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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission file number 1-13582
Speedway Motorsports, Inc.
(Exact name of registrant as specified in its charter)


Delaware 51-0363307
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
U.S. Highway 29 North
Concord, North Carolina 28026
(Address of principal (Zip Code)
executive offices)


Registrant's telephone number, including area code: (704) 455-3239
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. [X] Yes [ ] No
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. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant was approximately $288,708,193 based upon the closing sales price
of the registrant's Common Stock on February 28, 1997 of $23.50 per share. As of
February 28, 1997, 41,304,455 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").


FORM 10-K TABLE OF CONTENTS


Page

Part I
Item 1. Business........................................................................................ 3
Item 2. Properties...................................................................................... 8
Item 3. Legal Proceedings............................................................................... 10
Item 4. Submission of Matters to a Vote of Security Holders............................................. 11
Part II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters....................... 11
Item 6. Selected Financial Data......................................................................... 13
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation............ 14
Item 8. Financial Statements and Supplementary Data..................................................... 19
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............ 19
Part III
Item 10. Directors and Executive Officers of the Registrant.............................................. 20
Item 11. Executive Compensation.......................................................................... 21
Item 12. Security Ownership of Certain Beneficial Owners and Management.................................. 24
Item 13. Certain Relationships and Related Transactions.................................................. 25
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K................................ 25
Index to Financial Statements.............................................................................. F-1
Index to Financial Statement Schedules..................................................................... S-1
Signatures.................................................................................................


2


PART I
Item 1. Business
Speedway Motorsports, Inc. (the "Company"), the owner and
operator of Atlanta Motor Speedway ("AMS"), Bristol Motor Speedway ("BMS"),
Charlotte Motor Speedway ("CMS"), Texas Motor Speedway ("TMS"), 600 Racing,
and the operator of SearsvPoint Raceway ("SPR"), is a leading promoter,
marketer and sponsor of motorsports activities in the United States. The
Company currently will sponsor 15 major annual racing events in 1997 sanctioned
by the National Association of Stock Car Auto Racing, Inc. ("NASCAR"), including
nine races associated with the Winston Cup professional stock car racing circuit
(the "Winston Cup") and six races associated with the Busch Grand National
circuit. The Company also currently sponsors two Indy Racing League ("IRL")
racing events, three NASCAR Craftsman Truck Series racing events, and one
International Race Of Champions ("IROC") racing event. 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 and other motorsports events in the United
States. The Company is currently nearing substantial completion of construction
of TMS in Fort Worth, Texas, and will host its first major NASCAR Winston Cup
race on April 6, 1997. Upon its completion, TMS will be the second-largest
sports facility in America with permanent seating capacity of approximately
150,000, 200 suites and 76 condominiums. In 1996, the Company signed a joint
management and development agreement with Quad-Cities International Raceway.
In 1996, the Company derived approximately 83% of its total revenues from
events sanctioned by NASCAR. Based on information developed independently by The
Goodyear Tire & Rubber Co. ("Goodyear"), spectator attendance at Winston Cup and
Busch Grand National events have increased at compound annual growth rates of
6.8% and 13.1%, respectively, from 1994 to 1996. Management believes that
spectator demand for its largest events exceeds existing permanent seating
capacity at each of AMS, BMS, and CMS, which had, at December 31, 1996,
permanent seating capacity of approximately 102,000, 77,000, and 110,000,
respectively, in each case excluding infield admission, temporary seats and
general admission.
In recent years, television coverage and corporate sponsorship have
increased for NASCAR-related events. All NASCAR Winston Cup and Busch Grand
National events currently are broadcast by ABC, CBS, ESPN, TBS or TNN. Major
national corporate sponsorship of NASCAR-sanctioned events also has increased
significantly, according to NASCAR. Sponsors include such companies as
Coca-Cola, General Motors, NAPA, PrimeStar, Food City, Goodie's, Interstate
Batteries, McDonald's, and RJR Nabisco. The Company intends to increase the
exposure of its current Winston Cup and Busch Grand National events, add
television coverage to other track events, increase sponsorship revenue, and
schedule additional racing and other events at each of its speedway facilities.
Operating Strategy
The Company's operating strategy is to increase profitability through the
promotion and production of racing and related events at modern facilities,
which serve to enhance customer loyalty. The key elements of this strategy are
as follows:
Commitment to Quality and Customer Satisfaction. Upon assuming control of
CMS in 1975, management embarked upon a series of capital improvements,
including the construction of additional permanent grandstand seating, new
luxury suites, trackside dining and entertainment facilities and a condominium
complex overlooking the track. In 1992, CMS became the first and only
superspeedway in North America to offer nighttime racing. Following the purchase
of AMS in 1990, the Company began to implement a similar strategy there by
constructing additional grandstand seating, luxury suites and condominiums. In
addition, the Company is constructing new food concessions, restroom and other
fan amenities facilities at AMS, BMS, CMS and SPR to increase spectator comfort
and enjoyment as well as reconfiguring traffic patterns, entrances, and expanded
on-site roads to ease congestion caused by the increases in attendance. For
example, at BMS, the Company in 1997 will relocate various souvenir, concessions
and restroom facilities to the mezzanine level to increase spectator convenience
and accessibility. Also, at SPR, the Company plans to expand and improve
spectator seating and viewing areas in 1997.
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
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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
marketing innovations, in 1996, the Company began offering Preferred Seat
Licenses ("PSL") entitling licensees to purchase annual TMS season-ticket
packages for sanctioned racing events.
Utilization of Media. The Company negotiates directly with network and
cable television companies for live coverage of its NASCAR-sanctioned races. In
November, 1996, SPR signed a five-year television rights agreement with ESPN
covering its May NASCAR Winston Cup races through the NASCAR season for 2001. In
August 1996, TMS signed a four-year television rights agreement with CBS Sports
for the recently announced April races at TMS. In May 1996, AMS signed a
four-year television rights agreement with ESPN for NASCAR seasons for 1997
through 2000. Also in May 1996, BMS entered into a seven-year television rights
agreement with ESPN covering the April and August NASCAR Winston Cup and related
races through the NASCAR season for 2002. In December 1995, CMS signed a
three-year television rights agreement with Turner Sports, Inc. ("TSI"), with a
TSI renewal right for the fourth year. The TSI agreement covers the May and
October NASCAR and American Race Car Association ("ARCA") races at CMS to be
broadcast on TBS. In August 1996, CMS entered into a one-year television rights
agreement with TNN for the 1997 Winston Select race and associated events.
The Company also broadcasts its Winston Cup races at CMS over its
proprietary Performance Racing Network ("PRN"), which is syndicated to more than
300 stations. PRN also sponsors a weekly racing-oriented program throughout the
NASCAR season, which is syndicated to more than 100 stations. In 1997, the
Company also plans to begin broadcasting its Winston Cup races and other events
of AMS, BMS and TMS over PRN. 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 of CMS to promote the upcoming Winston Cup season. In 1997, this event
featured Winston Cup drivers and attracted media personnel representing
television networks and stations from throughout the United States. In addition,
in early 1997, a similar media tour was staged at TMS which also featured
Winston Cup drivers and was attended by numerous media personnel from throughout
the United States.
Growth Strategy
Management believes that the Company can achieve its growth objectives by
increasing attendance and 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 Improvements of AMS, BMS, CMS, SPR and Completion of TMS.
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 at AMS, BMS and CMS in
1997. As further described in "Properties" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Capital
Expenditures", the Company plans to make other significant renovations and
improvements at AMS, BMS, CMS and SPR, in 1997 as well. Upon completion in April
1997, TMS will have approximately 150,000 permanent grandstand seats, 200 suites
and 76 condominiums. In 1997, after adding more than 226,000 seats, including
the opening of TMS, permanent grandstand seating capacity at all of the
Company's speedways will exceed 500,000. Management believes that the expansion
and improvements of AMS, BMS, CMS and SPR will generate additional admissions
and event-related revenues.
Expansion of Television Coverage and Sponsorship. NASCAR-sanctioned stock
car racing is experiencing significant growth in television viewership and
spectator attendance. 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 Winston Cup events, to add
4


television coverage to other track events and to increase sponsorship revenue.
For example, as part of this strategy, the SPR acquisition allows for televised
coverage of its events in Northern California, which is currently believed to be
the 5th largest television market in the United States.
Development of the Legends Car Business. In 1992, the Company developed the
Legends Circuit. The Company sells cars used in Legends Circuit racing events at
retail prices of less than $12,900 and is the official sanctioning body of the
Legends Circuit. At these retail prices, management believes that Legends Cars
become economically affordable to a new group of racing enthusiasts who
previously could not race on an organized circuit. Legends Cars are an
increasingly important part of the Company's business. In 1994, 1995 and 1996,
Legends Cars revenues were $5,744,000, $8,464,000 and $9,825,000, respectively.
Increase in Daily Usage of Facilities. Management constantly seeks
revenue-producing uses for the Company's track facilities on days not committed
to racing events. Such other uses include car shows, supercross motorcycle
racing, auto fairs, driving schools, vehicle testing and settings for television
commercials, concerts, print advertisements and motion pictures. In 1994, 1995
and 1996, non-race-day track rental revenues were $1,162,000, $1,285,000 and
$1,730,000, respectively.
Addition of Motorsports Facilities. The Company also considers growth by
acquisition and development of motorsports facilities as appropriate
opportunities arise. The Company acquired BMS in Bristol, Tennessee in January
1996 and SPR in Sonoma, California in November 1996. In 1997, the Company will
substantially complete construction at TMS in Fort Worth, Texas. As such
additional development or acquisition opportunities arise which appear suitable
to the Company's plans and business, management will attempt to realize these
opportunities.
Operations
The Company's operations consist principally of racing and related events.
The Company also sells Legends Cars and sanctions the Legends Circuit. Its other
activities are ancillary to its core business of racing.
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 1997 at
each of the Company's speedways. Management is actively pursuing the scheduling
of additional motorsports racing and other events.
AMS. In 1997, AMS is scheduled to hold two Winston Cup races and one Busch
Grand National race, as well as several other races and events. Its
NASCAR-sanctioned racing schedule is as follows:


Date Event Circuit

March 8 "Stihl Outdoor Power Tools 300" Busch Grand National
March 9 "PrimeStar 500" Winston Cup
November 9 "NAPA 500" Winston Cup


In 1997, AMS is also scheduled to sponsor two ARCA races.
BMS. In 1997, 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

April 12 "Moore's Snack Food 250" Busch Grand National
April 13 "Food City 500" Winston Cup
August 22 "Food City 250" Busch Grand National
August 23 "Goody's Headache Powder 500" Winston Cup


In 1997, BMS is also scheduled to sponsor a NASCAR Craftsman Truck Series
event.
5


CMS. In 1997, CMS 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 17 "The Winston" Winston Cup (all-star race)
May 24 "CARQUEST Auto Parts 300" Busch Grand National
May 25 "Coca-Cola 600" Winston Cup
October 5 "All Pro Auto Parts Bumper to Bumper 300" Busch Grand National
October 6 "UAW-GM Quality 500" Winston Cup


In 1997, CMS is also scheduled to sponsor an IROC event, and IRL event and
two ARCA races.
SPR. In 1997, 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

May 4 "Save Mart Supermarkets 300" Winston Cup


In 1997, SPR is also scheduled to sponsor a NASCAR Craftsman Truck Series
event, a NHRA event, an AMA event and an IMSA event.
TMS. In 1997, TMS is currently 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 5 "Coca-Cola 300" Busch Grand National
April 6 "Interstate Batteries 500" Winston Cup


In 1997, the Company is also scheduled to sponsor a NASCAR Craftsman Truck
Series event and an IRL event at TMS.
The following table shows selected revenues of the Company for the years
ended December 31, 1994, 1995 and 1996. All numbers for 1994 and 1995 exclude
information for BMS and SPR.


1994 1995 1996

(in thousands)
Admissions.......................................................... $31,523 $36,569 $ 52,451
Sponsorship revenue................................................. 4,916 5,758 6,989
Broadcast revenue................................................... 2,791 3,228 5,299
Other............................................................... 25,307 30,018 37,374
Total............................................................. $64,537 $75,573 $102,113


Admissions. Grandstand ticket prices at the Company's NASCAR-sanctioned
events in 1997 range from $15.00 to $100.00. In general, as NASCAR increases
sanctioning fees and purses, the Company raises ticket prices.
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, Miller Brewing Company, Anheuser-Busch, the National
Automotive Parts Association, PrimeStar, Interstate Batteries, Chevrolet and
Ford. Some contracts allow the sponsor to name a particular racing event, as in
the "Coca-Cola 600" and the "UAW-GM Quality 500." Other consideration ranges
from "Official Car" designation (as with Ford at AMS, BMS and SPR, and Chevrolet
at CMS and TMS) to exclusive advertising and promotional rights in the sponsor's
product category (as with Anheuser-Busch at AMS, BMS, and TMS and Miller at
CMS). None of the Company's event sponsors accounted for as much as 5% of total
revenues in 1996.
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, ESPN, TBS and TNN covering events at
AMS, BMS and CMS. CMS events are carried over Company-owned PRN to over
6


300 radio stations. In 1997, the Company plans to carry events at all its other
speedways over PRN. 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 1996.
Other Revenue. The Company derives other revenue from the sale of souvenirs
and concessions, from fees paid for catering "hospitality" receptions and
private parties and from parking. In addition, once completed, its facilities at
AMS, BMS, CMS, SPR and TMS will include a total of approximately 470 luxury
suites available for leasing to corporate sponsors or others at current 1997
annual rates ranging from $15,600 to $79,000. CMS has also constructed 40 boxes,
each containing 32 seats, which are currently available for renting by corporate
sponsors or others at annual rates of up to $34,600. The Company's tracks and
related facilities often are leased to others for use in stock car driving
lessons; for testing, research and development of race cars and racing products;
for use as a setting for commercials and motion pictures; and for other outdoor
events.
Quad-Cities International Raceway Park. In October 1996, the Company signed
a joint management and development agreement with Quad-Cities International
Raceway Park. The Company will serve in an advisory capacity for the development
of a multi-use facility, which includes a speedway in northwest Illinois. The
agreement also grants the Company the option to purchase up to 40% equity
ownership in the facility. The option has not been exercised.
Legends Cars and The Legends 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
seven body styles modelled after classic sedans and coupes. Legends Circuit
races, at CMS and elsewhere, are sanctioned by a Company subsidiary, 600 Racing,
Inc. ("600 Racing"). More than 1,000 sanctioned races were held nationwide in
1996. Since 1995, Legends Cars have been manufactured by 600 Racing at a leased
92,000-square-foot facility located approximately two miles from CMS. Prior to
1995, Legends Cars were manufactured by an unaffiliated company.
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 $12,900.
At these retail prices, management believes that Legends Cars are economically
affordable to a new group of racing enthusiasts who otherwise could not race on
an organized circuit. A small percentage of these cars are purchased for "show"
rather than racing. Legends Cars are not designed for general road use. Cars and
parts are currently marketed and sold through approximately 41 distributors
doing business in approximately 33 states, Canada, England, Australia and the
United Arab Emirates. The Company's Legends Car business has experienced
substantial growth since its inception in 1992. It generated $8.4 million in
revenue in 1995 and $9.8 million in 1996, and $1.1 million in operating income
in 1995 and $2.1 million in 1996.
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
CMS. Smith Tower houses the Speedway Club, the corporate offices of CMS 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.
Open year-round, it is 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 35 were
sold at December 31, 1996. Also, the Company is building 76 condominiums at TMS,
above turn two of the speedway, 72 of which have been contracted for sale. It
built and sold 40 trackside condominiums at CMS in the 1980's and another 12
units at CMS 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 markets served
by AMS, BMS, CMS, SPR and TMS and competes regionally and nationally with other
track owners to sponsor events, especially NASCAR-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, Fort Worth,
7


and Sonoma. The Company also competes for attendance with a wide range of other
entertainment and recreational activities available in the Southeast, Southwest
and Northern California regions.
Employees
As of December 31, 1996, the Company had 304 full-time employees and 148
part-time employees. The Company hires temporary employees to assist during
periods of peak attendance at its events. None of the Company's employees is
represented by a labor union. Management believes that the Company enjoys a good
relationship with its employees.
Environmental Matters
Solid waste landfilling has occurred on and around the Company's property
at CMS for many years. Landfilling of general categories of municipal solid
waste on the CMS property ceased in 1992. There are two landfills currently
operating at CMS, however, that are permitted to receive inert debris and waste
from land clearing activities ("LCID" landfills). Two other LCID landfills on
the CMS property were closed in 1994. CMS intends to allow similar LCID
landfills to be operated on the CMS property in the future. CMS also leases
certain CMS property to a subsidiary of Browning-Ferris Industries, Inc. ("BFI")
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,
the subsidiary of BFI owns and operates an active solid waste landfill adjacent
to CMS. 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 CMS property are
subject to a groundwater monitoring program and data are submitted to the North
Carolina Department of Environment, Health and Natural Resources ("DEHNR").
DEHNR 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. DEHNR
has not acted to require any remedial action by the Company at this time with
respect to this situation. It is possible that action could be required of the
Company by DEHNR in the future with respect to this situation, which could
require the Company to incur costs that could be material.
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 "Atlanta Motor Speedway" and "Charlotte
Motor Speedway." It also has trademark rights concerning its Legends Cars, "600
Racing" and its corporate logos. Trademark and service mark registrations are
pending with respect to "Speedway Motorsports," "Bristol Motor Speedway," "Sears
Point Raceway" and "Texas Motor Speedway." The Company also has two patent
applications pending with respect to its Legends Car technology. Management's
policy is to protect its intellectual property rights zealously, through
litigation if need be, chiefly because of their proprietary value in souvenir
sales and market recognition.
Item 2. Properties
The following table shows the sum of admissions and event-related revenues
of each of AMS, BMS and CMS, in each case in dollars and as a percentage of
total admissions and event-related revenues, for 1994, 1995 and 1996 (BMS is not
included for 1994 and 1995 because it was not owned by the Company until 1996;
SPR is not included because its was not operated by the Company until
mid-November 1996 and SPR held no major events from that date to December 31,
1996) (dollars in thousands):
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1994 1995 1996
Amount Percent Amount Percent Amount Percent

Charlotte Motor Speedway................. $38,050 67.5% $42,811 66.5% $49,259 55.4%
Atlanta Motor Speedway................... 18,287 32.5 21,541 33.5 23,877 26.9
Bristol Motor Speedway................... -- -- -- -- 15,673 17.6
Total admissions and event-related
revenues, all Speedways............. $56,337 100.0% $64,352 100.0% $88,865 100.0%


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, today it is a modern, attractive facility. The AMS track is a 1.5-mile
banked asphalt oval in excellent condition; it was repaved in 1994. The Company
has, and continues to, improve and increase spectator seating arrangements at
AMS. In the interim, it will continue to use temporary bleacher seats to
partially satisfy demand at certain of its events. In 1996, the Company
completed 16 new suites at AMS and reconfigured AMS's main entrances and
expanded on-site roads to ease congestion caused by the increases in attendance.
In 1997, at AMS, the Company expects to complete 56 new suites, add
approximately 19,000 permanent grandstand seats, and is converting AMS to a
quad-oval configuration including changing the start-finish line location.
Bristol Motor Speedway. In January 1996, the Company acquired 100% of the
capital stock of BMS. BMS is located on approximately 530 acres in Bristol,
Tennessee and is a one-half mile lighted, 36-degree banked concrete oval with
77,000 permanent seats and 23 suites as of December 31, 1996. BMS also owns and
operates a one-quarter mile lighted dragstrip. BMS currently sponsors four major
NASCAR sanctioned racing events annually, including two Winston Cup and two
Busch Grand National events. BMS is one of the most popular facilities 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,
at BMS, the Company added approximately 6,000 permanent grandstand seats and
relocated various souvenir, concessions and restroom facilities to the
mezzanine level at BMS to increase spectator convenience and accessibility.
In 1997, at BMS, the Company expects to complete 55 new suites, add
approximately 53,000 permanent grandstand seats, and make other site
improvements, bringing the total number of its permanent seats to
approximately 130,000.
Charlotte Motor Speedway. CMS 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. CMS
was among the first few superspeedways built and today is often described in the
trade press as the most modern, attractive facility on the Winston Cup circuit.
The principal track is a 1.5-mile banked asphalt "quad-oval" facility in
excellent condition, having been repaved in 1994, and is the only superspeedway
in North America that is lighted for nighttime racing. CMS 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 CMS. In
1997, at CMS, the Company expects to complete 26 new suites, add approximately
15,000 permanent grandstand seats, and make other site improvements.
Sears Point Raceway. SPR, located on approximately 800 acres in Sonoma,
California, consists of a 2.52-mile, twelve-turn road course, a one-quarter mile
dragstrip, and an 157,000 square foot industrial park. The real property
associated with the SPR facilities is currently leased by the Company under a
long-term lease which includes a purchase option. See Note 7 to the Consolidated
Financial Statements for information on the terms and conditions of the SPR
acquisition and lease. SPR currently sponsors a major NASCAR-sanctioned Winston
Cup racing event annually. Additional annual events include a NASCAR sanctioned
Craftsman Truck Series, a National Hot Rod Association ("NHRA") Winston Drag
Racing Series, as well as American Motorcycle Association and Sports Car Club of
America (SCCA), racing events. The racetrack is also rented throughout the year
by various organizations, including the SCCA, major automobile manufacturers,
and other car clubs. In 1997, at SPR, the Company expects to complete parking,
road improvements and grading to improve spectator site lines, and to increase
and improve seating and facilities for spectator and media amenities.
Texas Motor Speedway. TMS, currently under construction, will operate a
1.5-mile, lighted, banked, asphalt quad-oval superspeedway with a permanent
seating capacity of approximately 150,000, 200 suites, and 76 condominiums. TMS,
believed to be the first superspeedway built in the United States since 1969,
will host its first
9


major NASCAR Winston Cup race on April 6, 1997 preceded by a Busch Grand
National race. TMS will also sponsor a NASCAR Craftsman Truck Series event, an
IRL event, and two music concerts in 1997. Management is actively pursuing the
scheduling of additional motorsports racing and other events at TMS. The Company
expects TMS to attract spectators from throughout the South Central and
SouthWestern United States. The TMS facilities are subject to a lease
transaction as of December 31, 1996. See Note 5 to the Consolidated Financial
Statements for information on the terms and conditions of the lease transaction.
Item 3. Legal Proceedings
The Company is a party to ordinary routine litigation incidental to its
business. Management does not believe that the resolution of any or all of such
litigation is likely to have a material adverse effect on the Company's
financial condition or results of operations.
On September 9, 1993, the Internal Revenue Service (the "IRS") asserted
that AMS, as the successor in interest to BND, Inc. ("BND"), is liable for
additional income taxes, penalties and interest. The total assessment including
taxes, penalties and interest (net of tax benefit for deductibility of interest)
through December 31, 1996 is approximately $7.5 million. This deficiency
allegedly relates to BND's income tax returns for the years ended November 30,
1988 and October 31, 1990. The IRS alleges that, during the acquisition of AMS
by the Company's Chairman and Chief Executive Officer in October 1990, BND's
merger into Atlanta International Raceway, Inc., the predecessor to AMS ("AIR"),
resulted in a taxable gain to BND. Moreover, this taxable gain allegedly
eliminates a net operating loss carryback to the tax return filed for the year
ended November 30, 1988. On November 30, 1993, AMS filed a protest contesting
the assessment with the appeals division of the IRS; as of this date, no
resolution of this matter has been obtained. However, the Company anticipates
resolution of this matter during 1997. Management intends to continue contesting
the allegations of a deficiency. There can be no assurance, however, that the
ultimate resolution of this proceeding will not have a material adverse effect
on the Company's results of operations or financial condition.
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 is unconstitutional under the Texas Constitution and that TMS will be
required to pay ad valorem taxes on the TMS facility. The Texas School District
has the power to levy as valorem taxes against TMS if the TMS facility is not
exempt property. All defendants successfully moved for dismissal on the grounds
that the School District Litigation had been improperly brought in Travis
County, Texas, rather than in the county in which TMS is located, as provided in
Texas statutory procedural rules for challenging claims of ad valorem tax
exemptions. The Texas School District appealed the dismissal and oral arguments
were heard in January 1997 by the Texas Court of Appeals, an intermediate
appellate court in Austin, Texas. The Company does not know when or how the
Texas Court of Appeals will rule on this issue. Nevertheless, management expects
the Texas School District will, in some forum, seek to have the TMS facility
taxable. In the event such an action is filed or the trial court's decision in
the School District Litigation is reversed, the Company will vigorously contest
any attempt to declare the TMS facilities taxable.
On December 18, 1996, TMS conveyed its facility properties to the FW Sports
Authority, a non-profit corporate instrumentality of the City of Fort Worth,
Texas, for a specified amount payable over 30 years from incremental tax funds
collected on non-exempt properties located within the boundaries of a
reinvestment zone established by the City. TMS simultaneously entered into
a lease with the FW Sports Authority ("TMS Lease") with an option to
repurchase the properties under specified conditions. The TMS Lease is a
"triple-net" lease and TMS is, therefore, required to pay all costs of
maintenance, upkeep and insurance relating to the TMS facility and is
entitled to receive all revenue therefrom. Because the properties are
owned by a public instrumentality and are to be used for public
recreational purposes, the TMS facility properties are listed as exempt from
ad valorem taxes on the property rolls of the Tarrant and Denton County Tax
Appraisal Districts. Like other publicly owned professional sports facilities,
significant ad valorem tax savings are expected over the next 30 years. Should
the Texas School District successfully challenge the ad valorem tax exemption,
the TMS Lease provides that all taxes levied on the TMS facility properties,
including any claims for back taxes, are payable by TMS and the Company. A bill
was recently introduced in the Texas Legislature seeking to prohibit non-profit
corporate instrumentalities, like the FW Sports Authority, from owning and
leasing sports and recreational facilities unless the voters of the sponsoring
City have affirmatively voted for certain sales taxes. The Company intends to
vigorously
10


oppose the passage of this bill and to make all legal challenges to the bill
should it become law. No assurance can be given that the Company will be
successful in protecting its tax exempt status of the TMS facility. If the TMS
facility loses its tax exempt status, the TMS Lease provides TMS with a purchase
option that is immediately exercisable provided that TMS continues to operate
the speedway as a motorsports facility for 15 years.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of 1996, 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 (the "Common Stock"), is currently
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 February 28, 1997, with giving effect to the
Stock Split, 41,304,455 shares of Common Stock were outstanding and there were
approximately 2,911 record holders of Common Stock.
On February 9, 1996, SMI's Board of Directors approved 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.
In May of 1996, SMI's Board of Directors increased the number of authorized
shares of common stock to 100,000,000.
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 AMS, BMS, CMS, SPR and TMS 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 Credit Facility (as described in Note 7 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, as adjusted to reflect the Stock
Split. Prior to February 24, 1995, the Company was privately held and there was
no public market for the Common Stock.


1995 High Low

First Quarter (from February 24, 1995).............................. $ 9.938 $ 8.813
Second Quarter...................................................... 10.875 8.875
Third Quarter....................................................... 13.625 10.688
Fourth Quarter...................................................... 15.500 12.813

1996

First Quarter....................................................... 28.250 13.875
Second Quarter...................................................... 30.250 25.125
Third Quarter....................................................... 29.625 22.625
Fourth Quarter...................................................... 27.125 18.750


Recent Sales of Unregistered Securities. In October 1996, the Company
issued $74,000,000 in aggregate principal amount of 5 3/4% convertible
subordinated debentures due 2003 (the "Debentures") in a private placement
pursuant to Rule 144A and Regulation S under the Securities Act (the "Debenture
Offering"). Wheat First Butcher Singer, Montgomery Securities and J.C. Bradford
& Co. acted as the initial purchasers in the Debenture
11


Offering (the "Initial Purchasers"). The Debentures were sold through the
Initial Purchasers to "qualified institutional buyers" (as defined in Rule 144A)
pursuant to Rule 144A and to certain foreign investors pursuant to Regulation S,
with the legends, notifications, restrictions and transfer agent instructions
regarding resales as appropriate to comply with Rule 144A or Regulation S, as
applicable. The Initial Purchasers received an aggregate discount of 2.5% or
$1,850,000 on the aggregate principal amount of the Debenture Offering. The
Debentures are convertible into Common Stock at any time after November 30, 1996
and prior to redemption or final maturity, at a conversion price of $31.11,
subject to certain adjustments. As of November 13, 1996, the Debentures, and the
Common Stock into which the Debentures are convertible, have been registered for
resale on a registration statement on Form S-3 filed by the Company under the
Securities Act.
On April 16, 1996, the Company issued 145,455 shares of Common Stock, with
additional cash consideration, in connection with the Company's acquisition by
merger of Oil-Chem Research Corp. ("Oil-Chem"). The Common Stock shares were
issued to the sole stockholder of Oil-Chem, The Chessa Company, L.L.C. (the
"Oil-Chem Seller"), in a private placement pursuant to Section 4(2) of the
Securities Act in exchange for all the Oil-Chem Seller's capital stock of
Oil-Chem. The Oil-Chem Seller represented that it was acquiring the Common Stock
for its own account and not with a view to public resale or distribution. The
certificate representing the Oil-Chem Seller's Common Stock also bears a
restrictive legend on subsequent transfers until such Common Stock has been
registered under the Securities Act.
12


Item 6. Selected Financial Data
The following selected financial data for the five years ended December 31,
1996 have been derived from audited financial statements. The financial
statements for the three years ended December 31, 1996 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
its "Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere herein.


Year Ended December 31,
1992 1993 1994 1995 1996

(in thousands, except per share data)
Income Statement Data(1)
Revenues:
Admissions............................................ $26,018 $27,727 $31,523 $ 36,569 $ 52,451
Event-related revenue................................. 19,096 22,115 24,814 27,783 36,414
Other operating revenue............................... 2,660 4,726 8,200 11,221 13,248
Total revenues................................... 47,774 54,568 64,537 75,573 102,113
Operating Expenses:
Direct expense of events.............................. 16,553 17,778 18,327 19,999 30,173
Other direct operating expense........................ 1,844 3,715 6,110 7,611 8,005
General and administrative............................ 10,050 10,629 11,812 13,381 16,995
Non-cash stock compensation(2)........................ -- -- 3,000 -- --
Depreciation and amortization......................... 4,289 4,375 4,500 4,893 7,598
Total operating expenses......................... 32,736 36,497 43,749 45,884 62,771
Operating income........................................ 15,038 18,071 20,788 29,689 39,342
Interest income (expense), net.......................... (4,291) (4,128) (3,855) (24) 1,316
Other income............................................ 352 1,435 1,592 3,625 2,399
Income from continuing operations before income taxes... 11,099 15,378 18,525 33,290 43,057
Provision for income taxes.............................. 4,646 6,137 8,055 13,700 16,652
Income from continuing operations....................... 6,453 9,241 10,470 19,590 26,405
Net income.............................................. $ 5,878 $ 9,203 $10,176 $ 19,457 $ 26,405
Income from continuing operations applicable to
Common Stock(3)....................................... $ 7,464 $ 19,590 $ 26,405
Income per share from continuing operations applicable
to Common Stock(4).................................... $ 0.25 $ 0.53 $ .64
Weighted average shares outstanding(4).................. 30,400 37,275 41,301
Balance Sheet Data(1)
Working capital (deficit)............................... $(6,307) $(2,039) $(1,344) $ (1,816) $ 3,644
Total assets............................................ 79,999 89,184 93,453 136,446 409,284
Long-term debt, including current maturities:
Loans payable to NationsBank and other (5)............ 46,081 43,564 47,261 1,806 23,465
Convertible subordinated debentures................... -- -- -- -- 74,000
Capital lease obligation.............................. -- -- -- -- 18,165
Stockholders' equity.................................... $11,086 $16,517 $19,232 $ 95,380 $204,735


13


(1) These data for 1992 to 1995 include CMS and AMS, and for 1996 include
BMS acquired in January 1996 and SPR acquired in November 1996. See
Note 1 to the Consolidated Financial Statements.
(2) On December 21, 1994, the Company granted options to nine employees to
purchase an aggregate of 800,000 shares of Common Stock at an exercise
price of $3.75 per share. As a result, the Company recorded a non-cash
stock compensation charge of $3.0 million (before tax) in December
1994. See Note 15 to the Consolidated Financial Statements.
(3) These data represent reported income from continuing operations less
accretion in 1994 in the estimated redemption value of certain warrants
to purchase AMS stock. On December 16, 1994, AMS redeemed such warrants
from NationsBank, N.A. (Carolinas). See Note 10 to the Consolidated
Financial Statements.
(4) The 1994 income per share from continuing operations applicable to
common stock has been prepared on a pro forma basis to reflect the
30,400,000 common shares outstanding after giving effect to a
restructuring whereby CMS and AMS became wholly-owned subsidiaries of
SMI, including 400,000 common equivalent shares arising from stock
options. The 1995 and 1996 income per share from continuing operations
applicable to common stock reflect the 37,275,000 and 41,301,000
weighted average shares outstanding, including 612,000 and 767,000
common share equivalents arising from stock options, for the years
ended December 31, 1995 and 1996. See Note 15 to the Consolidated
Financial Statements.
(5) Other note payable represents a road construction loan of $1,806,000
and $1,465,000 outstanding at December 31, 1995 and 1996, respectively.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements (including the Notes thereto) 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 the following "Management's Discussion
and Analysis of Financial Condition and Results of Operations" or relating to
the Company's future capital projects, the completion and cost of TMS and the
Company's future sponsorship of races, are "forward looking" statements within
the meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). 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 the other factors noted with such forward looking statements, include:
general economic conditions in the Company's markets, including inflation,
recession, interest rates and other economic factors; casualty to or other
disruption of the Company's facilities and equipment; and other factors that
generally affect the business of sports and recreational companies.
Overview
The Company derives revenues principally from the sale of tickets to
automobile races and other events held at its speedway facilities, from food and
beverage concession sales and souvenir sales made 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 has derived
additional revenue in recent years from the Speedway Club, a dining and
entertainment facility at CMS and from Legends Car sales since 1991.
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 revenues" includes concession and souvenir
sales, luxury suite rentals, sponsorship fees and broadcast right fees. "Other
operating revenue" includes the Speedway Club and Legends Car 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 souvenir sales,
compensation of certain employees and advertising. "Other direct operating
expense" includes cost of the Speedway Club and Legends Car sales.
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.
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 events, poor weather conditions can have an effect on the Company's results
of operations.
14


Significant growth in the Company's revenues will depend on consistent
investment in facilities. In addition to several capital projects underway at
AMS, BMS, CMS, and SPR, the construction of TMS is scheduled for substantial
completion before hosting its first major NASCAR Winston Cup race on April 6,
1997.
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
The table below shows the relationship of income and expense items relative
to total revenue for the fiscal years ended December 31, 1994, 1995 and 1996.


Percentage of Total Revenue
for
Year Ended December 31,
1994 1995 1996

Revenues:
Admissions........................................................... 48.8% 48.4% 51.4%
Event-related revenue................................................ 38.5 36.8 35.6
Other operating revenue.............................................. 12.7 14.8 13.0
Total revenues.................................................... 100.0% 100.0% 100.0%
Operating Expenses:
Direct expense of events............................................. 28.4 26.5 29.6
Other direct operating expense....................................... 9.5 10.0 7.8
General and administrative........................................... 18.3 17.7 16.7
Non-cash stock compensation.......................................... 4.6 -- --
Depreciation and amortization........................................ 7.0 6.5 7.4
Total operating expenses.......................................... 67.8 60.7 61.5
Operating income....................................................... 32.2 39.3 38.5
Interest income (expense), net......................................... (6.0) -- 1.3
Other income........................................................... 2.5 4.7 2.4
Provision for income taxes............................................. (12.5) (18.1) (16.3)
Net income............................................................. 16.2% 25.9% 25.9%


Year Ended December 31, 1996 Compared To Year Ended December 31, 1995
Total Revenues. Total revenues for 1996 increased by $26.5 million, or
35.1%, to $102.1 million, over such revenues for 1995. This improvement was due
to increases in all revenue items, particularly admissions and event related
revenues. Admissions for 1996 increased by $15.9 million, or 43.4%, over
admissions for 1995. This increase was due primarily to the acquisition of BMS
in January 1996, which hosted race events in the first and third quarters of
1996, and to growth in admissions to NASCAR-sanctioned racing events. The growth
in admissions reflects the continued increases in attendance, additions to
permanent seating capacity and price increases. Event related revenue for 1996
increased by $8.6 million, or 31.1%, over such revenue for 1995. This increase
was due primarily to the acquisition of BMS, the growth in admissions, including
related increases in concessions and souvenir sales, to increases in sponsorship
and broadcast right fees, and to increased rental revenue from newly constructed
VIP suites. Other operating revenue for 1996 increased by $2.0 million, or
18.1%, over such revenue for 1995. Legends Car revenues accounted for the
substantial portion of this increase.
Direct Expense of Events. Direct expense of events for 1996 increased by
$10.2 million, or 50.9%, over such expense for 1995. Such increase was due
primarily to the acquisition of BMS, to increased operating costs associated
with the growth in attendance and seating capacity at AMS and CMS, and to
increases in the size of purses and sanctioning fees required for
NASCAR-sanctioned racing events.
Other Direct Operating Expense. Other direct operating expense for 1996
increased by $394,000, or 5.2%, over such expense for 1995. The increase was due
primarily to increased revenues overall, and the change in sales mix to higher
margin part sales, for Legend Cars compared to 1995.
15


General and Administrative. As a percentage of total revenues, general and
administrative expense decreased from 17.7% for 1995 to 16.7% for 1996. This
improvement reflects continuing scale efficiencies associated with revenue
increases outpacing increases in general and administrative expenses. General
and administrative expense for 1996 increased by $3.6 million, or 27.0%, over
such expense for 1995. This change was due primarily to general and
administrative expenses incurred at BMS which was acquired in the first quarter
of 1996, and to a lesser extent, an increase in the average compensation of
employees.
Depreciation and Amortization. Depreciation and amortization expense for
1996 increased by $2.7 million, or 55.3%, over such expense for 1995. This
increase was due primarily to additions to property and equipment at CMS and AMS
and from the property and equipment and goodwill and other intangible assets
related to the acquisition of BMS.
Operating Income. Operating income for 1996 increased by $9.7 million, or
32.5%, over such income for 1995. This increase was due to the factors discussed
above.
Interest Income (Expense), Net. Interest income, net for 1996 was $1.3
million, compared to interest expense, net for 1995 of $24,000. This change was
due to higher levels of cash invested, from the public stock offering that
occurred in April 1996 and the convertible subordinated debentures offered in
October 1996, as compared to 1995. The change was also due to capitalizing $2.8
million in interest costs incurred in 1996 on TMS and other construction
projects. Interest costs capitalized in 1995 were insignificant.
Other Income. Other income for 1996 decreased by $1.2 million from such
income for 1995. This change was due primarily to decreased sales of AMS
condominiums and CMS land.
Provision for Income Taxes. The Company's effective income tax rate for
1996 was 39%, compared to an effective income tax rate for 1995 of 41%.
Income from Continuing Operations before Extraordinary Item. Income before
extraordinary item for 1996 increased by $9.8 million, or 29.3%, over such
income for 1995, due to the factors discussed above.
Extraordinary Item, Net. Upon repaying the long-term debt, related net debt
issuance costs previously amortized were written off in 1995, as an
extraordinary item. There were no similar charges in 1996.
Net Income. Net income for 1996, when compared to 1995, reflects improved
earnings in the Company's historical operations, and an increase in income due
to the newly acquired BMS facility which hosted two NASCAR sanctioned racing
events in 1996.
Year Ended December 31, 1995 Compared To The Year Ended December 31, 1994
Total Revenues. Total revenues for 1995 increased by $11.0 million, or
17.1%, to $75.6 million, over such revenues for 1994. This improvement was due
to increases in each of the revenue categories. Admissions for 1995 increased by
$5.0 million, or 16.0%, over admissions for 1994. This increase was due
primarily to additions to permanent seating capacity, growth in attendance at
NASCAR-sanctioned racing events, price increases and one additional non-NASCAR
event in 1995. Event-related revenue for 1995 increased by $3.0 million, or
12.0%, over such revenue for 1994. This increase was attributable to a
significant increase in luxury suite rentals, increased souvenir and concession
sales and, to a lesser extent, sponsorship revenue. Other operating revenue for
1995 increased by $3.0 million, or 36.8%, over such revenue for 1994. Legends
Car revenues accounted for the substantial portion of this increase.
Direct Expense of Events. Direct expense of events for 1995 increased by
$1.7 million, or 9.1%, over such expense for 1994. Such increase was due to
increases in the size of purses and sanctioning fees required for the Company's
NASCAR-sanctioned racing events and, to a lesser extent, one additional
non-NASCAR event.
Other Direct Operating Expense. Other direct operating expense for 1995
increased by $1.5 million, or 24.6%, over such expense for 1994. The increase
was primarily attributable to the cost of sales associated with the increase in
Legends Car revenues.
General and Administrative. As a percentage of total revenues, general and
administrative expense decreased to 17.7% for 1995 from 18.3% for 1994. This
improvement was due to scale efficiencies resulting from increases in revenues
outpacing increases in general and administrative costs. General and
administrative expense for 1995 increased by $1.6 million, or 13.3%, over such
expense for 1994. This change was due primarily to the
16


increase in the number of employees, predominantly at 600 Racing, and in average
compensation. Increases in Social Security, health insurance and other similar
charges associated with increased levels and amounts of employment also
occurred.
Depreciation and Amortization. Depreciation and amortization expense for
1995 increased by $393,000, or 8.7%, over such expense for 1994. This increase
was due to additions to property and equipment at AMS, CMS and 600 Racing.
Operating Income. Operating income for 1995 increased by $8.9 million, or
42.8%, over such income for 1994. This increase was due to the factors discussed
above.
Interest Expense, Net. Interest expense, net, for 1995 decreased by $3.8
million, or 99.4%, from such expense for 1994. This decrease was due to the
repayment of substantially all of the long-term debt with the proceeds of the
Company's IPO and interest income on short-term investments.
Other Income. Other income for 1995 increased by $1.8 million over such
income for 1994. This increase was due to gains on sale of land and
condominiums.
Provision for Income Taxes. The Company's effective income tax rate for
1995 was 41%, compared to an effective tax rate for 1994 of 43%.
Income from Continuing Operations. Income from continuing operations for
1995 increased by $9.1 million, or 87.1%, over such income for 1994, due to the
factors discussed above.
Extraordinary Item, Net. Upon repaying the Company's long-term debt,
related net debt issuance costs previously unamortized were written off as an
extraordinary item. There were no similar charges for 1994.
Seasonality and Quarterly Results
The Company has derived a substantial portion of its 1996 total revenues
from admissions and event-related revenue attributable to twelve
NASCAR-sanctioned races held in March, May, August, October and November. In
1997, the Company will hold a major racing event at TMS in April and at SPR in
May. As a result, although the Company's business has been highly seasonal, it
is expected to remain seasonal but to a lesser degree than in prior years when
the Company held NASCAR sanctioned races only in the second and fourth quarters.
In 1995 and 1996, the Company's second and fourth quarters accounted for
approximately 80% and 75% of its total annual revenues, and approximately 106%
and 96%, respectively, of its total annual operating income. The Company
sometimes produces minimal operating income or operating losses during its first
and third quarters, when it sponsors only one Winston Cup race each quarter. Set
forth below is certain summary information with respect to the Company's
operations for the most recent eight quarters.


1995 (unaudited) 1996 (unaudited)
1st 2nd 3rd 4th 1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total Quarter Quarter Quarter Quarter Total

(in thousands, except NASCAR-sanctioned events)
Total revenues................ $11,245 $27,709 $4,098 $32,521 $75,573 $12,330 $40,816 $13,505 $35,462 $102,113
Operating income (loss)....... 1,457 14,120 (3,147 ) 17,259 29,689 963 20,299 438 17,642 39,342
Net income (loss)............. 278 9,242 (637 ) 10,574 19,457 387 13,293 685 12,040 26,405
NASCAR-sanctioned events...... 2 3 0 3 8 2 5 2 3 12


Liquidity and Capital Resources
The Company has historically met its working capital and capital
expenditure requirements through a combination of cash flow from operations,
borrowings, particularly bank loans, and other debt and equity offerings.
Although the Company has expended significant amounts of cash in 1996 for the
construction of TMS, the acquisitions of BMS and SPR, and the improvement and
expansion and AMS, BMS, and CMS, the Company's financial condition and liquidity
strengthened during the year ended December 31, 1996. This strengthening of
liquidity was principally due to (1) in April 1996, the Company received net
cash proceeds of approximately $78,354,000 from the sale of 3,000,000 shares of
common stock in a public stock offering; (2) in October 1996, the Company
received net cash proceeds of approximately $72,150,000 from an offering of the
Debentures; (3) record operating results for the year ended December 31, 1996,
during which net income amounted to
17


$26,405,000 and net cash generated by operations amounted to $37,384,000; and
(4) the Company increased its net long-term borrowings under the Credit Facility
by $22,000,000 as of December 31, 1996.
Company management anticipates that the net proceeds of the 1996 equity and
debt offerings, together with cash from operations and funds available through
the Credit Facility, will sustain the Company's operating needs, including
planned capital expenditures at AMS, BMS, CMS, SPR and TMS into 1997. Based upon
the anticipated future growth and financing requirements of the Company,
management expects that the Company will, from time to time, engage in
additional financing of a character and in amounts to be determined. While the
Company expects to continue to generate positive cash flows from its existing
speedway operations, and has experienced improvement in its financial condition,
liquidity and credit availability, such resources, as well as possibly others,
will be needed to fund the Company's continued growth, including the continued
expansion and improvement of AMS, BMS, CMS and SPR.
In March 1996, the Company obtained from NationsBank, N.A. (Carolinas) an
unsecured, long-term working capital and letter of credit facility (the "Credit
Facility") with an overall borrowing limit of $110,000,000. The Credit Facility
matures in 1999 unless extended annually thereafter for two additional years at
the option of the lenders. Borrowings are permitted under the Credit Facility
for the following purposes: (i) refinancing of certain short-term borrowings,
(ii) financing seasonal working capital needs, and (iii) financing general
corporate purposes, including the costs of constructing TMS. Although the Credit
Facility is unsecured, the Company has agreed not to pledge its assets to any
third-party. See Note 7 to the Consolidated Financial Statements for discussion
of additional terms and restrictive loan covenants of the Credit Facility.
On October 1, 1996, the Company completed a private placement of the
Debentures in the aggregate principal amount of $74,000,000. Net proceeds to the
Company after commissions and discounts were $72,150,000. The Debentures are
unsecured, mature on September 30, 2003, are convertible into Common Stock at
the holder's option after November 30, 1996 at $31.11 per share until maturity,
and are redeemable at the Company's option after September 29, 2000. See Note 7
to the Consolidated Financial Statements for discussion of additional terms and
conditions of the Debentures. The proceeds of this Debenture Offering were used
to repay outstanding borrowings under the Credit Facility, fund construction
costs of TMS and for working capital needs of the Company.
Dividends
The Company does not anticipate paying any cash dividends in the
foreseeable future. Any decision concerning the payment of dividends on the
Common Stock will depend upon the results of operations, financial condition and
capital expenditure plans of the Company, as well as such factors as
permissibility under the Credit Facility and as the Board of Directors, in its
sole discretion, may consider relevant.
Capital Expenditures
Significant growth in the Company's revenues depends, in a large part, on
consistent investment in facilities. Therefore, the Company expects to continue
to make substantial capital expenditures. A variety of major capital projects
are underway, the most significant of which is the construction of TMS. As of
December 31, 1996, the Company's management estimates the remaining construction
costs to substantially complete TMS will approximate $40,000,000. Numerous
factors, many of which are beyond the Company's control, may influence the
ultimate cost of TMS, including undetected soil or land conditions, additional
land acquisition costs, adverse weather conditions, and accidents or natural
disasters affecting the construction site. In addition, the actual cost of TMS
could vary from the foregoing estimate if the Company's assumptions about the
quality of materials or workmanship required to complete TMS were to change. The
TMS construction is also subject to state and local regulatory processes, which
if changed, could materially affect the cost of TMS.
In 1996, the Company completed 16 new suites at AMS and reconfigured AMS's
main entrances and expanded on-site roads to ease congestion caused by the
increases in attendance. During 1996, the Company began a major renovation and
expansion of BMS. The Company is also in the process of acquiring additional
land for parking and camping at BMS. In 1996, at BMS, the Company added
approximately 6,000 permanent grandstand seats and relocated various mezzanine
level souvenir, concessions and restroom facilities at BMS to increase spectator
convenience and accessibility. In 1996, at CMS, the Company added approximately
10,000 permanent grandstand seats.
18


In 1997, at AMS, the Company expects to complete 56 new suites, add
approximately 19,000 permanent grandstand seats, and is converting AMS to a
quad-oval configuration, including changing the start-finish line location. In
1997, at BMS, the Company expects to complete 55 new suites, add approximately
53,000 permanent grandstand seats, and make other site improvements. In 1997, at
CMS, the Company expects to complete 26 new suites, add approximately 15,000
permanent grandstand seats, and make other site improvements. In 1997, at SPR,
the Company expects to complete parking, road improvements, and grading to
improve spectator site lines, and to increase and improve seating and facilities
for spectator and media amenities. Upon completion in April 1997, TMS will have
approximately 150,000 permanent grandstand seats, 200 suites and 76
condominiums. In 1997, after adding more than 226,000 seats, including the
opening of TMS, permanent grandstand seating capacity at all of the Company's
speedways will exceed 500,000.
The estimated aggregate cost of capital expenditures in 1997, exclusive of
TMS, will approximate $80 million.
On November 18, 1996, the Company acquired certain assets of SPR and
executed a 14-year capital lease with the seller for all of the real property of
the SPR complex. SMI has the option to purchase the real property for $38.1
million during a six-month option period commencing November 1, 1999, subject to
acceleration at the election of the seller after March 31, 1997 and through
December 31, 1999. Monthly lease payments range from $67,000 in 1997 to $631,000
in 2010. In connection with the acquisition, the Company loaned the seller
approximately $13.4 million under a promissory note receivable to repay their
then outstanding obligations on the real property. Amounts due under the note, a
$3.5 million purchase option payment, and $3.0 million lease security deposit
are to be credited against amounts due from the Company upon exercise of the
purchase option. In management's opinion, it is probable that the purchase
option will be exercised.
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
expansion and development of its existing Legends Cars products and markets and
the expansion into complementary businesses.
Environmental Matters
The Company's property at CMS includes areas that were used as solid waste
landfills for many years. Landfilling of general categories of municipal solid
waste on the CMS property ceased in 1992, but CMS 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
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 on its property, are in compliance
with all applicable federal, state and local environmental laws and regulations.
Management is not aware of any situation related to landfill operations which
would materially adversely affect the Company's financial position or future
results of operations.
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.
19



PART III
Item 10. Directors and Executive Officers of the Registrant
Directors of the Company are elected at the annual meeting of stockholders
to serve staggered terms of three years and until their successors are elected
and qualified. The terms of Messrs. Brooks and Gambill expire in 1999; the terms
of Messrs. Wheeler and Clark expire in 1997; and the terms of Messrs. Smith and
Benton expire in 1998. Executive officers of the Company are elected annually by
the Board of Directors of the Company 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 Company's Board of
Directors currently consists of six members. The following table sets forth
certain information with respect to the directors and executive officers of the
Company:



Name Age Positions with the Company

O. Bruton Smith 70 Chief Executive Office and Chairman of SMI
H.A. "Humpy" Wheeler 59 President, Chief Operating Officer and Director of
SMI; President and General Manager of CMS
William R. Brooks 47 Vice President, Treasurer, Chief Financial Officer
and Director of SMI
Edwin R. Clark 42 Executive Vice President and Director of SMI;
President and General Manager of AMS
William P. Benton 73 Director
Mark M. Gambill 46 Director


O. Bruton Smith has been Chief Executive Officer and a director of CMS
since 1975. He was a founder of CMS in 1959 and was an executive officer and
director of CMS until 1961, when it entered reorganization proceedings under the
bankruptcy laws. Mr. Smith became Chief Executive Officer, President and a
director of AMS upon acquiring it in 1990. He became Chief Executive Officer and
Chairman of SMI upon its organization in December 1994 and became the Chairman
and President of BMS upon its acquisition in January 1996, SPR upon its
acquisition in November 1996, and of TMS since formed. Mr. Smith also owns and
operates Town & Country Ford, Inc. ("T&C"), among other private businesses.
H.A. "Humpy" Wheeler was hired in 1975 and has been a director and General
Manager of CMS since 1976. Mr. Wheeler was named President of CMS 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 formed.
William R. Brooks joined Sonic from Price Waterhouse in 1983. Promoted from
Tax Manager to Controller in 1985, he was promoted again, to Chief Financial
Officer, in 1989. Mr. Brooks has been Vice President of CMS for more than five
years and has been Vice President and a director of AMS, BMS, and SPR since
their acquisition, and of TMS since formed. He became Vice President, Treasurer,
Chief Financial Officer and a director of SMI upon its organization in December
1994 and has been the President and a director of Speedway Funding Corp., the
Company's financing subsidiary, since 1995.
Edwin R. Clark 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 was CMS' Vice President of Events from 1981 to 1992. Mr. Clark
became Executive Vice President of SMI upon its organization in December 1994
and became a director of SMI in 1995.
William P. Benton became a director of SMI in 1995. Since 1986 Mr. Benton
has been Vice Chairman of Wells, Rich, Greene/BDDP Inc., an advertising agency
with offices in New York and Detroit. Mr. Benton is also a consultant to the
Chairman and Chief Executive Officers of TI Group and Allied Holdings, Inc. Mr.
Benton retired from Ford Motor Company as its Vice President of Marketing
Worldwide in 1984 after a 37-year career with that company.
Mark M. Gambill became a director of SMI in 1995. Mr. Gambill has been
employed continuously since 1972 by Wheat, First Securities, Inc., an investment
banking firm headquartered in Richmond, Virginia. In 1996,
20


he was named President of Wheat, First Securities, Inc. 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 also has served on the Board of Directors of
Wheat, First Securities, Inc. since 1983.
Messrs. Benton and Gambill serve as members of the Audit Committee of the
Board of Directors. Messrs. Benton, Gambill and Smith serve as members of the
Compensation Committee of the Board of Directors (the "Compensation Committee").
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, except that Mr. H.A. Wheeler
inadvertently filed late one report on Form 4 showing the sale in 1996 of 2000
shares of Common Stock.
Item 11. Executive Compensation
Board Compensation Committee Report on Executive Compensation
1996 Officer Compensation Program
The Company's 1996 executive officer compensation program 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 SMI's Stock Option Plan (for officers other than
the Chief Executive Officer). Executive officers (including the Chief Executive
Officer) were also eligible in 1996 to participate in various benefits plans
similar to those provided to other employees of the Company. Such benefit 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 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 1996 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 .7% to 2.5% of
the Company's 1996 operating income.
Awards of stock options under SMI's 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
level 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
Codes imposes a limitation on the deductibility of nonperformance-based
compensation in excess of $1 million paid to named executive officers. The Stock
Option Plan was created with the intention that all compensation attributable to
stock option exercises should qualify as deductible performance-based
compensation. The Committee currently believes that, generally, the Company
should be able to continue to manage its executive compensation program to
preserve federal income tax deductions.
21


Chief Executive Officer Compensation
The 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
1996 operating income. The 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 in the Company, his
rewards as Chief Executive Officer reflect increases in value enjoyed by all
other stockholders.
Compensation Committee
O. Bruton Smith Mark M. Gambill William P. Benton
Compensation of Officers
The following table sets forth compensation paid by or on behalf of the
Company to the Chief Executive Officer of the Company and to its other executive
officers for services rendered during the Company's fiscal years ended December
31, 1996, 1995 and 1994:
SUMMARY COMPENSATION TABLE


Long-Term
Compensation
Awards
Number of
Annual Compensation (1) Shares
Other Annual Underlying All Other
Name and Principal Position(s) Year Salary Bonus (2) Compensation Options (3) Compensation (4)

O. Bruton Smith 1996 $350,000 $ 975,000 $99,288(5) -- -0-
Chairman and Chief Executive 1995 350,000 740,000 96,266(5) -- -0-
Officer of SMI 1994 328,106 800,000 (6) -- -0-
H.A. "Humpy" Wheeler 1996 250,000 685,000 (6) -- $2,500
President and Chief Operating 1995 250,000 450,000 (6) -- 2,500
Officer of SMI; President and 1994 42,000 844,336 700,000 2,500
General Manager of CMS
William R. Brooks 1996 175,000 273,000 (6) 100,000 2,500
Vice President, Treasurer and 1995 175,000 207,200 (6) -- 2,500
Chief Financial Officer of SMI 1994 72,000 323,600 (6) 140,000 300
Edwin R. Clark 1996 102,500 205,593 (6) -- 2,500
Executive Vice President of 1995 102,500 240,927 (6) -- 2,500
SMI; President and General 1994 102,500 228,050 (6) 80,000 2,500
Manager 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 Company's 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 granted in 1994 and 1996 and is
adjusted to reflect the Stock Split. No options were granted to the
Company's executive officers in 1995.
(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 Insurance Arrangements." Mr.
Smith also received certain perquisites and other personal benefits
totalling 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.
Fiscal Year-End Option Values
The following table sets forth information concerning outstanding options
to purchase Common Stock held by executive officers of the Company at December
31, 1996, adjusted to reflect the Stock Split:
22


Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option


Number of Securities Unexercised
Number of Options Underlying Unexercised Options at In-the-Money Options at
Exercised in Fiscal Year-End (#) Fiscal Year-End ($)(1)
Name 1996 Exercisable/Unexercisable Exercisable/Unexercisable

H.A. "Humpy" Wheeler 102,000 598,000/0 $ 9,791,000/0
William R. Brooks -- 240,000/0 2,100,000/0
Edwin R. Clark -- 80,000/0 1,170,000/0


(1) Year end value is based on an assumed fair market value of $21.00 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 options plans with respect to
the Common Stock: (i) its 1994 Stock Option Plan (the "1994 Option Plan"), and
(ii) its Formula Stock Option Plan (the "Formula Option Plan"). The 1994 Option
Plan provides for the granting of options for up to an aggregate of 2,000,000
(as adjusted for the Stock Split) shares of Common Stock. Options indicated
above as held by executive officers at December 31, 1996 were granted pursuant
to the 1994 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 400,000 (as adjusted for the
Stock Split) shares of Common Stock. The Company granted options to purchase
20,000 shares in 1996 and options to purchase an additional 20,000 shares in
January 1997, to each of Messrs. Benton and Gambill under the Formula Option
Plan. Effective January 1, 1997, the Company's Board of Directors adopted the
SMI Employee Stock Purchase Plan as approved by SMI's stockholders at their 1996
annual meeting. The SMI Employee Stock Purchase Plan was adopted to provide
employees the opportunity to acquire stock ownership. An aggregate total of
200,000 shares of common stock have been reserved for purchase under the plan.
See Note 15 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 $16,362,454 (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 and in return, the trustees under such trust arrangements have
assigned a portion of the proceeds payable under the applicable Policy to the
Company as security for the repayment of the amounts which the Company has paid
for premiums less any amount that is treated as compensation to Mr. Smith.
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 (as defined below). The Company's Split-Dollar Interest
is, in the case of a surrender of a Policy for its cash value, the lesser of (i)
the net cash value of a Policy and (ii) the accumulated payments made by the
Company towards premiums under the Policy less amounts paid by the Company but
charged as compensation to Mr. Smith. The Company's Split-Dollar Interest is, in
the case of the payment of the death benefit, the cumulative payments made by
the Company towards the premiums under a Policy less amounts paid by the Company
but charged as compensation to Mr. Smith.
In connection with the Policies, Mr. Smith has agreed to reimburse the
Company for any difference between amounts received by the Company in the event
of a termination or surrender of a Policy at a time when the cumulative premium
paid is less than the cash value of such Policy, net of any amount paid to Mr.
Smith as compensation. Mr. Smith's promise is evidenced by a promissory note in
favor of the Company, which note includes a Limited Guaranty by Sonic whereby
Sonic will permit amounts owed by Mr. Smith to the Company to be offset by
amounts owed to Sonic by AMS.
23


Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
Messrs. Benton, Gambill and Smith served on the Company's Compensation
Committee during 1996. Mr. Smith serves as the Chief Executive Officer of the
Company. Mark M. Gambill is the President of Wheat, First Securities, Inc., the
investment banking firm which acted as a lead underwriter in the Company's IPO
and was a lead underwriter in the Company's March 1996 equity offering and the
Company's offering of the Debenture Offering.
The Company pays the annual (or shorter period) premiums on split dollar
life insurance policies for the benefit of Mr. Smith. See "Executive
Compensation -- Smith Life Insurance Arrangements."
No executive officer of SMI serves or served on the compensation committee
of another entity during 1996 and no executive officer of SMI serves or served
as a director of another entity who has or had an executive officer serving on
the Board of Directors of SMI.
Director Compensation
Members of the Board of Directors who are not employees of the Company each
received in 1996 an option to purchase 20,000 shares of the Company's common
stock at $20.625 for services as directors. The Company also reimburses all
directors for their expenses incurred in connection with their activities as
directors of the Company. 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 Option Plan for the Company's
outside directors which came into effect in 1996, see "Executive
Compensation -- Stock Option Plans."
24


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 and Poor's 500 Stock Index and a Peer Group Index for the time period
commencing February 24, 1995 and ending December 31, 1996. The companies used in
the Peer Group Index in 1995 consist of Churchill Downs Incorporated,
International Speedway Corporation, Gaylord Entertainment Company, Hollywood
Park, Inc., Walt Disney Co. and International Family Entertainment, and in 1996
also include Penske Motorsports and Dover International Raceway, which are all
publicly traded companies known by the Company to be involved in the amusement,
sports and recreation industries. 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 and the Peer Group Index companies and that all dividends were
reinvested.

(Performance Graph appears and it plot points reads as follows:)

Comparison of Cumulative Total Return


24 Feb 95 31 Mar 95 30 Jun 95 30 Sep 95 31 Dec 95 31 Mar 96 30 Jun 96 31 Sep 96 31 Dec 96
--------- --------- --------- --------- --------- --------- --------- --------- ---------

Speedway 100 103 115 137 159 299 272 278 223
S&P 100 101 113 121 129 136 142 147 159
Old Peer 100 101 105 109 112 121 120 119 131
New Peer 100 95 105 109 112 121 119 119 130


Item 12. Security Ownership of Certain Beneficial Owners and Management
The table below sets forth certain information regarding ownership of SMI's
Common Stock as of February 28, 1997, by (i) each person or entity who
beneficially owns five percent or more of the Common Stock, (ii) each director
and executive officer of SMI (including the Chief Executive Officer) and (iii)
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 it or him
as set forth opposite its or his name.


Amount & Nature of
Beneficial Owner Beneficial Ownership Percent

O. Bruton Smith (1).................. 29,000,000 70.2%
Sonic Financial Corporation (2)...... 23,700,000 57.4
H.A."Humpy" Wheeler (3).............. 598,000 1.4
William R. Brooks (3)................ 240,000 *
Edwin R. Clark (3)................... 84,800 *
William P. Benton (3)................ 50,000 *
Mark M. Gambill (3).................. 44,200 *
All directors and executive officers 30,017,000 71.0
as a group (six persons)(1)........


25


* 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") elsewhere in the table. Mr. Smith owns the substantial
majority of the common stock of Sonic. Mr. Smith's address is P.O. Box
18747, Charlotte, North Carolina 28212.
(2) Sonic's address is P.O. Box 18747, Charlotte, North Carolina 28212.
(3) All the shares owned by each such person (other than Mr. Clark, Mr. Gambill
and Mr. Benton) underlie options granted by the Company. All the shares
owned by Mr. Clark, Mr. Gambill, and Mr. Benton other than 4,800, 4,200, and
10,000 shares owned, respectively, by them directly, underlie options
granted by the Company. All such options are currently exercisable. See
"Executive Compensation -- Stock Option Plans."
Item 13. Certain Relationships and Related Transactions
CMS holds a note from a partnership in which the Company's Chief Executive
Officer is a partner. The outstanding balance due thereunder was $697,000 at
December 31, 1996, including interest totalling $197,000. The note due from such
partnership bears interest at 1% over prime, is collateralized by certain land
owned by the partnership and is payable on demand.
Sonic has made several loans and cash advances to AMS in the last three
years. Such loans and advances stood at approximately $2.6 million at December
31, 1996. Of such amount, approximately $1.8 million bears interest at 3.83% per
annum. The remainder of the amount bears interest at a rate of prime plus 1%.
Prior to the completion of the IPO, CMS joined with Sonic in filing
consolidated federal income tax returns for several years. It did so for the
period of 1995 ending with the restructuring consummated prior to the completion
of the IPO. Under applicable federal tax law, each corporation included in
Sonic's consolidated return is jointly and severally liable for any resultant
tax. Under a tax allocation agreement dated January 27, 1995, however, CMS
agreed to pay to Sonic, in the event that additional federal income tax is
determined to be due, an amount equal to CMS' separate federal income tax
liability computed for all periods in which CMS and Sonic have been members of
Sonic's consolidated group. Also pursuant to such agreement, Sonic agreed to
indemnify CMS for any additional amount determined to be due from Sonic's
consolidated group in excess of the federal income tax liability of CMS for such
periods. The tax allocation agreement establishes procedures with respect to tax
adjustments, tax claims, tax refunds, tax credits and other tax attributes
relating to periods ending prior to the time that CMS shall leave Sonic's
consolidated group. Pursuant to such agreement, amounts payable by CMS for tax
adjustments, if any, shall in no event exceed the sum of $1.8 million plus the
amount of any tax adjustments for which CMS may receive future tax benefits.
At December 31, 1996, the Company had a note receivable from the Company's
Chairman and Chief Executive Officer for $1,131,000. 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.
For information concerning certain transactions in which Mr. Smith has an
interest, see "Executive Compensation -- 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:
See the Index to Financial Statement Schedule which appears on page S-1
hereof.
(3) Exhibits:
26


Exhibits required in connection with this Annual Report on Form 10-K are
listed below. Certain of such 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 No. 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")).
* 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 "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 Indenture).
* 4.4 Registration Rights Agreement dated as of September 26, 1996 among the Company, Wheat, First
Securities, Inc, Montgomery Securities and J.C. Bradford & Co. (incorporated by reference to
Exhibit 4.3 to the November 1996 Form S-3).
* 4.5 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")).
* 4.6 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).
* 10.1 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).
* 10.2 Atlanta Motor Speedway, Inc. 14% Senior Subordinated of $5,150,000 dated as of October 23, 1990
(incorporated by reference to Exhibit 10.23 to the Form S-1).
* 10.3 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).
* 10.4 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).
* 10.5 Agreement for Purchase and Sale of an Option in Real Property 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).
* 10.6 Documentary Letter of Credit issued by NationsBank of North Carolina, N.A. for the account of
Charlotte Motor Speedway, Inc. in favor of Yamaha Motor Co., Ltd., Japan in the amount of
$1,600,000 dated as of September 19, 1994 (incorporated by reference to Exhibit 10.41 to the
Form S-1).
* 10.7 Sales Agreement by and between Yamaha Motor Co. Ltd. and Charlotte Motor Speedway, Inc. dated as
of August 1, 1994 (incorporated by reference to Exhibit 10.42 to the Form S-1).
* 10.8 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).
* 10.9 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).
* 10.10 Speedway Motorsports, Inc. 1994 Stock Option Plan (incorporated by reference to Exhibit 10.45 to
the Form S-1).

27




Exhibit No. Description

* 10.11 Speedway Motorsports Inc. Formula Stock Option Plan (incorporated by reference to Exhibit 10.3
to the Annual Report on Form 10-K of the Company for the year ended December 31, 1995 (the "1995
Form 10-K")).
* 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 LLC 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 the Form S-1).
* 10.14 Purchase Agreement by and among the Company and Calvin Carl Combs, Linda Fox Combs, Dennis J.
Combs, Ned D. Combs, and Judy C. Benfield (incorporated by reference to Exhibit 10.57 to the
Quarterly Report on Form 10-Q of the Company for the quarterly period ended June 30, 1995).
* 10.15 Stock Purchase Agreement dated January 22, 1996 between the Company and shareholders of National
Raceways, Inc. (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K of
the Company filed as of February 5, 1996 (the "BMS Form 8-K")).
* 10.16 Promissory Note dated January 22, 1996 by the Company and Speedway Funding Corp. in favor of
NationsBank, N.A. (incorporated by reference to Exhibit 99.2 to the BMS Form 8-K).
* 10.17 Guaranty Agreement dated January 22, 1996 among National Raceways, Inc., Charlotte Motor
Speedway, Inc., Atlanta Motor Speedway, Inc., 600 Racing, Inc. and NationsBank, N.A.
(incorporated by reference to Exhibit 99.3 to the BMS Form 8-K).
* 10.18 Non-Negotiable Promissory Note date 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).
* 10.19 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")).
* 10.20 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).
* 10.21 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).
* 10.22 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).
10.23 Purchase Contract dated December 18, 1996 between Texas Motor Speedway, Inc., as seller, and FW
Sports Authority, Inc., as purchaser.
10.24 Lease Agreement dated as of December 18, 1996 between FW Sports Authority, Inc., as lessor, and
Texas Motor Speedway, Inc., as lessee.
10.25 Guaranty Agreement dated as of December 18, 1996 among the Company, the City of Fort Worth,
Texas and FW Sports Authority, Inc.
11.1 Statement regarding Computation of Per Share Earnings.
21.1 Subsidiaries of the Company.
27.1 Financial Data Schedule.


* Previously filed.
28


INDEX TO FINANCIAL STATEMENTS


Page

SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT............................................................................. F-2
AUDITED CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets at December 31, 1995 and 1996............................................. F-3
Consolidated Statements of Income for the years ended December 31, 1994, 1995 and 1996................ F-5
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1994, 1995 and 1996.. F-6
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996............ F-7
Notes to Consolidated Financial Statements............................................................ F-8


F-1


INDEPENDENT AUDITORS' REPORT
Board of Directors
Speedway Motorsports, Inc.
Charlotte, North Carolina
We have audited the accompanying consolidated balance sheets of Speedway
Motorsports, Inc. and subsidiaries as of December 31, 1995 and 1996, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1996. Our audits
also included the financial statement schedule filed under Part IV of Item
14(a)2. These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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, 1995 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles. Also, in our opinion,
such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
As discussed in Note 11 to the consolidated financial statements, the
Internal Revenue Service has proposed significant adjustments for additional
income taxes and penalties, plus interest, at Atlanta Motor Speedway, Inc.
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
February 28, 1997
F-2


SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1996
(Dollars in thousands)


1995 1996

ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................................... $ 10,132 $ 22,252
Restricted cash (Note 2)................................................................ 86 14,624
Trade accounts receivable (Note 2)...................................................... 6,511 11,919
Prepaid income taxes.................................................................... 727 4,784
Inventories (Note 3).................................................................... 5,372 6,218
Speedway condominiums held for sale..................................................... 3,142 3,535
Prepaid expenses........................................................................ 185 526
Total current assets................................................................. 26,155 63,858
PROPERTY AND EQUIPMENT, NET (Notes 4 and 5)............................................... 93,105 288,361
GOODWILL AND OTHER INTANGIBLE ASSETS, NET (Note 2)........................................ 12,675 48,314
OTHER ASSETS:
Marketable equity securities (Notes 2 and 6)............................................ 1,855 2,447
Notes receivable (Note 12).............................................................. 934 2,148
Other assets (Note 2)................................................................... 1,722 4,156
Total other assets................................................................... 4,511 8,751
TOTAL................................................................................ $136,446 $409,284


F-3


SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS -- (Continued)
December 31, 1995 and 1996
(Dollars in thousands)


1995 1996

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 7)........................................... $ 348 $ 383
Accounts payable........................................................................ 7,743 11,363
Deferred race event income, net (Note 2)................................................ 13,345 36,393
Accrued expenses and other liabilities.................................................. 6,535 12,075
Total current liabilities.......................................................... 27,971 60,214
LONG-TERM DEBT (Note 7)................................................................... 1,458 115,247
PAYABLE TO AFFILIATED COMPANY (Note 12)................................................... 2,603 2,603
DEFERRED INCOME, NET (Note 2)............................................................. 1,563 9,732
DEFERRED INCOME TAXES (Note 11)........................................................... 6,717 13,742
OTHER LIABILITIES......................................................................... 755 3,011
Total liabilities.................................................................. 41,067 204,549
COMMITMENTS AND CONTINGENCIES (Notes 5, 11 and 13)........................................
STOCKHOLDERS' EQUITY (Notes 1, 6 and 9):
Preferred stock......................................................................... -- --
Common stock, $.01 par value, 100,000,000 shares
authorized, 38,000,000 and 41,305,000 shares
issued and outstanding in 1995 and 1996.............................................. 380 413
Additional paid-in capital.............................................................. 72,148 155,156
Retained earnings....................................................................... 22,943 49,348
Deduct:
Unrealized loss on marketable equity securities...................................... (92) (182)
Total stockholders' equity......................................................... 95,379 204,735
TOTAL.............................................................................. $136,446 $409,284


See notes to consolidated financial statements.
F-4


SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1994, 1995 and 1996
(Dollars and shares in thousands except per share amounts)


1994 1995 1996

REVENUES (Note 2):
Admissions..................................................................... $31,523 $36,569 $52,451
Event related revenue.......................................................... 24,814 27,783 36,414
Other operating revenue........................................................ 8,200 11,221 13,248
Total revenues.............................................................. 64,537 75,573 102,113
OPERATING EXPENSES:
Direct expense of events....................................................... 18,327 19,999 30,173
Other direct operating expense................................................. 6,110 7,611 8,005
General and administrative..................................................... 11,812 13,381 16,995
Non-cash stock compensation (Note 15).......................................... 3,000 -- --
Depreciation and amortization.................................................. 4,500 4,893 7,598
Total operating expenses.................................................... 43,749 45,884 62,771
OPERATING INCOME................................................................. 20,788 29,689 39,342
Interest income (expense), net (Notes 7 and 12).................................. (3,855) (24) 1,316
Other income (Note 14)........................................................... 1,592 3,625 2,399
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES................................................................... 18,525 33,290 43,057
Provision for income taxes (Note 11)............................................. (8,055) (13,700) (16,652)
INCOME FROM CONTINUING OPERATIONS................................................ 10,470 19,590 26,405
Discontinued operations -- equity in loss of joint
venture (Note 8)............................................................... (294) -- --
INCOME BEFORE EXTRAORDINARY ITEM................................................. 10,176 19,590 26,405
Extraordinary item, net (Note 7)................................................. -- (133) --
NET INCOME....................................................................... $10,176 $19,457 $26,405
NET INCOME APPLICABLE TO COMMON STOCK (Note 10).................................. $ 7,170 $19,457 $26,405
PER SHARE DATA (Notes 1, 9 and 10):
Income from continuing operations applicable to common stock................... $ 0.25 $ 0.53 $ .64
Discontinued operations........................................................ (0.01) -- --
Net income applicable to common stock.......................................... $ 0.24 $ 0.53 $ .64
WEIGHTED AVERAGE SHARES OUTSTANDING (Notes 1 and 15)............................. 30,400 37,275 41,301


See notes to consolidated financial statements.
F-5


SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1994, 1995 and 1996
(Dollars and shares in thousands)


Unrealized Loan
Gain (Loss) Receivable
Additional on Marketable from Sonic Total
Common Stock Paid-In Retained Equity Financial Stockholders'
Shares Amount Capital Earnings Securities Corporation Equity

BALANCE, JANUARY 1, 1994............. 28 $ 28 $ 3,706 $ 34,344 $(284) $ (21,278) $ 16,516
Net income......................... -- -- -- 10,176 -- -- 10,176
Interest on related party loans and
advances......................... -- -- -- 508 -- -- 508
Change in estimated redemption
value of put warrants (Note
10).............................. -- -- -- (3,006) -- -- (3,006)
Net unrealized gain on marketable
equity securities................ -- -- -- -- 249 -- 249
Increase in loan receivable from
Sonic Financial Corporation,
net.............................. -- -- -- -- -- (8,213) (8,213)
Issuance of Speedway Motorsports,
Inc. common stock (Note 1)....... 2 -- 1 -- -- -- 1
Distribution to Sonic Financial
Corporation (Note 12)............ -- -- -- (29,491) -- 29,491 --
Non-cash stock compensation
(Note 15)........................ -- -- 3,000 -- -- -- 3,000
BALANCE, DECEMBER 31, 1994........... 30 28 6,707 12,531 (35) -- 19,231
Net income......................... -- -- -- 19,457 -- -- 19,457
Restructuring of ownership prior to
initial public offering (Note
1)............................... 29,970 272 (272) -- -- -- --
Issuance of common stock
(Note 1)......................... 8,000 80 65,713 -- -- -- 65,793
Joint venture disposal (Note 8).... -- -- -- (9,045) -- -- (9,045)
Net unrealized loss on marketable
equity securities................ -- -- -- -- (57) -- (57)
BALANCE, DECEMBER 31, 1995........... 38,000 380 72,148 22,943 (92) -- 95,379
Net income......................... -- -- -- 26,405 -- -- 26,405
Issuance of common stock
(Note 1)......................... 3,000 30 78,324 -- -- -- 78,354
Issuance of common stock in
business acquisition of Oil-Chem
Research Corp. (Note 1).......... 146 1 3,944 -- -- -- 3,945
Exercise of stock options
(Note 15)........................ 159 2 740 -- -- -- 742
Net unrealized loss on marketable
equity securities................ -- -- -- -- (90) -- (90)
BALANCE, DECEMBER 31, 1996........... 41,305 $ 413 $155,156 $ 49,348 $(182) $ -- $ 204,735


See notes to consolidated financial statements.
F-6


SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1994, 1995 and 1996
(Dollars in Thousands)


1994 1995 1996

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................................... $ 10,176 $ 19,457 $ 26,405
Extraordinary item, net....................................................... -- 133 --
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization............................................... 4,500 4,893 7,598
Equity in earnings of equity method investee................................ -- (233) (371)
Equity in net loss of real estate joint venture............................. 491 -- --
Non-cash stock compensation................................................. 3,000 -- --
Gain on sale of marketable equity securities................................ (1,060) (242) (698)
Gain on sale of fixed assets................................................ (77) (1,199) --
Amortization of deferred membership income.................................. (274) (275) (275)
Deferred income tax provision............................................... (371) 516 3,890
Other....................................................................... (490) -- --
Changes in operating assets and liabilities:
Restricted cash........................................................... -- (86) (14,538)
Trade accounts receivable................................................. (1,209) (2,960) (4,569)
Prepaid income taxes...................................................... -- 223 (4,057)
Inventories............................................................... (942) (1,247) (819)
Other current assets and liabilities...................................... 560 (45) 3,651
Condominiums held for sale................................................ (2,623) 1,457 (393)
Accounts payable.......................................................... -- 6,175 (4,917)
Deferred race event income................................................ 1,890 4,053 15,812
Accrued expenses and other liabilities.................................... -- 1,008 3,179
Deferred income........................................................... -- -- 8,444
Other assets and liabilities.............................................. 422 (583) (958)
Net cash provided by operating activities.............................. 13,993 31,045 37,384
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt...................................... 6,429 -- 146,525
Increase in loans receivable from affiliate................................... (7,422) -- --
Principal payments on long-term debt.......................................... (10,732) (47,424) (50,866)
Payments of debt issuance costs............................................... -- -- (2,894)
Advances from related parties................................................. 301 2 --
Exercise of common stock options.............................................. -- -- 742
Issuance of common stock...................................................... 1 65,793 78,354
Net cash provided by (used in) financing activities.................... (11,423) 18,371 171,861
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.......................................................... (5,009) (40,718) (147,741)
Purchase of Bristol Motor Speedway............................................ -- -- (27,176)
Purchase of Oil-Chem Research Corp............................................ -- -- (514)
Purchase of Sears Point Raceway assets........................................ -- -- (8,487)
Issuance of note receivable................................................... -- -- (13,453)
Investment in North Wilkesboro Speedway....................................... -- (6,050) --
Purchase of marketable equity securities...................................... (924) (2,809) (2,135)
Proceeds from sales of marketable equity securities........................... 1,345 1,451 2,094
Proceeds from sale of fixed assets............................................ 243 1,796 --
Contribution of capital to real estate joint venture.......................... (42) -- --
Repayments from related parties............................................... 500 -- 287
Net cash used in investing activities.................................. (3,887) (46,330) (197,125)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................ (1,317) 3,086 12,120
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.................................. 8,363 7,046 10,132
CASH AND CASH EQUIVALENTS AT END OF YEAR........................................ $ 7,046 $ 10,132 $ 22,252
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest........................................................ $ 4,341 $ 1,486 $ 2,211
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Bank debt incurred in connection with redemption of put warrants (Note 10).... $ 8,000
Road construction costs financed with a note payable (Note 7)................. $ 1,969
Capital lease obligation incurred for Sears Point Raceway facility (Note 7)... $ 18,165


See notes to consolidated financial statements.
F-7


SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS

BASIS OF PRESENTATION -- The 1996 consolidated financial statements include
the accounts of Speedway Motorsports, Inc. (SMI), and its wholly-owned
subsidiaries, Charlotte Motor Speedway, Inc. and subsidiaries (CMS), Atlanta
Motor Speedway, Inc. (AMS), Bristol Motor Speedway, (BMS), Sears Point Raceway
(SPR), Texas Motor Speedway (TMS), Oil-Chem Research Corp. and subsidiary,
Speedway Funding Corp. and Sonoma Funding Corp. (collectively, the Company).

In a corporate restructuring (Restructuring) prior to the initial public
offering of common stock by SMI on March 3, 1995, CMS and AMS became
wholly-owned subsidiaries of SMI. Sonic Financial Corporation (Sonic), an
affiliate of the Company through common ownership, and other shareholders of CMS
and AMS became shareholders of SMI. Prior to the Restructuring, the accompanying
financial statements reflect the combined accounts of SMI, CMS and AMS. The
combination of SMI, CMS and AMS was accounted for based on historical cost in a
manner similar to a pooling-of-interests because the entities were under common
management and control.

BUSINESS ACQUISITIONS (see Description Of Business below and Note 17) -- On
January 22, 1996, the Company acquired 100% of the outstanding capital stock of
National Raceways, Inc. (NRI) for $27,176,000, including direct acquisition
costs of $146,000. NRI formerly owned and operated Bristol Motor Speedway. The
acquisition was financed through borrowings under the Company's Credit Facility
(see Note 7). As part of the acquisition, the Company obtained a right of first
refusal to acquire certain adjacent land used for camping and parking for race
events.

On April 16, 1996, the Company acquired 100% of the outstanding capital
stock of Oil-Chem Research Corp. (ORC) for $4,459,000 in Company stock and cash.

On November 18, 1996, the Company acquired certain tangible and intangible
assets and the operations of Sears Point Raceway (SPR) for approximately
$2,000,000 in cash. In addition, the Company executed a long-term lease,
including a $38,100,000 purchase option, for the racetrack facilities and real
property (see Note 7). The Company paid a lease security deposit of $3,000,000
and the purchase option was acquired for a cash payment of $3,500,000. The
Company operates the facility as Sears Point Raceway.

DESCRIPTION OF BUSINESS -- CMS owns and operates a 1.5-mile oval, asphalt
speedway located in Concord, North Carolina. CMS stages three major National
Association of Stock Car Auto Racing (NASCAR) Winston Cup events annually, two
in May and one in October. Additionally, two Busch Grand National and two
Automobile Racing Club of America (ARCA) races are held annually, each preceding
a Winston Cup event. In 1996, CMS also hosted an International Race of Champions
(IROC) race. All of these events are sanctioned by NASCAR, IROC 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.

CMS also owns an office and entertainment complex which overlooks the main
speedway. A wholly-owned subsidiary, The Speedway Club, Inc. (Speedway Club),
derives rental, catering and dining revenues from the complex. Additionally, CMS
has constructed 52 condominiums overlooking the main speedway, all of which had
been sold by the end of 1994.

CMS, through its wholly-owned subsidiary, 600 Racing, Inc., is also engaged
in the development and sale of 5/8-scale cars (Legends Cars) modeled after
older-style coupes and sedans. Revenue is derived from the sale of vehicles and
vehicle parts.

AMS owns and operates a 1.5-mile oval, asphalt speedway located on 870
acres in Hampton, Georgia. Two major NASCAR Winston Cup events are held
annually, one in March and one in November. Additionally, a Busch Grand National
race and two ARCA races are also held annually, each preceding a Winston Cup
event. All

F-8


SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

of these events are sanctioned by NASCAR or ARCA. AMS has constructed 46
condominiums overlooking the Atlanta speedway and is in the process of selling
the eleven 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 530 acres in Bristol, Tennessee. BMS currently sponsors two major
NASCAR Winston Cup events annually. Additionally, two Busch Grand National races
are held annually, each preceding a Winston Cup event.

SPR, located on approximately 800 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 sponsors a major
NASCAR-sanctioned Winston Cup racing event annually. Additional events held
annually include a NASCAR sanctioned Craftsman Truck Series, a NHRA Winston Drag
Racing Series, as well as American Motorcycle Association and Sports Car Club of
America (SCCA), racing events. The racetrack is also rented throughout the year
by various organizations, including the SCCA, major automobile manufacturers,
and other car clubs.

TMS was established on February 13, 1995 for the purpose of constructing
and operating a 1.5-mile, banked, asphalt quad-oval superspeedway located on 950
acres in Fort Worth, Texas (see Note 5). TMS will host its first major NASCAR
Winston Cup race on April 6, 1997 preceded by a Busch Grand National race.
Management is actively pursuing the scheduling of additional motorsports racing
and other events at TMS. Other events will be announced as they are scheduled.
In July 1996, TMS began construction of 76 condominiums above turn-two
overlooking the speedway, 72 of which have been contracted for sale.

ORC produces an environmentally friendly motor oil additive that the
Company intends to promote in conjunction with its speedways.

The Company's Chairman and CEO purchased approximately 24% of the
outstanding common stock of North Carolina Motor Speedway, Inc. in 1995. The
Chairman has offered to sell this stock to the Company at his cost. The Company
has declined to purchase the shares to date but may elect to do so in the
future. The Company has offered to buy the remaining 76% equity interest in
North Carolina Motor Speedway, Inc.

In October 1996, the Company signed a joint management and development
agreement with Quad-Cities International Raceway Park. The Company will serve in
an advisory capacity for the development of a multi-use facility, which includes
a speedway located in northwest Illinois. The agreement also grants the Company
the option to purchase up to 40% equity ownership in the facility. The option
has not been exercised.

2. SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION AND COMBINATION -- All significant intercompany
accounts and transactions have been eliminated in consolidation and combination.

REVENUE RECOGNITION -- Admissions revenue consists of ticket sales. Event
related revenues consist of amounts received from sponsorships, television,
concessions, commissions and souvenir sales. Other operating revenue consists of
Legends Car sales, Speedway Club restaurant and catering, and Speedway Club
membership income.

The Company's 1996 major racing events were held in March, May, August,
October and November. As discussed above, the Company will hold a major racing
event at TMS in April 1997. Also, the Company will hold a major racing event at
SPR in May 1997. The Company recognizes admissions and other event related
revenues when the events are held. Advance revenues and certain related direct
expenses pertaining to a specific event are deferred until such time as the
event is held. Deferred expenses primarily include race purses and sanctioning
fees remitted to NASCAR.

Deferred race event income, net, as of December 31, 1995 and 1996, relates
primarily to events held in March and May of 1996, and in March, April and May
of 1997. If circumstances prevent a race from being held

F-9


SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

at any time during the racing season, all advance revenue must be refunded and
all direct event expenses deferred would be immediately recognized except for
race purses which would be refundable from NASCAR.

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 is composed principally of customer
deposits received on speedway condominiums under construction and held for sale
of $86,000 and $5,436,000 at December 31, 1995 and 1996, and of fee deposits on
TMS's Preferred Seat License (PSL) ticket program of $9,188,000 at December 31,
1996 (see additional information regarding the PSL ticket program below).
Condominium deposits are held in escrow accounts until sales are closed or
transactions are completed. PSL fee deposits are being held in separate accounts
as restricted cash until TMS hosts its first Winston Cup race scheduled on April
6, 1997.

TRADE ACCOUNTS RECEIVABLE -- Trade accounts receivable are shown net of
allowance for doubtful accounts of $146,000 in 1995 and $161,000 in 1996.

INVENTORIES -- Inventories consist of souvenirs, foods, finished vehicles,
parts and accessories which are stated at the lower of cost determined on a
first-in, first-out basis, or market.

SPEEDWAY CONDOMINIUMS HELD FOR SALE -- Speedway condominiums held for sale
consist primarily of 46 condominiums constructed overlooking the Atlanta
speedway, of which 35 were sold as of December 31, 1996. The remaining unsold
condominiums are substantially complete and there are no significant remaining
costs of completion to be incurred.

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. As such, 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 1997, 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.

PROPERTY AND EQUIPMENT -- Property and equipment are recorded at cost less
accumulated depreciation and amortization. Depreciation and amortization are
computed using the straight-line method over the estimated useful lives of the
respective assets. Amortization of assets under capital lease is included in
depreciation expense. 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.

GOODWILL AND OTHER INTANGIBLE ASSETS -- Goodwill and other intangible
assets represent the excess of business acquisition costs over the fair value of
the net assets acquired and are being amortized principally on a straight-line
basis over 40 years. Goodwill and other intangible assets are shown net of
accumulated amortization of $948,000 and $1,712,000 at December 31, 1995 and
1996, respectively. Management periodically evaluates the recoverability of
goodwill and other intangible assets based on expected future profitability and
undiscounted operating cash flows of acquired businesses.

DEFERRED FINANCING COSTS -- Deferred financing costs are included in other
noncurrent assets and are amortized over the term of the related debt.

DEFERRED INCOME -- Deferred income primarily consists of net deferred
Speedway Club membership income of $1,563,000 and $1,288,000 at December 31,
1995 and 1996, and TMS Preferred Seat License fee deposits of $8,402,000, net of
expenses of $843,000, at December 31, 1996.

The Speedway Club has sold lifetime 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 over the
25-year estimated useful life of the related property. In each of the years
ended December 31, 1994, 1995 and 1996, lifetime membership income of $275,000
was recognized. The Speedway Club also offers

F-10


SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

executive memberships, which entitle members to certain dining privileges and
require a monthly assessment. Executive membership fees are recognized as income
as they are billed.

In 1996, TMS began offering Preferred Seat License (PSL) 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
may be 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.

Fees received under PSL agreements are being deferred until TMS hosts its
first Winston Cup race scheduled on April 6, 1997. The Company plans to amortize
net PSL fee revenues into income over the estimated useful life of TMS's
racetrack facility upon opening.

ADVERTISING EXPENSES -- Advertising costs are expensed as incurred.
Advertising expenses amounted to $1,568,000, $1,543,000 and $2,154,000 in 1994,
1995 and 1996, respectively.

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 the amounts reported in the financial statements.

FAIR VALUE OF FINANCIAL INSTRUMENTS -- The Company's financial instruments
consist of cash, accounts and notes receivable, accounts payable and long-term
debt. The carrying value of these financial instruments approximate their fair
value at December 31, 1996.

USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses. Actual
future results could differ from those estimates.

IMPACT OF NEW ACCOUNTING STANDARDS -- In 1996, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation." SFAS No. 123 requires expanded disclosures of
stock-based compensation arrangements with employees and encourages, but does
not require, compensation cost to be measured based on the fair value of the
equity instrument awarded. Under SFAS No. 123, companies are permitted, however,
to continue to apply Accounting Principles Board (APB) Opinion No. 25, which
recognizes compensation cost based on the intrinsic value of the equity
instrument awarded. The Company will continue to apply APB Opinion No. 25 and
will disclose the required pro forma effect on net income and earnings per share
under the provisions of SFAS No. 123 on an annual basis (see Note 15).

In 1996, the Company adopted SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and Long-Lived Assets to be Disposed Of." SFAS No. 121
requires recognition of impairment of long-lived assets in the event the net
book value of such assets exceeds future undiscounted cash flows attributable to
such assets. Adoption of SFAS No. 121 had no impact on the Company's financial
position or results of operations, nor is any impact expected in the foreseeable
future.

RECLASSIFICATIONS -- Certain prior year accounts were reclassified to
conform with current year presentation.

F-11


SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

3. INVENTORIES

Inventories as of December 31, 1995 and 1996 consisted of the following
components (dollars in thousands):



1995 1996

Souvenirs.......................................................................... $2,242 $2,359
Finished vehicles, parts and accessories........................................... 3,057 3,753
Food and other..................................................................... 73 106
Total.............................................................................. $5,372 $6,218


4. PROPERTY AND EQUIPMENT

Property and equipment as of December 31, 1995 and 1996 is summarized as
follows (dollars in thousands):



ESTIMATED
1995 1996 USEFUL LIVES

Land and land improvements...................................... $ 24,309 $ 47,220 5-20
Racetracks and grandstands...................................... 55,733 81,667 10-35
Buildings and luxury suites..................................... 32,336 58,966 7-30
Machinery and equipment......................................... 4,816 8,411 3-20
Furniture and fixtures.......................................... 2,752 4,365 5-10
Autos and trucks................................................ 960 1,219 3-5
Construction in progress (Note 5)............................... 12,708 133,843
Total........................................................... 133,614 335,691
Less accumulated depreciation................................. (40,509) (47,330)
Net............................................................. $ 93,105 $288,361


Property and equipment includes assets under capital lease as of December
31, 1996 as follows (dollars in thousands):



1996

Land....................................................................................... $ 8,074
Racetracks and grandstands................................................................. 18,599
Total...................................................................................... 26,673
Less accumulated amortization............................................................ (88)
Net........................................................................................ $26,585


5. CONSTRUCTION IN PROGRESS AND DEVELOPMENT AND CONSTRUCTION OF TMS

TEXAS MOTOR SPEEDWAY -- In 1995, the Company began constructing TMS, a
1.5-mile, banked asphalt quad-oval superspeedway, on a 950 acre site in Fort
Worth, Texas. As of December 31, 1996, the Company estimates the remaining
construction costs to substantially complete TMS will approximate $40,000,000.
Management expects to finance the remaining TMS facility costs through
borrowings under the Company's Credit Facility (see Note 7) and from cash flows
generated from operations.

In connection with the development and construction of TMS, the Company
entered into arrangements with the FW Sports Authority, a non-profit corporate
instrumentality of the City of Forth Worth, Texas, whereby the Company conveyed
the speedway facility to the sports authority and will lease 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 Company's consolidated balance sheet.

F-12


SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED


OTHER CONSTRUCTION IN PROGRESS -- Also included in construction in progress
at December 31, 1996 are costs incurred to increase and improve grandstand
seating capacity, suites and facilities for fan amenities at AMS, BMS and CMS.
In addition, AMS is converting its speedway to a quad-oval configuration in
conjunction with the other improvements. The estimated aggregate cost of capital
expenditures in 1997, exclusive of TMS, will approximate $80,000,000.

6. MARKETABLE EQUITY SECURITIES

To reduce the carrying amount of long-term marketable equity securities to
market value at December 31, 1995 and 1996, valuation allowances of $159,000 and
$314,000 (net of $67,000 and $132,000 in tax benefits), respectively, that would
be realized in the event the securities were sold at a loss, were recorded by a
charge to stockholders' equity. Net realized gains on sales of marketable equity
securities during the years ended December 31, 1994, 1995 and 1996 were
$1,060,000, $242,000 and $698,000, respectively.

7. LONG-TERM DEBT

Long-term debt as of December 31, 1995 and 1996 consists of the following
(dollars in thousands):



1995 1996

Loans payable to NationsBank.................................................... $ -- $ 22,000
Convertible subordinated debentures............................................. -- 74,000
Capital lease obligation........................................................ -- 18,165
Note payable -- road construction............................................... 1,806 1,465
Total......................................................................... 1,806 115,630
Less current maturities......................................................... (348) (383)
$1,458 $115,247


BANK CREDIT FACILITY -- In conjunction with its January 1996 acquisition of
BMS, the Company obtained from NationsBank an unsecured, short-term line of
credit in an aggregate principal amount of up to $50,000,000 (the "90-Day
Facility"). In early 1996, the Company borrowed $32,688,000 under the 90-Day
Facility to fund the purchase of BMS and the working capital needs of the
Company. In March 1996, the Company subsequently consummated longer term
financing through a credit facility ("the Credit Facility"), retired the 90-Day
Facility and borrowed additional funds for working capital purposes. At December
31, 1996, the Company has a total of $22,000,000 in outstanding borrowings under
the Credit Facility. The Credit Facility is an unsecured working capital and
letter of credit arrangement provided by a syndicate of banks led by
NationsBank.

The Credit Facility has an overall borrowing limit of $110,000,000 with a
sub-limit of $7,000,000 for standby letters of credit. The Credit Facility will
mature in March 31, 1999 unless extended annually thereafter for two additional
years at the option of the lenders. Draws are permitted under the Credit
Facility for the following purposes: (i) refinancing outstanding borrowings,
including the 90-Day Facility, (ii) financing seasonal working capital needs,
and (iii) financing general corporate purposes, including the costs of
constructing TMS. Although the Credit Facility is unsecured, the Company has
agreed not to pledge its assets to any third party. In addition, the Company
must meet certain financial covenants, including specified levels of net worth
and ratios of (i) debt to equity, (ii) debt to earnings before interest, taxes,
depreciation and amortization (EBITDA), (iii) earnings before interest and taxes
(EBIT) to interest expense, and (iv) subordinated debt to senior debt. The
Credit Facility also prohibits the Company from making cash expenditures in
excess of $10,000,000 in the aggregate to acquire additional motor speedways,
without the consent of the lenders, and limits its consolidated capital
expenditures, exclusive of expenditures on TMS, to amounts not to exceed
$80,000,000 in the aggregate for fiscal years 1996 and 1997, and $40,000,000 for
each fiscal year thereafter. The Company also agreed to certain

F-13


SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

other limitations or prohibitions concerning the incurrence of other
indebtedness, guaranties, asset sales, investments, cash dividends to
shareholders, distributions and redemptions.

CONVERTIBLE SUBORDINATED DEBENTURES -- On October 1, 1996, the Company
completed a private placement of 5 3/4% convertible subordinated debentures in
the aggregate principal amount of $70,000,000. On October 4, 1996, the Company
filed a registration statement to register these debentures and the underlying
equity securities. On October 15, 1996, the initial purchasers exercised an
option to purchase additional convertible subordinated debentures in the
principal amount of $4,000,000. Net proceeds after commissions and discounts
were $72,150,000.

The debentures are unsecured, mature on September 30, 2003, are convertible
into common stock of the Company 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 commencing March 31, 1997. The debentures are subordinated to
all present and future secured indebtedness of the Company, including the Credit
Facility. 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 9). The proceeds of this offering are being
used to repay outstanding borrowings under the Credit Facility, fund
construction costs of TMS and for working capital needs of the Company.

CAPITAL LEASE OBLIGATION AND PURCHASE OPTION (SEARS POINT RACEWAY) -- In
connection with the SPR asset acquisition by SMI on November 18, 1996 (see Note
1), the Company executed a 14 year capital lease with the seller for all of the
real property of the SPR complex. SMI has the option to purchase the real
property for $38,100,000 during a six-month option period commencing November 1,
1999, subject to acceleration at the election of the seller after March 31, 1997
and through December 31, 1999 (the Purchase Option). The Purchase Option was
acquired for a payment of $3,500,000 and upon its exercise, is to be credited
against the purchase price of the real property. The Purchase Option payment is
non-refundable. Under the lease agreement terms, SMI paid a security deposit of
$3,000,000, with such amount also to be credited against the purchase price of
the real property upon exercise of the Purchase Option. Monthly lease payments
ranging from $67,000 in 1997 to $631,000 in 2010 are due, including imputed
interest at 6.5%. SMI is responsible for maintenance, insurance, taxes and other
operating costs of the leased property. Beginning January 1, 2002, minimum lease
payments are subject to annual adjustment based on changes in the Consumer Price
Index as defined.

In connection with the acquisition, SMI loaned the seller approximately
$13,450,000 under a promissory note receivable to repay their then outstanding
obligations on the SPR real property. The note bears interest at 4% and is due
in equal monthly installments of interest of $45,000 through November 1999 and,
thereafter, of principal and interest of $68,000 through November 2026. The note
is collateralized by a thirty year deed of trust on the SPR real property in
favor of SMI. Also, amounts due under the note receivable are to be credited
against amounts due from SMI upon exercise of the Purchase Option.

In management's opinion, it is probable that the Purchase Option will be
exercised. Therefore, the lease security deposit and Purchase Option payment
have been included as consideration in determining the purchase price and
capital lease obligation for SPR. Also, because a legal right of offset exists
under the lease obligation and note receivable agreements, and because it is
probable offset will occur upon exercise of the Purchase Option, the note
receivable of $13,453,000 has been netted against the capital lease obligation
in the accompanying December 31, 1996 consolidated balance sheet.

F-14


SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

Annual future minimum lease payments under the capital lease obligation as
of December 31, 1996 are as follows (dollars in thousands):



1997................................................... $ 800
1998................................................... 2,800
1999................................................... 2,800
2000................................................... 4,800
2001................................................... 5,800
Thereafter............................................. 59,429
Total minimum lease payments........................... 76,429
Less amount representing imputed interest at 6.5%...... (44,811)
Total................................................ 31,618
Less current portion................................... --
Less offset of note receivable......................... (13,453)
Net capital lease obligation........................... $ 18,165


NOTES PAYABLE FOR ROAD CONSTRUCTION COSTS -- In 1995, the Company entered
into an agreement to pay a portion of the costs to construct an improved access
road to CMS from Interstate 85 under a note arrangement. The note payable bears
interest at 8% and is collateralized by a bank letter of credit from
NationsBank.

Annual maturities of long-term debt as scheduled as of December 31, 1996
are as follows (dollars in thousands):



1997.................................................. $ 383
1998.................................................. 1,090
1999.................................................. 23,168
2000.................................................. 3,072
2001.................................................. 4,058
Thereafter............................................ 97,312
Total............................................... 129,083
Less offset of note receivable against capital lease
obligation.......................................... (13,453)
$115,630


Included in interest expense, net, in the accompanying consolidated
statements of income is interest income in the amounts of $426,000 and $899,000
for the years ended December 31, 1994 and 1995, respectively. Included in
interest income, net, is interest expense of $693,000 for the year ended
December 31, 1996. The Company capitalized interest costs of $2,834,000 in 1996.
No interest cost was capitalized in 1994 or 1995.

EXTRAORDINARY ITEM -- Long-term debt as of December 31, 1994 included
various notes payable to NationsBank totaling $46,588,000. On March 3, 1995,
these loans were repaid using the proceeds from the 1995 initial public
offering. Accordingly, unamortized debt issuance costs of $133,000, net of tax
benefit of $89,000, related to these notes were expensed in the accompanying
1995 consolidated statement of income as an extraordinary item.

8. DISPOSAL OF INVESTMENT IN REAL ESTATE JOINT VENTURE IN 1994

On December 21, 1994, CMS agreed to dispose of its 50% investment in a real
estate joint venture (Chartown), prior to completion of the Company's initial
public offering in 1995, to focus on its principal operations of motorsports
entertainment, racing and related activities. The disposition of Chartown was
completed in early 1995 and was accounted for as discontinued operations in the
year ended December 31, 1994. This disposition resulted in the transfer of CMS's
interest in the joint venture at its then net book value of approximately

F-15


SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

$9,045,000, consisting of the Company's investment in the joint venture of
$8,330,000 plus a related deferred tax asset of $715,000, to an affiliate, and
the subsequent dividend of the proceeds thereof to Sonic. The Company's retained
earnings was reduced by an amount equal to the net book value of the assets
distributed.

There was no effect of Chartown's operations or disposal on the
accompanying 1995 or 1996 consolidated statements of income. Total revenues and
net loss of the joint venture for year ended December 31, 1994 were $2,609,000
and $546,000, respectively. CMS's share of the 1994 loss, net of tax benefit of
$198,000, was $294,000.

Chartown leases an office and warehouse facility, located near CMS, to 600
Racing, Inc. for Legends Car operations. This operating lease is renewable
annually. The current lease provides for annual rent of approximately $132,000
through July 31, 1997. Rent expense, net of sub-rental income, under this lease
was $26,000, $44,000, and $112,000 in 1994, 1995 and 1996, respectively.

9. CAPITAL STRUCTURE, PUBLIC OFFERINGS OF COMMON STOCK AND PER SHARE DATA

PREFERRED STOCK -- At December 31, 1996, 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, 1995 or 1996.

STOCK SPLIT -- On February 9, 1996, the Company's Board of Directors
approved a two for one stock split for each share of the Company's common stock.
The stock split was effective March 15, 1996 in the form of a 100% common stock
dividend payable to stockholders of record as of February 26, 1996. All share
and per share information in the accompanying consolidated and combined
financial statements take into account this stock split.

PUBLIC OFFERINGS OF COMMONS STOCK -- The Company completed an initial
public offering of SMI common stock on March 3, 1995 at a price of $9 per share.
SMI had 38,000,000 common shares outstanding immediately after the public
offering was consummated, of which approximately 9,000,000 shares were held by
new outside investors. Net proceeds of the 1995 initial public offering of
$65,793,000 were used to repay existing bank indebtedness, expand CMS and AMS
racing facilities, and for other general corporate purposes.

The Company completed an additional offering of common stock on April 1,
1996 by issuing 3,000,000 shares of common stock at a price of $27.625 per
share. Net proceeds after offering expenses were $78,354,000 with such proceeds
used to pay construction costs of TMS and for other general corporate purposes.

PER SHARE DATA -- The 1995 and 1996 per share amounts reflect the
37,275,000 and 41,301,000 weighted average shares outstanding, including 612,000
and 767,000 common share equivalents arising from stock options, for the years
ended December 31, 1995 and 1996, respectively. The 1994 per share amounts have
been prepared on a pro forma basis to reflect the 30,400,000 common shares
outstanding after giving effect to the Restructuring, including 400,000 common
share equivalents arising from stock options.

Had the 1995 initial public stock offering and related repayment of debt
occurred on January 1, 1995, income from continuing operations applicable to
common stock in 1995 would have been $0.52 per share. Had the October 1996
offering of subordinated convertible debentures (see Note 7) been fully
converted on January 1, 1996, and related interest expense on such debt not
recorded in 1996, income from continuing operations applicable to common stock
in 1996 would have been $0.61 per share.

10. PUT WARRANTS AND NET INCOME APPLICABLE TO COMMON STOCK IN 1994

In connection with bank financing received in 1990, AMS issued to
NationsBank two common stock purchase warrants (Equity Warrants). These warrants
entitled the holder to purchase a 37% equity interest in AMS at a price of $1
per share. The warrants were originally exercisable through October 23, 2005.

F-16


SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

In connection with additional bank financing received during 1991, AMS
issued to NationsBank a third common stock purchase warrant (Contingent
Warrant). This warrant entitled the holder to purchase shares of AMS at $1 per
share. The number of shares that could be purchased was based on the number of
events of default, if any, which occurred subsequent to December 16, 1991. These
events of default related to the aggregate capital expenditures during any
fiscal year. Each event of default entitled the holder to exercise the warrant
for 5% of the outstanding stock of AMS. However, in no event could the aggregate
warrants issued during one calendar year under this financing exceed 5% of the
outstanding stock of AMS. No event of default, as defined, occurred prior to the
date the warrant was cancelled by NationsBank on December 16, 1994 (discussed
below).

The warrants described above contained provisions whereby the holder could
require AMS to redeem the warrants for cash at any time from October 23, 1995
through October 23, 2005. The per share redemption price was determined using
the higher of book value, market price as determined in a public exchange, a
cash flow capitalization formula or appraised value. On December 16, 1994, the
Company redeemed the Equity Warrants from NationsBank for $8,000,000 and
cancelled the Contingent Warrant. In each of the years from 1991 to 1994, the
Company increased the carrying value of the Equity Warrants and decreased
retained earnings in order to accrete the aggregate value of the put provision
over the minimum stock warrant redemption period. Net income applicable to
common stock of $7,170,000 for the year ended December 31, 1994 represents
reported net income of the Company of $10,176,000 less the periodic accretion in
estimated redemption value of the Equity Warrants of $3,006,000.

11. INCOME TAXES

The components of the provision for income taxes are as follows (dollars in
thousands):



1994 1995 1996

Current............................................................... $8,426 $13,184 $12,762
Deferred.............................................................. (371) 516 3,890
Total............................................................... $8,055 $13,700 $16,652


The tax effect of temporary differences resulting in deferred income taxes
are as follows (dollars in thousands):



1995 1996

Deferred tax liabilities:
Property and equipment......................................................... $ 9,774 $14,958
Other.......................................................................... -- 755
9,774 15,713
Deferred tax assets:
Income previously recognized for tax purposes.................................. (608) (520)
Stock option compensation expense.............................................. (1,206) (1,095)
Other.......................................................................... (1,243) (356)
(3,057) (1,971)
Total net deferred tax liability................................................. $ 6,717 $13,742


No valuation allowance against deferred tax assets has been recorded for
any year presented. The differences between the effective tax rate and the
federal statutory tax rate in 1994, 1995 and 1996 are principally due to the
effect of state income taxes (approximately 5% for 1994, 4% for 1995 and 6% for
1996) and nondeductible items, including goodwill amortization.

The Company made income tax payments during 1994, 1995 and 1996 totaling
approximately $8,614,000, $13,163,000 and $17,402,000, respectively.

F-17


SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

On September 9, 1993, the Internal Revenue Service (IRS) asserted that AMS,
as the successor in interest to BND, Inc. (BND), is liable for additional income
taxes, penalties and interest. The total assessment for taxes, penalties and
interest (net of tax benefit for deductibility of interest) through December 31,
1996 is approximately $7,500,000. This deficiency allegedly relates to BND's
income tax returns for the years ended November 30, 1988 and October 31, 1990.
The IRS alleges that, during the acquisition of AMS by the Company's Chairman
and Chief Executive Officer in October 1990, BND's merger into Atlanta
International Raceway, Inc., the predecessor of AMS (AIR), resulted in a taxable
gain to BND. Moreover, this taxable gain allegedly eliminates a net operating
loss carryback to the tax return filed for the year ended November 30, 1988. On
November 30, 1993, AMS filed a protest contesting the assessment with appeals
division of the IRS; as of this date, no resolution of this matter has been
obtained. However, the Company anticipates resolution of this matter during
1997. Management intends to continue contesting the allegations of a deficiency
and has not provided for this contingency in the accompanying consolidated
financial statements. There can be no assurance, however, that the ultimate
resolution of this proceeding will not have a material adverse effect on the
Company's future results of operations or financial condition.

12. RELATED PARTY TRANSACTIONS

Notes receivable at December 31, 1995 and 1996 include a note receivable of
$934,000 and $697,000, 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 1997, the balance has been classified as a noncurrent asset in the
accompanying 1996 balance sheet.

Notes receivable also include a note receivable from the Company's Chairman
and Chief Executive Officer for $528,000 at December 31, 1995 and $1,131,000 at
December 31, 1996. 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.

Amounts payable to affiliated company of approximately $2,603,000 at
December 31, 1995 and 1996 represents acquisition and other expenses paid on
behalf of AMS by Sonic in prior years. Of such amounts, approximately $1,800,000
bears interest at 3.83% per annum. The remainder of the amount bears interest at
prime plus 1%. The entire account balance is classified as long-term based on
expected repayment dates. Interest expense incurred on this obligation was
$65,000 in 1994, $130,000 in 1995, and $141,000 in 1996.

Interest income of $118,000, $75,000 and $130,000 was earned on amounts due
from related parties during the years ended December 31, 1994, 1995 and 1996,
respectively.

The Company paid Sonic management fees of $1,500,000 in 1994 for certain
accounting, administrative and management services, including assistance in the
planning and execution of racing events; maintenance of banking relationships;
tax planning; preparation of tax returns and representation in tax examinations;
record maintenance; internal audits and special audits; assistance to the
Company's independent public accountants; and litigation support to the
Company's legal counsel. In the opinion of Company management, the management
fees charged approximated the costs required for these services had the Company
operated as a separate unaffiliated entity during that year.

On December 21, 1994, the Board of Directors of CMS declared a dividend to
Sonic in the amount of $29,491,000 as part of the Restructuring. This amount
represented a loan receivable, including accrued interest, from Sonic. Prior to
the date of the dividend, the entire loan receivable had been recorded as a
reduction of stockholders' equity because repayment had not been anticipated in
the near future.

13. CONTINGENCIES

The Company is 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 condition or
future results of operations.

F-18


SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

The Company's property at CMS includes areas that were used as solid waste
landfills for many years. Landfilling of general categories of municipal solid
waste on the CMS property ceased in 1992, but CMS 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.

14. OTHER INCOME

Other income for the years ended December 31, 1994, 1995 and 1996 consists
of the following (dollars in thousands):



1994 1995 1996

Gain on sale of speedway condominiums................................. $ 303 $ 761 $ 163
Equity in earnings of North Wilkesboro Speedway....................... -- 233 371
Other income.......................................................... 1,289 2,631 1,865
$1,592 $ 3,625 $ 2,399


Other income in 1994 consists primarily of gains on sales of marketable
equity securities. Other income in 1995 and 1996 consists primarily of gains on
sales of land and marketable equity securities, and landfill fees.

15. STOCK OPTION PLANS

1994 STOCK OPTION PLAN -- On December 21, 1994, 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 2,000,000 shares of common stock may be granted
to directors, officers and key employees of SMI and its subsidiaries. Such
options provide for the purchase of common stock at a price as determined by the
Compensation Committee of the Board of Directors.

On December 21, 1994, SMI granted options to nine officers to purchase an
aggregate of 800,000 shares of common stock at an exercise price of $3.75 per
share. The Company recorded a noncash stock compensation charge of $3,000,000
(before tax) in December 1994, which represents the difference between
management's estimate of the fair value of the SMI common stock at the date of
grant, after considering the then proposed initial public offering of the
Company's stock discussed in Note 1, and the exercise price of the options
granted. Also on December 21, 1994, SMI granted options to the same nine
officers to purchase an aggregate of 320,000 shares of common stock at an
exercise price equal to the initial public offering price of the common stock.

The exercise price of all stock options granted in 1995 and 1996 was the
fair or trading value of the Company's common stock at the date of grant. No
stock options were exercised through December 31, 1995.

F-19


SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

Other option information regarding the 1994 Stock Option Plan for the years
ended December 31, 1995 and 1996 is summarized as follows:



WEIGHTED
EXERCISE AVERAGE
SHARES IN PRICE EXERCISE
THOUSANDS PER SHARE PRICE

Outstanding, January 1, 1995............................................... 1,120 $3.75-$ 9.00 $ 5.34
Granted.................................................................... 100 $9.00-$15.38 13.46
Exercised.................................................................. -- -- --
Outstanding, December 31, 1995............................................. 1,220 $3.75-$15.38 6.00
Granted.................................................................... 280 $23.00 23.00
Exercised.................................................................. (159) $3.75-$15.38 4.67
Cancelled.................................................................. (17) $15.38 15.38
Outstanding, December 31, 1996............................................. 1,324 $3.75-$23.00 $ 9.64


Of the options outstanding as of December 31, 1996, 1,244,000 are currently
exercisable. The weighted average remaining contractual life of the options
outstanding at December 31, 1996 is 8.35 years.

FORMULA STOCK OPTION PLAN -- Effective January 1, 1996, the Company's Board
of Directors adopted the Formula Stock Option Plan for the benefit of the
Company's outside directors as approved by the Company's stockholders at the
1996 annual meeting. The plan authorizes options to purchase up to an aggregate
of 400,000 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 at an
exercise price equal to the fair market value per share of common stock at the
date of award.

In 1996, the Company granted options to purchase 20,000 common shares to
each of the Company's two outside directors at an exercise price per share at
award date of $14.94. All options to purchase shares under this plan expire ten
years from grant date. As of December 31, 1996, none of the options granted had
been exercised. Subject to stockholder approval, effective January 2, 1997, the
Company granted options to purchase an additional 20,000 shares to each of the
two outside directors.

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 100,000 and 280,000 options in
1995 and 1996 with weighted average grant-date fair values of $3.36 and $7.16,
respectively. No compensation cost has been recognized for the stock option
plans except for the charge in 1994 as described in "1994 Stock Option Plan"
above. Had compensation cost for the stock options been determined based on
their fair value method as prescribed by SFAS No. 123, the Company's pro forma
net income would have been $19,219,000, or $.52 per share, for 1995, and
$25,036,000, or $.61 per share, for 1996.

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions: expected
volatility of 18.7% in 1995 and 37.3% in 1996; risk-free interest rate of 6.5%
in 1995 and 5.7% in 1996; and expected lives of 3.0 years in 1995 and 3.1 years
in 1996. The model reflects that no dividends were declared in either 1995 or
1996.

EMPLOYEE STOCK PURCHASE PLAN -- Effective January 1, 1997, the Company's
Board of Directors adopted the SMI Employee Stock Purchase Plan to provide
employees the opportunity to acquire stock ownership as approved by the
Company's stockholders at the 1996 annual meeting. An aggregate total of 200,000
shares of common stock have been reserved for purchase under the new 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

F-20


SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

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 will expire at the end of
each calendar year.

16. EMPLOYEE BENEFIT PLAN

Effective October 1, 1994, Sonic established the Sonic Financial
Corporation 401(k) Plan and Trust which is available to all employees of the
Company. Under the Plan provisions, participants may elect to contribute up to
12% of their annual salary and bonus to the Plan up to allowed limits, of which
the Company will match 25% of the first 4% of annual salary and bonus
contributed by the employee. Participants are fully vested in Company matching
contributions after five years. Required plan contributions by the Company for
the period from October 1, 1994 to December 31, 1994 was immaterial. The
Company's contributions to the Plan were $40,000 in 1995 and $35,000 in 1996.

17. BRISTOL MOTOR SPEEDWAY AND SEARS POINT RACEWAY ACQUISITIONS

As further described in Note 1, the Company acquired Bristol Motor Speedway
on January 22, 1996 and Sears Point Raceway on November 18, 1996. The
acquisitions have been accounted for using the purchase method, and the results
of their operations after the acquisition dates are included in the Company's
1996 consolidated statement of income. The purchase price has been allocated to
the assets and liabilities acquired at their estimated fair market values at
acquisition date. The Company obtained independent appraisals of BMS's property
and equipment and other net assets acquired, and of SPR's property and
equipment. These appraised fair values are reflected in the accompanying
financial statements. In the near future, the Company plans to obtain an
independent appraisal of the fair value of other SPR net assets acquired,
including identifiable intangibles, if any. Based on current information, the
Company's management does not expect the final allocation of the SPR purchase
price to materially differ from that used in the accompanying December 31, 1996
balance sheet.

The following unaudited pro forma financial information presents a summary
of consolidated results of operations as if the transactions had occurred as of
January 1, 1995 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 acquisitions been made on that date, nor are they necessarily indicative
of results which may occur in the future.



(PRO FORMA)
YEAR ENDED
DECEMBER 31,
1995 1996

Total revenues.................................................................... $96,431,000 $110,594,000
Income before extraordinary item.................................................. 18,172,000 26,355,000
Net income........................................................................ 18,039,000 26,355,000
Net income per share.............................................................. $ 0.48 $ 0.64


F-21


SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENT SCHEDULE
Years Ended December 31, 1994, 1995 and 1996


II Valuation and Qualifying Accounts...................................................................... S-2

Note: All other schedules are omitted because they are not applicable or
not required.
S-1


SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)


Balance
Balance at Charges at
Beginning of to End of
Period Expense Deductions Period

1) Reserve for bad debts
December 31, 1994............................................ $233 $ 12 $ (62 )(1) 18$3
December 31, 1995............................................ 183 30 (67 )(1) 146
December 31, 1996............................................ 146 97 (82 )(1) 161
2) Unrealized loss on marketable equity securities
December 31, 1994............................................ 284 -- (249 )(2) 35
December 31, 1995............................................ 35 -- 57 (2) 92
December 31, 1996............................................ $ 92 -- $ 90 (3) 182


(1) Represents actual write-offs of specific accounts receivable.
(2) Represents recovery of previously unrealized losses on marketable equity
securities.
(3) Represents an increase in unrealized losses on marketable equity securities.
S-2


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 15th day of March, 1997.
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 15, 1997
O. Bruton Smith executive officer) and Chairman
/s/ H.A. "HUMPY" WHEELER President, Chief Operating Officer March 15, 1997
H.A. "Humpy" Wheeler and Director
/s/ WILLIAM R. BROOKS Vice President, Treasurer, Chief March 15, 1997
William R. Brooks Financial Officer (principal
financial officer and accounting
officer) and Director
/s/ EDWIN R. CLARK Executive Vice President and March 15, 1997
Edwin R. Clark Director
/s/ WILLIAM P. BENTON Director March 15, 1997
William P. Benton
/s/ MARK M. GAMBILL Director March 15, 1997
Mark M. Gambill



EXHIBIT INDEX


Sequentially
Numbered
Exhibit No. Description Pages

* 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")).
* 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 "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
Indenture).
* 4.4 Registration Rights Agreement dated as of September 26, 1996 among the Company,
Wheat, First Securities, Inc, Montgomery Securities and J.C. Bradford & Co.
(incorporated by reference to Exhibit 4.3 to the November 1996 Form S-3).
* 4.5 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")).
* 4.6 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).
* 10.1 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).
* 10.2 Atlanta Motor Speedway, Inc. 14% Senior Subordinated Note in the amount of
$5,150,000 dated as of October 23, 1990 (incorporated by reference to Exhibit
10.23 to the Form S-1).
* 10.3 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).
* 10.4 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).
* 10.5 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).
* 10.6 Documentary Letter of Credit issued by NationsBank of North Carolina, N.A. for the
account of Charlotte Motor Speedway, Inc. in favor of Yamaha Motor Co., Ltd.,
Japan in the amount of $1,600,000 dated as of September 19, 1994 (incorporated by
reference to Exhibit 10.41 to the Form S-1).
* 10.7 Sales Agreement by and between Yamaha Motor Co. Ltd. and Charlotte Motor Speedway,
Inc. dated as of August 1, 1994 (incorporated by reference to Exhibit 10.42 to the
Form S-1).
* 10.8 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).





Sequentially
Numbered
Exhibit No. Description Pages

* 10.9 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).
* 10.10 Speedway Motorsports, Inc. 1994 Stock Option Plan (incorporated by reference to
Exhibit 10.45 to the Form S-1).
* 10.11 Speedway Motorsports Inc. Formula Stock Option Plan (incorporated by reference to
Exhibit 10.3 to the Annual Report on Form 10-K of the Company for the year ended
December 31, 1995 (the "1995 Form 10-K").
* 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 LLC 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 the Form S-1).
* 10.14 Purchase Agreement by and among the Company and Calvin Carl Combs, Linda Fox
Combs, Dennis J. Combs, Ned D. Combs, and Judy C. Benfield (incorporated by
reference to Exhibit 10.57 to the Quarterly Report on Form 10-Q of the Company for
the quarterly period ended June 30, 1995).
* 10.15 Stock Purchase Agreement dated January 22, 1996 between the Company and
shareholders of National Raceways, Inc. (incorporated by reference to Exhibit 99.1
to the Current Report on Form 8-K of the Company filed as of February 5, 1996 (the
"BMS Form 8-K")).
* 10.16 Promissory Note dated January 22, 1996 by the Company and Speedway Funding Corp.
in favor of NationsBank, N.A. (incorporated by reference to Exhibit 99.2 to the
BMS Form 8-K).
* 10.17 Guaranty Agreement dated January 22, 1996 among National Raceways, Inc., Charlotte
Motor Speedway, Inc., Atlanta Motor Speedway, Inc., 600 Racing, Inc. and
NationsBank, N.A. (incorporated by reference to Exhibit 99.3 to the BMS Form 8-K).
* 10.18 Non-Negotiable Promissory Note date 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).
* 10.19 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")).
* 10.20 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).
* 10.21 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).
* 10.22 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).
10.23 Purchase Contract dated December 18, 1996 between Texas Motor Speedway, Inc., as
seller, and FW Sports Authority, Inc., as purchaser.
10.24 Lease Agreement dated as of December 18, 1996 between FW Sports Authority, Inc.,
as lessor, and Texas Motor Speedway, Inc., as lessee.
10.25 Guaranty Agreement dated as of December 18, 1996 among the Company, the City of
Fort Worth, Texas and FW Sports Authority, Inc.
11.1 Statement regarding Computation of Per Share Earnings.
21.1 Subsidiaries of the Company.
27.1 Financial Data Schedule.


* Previously filed.