000 Index was included beginning in 1998
because management believes, as a small-cap index, it more closely represents
companies with market capitalization similar to the Company's than the Standard
& Poor's 500 Stock Index. The companies used in the Peer Group Index in 1995
consist of Churchill Downs Incorporated, International Speedway Corporation,
and Walt Disney Co.; in 1996 also include Penske Motorsports and Dover Downs
Entertainment; in 1997 also include Grand Prix of Long Beach; in 1998 also
include Action Performance; and in 1999 also include Championship Auto Racing
Teams, which are all publicly traded companies known by the Company to be
involved in the amusement, sports and recreation industries. Churchill Downs
Incorporated, Gaylord Entertainment Company, Hollywood Park, Inc.,
International Family Entertainment, which is no longer a publicly traded
company, Grand Prix of Long Beach, which was acquired by Dover Downs
Entertainment, and Penske Motorsports, which was acquired by International
Speedway Corporation, are no longer included in the Peer Group Index. The graph
assumes that $100 was invested on February 24, 1995 in each of the Company's
Common Stock, the Standard & Poor's 500 Stock Index, the Russell 2000 Index,
and the Peer Group Index companies and that all dividends were reinvested.
(Performance Graph appears here with the following plot points.)
Comparison of Cumulative Total Return
1994 1995 1996 1997 1998 1999
Speedway Motorsports Inc $100 $158 $221 $261 $300 $293
1999 Peer Group $100 $111 $132 $188 $175 $173
S&P 500 Index $100 $129 $159 $212 $272 $329
1998 Peer Group $100 $111 $132 $188 $175 $173
Russell 2000 Index $100 $125 $146 $178 $173 $207
33
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding ownership of
SMI's Common Stock as of March 16, 2000, by (i) each person or entity known to
SMI and its subsidiaries who beneficially owns five percent or more of the
Common Stock, (ii) each director and nominee to the Board of Directors of SMI,
(iii) each executive officer of SMI (including the Chief Executive Officer),
and (iv) all directors and executive officers of SMI as a group. Except as
otherwise indicated below, each of the persons named in the table has sole
voting and investment power with respect to the securities beneficially owned
by him or it as set forth opposite his or its name.
AMOUNT & NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT
- ------------------------------------------------------------------ ---------------------- ----------
O. Bruton Smith (1)(2) ........................................... 29,000,000 66.3%
Sonic Financial Corporation (2) .................................. 23,700,000 54.2
H.A. "Humpy" Wheeler (3)(8) ...................................... 616,500 1.4
William R. Brooks (4)(8) ......................................... 291,000 *
Edwin R. Clark (5)(8) ............................................ 106,300 *
William P. Benton (6)(8) ......................................... 80,000 *
Mark M. Gambill (7)(8) ........................................... 104,200 *
Jack L. Kemp (6)(8) .............................................. 35,000 *
All directors and executive officers as a group (six persons) (1) 30,233,000 69.1
- ---------
* Less than one percent
(1) The shares of Common Stock shown as owned by such person or group include,
without limitation, all of the shares shown as owned by Sonic Financial
Corporation ("Sonic Financial") elsewhere in the table. Mr. Smith owns the
substantial majority of the common stock of Sonic Financial.
(2) The address of such person is P.O. Box 18747, Charlotte, North Carolina
28218.
(3) All the shares shown as owned by Mr. Wheeler, other than 10,400 shares
owned by him directly, underlie options granted by the Company.
(4) All the shares shown as owned by Mr. Brooks, other than 1,000 shares owned
by him directly, underlie options granted by the Company.
(5) All the shares shown as owned by Mr. Clark, other than 6,300 shares owned
by him directly, underlie options granted by the Company.
(6) All the shares shown as owned by Messrs. Benton and Kemp underlie options
granted by the Company.
(7) All the shares shown as owned by Mr. Gambill, other than 4,200 shares owned
by him directly, underlie options granted by the Company.
(8) All such options are currently exercisable except for 20,000 shares owned
by Mr. Clark. For additional information concerning options granted to the
Company's executive officers, see "Executive Compensation" above.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LMSC holds a note from a partnership in which Mr. Smith, the Company's
Chairman and Chief Executive Officer, is a partner. The outstanding balance due
thereunder was $848,000 at December 31, 1999, including accrued interest. The
note due from such partnership is collateralized by certain land owned by the
partnership and is payable on demand. The note bears interest at 1% over prime.
Sonic Financial, an affiliate of the Company through common ownership, has
made several loans and cash advances to AMS prior to 1996. Such loans and
advances stood at approximately $2.6 million at December 31, 1999. Of such
amount, approximately $1.8 million bears interest at 3.83% per annum. The
remainder of the amount bears interest at 1% over prime.
From time to time during 1999, the Company paid certain expenses and made
cash advances for various corporate purposes on behalf of Sonic Financial. At
December 31, 1999, the Company had no outstanding amounts due from Sonic
Financial.
At December 31, 1999, the Company had a note receivable from the Company's
Chairman and Chief Executive Officer for approximately $2.1 million including
accrued interest. The principal balance of the note represents premiums paid by
the Company under the split-dollar life insurance trust arrangement on behalf
of the Chairman, in excess of cash surrender value, see "Smith Life Insurance
Arrangements." The note bears interest at 1% over prime.
34
In January 2000, the Company sold the 1.4 million square-foot Las Vegas
Industrial Park and 280 acres of undeveloped land to Las Vegas Industrial Park,
LLC, an entity owned by the Company's Chairman and Chief Executive Officer, for
approximately $53.3 million paid in cash of $40.0 million and a note receivable
of $13.3 million. The sales price was based on an independent fair value
appraisal and approximates the Company's net carrying value as of December 31,
1999 and selling costs.
For information concerning certain transactions in which Messrs. Smith and
Gambill have an interest, see "Compensation Committee Interlocks and Insider
Participation."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The exhibits and other documents filed as a part of this Annual Report on
Form 10-K, including those exhibits which are incorporated by reference herein
are:
(a) (1) Financial Statements:
See the Index to Financial Statements which appears on page F-1 hereof.
(2) Financial Statement Schedules:
None.
(3) Exhibits:
Exhibits required in connection with this Annual Report on Form 10-K are
listed below. Certain exhibits, indicated by an asterisk, are hereby
incorporated by reference to other documents on file with the Securities
and Exchange Commission with which they are physically filed, to be a part
hereof as of their respective dates.
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------------- ----------------------------------------------------------------------------------------------------------
*3.1 Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Registration
Statement on Form S-1 (File No. 33-87740) of the Company (the "Form S-1")).
*3.2 Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Form S-1).
*3.3 Amendment to Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.3 to
the Registration Statement on Form S-3 (File No. 333-13431) of the Company (the "November 1996
Form S-3")).
*3.4 Amendment to Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.4 to
the Registration Statement on Form S-4 (File No. 333-35091) of the Company (the "September 1997
Form S-4")).
*4.1 Form of Stock Certificate (incorporated by reference to Exhibit 4.1 to the Form S-1).
*4.2 Indenture dated as of September 1, 1996 between the Company and First Union National Bank of North
Carolina, as Trustee (the "First Union Indenture") (incorporated by reference to Exhibit 4.1 to the
November 1996 Form S-3).
*4.3 Form of 5 3/4% Convertible Subordinated Debenture due 2003 (included in the First Union Indenture).
*4.4 Indenture dated as of August 4, 1997 between the Company and First Trust National Association, as
Trustee (the "First Trust Indenture") (incorporated by reference to Exhibit 4.1 to the September 1997
Form S-4).
*4.5 Form of 8 1/2% Senior Subordinated Notes Due 2007 (included in the First Trust Indenture).
*4.6 First Supplemental Indenture to the First Trust Indenture, dated as of April 1, 1999 (incorporated by
reference to Exhibit 4.6 to the Registration Statement on Form S-3 (File No. 333-80021) of the Company
(the "June 1999 Form S-4").
*4.7 Second Supplemental Indenture to the First Trust Indenture, dated as of June 1, 1999 (incorporated by
reference to Exhibit 4.7 to the June 1999 Form S-4).
*4.8 Indenture dated as of May 11, 1999 between the Company, the Guarantors named therein and US Bank
Trust National Association, as Trustee (the "US Bank Trust Indenture") (incorporated by reference to
Exhibit 4.8 to the June 1999 Form S-4).
35
EXHIBIT
NUMBER DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------------------------
* 4.9 Form of 8 1/2% Senior Subordinated Notes Due 2007 (included in the US Bank Trust Indenture).
* 4.10 First Supplemental Indenture to the US Bank Trust Indenture, dated as of June 1, 1999 (incorporated by
reference to Exhibit 4.10 to the June 1999 Form S-4).
*10.1 Letter of Credit issued by NationsBank of North Carolina, N.A. in favor of Charlotte Motor Speedway,
Inc. for the benefit of the North Carolina Department of Transportation for $1,902,600, dated March 14,
1994 (incorporated by reference to Exhibit 10.9 to the Form S-1).
*10.2 Reimbursement Agreement by and between Charlotte Motor Speedway, Inc. and NationsBank of North
Carolina, N.A., dated as of March 11, 1994 (incorporated by reference to Exhibit 10.11 to the Form S-1).
*10.3 Project Agreement by and among The Department of Transportation, an agency of the State of North
Carolina, Interstate Combined Ventures and Charlotte Motor Speedway, Inc., dated as of December 6,
1993 (incorporated by reference to Exhibit 10.12 to the Form S-1).
*10.4 Deed of Trust by and among Terry L. Faulkenburg and Danny Ray Safrit, as Trustees of West Cabarrus
Church, Charlotte Motor Speedway, Inc. and Alan G. Dexter, Trustee, dated as of September 29, 1994
(incorporated by reference to Exhibit 10.38 to the Form S-1).
*10.5 Balance of Purchase Money Promissory Note in the amount of $720,000, made by Charlotte Motor
Speedway, Inc. in favor of West Cabarrus Church, dated as of September 29, 1994 (incorporated by
reference to Exhibit 10.39 to the Form S-1).
*10.6 Agreement for Purchase and Sale of an Option in Real Property by and between West Cabarrus Church
and Charlotte Motor Speedway, Inc., dated as of July 26, 1994 (incorporated by reference to Exhibit
10.40 to the Form S-1).
*10.7 Deferred Compensation Plan and Agreement by and between Atlanta Motor Speedway, Inc. and Edwin R.
Clark, dated as of January 22, 1993 (incorporated by reference to Exhibit 10.43 to the Form S-1).
*10.8 Deferred Compensation Plan and Agreement by and between Charlotte Motor Speedway, Inc. and
H.A. "Humpy" Wheeler (incorporated by reference to Exhibit 10.44 to the Form S-1).
*10.9 Speedway Motorsports, Inc. 1994 Stock Option Plan (incorporated by reference to Exhibit 10.45 to the
Form S-1).
*10.10 Speedway Motorsports, Inc. Formula Stock Option Plan (incorporated by reference to Exhibit 10.13 to the
Annual Report on Form 10-K of the Company for the year ended December 31, 1995 (the "1995 Form
10-K")).
*10.11 Speedway Motorsports, Inc. Employee Stock Purchase Plan amended and restated as of July 1, 1996
(incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-8 (File No. 333-17687)
of the Company).
*10.12 Amended and Restated Agreement by and among Charlotte Motor Speedway, Inc., Sonic Financial
Corporation, Town and Country Ford, Inc., O. Bruton Smith, SMDA Properties and Chartown, dated
February 10, 1995 (incorporated by reference to Exhibit 10.50 to the Form S-1).
*10.13 Promissory Note made by Atlanta Motor Speedway, Inc. in favor of Sonic Financial Corporation in the
amount of $1,708,767, dated as of December 31, 1993 (incorporated by reference to Exhibit 10.51 to
Form S-1).
*10.14 Non-Negotiable Promissory Note dated April 24, 1995 by O. Bruton Smith in favor of the Company
(incorporated by reference to Exhibit 10.20 to the 1995 Form 10-K).
*10.15 Asset Purchase Agreement dated October 24, 1996 between the Company, as buyer, and Sears Point
Raceway (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K of the Company
filed as of December 4, 1996 (the "SPR Form 8-K")).
*10.16 Master Ground Lease dated November 18, 1996 by and between Brenda Raceway Corporation and the
Company (incorporated by reference to Exhibit 99.2 to the SPR Form 8-K).
*10.17 Deed of Trust, Security Agreement and Fixture Filing with Assignment of Rents and Agreements dated as
of November 18, 1996 by Brenda Raceway Corporation to First American Title Insurance Company for
the benefit of Sonoma Funding Corporation (incorporated by reference to Exhibit 99.3 to the SPR Form
8-K).
*10.18 Promissory Note secured by Deed of Trust dated November 18, 1996 by Brenda Raceway Corporation in
favor of Sonoma Funding Corporation (incorporated by reference to Exhibit 99.4 to the SPR Form 8-K).
*10.19 Purchase Contract dated December 18, 1996 between Texas Motor Speedway, Inc., as seller, and FW
Sports Authority, Inc., as purchaser (incorporated by reference to Exhibit 10.23 to the Annual Report on
Form 10-K of the Company for the year ended December 31, 1996 (the "1996 Form 10-K")).
36
EXHIBIT
NUMBER DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------------
*10.20 Lease Agreement dated as of December 18, 1996 between FW Sports Authority, Inc., as lessor, and Texas
Motor Speedway, Inc., as lessee (incorporated by reference to Exhibit 10.24 to the 1996 Form 10-K).
*10.21 Guaranty Agreement dated as of December 18, 1996 among the Company, the City of Fort Worth, Texas
and FW Sports Authority, Inc. (incorporated by reference to Exhibit 10.25 to the 1996 Form 10-K).
*10.22 Credit Agreement dated as of March 7, 1996 among the Company and Speedway Funding Corp., as
borrowers, and the lenders named therein, including NationsBank, N.A. as agent for the lenders and a
lender (incorporated by reference to Exhibit 99.2 to the Registration Statement on Form S-3 (File No.
333-1856) of the Company (the "March 1996 Form S-3")).
*10.23 First Amendment to the Credit Agreement dated as of September 24, 1996 among the Company and
Speedway Funding Corp., as borrowers, and the lenders named therein, including NationsBank, N.A. as
agent for the lenders and a lender (incorporated by reference to Exhibit 99.3 to the November 1996 Form
S-3).
*10.24 Second Amendment to Credit Agreement dated June 30, 1997 among the Company and Speedway
Funding Corp., as borrowers, and the lenders named therein, including NationsBank, N.A. as agent for the
lenders and a lender (incorporated by reference to Exhibit 10.32 to the September 1997 Form S-4).
*10.25 Promissory Note dated June 30, 1997 among the Company and Speedway Funding Corp. as borrowers,
and NationsBank, N.A. as lender (incorporated by reference to Exhibit 10.33 to the September 1997 Form
S-4).
*10.26 Guaranty Agreement dated as of June 30, 1997 among Atlanta Motor Speedway, Inc., Charlotte Motor
Speedway, Inc., Texas Motor Speedway, Inc., 600 Racing, Inc., Bristol Motor Speedway, Inc. and SPR
Acquisition Corporation, as guarantors, and NationsBank, N.A. (incorporated by reference to Exhibit
10.34 to the September 1997 Form S-4).
*10.27 Amended and Restated Credit Agreement dated as of August 4, 1997 among the Company and Speedway
Funding Corp., as borrowers, and the lenders named therein, including NationsBank, N.A. as agent for the
lenders and a lender (incorporated by reference to Exhibit 10.36 to the September 1997 Form S-4).
*10.28 Registration Rights Agreement dated as of August 4, 1997 among the Company, NationsBanc Capital
Markets, Inc., Wheat, First Securities, Inc. and J.C. Bradford & Co. (incorporated by reference to Exhibit
4.3 to the September 1997 Form S-4).
*10.29 Purchase Agreement dated as of August 4, 1997 among the Company, NationsBanc Capital Markets, Inc.,
Wheat, First Securities, Inc. and J.C. Bradford & Co. (incorporated by reference to Exhibit 10.35 to the
September 1997 Form S-4).
*10.30 Asset Purchase Agreement and Escrow Instructions dated November 17, 1998 between Speedway
Motorsports, Inc., as buyer, and Las Vegas Motor Speedway, Inc., as seller (incorporated by reference to
Exhibit 99.1 to the Company's current Report on Form 8-K filed as of December 15, 1998 ("the LVMS
Form 8- K").
*10.31 First Amendment to Amended and Restated Credit Agreement dated as of November 18, 1998 among
Speedway Motorsports, Inc. and Speedway Funding Corp., as borrowers, certain subsidiaries of Speedway
Motorsports, Inc., as guarantors, and NationsBank, N.A., as the lender (incorporated by reference to
Exhibit 99.2 to the LVMS Form 8-K).
*10.32 Second Amended and Restated Credit Agreement dated as of November 23, 1998 among Speedway
Motorsports, Inc. and Speedway Funding Corp., as borrowers, certain subsidiaries of Speedway
Motorsports, Inc., as guarantors, and NationsBank, N.A., as agent for the lenders and a lender
(incorporated by reference to Exhibit 99.3 to the LVMS Form 8-K).
*10.33 Naming Rights Agreement dated as of February 9, 1999 by and between Speedway Motorsports, Inc.,
Charlotte Motor Speedway, Inc., Lowe's Home Center's, Inc. Lowe's HIW, Inc. and Sterling Advertising
Ltd. (incorporated by reference to Exhibit 10.1 to SMI's Quarterly Report of Form 10-Q for the quarter
ended March 31, 1999).
*10.34 Registration Rights Agreement dated as of May 11, 1999 among the Company, NationsBank Montgomery
Securities LLC, First Union Capital Markets Corp. and JC Bradford & Co., LLC (incorporated by
reference to Exhibit 10.34 to the June 1999 Form S-4).
*10.35 Purchase Agreement dated as of May 4, 1999 among the Company, NationsBank Montgomery Securities
LLC, First Union Capital Markets Corp. and JC Bradford & Co., LLC (incorporated by reference to
Exhibit 10.35 to the June 1999 Form S-4).
*10.36 Credit Agreement dated as of May 28, 1999 (the "Credit Agreement") among the Company and
Speedway Funding Corp., as borrowers, certain subsidiaries of the Company, as guarantors, and the
lenders named therein, including NationsBank, N.A., as agent for the lenders and a lender (incorporated
by reference to Exhibit 10.36 to the June 1999 Form S-4).
37
EXHIBIT
NUMBER DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------------
*10.37 Pledge Agreement dated as of May 28, 1999 among the Company and the subsidiaries of the Company
that are guarantors under the Credit Agreement, as pledgors, and, Nations Bank, N.A., as agent for the
lenders under the Credit Agreement (incorporated by reference to Exhibit 10.37 to the June 1999 Form
S-4).
21.1 Subsidiaries of the Company (incorporated by reference to Exhibit 21.1 to the 1999 Form 10-K).
23.0 Independent Auditors' Consent for Registration Statements No. 33-99942, No. 333-17687, and No.
333-49027 of Speedway Motorsports, Inc. on Forms S-8.
27.0 Financial Data Schedule for the Year Ended December 31, 1999.
99.1 Risk Factors regarding "forward-looking" statements.
- ---------
*Previously filed.
(b) Reports on Form 8-K
No reports were filed on Form 8-K during the fourth quarter of 1999.
38
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Charlotte, State of North Carolina, on the 23rd day of March, 2000.
SPEEDWAY MOTORSPORTS, INC.
By: /S/ O. BRUTON SMITH
--------------------------------------
O. BRUTON SMITH
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, the
report has been signed below by the following persons in the capacities and on
the dates indicated.
SIGNATURE TITLE DATES
- ------------------------------------------------------ ---------------------------------------- ---------------
/S/ O. BRUTON SMITH Chief Executive Officer (principal March 23, 2000
---------------------------------- executive officer) and Chairman
O. BRUTON SMITH
/S/ H.A. "HUMPY" WHEELER President, Chief Operating Officer and March 23, 2000
---------------------------------- Director
H.A. "HUMPY" WHEELER
/S/ WILLIAM R. BROOKS Vice President, Treasurer, Chief March 23, 2000
---------------------------------- Financial Officer (principal financial
WILLIAM R. BROOKS officer and accounting officer) and
Director
/S/ EDWIN R. CLARK Executive Vice President and Director March 23, 2000
----------------------------------
EDWIN R. CLARK
/S/ WILLIAM P. BENTON Director March 23, 2000
----------------------------------
WILLIAM P. BENTON
/S/ MARK M. GAMBILL Director March 23, 2000
----------------------------------
MARK M. GAMBILL
/S/ JACK L. KEMP Director March 23, 2000
----------------------------------
JACK L. KEMP
39
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ---------- ----------------------------------------------------------------------------------------------------------
* 3.1 Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Registration
Statement on Form S-1 (File No. 33-87740) of the Company (the "Form S-1")).
* 3.2 Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Form S-1).
* 3.3 Amendment to Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.3 to
the Registration Statement on Form S-3 (File No. 333-13431) of the Company (the "November 1996
Form S-3")).
* 3.4 Amendment to Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.4 to
the Registration Statement on Form S-4 (File No. 333-35091) of the Company (the "September 1997
Form S-4")).
* 4.1 Form of Stock Certificate (incorporated by reference to Exhibit 4.1 to the Form S-1).
* 4.2 Indenture dated as of September 1, 1996 between the Company and First Union National Bank of North
Carolina, as Trustee (the "First Union Indenture") (incorporated by reference to Exhibit 4.1 to the
November 1996 Form S-3).
* 4.3 Form of 5 3/4% Convertible Subordinated Debenture due 2003 (included in the First Union Indenture).
* 4.4 Indenture dated as of August 4, 1997 between the Company and First Trust National Association, as
Trustee (the "First Trust Indenture") (incorporated by reference to Exhibit 4.1 to the September 1997
Form S-4).
* 4.5 Form of 8 1/2% Senior Subordinated Notes Due 2007 (included in the First Trust Indenture).
* 4.6 First Supplemental Indenture to the First Trust Indenture, dated as of April 1, 1999 (incorporated by
reference to Exhibit 4.6 to the Registration Statement on Form S-3 (File No. 333-80021) of the Company
(the "June 1999 Form S-4").
* 4.7 Second Supplemental Indenture to the First Trust Indenture, dated as of June 1, 1999 (incorporated by
reference to Exhibit 4.7 to the June 1999 Form S-4).
* 4.8 Indenture dated as of May 11, 1999 between the Company, the Guarantors named therein and US Bank
Trust National Association, as Trustee (the "US Bank Trust Indenture") (incorporated by reference to
Exhibit 4.8 to the June 1999 Form S-4).
* 4.9 Form of 8 1/2% Senior Subordinated Notes Due 2007 (included in the US Bank Trust Indenture).
* 4.10 First Supplemental Indenture to the US Bank Trust Indenture, dated as of June 1, 1999 (incorporated by
reference to Exhibit 4.10 to the June 1999 Form S-4).
*10.1 Letter of Credit issued by NationsBank of North Carolina, N.A. in favor of Charlotte Motor Speedway,
Inc. for the benefit of the North Carolina Department of Transportation for $1,902,600, dated March 14,
1994 (incorporated by reference to Exhibit 10.9 to the Form S-1).
*10.2 Reimbursement Agreement by and between Charlotte Motor Speedway, Inc. and NationsBank of North
Carolina, N.A., dated as of March 11, 1994 (incorporated by reference to Exhibit 10.11 to the Form S-1).
*10.3 Project Agreement by and among The Department of Transportation, an agency of the State of North
Carolina, Interstate Combined Ventures and Charlotte Motor Speedway, Inc., dated as of December 6,
1993 (incorporated by reference to Exhibit 10.12 to the Form S-1).
*10.4 Deed of Trust by and among Terry L. Faulkenburg and Danny Ray Safrit, as Trustees of West Cabarrus
Church, Charlotte Motor Speedway, Inc. and Alan G. Dexter, Trustee, dated as of September 29, 1994
(incorporated by reference to Exhibit 10.38 to the Form S-1).
*10.5 Balance of Purchase Money Promissory Note in the amount of $720,000, made by Charlotte Motor
Speedway, Inc. in favor of West Cabarrus Church, dated as of September 29, 1994 (incorporated by
reference to Exhibit 10.39 to the Form S-1).
*10.6 Agreement for Purchase and Sale of an Option in Real Property by and between West Cabarrus Church
and Charlotte Motor Speedway, Inc., dated as of July 26, 1994 (incorporated by reference to Exhibit
10.40 to the Form S-1).
*10.7 Deferred Compensation Plan and Agreement by and between Atlanta Motor Speedway, Inc. and Edwin R.
Clark, dated as of January 22, 1993 (incorporated by reference to Exhibit 10.43 to the Form S-1).
*10.8 Deferred Compensation Plan and Agreement by and between Charlotte Motor Speedway, Inc. and
H.A. "Humpy" Wheeler (incorporated by reference to Exhibit 10.44 to the Form S-1).
*10.9 Speedway Motorsports, Inc. 1994 Stock Option Plan (incorporated by reference to Exhibit 10.45 to the
Form S-1).
40
EXHIBIT
NUMBER DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------------
*10.10 Speedway Motorsports, Inc. Formula Stock Option Plan (incorporated by reference to Exhibit 10.13 to the
Annual Report on Form 10-K of the Company for the year ended December 31, 1995 (the "1995 Form
10-K")).
*10.11 Speedway Motorsports, Inc. Employee Stock Purchase Plan amended and restated as of July 1, 1996
(incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-8 (File No. 333-17687)
of the Company).
*10.12 Amended and Restated Agreement by and among Charlotte Motor Speedway, Inc., Sonic Financial
Corporation, Town and Country Ford, Inc., O. Bruton Smith, SMDA Properties and Chartown, dated
February 10, 1995 (incorporated by reference to Exhibit 10.50 to the Form S-1).
*10.13 Promissory Note made by Atlanta Motor Speedway, Inc. in favor of Sonic Financial Corporation in the
amount of $1,708,767, dated as of December 31, 1993 (incorporated by reference to Exhibit 10.51 to
Form S-1).
*10.14 Non-Negotiable Promissory Note dated April 24, 1995 by O. Bruton Smith in favor of the Company
(incorporated by reference to Exhibit 10.20 to the 1995 Form 10-K).
*10.15 Asset Purchase Agreement dated October 24, 1996 between the Company, as buyer, and Sears Point
Raceway (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K of the Company
filed as of December 4, 1996 (the "SPR Form 8-K")).
*10.16 Master Ground Lease dated November 18, 1996 by and between Brenda Raceway Corporation and the
Company (incorporated by reference to Exhibit 99.2 to the SPR Form 8-K).
*10.17 Deed of Trust, Security Agreement and Fixture Filing with Assignment of Rents and Agreements dated as
of November 18, 1996 by Brenda Raceway Corporation to First American Title Insurance Company for
the benefit of Sonoma Funding Corporation (incorporated by reference to Exhibit 99.3 to the SPR Form
8-K).
*10.18 Promissory Note secured by Deed of Trust dated November 18, 1996 by Brenda Raceway Corporation in
favor of Sonoma Funding Corporation (incorporated by reference to Exhibit 99.4 to the SPR Form 8-K).
*10.19 Purchase Contract dated December 18, 1996 between Texas Motor Speedway, Inc., as seller, and FW
Sports Authority, Inc., as purchaser (incorporated by reference to Exhibit 10.23 to the Annual Report on
Form 10-K of the Company for the year ended December 31, 1996 (the "1996 Form 10-K")).
*10.20 Lease Agreement dated as of December 18, 1996 between FW Sports Authority, Inc., as lessor, and Texas
Motor Speedway, Inc., as lessee (incorporated by reference to Exhibit 10.24 to the 1996 Form 10-K).
*10.21 Guaranty Agreement dated as of December 18, 1996 among the Company, the City of Fort Worth, Texas
and FW Sports Authority, Inc. (incorporated by reference to Exhibit 10.25 to the 1996 Form 10-K).
*10.22 Credit Agreement dated as of March 7, 1996 among the Company and Speedway Funding Corp., as
borrowers, and the lenders named therein, including NationsBank, N.A. as agent for the lenders and a
lender (incorporated by reference to Exhibit 99.2 to the Registration Statement on Form S-3 (File No.
333-1856) of the Company (the "March 1996 Form S-3")).
*10.23 First Amendment to the Credit Agreement dated as of September 24, 1996 among the Company and
Speedway Funding Corp., as borrowers, and the lenders named therein, including NationsBank, N.A. as
agent for the lenders and a lender (incorporated by reference to Exhibit 99.3 to the November 1996 Form
S-3).
*10.24 Second Amendment to Credit Agreement dated June 30, 1997 among the Company and Speedway
Funding Corp., as borrowers, and the lenders named therein, including NationsBank, N.A. as agent for the
lenders and a lender (incorporated by reference to Exhibit 10.32 to the September 1997 Form S-4).
*10.25 Promissory Note dated June 30, 1997 among the Company and Speedway Funding Corp. as borrowers,
and NationsBank, N.A. as lender (incorporated by reference to Exhibit 10.33 to the September 1997 Form
S-4).
*10.26 Guaranty Agreement dated as of June 30, 1997 among Atlanta Motor Speedway, Inc., Charlotte Motor
Speedway, Inc., Texas Motor Speedway, Inc., 600 Racing, Inc., Bristol Motor Speedway, Inc. and SPR
Acquisition Corporation, as guarantors, and NationsBank, N.A. (incorporated by reference to Exhibit
10.34 to the September 1997 Form S-4).
*10.27 Amended and Restated Credit Agreement dated as of August 4, 1997 among the Company and Speedway
Funding Corp., as borrowers, and the lenders named therein, including NationsBank, N.A. as agent for the
lenders and a lender (incorporated by reference to Exhibit 10.36 to the September 1997 Form S-4).
*10.28 Registration Rights Agreement dated as of August 4, 1997 among the Company, NationsBanc Capital
Markets, Inc., Wheat, First Securities, Inc. and J.C. Bradford & Co. (incorporated by reference to Exhibit
4.3 to the September 1997 Form S-4).
41
EXHIBIT
NUMBER DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------------
*10.29 Purchase Agreement dated as of August 4, 1997 among the Company, NationsBanc Capital Markets, Inc.,
Wheat, First Securities, Inc. and J.C. Bradford & Co. (incorporated by reference to Exhibit 10.35 to the
September 1997 Form S-4).
*10.30 Asset Purchase Agreement and Escrow Instructions dated November 17, 1998 between Speedway
Motorsports, Inc., as buyer, and Las Vegas Motor Speedway, Inc., as seller (incorporated by reference to
Exhibit 99.1 to the Company's current Report on Form 8-K filed as of December 15, 1998 ("the LVMS
Form 8- K").
*10.31 First Amendment to Amended and Restated Credit Agreement dated as of November 18, 1998 among
Speedway Motorsports, Inc. and Speedway Funding Corp., as borrowers, certain subsidiaries of Speedway
Motorsports, Inc., as guarantors, and NationsBank, N.A., as the lender (incorporated by reference to
Exhibit 99.2 to the LVMS Form 8-K).
*10.32 Second Amended and Restated Credit Agreement dated as of November 23, 1998 among Speedway
Motorsports, Inc. and Speedway Funding Corp., as borrowers, certain subsidiaries of Speedway
Motorsports, Inc., as guarantors, and NationsBank, N.A., as agent for the lenders and a lender
(incorporated by reference to Exhibit 99.3 to the LVMS Form 8-K).
*10.33 Naming Rights Agreement dated as of February 9, 1999 by and between Speedway Motorsports, Inc.,
Charlotte Motor Speedway, Inc., Lowe's Home Center's, Inc. Lowe's HIW, Inc. and Sterling Advertising
Ltd. (incorporated by reference to Exhibit 10.1 to SMI's Quarterly Report of Form 10-Q for the quarter
ended March 31, 1999).
*10.34 Registration Rights Agreement dated as of May 11, 1999 among the Company, NationsBank Montgomery
Securities LLC, First Union Capital Markets Corp. and JC Bradford & Co., LLC (incorporated by
reference to Exhibit 10.34 to the June 1999 Form S-4).
*10.35 Purchase Agreement dated as of May 4, 1999 among the Company, NationsBank Montgomery Securities
LLC, First Union Capital Markets Corp. and JC Bradford & Co., LLC (incorporated by reference to
Exhibit 10.35 to the June 1999 Form S-4).
*10.36 Credit Agreement dated as of May 28, 1999 (the "Credit Agreement") among the Company and
Speedway Funding Corp., as borrowers, certain subsidiaries of the Company, as guarantors, and the
lenders named therein, including NationsBank, N.A., as agent for the lenders and a lender (incorporated
by reference to Exhibit 10.36 to the June 1999 Form S-4).
*10.37 Pledge Agreement dated as of May 28, 1999 among the Company and the subsidiaries of the Company
that are guarantors under the Credit Agreement, as pledgors, and, Nations Bank, N.A., as agent for the
lenders under the Credit Agreement (incorporated by reference to Exhibit 10.37 to the June 1999 Form
S-4).
21.1 Subsidiaries of the Company (incorporated by reference to Exhibit 21.1 to the 1999 Form 10-K).
23.0 Independent Auditors' Consent for Registration Statements No. 33-99942, No. 333-17687, and No.
333-49027 of Speedway Motorsports, Inc. on Forms S-8.
27.0 Financial Data Schedule for the Year Ended December 31, 1999.
99.1 Risk Factors regarding "forward-looking" statements.
- ---------
*Previously filed.
42
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
-----
INDEPENDENT AUDITORS' REPORT ............................................................. F-2
AUDITED CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets at December 31, 1999 and 1998 ............................... F-3
Consolidated Statements of Income for the Years Ended December 31, 1999, 1998 and 1997 .. F-5
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1999, F-6
1998 and 1997
Consolidated Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and F-7
1997
Notes to Consolidated Financial Statements .............................................. F-8
F-1
INDEPENDENT AUDITORS' REPORT
BOARD OF DIRECTORS
SPEEDWAY MOTORSPORTS, INC.
CHARLOTTE, NORTH CAROLINA
We have audited the accompanying consolidated balance sheets of Speedway
Motorsports, Inc. and subsidiaries (the Company) as of December 31, 1999 and
1998, and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 1999 and 1998, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1999 in
conformity with accounting principles generally accepted in the United States
of America.
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
February 15, 2000
F-2
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
1999 1998
---------- -----------
(DOLLARS IN THOUSANDS)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................. $ 56,270 $ 35,399
Restricted cash (Note 2) .................................. 278 258
Accounts and notes receivable (Notes 2 and 8) ............. 28,695 28,924
Prepaid income taxes ...................................... 4,137 10,356
Inventories (Note 3) ...................................... 15,287 10,447
Prepaid expenses (Note 2) ................................. 3,900 2,026
-------- --------
Total Current Assets .................................... 108,567 87,410
-------- --------
PROPERTY HELD FOR SALE (NOTE 4) ............................ 53,254 --
PROPERTY AND EQUIPMENT, NET (Notes 2 and 4) ................ 741,580 730,686
GOODWILL AND OTHER INTANGIBLE ASSETS, NET (Note 2) ......... 58,987 56,903
OTHER ASSETS:
Speedway condominiums held for sale (Note 2) .............. 5,359 4,930
Marketable equity securities (Note 2) ..................... 1,181 1,439
Notes receivable (Note 8) ................................. 13,018 11,420
Other assets (Note 2) ..................................... 14,036 12,089
-------- --------
Total Other Assets ...................................... 33,594 29,878
-------- --------
TOTAL ................................................... $995,982 $904,877
======== ========
See notes to consolidated financial statements.
F-3
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
DECEMBER 31, 1999 AND 1998
1999 1998
------------ ------------
(DOLLARS IN THOUSANDS)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 5) .......................................... $ 160 $ 539
Accounts payable ....................................................................... 17,771 6,592
Deferred race event income, net (Note 2) ............................................... 93,349 84,713
Accrued interest ....................................................................... 10,897 5,756
Accrued expenses and other liabilities ................................................. 9,805 9,016
-------- --------
131,982 106,616
Revolving credit facility and acquisition loan (Notes 2 and 5) ......................... -- 254,050
-------- --------
Total Current Liabilities ............................................................. 131,982 360,666
LONG-TERM DEBT (Note 5) .................................................................. 458,400 199,335
PAYABLE TO AFFILIATES (Note 8) ........................................................... 4,320 4,134
DEFERRED INCOME, NET (Note 2) ............................................................ 15,262 16,252
DEFERRED INCOME TAXES (Note 7) ........................................................... 51,680 35,208
OTHER LIABILITIES ........................................................................ 2,630 2,162
-------- --------
Total Liabilities ..................................................................... 664,274 617,757
-------- --------
COMMITMENTS AND CONTINGENCIES (Notes 4 and 9)
STOCKHOLDERS' EQUITY (Notes 2, 5, 6 and 11):
Preferred stock, $.10 par value, 3,000,000 shares authorized, no shares issued ......... -- --
Common stock, $.01 par value, 200,000,000 shares authorized, 41,647,000 and 41,502,000
shares issued and outstanding in 1999 and 1998 ........................................ 416 415
Additional paid-in capital ............................................................. 160,225 157,216
Retained earnings ...................................................................... 171,340 129,897
Accumulated other comprehensive loss -- unrealized loss on marketable equity securities (273) (408)
-------- --------
Total Stockholders' Equity ............................................................ 331,708 287,120
-------- --------
TOTAL ................................................................................. $995,982 $904,877
======== ========
See notes to consolidated financial statements.
F-4
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1999 1998 1997
----------- ----------- -----------
(IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
REVENUES (Note 2):
Admissions ........................................ $ 132,694 $ 107,601 $ 94,032
Event related revenue ............................. 148,316 105,459 83,177
Other operating revenue ........................... 36,483 16,736 14,917
--------- --------- ---------
Total Revenues .................................. 317,493 229,796 192,126
--------- --------- ---------
OPERATING EXPENSES:
Direct expense of events .......................... 110,650 83,046 65,347
Other direct operating expense .................... 32,241 10,975 9,181
General and administrative ........................ 47,375 34,279 31,623
Depreciation and amortization ..................... 28,536 21,701 15,742
Preoperating expense of new facility (Note 2) ..... -- -- 1,850
--------- --------- ---------
Total Operating Expenses ........................ 218,802 150,001 123,743
--------- --------- ---------
OPERATING INCOME ................................... 98,691 79,795 68,383
Interest expense, net (Notes 5 and 8) ............. (27,686) (12,228) (5,313)
Acquisition loan cost amortization (Note 2) ....... (3,398) (752) --
Other income, net (Note 10) ....................... 959 3,202 991
--------- --------- ---------
INCOME BEFORE INCOME TAXES ......................... 68,566 70,017 64,061
Provision for Income Taxes (Note 7) ................ (27,123) (27,646) (25,883)
--------- --------- ---------
NET INCOME ......................................... $ 41,443 $ 42,371 $ 38,178
========= ========= =========
PER SHARE DATA (NOTE 6):
Basic Earnings Per Share .......................... $ 1.00 $ 1.02 $ 0.92
Weighted average shares outstanding ............. 41,569 41,482 41,338
Diluted Earnings Per Share ........................ $ 0.97 $ 1.00 $ 0.89
Weighted average shares outstanding ............. 44,960 44,611 44,491
See notes to consolidated financial statements.
F-5
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS)
ACCUMULATED TOTAL
COMMON STOCK ADDITIONAL OTHER STOCK-
----------------- PAID-IN RETAINED COMPREHENSIVE HOLDERS'
SHARES AMOUNT CAPITAL EARNINGS LOSS EQUITY
-------- -------- ------------ ---------- --------------- -----------
BALANCE, JANUARY 1, 1997 ..................... 41,305 $413 $155,156 $ 49,348 $ (182) $204,735
Net income ................................. -- -- -- 38,178 -- 38,178
Issuance of stock under employee stock
purchase plan (Note 11) ................... 25 -- 375 -- -- 375
Exercise of stock options (Note 11) ........ 103 1 946 -- -- 947
Net unrealized loss on marketable equity
securities ................................ -- -- -- -- (121) (121)
------ ---- -------- -------- ------ --------
BALANCE, DECEMBER 31, 1997 ................... 41,433 414 156,477 87,526 (303) 244,114
Net income ................................. -- -- -- 42,371 -- 42,371
Issuance of stock under employee stock
purchase plan (Note 11) ................... 16 -- 340 -- -- 340
Exercise of stock options (Note 11) ........ 53 1 399 -- -- 400
Net unrealized loss on marketable equity
securities ................................ -- -- -- -- (105) (105)
------ ---- -------- -------- ------ --------
BALANCE, DECEMBER 31, 1998 ................... 41,502 415 157,216 129,897 (408) 287,120
Net income ................................. -- -- -- 41,443 -- 41,443
Issuance of stock under employee stock
purchase plan (Note 11) ................... 60 -- 1,535 -- -- 1,535
Exercise of stock options (Note 11) ........ 85 1 1,474 -- -- 1,475
Net unrealized gain on marketable equity
securities ................................ -- -- -- -- 135 135
------ ---- -------- -------- ------ --------
BALANCE, DECEMBER 31, 1999 ................... 41,647 $416 $160,225 $171,340 $ (273) $331,708
====== ==== ======== ======== ====== ========
See notes to consolidated financial statements.
F-6
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1999
-------------
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................................................. $ 41,443
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ......................................................... 28,536
Gain on sale of marketable equity securities and investments .......................... (415)
Amortization of acquisition loan costs ................................................ 3,398
Amortization of deferred income ....................................................... (1,366)
Deferred income tax provision ......................................................... 16,383
Changes in operating assets and liabilities, net of effects of business acquisitions:
Restricted cash ..................................................................... (20)
Accounts receivable ................................................................. (5,825)
Prepaid and accrued income taxes .................................................... 6,219
Inventories ......................................................................... (4,447)
Condominiums held for sale .......................................................... (429)
Accounts payable .................................................................... 11,179
Deferred race event income .......................................................... 8,636
Accrued expenses and other liabilities .............................................. 5,680
Deferred income ..................................................................... 376
Other assets and liabilities ........................................................ (1,854)
-----------
Net Cash Provided by Operating Activities .......................................... 107,494
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under long-term debt and acquisition loan ................................... 128,750
Principal payments on long-term debt ................................................... (124,805)
Payments of debt issuance costs ........................................................ (6,446)
Issuance of stock under employee stock purchase plan ................................... 1,535
Exercise of common stock options ....................................................... 1,475
-----------
Net Cash Provided by Financing Activities .......................................... 509
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................................................... (90,616)
Purchase of Las Vegas Motor Speedway ................................................... --
Purchase of marketable equity securities and other investments ......................... (1,645)
Proceeds from sales of marketable equity securities and investments .................... 1,435
Distribution from equity method invested ............................................... --
Increase in notes and other receivables ................................................ (5,185)
Repayment of notes and other receivables ............................................... 8,879
-----------
Net Cash Used in Investing Activities .............................................. (87,132)
-----------
NET INCREASE IN CASH AND CASH EQUIVALENTS ............................................... 20,871
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR .......................................... 35,399
-----------
CASH AND CASH EQUIVALENTS AT END OF YEAR ................................................ $ 56,270
===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest, net of amounts capitalized ..................................... $ 24,942
SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES INFORMATION (Note 13):
Net liabilities assumed and incurred in Las Vegas Motor Speedway acquisition ........... --
1998 1997
------------- -------------
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................................................. $ 42,371 $ 38,178
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ......................................................... 21,701 15,742
Gain on sale of marketable equity securities and investments .......................... (150) (241)
Amortization of acquisition loan costs ................................................ 752 --
Amortization of deferred income ....................................................... (891) (662)
Deferred income tax provision ......................................................... 16,256 5,053
Changes in operating assets and liabilities, net of effects of business acquisitions:
Restricted cash ..................................................................... 2,517 11,849
Accounts receivable ................................................................. (7,262) (4,245)
Prepaid and accrued income taxes .................................................... (5,707) 135
Inventories ......................................................................... (1,384) (2,682)
Condominiums held for sale .......................................................... 17,978 (19,373)
Accounts payable .................................................................... (15,335) 10,564
Deferred race event income .......................................................... 16,258 22,040
Accrued expenses and other liabilities .............................................. 672 3,720
Deferred income ..................................................................... 3,243 4,830
Other assets and liabilities ........................................................ (4,623) (3,859)
----------- -----------
Net Cash Provided by Operating Activities .......................................... 86,396 81,049
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under long-term debt and acquisition loan ................................... 254,253 203,073
Principal payments on long-term debt ................................................... (18,565) (100,475)
Payments of debt issuance costs ........................................................ (4,053) (6,429)
Issuance of stock under employee stock purchase plan ................................... 340 375
Exercise of common stock options ....................................................... 400 947
----------- -----------
Net Cash Provided by Financing Activities .......................................... 232,375 97,491
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................................................... (98,574) (162,011)
Purchase of Las Vegas Motor Speedway ................................................... (210,400) --
Purchase of marketable equity securities and other investments ......................... (933) (412)
Proceeds from sales of marketable equity securities and investments .................... 692 1,417
Distribution from equity method invested ............................................... 1,300 --
Increase in notes and other receivables ................................................ (13,394) (11,638)
Repayment of notes and other receivables ............................................... 9,789 --
----------- -----------
Net Cash Used in Investing Activities .............................................. (311,520) (172,644)
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS ............................................... 7,251 5,896
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR .......................................... 28,148 22,252
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR ................................................ $ 35,399 $ 28,148
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest, net of amounts capitalized ..................................... $ 14,951 $ 5,232
SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES INFORMATION (Note 13):
Net liabilities assumed and incurred in Las Vegas Motor Speedway acquisition ........... $ 8,783 --
See notes to consolidated financial statements.
F-7
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
BASIS OF PRESENTATION -- The consolidated financial statements include the
accounts of Speedway Motorsports, Inc. (SMI) and its wholly-owned subsidiaries,
Atlanta Motor Speedway, Inc. (AMS), Bristol Motor Speedway, Inc. (BMS),
Charlotte Motor Speedway, Inc. and subsidiaries d/b/a Lowe's Motor Speedway at
Charlotte (LMSC), Las Vegas Motor Speedway LLC (LVMS), SPR Acquisition Corp.
d/b/a Sears Point Raceway (SPR), Texas Motor Speedway, Inc. (TMS), Speedway
Systems LLC d/b/a Finish Line Events and subsidiaries (FLE), Oil-Chem Research
Corp. and subsidiary (ORC), SoldUSA, Inc., and Speedway Funding Corp.
(collectively, the Company).
CURRENT YEAR BUSINESS ACQUISITIONS (see Description of Business) -- In
January 1999, the Company acquired certain tangible and intangible assets and
operations of SoldUSA, Inc. for $1,069,000 in cash and notes payable. In July
1999, the Company acquired certain tangible and intangible assets and
operations of Motorsports By Mail, LLC (MBM) for $2,001,000 in cash and other
liabilities. The acquisitions were accounted for using the purchase method, and
the results of operations after acquisition are included in the Company's
consolidated statements of income. The acquisitions were not significant and,
therefore, unaudited pro forma financial information is not presented.
DESCRIPTION OF BUSINESS -- AMS owns and operates a 1.54-mile lighted,
quad-oval, asphalt superspeedway located on approximately 870 acres in Hampton,
Georgia. Two major National Association for Stock Car Auto Racing (NASCAR)
Winston Cup events are held annually, one in March and one in November. In
addition, AMS is currently hosting one Busch Grand National race and one
Automobile Racing Club of America (ARCA) race annually, each preceding a
Winston Cup event. AMS also hosts an annual Indy Racing Northern Light Series
(IRL) racing event. All of these events are sanctioned by NASCAR, IRL or ARCA.
AMS has constructed 46 condominiums overlooking the Atlanta speedway and is in
the process of marketing the 4 remaining condominiums.
BMS owns and operates a one-half mile lighted, 36-degree banked concrete
oval speedway, and a one-quarter mile lighted dragstrip, located on
approximately 550 acres in Bristol, Tennessee. BMS currently holds two major
NASCAR-sanctioned Winston Cup events annually. Additionally, two
NASCAR-sanctioned Busch Grand National races are held annually, each preceding
a Winston Cup event. BMS also owns and operates a "state-of-the-art" dragway
with permanent grandstand seating, luxury suites, and extensive fan amenities
and facilities. Construction of the Bristol Dragway was completed in 1999. BMS
is currently hosting an annual National Hot Rod Association (NHRA) sanctioned
Winston Showdown and other bracket racing events, as well as various auto
shows.
LMSC owns and operates a 1.5-mile lighted quad-oval, asphalt superspeedway
located in Concord, North Carolina. LMSC stages three major NASCAR Winston Cup
events annually, two in May and one in October. Additionally, two Busch Grand
National and two ARCA races are held annually, each preceding a Winston Cup
event. All of these events are sanctioned by NASCAR or ARCA. The Charlotte
facility also includes a 2.25-mile road course, a one-quarter mile asphalt oval
track, a one-fifth mile asphalt oval track and a one-fifth mile dirt oval
track, all of which hold race events throughout the year. In addition, LMSC has
constructed 52 condominiums overlooking the main speedway, all of which have
been sold.
LMSC is constructing a 4/10-mile, modern, lighted, dirt track facility
where nationally-televised events such as World of Outlaws and Hav-A-Tampa Dirt
Late Model Series, as well as American Motorcycle Association (AMA) and other
racing events will be held annually. Construction is expected to be completed
in 2000.
LMSC also owns an office and entertainment complex which overlooks the
main speedway, d/b/a The Speedway Club, which derives rental, catering and
dining revenues from the complex.
LVMS owns and operates a 1.5-mile, lighted, asphalt superspeedway, several
other on-site race tracks and a 1.4 million square foot on-site industrial
park, located on approximately 1,300 acres in Las Vegas, Nevada. LVMS currently
hosts several annual NASCAR-sanctioned racing events, including a Winston Cup
Series, Busch Grand National Series, two Winston West Series, and two Winston
Southwest Series racing events. Additional major events held annually include
IRL, World of Outlaws, AMA, and drag racing events, among others. The racetrack
is also rented throughout the year for non-racing activities such as driving
schools and automobile testing.
F-8
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS -- (CONTINUED)
Construction of LVMS was substantially completed in 1997 and its first
major NASCAR Winston Cup race was held in March 1998. LVMS is reconstructing
and expanding one of its dragstrips into a "state-of-the-art" dragway with
permanent grandstand seating, luxury suites, and extensive fan amenities and
facilities. Construction of The Strip at Las Vegas is expected to be completed
in 2000, and its inaugural NHRA-sanctioned Nationals event will be hosted in
April 2000. The dragway will also host NHRA and other bracket racing events, as
well as various auto shows.
SPR, located on approximately 1,500 acres in Sonoma, California, owns and
operates a 2.52-mile, twelve-turn road course, a one-quarter mile dragstrip,
and an 157,000 square foot industrial park. SPR currently holds one major
NASCAR-sanctioned Winston Cup racing event annually. Additional events held
annually include a NASCAR-sanctioned Winston Southwest Series, NHRA Winston
Drag Racing Series National, as well as AMA and Sports Car Club of America
(SCCA) racing events. The racetrack is also rented throughout the year by
various organizations, including the SCCA, driving schools, major automobile
manufacturers, and other car clubs.
TMS, located on approximately 1,360 acres in Fort Worth, Texas, is a
1.5-mile lighted, banked, asphalt quad-oval superspeedway. Construction of TMS
was completed at March 31, 1997 with TMS hosting its first major NASCAR Winston
Cup race on April 6, 1997. TMS currently hosts one major NASCAR Winston Cup
event, preceded by a Busch Grand National racing event. In 2000, TMS is also
hosting two NASCAR-sanctioned Craftsman Truck Series and two IRL racing events.
In 1998, TMS completed construction of 76 condominiums above turn two
overlooking the speedway, 68 of which have been sold or contracted for sale as
of December 31, 1999 (see Note 2).
TMS is constructing a 4/10-mile, modern, lighted, dirt track facility
where nationally-televised events such as World of Outlaws and Hav-A-Tampa Dirt
Late Model Series, as well as AMA and other racing events will be held
annually. Construction is expected to be completed in 2000.
TMS also owns and operates an office and entertainment complex which
overlooks the main speedway. Construction was completed in 1999. TMS derives
rental, catering and dining revenues from the dining-entertainment and
health-fitness club complex, The Texas Motor Speedway Club, which opened March
26, 1999.
FLE provides event food, beverage, and souvenir merchandising services at
each of the Company's speedways and to other third party sports-oriented venues
(see Note 2).
MBM, a wholly-owned subsidiary of FLE, is a wholesale and retail
distributor of racing and other sports related souvenir merchandise and
apparel.
ORC produces an environmentally friendly motor oil additive that the
Company is promoting in conjunction with its speedways and through
direct-response and other advertising, and intends to also sell to wholesale
and retail distributors (see Note 2).
SOLDUSA is an internet auction and e-commerce company under development.
WMI, a division of FLE, is a screen printing and embroidery manufacturer
and distributor of wholesale and retail apparel.
600 RACING, INC., a wholly-owned subsidiary of LMSC, developed, operates
and is the official sanctioning body of the Legends Racing Circuit. 600 Racing
also manufactures and sells 5/8-scale cars (Legends Cars) modeled after
older-style coupes and sedans. In 1997, 600 Racing released a new line of
smaller-scale cars (the Bandolero). Revenue is principally derived from the
sale of vehicles and vehicle parts.
2. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION -- All significant intercompany accounts and
transactions have been eliminated in consolidation.
REVENUE RECOGNITION -- Admissions revenue consists of ticket sales. Event
related revenues consist of amounts received from sponsorships, broadcasting
rights, concessions, luxury suite rentals, commissions and souvenir sales.
Other operating revenue consists of Legends Car sales, Speedway Clubs'
restaurant, catering and membership income, and industrial park rentals, MBM,
Oil-Chem, SoldUSA and WMI revenues.
F-9
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
The Company recognizes admissions and other event related revenues when an
event is held. Advance revenues and certain related direct expenses pertaining
to specific events are deferred until the event is held. Deferred expenses
primarily include race purses and sanctioning fees remitted to NASCAR or other
sanctioning bodies.
Deferred race event income relates to scheduled events to be held in the
upcoming year. If circumstances prevent a race from being held at any time
during the racing season, all advance revenue must be refunded and all direct
event expenses deferred would be recognized immediately except for race purses
which would be refundable from NASCAR or other sanctioning bodies.
NAMING RIGHTS -- In February 1999, the Company entered into a ten year
naming rights agreement whereby Charlotte Motor Speedway has been renamed
Lowe's Motor Speedway (at Charlotte) for gross fees aggregating approximately
$35,000,000 over the agreement term. The agreement specifies, among other
things, that essentially all promotional signage, souvenirs, marketing and
other associated materials, formerly bearing Charlotte Motor Speedway insignia,
be renamed Lowe's Motor Speedway (at Charlotte). Fee revenues, net of
associated expenses, are being recognized ratably over the ten year agreement
term.
CASH AND CASH EQUIVALENTS -- The Company classifies as cash equivalents
all highly liquid investments with original maturities of three months or less.
Cash equivalents principally consist of commercial paper and United States
Treasury securities.
RESTRICTED CASH -- Restricted cash consists principally of customer
deposits received on speedway condominiums held for sale of $187,000 and
$223,000 at December 31, 1999 and 1998. Condominium deposits are held in escrow
accounts until sales are closed.
ACCOUNTS AND NOTES RECEIVABLE -- Accounts receivable are reported net of
allowance for doubtful accounts of $951,000 and $291,000 at December 31, 1999
and 1998. Short term notes receivable amounted to $3,000 and $4,222,000 at
December 31, 1999 and 1998. Bad debt expense amounted to $660,000 in 1999,
$29,000 in 1998 and $392,000 in 1997, and allowance for doubtful accounts
reductions for actual write-offs and recoveries of specific accounts receivable
amounted to $0 in 1999, $291,000 in 1998 and $0 in 1997.
INVENTORIES -- Inventories consist of souvenirs, finished vehicles, parts
and accessories, and food costs determined on a first-in, first-out basis, and
apparel and oil additive costs determined on a average current cost basis, all
of which are stated at the lower of cost or market.
SPEEDWAY CONDOMINIUMS HELD FOR SALE -- The Company has constructed 46
condominiums at AMS and 76 condominiums at TMS, of which 42 and 68,
respectively, have been sold or contracted for sale as of December 31, 1999.
Speedway condominiums held for sale are recorded at cost, and represent 4
condominiums at AMS and 8 condominiums at TMS which are substantially complete
and are being marketed.
PROPERTY AND EQUIPMENT -- Property and equipment are recorded at cost less
accumulated depreciation. Depreciation is provided using the straight-line
method over the estimated useful lives of the respective assets. Expenditures
for repairs and maintenance are charged to expense when incurred. Construction
in progress includes all direct costs and capitalized interest on fixed assets
under construction. Under Statement of Financial Accounting Standards (SFAS)
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of ", management periodically evaluates long-lived assets
for possible impairment based on expected future undiscounted operating cash
flows attributable to such assets.
In the fourth quarter ended December 31, 1997, the Company revised the
estimated useful lives of certain property and equipment based on new
information obtained from a third party review of applicable lives for these
assets. Management believes the revised lives are more appropriate and result
in better estimates of depreciation. The revised lives decreased depreciation
expense $735,000, and increased net income $441,000, or approximately $.01 per
share, for the year ended December 31, 1997 compared to using former lives.
In connection with the development and completed construction of TMS in
1997, the Company entered into arrangements with the FW Sports Authority, a
non-profit corporate instrumentality of the City of Fort Worth, Texas, whereby
the
F-10
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Company conveyed the speedway facility, excluding its on-site condominiums and
office and entertainment complex, to the sports authority and is leasing the
facility back over a 30-year period. Because of the Company's responsibilities
under these arrangements, the speedway facility and related liabilities are
included in the accompanying consolidated balance sheets.
GOODWILL AND OTHER INTANGIBLE ASSETS -- Goodwill and other intangible
assets represent the excess of business acquisition costs over the fair value
of net assets acquired and are being amortized on a straight-line basis
principally over 40 years. Goodwill and other intangible assets are reported
net of accumulated amortization of $5,615,000 and $4,063,000 at December 31,
1999 and 1998. Management periodically evaluates the recoverability of goodwill
and other intangible assets based on expected future profitability and
undiscounted operating cash flows of acquired businesses.
MARKETABLE EQUITY SECURITIES -- The Company's marketable equity securities
are classified as "available for sale" and are not bought and held principally
for the purpose of selling them in the near term. Accordingly, these securities
are reported at fair value, with unrealized gains and losses, net of tax,
excluded from earnings and reported as a separate component of stockholders'
equity. Management intends to hold these securities through at least fiscal
2000, and accordingly, they are reflected as non-current assets. Realized gains
and losses on sales of marketable equity securities are determined using the
specific identification method.
Valuation allowances for unrealized losses of $273,000 and $408,000, net
of $183,000 and $272,000 in tax benefits, are reflected as a charge to
stockholders' equity to reduce the carrying amount of long-term marketable
equity securities to market value as of December 31, 1999 and 1998,
respectively. Realized gains on sales of marketable equity securities were
$415,000 in 1999, $150,000 in 1998 and $241,000 in 1997.
DEFERRED FINANCING COSTS AND ACQUISITION LOAN COST AMORTIZATION --
Deferred financing costs are included in other noncurrent assets and are
amortized over the term of the related debt. Acquisition loan cost amortization
resulted from financing costs incurred in obtaining an amended credit facility
and acquisition loan to fund the Company's acquisition of LVMS in December 1998
(see Notes 5 and 13). Associated deferred financing costs of $4,050,000 were
amortized over the loan term which matured May 28, 1999. Deferred financing
costs are reported net of accumulated amortization of $3,132,000 and $2,458,000
at December 31, 1999 and 1998.
DEFERRED INCOME -- Deferred income as of December 31, 1999 and 1998
consisted of the following (dollars in thousands):
1999 1998
---------- ----------
TMS Preferred Seat License fees, net ................ $11,802 $12,624
Deferred gain on TMS condominium sales. ............. 2,957 2,817
Deferred Speedway Club membership income and other .. 464 739
Other ............................................... 39 72
------- -------
Total .............................................. $15,262 $16,252
======= =======
In 1996, TMS began offering Preferred Seat License agreements whereby
licensees are entitled to purchase annual TMS season-ticket packages for
sanctioned racing events under specified terms and conditions. Among other
items, licensees are required to purchase all season-ticket packages when and
as offered each year. License agreements automatically terminate without refund
should licensees not purchase any offered ticket. Also, licensees are not
entitled to refunds for postponements or cancellation of events due to weather
or certain other conditions. After May 31, 1999, license agreements are
transferrable once each year subject to certain terms and conditions. TMS
Preferred Seat License fees are reported net of expenses of $1,052,000 at
December 31, 1999 and 1998.
Fees received under PSL agreements were deferred prior to TMS hosting its
first Winston Cup race in April 1997. The Company began amortizing net PSL fee
revenues into income over the estimated useful life of TMS's facility upon its
opening. Amortization income recognized was $1,060,000 in 1999, $616,000 in
1998, and $387,000 in 1997.
The LMSC and TMS Speedway Clubs have sold lifetime and other extended
memberships which entitle individual members to certain private dining and
racing event seating privileges. Net revenues from lifetime membership fees are
being amortized into income principally over 15 years. In each of the three
years ended December 31, 1999, lifetime membership
F-11
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
income of $275,000 was recognized. The Speedway Clubs also offer executive
memberships, which entitle members to certain dining, other club and racing
event seating privileges, and require upfront fees and monthly assessments. Net
revenues from other membership fees and monthly assessments are recognized
through December 31, 1999 as income when billed and associated expenses are
incurred.
Certain condominium sales contracts, aggregating approximately $17,300,000
as of December 31, 1999, provide buyers the right to require the Company to
repurchase real estate within three years from the purchase date. Gain
recognition has been deferred until the buyer's right expires. Management
believes the likelihood of buyers exercising such rights, in amounts that at
any one time or in the aggregate would be significant, is remote.
ADVERTISING EXPENSES -- Event related advertising costs are expensed when
an event is held and included principally in direct expense of events.
Non-event related advertising costs, excluding direct-response advertising, are
expensed as incurred and included principally in other direct operating
expense. Advertising expenses amounted to $15,144,000 in 1999, $7,626,000 in
1998, and $5,205,000 in 1997. Prepaid expense at December 31, 1999 and 1998
includes $1,407,000 and $1,240,000 of deferred direct-response advertising
costs related to future media promotion of certain ORC products. These deferred
costs are amortized into advertising expense over the estimated period of
future benefit upon commencement of the primary media promotion.
PREOPERATING EXPENSE OF NEW FACILITY -- Preoperating expenses consist of
non-recurring and non-event related costs to develop, organize and open Texas
Motor Speedway, which hosted its first racing event on April 6, 1997.
INCOME TAXES -- The Company recognizes deferred tax assets and liabilities
for the future income tax effect of temporary differences between financial and
income tax bases of assets and liabilities assuming they will be realized and
settled at amounts reported in the financial statements.
STOCK-BASED COMPENSATION -- The Company continues to apply Accounting
Principles Board (APB) Opinion No. 25, which recognizes compensation cost based
on the intrinsic value of the equity instrument awarded as permitted under SFAS
No. 123, "Accounting for Stock-Based Compensation." The pro forma effect on net
income and earnings per share under the provisions of SFAS No. 123 is disclosed
in Note 11.
FAIR VALUE OF FINANCIAL INSTRUMENTS -- The Company's financial instruments
include cash, accounts and notes receivable, marketable equity securities,
accounts payable and bank revolving credit facility borrowings with carrying
values approximating their fair value at December 31, 1999 and 1998. Also
included are fixed rate senior subordinated notes and convertible subordinated
debentures with carrying values of $253,208,000 and $74,000,000, and fair
values of approximately $238,750,000 and $77,330,000, respectively, as of
December 31, 1999. The carrying values of those financial instruments
approximated their fair value at December 31, 1998.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the financial
statement date, and reported amounts of revenues and expenses. Actual future
results could differ from those estimates.
IMPACT OF NEW ACCOUNTING STANDARDS -- In December 1999, the Securities and
Exchange Commission issued Staff Accounting Bulletin (SAB) No. 101 "Revenue
Recognition in Financial Statements" which summarizes certain of the staff's
views in applying generally accepted accounting principles to revenue
recognition in financial statements. SAB No. 101, where applicable, provides
for restatement of prior financial statements or reporting a change in
accounting principle no later than the first quarter of fiscal years beginning
after December 15, 1999. The Company has assessed its revenue recognition
policies for Speedway Club membership fees, and expects to report a change in
accounting principle under SAB No. 101. However, the change is not expected to
materially impact the Company's financial position or future results of
operations.
RECLASSIFICATIONS -- Certain prior year accounts were reclassified to
conform with current year presentation.
PRESENTATION -- In 1998, the Company began operating certain food and
beverage concession activities through FLE which previously had been procured
from a third party. As a result, revenues and expenses associated with such
concession activities in 1999 and 1998 are included in event related revenues,
direct expense of events and general and administrative
F-12
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
expense. In 1997, the Company's operating profits from such activities under
its arrangement with the outside vendor were reported as event related revenue.
3. INVENTORIES
Inventories as of December 31, 1999 and 1998 consisted of the following
components (dollars in thousands):
1999 1998
--------- ---------
Souvenirs and apparel ............................. $ 8,490 $ 5,023
Finished vehicles, parts and accessories .......... 4,310 4,409
Oil additives, food and other ..................... 2,487 1,015
------- -------
Total ........................................... $15,287 $10,447
======= =======
4. PROPERTY AND EQUIPMENT AND PROPERTY HELD FOR SALE
Property and equipment as of December 31, 1999 and 1998 is summarized as
follows (dollars in thousands):
ESTIMATED
USEFUL LIVES 1999 1998
-------------- ------------- -----------
Land and land improvements ............. 5-25 $ 202,692 $ 200,193
Racetracks and grandstands ............. 5-45 333,037 298,701
Buildings and luxury suites ............ 5-40 215,163 182,426
Machinery and equipment ................ 3-20 39,409 32,302
Furniture and fixtures ................. 5-20 15,034 11,390
Autos and trucks ....................... 3-10 4,282 3,651
Construction in progress ............... 39,111 83,081
---------- ---------
Total ................................. 848,728 811,744
Less accumulated depreciation ......... (107,148) (81,058)
---------- ---------
Net .................................. $ 741,580 $ 730,686
========== =========
CONSTRUCTION IN PROGRESS -- At December 31, 1999, the Company had various
construction projects underway to increase and improve grandstand seating
capacity, luxury suites, facilities for fan amenities, and make various other
site improvements at each of its speedways. For example, LMSC and TMS are
constructing 4/10-mile, modern, lighted, dirt track facilities where
nationally-televised events such as World of Outlaws and Hav-A-Tampa Dirt Late
Model Series, as well as AMA and other racing events will be held annually.
Construction is expected to be completed in 2000. In addition, LVMS is
reconstructing and expanding one of its dragstrips into a "state-of-the-art"
dragway with permanent grandstand seating, luxury suites, and extensive fan
amenities and facilities. Construction of The Strip at Las Vegas is expected to
be completed in 2000, with its inaugural NHRA-sanctioned Nationals event hosted
in April 2000. The estimated aggregate cost of capital expenditures in 2000
will approximate $90,000,000.
PROPERTY HELD FOR SALE -- In January 2000, the Company sold the 1.4
million square-foot Las Vegas Industrial Park and 280 acres of undeveloped land
to Las Vegas Industrial Park, LLC, an entity owned by the Company's Chairman
and Chief Executive Officer, for approximately $53.3 million paid in cash of
$40.0 million and a note receivable of $13.3 million. The Company acquired the
industrial park then under construction and land in connection with its
acquisition of LVMS in December 1998. Construction was completed and rental
operations commenced in 1999. The sales price was based on an independent fair
value appraisal and approximates the Company's net carrying value as of
December 31, 1999 and selling costs.
F-13
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. LONG-TERM DEBT
Revolving credit facility and acquisition loan borrowings and long-term
debt as of December 31, 1999 and 1998 consisted of the following (dollars in
thousands):
1999 1998
----------- -------------
Revolving credit facility and acquisition loan ......................................... $130,000 $ 254,050
Senior subordinated notes .............................................................. 253,208 124,708
Convertible subordinated debentures .................................................... 74,000 74,000
Other notes payable .................................................................... 1,352 1,166
-------- ----------
Total ................................................................................ 458,560 453,924
Less current maturities ............................................................. (160) (539)
Less revolving credit facility and acquisition loan borrowings matured May 1999 ..... -- (254,050)
-------- ----------
$458,400 $ 199,335
======== ==========
ACQUISITION LOAN -- On November 23, 1998, the Company's former credit
facility was amended and restated in connection with the Company's December
1998 acquisition of LVMS. The amended credit facility and acquisition loan (the
Acquisition Loan) increased the Company's overall borrowing limit from
$175,000,000 to $270,000,000 to fund the LVMS acquisition. The Acquisition Loan
was retired and repaid on May 28, 1999 concurrently with the issuance of senior
subordinated notes and bank credit facility replacement as described below. At
December 31, 1998, the Company had $254,050,000 in outstanding borrowings under
the former Acquisition Loan.
The former Acquisition Loan, obtained from NationsBank N.A., was an
unsecured, senior revolving credit facility and term loan with a $10,000,000
borrowing sub-limit for standby letters of credit. Interest was based, at the
Company's option, upon (i) LIBOR plus 1.125% or (ii) the greater of
NationsBank's prime rate or the Federal fund rate plus .5%.
While the retirement and repayment did not result in the use of
significant working capital, the outstanding borrowings of $254,050,000 were
classified as a current liability in the accompanying December 31, 1998 balance
sheet in accordance with generally accepted accounting principles.
BANK CREDIT FACILITY REPLACEMENT -- On May 28, 1999, the Company obtained
a long-term, secured, senior revolving credit facility with a syndicate of
banks led by NationsBank, N.A. as an agent and lender (the 1999 Credit
Facility). The 1999 Credit Facility has an overall borrowing limit of
$250,000,000, with a sub-limit of $10,000,000 for standby letters of credit,
matures in May 2004, and is secured by a pledge of the capital stock and other
equity interests of all material Company subsidiaries. Also, the Company agreed
not to pledge its assets to any third party. The 1999 Credit Facility was used
to fully repay and retire then outstanding borrowings under the Acquisition
Loan after reduction for the application of proceeds from the 1999 Senior Notes
offering, and for working capital and general corporate purposes. At December
31, 1999, the Company had $130,000,000 in outstanding borrowings under the 1999
Credit Facility.
Interest is based, at the Company's option, upon (i) LIBOR plus .5% to
1.25% or (ii) the greater of NationsBank's prime rate or the Federal Funds rate
plus .5%. The margin applicable to LIBOR borrowings will be adjusted
periodically based upon certain ratios of funded debt to earnings before
interest, taxes, depreciation and amortization (EBITDA). In addition, among
other items, the Company is required to meet certain financial covenants,
including specified levels of net worth and ratios of (i) debt to EBITDA and
(ii) earnings before interest and taxes (EBIT) to interest expense. The 1999
Credit Facility also contains certain limitations on cash expenditures to
acquire additional motor speedways without the consent of the lenders, and
limits the Company's consolidated capital expenditures to amounts not to exceed
$125 million annually and $500 million in the aggregate over the loan term. The
Company also has agreed to certain other limitations or prohibitions concerning
the incurrence of other indebtedness, transactions with affiliates, guaranties,
asset sales, investments, dividends, distributions and redemptions.
SENIOR SUBORDINATED NOTES -- On May 11, 1999, the Company completed a
private placement of 8 1/2% senior subordinated notes (the 1999 Senior Notes)
in the aggregate principal amount of $125,000,000. The Company filed a
registration statement to register these notes in June 1999. Net proceeds,
after issuance at 103% of face value, commissions and discounts, approximated
$125,737,000 and were used to repay a portion of the outstanding borrowings
under the Acquisition Loan. In August 1997, the Company issued 8 1/2% senior
subordinated notes in the aggregate principal amount of $125,000,000.
F-14
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. LONG-TERM DEBT -- (CONTINUED)
The 1999 Senior Notes and those issued in 1997 (the Senior Notes) are
substantially identical and are governed by substantially similar Indentures.
The Senior Notes are unsecured, mature in August 2007, and are redeemable at
the Company's option after August 15, 2002. Interest payments are due
semi-annually on February 15 and August 15. The Senior Notes are subordinated
to all present and future senior secured indebtedness of the Company.
Redemption prices in fiscal year periods ending August 15 are 104.25% in 2002,
102.83% in 2003, 101.42% in 2004 and 100% in 2005 and thereafter.
The Indentures governing the Senior Notes contain certain specified
restrictive and required financial covenants. The Company has agreed not to
pledge its assets to any third party except under certain limited
circumstances. The Company also has agreed to certain other limitations or
prohibitions concerning the incurrence of other indebtedness, capital stock,
guaranties, asset sales, investments, cash dividends to shareholders,
distributions and redemptions. The Indentures and 1999 Credit Facility
agreements contain cross-default provisions.
CONVERTIBLE SUBORDINATED DEBENTURES -- In October 1996, the Company
completed a private placement of 5 3/4% convertible subordinated debentures in
the aggregate principal amount of $74,000,000, and subsequently filed a
registration statement to register these debentures and the underlying equity
securities. Net proceeds after commissions and discounts were $72,150,000. The
debentures are unsecured, mature on September 30, 2003, are convertible into
Company common stock at the holder's option after December 1, 1996 at $31.11
per share until maturity, and are redeemable at the Company's option after
September 29, 2000. Interest payments are due semi-annually on March 31 and
September 30. The debentures are subordinated to all present and future secured
indebtedness of the Company, including the Acquisition Loan. Redemption prices
in fiscal year periods ending September 30 are 102.46% in 2000, 101.64% in 2001
and 100.82% in 2002. After September 30, 2002, the debentures are redeemable at
par. In conversion, 2,378,565 shares of common stock would be issuable (see
Note 6). The proceeds of this offering were used to repay outstanding
borrowings under the Company's former bank credit facility, fund construction
costs of TMS and for working capital needs of the Company.
CAPITAL LEASE OBLIGATION AND EXERCISE OF PURCHASE OPTION (SEARS POINT
RACEWAY) -- In connection with its SPR asset acquisition in 1996, the Company
executed a fourteen year capital lease, including a purchase option, with the
seller for all real property of the SPR complex. In 1998, the purchase
transaction was consummated thereby transferring ownership of the SPR racetrack
facilities and real property to the Company and eliminating its capital lease
obligation.
Annual maturities of debt at December 31, 1999 are as follows (dollars in
thousands):
2000 ................... $ 160
2001 ................... 129
2002 ................... 1,035
2003 ................... 74,028
2004 ................... 130,000
Thereafter ............. 253,208
--------
$458,560
========
Interest expense, net includes interest expense of $30,083,000 in 1999,
$15,258,000 in 1998, and $7,745,000 in 1997; and includes interest income of
$2,397,000 in 1999, $3,030,000 in 1998, and $2,432,000 in 1997. The Company
capitalized interest costs of $4,667,000 in 1999, $3,846,000 in 1998, and
$5,768,000 in 1997. The weighted-average interest rate on borrowings under bank
revolving credit facilities was 6.5% in 1999 and 6.4% in 1998.
6. CAPITAL STRUCTURE AND PER SHARE DATA
PREFERRED STOCK -- At December 31, 1999, SMI has authorized 3,000,000
shares of preferred stock with a par value of $.10 per share. Shares of
preferred stock may be issued in one or more series with rights and
restrictions as may be determined by the Company's Board of Directors. No
preferred shares were issued and outstanding at December 31, 1999 or 1998.
F-15
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. CAPITAL STRUCTURE AND PER SHARE DATA -- (CONTINUED)
PER SHARE DATA -- Diluted earnings per share assumes conversion of the
convertible debentures into common stock and elimination of associated interest
expense, net of taxes, on such debt (see Note 5). The following schedule
reconciles basic and diluted earnings per share (dollars and shares in
thousands):
WEIGHTED
NET AVERAGE EARNINGS
YEAR ENDED: INCOME SHARES PER SHARE
- ---------------------------------------------------- ---------- --------- ----------
December 31, 1999:
Basic earnings per share .......................... $41,443 41,569 $ 1.00
Dilution adjustments:
Common stock equivalents--stock options......... -- 1,012
5 3/4% Convertible debentures ................... 2,200 2,379
------- -------
Diluted earnings per share ........................ $43,643 44,960 $ 0.97
======= =======
December 31, 1998:
Basic earnings per share .......................... $42,371 41,482 $ 1.02
Dilution adjustments:
Common stock equivalents--stock options......... -- 750
5 3/4% Convertible debentures ................... 2,108 2,379
------- -------
Diluted earnings per share ........................ $44,479 44,611 $ 1.00
======= =======
December 31, 1997:
Basic earnings per share .......................... $38,178 41,338 $ 0.92
Dilution adjustments:
Common stock equivalents--stock options......... -- 774
5 3/4% Convertible debentures ................... 1,237 2,379
------- -------
Diluted earnings per share ........................ $39,415 44,491 $ 0.89
======= =======
7. INCOME TAXES
The components of the provision for income taxes are as follows (dollars
in thousands):
1999 1998 1997
---------- ---------- ----------
Current ........... $10,740 $11,390 $20,830
Deferred .......... 16,383 16,256 5,053
------- ------- -------
Total ............ $27,123 $27,646 $25,883
======= ======= =======
The reconciliation of the statutory federal income tax rate and the
effective income tax rate is as follows:
1999 1998 1997
-------- -------- --------
Statutory federal tax rate .................................... 35% 35% 35%
State and local income taxes, net of federal income tax effect 4 4 4
Other, net .................................................... -- -- 1
-- -- --
Total ........................................................ 39% 39% 40%
== == ==
F-16
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES -- (CONTINUED)
The tax effect of temporary differences resulting in deferred income taxes
are as follows (dollars in thousands):
1999 1998
------------ ------------
Deferred tax liabilities:
Property and equipment ........................................ $ 82,023 $ 49,493
Expenses deducted for tax purposes and other .................. 1,055 1,520
--------- ---------
Subtotal .................................................... 83,078 51,013
--------- ---------
Deferred tax assets:
Income previously recognized for tax purposes ................. (1,107) (808)
Stock option compensation expense ............................. (933) (1,020)
PSL and other deferred income recognized for tax purposes ..... (4,511) (5,075)
State and federal net operating loss carryforwards ............ (8,932) (1,639)
Alternative minimum tax credit ................................ (15,915) (6,898)
Other ......................................................... -- (365)
--------- ---------
Subtotal .................................................... (31,398) (15,805)
--------- ---------
Total net deferred tax liability ............................... $ 51,680 $ 35,208
========= =========
The Company made income tax payments during 1999, 1998 and 1997 totaling
approximately $15,375,000, $16,328,000, and $27,329,000, respectively. No
valuation allowance against deferred tax assets has been recorded for any year
presented.
8. RELATED PARTY TRANSACTIONS
Notes receivable at December 31, 1999 and 1998 include $848,000 and
$798,000, respectively, due from a partnership in which the Company's Chairman
and Chief Executive Officer is a partner. The note bears interest at 1% over
prime, is collateralized by certain partnership land and is payable on demand.
Because the Company does not anticipate repayment of the note during 2000, the
balance has been classified as a noncurrent asset in the accompanying 1999
balance sheet.
Notes receivable also include a note receivable from the Company's
Chairman and Chief Executive Officer for $2,103,000 at December 31, 1999 and
$842,000 at December 31, 1998. The principal balance of the note represents
premiums paid by the Company under a split-dollar life insurance trust
arrangement on behalf of the Chairman, in excess of cash surrender value. The
note bears interest at 1% over prime. Because the Company does not anticipate
repayment of the note during 2000, the balance has been classified as a
noncurrent asset in the accompanying 1999 balance sheet.
From time to time, the Company paid certain expenses and made cash
advances for various corporate purposes on behalf of Sonic Financial Corp.
(Sonic Financial), an affiliate of the Company through common ownership.
Accounts receivable include approximately $1,040,000 net due from Sonic
Financial at December 31, 1998. There were no amounts outstanding due from
Sonic Financial at December 31, 1999.
Interest income of $179,000 in 1999, $115,000 in 1998, and $166,000 in
1997 was earned on amounts due from related parties.
Amounts payable to affiliates at December 31, 1999 and 1998 includes
$2,592,000 for acquisition and other expenses paid on behalf of AMS by Sonic
Financial prior to 1996. Of this amount, approximately $1,800,000 bears
interest at 3.83% per annum. The remainder of the amount bears interest at
prime plus 1%. The entire amount is classified as long-term based on expected
repayment dates. Amounts payable to affiliates at December 31, 1999 and 1998
also include $1,729,000 and $1,542,000 owed to a former LVMS shareholder and
executive officer, who is now an LVMS employee, in equal monthly payments
through December 2003 at 6.4% imputed interest.
Interest expense of $266,000 in 1999, $151,000 in 1998 and $144,000 in
1997 was accrued on amounts payable to affiliates.
F-17
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. LEGAL PROCEEDINGS & CONTINGENCIES
On May 1, 1999, during the running of an IRL event at LMSC, an on-track
accident occurred that caused race car debris to enter the spectator seating
area. The Company offered refunds to paid ticket holders for the IRL event
through July 31, 1999, and recovered certain associated race purse and sanction
fees. Three deaths resulted, and all three decedents' estates filed separate
wrongful death lawsuits against SMI, IRL and others in the Superior Court of
Mecklenburg County, North Carolina. The Estate of Dexter Mobley lawsuit was
filed on May 28, 1999, and the Estates of Randy Pyatte and Jeffrey Patton
lawsuits were filed on August 26, 1999. These suits seek unspecified
compensatory and punitive damages. SMI has filed answers in all three pending
actions, and preliminary discovery has occurred. SMI intends to defend itself
and denies the allegations of negligence as well as related claims for punitive
damages. Management does not believe the outcome of these lawsuits will have a
material adverse affect on the Company's financial position or future results
of operations.
The Company is also involved in various lawsuits and disputes which arose
in the ordinary course of business. In management's opinion, the outcome of
these matters will not have a material impact on the Company's financial
position or future results of operations.
The Company's property at LMSC includes areas that were used as solid
waste landfills for many years. Landfilling of general categories of municipal
solid waste on the LMSC property ceased in 1992, but LMSC currently allows
certain property to be used for land clearing and inert debris landfilling and
for construction and demolition debris landfilling. Management believes that
the Company's operations, including the landfills on its property, are in
compliance with all applicable federal, state and local environmental laws and
regulations. Company management is not aware of any situation related to
landfill operations which would adversely affect the Company's financial
position or future results of operations.
10. OTHER INCOME
Other income, net for the years ended December 31, 1999, 1998 and 1997
consisted of the following (dollars in thousands):
1999 1998 1997
--------- --------- -------
Gain on sale of speedway condominiums ............ $ 186 $1,032 $ 142
Equity in operations of equity investee .......... (103) 26 (97)
Other income ..................................... 876 2,144 946
------ ------ -----
$ 959 $3,202 $ 991
====== ====== =====
Other income in 1999 and 1997 consists primarily of landfill fees and
gains on sales of marketable equity securities; and in 1998 consists primarily
of December gain on exercise of SPR purchase option and on sales of marketable
equity securities and landfill fees.
11. STOCK OPTION PLANS
1994 STOCK OPTION PLAN -- The Board of Directors and stockholders of SMI
adopted the Company's 1994 Stock Option Plan in order to attract and retain key
personnel. Under the stock option plan, options to purchase up to an aggregate
of 3,000,000 shares of common stock may be granted to directors, officers and
key employees of SMI and its subsidiaries. All options to purchase shares under
this plan expire ten years from grant date. Such options provide for the
purchase of common stock at a price as determined by the Compensation Committee
of the Board of Directors. The exercise price of all stock options granted in
1997 through 1999 was the fair or trading value of the Company's common stock
at grant date. Other option information regarding the 1994 Stock Option Plan
for 1997 through 1999 is summarized as follows:
F-18
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. STOCK OPTION PLANS -- (CONTINUED)
WEIGHTED
EXERCISE AVERAGE
SHARES IN PRICE EXERCISE
THOUSANDS PER SHARE PRICE
----------- ----------------- ---------
Outstanding, January 1, 1997 ........... 1,324 $ 3.75-$23.00 $ 9.64
Granted ................................ 90 23.50 23.50
Exercised .............................. (83) 3.75-9.00 7.73
----- --------------- -------
Outstanding, December 31, 1997 ......... 1,331 3.75-23.50 10.40
Granted ................................ 200 25.63 25.63
Exercised .............................. (53) 3.75-9.00 7.71
----- --------------- -------
Outstanding, December 31, 1998 ......... 1,478 3.75-25.63 12.56
Granted ................................ 490 29.13-41.13 36.23
Cancelled .............................. (5) 23.50 23.50
Exercised .............................. (85) 9.00-23.50 17.67
------ --------------- -------
Outstanding, December 31, 1999 ......... 1,878 $ 3.75-$41.13 $ 18.49
====== =============== =======
Of the options outstanding as of December 31, 1999, 1,618,000 are
currently exercisable at a weighted average exercise price of $16.04 per share.
The weighted average remaining contractual life of the options outstanding at
December 31, 1999 is 6.59 years.
FORMULA STOCK OPTION PLAN -- The Company's Board of Directors and
stockholders adopted the Formula Stock Option Plan for the benefit of the
Company's outside directors. The plan authorizes options to purchase up to an
aggregate of 800,000 shares of common stock. Under the plan, before February 1
of each year, each outside director is awarded an option to purchase 20,000
shares of common stock at an exercise price equal to the fair market value per
share at award date. In 1999, the Company's Board of Directors appointed a
third outside director who was granted options to purchase 15,000 shares at an
exercise price equal to the fair market value per share at award date. Other
option information regarding the Formula Option Plan for 1997 through 1999 is
summarized as follows:
WEIGHTED
EXERCISE AVERAGE
SHARES IN PRICE EXERCISE
THOUSANDS PER SHARE PRICE
----------- ----------------- -----------
Outstanding, January 1, 1997 ........... 40 $ 14.94 $ 14.94
Granted ................................ 40 20.63 20.63
Exercised .............................. (20) 14.94 14.94
---- -------------- --------
Outstanding, December 31, 1997 ......... 60 14.94-20.63 18.73
Granted ................................ 40 24.81 24.81
Exercised .............................. -- -- --
---- --------------- --------
Outstanding, December 31, 1998 ......... 100 14.94-24.81 21.16
Granted ................................ 55 26.88-27.88 27.60
Exercised .............................. -- -- --
---- --------------- --------
Outstanding, December 31, 1999 ......... 155 $ 14.94-$27.88 $ 23.45
==== =============== ========
All options outstanding as of December 31, 1999 are currently exercisable,
and have a weighted average remaining contractual life of 7.94 years. Effective
January 3, 2000, the Company granted options to purchase an additional 20,000
shares to each of the three outside directors at an exercise price per share of
$27.13 at award date.
STOCK-BASED COMPENSATION INFORMATION -- As discussed in Note 2, the
Company has adopted the disclosure-only provisions of SFAS No. 123, "Accounting
for Stock-Based Compensation". The Company granted 545,000, 240,000, and
F-19
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. STOCK OPTION PLANS -- (CONTINUED)
130,000 options in 1999, 1998 and 1997 with weighted average grant-date fair
values of $12.56, $7.91 and $7.18, respectively, under both stock option plans.
No compensation cost has been recognized for the stock option plans. Had
compensation cost for the stock options been determined based on the fair value
method as prescribed by SFAS No. 123, the Company's pro forma net income and
basic and diluted earnings per share would have been $37,308,000 or $0.90 and
$0.88 per share for 1999, $41,233,000 or $0.99 and $0.97 per share for 1998,
and $37,704,000 or $0.91 and $0.88 per share for 1997.
The fair value of each option grant is estimated on the grant date using
the Black-Scholes option-pricing model with the following assumptions: expected
volatility of 44.7% in 1999, 37.8% in 1998, and 37.1% in 1997; risk-free
interest rates of 5.5% in 1999, 4.6% in 1998, and 5.9% in 1997; and expected
lives of 3.0 years in 1997 through 1999. The model reflects that no dividends
were declared in 1997 through 1999.
Options outstanding and exercisable for both stock option plans as of
December 31, 1999 are as follows (shares in thousands):
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------- -----------------------------
WEIGHTED AVERAGE
REMAINING WEIGHTED
RANGE OF NUMBER CONTRACTUAL LIFE WEIGHTED AVERAGE NUMBER AVERAGE
EXERCISE PRICE OUTSTANDING (IN YEARS) EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- ------------------ ------------- ------------------ ------------------ ------------- ---------------
$3.75 632 5.0 $ 3.75 632 $ 3.75
9.00 211 5.2 9.00 211 9.00
14.94-20.63 110 6.4 17.20 110 17.20
23.00-25.63 535 7.9 24.16 495 24.25
26.88-29.13 255 9.8 28.80 155 28.58
41.13 290 9.5 41.13 170 41.13
- ---------------- ----- --- ------- --- -------
$3.75-$41.13 2,033 7.1 $ 18.87 1,773 $ 16.69
================ ===== === ======= ===== =======
EMPLOYEE STOCK PURCHASE PLAN -- The Company's Board of Directors and
stockholders adopted the SMI Employee Stock Purchase Plan to provide employees
the opportunity to acquire stock ownership. An aggregate total of 400,000
shares of common stock have been reserved for purchase under the plan. Each
January 1, eligible employees electing to participate will be granted an option
to purchase shares of common stock. Prior to each January 1, the Compensation
Committee of the Board of Directors determines the number of shares available
for purchase under each option, with the same number of shares to be available
under each option granted on the same grant date. No participant can be granted
options to purchase more than 500 shares in each calendar year, nor which would
allow an employee to purchase stock under this or all other employee stock
purchase plans in excess of $25,000 of fair market value at the grant date in
each calendar year. Participating employees designate a limited percentage of
their annual compensation or may directly contribute an amount for deferral as
contributions to the Plan. The stock purchase price is 90% of the lesser of
fair market value at grant date or exercise date. Options granted may be
exercised once at the end of each calendar quarter, and will be automatically
exercised to the extent of each participant's contributions. Options granted
that are unexercised expire at the end of each calendar year.
In 1999, 1998 and 1997, employees purchased approximately 60,000, 16,000
and 25,000 shares granted under the Plan on January 1, 1999, 1998 and 1997 at
an average purchase price of $25.48, $21.79 and $18.56 per share, respectively.
12. EMPLOYEE BENEFIT PLAN
The Speedway Motorsports, Inc. 401(k) Plan and Trust is available to all
employees of the Company meeting certain eligibility requirements. The Plan
allows participants to elect contributions of up to 15% of their annual
compensation within certain prescribed limits, of which the Company will match
25% of the first 4% of employee contributions. Participants are fully vested in
Company matching contributions after five years. The Company's contributions to
the Plan were $161,000 in 1999, $151,000 in 1998, and $81,000 in 1997.
F-20
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. LAS VEGAS MOTOR SPEEDWAY ACQUISITION
On December 1, 1998, the Company acquired certain tangible and intangible
assets, including the real and personal property and operations of LVMS, an
industrial park and certain adjacent unimproved land for approximately $215.0
million, consisting principally of net cash outlay of $210.4 million and
assumed associated deferred revenue. The LVMS acquisition was accounted for
using the purchase method in accordance with APB No. 16. Accordingly, the
results of operations after the acquisition date are included in the Company's
consolidated statements of income.
The following unaudited pro forma financial information presents a summary
of consolidated results of operations as if the LVMS acquisition had occurred
as of January 1, 1997, after giving effect to certain adjustments, including
amortization of goodwill, interest expense on acquisition debt and related
income tax effects. The pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of what would have occurred
had the acquisition been made on that date, nor are they necessarily indicative
of results which may occur in the future.
PRO FORMA
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
YEAR ENDED
DECEMBER 31,
---------------------------
1998 1997
------------- -------------
Total revenues ..................... $ 264,583 $ 206,304
Net income ......................... 40,672 26,551
========= =========
Basic earnings per share ........... $ 0.98 $ 0.64
Diluted earnings per share ......... $ 0.96 $ 0.62
14. SUMMARIZED PARENT COMPANY ONLY FINANCIAL INFORMATION
The following table presents summarized parent company only financial
information for fiscal years 1997 through 1999 (in thousands):
DECEMBER 31,
---------------------
1999 1998
---------- ----------
Current assets .............................................................. $ 43,842 $ 37,908
Noncurrent assets, including investment in and advances to subsidiaries, net 796,896 732,404
Total Assets ................................................................ 840,738 770,312
Current liabilities ......................................................... 14,172 9,147
Noncurrent liabilities ...................................................... 494,858 474,045
Total Liabilities ........................................................... 509,030 483,192
Total Stockholders' Equity .................................................. $331,708 $287,120
YEAR ENDED DECEMBER 31:
----------------------------------
1999 1998 1997
------------ ---------- ----------
Total revenues ............................. $ 14,878 $ 5,344 $ 2,823
Total expenses ............................. (15,474) (6,446) (5,112)
Loss from operations ....................... (596) (1,102) (2,289)
Loss before equity in subsidiaries ......... (358) (661) (1,373)
Net income ................................. $ 41,443 $ 42,371 $ 38,178
F-21