-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H65hD7qjgi7Ro7uBNzj7D264TZ+cEELtXtolav3s3TX0mekCkB+FpyGPOhyVD0O2 4E+UIdwRXDOtJucJd+bDVA== 0000950123-99-006916.txt : 19990729 0000950123-99-006916.hdr.sgml : 19990729 ACCESSION NUMBER: 0000950123-99-006916 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990726 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990728 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL SPEEDWAY CORP CENTRAL INDEX KEY: 0000051548 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-RACING, INCLUDING TRACK OPERATION [7948] IRS NUMBER: 590709342 STATE OF INCORPORATION: FL FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-02384 FILM NUMBER: 99672121 BUSINESS ADDRESS: STREET 1: 1801 W INTERNATIONAL SPEEDWAY BLVD CITY: DAYTONA BEACH STATE: FL ZIP: 32114-1243 BUSINESS PHONE: 9042542700 MAIL ADDRESS: STREET 1: 1801 WEST INTERNATIONAL SPEEDWAY CORP CITY: DAYTONA BEACH STATE: FL ZIP: 32114-1243 FORMER COMPANY: FORMER CONFORMED NAME: DAYTONA INTERNATIONAL SPEEDWAY CORP DATE OF NAME CHANGE: 19691130 FORMER COMPANY: FORMER CONFORMED NAME: FRANCE BILL RACING INC DATE OF NAME CHANGE: 19670227 8-K 1 INTERNATIONAL SPEEDWAY CORPORATION 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): July 26, 1999 International Speedway Corporation (Exact name of Registrant as specified in its charter) Florida 0-2384 59-0709342 (State or other (Commission (I.R.S. Employer jurisdiction of File Number) Identification No.) incorporation) 1801 W. International Speedway Blvd. Daytona Beach, Florida 32114 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (904) 254-2700 (Former name or address, if changed since last report): No Change 2 Item 2. Acquisition or Disposition of Assets. On July 26, 1999, pursuant to an Agreement and Plan of Merger, dated as of May 10, 1999, as amended by Amendment No. 1 thereto dated as of June 21, 1999 (the "Merger Agreement"), among International Speedway Corporation, a Florida corporation (the "Registrant"), 88 Corp., a Delaware corporation and wholly owned subsidiary of the Registrant ("88 Corp."), and Penske Motorsports, Inc., a Delaware corporation ("Penske Motorsports"), Penske Motosports merged with and into 88 Corp. (the "Merger"). 88 Corp. was the surviving corporation in the Merger. In the Merger, each outstanding share of common stock, par value $0.01 per share, of Penske Motorsports, other than shares held in Penske Motorsports' treasury or owned by the Registrant or any wholly owned subsidiary of the Registrant or of Penske Motorsports, was converted into the right to receive, at the election of each former Penske Motorsports stockholder, either $15.00 in cash and 0.729 shares of the Registrant's class A common stock, or 1.042 shares of the Registrant's class A common stock. On July 26, 1999, pursuant to an Agreement and Plan of Merger, dated as of May 10, 1999 (the "PSH Merger Agreement"), among the Registrant, Penske Performance, Inc., a Delaware corporation ("Performance"), Penske Corporation, a Delaware corporation and sole stockholder of Performance, and PSH Corp., a Delaware corporation ("PSH"), PSH merged with and into the Registrant (the "PSH Merger"). The Registrant was the surviving corporation in the PSH Merger. In the PSH Merger, each outstanding share of common stock, par value $0.01 per share, of PSH, other than shares held in the Registrant's treasury or owned by PSH or any wholly owned subsidiary of the Registrant or PSH, was converted into the right to receive $116,156.95 in cash and 5,648.413 shares of the Registrant's class A common stock. As a consequence of the Merger and the PSH Merger, Penske Motorsports is now a wholly owned subsidiary of the Registrant. The source of funds for the cash portion of the consideration paid to stockholders of Penske Motorsports is comprised of a combination of the Registrant's existing cash and available borrowings under the Registrant's five year, $300 million revolving credit facility. The foregoing descriptions of the Merger and the PSH Merger do not purport to be complete and are qualified by reference to the Merger Agreement and the PSH Merger Agreement incorporated herein by reference to Annex A and B, respectively, to the Joint Proxy Statement/Prospectus included in the Registrant's Registration Statement on Form S-4 (File No. 333-81165). A copy of the press release, dated July 26, 1999, issued by the Registrant relating to the above described transactions is attached as an exhibit to this report and is incorporated 2 3 herein by reference. Item 7. Financial Statements and Exhibits. (a) Financial statements of Business Acquired The audited consolidated balance sheet of Penske Motorsports as of December 31, 1998 and the related consolidated statements of income and cash flows for the fiscal year ended December 31, 1998 and the related notes to the financial statements are hereby incorporated by reference to the Annual Report of Penske Motorsports on Form 10-K for the year ended December 31, 1998. 3 4 PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1998 AND 1997
1998 1997 ---- ---- (IN THOUSANDS) ASSETS CURRENT ASSETS: Cash and cash equivalents................................. $ 1,311 $ 249 Receivables............................................... 4,398 4,787 Inventories............................................... 3,085 2,433 Prepaid expenses.......................................... 1,246 1,769 Deferred taxes............................................ 368 313 -------- -------- TOTAL CURRENT ASSETS................................... 10,408 9,551 PROPERTY AND EQUIPMENT, NET................................. 247,421 224,666 INVESTMENTS................................................. 12,679 15,366 GOODWILL, NET............................................... 39,497 40,112 OTHER ASSETS................................................ 529 2,077 -------- -------- TOTAL....................................................... $310,534 $291,772 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt......................... $ 512 $ 1,017 Accounts payable.......................................... 3,915 3,868 Accrued expenses.......................................... 2,933 2,343 Other payables (Note 3)................................... 9,956 Deferred revenues, net.................................... 19,204 22,529 -------- -------- TOTAL CURRENT LIABILITIES.............................. 26,564 39,713 LONG-TERM DEBT, LESS CURRENT PORTION........................ 61,442 47,278 DEFERRED TAXES.............................................. 22,413 13,349 DEFERRED REVENUES........................................... 369 738 COMMITMENTS AND CONTINGENCIES (NOTE 12) STOCKHOLDERS' EQUITY: Common stock, par value $ .01 share: Authorized 50,000,000 shares Issued and outstanding 14,208,898 shares in 1998 and 1997.................................................. 142 142 Additional paid-in-capital................................ 159,371 159,371 Retained earnings......................................... 47,768 31,181 -------- -------- 207,281 190,694 Treasury stock, at cost, 353,900 shares (Note 11)......... (7,535) -------- -------- TOTAL STOCKHOLDERS' EQUITY............................. 199,746 190,694 -------- -------- TOTAL....................................................... $310,534 $291,772 ======== ========
See Notes to Consolidated Financial Statements. 4 5 PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996 ---- ---- ---- (IN THOUSANDS EXCEPT FOR PER SHARE DATA) REVENUES: Speedway admissions.................................... $ 51,335 $ 45,550 $20,248 Other speedway revenues................................ 41,811 33,926 13,041 Merchandise, tires and accessories..................... 23,712 30,340 21,886 -------- -------- ------- TOTAL REVENUES......................................... 116,858 109,816 55,175 EXPENSES: Operating expenses..................................... 46,151 40,399 18,067 Cost of sales.......................................... 13,972 16,954 12,834 Depreciation and amortization.......................... 11,189 7,212 3,167 Selling, general and administrative.................... 14,465 16,379 6,185 -------- -------- ------- TOTAL EXPENSES......................................... 85,777 80,944 40,253 OPERATING INCOME............................................ 31,081 28,872 14,922 EQUITY IN LOSS OF AFFILIATES................................ (1,382) (860) GAIN ON SALE OF INVESTMENT.................................. 1,108 INTEREST INCOME (EXPENSE), NET.............................. (3,523) (1,558) 1,950 -------- -------- ------- INCOME BEFORE INCOME TAXES.................................. 27,284 26,454 16,872 INCOME TAXES................................................ 10,697 10,009 5,992 -------- -------- ------- NET INCOME.................................................. $ 16,587 $ 16,445 $10,880 ======== ======== ======= BASIC NET INCOME PER SHARE.................................. $ 1.17 $ 1.19 ======== ======== PRO FORMA BASIC NET INCOME PER SHARE........................ $ .90 ======= DILUTED NET INCOME PER SHARE................................ $ 1.17 $ 1.19 ======== ======== PRO FORMA DILUTED NET INCOME PER SHARE...................... $ .90 =======
See Notes to Consolidated Financial Statements. 5 6 PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
ADDITIONAL RETAINED TREASURY COMMON STOCK PAID-IN CAPITAL EARNINGS STOCK TOTAL ------------ --------------- -------- -------- ----- (IN THOUSANDS) BALANCE, JANUARY 1, 1996.............. $ 93 $ 37,446 $ 8,273 $ 45,812 Net income.......................... 10,880 10,880 Sale of common stock................ 37 82,703 82,740 Competition Tire West, Inc. transaction (Note 4)............. (28) (4,417) (4,445) Acquisition of minority interest (Note 4)......................... 2,063 2,063 Stock issuance (Note 5)............. 2 8,350 8,352 ---- -------- ------- ------- -------- BALANCE, DECEMBER 31, 1996............ 132 130,534 14,736 145,402 Net income.......................... 16,445 16,445 North Carolina Speedway, Inc. acquisition (Note 3)............. 10 28,837 28,847 ---- -------- ------- ------- -------- BALANCE, DECEMBER 31, 1997............ 142 159,371 31,181 190,694 Net income.......................... 16,587 16,587 Purchase of common stock (Note 11).............................. $(7,535) (7,535) ---- -------- ------- ------- -------- BALANCE, DECEMBER 31, 1998............ $142 $159,371 $47,768 $(7,535) $199,746 ==== ======== ======= ======= ========
See Notes to Consolidated Financial Statements. 6 7 PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996 ---- ---- ---- (IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES: Net income............................................. $ 16,587 $ 16,445 $ 10,880 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization....................... 11,189 7,212 3,167 Equity in loss of affiliates........................ 1,382 860 Gain on sale of investment.......................... (1,108) Deferred taxes...................................... 9,009 3,750 (146) Changes in assets and liabilities which provided (used) cash: Receivables......................................... 389 (2,110) (431) Inventories, prepaid expenses and other assets...... 1,412 (821) (2,784) Accounts payable and accrued liabilities............ 637 (5,082) 2,668 Deferred revenues................................... (3,694) 5,952 5,259 -------- -------- -------- Net cash provided by operating activities...... 35,803 26,206 18,613 CASH FLOWS FROM INVESTING ACTIVITIES: Additions of property and equipment.................... (32,893) (73,349) (73,812) Proceeds from sale of investment (Note 3).............. 5,270 Acquisition of Competition Tire South, Inc. (Note 4)... (758) Competition Tire West, Inc. transaction (Note 4)....... (3,326) Acquisitions of equity interest in subsidiaries and affiliates.......................................... (10,392) (19,050) (622) -------- -------- -------- Net cash used in investing activities.......... (38,015) (92,399) (78,518) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from sale of common stock..................... 82,740 Purchase of common stock (Note 11)..................... (7,535) Proceeds from issuance of debt......................... 11,900 45,400 14,016 Principal payments on long-term debt................... (433) (5,000) (12,540) Repayment of related party debt........................ (658) (1,820) (1,254) -------- -------- -------- Net cash provided by financing activities...... 3,274 38,580 82,962 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..... 1,062 (27,613) 23,057 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR........... 249 27,862 4,805 -------- -------- -------- CASH AND CASH EQUIVALENTS AT END OF YEAR................. $ 1,311 $ 249 $ 27,862 ======== ======== ======== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the year for interest................. $ 4,088 $ 1,834 $ 133 ======== ======== ======== Cash paid during the year for taxes, net............... $ 380 $ 8,089 $ 9,279 ======== ======== ========
See Notes to Consolidated Financial Statements. 7 8 PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS The consolidated financial statements include the accounts of Penske Motorsports, Inc. (the "Company") and its wholly-owned subsidiaries Michigan International Speedway, Inc., Pennsylvania International Raceway, Inc. ("PIR"), California Speedway Corporation, North Carolina Speedway, Inc. ("NCS"), Motorsports International Corp., Competition Tire West, Inc. ("CTW") and Competition Tire South, Inc. ("CTS"). The Company also owns 45% of Homestead-Miami Speedway, LLC ("HMS"), which is recorded using the equity method. The Company is an indirect subsidiary of Penske Corporation (the "Parent"). All material intercompany balances and transactions have been eliminated. Nature of Operations -- The Company generates a predominant portion of its earnings from operating Michigan Speedway in Brooklyn, Michigan, Nazareth Speedway in Nazareth, Pennsylvania (operated by PIR), California Speedway in Fontana, California, and North Carolina Speedway in Rockingham, North Carolina. HMS operates Miami-Dade Homestead Motorsports Complex in Homestead, Florida. The Company also sells motorsports-related merchandise and apparel and racing tires and accessories. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash and Cash Equivalents -- The Company considers all short-term investments with a maturity of three months or less, at purchase, as cash equivalents. Inventories -- Inventories are stated at the lower of cost or market, with cost determined by the first in, first out method. Property and Equipment and Goodwill -- Property and equipment is carried at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the respective assets as follows:
YEARS ----- Buildings and improvements.................................. 10 - 40 Equipment................................................... 2 - 15
Goodwill represents the excess of the purchase price over the fair value of net assets acquired and is being amortized primarily over a period of 40 years. Accumulated amortization was $1,921,000 and $872,000 at December 31, 1998 and 1997, respectively. The carrying values of property and equipment and goodwill are evaluated for impairment based upon expected future undiscounted cash flows. If events or circumstances indicate that the carrying value of an asset may not be recoverable, an impairment loss would be recognized equal to the difference between the carrying value of the asset and its fair value. Revenue Recognition -- Race-related revenues and expenses are recognized upon completion of an event. Deferred revenues represent advance race-related revenues, net of expenses, on future races. Revenues from the sale of merchandise, tires and accessories are recognized at the time of sale. Operating expenses include race-related expenses and other operating costs. Cost of sales relates entirely to merchandise, tires and accessories sales. Income Taxes -- Deferred taxes reflect the impact of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. 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 8 9 PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED and liabilities and disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results will likely differ from those which are estimated, however, such differences are not expected to be material. 3. ACQUISITIONS AND INVESTMENTS North Carolina Speedway Acquisition -- During 1997, the Company acquired the outstanding shares of NCS, which owns and operates North Carolina Speedway in Rockingham, North Carolina. On May 19, 1997, the Company purchased the shares of NCS held by its former majority shareholder in exchange for 906,542 shares of the Company's stock. On December 2, 1997, the shareholders of NCS approved a merger with the Company, whereby shareholders of NCS would receive cash of $19.61 per share or an equivalent amount of the Company's stock. In connection with the merger, 60,558 shares of the Company's stock were issued. The merger was completed December 2, 1997. Certain NCS shareholders dissented to the merger of the Company and NCS. These shareholders were paid $16.77 per share, the median fair value of NCS shares as determined by an independent investment banking firm retained by NCS to evaluate the Company's merger offer. These dissenters have requested additional compensation and, if they are successful in court, the cost of the NCS acquisition may increase (see Note 12). The acquisition, which approximated $42.0 million, was accounted for using the purchase method and resulted in goodwill of $34.2 million and an increase in stockholders' equity of $28.8 million. The fair market value of the assets acquired and liabilities assumed was as follows: current assets of $507,000, fixed assets of $17.6 million, current liabilities of $5.1 million and debt of $4.2 million. As of December 31, 1997, the Company recorded a liability of $10.0 million to recognize amounts due to the former NCS shareholders. NCS has been included in the consolidated financial statements since the date of acquisition of the controlling interest. The pro forma effect of the acquisition for the years ended December 31, 1997 and 1996, assuming the transactions occurred at the beginning of each year, would be to increase revenues by $4.8 million and $9.6 million, respectively, with no material impact on net income or net income per share. Investments -- In July 1997, the Company acquired 40% of the ownership interests of HMS for $11.8 million. In March 1998, the Company acquired an additional 5% of the ownership interests of HMS for $2.85 million, payable on December 31, 2001. This investment is accounted for using the equity method. The Company has joint right of first refusal agreements with the other investors in HMS for each to acquire additional shares of HMS proportionate to their current ownership interest should a sale occur. During 1998, the Company sold its investment in the common stock of Grand Prix Association of Long Beach, Inc. for $5.3 million. This investment was acquired in a series of transactions in 1997 for $4.2 million. 4. INITIAL PUBLIC OFFERING AND RELATED ACQUISITIONS Initial Public Offering -- On March 27, 1996, the Company completed its initial public offering ("IPO") of 3,737,500 shares of common stock. The initial offering price was $24.00 per share. The net proceeds to the Company of $82.7 million were used to repay outstanding debt of $10.6 million and to fund construction of California Speedway. Acquisition of Minority Interest in PIR -- Immediately prior to the effective date of the IPO, an investor in PIR exchanged 2,557 shares of PIR for 92,500 shares of common stock of the Company. This transaction resulted in goodwill of approximately $2.0 million and reduced the minority interest in PIR by $1.2 million. Acquisition of Minority Interest in CTW and Capital Distribution -- On March 21, 1996, the Company acquired CTW for $7.4 million, of which $4.3 million was paid to the two selling shareholders in cash with the balance of $3.1 million payable over five years with interest at 8% per annum. The acquisition of the shares of 9 10 PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED the former 40% CTW shareholder was accounted for as an acquisition of a minority interest and resulted in recording goodwill of approximately $1.9 million. The former controlling shareholder of CTW (60%) is also the controlling shareholder of the Company. Therefore, the excess of the amount paid for such shares over the net book value of assets acquired (approximately $2.9 million) was recorded as a capital distribution. The note payable to the former controlling shareholder of CTW, which had a balance of $1.8 million, was repaid in April 1997. Acquisition of CTS Common Stock -- On March 21, 1996, the Company acquired the common shares of CTS not owned by CTW (approximately 67%) for cash and notes totaling approximately $2.2 million. The notes had an original balance of $830,000 and a term of five years with interest at 8%. This acquisition was accounted for using the purchase method and resulted in recording $1.7 million of goodwill. CTS has been included in the consolidated financial statements from the date acquired. 5. PROPERTY AND EQUIPMENT Property and equipment consists of the following as of December 31:
1998 1997 ---- ---- (IN THOUSANDS) Land and improvements.................................... $ 96,635 $ 95,758 Buildings and improvements............................... 158,644 129,031 Equipment................................................ 23,677 21,846 -------- -------- 278,956 246,635 Less accumulated depreciation............................ 31,535 21,969 -------- -------- $247,421 $224,666 ======== ========
In December 1996, the Company acquired 54 acres of commercial property located adjacent to California Speedway from a noncontrolling shareholder of the Company for $13.4 million, which the Company paid in cash of $5 million and by the issuance of 254,298 shares of the Company's common stock. The issuance of stock was recorded as an $8.4 million increase in stockholders' equity. 6. LONG-TERM DEBT Long-term debt consists of the following as of December 31:
1998 1997 ---- ---- (IN THOUSANDS) $100 million unsecured revolving line of credit, bearing interest at LIBOR plus 0.5% (6.29%) due in 2002.......... $57,300 $45,400 Notes payable through 2006, bearing interest at fixed rates ranging from 7.5% to 8.0%................................ 4,654 2,895 ------- ------- 61,954 48,295 Less current portion....................................... 512 1,017 ------- ------- $61,442 $47,278 ======= =======
10 11 PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED The following table presents the expected repayment of long-term debt as of December 31, 1998 (in thousands): 1999........................................................ $ 512 2000........................................................ 520 2001........................................................ 2,892 2002........................................................ 57,426 2003........................................................ 137 2004 and thereafter......................................... 467 ------- $61,954 =======
Long-term debt at December 31, 1998 and 1997 includes $.7 million and $1.3 million, respectively, which are due to related parties as a result of the purchase of CTW and CTS in March 1996 and $1.1 million and $1.2 million, respectively, which are secured by certain parcels of land. At December 31, 1998 and 1997 the carrying value of the debt approximated fair value. 7. EMPLOYEE BENEFIT PLANS The Company participates in a non-contributory profit-sharing plan which covers employees who meet certain length of service requirements. Contributions of approximately $235,000, $185,000 and $100,000 were made to the plan in 1998, 1997 and 1996, respectively. The Company also sponsors a defined contribution plan under Section 401(k) of the Internal Revenue Code. The Company's expense related to this plan was $209,000, $150,000 and $80,000 in 1998, 1997 and 1996, respectively. 8. TAXES The provision for income taxes consists of the following for the years ended December 31:
1998 1997 1996 ---- ---- ---- (IN THOUSANDS) Current............................................. $ 1,878 $ 6,259 $5,753 Deferred............................................ 8,819 3,750 239 ------- ------- ------ Total............................................... $10,697 $10,009 $5,992 ======= ======= ======
A reconciliation of taxes computed at the federal statutory rate and the consolidated effective rate is as follows for the years ended December 31:
1998 1997 1996 ---- ---- ---- (IN THOUSANDS) Income before income taxes......................... $27,284 $26,454 $16,872 ------- ------- ------- Taxes computed at statutory rate................... $ 9,549 $ 9,259 $ 5,905 State and local taxes, net of federal benefit...... 684 616 37 Amortization of goodwill........................... 368 190 60 Other.............................................. 96 (56) (10) ------- ------- ------- Total income tax expense........................... $10,697 $10,009 $ 5,992 ======= ======= ======= Effective tax rate................................. 39.2% 37.8% 35.5% ======= ======= =======
11 12 PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED Temporary differences which give rise to deferred tax (assets) and liabilities are as follows as of December 31:
1998 1997 ---- ---- (IN THOUSANDS) Property, non-current...................................... $22,413 $13,349 Other, current............................................. (368) (313) ------- ------- Total...................................................... $22,045 $13,036 ======= =======
9. RELATED PARTY TRANSACTIONS The following is a summary of significant related party balances and transactions as of and for the years ended December 31:
1998 1997 1996 ---- ---- ---- (IN THOUSANDS) Balances included in assets and liabilities: Accounts receivable -- affiliates......................... $ 681 $ 388 $ 339 ====== ====== ====== Accounts payable -- affiliates............................ $ 879 $1,038 $1,702 ====== ====== ====== Accrued expenses payable to affiliates.................... $ 376 $ 424 $ 405 ====== ====== ====== Other transactions: Sales to affiliates....................................... $3,434 $3,149 $2,005 ====== ====== ====== Purchases from affiliates................................. $ 623 $1,078 $ 587 ====== ====== ======
In addition, the Parent bills the Company for services rendered and expenses incurred by the Parent for the benefit of the Company. During the years ended December 31, 1998, 1997 and 1996, the Company paid the Parent $570,000, $511,000 and $478,000, respectively, for general and operating expenses. Prior to the IPO, the Company was charged for its allocated share of income taxes on the basis of the Company as a separate tax group. The Company paid the Parent $1.5 million for its portion of taxes relating to the period in 1996 prior to the IPO. The Company has a five-year agreement with a shareholder of the Company to provide sanitary wastewater treatment services to California Speedway, for which the Company paid $92,000 during the years ended December 31, 1998 and 1997 and $89,000 during the year ended December 31, 1996. The agreement, which is adjusted annually by increases in the Consumer Price Index, also grants an option to the Company to purchase such shareholder's wastewater treatment facility. The Company pays fees to the sanctioning bodies which conduct racing events at its speedways, including the National Association for Stock Car Auto Racing, Inc. ("NASCAR"). NASCAR is an affiliate of a significant shareholder. The Company, through its subsidiaries, paid NASCAR sanction fees, prize money and point funds of $13.6 million, $9.9 million and $3.8 million for the years ended December 31, 1998, 1997 and 1996, respectively. 10. SEGMENT REPORTING Effective December 31, 1998, the Company adopted Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information. This statement establishes standards for the way in which public business enterprises report information about operating segments in annual financial statements. 12 13 PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED The Company's reportable segments are business units that offer different products and services. The Company classifies its business interests into two fundamental areas: admissions and other track-related activities, which consists principally of race-related revenues and expenses from promoting motorsports events, and merchandise, tires and accessories ("MTA"), consisting principally of the revenues and expenses from the sale of race-related apparel, tires and accessories items. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Revenues relating to the Company's track operations totaled $93.1 million, $79.5 million and $33.3 million in 1998, 1997 and 1996, respectively, with expenses (operating, depreciation and amortization, and selling, general and administrative) of approximately $64.6 million, $54.0 million and $20.4 million, respectively, for the same periods. Revenues relating to the Company's MTA business totaled $23.7 million, $30.3 million and $21.9 million in 1998, 1997 and 1996, respectively. The MTA business segment had cost of sales of $14.0 million, $17.0 million and $12.8 million, respectively, and operating, depreciation and amortization, and selling, general and administrative expenses of approximately $7.2 million, $10.0 million and $7.0 million, respectively, in 1998, 1997 and 1996 relating to such operations. Substantially all of the Company's capital expenditures, property, plant and equipment, equity investments and goodwill, as well as depreciation and amortization expenses, are related to track operations. Substantially all of the Company's inventory is related to its MTA businesses. 11. COMMON STOCK AND STOCK OPTIONS Prior to the completion of the IPO in March 1996, the Company effected a recapitalization pursuant to which the Company (i) increased its authorized shares of common stock to 50,000,000 shares, (ii) effected a 91.575-to-one share split, and (iii) converted 15,000 shares of outstanding preferred stock to 1,373,625 shares of common stock. The basic net income per share for the years ended December 31, 1998 and 1997 reflects the weighted average number of shares outstanding of 14,117,993 and 13,810,570. The pro forma basic net income per share for the year ended December 31, 1996 reflects the weighted average number of post-split shares outstanding of 12,128,920, including the dilutive effect of the number of shares issued equivalent to the $2.9 million capital distribution of 121,667 shares, based on the offering price of $24.00 per share, from the March 1996 acquisition of CTW. The diluted net income per share for the years ended December 31, 1998 and 1997 and the pro forma diluted net income per share for the year ended December 31,1996 reflect the weighted average number of shares outstanding plus the dilutive effect of outstanding stock options of 16,048, 19,534 and 12,621, respectively. The dilutive effect was calculated using the treasury stock method. In September 1998, the Company announced plans to repurchase, from time to time, up to $10 million of the Company's common stock in open market transactions, depending on market conditions. As of December 31, 1998, the Company had repurchased 353,900 shares at prices ranging from $19.875 to $23.25 per share. In March 1996, the stockholders of the Company approved a stock incentive plan whereby key employees and certain outside consultants and advisors of the Company and its subsidiaries may receive awards of stock options, stock appreciation rights or restricted stock up to a maximum of 400,000 shares of common stock. In May 1998, the stockholders of the Company approved an increase in the number of shares authorized 13 14 PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED pursuant to this plan to 720,000. The following table summarizes stock option activity during the years ended December 31, 1998, 1997 and 1996.
YEAR ENDED DECEMBER 31, ----------------------------------------------------------------------- 1998 1997 1996 --------------------- --------------------- --------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE --------- -------- --------- -------- --------- -------- Options, Beginning of Year......... 155,000 $26.06 75,000 $24.00 Granted............................ 165,000 26.38 115,000 27.75 75,000 $24.00 Forfeited.......................... (35,000) 27.75 ------- ------ ------- ------ ------ ------ Options, End of Year............... 320,000 $26.22 155,000 $26.06 75,000 $24.00 ======= ====== ======= ====== ====== ====== Options Exercisable at End of Year............................. 76,534 $25.70 34,100 $25.26 7,500 $24.00 ======= ====== ======= ====== ====== ====== Weighted Average Fair Value of Options Granted During the Year............................. $ 9.27 $10.91 $ 9.90 ====== ====== ======
The 320,000 stock options outstanding as of December 31, 1998 had exercise prices ranging from $24.00 to $27.75 per share and a weighted average remaining contractual life of 7.9 years. The Company applies APB Opinion 25 and related Interpretations in accounting for stock options. Accordingly, no compensation cost has been recognized in the consolidated statements of income. If the Company had recognized compensation cost, the Company would have reported net income of $16.2 million, $16.2 million and $10.8 million and basic net income per share of $1.15, $1.17 and $.89 for the years ended December 31, 1998, 1997 and 1996, respectively. The Black-Sholes valuation model was used, assuming an average life of the options of five years, a discount rate of 4.53%, 5.53% and 6.15% in 1998, 1997 and 1996, respectively, no dividend payout and a volatility of 30% in 1998 and 35% in 1997 and 1996. 12. COMMITMENTS AND CONTINGENCIES The Company is party to certain claims and contingencies arising in the normal course of business. In the opinion of management, the Company has meritorious defenses on all such claims, or they are of such kind, or involve such amounts, as would not have a materially adverse effect on the financial position or results of operations of the Company if disposed of unfavorably. 13. SELECTED QUARTERLY DATA (UNAUDITED) The following table presents the Company's quarterly results for the most recent eight quarters (in thousands, except per share amounts).
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER ----------------- ----------------- ----------------- ----------------- 1998 1997 1998 1997 1998 1997 1998 1997 ---- ---- ---- ---- ---- ---- ---- ---- Revenues................ $10,137 $ 5,375 $46,087 $46,296 $35,218 $43,974 $25,416 $14,171 Operating income (loss)................ (3,442) (2,606) 19,606 17,965 7,749 15,295 7,168 (1,782) Net income (loss)....... (1,648) (1,511) 10,892 10,929 3,510 8,845 3,833 (1,818) Basic Net income (loss) per share............. $ (.12) $ (.11) $ .77 $ .80 $ .25 $ .63 $ .28 $ (.13)
14 15 PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES REPORT OF MANAGEMENT The consolidated financial statements of Penske Motorsports, Inc. and subsidiaries (the "Company") have been prepared by management and have been audited by the Company's independent auditors, Deloitte & Touche LLP. Management is responsible for the consolidated financial statements, which have been prepared in conformity with generally accepted accounting principles and include amounts based on management's judgments. Management is also responsible for maintaining internal accounting control systems designed to provide reasonable assurance, at appropriate cost, that assets are recorded in accordance with established policies and procedures. The Company's systems are under continuing review and are supported by, among other things, business conduct and other written guidelines and the selection and training of qualified personnel. The Board of Directors is responsible for the Company's financial and accounting policies, practices and reports. Its Audit Committee meets annually with the independent auditors and representatives of management to discuss and make inquiries into their activities. The independent auditors have free access to the Audit Committee, with and without management representatives in attendance, to discuss the results of the audit, the adequacy of internal accounting controls, and the quality of the financial reporting. It is management's conclusion that the system of internal accounting controls at December 31, 1998 provides reasonable assurance that the books and records reflect the transactions of the Company and that the Company has complied with its established policies and procedures. /s/ ROGER S. PENSKE - ------------------------------------------ Roger S. Penske Chairman /s/ GREGORY W. PENSKE - ------------------------------------------ Gregory W. Penske President and Chief Executive Officer February 1, 1999 15 16 INDEPENDENT AUDITORS' REPORT Stockholders and Board of Directors Penske Motorsports, Inc. We have audited the accompanying consolidated balance sheets of Penske Motorsports, Inc. and subsidiaries (the "Company") as of December 31, 1998 and 1997, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1998. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements 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 consolidated 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, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 1998 and 1997, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. /s/ DELOITTE & TOUCHE LLP Detroit, Michigan February 1, 1999 16 17 The unaudited interim balance sheet, statements of income and cash flows of Penske Motorsports for the interim period ended March 31, 1999, are hereby incorporated by reference to the Quarterly Report of Penske Motorsports on Form 10-Q for the quarter ended March 31, 1999. PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands)
MARCH 31, DECEMBER 31, 1999 1998 -------------------- -------------------- ASSETS (UNAUDITED) ------ CURRENT ASSETS: Cash and cash equivalents $ 1,368 $ 1,311 Receivables 14,552 4,398 Inventories 3,217 3,085 Prepaid expenses and other assets 2,756 1,614 ------------------- ------------------- TOTAL CURRENT ASSETS 21,893 10,408 PROPERTY AND EQUIPMENT, net 248,582 247,421 INVESTMENTS 13,021 12,679 GOODWILL, net 39,345 39,497 OTHER ASSETS 983 529 ------------------- ------------------- TOTAL $ 323,824 $ 310,534 =================== =================== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Current portion of long-term debt $ 514 $ 512 Accounts payable 3,695 3,915 Accrued expenses 1,566 2,933 Deferred revenues, net 47,544 19,573 ------------------- ------------------- TOTAL CURRENT LIABILITIES 53,319 26,933 LONG-TERM DEBT, less current portion 49,916 61,442 DEFERRED TAXES 23,763 22,413 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common stock, par value $ .01 share: Authorized 50,000,000 shares Issued and outstanding 14,208,898 shares in 1999 and 1998 142 142 Additional paid-in-capital 159,371 159,371 Retained earnings 44,848 47,768 ------------------- ------------------- 204,361 207,281 Treasury stock, at cost, 353,900 shares (7,535) (7,535) ------------------- ------------------- TOTAL STOCKHOLDERS' EQUITY 196,826 199,746 ------------------- ------------------- TOTAL $ 323,824 $ 310,534 =================== ===================
See accompanying notes to consolidated financial statements. 17 18 PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share data) (Unaudited)
THREE MONTHS ENDED MARCH 31, ------------------------------------------------- 1999 1998 --------------------- -------------------- REVENUES: Speedway admissions $ 3,243 $ 3,238 Other speedway revenues 4,754 2,953 Merchandise, tires and accessories 4,856 3,946 --------------------- -------------------- TOTAL REVENUES 12,853 10,137 EXPENSES: Operating 7,749 6,190 Cost of sales 3,145 2,462 Depreciation and amortization 3,039 2,675 Selling, general and administrative 3,042 2,252 --------------------- -------------------- OPERATING EXPENSES 16,975 13,579 --------------------- -------------------- OPERATING LOSS (4,122) (3,442) EQUITY IN INCOME OF AFFILIATES 356 512 GAIN ON SALE OF INVESTMENT 1,108 INTEREST EXPENSE (1,039) (859) --------------------- -------------------- LOSS BEFORE INCOME TAXES (4,805) (2,681) INCOME TAX BENEFIT 1,884 1,033 --------------------- -------------------- NET LOSS $ (2,921) $ (1,648) BASIC NET LOSS PER SHARE $ (.21) $ (.12) DILUTED NET LOSS PER SHARE $ (.21) $ (.12) BASIC WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 13,854,998 14,208,898 DILUTED WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 13,909,117 14,216,214
See accompanying notes to consolidated financial statements 18 19 PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
THREE MONTHS ENDED MARCH 31, --------------------------------------- 1999 1998 ----------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (2,921) $ (1,648) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 3,039 2,675 Equity in income of affiliates (356) (512) Gain on sale of investment (1,108) Changes in assets and liabilities which provided (used) cash: Receivables (10,154) (8,746) Inventories, prepaid expenses and other assets (1,826) (1,351) Accounts payable and accrued liabilities (1,586) (7,609) Deferred taxes 1,350 2,459 Deferred revenues 27,971 20,556 ----------------- ---------------- Net cash provided by operating activities 15,517 4,716 CASH FLOWS FROM INVESTING ACTIVITIES: Additions of property and equipment, net (3,936) (8,567) Acquisitions of equity interests in affiliates and subsidiaries (241) Proceeds from sale of investment 5,270 ----------------- ---------------- Net cash used in investing activities (3,936) (3,538) CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of debt (11,524) (409) ----------------- ---------------- Net cash used in financing activities (11,524) (409) ----------------- ---------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 57 769 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,311 249 ----------------- ---------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,368 $ 1,018 ================= ================ SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for interest $ 1,059 $ 932 Cash paid (refunded) during the period for taxes, net $ (751) $ (1,971)
See accompanying notes to consolidated financial statements 19 20 PENSKE MOTORSPORTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - FINANCIAL STATEMENTS. The consolidated financial statements include the accounts of Penske Motorsports, Inc. (the "Company") and its wholly-owned subsidiaries, Michigan International Speedway, Inc., Pennsylvania International Raceway, Inc., California Speedway Corporation, North Carolina Speedway, Inc., Motorsports International Corp., Competition Tire West, Inc. and Competition Tire South, Inc. The Company also owns 45% of the ownership interests of Homestead-Miami Speedway, LLC, which is recorded using the equity method. All material intercompany balances and transactions have been eliminated. The financial statements have been prepared by management and, in the opinion of management, contain all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial position of the Company as of March 31, 1999 and December 31, 1998, and the results of operations and cash flows of the Company for the three months ended March 31, 1999 and 1998. The consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission. Because of the seasonal concentration of racing events, the results of operations for the three months ended March 31, 1999 and 1998 are not indicative of the results to be expected for the year. NOTE 2 - PROPERTY AND EQUIPMENT, NET. Property and equipment consists of the following:
MARCH 31, DECEMBER 31, 1999 1998 -------------------- ------------------- (In thousands) Land and land improvements $ 96,641 $ 96,635 Buildings and improvements 162,253 158,644 Equipment 23,845 23,677 -------------------- ------------------- 282,739 278,956 Less accumulated depreciation 34,157 31,535 -------------------- ------------------- $ 248,582 $ 247,421 ==================== ===================
NOTE 3 - SEGMENT INFORMATION. The Company's reportable segments are business units that offer different products and services. The Company classifies its business interests into two fundamental areas: admissions and other track-related activities, which consists principally of race-related revenues and expenses from promoting motorsports events, and merchandise, tires and accessories ("MTA"), consisting principally of the revenues and expenses from the sale of race-related apparel, tires and accessories items. Revenues relating to the Company's track operations totaled $8.0 million and $6.2 million for the three months ended March 31, 1999 and 1998, respectively, with expenses (operating, depreciation and amortization, and selling, general and administrative) of approximately $12.0 million and $9.7 million, respectively, for the same periods. 20 21 Revenues for the first quarter relating to the Company's MTA business totaled $4.9 million and $3.9 million in 1999 and 1998, respectively. The MTA business segment had cost of sales of $3.1 million and $2.5 million, respectively, and operating, depreciation and amortization, and selling, general and administrative expenses of approximately $1.8 million and $1.4 million, respectively, in the first quarter of 1999 and 1998 relating to such operations. Substantially all of the Company's capital expenditures, property, plant and equipment, equity investments and goodwill, as well as depreciation and amortization expenses, are related to track operations. Substantially all of the Company's inventory is related to its MTA businesses. NOTE 4 - COMMITMENTS AND CONTINGENCIES. The Company is party to certain claims and contingencies arising in the normal course of business. In the opinion of management, the Company has meritorious defenses on all such claims, or they are of such kind, are adequately covered by insurance, or involve such amounts, as would not have a materially adverse effect on the financial position or results of operations of the Company if disposed of unfavorably. NOTE 5 - SUBSEQUENT EVENT. On May 10, 1999, the Company entered into a definitive Merger Agreement among the Company, International Speedway Corporation ("ISC") and 88 Corp., a wholly-owned subsidiary of ISC. Pursuant to the Merger Agreement, ISC will acquire the approximately 12.2 million outstanding common shares of the Company which it does not already own for $50 per share, subject to a collar provision. The Company's stockholders will be able to elect to receive this consideration as either (i) $15.00 in cash and $35.00 in Class A Common Stock of ISC or (ii) $50.00 of Class A Common Stock of ISC. The Merger Agreement is subject to customary conditions, including the approval of the transaction by the Company's stockholders and the approval of the ISC stock issuance by the stockholders of ISC. 21 22 INDEPENDENT ACCOUNTANTS' REPORT Stockholders and Board of Directors Penske Motorsports, Inc. We have reviewed the accompanying condensed consolidated balance sheet of Penske Motorsports, Inc. and subsidiaries (the "Company") as of March 31, 1999 and the related condensed consolidated statements of operations and cash flows for the three month periods ended March 31, 1999 and 1998. These consolidated financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is an expression of an opinion regarding the consolidated financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to such condensed consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of the Company as of December 31, 1998, and the related consolidated statements of income, changes in stockholders' equity and cash flow for the year then ended (not presented herein); and in our report dated February 1, 1999, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet at December 31, 1998 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ Deloitte & Touche LLP - ------------------------- Detroit, Michigan May 13, 1999 22 23 (b) Pro Forma Financial Information The unaudited pro forma condensed consolidated financial information and related notes presented herein is related to the Merger and is hereby incorporated by reference to the Registration Statement on Form S-4 of the Registrant, filed with Securities and Exchange Commission on June 21, 1999 (File No. 333-81165). INTERNATIONAL SPEEDWAY UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following International Speedway unaudited pro forma condensed consolidated financial statements reflect adjustments to the historical consolidated balance sheets and statements of income of International Speedway and Penske Motorsports to give effect to the merger, using the purchase method of accounting for a business combination. The International Speedway unaudited pro forma condensed consolidated balance sheet as of February 28, 1999, assumes the merger was effected as of February 28, 1999. The International Speedway unaudited pro forma condensed consolidated statements of income for the three months ended February 28, 1999 and for the year ended November 30, 1998 assume the merger was effected as of the beginning of each period presented. The fiscal year-ends of International Speedway and Penske Motorsports occur at different dates. International Speedway's fiscal year-end is November 30 and Penske Motorsports' fiscal year-end is December 31. The International Speedway unaudited pro forma condensed consolidated balance sheet and statements of income have been prepared by combining the following periods of operations of International Speedway and Penske Motorsports:
PRO FORMA PERIOD INTERNATIONAL SPEEDWAY PENSKE MOTORSPORTS - ---------------- ---------------------- ------------------ February 28, 1999 February 28, 1999 March 31, 1999 Three months ended Three months ended Three months ended February 28, 1999 February 28, 1999 March 31, 1999 Year ended Year ended Year ended November 30, 1998 November 30, 1998 December 31, 1998
International Speedway and Penske Motorsports each owns 45% of Miami-Homestead and each entity records its respective investment using the equity method of accounting. For purposes of pro forma presentations, Miami-Homestead's March 31, 1999 historical consolidated balance sheet and its historical statements of income for the three months ended March 31, 1999, and the year ended December 31, 1998, have been combined with Penske Motorsports historical financial information. The following International Speedway unaudited pro forma condensed consolidated financial statements have been prepared from, and should be read in conjunction with, the historical consolidated financial statements and notes of International Speedway, incorporated by reference into this Joint Proxy Statement/Prospectus, and the historical consolidated financial statements and notes of Penske Motorsports incorporated by reference into this Joint Proxy Statement/Prospectus. See "Where You Can Find More Information" on page 74. The following International Speedway unaudited pro forma condensed consolidated statements of income are not necessarily indicative of the results of operations that would have occurred had the merger occurred at the dates indicated, nor are they necessarily indicative of future operating results of the combined company. 23 24 INTERNATIONAL SPEEDWAY UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET FEBRUARY 28, 1999
PENSKE MOTORSPORTS INTERNATIONAL AND MIAMI- PRO FORMA PRO FORMA SPEEDWAY HOMESTEAD ADJUSTMENTS CONSOLIDATED ------------- ----------- ----------- ------------ (IN THOUSANDS) ASSETS Current Assets: Cash and cash equivalents.................... $ 24,887 $ 1,461 $(12,375)(3)(7) $ 13,973 Short-term investments....................... 87,171 0 0 87,171 Receivables.................................. 12,960 17,183 0 30,143 Inventories.................................. 1,736 3,217 0 4,953 Prepaid expenses and other current assets.... 2,878 7,636 0 10,514 -------- -------- -------- ---------- Total Current Assets....................... 129,632 29,497 (12,375) 146,754 Property and equipment, net.................... 241,759 278,904 26,500(1) 547,163 Other Assets: Equity investments........................... 44,650 13,021 (57,546)(6) 125 Goodwill, net................................ 38,675 72,040 445,768(1)(2) 556,483 Restricted investments....................... 112,713 0 0 112,713 Other........................................ 11,102 983 900(1) 12,985 -------- -------- -------- ---------- 207,140 86,044 389,122 682,306 -------- -------- -------- ---------- Total Assets............................... $578,531 $394,445 $403,247 $1,376,223 ======== ======== ======== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable............................. $ 10,551 $ 4,672 $ 0 $ 15,223 Income taxes payable......................... 11,286 0 (4,677)(3) 6,609 Deferred income.............................. 55,536 55,337 0 110,873 Current portion of long-term debt............ 685 3,014 0 3,699 Other current liabilities.................... 5,457 5,134 0 10,591 -------- -------- -------- ---------- Total Current Liabilities.................. 83,515 68,157 (4,677) 146,995 Long-term debt................................. 71,725 79,916 190,338(4) 341,979 Deferred income taxes.......................... 30,287 23,763 10,375(1)(7) 64,425 Minority interest.............................. 0 0 2,578(6) 2,578 Stockholders' Equity Class A common stock......................... 119 142 (52)(5) 209 Class B common stock......................... 312 0 0 312 Additional paid-in capital................... 205,851 159,371 268,265(5)(7) 633,487 Members' capital............................. 0 25,783 (25,783)(6) 0 Retained earnings............................ 188,344 44,848 (45,332)(3)(5) 187,860 -------- -------- -------- ---------- 394,626 230,144 197,098 821,868 Less unearned compensation-restricted stock...................................... 1,622 0 0 1,622 Less treasury stock.......................... 0 7,535 (7,535)(5)(7) 0 -------- -------- -------- ---------- Total Stockholders' Equity................. 393,004 222,609 204,633 820,246 Total Liabilities and Stockholders' Equity.................................. $578,531 $394,445 $403,247 $1,376,223 ======== ======== ======== ==========
See accompanying notes to unaudited pro forma condensed consolidated financial statements. 24 25 INTERNATIONAL SPEEDWAY UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED FEBRUARY 28, 1999
PENSKE MOTORSPORTS INTERNATIONAL AND MIAMI- PRO FORMA PRO FORMA SPEEDWAY HOMESTEAD ADJUSTMENTS TOTAL ------------- ----------- ----------- --------- (IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA) REVENUES Admissions, net......................... $ 37,614 $ 5,730 $ 0 $ 43,344 Motorsports related income.............. 34,444 8,257 0 42,701 Food, beverage and merchandise income... 10,834 5,677 0 16,511 Other income............................ 344 0 0 344 ----------- ------- ---------- ----------- 83,236 19,664 0 102,900 EXPENSES Direct expenses: Prize and point fund monies and NASCAR sanction fees........... 12,804 3,143 0 15,947 Motorsports related expenses.......... 11,080 4,040 0 15,120 Food, beverage and merchandise expenses........................... 5,239 4,638 0 9,877 General and administrative expenses..... 10,254 6,931 0 17,185 Depreciation and amortization........... 3,626 3,709 2,994(8)(9) 10,329 ----------- ------- ---------- ----------- 43,003 22,461 2,994 68,458 Operating income (loss)................. 40,233 (2,797) (2,994) 34,442 Interest income......................... 2,086 51 0 2,137 Interest expense........................ (297) (1,623) (3,569)(10) (5,489) Equity in net income (loss) from equity investments........................... 25 356 (881)(6) (500) Minority interest....................... 0 0 (79)(6) (79) ----------- ------- ---------- ----------- Income (loss) before income taxes....... 42,047 (4,013) (7,523) 30,511 Income tax expense (benefit)............ 16,108 (1,884) (1,711)(11) 12,513 ----------- ------- ---------- ----------- Net income (loss)....................... $ 25,939 $(2,129) $ (5,812) $ 17,998 =========== ======= ========== =========== Basic earnings (loss) per share......... $0.61 $0.35 Diluted earnings (loss) per share....... $0.60 $0.35 Basic weighted average shares........... 42,858,839 9,006,036(12) 51,864,875 Diluted weighted average shares......... 42,994,673 9,006,036(12) 52,000,709
See accompanying notes to unaudited pro forma condensed consolidated financial statements. 25 26 INTERNATIONAL SPEEDWAY UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED NOVEMBER 30, 1998
PENSKE MOTORSPORTS INTERNATIONAL AND MIAMI- PRO FORMA PRO FORMA SPEEDWAY HOMESTEAD ADJUSTMENTS TOTAL ------------- ----------- ----------- --------- (IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA) REVENUES Admissions, net......................... $ 86,946 $ 55,609 $ 0 $ 142,555 Motorsports related income.............. 71,793 46,064 0 117,857 Food, beverage and merchandise income... 28,597 29,571 0 58,168 Other income............................ 1,632 0 0 1,632 ----------- -------- ---------- ----------- Total revenues..................... 188,968 131,244 0 320,212 EXPENSES Direct expenses: Prize and point fund monies and NASCAR sanction fees........... 28,767 15,520 0 44,287 Motorsports related expenses.......... 33,283 28,122 0 61,405 Food, beverage and merchandise expenses........................... 15,025 20,917 0 35,942 General and administrative expenses..... 37,842 22,700 0 60,542 Depreciation and amortization........... 13,137 13,766 11,974(8)(9) 38,877 ----------- -------- ---------- ----------- Total expenses..................... 128,054 101,025 11,974 241,053 Operating income (loss)................. 60,914 30,219 (11,974) 79,159 Interest income......................... 4,414 246 0 4,660 Interest expense........................ (582) (6,111) (14,275)(10) (20,968) Equity in net income (loss) from equity investments........................... (905) (1,382) 2,163(6) (124) Minority interest....................... 0 0 320(6) 320 Gain on sale of equity investment....... 1,245 1,108 0 2,353 ----------- -------- ---------- ----------- Income (loss) before income taxes....... 65,086 24,080 (23,766) 65,400 Income tax expense (benefit)............ 24,894 10,697 (4,572)(11) 31,019 ----------- -------- ---------- ----------- Net income (loss)....................... $ 40,192 $ 13,383 $ (19,194) $ 34,381 =========== ======== ========== =========== Basic earnings (loss) per share......... $1.00 $0.70 Diluted earnings (loss) per share....... $1.00 $0.70 Basic weighted average shares........... 40,025,463 9,006,036(12) 49,031,679 Diluted weighted average shares......... 40,188,800 9,006,036(12) 49,194,836
See accompanying notes to unaudited pro forma condensed consolidated financial statements. 26 27 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS EXCEPT FOR SHARE AND PER SHARE AMOUNTS) Basis of Presentation. Under the terms of the merger, each outstanding share of Penske Motorsports common stock, other than shares held directly or indirectly by International Speedway, will be converted into the right to receive at the election of each Penske Motorsports stockholder, subject to the transaction's collar provision described below, (a) $15.00 in cash and $35.00 worth of International Speedway class A common stock or (b) $50.00 worth of International Speedway class A common stock. In accordance with the collar provision, if the volume-weighted average price for International Speedway class A common stock during the 20-day trading period ending two trading days before the merger is no higher than $53.44 and no lower than $41.56, International Speedway will issue the necessary number of shares to provide the $35.00 (plus $15 in cash) or $50.00, as applicable, of value for each share of Penske Motorsports common stock. If the volume-weighted average price is outside this range, for each share of Penske Motorsports common stock International Speedway would issue (a) no less than 0.655 and no more than 0.842 shares of International Speedway class A common stock, plus $15 cash, for those who choose cash and stock and (b) no less than 0.936 and no more than 1.203 shares of International Speedway class A common stock for those who elect to receive entirely stock. For purposes of pro forma presentation, it is assumed (a) that all stockholders will elect to receive their consideration as 70% stock and 30% cash and (b) the volume-weighted average price for International Speedway class A common stock during the 20-day trading period ending two trading days before the merger is $47.50, which results in an exchange ratio of 0.73684 shares of International Speedway class A common stock, plus $15.00 in cash, for each share of Penske Motorsports common stock. Further, it is assumed that 12,222,477 Penske Motorsports common stock are subject to the transaction (total shares outstanding of 14,208,898, less treasury shares of 377,400 less 1,609,021 shares of Penske Motorsports common stock owned directly and indirectly by International Speedway). The pro forma financial statements assume receipt of 100% of the outstanding Penske Motorsports common stock. Based on the assumed exchange factor, International Speedway would issue 9,006,036 shares of class A common stock in the proposed merger. Had holders of Penske Motorsports common stock elected to receive all stock consideration, the resulting pro forma net income, basic earnings per share and diluted earnings per share would have been $20,175, $0.36 and $0.36, and $43,089, $0.81 and $0.81 for the three months ended February 28, 1999 and the year ended November 30, 1998, respectively. (1) The estimated costs of the acquisition are as follows: Cash consideration (assumes 30% of the 12,222,477 shares of Penske Motorsports common stock at $50.00 per share)...... $183,337 Stock consideration (assumes 70% of the 12,222,477 shares of Penske Motorsports common stock at $50.00 per share)...... 427,787 Transaction costs........................................... 7,001 -------- Total acquisition cost...................................... $618,125 ========
Under purchase accounting, Penske Motorsports' assets and liabilities are required to be adjusted to their estimated fair values. The estimated fair value adjustments have been determined by International Speedway based upon a preliminary valuation and are subject to adjustments based on a final valuation. These estimated fair values may not be the fair values that will ultimately be determined after the 27 28 completion of the proposed merger. The following are the pro forma adjustments made to reflect Penske Motorsports' estimated fair values assuming the merger was completed on February 28, 1999: Net Assets Acquired......................................... $155,369 ADJUSTMENT --------- Fixed assets................................................ $ 26,500 Intangibles................................................. 900 Deferred taxes.............................................. (10,412) -------- 16,988 Goodwill.................................................... 438,767 Transaction costs........................................... 7,001 -------- Total acquisition cost...................................... $618,125 ========
(2) To reflect the excess purchase price over the fair value of the net assets acquired, goodwill of $510,807 plus transaction costs of $7,001, less the elimination of historical goodwill recorded by Penske Motorsports and Miami-Homestead of $72,040. (3) To reflect the accelerated vesting of 464,000 Penske Motorsports employee stock options and the cancellation of those options in an amount equal to the excess of the merger cash/stock consideration over the per share exercise price of the Penske Motorsports stock option, $11,200 in cash, and the associated equity adjustment to retained earnings of $6,832, net of income tax benefit of $4,368. In addition, to reflect International Speedway's decrease to retained earnings of $484 related to its pro rata share of the adjustment by Penske Motorsports under the equity method of accounting, net of income tax benefit of $309. (4) To record long term debt incurred related to the 30% of the total consideration of the merger of $183,337 in cash and the transaction costs of $7,001. (5) To record the issuance of 9,006,036 shares of International Speedway class A common stock for 70% of the total consideration, which increases common stock $90 and additional paid-in capital $427,697. Also, to record the elimination of Penske Motorsports common stock of $142, additional paid-in capital of $159,371, retained earnings of $38,016 (after option adjustment -- note 3), and treasury stock of $8,710 (after treasury stock adjustment -- note 7). (6) To eliminate (a) International Speedway's investment in Penske Motorsports of $31,729 (including adjustments for stock options and treasury stock -- notes 3 and 7), (b) International Speedway's and Penske Motorsports' investment in Miami-Homestead of $25,817, (c) Miami-Homestead's members capital of $25,783, and (d) to record the 10% minority interest on Miami-Homestead's members capital for $2,578. In addition, to reflect the elimination of equity earnings (losses) and record minority interest for those investments in the pro forma statements of income for the three months ended February 28, 1999, and the year ended November 30, 1998. (7) To reflect the repurchase of 23,500 shares of Penske Motorsports common stock subsequent to March 31, 1999, which increased treasury stock and decreased cash by $1,175. In addition, to reflect International Speedway's related change in equity investment, which is subsequently eliminated, and the decrease in additional paid-in capital of $61 and deferred taxes of $37. (8) Amortization expense of $2,831 and $11,324 for the three months ended February 28, 1999 and year ended November 30, 1998, respectively, representing amortization of the excess purchase price over the fair value of the net assets acquired (including transaction costs) of $445,768, over a period of 40 years and amortization of other intangibles of $900 over a period of 5 years. 28 29 (9) Depreciation expense of $163 and $650 for the three months ended February 28, 1999, and the year ended November 30, 1998, respectively, representing additional depreciation expense that would have been recorded if the transaction had occurred on December 1, 1997 assuming current fair adjustments and a depreciable life of 30 years. (10) Interest expense recorded on the long term debt to be borrowed for the cash consideration of $183,337 and transaction costs of $7,001, assuming a borrowing rate of 7.5%. If the borrowing rate were to fluctuate by approximately 1/8%, interest expense would fluctuate by $59 and $238 for the three months ended February 28, 1999, and the year ended November 30, 1998, respectively. (11) Reduction in income taxes as a result of pro forma adjustments, primarily interest expense. (12) Reflects International Speedway's historical basic weighted-average shares outstanding and diluted weighted average shares outstanding plus the assumed 9,006,036 shares issued by International Speedway for the proposed merger. (c) Exhibits See the Index to Exhibits attached hereto. 29 30 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. INTERNATIONAL SPEEDWAY CORPORATION Date: July 28, 1999 /s/ W. Garrett Crotty ----------------------------------- Name: W. Garrett Crotty Title: Secretary 30 31 EXHIBIT INDEX
Exhibit No. Description - ------- ----------- 2.1 Agreement and Plan of Merger, dated as of May 10, 1999, among International Speedway Corporation, 88 Corp. and Penske Motorsports, Inc., as amended by Amendment No. 1 thereto, dated as of June 21, 1999 (attached as Annex A to the Joint Proxy Statement/Prospectus included in the Registrant's Registration Statement on Form S-4 File No. 333-81165). 2.2 Agreement and Plan of Merger, dated as of May 10, 1999, by and among International Speedway Corporation, Penske Performance, Inc., PSH Corp. and Penske Corporation (attached as Annex B to the Joint Proxy Statement/Prospectus included in the Registrant's Registration Statement on Form S-4 File No. 333-81165). 3.1 Articles of Amendment of the Restated and Amended Articles of Incorporation of the Registrant, filed with the Department of State of the State of Florida on July 26, 1999. 3.2 Conformed copy of Amended and Restated Articles of Incorporation of the Registrant, as amended as of July 26, 1999. 99.1 Press release of the Registrant, issued on July 26, 1999, regarding the Merger.
EX-3.1 2 ARTICLES OF AMENDMENT 1 EXHIBIT 3.1 ARTICLES OF AMENDMENT OF INTERNATIONAL SPEEDWAY CORPORATION Pursuant to Section 607.1006 of the Florida Business Corporation Act, the undersigned corporation adopts these Articles of Amendment. First: The name of the corporation is International Speedway Corporation. Second: The Amended and Restated Articles of Incorporation of International Speedway Corporation are amended by changing the first sentence of Section A of Article VI of the Amended and Restated Articles of Incorporation, so that, as amended it shall read as follows: A. NUMBER AND TERM OF DIRECTORS. The number of members of the Corporation's Board shall be fixed from time to time by resolution of the Board. Third: These Articles of Amendment to the Amended and Restated Articles of Incorporation of the corporation set forth above were adopted by shareholders of International Speedway Corporation on July 26, 1999. Holders of class A common stock, par value $.01 per share and class B common stock, par value $.01 per share are entitled to vote together as a group to approve these Articles of Amendment. The number of votes cast for these Articles of Amendment by the shareholders was sufficient for approval. IN WITNESS WHEREOF, International Speedway Corporation has caused this Articles of Amendment to be executed by an officer thereunto duly authorized on this 26th day of July, 1999. By: /s/ William C. France ------------------------ Name: William C. France Its: Chief Executive Officer EX-3.2 3 AMENDED AND RESTATED ARTICLES OF INCORPORATION 1 EXHIBIT 3.2 AMENDED AND RESTATED ARTICLES OF INCORPORATION OF INTERNATIONAL SPEEDWAY CORPORATION (Conformed Copy - As Amended as of July 26, 1999) The original Amended and Restated Articles of Incorporation of INTERNATIONAL SPEEDWAY CORPORATION were filed with the Department of State of the State of Florida on October 29, 1996. The original Amended and Restated Articles of Incorporation are hereby amended and restated pursuant to Sections 607.0704, 607.1003 and 607.1007 of the Florida Business Corporation Act to read in its entirety as follows: ARTICLE I The name of the corporation is International Speedway Corporation (hereinafter called the "Corporation"). ARTICLE II The purpose for which the Corporation is organized is to engage in the transaction of any lawful business for which corporations may be incorporated under the laws of the State of Florida. ARTICLE III A. AUTHORIZED CAPITAL STOCK. The aggregate number of shares of all classes of stock which the Corporation shall have authority to issue is one hundred twenty-six million (126,000,000) shares, consisting of: (i) one hundred twenty million (120,000,000) shares of common stock, par value $0.01 per share (the "Common Stock"), of which (A) eighty million (80,000,000) shares are designated as Class A Common Stock (the "Class A Common Stock") and (B) forty million (40,000,000) shares are designated as Class B Common Stock (the "Class B Common Stock"), and (ii) one million (1,000,000) shares of preferred stock, par value $0.01 per share (the "Preferred Stock"); and 2 (iii) five million (5,000,000) shares of common stock, par value $0.10 per share (the "Existing Common Stock"). B. PROVISIONS RELATING TO PREFERRED STOCK. 1. GENERAL. The Preferred Stock may be issued from time to time in one or more classes or series, the shares of each class or series to have such designations and powers, preferences and rights, and qualifications, limitations and restrictions thereof as are stated and expressed herein and in the resolution or resolutions providing for the issue of such class or series adopted by the Board of Directors (the "Board") as hereinafter prescribed. 2. PREFERENCES. Authority is hereby expressly granted to and vested in the Board to authorize the issuance of the Preferred Stock from time to time in one or more classes or series, to determine and take necessary proceedings fully to effect the issuance and redemption of any such Preferred Stock and, with respect to each class or series of the Preferred Stock, to fix and state, by resolution or resolutions from time to time adopted providing for the issuance thereof, the following: (a) whether or not the class or series is to have voting rights, full or limited, or is to be without voting rights; (b) the number of shares to constitute the class or series and the designations thereof; (c) the preferences and relative, participating, optional or other special rights, if any, and the qualifications, limitations or restrictions thereof, if any, with respect to any class or series; (d) whether or not the shares of any class or series shall be redeemable and if redeemable the redemption price or prices, and the time or times at which and the terms and conditions upon which, such shares shall be redeemable and the manner of redemption; (e) whether or not the shares of a class or series shall be subject to the operation of retirement or sinking funds to be applied to the purchase or redemption of such shares for retirement, and if such retirement or sinking fund or funds be established, the annual amount thereof and the terms and provisions relative to the operation thereof; (f) the dividend rate, whether dividends are payable in cash, stock of the Corporation or other property, the conditions upon which 3 and the times when such dividends are payable, the preference to or the relation to the payment of the dividends payable on any other class or classes or series of stock, whether or not such dividend shall be cumulative or noncumulative, and, if cumulative, the date or dates from which such dividends shall accumulate; (g) the preferences, if any, and the amounts thereof that the holders of any class or series thereof shall be entitled to receive upon the voluntary or involuntary dissolution of, or upon any distribution of the assets of, the Corporation; (h) whether or not the shares of any class or series shall be convertible into, or exchangeable for, the shares of any other class or classes or of any other series of the same or any other class or classes of the Corporation and the conversion price or prices or ratio or ratios or the rate or rates at which such conversion or exchange may be made, with such adjustments, if any, as shall be stated and expressed or provided for in such resolution or resolutions; and (i) such other special rights and protective provisions with respect to any class or series as the Board may deem advisable. The shares of each class or series of the Preferred Stock may vary from the shares of any other class or series thereof in any or all of the foregoing respects. The Board may increase the number of shares of Preferred Stock designated for any existing class or series by a resolution adding to such class or series authorized and unissued shares of the Preferred Stock not designated for any other class or series. The Board may decrease the number of shares of the Preferred Stock designated for any existing class or series by a resolution, subtracting from such series unissued shares of the Preferred Stock designated for such class or series, and the shares so subtracted shall become authorized, unissued and undesignated shares of the Preferred Stock. C. PROVISIONS RELATING TO THE COMMON STOCK. The Common Stock shall be subject to the express terms of the Preferred Stock and any class or series thereof. The powers, preferences and rights of the Class A Common Stock and the Class B Common Stock and the qualifications, limitations and restrictions thereof, shall in all respects be identical, except as otherwise required by law or as expressly provided in this Section C. 1. VOTING RIGHTS. Except as otherwise required by law or as may be provided by the resolutions of the Board authorizing the issuance of any class or series of the Preferred Stock, as hereinabove provided, all rights to vote and all voting power shall be vested exclusively in the holders of the Common Stock. The holders of shares of Class A Common Stock and Class B Common Stock shall have the following voting rights: 4 (a) the holders of Class A Common Stock shall be entitled to one-fifth (1/5th) vote for each share of Class A Common Stock held on all matters voted upon by the shareholders of the Corporation and shall vote together with the holders of Class B Common Stock and together with the holders of any other classes or series of stock who are entitled to vote in such manner and not as a separate class; and (b) the holders of Class B Common Stock shall be entitled to one (1) vote for each share of Class B Common Stock held on all matters voted upon by the shareholders of the Corporation and shall vote together with the holders of Class A Common Stock and together with the holders of any other classes or series of stock who are entitled to vote in such manner and not as a separate class. 2. DIVIDENDS. Subject to the rights of the holders of the Preferred Stock, the holders of the Common Stock shall be entitled to receive when, as and if declared by the Board, out of funds legally available therefor, dividends and other distributions payable in cash, property, stock (including shares of any class or series of the Corporation, whether or not shares of such class or series are already outstanding) or otherwise. Each share of Class A Common Stock and each share of Class B Common Stock shall have identical rights with respect to dividends and distributions subject to the following: (a) a dividend or distribution in Common Stock on Class B Common Stock may be paid or made in shares of Class A Common Stock or shares of Class B Common Stock or a combination of both; (b) a dividend or distribution in Common Stock on Class A Common Stock may be paid only in shares of Class A Common Stock; (c) a dividend or distribution with respect to Common Stock payable in shares of the Corporation's capital stock may be paid or made only in shares of Common Stock; (d) whenever a dividend or distribution is payable in shares of Class B Common Stock and/or Class A Common Stock, the number of shares of Common Stock payable as a dividend or distribution per each share of Common Stock shall be equal in number; and (e) a dividend or distribution on Class B Common Stock which is paid or made in shares of Class B Common Stock shall be considered identical to a dividend or distribution on Class A 5 Common Stock which is paid or made in a proportionate number of shares of Class A Common Stock. 3. CONVERSION. (a) OPTIONAL CONVERSION. Each share of Class B Common Stock may from time to time, at the option of the holder of record thereof and without payment of any consideration, be converted into one fully paid and nonassessable share of Class A Common Stock (an "Optional Conversion")(i) upon the Effective Date (as hereinafter defined) if the shares of Class A Common Stock to be issued upon such conversion are to be offered pursuant to the Registration Statement (as hereinafter defined), and (ii) otherwise commencing on the 91st day after the Effective Date. Any holder of any share of Class B Common Stock may effect a conversion by surrendering such holder's certificate certificates representing the shares of Class B Common Stock to be converted, duly endorsed, during normal business hours at the office of the Corporation or any transfer agent for the Common Stock (the "Transfer Agent"), together with a written notice that the holder elects to convert all or a specified whole number of shares of Class B Common Stock and stating the name or names in which such holder desires the certificate or certificates representing the shares of Class A Common Stock to be issued. If so required by the Corporation or the Transfer Agent, any certificate for shares surrendered for conversion shall be accompanied by instruments of transfer, in form satisfactory to the Corporation or the Transfer Agent, duly executed by the holder of such shares or the duly authorized representative of such holder, together with funds for the payment of any transfer tax required pursuant to paragraph (f) of this Subsection 3. In the event that any shares of Class B Common Stock tendered for conversion are subject to restrictions upon transfer noted in a legend on the certificates representing such shares, 6 the Corporation and the Transfer Agent shall require the holder of such shares to submit, as a condition to the conversion of such Class B Common Stock into Class A Common Stock, satisfactory evidence that the proposed conversion will not violate any of the noted restrictions upon transfer of such shares. (b) MANDATORY CONVERSION. If, on the record date for any meeting of shareholders of the Corporation, the number of shares of Class A Common Stock then outstanding constitutes less than 10% of the aggregate number of shares of Class A Common Stock and Class B Common Stock outstanding, as determined by the Board, then each share of Class B Common Stock then issued or outstanding shall thereupon be converted automatically as of such record date into one fully paid and nonassessable share of Class A Common Stock and will have one-fifth vote per share at such meeting (a "Mandatory Conversion"). Upon making such determination, notice of such automatic conversion shall be given by the Corporation as soon as practicable, but no later than the next meeting of shareholders of the Corporation, by means of a press release and written notice to all holders of Class B Common Stock, and the Secretary of the Corporation shall be instructed to and shall promptly request that each holder of Class B Common Stock promptly deliver, and each such holder shall promptly deliver, the certificate or certificates representing each share of such Class B Common Stock to the Corporation or the Transfer Agent. If so required by the Corporation or the Transfer Agent, any certificate for shares surrendered for conversion shall be accompanied by instruments of transfer, in form satisfactory to the Corporation or the Transfer Agent, duly executed by the holder of such shares or the duly authorized representative of such holder, together with funds for the payment of any transfer tax required pursuant to paragraph (f) of this Subsection 3. (c) ISSUANCE OF CERTIFICATES REPRESENTING CLASS A COMMON STOCK; EFFECTIVENESS OF CONVERSION. As promptly as practicable following the surrender for conversion of a certificate representing shares of Class B common Stock in the 7 manner provided in paragraph (a) or (b) of this Subsection 3, as applicable, any required instruments of transfer and the payment in cash of any amount required by the provisions of paragraph (f) of this Subsection 3, the Corporation shall issue and deliver or cause to be issued and delivered to such holder or such holder's nominee or nominees, a certificate or certificates representing the number of shares of Class A Common Stock issued upon such conversion in such name or names as such holder may direct. In the case of an Optional Conversion, if any shares of Class B Common Stock of such holder represented by a certificate surrendered for conversion are not converted, a new certificate or certificates representing such shares of Class B Common Stock shall be issued and delivered to such holder or its nominee or nominees with the certificate or certificates representing shares of Class A Common Stock. Optional Conversions shall be deemed to have been effected immediately prior to the close of business on the date of receipt by the Corporation or the Transfer Agent of the certificate or certificates representing the relevant shares of Class B Common Stock and the related written notice. Mandatory Conversions shall be deemed to have been effected on record date for the relevant shareholders meeting on which the condition set forth in paragraph (b) of this Subsection 3 is determined by the Board to have 8 occurred. Upon the date any conversion is deemed effected, all rights of the holder of such shares of Class B Common Stock so converted, as the holder of such shares, shall cease, and the person or persons in whose name or names the certificate or certificates representing the shares of Class A Common Stock are issued shall be treated for all purposes as having become the record holder or holders of such shares of Class A Common Stock on that date; provided, however, that if any surrender and payment pursuant to a Mandatory Conversion occurs on any date when the stock transfer books of the Corporation shall be closed, the person or persons in whose name or names the certificate or certificates representing shares of Class A Common Stock are issued shall be deemed the record holder or holders thereof for all purposes on the next succeeding day on which the stock transfer books are open. (d) ADJUSTMENTS. No adjustments in respect of dividends shall be made upon the Optional Conversion or Mandatory Conversion of any shares of Class B Common Stock; provided, however, that if a share of Class B Common Stock shall be converted subsequent to the record date for the payment of a dividend or other distribution on Class B Common Stock but prior to such payment, then the registered holder of such share of Class B Common Stock at the close of business on such record date shall be entitled to receive the dividend or other distribution payable on such share of Class B Common Stock on such date notwithstanding the Optional Conversion or Mandatory Conversion thereof or the Corporation's default in payment of the dividend due on such date. (e) AVAILABILITY OF CLASS A COMMON STOCK FOR CONVERSION; REGISTRATION. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock, solely for the purpose of issuance upon conversion of the outstanding shares of Class B Common Stock, such number of shares of Class A Common Stock that shall be issuable upon the conversion of all such shares of Class B Common Stock then outstanding, in addition to the number of shares of Class A Common Stock then outstanding. If any shares of Class A Common Stock require registration with or approval of any governmental authority under any federal or state law before such shares may be issued upon conversion, the Corporation shall cause such shares to be duly registered or approved, as the case may be. The Corporation shall endeavor to use its best efforts to list the shares of Class A Common Stock to be delivered upon conversion prior to such delivery upon each national securities exchange upon which the outstanding shares of Class A Common Stock are listed at the time of such delivery. All shares of Class A Common Stock that shall be issued upon conversion of the fully paid and nonassessable shares of Class B Common Stock shall, upon issue, be fully paid and nonassessable. 9 (f) CHARGES, PAYMENT OF TAXES UPON CONVERSION. The issuance of certificates for shares of Class A Common Stock issuable upon the conversion of Class B Common Stock shall be made without charge to the converting holder; provided, however, that if any certificate is to be issued in a name other than that of the record holder of the shares being converted, the Corporation shall not be required to issue or deliver any such certificate unless and until the person requesting the issuance thereof shall have paid to the Corporation the amount of any tax that may be payable with respect to any transfer involved in the issuance and delivery of such certificate or has established to the satisfaction of the Corporation that such tax has been paid. (g) REISSUANCE OF CLASS B COMMON STOCK. Shares of Class B Common Stock that are converted into Class A Common Stock as provided herein shall continue to be part of the authorized Class B Common Stock and shall be available for reissue by the Corporation. 4. SPLITS OR COMBINATIONS. If the Corporation shall in any manner split, subdivide or combine the outstanding shares of Class A Common Stock or Class B Common Stock, then the outstanding shares of the other such class of Common Stock shall be proportionately split, subdivided or combined in the same manner and on the same basis as the outstanding shares of the class that has been split, subdivided or combined. 5. MERGERS AND CONSOLIDATIONS. In the event of a merger, consolidation or combination of the Corporation with another entity (whether or not the Corporation is the surviving entity), the holders of Class A Common Stock and Class B Common Stock shall be entitled to receive the same per share consideration in that transaction, except that any common stock that holders of Class A Common Stock are entitled to receive in any such event may differ as to voting rights and otherwise to the extent and only the extent that the Class A Common Stock and the Class B Common Stock differ as set forth in this Section C. 6. LIQUIDATING DISTRIBUTIONS. Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, and after the holders of the Preferred Stock shall have been paid in full the amounts to which they shall be entitled, if any, or a sum sufficient or such payment in full shall have been set aside, the remaining net assets of the Corporation, if any, shall be divided among and paid ratably to the holders of Class A Common Stock and Class B Common Stock treated as a single class. 7. SALES AND REPURCHASES. The Board shall have the power to cause the Corporation to issue and sell shares of either class of Common Stock to such individuals, partnerships, joint ventures, limited liability companies, associations, corporations, trusts or other legal entities (collectively, "persons") and for such consideration as the Board shall from time to 10 time in its discretion determine, whether or not greater consideration could be received upon the issue or sale of the same number of shares of the other class of Common Stock, and as otherwise permitted by law. The Board shall have the power to cause the Corporation to purchase, out of funds legally available therefor, shares of either class of Common Stock from such persons and for such consideration as the Board shall from time to time in its discretion determine, whether or not less consideration could be paid upon the purchase of the same number of shares of the other class of Common Stock, and as otherwise permitted by law. D. SHARE RECLASSIFICATION. Immediately prior to the effective date (the "Effective Date") of the Corporation's Registration Statement on Form S-3 (File No. 333-11541), relating to a proposed underwritten public offering of Class A Common Stock and initially filed with the Securities and Exchange Commission on September 6, 1996 (the "Registration Statement"), each outstanding share of the Corporation's Existing Common Stock shall thereby and thereupon, automatically and without any action by the holder, be reclassified and converted into 15 validly issued, fully paid and nonassessable shares of Class B Common Stock. Each certificate that theretofore represented shares of Existing Common Stock shall thereafter represent the number of shares of Class B Common Stock into which the shares of Existing Common Stock represented by such certificate were reclassified and converted hereby; provided, however, that each person holding of record a stock certificate or certificates that represented shares of Existing Common Stock shall receive, upon surrender of each such certificate or certificates, a new certificate or certificates evidencing and representing the number of shares of Class B Common Stock to which such person is entitled. Upon consummation of the reclassification of the Existing Common Stock of the Corporation provided for in this Section D (the "Reclassification"), the holders of the Class B Common Stock of the Corporation shall have all rights accorded them by law and these Amended and Restated Articles of Incorporation. The issuance of certificates representing shares of Class B Common Stock issuable upon the Reclassification shall be made without charge to the holders of Existing Common Stock; provided, however, that if any certificate is to be issued in a name other than that of the record holder of the shares of Existing Common Stock being reclassified pursuant to the Reclassification, the Corporation shall not be required to issue or deliver any such certificate unless and until the person requesting the issuance thereof shall have paid to the Corporation the amount of any tax that may be payable with respect to any transfer involved in the issuance and delivery of such certificate or has established to the satisfaction of the Corporation that such tax has been paid. If so required by the Corporation or the Transfer Agent, any certificate for shares of Existing Common Stock surrendered in connection with the Reclassification shall be accompanied by instruments of transfer, in form satisfactory to the Corporation or the Transfer Agent, duly executed by the holder of such shares or the duly authorized representative of such holder, together with funds for the payment of any transfer tax required as set forth above. As promptly as practicable following the surrender of a certificate representing shares of Class B Common Stock in the foregoing manner, any required instruments of transfer and the payment in cash of any amount for the payment of any transfer tax, the Corporation shall issue and deliver or cause to be issued and delivered to such holder or such holder's nominee or 11 nominees, a certificate or certificates representing the number of shares of Class B Common Stock issued upon the Reclassification to which such holder is entitled, in such name or names as such holder may direct. ARTICLE IV The Corporation shall exist perpetually unless sooner dissolved according to law. ARTICLE V The Corporation's mailing address and the address of the Corporation's principal office is 1801 West International Speedway Boulevard, Daytona Beach, Florida 32114. The address of the Corporation's registered office is 150-A South Palmetto Avenue, Daytona Beach, Florida 32114, and the Corporation's registered agent at such office is Doyle Tumbleson. ARTICLE VI A. NUMBER AND TERM OF DIRECTORS. The number of members of the Corporation's Board shall be fixed from time to time by resolution of the Board. The Board shall be divided into three classes, Class I, Class II and Class III with the directors of each class to be elected for a staggered term of three years and to serve until their successors are duly elected and qualified or until their earlier resignation, death or removal from office. The number of directors elected to each class shall be as nearly equal in number as possible. The Board shall apportion any increase or decrease in the number of directorships among the classes so as to make the number of directors in each class as nearly equal as possible. B. DIRECTOR VACANCIES; REMOVAL. Whenever any vacancy on the Board shall occur due to death, resignation, retirement, disqualification, removal, increase in the number of directors or otherwise, a majority of directors in office, although less than a quorum of the entire Board, may fill the vacancy or vacancies for the balance of the unexpired term or terms, at which time a successor or successors shall be duly elected by the shareholders and qualified. Notwithstanding the provisions of any other Article herein, only the remaining directors of the Corporation shall have the authority, in accordance with the procedure stated above, to fill any vacancy that exists on the Board for the balance of the unexpired term or terms. The Company's shareholders shall not, and shall have no power to, fill any vacancy on the Board. Shareholders may remove a director from office prior to the expiration of his or her term, with or without "cause," by an affirmative vote of a majority of all votes entitled to be case for the election of directors. C. SHAREHOLDER NOMINATIONS OF DIRECTOR CANDIDATES. Only persons who 12 are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation. Nominations of persons for election to the Board at an annual or special meeting of shareholders may be made by or at the direction of the Board by any nominating committee or person appointed by the Board or by any shareholder of the Corporation entitled to vote for the election of directors at such meeting who complies with the procedures set forth in this Section C; provided, however, that nominations of persons for election to the Board at a special meeting may be made only if the election of directors is one of the purposes described in the special meeting notice required by Section 607.0705 of the Florida Business Corporation Act. Nominations of persons for election at a special meeting, other than nominations made by or at the direction of the Board, shall be made pursuant to notice in writing delivered to or mailed and received at the principal executive offices of the Corporation not later than the close of business on the fifth (5th) day following the date on which notice of such meeting is given to shareholders or made public, whichever first occurs. Nominations of persons for election at an annual meeting, other than nominations made by or at the direction of the Board, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than one hundred twenty (120) days nor more than one hundred eighty (180) days prior to the first anniversary of the date of the Corporation's notice of annual meeting provided with respect to the previous year's annual meeting; provided, however, that if no annual meeting was held in the previous year or the date of the annual meeting has been changed to be more than thirty (30) calendar days earlier than the date contemplated by the previous year's notice of annual meeting, such notice by the shareholder to be timely must be so delivered or received not later than the close of business on the fifth (5th) day following the date on which notice of the date of the annual meeting is given to shareholders or made public, whichever first occurs. Such shareholder's notice to the Secretary shall set forth the following information: (a) as to each person whom the shareholder proposes to nominate for election or re-election as a director at the annual meeting, (i) the name, age, business address and residence address of the proposed nominee, (ii) the principal occupation or employment of the proposed nominee, (iii) the class and number of shares of capital stock of the Corporation which are beneficially owned by the proposed nominee, and (iv) any other information relating to the proposed nominee that is required to be disclosed in solicitations for proxies for election of directors pursuant to Rule 14a under the Securities Exchange Act of 1934, as amended; and (b) as to the shareholder giving the notice of nominees for election at the annual meeting, (i) the name and record address of the shareholder, and (ii) the class and number of shares of capital stock of the Corporation which are beneficially owned by the shareholder. The Corporation may require any proposed nominee for election at an annual or special meeting of shareholders to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director of the Corporation. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth herein. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made 13 in accordance with the requirements of this Section C, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. ARTICLE VII The Corporation shall indemnify and may advance expenses to its officers and directors to the fullest extent permitted by law in existence either now or hereafter. ARTICLE VIII A. CALL OF SPECIAL SHAREHOLDERS MEETING. Except as otherwise required by law, the Corporation shall not be required to hold a special meeting of shareholders of the Corporation unless (in addition to any other requirements of law) (i) the holders of not less than fifty (50) percent of all the votes entitled to be cast on any issue proposed to be considered at the proposed special meeting sign, date and deliver to the Corporation's Secretary one or more written demands for the meeting describing the purpose or purposes for which it is to be held; (ii the meeting is called by the Board pursuant to a resolution approved by a majority of the entire Board; or (iii) the meeting is called by the Chairman of the Board of Directors. Only business within the purpose or purposes described in the special meeting notice required by Section 607.0705 of the Florida Business Corporation Act may be conducted at a special shareholders' meeting. B. ADVANCE NOTICE OF SHAREHOLDER-PROPOSED BUSINESS FOR ANNUAL MEETING. At an annual meeting of the shareholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board, (b) otherwise properly brought before the meeting by or at the direction of the Board, or (c) otherwise properly brought before the meeting by a shareholder. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than one hundred twenty (120) days nor more than one hundred eighty (180) days prior to the first anniversary of the date of the Corporation's notice of annual meeting provided with respect to the previous year's annual meeting; provided, however, that if no annual meeting was held in the previous year or the date of the annual meeting has been changed to be more than thirty (30) calendar days earlier than the date contemplated by the previous year's notice of annual meeting, such notice by the shareholder to be timely must be so delivered or received not later than the close of business on the fifth (5th) day following the date on which notice of the date of the annual meeting is given to shareholders or made public, whichever first occurs. Such shareholder's notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such 14 business at the annual meeting, (ii) the name and record address of the shareholder proposing such business, (iii) the class and number of shares of capital stock of the Corporation which are beneficially owned by the shareholder, and (iv) any material interest of the shareholder in such business. The Chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the requirements of this Section B, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. EX-99.1 4 PRESS RELEASE 1 EXHIBIT 99.1 FOR: International Speedway Corporation APPROVED BY: Wes Harris Director of Investor Relations (904) 947-6465 CONTACT: Betsy Brod/Jonathan Schaffer Media: Merridith Ingram/Heather Fox Morgen-Walke Associates, Inc. (212) 850-5600 FOR IMMEDIATE RELEASE INTERNATIONAL SPEEDWAY CORPORATION COMPLETES MERGER WITH PENSKE MOTORSPORTS DAYTONA BEACH, FLORIDA - July 26, 1999 - International Speedway Corporation ("ISC") (Nasdaq/NM: ISCA; OTC Bulletin Board: ISCB), announced today that it has completed its merger with Penske Motorsports, Inc. ("PMI") (Nasdaq/NM: SPWY), first announced on May 10, 1999. Both companies held special meetings of their respective stockholders today who overwhelmingly approved the merger. The merger now positions ISC as America's leading provider of motorsports entertainment with 10 major motorsports facilities across the country, including a 90% interest in the Homestead-Miami Speedway. These venues, combined with ISC's other track interests, will host over 100 motorsports events annually. William C. France, Chairman and Chief Executive Officer of ISC, commented, "We are delighted to welcome Roger and Greg Penske, Walter Czarnecki, and the entire Penske Motorsports team to ISC. With their involvement, ISC will further the potential of its facilities and related motorsports businesses. In addition, the contribution of PMI's management will be instrumental in developing new tracks in key markets including Kansas City, Chicagoland, New York, and Denver." - - MORE - 2 INTERNATIONAL SPEEDWAY COMPLETES MERGER WITH PENSKE MOTORSPORTS Page -2- Roger Penske, PMI's founder and Chairman, commented, "We bring excellent facilities and excellent people to the ISC organization. As part of ISC, we will benefit from their industry expertise and financial resources as we seek to provide fans with the best in motorsports entertainment. During our second quarter ended June 30, 1999, we held sold-out events at our California and Michigan speedways which produced record results for the company and helped generate revenues and earnings in line with expectations for the second quarter. The momentum established from these successful events will be carried into our new role as part of the ISC organization." As of the close of business on July 26, 1999, the common stock of PMI will cease trading. As part of ISC, Roger Penske will serve as Vice Chairman of ISC's Board of Directors, and Penske Corp. will be ISC's second-largest holder. Greg Penske, PMI's President and Chief Executive Officer, will oversee the management of the acquired facilities. International Speedway Corporation is a leading promoter of motorsports activities in the United States, currently promoting more than 100 events annually. The Company currently owns and/or operates 10 major motorsports facilities, including Daytona International Speedway in Florida (home of the Daytona 500); Talladega Superspeedway in Alabama; Michigan Speedway in Brooklyn, Michigan; California Speedway in San Bernardino County, California; Homestead-Miami Speedway in Florida; Phoenix International Raceway in Arizona; Darlington Raceway in South Carolina; North Carolina Speedway in Rockingham, North Carolina; Watkins Glen International in New York, and Nazareth Speedway in Pennsylvania. Other track interests include the operation of Tucson (Arizona) Raceway Park and an indirect 37.5% interest in Raceway Associates, LLC, which owns the Route 66 Raceway and is developing a superspeedway in the Chicagoland area. The Company also owns and operates MRN Radio, the nation's largest independent sports radio network; DAYTONA USA, the "Ultimate Motorsports Attraction" in Daytona Beach, Florida, the official attraction of NASCAR; Americrown Service Corporation, a provider of catering services, food and beverage concessions, and merchandise sales; Motorsports International, a producer and marketer of motorsports-related merchandise; and Competition Tire, which distributes and sells Goodyear brand racing tires in the Midwest and Southeast regions of the United States. For more information, visit the Company's website at www.iscmotorsports.com. 3 Statements made in this release that state the Company's or management's beliefs or expectations and which are not historical facts or which apply prospectively are forward-looking statements. It is important to note that the Company's actual results could differ materially from those contained in or implied by such forward looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward looking statements is contained from time to time in the Company's SEC filings including but not limited to the 10-K and subsequent 10-Q's. Copies of those filings are available from the Company and the SEC. # # # -----END PRIVACY-ENHANCED MESSAGE-----