SPEEDWAY MOTORSPORTS INC, 10-Q filed on 8/3/2012
Quarterly Report
Document and Entity Information
6 Months Ended
Jun. 30, 2012
Aug. 1, 2012
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Jun. 30, 2012 
 
Document Fiscal Year Focus
2012 
 
Document Fiscal Period Focus
Q2 
 
Trading Symbol
TRK 
 
Entity Registrant Name
SPEEDWAY MOTORSPORTS INC 
 
Entity Central Index Key
0000934648 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
41,427,412 
CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2012
Dec. 31, 2011
Current Assets:
 
 
Cash and cash equivalents
$ 111,142 
$ 87,368 
Accounts and notes receivable, net
61,580 
39,415 
Prepaid income taxes
5,660 
12,975 
Inventories, net
9,739 
8,630 
Prepaid expenses
3,710 
3,583 
Deferred income taxes
5,924 
5,924 
Total Current Assets
197,755 
157,895 
Notes and Other Receivables:
 
 
Affiliates
3,869 
4,055 
Other
1,894 
2,057 
Other Assets
28,616 
29,805 
Property and Equipment, Net
1,171,307 
1,177,154 
Other Intangible Assets, Net
394,984 
394,960 
Goodwill
138,717 
138,717 
Total
1,937,142 
1,904,643 
Current Liabilities:
 
 
Current maturities of long-term debt
17,623 
17,540 
Accounts payable
27,833 
13,705 
Deferred race event and other income, net
76,363 
62,658 
Accrued interest
6,243 
6,260 
Accrued expenses and other current liabilities
20,717 
21,480 
Total Current Liabilities
148,779 
121,643 
Long-term Debt
536,806 
555,017 
Payable to Affiliate
2,594 
2,594 
Deferred Income, Net
11,752 
12,713 
Deferred Income Taxes
377,482 
366,898 
Other Liabilities
4,629 
4,598 
Total Liabilities
1,082,042 
1,063,463 
Commitments and Contingencies (Notes 2, 5, 6, and 8)
   
   
Stockholders' Equity:
 
 
Preferred Stock, $.10 par value, shares authorized - 3,000,000, no shares issued
   
   
Common Stock, $.01 par value, shares authorized - 200,000,000, issued and outstanding - 41,438,000 in 2012 and 41,452,000 in 2011
452 
451 
Additional Paid-in Capital
245,914 
244,946 
Retained Earnings
693,834 
679,491 
Treasury stock at cost, shares - 3,759,000 in 2012 and 3,673,000 in 2011
(85,100)
(83,708)
Total Stockholders' Equity
855,100 
841,180 
Total
$ 1,937,142 
$ 1,904,643 
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Jun. 30, 2012
Dec. 31, 2011
Preferred Stock, par value
$ 0.10 
$ 0.10 
Preferred Stock, shares authorized
3,000,000 
3,000,000 
Preferred Stock, shares issued
   
   
Common Stock, par value
$ 0.01 
$ 0.01 
Common Stock, shares authorized
200,000,000 
200,000,000 
Common Stock, issued
41,438,000 
41,452,000 
Common Stock, outstanding
41,438,000 
41,452,000 
Treasury stock at cost, shares
3,759,000 
3,673,000 
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2012
Jun. 30, 2011
Jun. 30, 2012
Jun. 30, 2011
Revenues:
 
 
 
 
Admissions
$ 39,018 
$ 31,282 
$ 61,487 
$ 55,858 
Event related revenue
55,667 
51,904 
80,369 
78,529 
NASCAR broadcasting revenue
78,040 
62,401 
107,473 
90,827 
Other operating revenue
8,298 
7,492 
16,496 
14,540 
Total Revenues
181,023 
153,079 
265,825 
239,754 
Expenses and Other:
 
 
 
 
Direct expense of events
34,532 
28,948 
49,521 
44,500 
NASCAR purse and sanction fees
47,191 
37,684 
65,946 
55,977 
Other direct operating expense
5,083 
5,669 
10,137 
11,043 
General and administrative
24,453 
23,036 
46,332 
44,539 
Depreciation and amortization
14,093 
13,323 
28,009 
26,573 
Interest expense, net
10,240 
10,114 
20,676 
21,361 
Impairment of goodwill (Note 4)
 
48,609 
 
48,609 
Loss on early debt redemption and refinancing (Note 5)
 
23 
7,456 
Other income, net
(49)
(12)
(95)
(32)
Total Expenses and Other
135,543 
167,394 
220,526 
260,026 
Income (Loss) from Continuing Operations Before Income Taxes
45,480 
(14,315)
45,299 
(20,272)
Provision for Income Taxes
(18,519)
(13,779)
(18,456)
(9,066)
Income (Loss) from Continuing Operations
26,961 
(28,094)
26,843 
(29,338)
Loss from Discontinued Operation, Net of Taxes
(11)
(179)
(39)
(453)
Net Income (Loss) and Comprehensive Income (Loss) (Note 1)
$ 26,950 
$ (28,273)
$ 26,804 
$ (29,791)
Basic Earnings (Loss) Per Share:
 
 
 
 
Continuing Operations
$ 0.65 
$ (0.68)
$ 0.65 
$ (0.71)
Discontinued Operation
 
 
 
$ (0.01)
Net Income (Loss)
$ 0.65 
$ (0.68)
$ 0.65 
$ (0.72)
Weighted Average Shares Outstanding
41,451 
41,553 
41,447 
41,574 
Diluted Earnings (Loss) Per Share:
 
 
 
 
Continuing Operations
$ 0.65 
$ (0.68)
$ 0.65 
$ (0.71)
Discontinued Operation
 
 
 
$ (0.01)
Net Income (Loss)
$ 0.65 
$ (0.68)
$ 0.65 
$ (0.72)
Weighted Average Shares Outstanding
41,459 
41,553 
41,455 
41,574 
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (USD $)
In Thousands
Total
Common Stock
Additional Paid-In Capital
Retained Earnings
Treasury Stock
Beginning Balance at Dec. 31, 2011
$ 841,180 
$ 451 
$ 244,946 
$ 679,491 
$ (83,708)
Beginning Balance (in shares) at Dec. 31, 2011
 
41,452 
 
 
 
Net income and comprehensive income (Note 1)
26,804 
 
 
26,804 
 
Share-based compensation (in shares)
 
71 
 
 
 
Share-based compensation
969 
968 
 
 
Quarterly cash dividends of $0.15 per share of common stock
(12,461)
 
 
(12,461)
 
Repurchases of common stock (in shares)
 
(85)
 
 
 
Repurchases of common stock
(1,392)
 
 
 
(1,392)
Ending Balance at Jun. 30, 2012
$ 855,100 
$ 452 
$ 245,914 
$ 693,834 
$ (85,100)
Ending Balance (in shares) at Jun. 30, 2012
 
41,438 
 
 
 
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (Parenthetical)
6 Months Ended
Jun. 30, 2012
Quarterly cash dividends, per share of common stock
$ 0.15 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
6 Months Ended
Jun. 30, 2012
Jun. 30, 2011
Cash Flows from Operating Activities:
 
 
Net income (loss)
$ 26,804,000 
$ (29,791,000)
Loss from discontinued operation, net of tax
39,000 
453,000 
Cash (used) provided by operating activities of discontinued operation
(39,000)
1,697,000 
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
 
 
Impairment of goodwill
 
48,609,000 
Loss on early debt redemption and refinancing, non-cash
 
7,456,000 
Deferred loan cost amortization
1,252,000 
1,258,000 
Interest expense accretion of debt discount
872,000 
949,000 
Depreciation and amortization
28,009,000 
26,573,000 
Amortization of deferred income
(3,087,000)
(1,380,000)
Deferred income tax provision
10,584,000 
11,331,000 
Share-based compensation
969,000 
943,000 
Changes in operating assets and liabilities:
 
 
Accounts and notes receivable
(22,130,000)
(12,130,000)
Prepaid and accrued income taxes
7,315,000 
290,000 
Inventories
(1,109,000)
(981,000)
Prepaid expenses
(127,000)
(183,000)
Accounts payable
10,820,000 
7,099,000 
Deferred race event and other income
13,398,000 
20,632,000 
Accrued interest
(17,000)
2,401,000 
Accrued expenses and other liabilities
(763,000)
(88,000)
Deferred income
1,217,000 
258,000 
Other assets and liabilities
88,000 
(4,105,000)
Net Cash Provided By Operating Activities
74,095,000 
81,291,000 
Cash Flows from Financing Activities:
 
 
Borrowings under long-term debt
 
330,000,000 
Principal payments on long-term debt
(19,000,000)
(359,000,000)
Payment of debt issuance costs
 
(11,336,000)
Dividend payments on common stock
(12,461,000)
(8,330,000)
Repurchases of common stock
(1,392,000)
(1,983,000)
Net Cash Used By Financing Activities
(32,853,000)
(50,649,000)
Cash Flows from Investing Activities:
 
 
Payments for capital expenditures
(17,566,000)
(32,850,000)
Proceeds from sales of property and equipment
 
229,000 
Increase in other non-current assets
(30,000)
 
Repayment of notes and other receivables
128,000 
155,000 
Net Cash Used By Investing Activities
(17,468,000)
(32,466,000)
Net Increase (Decrease) In Cash and Cash Equivalents
23,774,000 
(1,824,000)
Cash and Cash Equivalents at Beginning of Period
87,368,000 
92,200,000 
Cash and Cash Equivalents at End of Period
111,142,000 
90,376,000 
Supplemental Cash Flow Information:
 
 
Cash paid for interest, net of amounts capitalized
20,825,000 
19,127,000 
Cash paid for income taxes
600,000 
1,000,000 
Supplemental Non-Cash Investing and Financing Activities Information:
 
 
Increase in accounts payable for capital expenditures
3,308,000 
10,169,000 
Increase in deferred income for exchange of property and equipment
$ 1,247,000 
$ 5,350,000 
DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS

1. DESCRIPTION OF BUSINESS

Basis of Presentation—The consolidated financial statements include the accounts of Speedway Motorsports, Inc. and all of its wholly-owned and operated subsidiaries: Atlanta Motor Speedway LLC (AMS), Bristol Motor Speedway LLC (BMS), Charlotte Motor Speedway LLC (CMS), Kentucky Raceway LLC d/b/a Kentucky Speedway (KyS), Nevada Speedway LLC d/b/a Las Vegas Motor Speedway (LVMS), Speedway Sonoma LLC (Sonoma) (formerly known as Infineon Raceway), New Hampshire Motor Speedway, Inc. (NHMS), North Wilkesboro Speedway, Inc. (NWS), Texas Motor Speedway, Inc. (TMS), SMISC Holdings, Inc. d/b/a SMI Properties (SMI Properties), US Legend Cars International, Inc. (US Legend Cars), Oil-Chem Research Corporation (Oil-Chem), SMI Trackside LLC (SMI Trackside), Speedway Funding LLC, Speedway Motorsports International Limited (BVI) and consolidated foreign entities (SMIL), Speedway Properties Company LLC a/k/a Performance Racing Network (PRN), Speedway Media LLC a/k/a Racing Country USA (RCU), and TSI Management Company LLC d/b/a The Source International LLC (TSI) (collectively, the Company, SMI, we, our or us). Hereafter, references to “the Company’s” or “eight” speedways exclude NWS, which presently has no significant operations and assets consist primarily of real estate which has no significant fair value. All note disclosures pertain to continuing operations unless otherwise indicated. See Note 1 to the Consolidated Financial Statements in the Company’s 2011 Annual Report on Form 10-K (2011 Annual Report) for further description of its business operations, properties and scheduled events.

Comprehensive Income or Loss Presentation—The Company has no accumulated other comprehensive income or loss at June 30, 2012 or December 31, 2011, and no components of other comprehensive income or loss separate from net income or loss for the three or six months ended June 30, 2012 and 2011 that require presentation either in a single continuous statement of comprehensive income or in two separate but consecutive statements. For the three and six months ended June 30, 2011, the Company’s Consolidated Statement of Stockholder’s Equity and Comprehensive Loss reflected a decrease in net unrealized loss on marketable equity securities of $22,000 and $19,000, respectively, which management believes is insignificant for separate presentation in the current period. As of December 31, 2011, management assessed the declines in fair value of these securities as other than temporary and associated insignificant losses were recognized, and there were no remaining unrealized gains or losses or accumulated other comprehensive loss.

Racing Events—In 2012, the Company plans to hold 24 major annual racing events sanctioned by the National Association for Stock Car Auto Racing, Inc. (NASCAR), including 13 Sprint Cup and 11 Nationwide Series racing events. The Company also plans to hold eight NASCAR Camping World Truck Series racing events, four NASCAR K&N Pro Series racing events, two IndyCar Series (IndyCar) racing events, six major National Hot Rod Association (NHRA) racing events, and three World of Outlaws (WOO) racing events. In 2011, the Company held 23 major annual racing events sanctioned by NASCAR, including 13 Sprint Cup and 10 Nationwide Series racing events, nine NASCAR Camping World Truck Series, four NASCAR K&N Pro Series, five IndyCar, six major NHRA, one US Legend Cars international circuit, and three WOO racing events.

Discontinuation of Oil and Gas Activities (Note 11)—In 2008, the Company decided to discontinue its oil and gas operations primarily because of ongoing challenges and business risks in conducting these activities in foreign countries. Those operations are presented herein as discontinued operations and all note disclosures pertain to continuing operations unless otherwise indicated.

SIGNIFICANT ACCOUNTING POLICIES AND OTHER DISCLOSURES
SIGNIFICANT ACCOUNTING POLICIES AND OTHER DISCLOSURES

2. SIGNIFICANT ACCOUNTING POLICIES AND OTHER DISCLOSURES

These unaudited consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements included in its 2011 Annual Report. In management’s opinion, these unaudited consolidated financial statements contain all adjustments necessary for their fair presentation at interim periods in accordance with accounting principles generally accepted in the United States. All such adjustments are of a normal recurring nature unless otherwise noted. The results of operations for interim periods are not necessarily indicative of operating results that may be expected for the entire year due to the seasonal nature of the Company’s motorsports business. See Note 2 to the Consolidated Financial Statements in our 2011 Annual Report for further discussion of significant accounting policies.

 

Quarterly Reporting—The Company recognizes revenues and operating expenses for all events in the calendar quarter in which conducted. Changes in race schedules at the Company’s speedways from time to time, including speedway acquisitions, can lessen the comparability of operating results between quarterly financial statements of successive years and increase or decrease the seasonal nature of its motorsports business.

The significant racing schedule changes for the six months ended June 30, 2012 as compared to 2011 include:

 

KyS held one NASCAR Sprint Cup, one NASCAR Nationwide and one NASCAR Camping World Truck Series racing event in the second quarter 2012 that were held in the third quarter 2011

Marketing Agreements—The Company had one facility naming rights agreement that renamed Sears Point Raceway as Infineon Raceway, which expired in the second quarter 2012. This naming rights agreement has provided significant contracted revenues over its ten-year term. However, the annual contracted revenue received by the Company under this agreement individually was not material. The facility has been renamed Speedway Sonoma, and associated costs were not significant.

Joint Venture Equity Investment—The Company and International Speedway Corporation (ISC) equally own a joint venture (50% non-controlling interest) that operates independently under the name Motorsports Authentics (MA). MA’s operations consist principally of trackside, and to a lesser extent wholesale and retail, event souvenir merchandising as licensed and regulated under certain NASCAR Teams Licensing Trust agreements.

As further described in Note 2 to the Consolidated Financial Statements in our 2011 Annual Report “Joint Venture Equity Investment Impairment”, the carrying value of the Company’s equity investment in MA was reduced to $0 as of December 31, 2009. Under equity method accounting, the Company no longer records its 50% share of MA operating losses, if any, unless and until this carrying value is increased from additional Company investments in MA or to the extent of future MA operating profits, if any. As such, the Company’s second quarter and year-to-date 2012 and 2011 results were not impacted by MA’s operations under the equity method. The following summarized financial information on MA’s operating results is presented for informational purposes (in thousands):

 

                                                                                                   
      Second Quarter      Year-to-Date  
      2012      2011      2012      2011  

Net sales

   $ 10,997           $ 10,858           $ 17,127           $ 16,698       

Gross profit

     4,958             4,489             7,199             6,512       

Income (loss) from continuing operations

     1,632             493             1,232             (1,256)     

Net income (loss)

     1,632             493             1,232             (1,256)     

SMI and ISC have contingently guaranteed an MA obligation associated with one NASCAR team licensor of MA, which is scheduled for periodic reduction and elimination by MA payments through January 2013. As of both June 30, 2012 and December 31, 2011, the Company’s contingent guarantee approximated $1.2 million. Should MA not have sufficient future financial resources and such obligation remains due, the Company could be required to fund part or all of the guarantee up to the obligation amount determined at that time. Although reasonably possible that some future obligation could arise, the amount, if any, is not reasonably estimable at this time. Management believes the fair value of this guarantee is presently insignificant and no obligation has been recorded. Although not expected at this time, the Company could be required to record a charge related to the Company’s contingent guarantee obligation, if funding was required.

Effective Income Tax Rates—The Company’s effective income tax rate for the three and six months ended June 30, 2012 was 40.7%. The Company’s effective income tax rate for the three and six months ended June 30, 2011 was 40.0%, excluding the negative impact of recording no tax benefit related to the goodwill impairment charge further described in Note 4, and positive impact of net decreases in income tax position liabilities of prior years.

The Company provides for income taxes at the end of each interim period based on management’s best estimate of the annual estimated effective income tax rate. Cumulative adjustments to the Company’s annual estimated effective income tax rate are recorded in the interim period in which a change in the annual estimated effective income tax rate is determined. See Notes 2 and 8 to the Consolidated Financial Statements in our 2011 Annual Report for additional information on accounting for income taxes. Income tax liabilities for unrecognized tax benefits approximate $1,004,000 as of both June 30, 2012 and December 31, 2011, and are included in other noncurrent liabilities, all of which would favorably impact the Company’s effective tax rate if recognized. The Company reports interest expense and penalties related to income tax liabilities, when applicable, in income tax expense. Interest and penalties recognized on uncertain tax positions amounted to $19,000 and $20,000 for the three months ended June 30, 2012 and 2011, and $37,000 and $237,000 for the six months ended June 30, 2012 and 2011. As of June 30, 2012 and December 31, 2011, the Company had $734,000 and $697,000 accrued for the payment of interest and penalties on uncertain tax positions, which is included in other noncurrent liabilities.

As of June 30, 2012, management was not aware of any significant tax positions where it appeared reasonably possible that unrecognized tax benefits might significantly increase within the next twelve months. The tax years that remain open to examination include 2006 through 2011 by the Georgia Department of Revenue and the California Franchise Tax Board, and 2008 through 2011 by all other taxing jurisdictions to which the Company is subject. The Internal Revenue Service is currently conducting an examination of the Company’s 2010 federal income tax return, the outcome of which will not be known until finalized. A reconciliation of the change in the total unrecognized tax benefits and other information for the six months ended June 30, 2012 and 2011 is as follows (in thousands):

 

                                                         
      2012      2011  

Beginning of period

   $ 1,004       $ 2,879   

Increases (decreases) for tax positions of current year

               

Increases for tax positions of prior years

             358   

Decreases for tax positions of prior years

             (2,196

Increases (decreases) for settlements with taxing authorities

             (489

Reductions for lapse of applicable statute of limitations

               
  

 

 

    

 

 

 

End of period

   $ 1,004       $ 552   
  

 

 

    

 

 

 

Taxes Collected from Customers—The Company reports sales, admission and other taxes collected from customers on both a gross and net basis in operations. Such taxes reported on a gross basis for the three months ended June 30, 2012 and 2011 amounted to $1,602,000 and $1,754,000, and for the six months ended June 30, 2012 and 2011 amounted to $2,545,000 and $3,000,000.

Advertising Expenses—Event specific advertising costs are expensed when an associated event is held and included principally in direct expense of events. Non-event related advertising costs are expensed as incurred and included principally in other direct operating expense. Advertising expense amounted to $6,848,000 and $5,581,000 in the three months ended June 30, 2012 and 2011, and $9,356,000 and $8,148,000 in the six months ended June 30, 2012 and 2011. There were no deferred direct-response advertising costs at June 30, 2012 or December 31, 2011.

Concentrations of Credit Risk—Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, accounts and notes receivable, and cash surrender values. Concentration of credit risk with respect to cash and cash equivalents and cash surrender values is limited through placement with major high-credit qualified financial institutions and insurance carriers, respectively. However, amounts placed often significantly exceed available insured limits. Concentrations of credit risk with respect to accounts receivable are limited due to the large numbers and wide variety of customers and customer industries and their broad geographical dispersion. Also, a significant portion of the Company’s accounts receivable typically pertain to advance revenues for specific events which are deferred until the event is held. As such, exposure to credit risk on such receivables that could adversely affect operating results is limited until recognition of the associated deferred race event income. The Company generally requires sufficient collateral equal to or exceeding note amounts, or accepts notes from high-credit quality entities or high net-worth individuals, limiting its exposure to credit risk. Amounts due from affiliates typically can be offset to the extent of amounts payable to affiliates, limiting the Company’s exposure to credit risk.

 

Fair Value of Financial Instruments—The Company follows applicable authoritative guidance which requires that financial and non-financial assets and liabilities measured and reported on a fair value basis be classified, disclosed and categorized as further described below. Fair value estimates are based on relevant market information and single broker quoted market prices where available at a specific point in time, and changes in assumptions or market conditions could significantly affect estimates. The carrying values of cash and cash equivalents, accounts and notes receivable, certain other assets and accounts payable approximate fair value because of the short maturity of these financial instruments. Cash surrender values are carried at fair value based on binding broker quoted market prices. Notes and other receivables and bank revolving credit facility and term loan borrowings are variable interest rate financial instruments and, therefore, carrying values approximate fair value. The fixed rate senior notes payable are publicly traded and estimated fair values are based on single broker quoted market prices. Other long-term debt is non-interest bearing and discounted based on estimated current cost of borrowings and, therefore, carrying values approximate market value. Quoted market prices are not available for determining market value of the Company’s equity investment in an associated entity. For equity investments, the Company estimates fair value primarily using estimated discounted cash flows. See “Joint Venture Equity Investment” above for fair value information on a contingent guarantee obligation associated with MA.

The following table presents estimated fair values and categorization levels of the Company’s financial instruments as of June 30, 2012 and December 31, 2011 (in thousands):

 

               June 30, 2012      December 31, 2011  
      Level    Class    Carrying Value      Fair Value      Carrying Value      Fair Value  

Assets

                 

Cash and cash equivalents

   1    R      $  111,142             $  111,142         $  87,368             $    87,368   

Floating rate notes receivable

   2    NR      2,575             2,575         2,765             2,765   

Cash surrender values

   2    NR      4,460             4,460         4,319             4,319   

Liabilities

                 

Floating rate revolving Credit

    Facility, including Term Loan

   2    NR      127,500             127,500         145,000             145,000   

6 3/4% Senior Notes Payable due 2019

   1    NR      150,000             156,325         150,000             150,750   

8 3/4% Senior Notes payable due 2016

   1    NR      270,137             298,375         269,517             298,375   

Other long-term debt

   2    NR      6,791             6,791         8,040             8,040   

 

Level 1:

 

Quoted market prices in active markets for identical assets or liabilities.

Level 2:

 

Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3:

 

Unobservable inputs that are not corroborated by market data.

Class R:

 

Measured at fair value on recurring basis, subsequent to initial recognition.

Class NR:

 

Measured at fair value on nonrecurring basis, subsequent to initial recognition.

Other Contingencies—CMS’s property includes areas used as solid waste landfills for many years. Landfilling of general categories of municipal solid waste on the CMS property ceased in 1992, but CMS currently allows certain property to be used for land clearing and inert debris landfilling. Landfilling for construction and demolition debris has ceased on the CMS property. Management believes the Company’s operations, including the landfills on its property, comply with all applicable federal, state and local environmental laws and regulations. Management is not aware of any situation related to landfill operations which would have a material adverse effect on the Company’s financial position, future results of operations or cash flows.

KyS held an inaugural NASCAR Sprint Cup race in the third quarter 2011. Because of various traffic congestion issues, the Company offered to exchange race tickets meeting certain criteria for tickets to specified KyS or other speedway 2011 race events or KyS’s second quarter 2012 Sprint Cup race. The exchange offer expired November 30, 2011 and cash refunds were not offered. Tickets exchanged for race events held in 2011 were not significant. At December 31, 2011, the Company had deferred race event income of $589,000 associated with tickets exchanged for KyS’s 2012 Sprint Cup event, all of which was recognized in the second quarter 2012.

 

TMS, in conjunction with the Fort Worth Sports Authority, has a two-year oil and gas mineral rights lease agreement expiring December 2013 which, among other things, provides the lessee various defined property access and right-of-ways, exclusive exploration and extraction rights, and non-interference by TMS should extraction infrastructure construction and operations commence. TMS is required to coordinate directly with the lessor on roadway and pipeline logistics to prevent interference of TMS or lessor activities, and monitor regulatory and other contract compliance. An upfront cash payment received in December 2011 is being accreted into other operating revenue over the two-year agreement term on a straight-line basis, with $801,000 and $1,607,000 recognized in the three and six months ended June 30, 2012. Deferred revenue recognizable in the upcoming fiscal year is reflected as current liabilities in deferred race event and other income.

Reclassifications—Certain insignificant reclassifications to prior year amounts in the accompanying consolidated statement of cash flows were made to conform with current year presentation.

Recently Issued Accounting Standards—The Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2011-05 “Comprehensive Income (Topic 220): Presentation of Comprehensive Income” to improve the comparability, consistency and transparency of financial reporting and increase the prominence of items reported in other comprehensive income. The option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity will be eliminated. All non-owner changes in stockholders’ equity will now require presentation either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, applied retrospectively, and did not require any transition disclosures. The Company’s adoption had no significant impact on its financial statements or disclosures.

The FASB issued Accounting Standards Update No. 2011-08 “Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment” under which entities have the option to first assess qualitative factors to determine whether events or circumstances exist that lead to determining it is more likely than not that the reporting unit’s fair value is less than its carrying amount. If an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test described in Topic 350 is unnecessary. Under this update, entities have the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the first step of the two-step goodwill impairment test, and may resume performing the qualitative assessment in any subsequent period. In concluding whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, entities should consider the extent to which each adverse event or circumstance identified could affect the comparison of a reporting unit’s fair value with its carrying amount. Entities should place more weight on events and circumstances that most affect a reporting unit’s fair value or the carrying amount of its net assets, and should consider positive and mitigating events and circumstances that may affect its determination of whether it is more likely than not that the reporting unit’s fair value is less than its carrying amount. Where recent fair value calculations have been performed, the difference between reporting unit fair value and carrying amount must be considered in deciding whether the first step of the impairment test is necessary. This update provides examples of events and circumstances that entities should consider in performing qualitative assessments and other testing that supersede previous examples. Under this update, entities are no longer permitted to carry forward detailed calculations of a reporting unit’s fair value from a prior year. This update does not change current guidance for testing other indefinite-lived intangible assets for impairment. The guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company’s adoption had no impact on its financial statements or disclosures, and the Company will apply this guidance to future impairment assessments.

The FASB issued Accounting Standards Update No. 2012-02 “Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment” which permits entities first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30 “Intangibles—Goodwill and Other—General Intangibles Other than Goodwill”. Under this Update, entities have an option not to calculate annually the fair value of an indefinite-lived intangible asset if it determines that it is not more likely than not the asset is impaired. This Update results in permitting entities to assess qualitative factors when testing indefinite-lived intangible assets for impairment results that is similar to the goodwill impairment testing guidance in Update 2011-08 as further described in the preceding paragraph. If, after assessing the totality of events and circumstances, an entity concludes it is not more likely than not that the indefinite-lived intangible asset is impaired, no further action is required. However, if an entity concludes otherwise, it is required to determine fair value of the intangible asset and perform quantitative impairment testing by comparing fair value with the carrying amount in accordance with Subtopic 350-30. Entities also have the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. Entities should consider positive and mitigating events and circumstances that could affect its determination of whether it is more likely than not that the intangible asset is impaired, and should refer to examples in paragraph 350-30-35-18B(a) through (f) for guidance about the types of events and circumstances to consider in evaluating possible impairment. The guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, and early adoption is permitted. The Company is currently assessing the impact, if any, adoption may have on its future impairment assessments.

INVENTORIES
INVENTORIES

3. INVENTORIES

Inventories, net consist of the following components (in thousands):

 

                                             
     June 30,     December 31,  
      2012     2011  

Souvenirs and apparel

   $ 3,342      $ 2,867   

Finished vehicles, parts and accessories

     5,834        5,149   

Micro-lubricant® and other

     563        614   
  

 

 

   

 

 

 

Total

   $ 9,739      $ 8,630   
  

 

 

   

 

 

 

All inventories are stated at the lower of cost or market with provisions for differences between cost and estimated market value based on assumptions about current and future demand, market conditions and trends that might adversely impact realization. At June 30, 2012 and December 31, 2011, inventories reflect provisions of $5,156,000 and $5,765,000.

GOODWILL AND OTHER INTANGIBLE ASSETS
GOODWILL AND OTHER INTANGIBLE ASSETS

4. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and Other Intangible Assets represent the excess of business acquisition costs over the fair value of net assets acquired, and are all associated with the Company’s motorsports related activities and reporting units. Intangible assets consist predominately of goodwill and nonamortizable intangible assets for race event sanctioning and renewal agreements and, to a lesser extent, goodwill associated with event related motorsports merchandising. The Company’s race event sanctioning and renewal agreements for each NASCAR-sanctioned racing event are awarded annually. The Company has evaluated each of its intangible assets for these agreements and determined that each will extend into the foreseeable future. The Company has never been unable to renew these race date agreements for any subsequent year and no such agreement has ever been cancelled. Based on these and other factors, such race date agreements are expected to be awarded to the Company in perpetuity. As such, these nonamortizable intangible assets for race event sanctioning and renewal agreements are considered to have indefinite useful lives because their renewal and cash flow generation are expected to continue indefinitely.

2012 Annual Impairment Assessment—The Company evaluates goodwill and other intangible assets for possible impairment annually in the second quarter, or when events or circumstances indicate possible impairment may have occurred. Management’s latest annual assessment of goodwill and other intangible assets in the second quarter 2012 indicated the estimated fair value of each reporting unit and each indefinite-lived intangible asset exceeded its associated carrying value, and there have since been no events or circumstances which indicate possible unrecognized impairment as of June 30, 2012. The impairment evaluation was based predominately on management’s best estimate of future discounted operating cash flows and profitability for all reporting units. Management believes the Company’s market capitalization decline below its consolidated shareholder’s equity is not an indicator of impairment. See Notes 2 and 5 to the Consolidated Financial Statements in our 2011 Annual Report for additional information on the Company’s goodwill and other intangible assets and assessment methodology and evaluation. Different economic or industry conditions or assumptions, and changes in projected cash flows or profitability, if significantly negative or unfavorable, could have a material adverse effect on the impairment evaluation and the Company’s future financial condition or results of operations. The evaluations are subjective and based on conditions, trends and assumptions existing at the time of evaluation.

 

2011 Impairment of Goodwill—Management’s annual assessment of goodwill and other intangible assets in the second quarter 2011 indicated the carrying values for NHMS exceeded estimated fair value. As such, a non-cash impairment charge of $48,609,000 (with no income tax benefit) was reflected in the second quarter 2011 to reduce goodwill related to NHMS to estimated fair value. The evaluation reflected lowered estimated future cash flows principally because of the severity and length of the recession extending beyond the Company’s previous forecast, reducing visibility on profitability recovery. The goodwill originated upon recording deferred tax liabilities associated with race date intangibles of $127.4 million established under purchase method accounting rules over and above NHMS’s net cash purchase price of $330.1 million paid in 2008. Those accounting rules required establishing such deferred tax liabilities assuming the Company would ultimately sell NHMS assets, and not stock, for tax reporting purposes. Those accounting rules prohibit elimination or adjustment notwithstanding such ultimate payment of taxes was, and still is, believed unlikely and that no sale is being contemplated. The impairment does not pertain to or affect the underlying value of the Company’s race date intangibles. The 2011 charge and associated operations are included in the Company’s “motorsports event related” reporting segment (see Note 10).

As of June 30, 2012 and December 31, 2011, gross carrying values and accumulated amortization by class of intangible asset are as follows (dollars in thousands):

 

      June 30, 2012      December 31, 2011         
      Gross
Carrying
Value
     Accumulated
Amortization
    Net      Gross
Carrying
Value
     Accumulated
Amortization
    Net      Estimated
Amortization
Period
(Years)
 

Nonamortizable race event sanctioning and
renewal agreements

   $ 394,913         —        $ 394,913       $ 394,913         —        $ 394,913         —     

Amortizable race event
sanctioning and
renewal agreements

     100       $ (29     71         70       $ (23     47         5-6   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

Total

   $   395,013       $ (29   $   394,984       $   394,983       $ (23   $   394,960      
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

In the six months ended June 30, 2012, amortizable other intangible assets increased $30,000 for event sanctioning and renewal agreements for certain annual minor racing events to be held for five years commencing in the second quarter 2012. There were no other changes in the gross carrying value of goodwill or other intangible assets during the six months ended June 30, 2012.

LONG-TERM DEBT
LONG-TERM DEBT

5. LONG-TERM DEBT

Bank Credit Facility—The Company’s Credit Facility (the 2011 Credit Facility or Credit Facility): (i) provides for a four-year $100,000,000 senior secured revolving credit facility, with separate sub-limits of $50,000,000 for standby letters of credit and $10,000,000 for swing line loans; (ii) provides for a four-year $150,000,000 senior secured term loan (the Term Loan); (iii) matures in January 2015; (iv) allows the Company to increase revolving commitments or establish a term loan (or a combination of the two) up to an aggregate additional $50,000,000 with certain lender commitment conditions; (v) provides that Credit Facility borrowings must be used solely for refinancing existing indebtedness, working capital and other general corporate needs, capital expenditures and permitted investments; (vi) allows the acquisition of additional motor speedways and related businesses subject to specified limitations; (vii) permits other investments not specifically referenced of up to $5,000,000 each year with unrestricted subsidiaries; (viii) allows annual aggregate payments of dividends and repurchases of SMI securities of up to $50,000,000, increasing up to $75,000,000 subject to maintaining certain financial covenants; and (ix) limits annual capital expenditures to $75,000,000. The Term Loan requires quarterly principal payments of at least $3,750,000.

During the six months ended June 30, 2012, the Company repaid $17,500,000 of Credit Facility borrowings, including Term Loan borrowings of $7,500,000. At June 30, 2012 and December 31, 2011, outstanding borrowings under the revolving Credit Facility were $0 and $10,000,000, and under the Term Loan were $127,500,000 and $135,000,000, respectively. At June 30, 2012, outstanding letters of credit amounted to $892,000.

 

Revolving loans under the Credit Facility may be borrowed, repaid and reborrowed, from time to time, subject to certain conditions on the date borrowed. Interest is based, at the Company’s option, upon LIBOR plus 1.75% to 2.75% or the greater of Bank of America’s prime rate, Federal Funds rate plus 0.5% or LIBOR plus 1.0%, plus 0.75% to 1.75%. The Credit Facility also contains a commitment fee ranging from 0.35% to 0.55% of unused amounts available for borrowing. The interest rate margins on borrowings and the commitment fee are adjustable periodically based upon certain consolidated total leverage ratios. The Credit Facility contains a number of affirmative and negative financial covenants, including requirements that the Company maintain certain ratios of funded debt to earnings before interest, taxes, depreciation and amortization (EBITDA) and earnings before interest and taxes (EBIT) to interest expense, and minimum net worth. Indebtedness under the Credit Facility is secured by a pledge of all capital stock and limited liability company interests of the Guarantors. Under the Credit Facility prior to amendment in the first quarter 2011, interest was based at the Company’s option, upon LIBOR plus 2.50% to 3.75% or the greater of Bank of America’s prime rate, the Federal Funds rate plus 0.5% or the Eurodollar rate plus 1.0%, plus 1.5% to 2.75%.

2011 Senior Notes—In February 2011, the Company completed a private placement of new 6 3/4% Senior Notes in aggregate principal amount of $150,000,000 (the 2011 Senior Notes). These 2011 Senior Notes were issued at par value, and net proceeds, after commissions and fees, approximated $147,075,000. Net offering proceeds, along with new Term Loan borrowings of $150,000,000 under the Credit Facility and cash on hand, were used to redeem and retire all tendered outstanding senior subordinated notes as further discussed below. The Company completed an exchange offer for substantially identical notes registered under the Securities Act in May 2011.

The 2011 Senior Notes mature in February 2019, and interest payments are due semi-annually on February 1 and August 1 commencing August 1, 2011. The Company may redeem some or all of the 2011 Senior Notes at annually declining redemption premiums ranging from 103.375% of par in fiscal years beginning February 1, 2015 to par after February 1, 2017, and up to 35% of the 2011 Senior Notes before February 1, 2014 with proceeds from certain equity offerings at a redemption premium of 106.75% of par. The Company may also redeem some or all of the 2011 Senior Notes before February 1, 2015 at par plus a “make-whole” premium. In the event of a change of control, the Company must offer to repurchase the 2011 Senior Notes at 101% of par value. The 2011 Senior Notes rank equally in right of payment with all other Company existing and future senior debt, are senior in right of payment to any subordinated debt and are effectively subordinated to all secured debt, including the Credit Facility. The Indenture governing the 2011 Senior Notes permits dividend payments each year of up to approximately $0.48 per share of common stock, increasable subject to meeting certain financial covenants.

2009 Senior Notes—In 2009, the Company completed a private placement, and subsequent exchange offer for substantially identical notes registered under the Securities Act, of 8 3/4% senior notes (the 2009 Senior Notes) in aggregate principal amount of $275,000,000. These 2009 Senior Notes were issued at 96.8% of par value and net proceeds were used to reduce outstanding borrowings under the Credit Facility. As of June 30, 2012 and December 31, 2011, the 2009 Senior Notes carrying value of $270,137,000 and $269,517,000 is reported net of unamortized issuance discount of $4,863,000 and $5,483,000, respectively.

The 2009 Senior Notes mature in 2016 and interest payments are due semi-annually on June 1 and December 1. The 2009 Senior Notes rank equally in right of payment with all existing and future senior debt; rank senior in right of payment to all existing and future subordinated debt; are effectively subordinated to all existing and future debt to the extent of assets securing such debt, including the Credit Facility; and are structurally subordinated to existing and future debt or other liabilities of subsidiaries that do not guarantee the 2009 Senior Notes. The 2009 Senior Notes Indenture permits annual dividend payments of up to approximately $0.48 per share of common stock, increasable subject to meeting certain financial covenants. The Company may redeem some or all of the 2009 Senior Notes at annually declining redemption premiums ranging from 104.375% of par in the twelve month periods beginning June 1, 2013 to par after June 1, 2015, and up to 35% of the 2009 Senior Notes on or before June 1, 2012 with proceeds from certain equity offerings at a redemption premium. In the event of a change of control, the Company must offer to repurchase the 2009 Senior Notes at 101% of par value plus accrued and unpaid interest.

Other General Terms and Conditions—The 2011 Credit Facility, 2009 Senior Notes and 2011 Senior Notes contain certain requirements and restrictive financial covenants and limitations on capital expenditures, acquisitions, dividends, repurchase or issuance of SMI securities, restricted payments, equity and debt security repurchases, limitations or prohibitions on incurring other indebtedness, liens or pledging assets to third parties, consolidation, mergers, transactions with affiliates, guarantees, asset sales, specific types of investments, distributions, redemptions and disposition of property, and entering into new lines of business. The 2011 Credit Facility agreement, 2009 Senior Notes Indenture and 2011 Senior Notes Indenture also contain cross-default provisions. The Company was in compliance with all applicable covenants under these debt agreements as of June 30, 2012. See Note 5 to the Consolidated Financial Statements included in the Company’s 2011 Annual Report for additional information on these debt agreements.

 

2011 Early Redemption of Senior Subordinated Notes—In the first quarter 2011, the Company completed a tender offer and redeemed $330,000,000 in aggregate principal amount of outstanding 6 3/4% Senior Subordinated Notes (Senior Subordinated Notes) at 101.25% to 101.375% of par, with proceeds from the 2011 Senior Notes issuance, Term Loan borrowings of $150,000,000 and cash on hand. The Senior Subordinated Notes were previously scheduled to mature in September 2013. The 2011 loss on early debt redemption and refinancing represents a first quarter (and nominal second quarter) charge to earnings for tender offer redemption premium, associated unamortized net deferred loan costs, settlement payment and transaction costs, all associated with the former debt arrangements, and aggregating approximately $7.5 million, before income taxes of $2.9 million.

Other Notes Payable—Long-term debt includes two non-interest bearing debt obligations associated with the Company’s acquisition of KyS. Each obligation is payable in 60 monthly installments of $125,000. As of June 30, 2012 and December 31, 2011, their combined carrying values of $6,791,000 and $8,040,000 reflect discounts of $709,000 and $960,000, respectively, based on effective interest rates of 6% and 7%.

Subsidiary Guarantees—Amounts outstanding under the 2011 Credit Facility, 2009 Senior Notes and 2011 Senior Notes are guaranteed by all of SMI’s material operative subsidiaries except for Oil-Chem and its subsidiaries (which are presently non-material). These guarantees are full and unconditional and joint and several, with the 2011 Senior Notes on a senior unsecured basis. The parent company has no independent assets or operations. There are no restrictions on the subsidiaries’ ability to pay dividends or advance funds to the parent company.

Interest Expense, Net—Interest expense, interest income and capitalized interest costs are summarized as follows (in thousands):

 

                                                                                   
     Three Months Ended
June  30:
    Six Months Ended
June 30:
 
     2012     2011     2012     2011  

Gross interest costs

  $ 10,597         $ 11,036         $ 21,249         $ 23,153      

Less: capitalized interest costs

    (286)          (840)          (441)          (1,625)     
 

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense

    10,311           10,196           20,808           21,528      

Interest income

    (71)          (82)          (132)          (167)     
 

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense, net

  $ 10,240         $ 10,114         $ 20,676         $ 21,361      
 

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average interest rate on borrowings
under bank Credit Facility

    2.7%        2.7%        2.8%        3.0%   
PER SHARE AND OTHER EQUITY INFORMATION
PER SHARE AND OTHER EQUITY INFORMATION

6. PER SHARE AND OTHER EQUITY INFORMATION

The following schedule reconciles basic and diluted earnings or loss per share from continuing operations (where computations are anti-dilutive, reported basic and diluted per share amounts are the same) (in thousands except per share amounts):

 

                                                                                   
     Three Months Ended
June  30:
    Six Months Ended
June 30:
 
     2012     2011     2012     2011  

Income (loss) from continuing operations applicable to
common stockholders and assumed conversions

  $ 26,961         $ (28,094)        $ 26,843         $ (29,338)     
 

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding

    41,451           41,553           41,447           41,574      

Dilution effect of assumed conversions:

       

Common stock equivalents—stock awards

    8          —           8           —      
 

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding
and assumed conversions

    41,459           41,553           41,455           41,574      
 

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings (loss) per share

  $ 0.65         $ (0.68)        $ 0.65         $ (0.71)     
 

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings (loss) per share

  $ 0.65         $ (0.68)        $ 0.65         $ (0.71)     
 

 

 

   

 

 

   

 

 

   

 

 

 

Anti-dilutive common stock equivalents excluded in
computing diluted earnings (loss) per share

    1,033           1,397           1,037           1,397      

 

Stock Repurchase Program—The Company’s Board of Directors approved a stock repurchase program authorizing SMI to repurchase up to an aggregate of 4,000,000 shares of the Company’s outstanding common stock from time to time, depending on market conditions, share price, applicable limitations under the Company’s debt agreements (see Note 5), and other factors the Board of Directors or its designees, in their sole discretion, may consider relevant. The purchases can be in the open market or private transactions. The stock repurchase program is presently funded using available cash and cash equivalents and may be suspended or discontinued at any time. During the three and six months ended June 30, 2012, the Company repurchased 30,000 and 63,000 shares of common stock for $516,000 and $1,033,000. As of June 30, 2012, the Company could repurchase up to an additional 305,000 shares under the current authorization.

Declaration of Cash Dividends—To date in 2012, the Company’s Board of Directors has approved the following quarterly cash dividends on common stock, which are being paid using available cash and cash equivalents on hand (in thousands except per share amounts):

 

Declaration date

     February 22, 2012         April 17, 2012         July 19, 2012   

Record date

     March 5, 2012         May 18, 2012         August 17, 2012   

Paid or payable to shareholders

     March 15, 2012         June 8, 2012         September 7, 2012   

Aggregate quarterly cash dividend

     $6,241         $6,220         Approximately $6,200   

Dividend per common share

     $0.15         $0.15         $0.15   
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS

7. RELATED PARTY TRANSACTIONS

Before July 30, 2002, the Company made loans to, and paid certain expenses on behalf of, Sonic Financial Corporation (Sonic Financial), a Company affiliate through common ownership by the Company’s Chairman and Chief Executive Officer, for various corporate purposes. Also, the Company and Sonic Financial currently share various expenses in the ordinary course of business. Notes and other receivables from affiliates at June 30, 2012 and December 31, 2011 include $3,869,000 and $4,055,000 due from Sonic Financial. The amount due bears interest at 1% over prime, is payable on demand, and because the Company does not anticipate or require repayment before June 30, 2013, is classified as a noncurrent asset in the accompanying consolidated balance sheet. Changes in the amount due from December 31, 2011 primarily reflect increases for accrued interest on outstanding balances and decreases from shared expenses with affiliates. The amounts due were reduced from shared expenses and repayments, if any, net of accrued interest by $93,000 and $89,000 in the three months ended June 30, 2012 and 2011, and $185,000 and $177,000 in the six months ended June 30, 2012 and 2011. Any increases pertain to note receivable arrangements in place before July 30, 2002.

Amounts payable to affiliate at June 30, 2012 and December 31, 2011 consist of $2,594,000 for acquisition and other expenses paid on behalf of AMS by Sonic Financial prior to 1996. Of this amount, approximately $1,800,000 bears interest at 3.83% and the remainder at prime plus 1%. The entire amount is classified as long-term because payment is not required before June 30, 2013.

Certain SMI subsidiaries lease office and warehouse facilities from companies affiliated through common ownership by the Company’s Chairman and Chief Executive Officer, under annually renewable lease agreements. Rent expense amounted to $173,000 and $138,000 in the three months ended June 30, 2012 and 2011, and $311,000 and $280,000 in the six months ended June 30, 2012 and 2011. At June 30, 2012 and December 31, 2011, amounts owed to these affiliated companies were not significant.

Various SMI subsidiaries purchased new and used vehicles for operations and employee use from certain subsidiary dealerships of Sonic Automotive, Inc. (SAI), an entity in which the Company’s Chairman and Chief Executive Officer is a controlling stockholder, for an aggregate of $43,000 and $139,000 in the three months ended June 30, 2012 and 2011, and $139,000 and $275,000 in the six months ended June 30, 2012 and 2011. There were no vehicles sold to SAI in the three and six months ended June 30, 2012 or 2011. Also, SMI Properties sold merchandise to SAI totaling $176,000 and $170,000 in the three months ended June 30, 2012 and 2011, and $319,000 and $312,000 in the six months ended June 30, 2012 and 2011. Amounts due from SAI at June 30, 2012 were $65,000, and at December 31, 2011 were not significant.

Oil-Chem sold zMAX micro-lubricant® product to certain dealerships of SAI for resale to service customers of the dealerships in the ordinary course of business. Total purchases from Oil-Chem by SAI dealerships approximated $568,000 and $427,000 for the three months ended June 30, 2012 and 2011 and $1,151,000 and $816,000 for the six months ended June 30, 2012 and 2011. At June 30, 2012 and December 31, 2011, approximately $246,000 and $161,000 was due from SAI to Oil-Chem. These amounts are reflected in current assets.

SMI Properties and, to a lesser extent, other SMI subsidiaries purchased and sold motorsports merchandise, and received commissions from MA for merchandise sold during Company events. In the three months ended June 30, 2012 and 2011, merchandise purchases approximated $56,000 and $94,000, and merchandise sales and event related commissions approximated $569,000 and $676,000, respectively. In the six months ended June 30, 2012 and 2011, merchandise purchases approximated $439,000 and $375,000, and merchandise sales and event related commissions approximated $1,167,000 and $1,485,000, respectively. At June 30, 2012 and December 31, 2011, net amounts due from MA approximated $150,000 and $138,000, and are reflected in current assets and current liabilities as applicable.

The foregoing related party balances as of June 30, 2012 and December 31, 2011, and transactions for the three and six months ended June 30, 2012 and 2011, are summarized below (in thousands):

 

                                                                                   
                    June 30,
2012
     December 31,
2011
 

Notes and other receivables

         $ 4,330           $ 4,386       

Amounts payable to affiliates

           2,594             2,594       
      Three Months Ended
June 30:
     Six Months Ended
June 30:
 
      2012      2011      2012      2011  

Merchandise and vehicle purchases

   $ 99           $ 233           $ 578           $ 650       

Merchandise and vehicle sales and event related

commissions, and reimbursed shared expenses

     1,408             1,368             2,827             2,803       

Rent expense

     173             138             311             280       

Interest income

     28             32             57             64       

Interest expense

     26             26             52             51       
LEGAL PROCEEDINGS AND CONTINGENCIES
LEGAL PROCEEDINGS AND CONTINGENCIES

8. LEGAL PROCEEDINGS AND CONTINGENCIES

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

On April 22, 2008, SMIL filed a complaint in the Superior Court of North Carolina sitting in Mecklenburg County (the Complaint) against Bronwen Energy Trading, Ltd. (Bronwen), Bronwen Energy Trading UK, Ltd. (Bronwen UK), Dr. Patrick Denyefa Ndiomu (Dr. Ndiomu), BNP Paribas (Suisse) SA (BNP Suisse), BNP Paribas S.A. (BNP France), Swift Aviation Group, Inc. (SAG), Swift Air, LLC (SA), and Swift Aviation Group, LLC (Swift Aviation). On May 29, 2008, SMIL filed an amended complaint (the Amended Complaint) adding Swift Transportation Company, Inc. (Swift Transportation). SAG, SA, Swift Aviation and Swift Transportation are collectively referred to as the “Swift Defendants”. SMIL is seeking recovery of $12,000,000 it alleges was wrongfully drawn from its bank account by BNP Suisse and BNP France in connection with obligations SMIL contends are owed by Bronwen, Bronwen UK, Dr. Ndiomu, and the Swift Defendants for petroleum product purchases utilizing credit extended by BNP France. SMIL is also seeking to recover contractual amounts it alleges are owed by Bronwen, Bronwen UK, Dr. Ndiomu, and the Swift Defendants under the terms of various contracts regarding the petroleum product purchases. Additionally, SMIL is seeking treble damages, attorneys’ fees and costs. In the litigation, SMIL has asserted claims for breach of contract, wrongful honor on a guarantee demand, conversion, fraud, negligent misrepresentation, equitable subrogation, alter ego, unfair and deceptive trade practices, and has sought an accounting. On July 23, 2008, SMIL obtained an entry of default against Bronwen due to its failure to timely file a responsive pleading. On September 12, 2008, SMIL obtained entries of default against Bronwen UK and Dr. Ndiomu due to their failure to timely file a responsive pleading. On December 15, 2010, SMIL reached a negotiated settlement with the Swift Defendants, as a result of which SMIL dismissed its claims against only the Swift Defendants on December 29, 2010. The settlement did not have a material impact on the Company’s financial position, results of operations or cash flows. On August 18, 2008, BNP France filed a motion to dismiss the claims against it alleging: 1) the North Carolina court does not possess personal jurisdiction over BNP France; 2) that Geneva, Switzerland is the appropriate forum for disputes about the guarantees; and 3) that SMIL is unable to state claims for relief against BNP France. On September 30, 2008, BNP France filed a revised motion to dismiss, withdrawing its challenge to personal jurisdiction, but maintaining allegations that Geneva, Switzerland is the appropriate forum for disputes about the guarantees and that SMIL is unable to state claims for relief against BNP France. On January 21, 2009, the trial court denied BNP France’s motion to dismiss based upon its contention that SMIL’s claims against it should be heard in Geneva, Switzerland, and further denied its motion to dismiss for failure to state a claim for relief as to all of SMIL’s claims, except for SMIL’s breach of contract claim against BNP France. On February 10, 2009, BNP France served notice it was appealing the trial court’s ruling with respect to its contention that SMIL’s claims against it should be heard in Geneva, Switzerland. On February 15, 2011, the North Carolina Court of Appeals filed its opinion affirming the trial court’s ruling denying BNP France’s motion to dismiss. On March 22, 2011, BNP France filed a Petition for Discretionary Review with the North Carolina Supreme Court seeking to have the Supreme Court review the decision of the North Carolina Court of Appeals that affirmed the trial court’s ruling denying BNP France’s motion to dismiss. SMIL filed its response to the petition on April 4, 2011. The North Carolina Supreme Court denied BNP France’s Petition for Discretionary Review on January 26, 2012. On August 4, 2008, BNP Suisse filed a motion to dismiss the claims against it alleging the North Carolina court does not possess personal jurisdiction over BNP Suisse, which motion was denied by the trial court on July 14, 2009. On August 11, 2009, BNP Suisse served notice it was appealing the trial court’s ruling. On February 15, 2011, the North Carolina Court of Appeals filed its opinion which reversed the trial court, holding that BNP Suisse was not subject to personal jurisdiction in North Carolina. On March 22, 2011, SMIL filed a Petition for Discretionary Review with the North Carolina Supreme Court seeking to have the Supreme Court review the decision of the North Carolina Court of Appeals which reversed the trial court, holding that BNP Suisse was not subject to personal jurisdiction in North Carolina. BNP Suisse filed its response to the petition on April 4, 2011. The North Carolina Supreme Court denied SMIL’s Petition for Discretionary Review on January 26, 2012. SMIL intends to continue pursuit of its claims against BNP France in the North Carolina Business Court. Discovery is ongoing in this matter.

On June 16, 2009, Melissa Jenks, as guardian for Roderick Jenks and individually, filed a lawsuit against NHMS and an employee in the United States District Court for the District of New Hampshire. The lawsuit alleges that Mr. Jenks suffered a traumatic head injury after falling from a golf cart being driven by an NHMS employee, and asserts claims of negligence, vicarious liability, and loss of consortium. The lawsuit claims past medical expenses for Mr. Jenks in excess of $662,000, and future economic losses of between $2,524,915 and $2,857,215 including future medical and life care expenses, and lost future income. The Plaintiff initially demanded $25 million, and at mediation in February 2012, the Plaintiff demanded $18 million to settle this matter. The Plaintiff later reduced the demand to $11.5 million. NHMS denied all claims in its answer as filed with the court. This matter was settled at a subsequent mediation in a manner that did not have a significant impact on the Company’s financial position, results of operations or cash flows.

STOCK COMPENSATION PLANS
STOCK COMPENSATION PLANS

9. STOCK COMPENSATION PLANS

2004 Stock Incentive Plan, Amended and Restated as of February 10, 2009—Awards under the 2004 Stock Incentive Plan (the 2004 Plan) may consist of incentive stock options, non-statutory stock options, restricted stock units or restricted stock. Exercise prices for awarded stock options generally may not be less than the fair or trading value of the Company’s common stock at, and exercise periods may not exceed ten years from, the option grant date. The 2004 Plan is scheduled to terminate in February 2014. No individual may be granted options aggregating more than 100,000 shares of common stock during any calendar year. In the case of restricted stock awards that are designated as performance awards, no individual may be granted an aggregate of more than 35,000 shares of common stock during any calendar year. To date, all stock options granted under the 2004 Plan have an exercise price equal to the market value of the underlying common stock at grant date, expire ten years from grant date and vest immediately or in equal installments over three years, and restricted stock and restricted stock units vest three years from grant date or in equal installments over three years. Once applicable restrictions lapse or have been satisfied, restricted stock units may be payable in cash, shares of common stock or a combination, as specified in the award agreement.

Under the Company’s performance-based Incentive Compensation Plan, the Compensation Committee of the Company’s Board of Directors approved grants of restricted stock to the Company’s Vice Chairman and Chief Financial Officer and restricted stock units to the Company’s President and Chief Operating Officer in each of the six months ended June 30, 2012 and 2011. All grants are under the 2004 Plan, are to be settled in shares of common stock, vest after three years or in equal installments over three years and are subject to reaching certain defined full year earnings targets established at the beginning of each year by the Compensation Committee. Amounts shown below as “Forfeited” are performance forfeitures in accordance with the terms of the Incentive Compensation Plan and result from differences between the Company’s actual results and the defined full year earnings target. Once the vesting period expires, common stock is issued in settlement of the restricted stock units and all vested shares are no longer subject to forfeiture or restrictions on transferability. The following is a summary of restricted stock and restricted stock units granted, vested and forfeited under the Incentive Compensation Plan during the six months ended June 30, 2012 and 2011 (shares in thousands):

 

      Six Months Ended June 30:
      2012   2011
      Restricted Stock   Restricted Stock
Units
  Restricted Stock   Restricted Stock
Units

Outstanding, beginning of period

       63         63         67         47  

Granted

       35         35         35         35  

Vested

       (30 )       (30 )       (27 )       (7 )

Forfeited

       (8 )       (8 )       (12 )       (12 )

Outstanding, end of period

       60         60         63         63  

Additionally, 40,000 stock options granted in 2009 to a non-executive management employee at an exercise price per share of $14.58 vested during the six months ended June 30, 2012. In the six months ended June 30, 2012, the Company repurchased 22,000 shares of common stock for $359,000 from executive management employees to settle income taxes on 60,000 shares that vested during the period. In the six months ended June 30, 2011, the Company repurchased 2,300 shares of common stock from a former executive management employee for $36,000 to settle income taxes on 6,608 shares of that vested during the period. Repurchases of common stock related to settlement of income taxes upon restricted stock vesting are reflected as financing activities in the statement of cash flows.

2008 Formula Restricted Stock Plan, Amended and Restated as of April 17, 2012—The 2008 Formula Restricted Stock Plan (the 2008 Formula Plan) is intended to promote the interests of the Company and its stockholders by providing non-employee directors with Company ownership interests to more closely align their interests with the Company’s stockholders and to enhance the Company’s ability to attract and retain highly qualified non-employee directors. The 2008 Formula Plan is intended to constitute a “formula plan” within the meaning of SEC Rule 16b-3 of the Exchange Act. Approval of the 2008 Formula Plan, and termination of the Formula Stock Option Plan, did not adversely affect the rights of any outstanding stock options previously granted under the Formula Stock Option Plan. The 2008 Formula Plan is administered by the Board of Directors, excluding non-employee directors, and expires by its terms in February 2018. The Board of Directors, excluding non-employee directors, may amend, suspend or terminate the 2008 Formula Plan in whole or in part, provided that no such amendment, suspension or termination adversely affects previously granted awards without the consent of the award recipient. Any such amendment, suspension or termination may be subject to stockholder approval.

Under the 2008 Formula Plan prior to amendment, 100,000 shares of SMI’s common stock were reserved for issuance and awards were in the form of restricted stock. On the first business day following each annual meeting, beginning with the Company’s 2008 Annual Meeting, each non-employee director who was then a member of the Board received a grant of restricted stock consisting of the number of shares equaling $60,000 divided by the average closing sale price for the twenty days immediately preceding the grant date, rounded up to the nearest whole share. The amendment approved by stockholders on April 17, 2012 increased the maximum number of shares that may be issued under the 2008 Formula Plan from 100,000 to 250,000 and increased the dollar value to be used in the formula for determining the number of shares covered by each grant of restricted stock from $60,000 to $75,000. Grants of restricted stock fully vest on the earlier of (i) the first grant date anniversary or (ii) the day before the Company’s next annual meeting following the grant date. Vesting is subject to continued service as a director through scheduled vesting dates. In the six months ended June 30, 2012 and 2011, the Company awarded a total of 17,200 and 15,556 shares of restricted stock to non-employee directors, and a total of 15,556 and 15,120 shares previously granted to non-employee directors vested during these periods and are no longer subject to forfeiture or restrictions on transferability. All restricted stock awards were granted and vested in accordance with plan provisions.

Employee Stock Purchase Plan—No shares were granted to employees under the Employee Stock Purchase Plan for calendar years 2012 or 2011.

Share-Based Payments—The Company generally records share-based compensation cost for stock option, restricted stock and restricted stock unit awards on either the accelerated method using a graded vesting schedule or the straight-line method over the requisite service period, depending on the vesting schedule of the awards. The Company’s practice has been to issue new shares upon option exercise; however, repurchases of shares in the open market are permitted. There were no significant changes in the characteristics of stock options or restricted stock granted during 2012 or 2011 as compared to prior grants and no modifications of the terms of any share-based payment arrangements. There were no significant changes in estimates, assumptions or valuation methods used to estimate the fair value of share-based payment awards.

Share-based compensation cost for the three months ended June 30, 2012 and 2011 totaled $472,000 and $486,000, before income taxes of $192,000 and $194,000, and for the six months ended June 30, 2012 and 2011 totaled $969,000 and $943,000, before income taxes of $395,000 and $377,000, respectively, and is included in general and administrative expense. There were no capitalized share-based compensation costs at June 30, 2012 or December 31, 2011. As of June 30, 2012, there was approximately $39,000 of unrecognized compensation cost related to non-vested stock options granted under the 2004 Plan that is expected to be recognized over a weighted average period of 0.4 year, and none related to the 1994 Plan or the Formula Stock Option Plan. As of June 30, 2012, there was approximately $1,889,000 of total unrecognized compensation cost related to non-vested restricted stock and restricted stock units granted under the 2004 Plan and the 2008 Formula Plan that is expected to be recognized over a weighted average period of 0.8 year.

See Note 11 to the Consolidated Financial Statements in our 2011 Annual Report for additional information and terms of the Company’s stock incentive, stock option, restricted stock and employee stock purchase plans.

SEGMENT DISCLOSURES
SEGMENT DISCLOSURES

10. SEGMENT DISCLOSURES

The Company’s operations are predominately comprised of promoting, marketing and sponsoring motorsports racing events, merchandising and other related activities conducted at its various major speedway facilities located in the United States. The Company’s business activities, including those of its subsidiaries and joint venture equity investee, are further described in Note 1 to the Consolidated Financial Statements in our 2011 Annual Report. The Company’s “motorsports event related” segment consists of revenues and expenses associated with all admissions, event related, NASCAR broadcasting and event motorsports merchandising activities, and joint venture equity investee earnings or losses associated with motorsports merchandising. The segment includes motorsports related events and operations for all Company speedways, NASCAR broadcasting and ancillary media rights, PRN and RCU motorsports radio programming, and SMI Properties, SMI Trackside and MA joint venture motorsports merchandising at Company and non-Company speedways. These operating segments have been aggregated into the motorsports related reporting segment as each share similar types and classes of customers, similar methods for providing or distributing motorsports related services, souvenirs and other merchandise, and other similar economic characteristics. The Company’s “all other” operations consist of TSI non-event motorsports and non-motorsports merchandising, US Legend Cars non-event merchandising and sanctioning body activities, Oil-Chem micro-lubricant activities, and office rentals at certain Company speedways. All segment information below pertains to continuing operations, and excludes discontinued oil and gas operations for all periods presented.

 

Segment information as presented below comports with information the Company’s chief operating decision maker and management use and focus on when assessing segment performance and allocating resources. Segment operating income excludes interest, taxes and other expense (income) and specified non-recurring items, if any, and corporate general and administrative and depreciation costs are allocated to operating segments based on their respective revenues relative to consolidated revenues. Segment information on continuing operations for the three and six months ended June 30, 2012 and 2011, and as of June 30, 2012 and December 31, 2011 is as follows (in thousands):

 

                                                                                                                             
      Three Months Ended June 30:  
      2012      2011  
      Motorsports
Event
Related
     All
Other
     Consolidated      Motorsports
Event
Related
    All
Other
     Consolidated  

Revenues

   $ 175,954       $ 5,069       $ 181,023       $ 148,142      $ 4,937       $ 153,079   

Depreciation and amortization

     14,032         61         14,093         13,258        65         13,323   

Impairment of goodwill (Note 4)

                             48,609                48,609   

Segment operating income (loss)

     54,591         1,080         55,671         (4,681 )     491         (4,190 )

Capital expenditures

     8,854         51         8,905         23,723        133         23,856   
      Six Months Ended June 30:  
      2012      2011  
      Motorsports
Event
Related
     All
Other
     Consolidated      Motorsports
Event
Related
    All
Other
     Consolidated  

Revenues

   $ 255,462       $ 10,363       $ 265,825       $ 230,093      $ 9,661       $ 239,754   

Depreciation and amortization

     27,882         127         28,009         26,440        133         26,573   

Impairment of goodwill (Note 4)

                             48,609                48,609   

Segment operating income

     63,851         2,029         65,880         7,710        803         8,513   

Capital expenditures

     17,501         65         17,566         53,049        137         53,186   
      June 30, 2012      December 31, 2011  

Other intangibles

   $ 394,984               $ 394,984         394,960      $       $ 394,960   

Goodwill intangibles

     138,717                 138,717         138,717                138,717   

Total assets

     1,910,660       $ 26,482         1,937,142       $ 1,879,606        25,037         1,904,643   

 

The following table reconciles segment operating income or loss above to consolidated income or loss before income taxes (both from continuing operations) for the periods indicated (in thousands):

 

                                                                                   
      Three Months Ended
June 30:
    Six Months Ended
June  30:
 
      2012     2011     2012     2011  

Total segment operating income (loss) from continuing
operations

   $ 55,671      $ (4,190   $ 65,880      $ 8,513   

Adjusted for:

        

Interest expense, net

     (10,240     (10,114     (20,676     (21,361

Loss on early debt redemption and refinancing (Note 5)

            (23            (7,456

Other income, net

     49        12        95        32   
  

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated income (loss) from continuing operations
before income taxes

   $ 45,480      $ (14,315   $ 45,299      $ (20,272 )
  

 

 

   

 

 

   

 

 

   

 

 

 
DISCONTINUED OIL AND GAS OPERATIONS
DISCONTINUED OIL AND GAS OPERATIONS

11. DISCONTINUED OIL AND GAS OPERATIONS

In 2008, the Company discontinued its oil and gas operations primarily because of ongoing challenges and business risks in conducting these activities in foreign countries. These oil and gas activities are presented as discontinued operations for all periods using applicable authoritative guidance. SMIL presently owns an interest in one foreign entity owning certain oil and gas mineral rights in Russia, and significant uncertainties continue about its economic viability and ultimate recovery. This investment has been reflected as fully impaired since December 31, 2008. The Company is attempting to finalize sale, transfer or dissolution of the foreign interest in 2012. At June 30, 2012 and December 31, 2011, there were no current or non-current assets or liabilities or outstanding standby letters of credit associated with discontinued operations.

During the three and six months ended June 30, 2012 and 2011, the Company incurred legal fees and other costs associated with efforts to sell or dissolve its remaining foreign investment interest and recover previously reserved receivables (see Note 8 for information on legal proceedings associated with oil and gas activities). There were no revenues generated from oil and gas activities in the three and six months ended June 30, 2012 or 2011. No interest expense, corporate general and administrative expense, transaction or transition service costs or continuing costs have been allocated to the discontinued operation, and no associated income tax benefits or gain or loss on disposal have been reflected in any period presented. Remaining estimated costs to sell or dispose, if any, have not yet been determined.

As of June 30, 2012 and December 31, 2011, all receivables associated with oil and gas activities are fully reserved. The Company recorded receivables of approximately $5,000 and $46,000 for the three months ended June 30, 2012 and 2011, and $19,000 and $145,000 for the six months ended June 30, 2012 and 2011, under its profit and loss sharing arrangement with Oasis Trading Group LLC (a US entity which provided oil and gas management and operational services to the Company), for that entity’s reimbursable share of these costs. Oasis’s ability to repay the Company these amounts (or any previously reserved or future amounts) is largely dependent on sufficient profitability and recovery from future oil and gas activities no longer Company owned or from legal proceedings. As such, uncertainty exists regarding recoverability, and these amounts have been fully reserved and reflected as a component of loss from discontinued operation.

In discontinuing these operations, and prior to sale or dissolution of the Company’s remaining interest, the Company may spend, or be required to spend, additional amounts or take legal action to protect or preserve its interests in order to maintain or maximize potential recovery value, and to protect other aspects of the Company’s oil and gas interests. At this time, such future expenditures are not expected to be significant. All future expenditures will likely be expensed and included in the results of discontinued operations. See Note 14 to the Consolidated Financial Statements in our 2011 Annual Report for additional information on historical activities and operating challenges, Oasis’s profit and loss sharing arrangement, accounting policies, and uncertainty involving recovery of fully impaired consolidated foreign investments and fully reserved receivables related to oil and gas activities.

SIGNIFICANT ACCOUNTING POLICIES AND OTHER DISCLOSURES (Policies)

Quarterly Reporting—The Company recognizes revenues and operating expenses for all events in the calendar quarter in which conducted. Changes in race schedules at the Company’s speedways from time to time, including speedway acquisitions, can lessen the comparability of operating results between quarterly financial statements of successive years and increase or decrease the seasonal nature of its motorsports business.

Marketing Agreements—The Company had one facility naming rights agreement that renamed Sears Point Raceway as Infineon Raceway, which expired in the second quarter 2012. This naming rights agreement has provided significant contracted revenues over its ten-year term. However, the annual contracted revenue received by the Company under this agreement individually was not material. The facility has been renamed Speedway Sonoma, and associated costs were not significant.

Joint Venture Equity Investment—The Company and International Speedway Corporation (ISC) equally own a joint venture (50% non-controlling interest) that operates independently under the name Motorsports Authentics (MA). MA’s operations consist principally of trackside, and to a lesser extent wholesale and retail, event souvenir merchandising as licensed and regulated under certain NASCAR Teams Licensing Trust agreements.

As further described in Note 2 to the Consolidated Financial Statements in our 2011 Annual Report “Joint Venture Equity Investment Impairment”, the carrying value of the Company’s equity investment in MA was reduced to $0 as of December 31, 2009. Under equity method accounting, the Company no longer records its 50% share of MA operating losses, if any, unless and until this carrying value is increased from additional Company investments in MA or to the extent of future MA operating profits, if any. As such, the Company’s second quarter and year-to-date 2012 and 2011 results were not impacted by MA’s operations under the equity method. The following summarized financial information on MA’s operating results is presented for informational purposes (in thousands):

 

                                                                                                   
      Second Quarter      Year-to-Date  
      2012      2011      2012      2011  

Net sales

   $ 10,997           $ 10,858           $ 17,127           $ 16,698       

Gross profit

     4,958             4,489             7,199             6,512       

Income (loss) from continuing operations

     1,632             493             1,232             (1,256)     

Net income (loss)

     1,632             493             1,232             (1,256)     

SMI and ISC have contingently guaranteed an MA obligation associated with one NASCAR team licensor of MA, which is scheduled for periodic reduction and elimination by MA payments through January 2013. As of both June 30, 2012 and December 31, 2011, the Company’s contingent guarantee approximated $1.2 million. Should MA not have sufficient future financial resources and such obligation remains due, the Company could be required to fund part or all of the guarantee up to the obligation amount determined at that time. Although reasonably possible that some future obligation could arise, the amount, if any, is not reasonably estimable at this time. Management believes the fair value of this guarantee is presently insignificant and no obligation has been recorded. Although not expected at this time, the Company could be required to record a charge related to the Company’s contingent guarantee obligation, if funding was required.

Effective Income Tax Rates—The Company’s effective income tax rate for the three and six months ended June 30, 2012 was 40.7%. The Company’s effective income tax rate for the three and six months ended June 30, 2011 was 40.0%, excluding the negative impact of recording no tax benefit related to the goodwill impairment charge further described in Note 4, and positive impact of net decreases in income tax position liabilities of prior years.

The Company provides for income taxes at the end of each interim period based on management’s best estimate of the annual estimated effective income tax rate. Cumulative adjustments to the Company’s annual estimated effective income tax rate are recorded in the interim period in which a change in the annual estimated effective income tax rate is determined. See Notes 2 and 8 to the Consolidated Financial Statements in our 2011 Annual Report for additional information on accounting for income taxes. Income tax liabilities for unrecognized tax benefits approximate $1,004,000 as of both June 30, 2012 and December 31, 2011, and are included in other noncurrent liabilities, all of which would favorably impact the Company’s effective tax rate if recognized. The Company reports interest expense and penalties related to income tax liabilities, when applicable, in income tax expense. Interest and penalties recognized on uncertain tax positions amounted to $19,000 and $20,000 for the three months ended June 30, 2012 and 2011, and $37,000 and $237,000 for the six months ended June 30, 2012 and 2011. As of June 30, 2012 and December 31, 2011, the Company had $734,000 and $697,000 accrued for the payment of interest and penalties on uncertain tax positions, which is included in other noncurrent liabilities.

As of June 30, 2012, management was not aware of any significant tax positions where it appeared reasonably possible that unrecognized tax benefits might significantly increase within the next twelve months. The tax years that remain open to examination include 2006 through 2011 by the Georgia Department of Revenue and the California Franchise Tax Board, and 2008 through 2011 by all other taxing jurisdictions to which the Company is subject. The Internal Revenue Service is currently conducting an examination of the Company’s 2010 federal income tax return, the outcome of which will not be known until finalized. A reconciliation of the change in the total unrecognized tax benefits and other information for the six months ended June 30, 2012 and 2011 is as follows (in thousands):

 

                                                         
      2012      2011  

Beginning of period

   $ 1,004       $ 2,879   

Increases (decreases) for tax positions of current year

               

Increases for tax positions of prior years

             358   

Decreases for tax positions of prior years

             (2,196

Increases (decreases) for settlements with taxing authorities

             (489

Reductions for lapse of applicable statute of limitations

               
  

 

 

    

 

 

 

End of period

   $ 1,004       $ 552   
  

 

 

    

 

 

 

Taxes Collected from Customers—The Company reports sales, admission and other taxes collected from customers on both a gross and net basis in operations. Such taxes reported on a gross basis for the three months ended June 30, 2012 and 2011 amounted to $1,602,000 and $1,754,000, and for the six months ended June 30, 2012 and 2011 amounted to $2,545,000 and $3,000,000.

Advertising Expenses—Event specific advertising costs are expensed when an associated event is held and included principally in direct expense of events. Non-event related advertising costs are expensed as incurred and included principally in other direct operating expense. Advertising expense amounted to $6,848,000 and $5,581,000 in the three months ended June 30, 2012 and 2011, and $9,356,000 and $8,148,000 in the six months ended June 30, 2012 and 2011. There were no deferred direct-response advertising costs at June 30, 2012 or December 31, 2011.

Concentrations of Credit Risk—Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, accounts and notes receivable, and cash surrender values. Concentration of credit risk with respect to cash and cash equivalents and cash surrender values is limited through placement with major high-credit qualified financial institutions and insurance carriers, respectively. However, amounts placed often significantly exceed available insured limits. Concentrations of credit risk with respect to accounts receivable are limited due to the large numbers and wide variety of customers and customer industries and their broad geographical dispersion. Also, a significant portion of the Company’s accounts receivable typically pertain to advance revenues for specific events which are deferred until the event is held. As such, exposure to credit risk on such receivables that could adversely affect operating results is limited until recognition of the associated deferred race event income. The Company generally requires sufficient collateral equal to or exceeding note amounts, or accepts notes from high-credit quality entities or high net-worth individuals, limiting its exposure to credit risk. Amounts due from affiliates typically can be offset to the extent of amounts payable to affiliates, limiting the Company’s exposure to credit risk.

Fair Value of Financial Instruments—The Company follows applicable authoritative guidance which requires that financial and non-financial assets and liabilities measured and reported on a fair value basis be classified, disclosed and categorized as further described below. Fair value estimates are based on relevant market information and single broker quoted market prices where available at a specific point in time, and changes in assumptions or market conditions could significantly affect estimates. The carrying values of cash and cash equivalents, accounts and notes receivable, certain other assets and accounts payable approximate fair value because of the short maturity of these financial instruments. Cash surrender values are carried at fair value based on binding broker quoted market prices. Notes and other receivables and bank revolving credit facility and term loan borrowings are variable interest rate financial instruments and, therefore, carrying values approximate fair value. The fixed rate senior notes payable are publicly traded and estimated fair values are based on single broker quoted market prices. Other long-term debt is non-interest bearing and discounted based on estimated current cost of borrowings and, therefore, carrying values approximate market value. Quoted market prices are not available for determining market value of the Company’s equity investment in an associated entity. For equity investments, the Company estimates fair value primarily using estimated discounted cash flows. See “Joint Venture Equity Investment” above for fair value information on a contingent guarantee obligation associated with MA.

The following table presents estimated fair values and categorization levels of the Company’s financial instruments as of June 30, 2012 and December 31, 2011 (in thousands):

 

               June 30, 2012      December 31, 2011  
      Level    Class    Carrying Value      Fair Value      Carrying Value      Fair Value  

Assets

                 

Cash and cash equivalents

   1    R      $  111,142             $  111,142         $  87,368             $    87,368   

Floating rate notes receivable

   2    NR      2,575             2,575         2,765             2,765   

Cash surrender values

   2    NR      4,460             4,460         4,319             4,319   

Liabilities

                 

Floating rate revolving Credit

    Facility, including Term Loan

   2    NR      127,500             127,500         145,000             145,000   

6 3/4% Senior Notes Payable due 2019

   1    NR      150,000             156,325         150,000             150,750   

8 3/4% Senior Notes payable due 2016

   1    NR      270,137             298,375         269,517             298,375   

Other long-term debt

   2    NR      6,791             6,791         8,040             8,040   

 

Level 1:

 

Quoted market prices in active markets for identical assets or liabilities.

Level 2:

 

Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3:

 

Unobservable inputs that are not corroborated by market data.

Class R:

 

Measured at fair value on recurring basis, subsequent to initial recognition.

Class NR:

 

Measured at fair value on nonrecurring basis, subsequent to initial recognition.

Other Contingencies—CMS’s property includes areas used as solid waste landfills for many years. Landfilling of general categories of municipal solid waste on the CMS property ceased in 1992, but CMS currently allows certain property to be used for land clearing and inert debris landfilling. Landfilling for construction and demolition debris has ceased on the CMS property. Management believes the Company’s operations, including the landfills on its property, comply with all applicable federal, state and local environmental laws and regulations. Management is not aware of any situation related to landfill operations which would have a material adverse effect on the Company’s financial position, future results of operations or cash flows.

KyS held an inaugural NASCAR Sprint Cup race in the third quarter 2011. Because of various traffic congestion issues, the Company offered to exchange race tickets meeting certain criteria for tickets to specified KyS or other speedway 2011 race events or KyS’s second quarter 2012 Sprint Cup race. The exchange offer expired November 30, 2011 and cash refunds were not offered. Tickets exchanged for race events held in 2011 were not significant. At December 31, 2011, the Company had deferred race event income of $589,000 associated with tickets exchanged for KyS’s 2012 Sprint Cup event, all of which was recognized in the second quarter 2012.

 

TMS, in conjunction with the Fort Worth Sports Authority, has a two-year oil and gas mineral rights lease agreement expiring December 2013 which, among other things, provides the lessee various defined property access and right-of-ways, exclusive exploration and extraction rights, and non-interference by TMS should extraction infrastructure construction and operations commence. TMS is required to coordinate directly with the lessor on roadway and pipeline logistics to prevent interference of TMS or lessor activities, and monitor regulatory and other contract compliance. An upfront cash payment received in December 2011 is being accreted into other operating revenue over the two-year agreement term on a straight-line basis, with $801,000 and $1,607,000 recognized in the three and six months ended June 30, 2012. Deferred revenue recognizable in the upcoming fiscal year is reflected as current liabilities in deferred race event and other income.

Reclassifications—Certain insignificant reclassifications to prior year amounts in the accompanying consolidated statement of cash flows were made to conform with current year presentation.

Recently Issued Accounting Standards—The Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2011-05 “Comprehensive Income (Topic 220): Presentation of Comprehensive Income” to improve the comparability, consistency and transparency of financial reporting and increase the prominence of items reported in other comprehensive income. The option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity will be eliminated. All non-owner changes in stockholders’ equity will now require presentation either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, applied retrospectively, and did not require any transition disclosures. The Company’s adoption had no significant impact on its financial statements or disclosures.

The FASB issued Accounting Standards Update No. 2011-08 “Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment” under which entities have the option to first assess qualitative factors to determine whether events or circumstances exist that lead to determining it is more likely than not that the reporting unit’s fair value is less than its carrying amount. If an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test described in Topic 350 is unnecessary. Under this update, entities have the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the first step of the two-step goodwill impairment test, and may resume performing the qualitative assessment in any subsequent period. In concluding whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, entities should consider the extent to which each adverse event or circumstance identified could affect the comparison of a reporting unit’s fair value with its carrying amount. Entities should place more weight on events and circumstances that most affect a reporting unit’s fair value or the carrying amount of its net assets, and should consider positive and mitigating events and circumstances that may affect its determination of whether it is more likely than not that the reporting unit’s fair value is less than its carrying amount. Where recent fair value calculations have been performed, the difference between reporting unit fair value and carrying amount must be considered in deciding whether the first step of the impairment test is necessary. This update provides examples of events and circumstances that entities should consider in performing qualitative assessments and other testing that supersede previous examples. Under this update, entities are no longer permitted to carry forward detailed calculations of a reporting unit’s fair value from a prior year. This update does not change current guidance for testing other indefinite-lived intangible assets for impairment. The guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company’s adoption had no impact on its financial statements or disclosures, and the Company will apply this guidance to future impairment assessments.

The FASB issued Accounting Standards Update No. 2012-02 “Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment” which permits entities first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30 “Intangibles—Goodwill and Other—General Intangibles Other than Goodwill”. Under this Update, entities have an option not to calculate annually the fair value of an indefinite-lived intangible asset if it determines that it is not more likely than not the asset is impaired. This Update results in permitting entities to assess qualitative factors when testing indefinite-lived intangible assets for impairment results that is similar to the goodwill impairment testing guidance in Update 2011-08 as further described in the preceding paragraph. If, after assessing the totality of events and circumstances, an entity concludes it is not more likely than not that the indefinite-lived intangible asset is impaired, no further action is required. However, if an entity concludes otherwise, it is required to determine fair value of the intangible asset and perform quantitative impairment testing by comparing fair value with the carrying amount in accordance with Subtopic 350-30. Entities also have the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. Entities should consider positive and mitigating events and circumstances that could affect its determination of whether it is more likely than not that the intangible asset is impaired, and should refer to examples in paragraph 350-30-35-18B(a) through (f) for guidance about the types of events and circumstances to consider in evaluating possible impairment. The guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, and early adoption is permitted. The Company is currently assessing the impact, if any, adoption may have on its future impairment assessments.

SIGNIFICANT ACCOUNTING POLICIES AND OTHER DISCLOSURES (Tables)

A reconciliation of the change in the total unrecognized tax benefits and other information for the six months ended June 30, 2012 and 2011 is as follows (in thousands):

 

                                                         
      2012      2011  

Beginning of period

   $ 1,004       $ 2,879   

Increases (decreases) for tax positions of current year

               

Increases for tax positions of prior years

             358   

Decreases for tax positions of prior years

             (2,196

Increases (decreases) for settlements with taxing authorities

             (489

Reductions for lapse of applicable statute of limitations

               
  

 

 

    

 

 

 

End of period

   $ 1,004       $ 552   
  

 

 

    

 

 

 

The following table presents estimated fair values and categorization levels of the Company’s financial instruments as of June 30, 2012 and December 31, 2011 (in thousands):

 

               June 30, 2012      December 31, 2011  
      Level    Class    Carrying Value      Fair Value      Carrying Value      Fair Value  

Assets

                 

Cash and cash equivalents

   1    R      $  111,142             $  111,142         $  87,368             $    87,368   

Floating rate notes receivable

   2    NR      2,575             2,575         2,765             2,765   

Cash surrender values

   2    NR      4,460             4,460         4,319             4,319   

Liabilities

                 

Floating rate revolving Credit

    Facility, including Term Loan

   2    NR      127,500             127,500         145,000             145,000   

6 3/4% Senior Notes Payable due 2019

   1    NR      150,000             156,325         150,000             150,750   

8 3/4% Senior Notes payable due 2016

   1    NR      270,137             298,375         269,517             298,375   

Other long-term debt

   2    NR      6,791             6,791         8,040             8,040   

 

Level 1:

 

Quoted market prices in active markets for identical assets or liabilities.

Level 2:

 

Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3:

 

Unobservable inputs that are not corroborated by market data.

Class R:

 

Measured at fair value on recurring basis, subsequent to initial recognition.

Class NR:

 

Measured at fair value on nonrecurring basis, subsequent to initial recognition.

The following summarized financial information on MA’s operating results is presented for informational purposes (in thousands):

 

                                                                                                   
      Second Quarter      Year-to-Date  
      2012      2011      2012      2011  

Net sales

   $ 10,997           $ 10,858           $ 17,127           $ 16,698       

Gross profit

     4,958             4,489             7,199             6,512       

Income (loss) from continuing operations

     1,632             493             1,232             (1,256)     

Net income (loss)

     1,632             493             1,232             (1,256)     
INVENTORIES (Tables)
Inventories

Inventories, net consist of the following components (in thousands):

 

                                             
     June 30,     December 31,  
      2012     2011  

Souvenirs and apparel

   $ 3,342      $ 2,867   

Finished vehicles, parts and accessories

     5,834        5,149   

Micro-lubricant® and other

     563        614   
  

 

 

   

 

 

 

Total

   $ 9,739      $ 8,630   
  

 

 

   

 

 

 
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables)
Gross Carrying Values and Accumulated Amortization by Class of Intangible Asset

As of June 30, 2012 and December 31, 2011, gross carrying values and accumulated amortization by class of intangible asset are as follows (dollars in thousands):

 

      June 30, 2012      December 31, 2011         
      Gross
Carrying
Value
     Accumulated
Amortization
    Net      Gross
Carrying
Value
     Accumulated
Amortization
    Net      Estimated
Amortization
Period
(Years)
 

Nonamortizable race event sanctioning and
renewal agreements

   $ 394,913         —        $ 394,913       $ 394,913         —        $ 394,913         —     

Amortizable race event
sanctioning and
renewal agreements

     100       $ (29     71         70       $ (23     47         5-6   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

Total

   $   395,013       $ (29   $   394,984       $   394,983       $ (23   $   394,960      
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    
LONG-TERM DEBT (Tables)
Interest Expense, Net

Interest Expense, Net—Interest expense, interest income and capitalized interest costs are summarized as follows (in thousands):

 

                                                                                   
     Three Months Ended
June  30:
    Six Months Ended
June 30:
 
     2012     2011     2012     2011  

Gross interest costs

  $ 10,597         $ 11,036         $ 21,249         $ 23,153      

Less: capitalized interest costs

    (286)          (840)          (441)          (1,625)     
 

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense

    10,311           10,196           20,808           21,528      

Interest income

    (71)          (82)          (132)          (167)     
 

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense, net

  $ 10,240         $ 10,114         $ 20,676         $ 21,361      
 

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average interest rate on borrowings
under bank Credit Facility

    2.7%        2.7%        2.8%        3.0%   
PER SHARE AND OTHER EQUITY INFORMATION (Tables)

The following schedule reconciles basic and diluted earnings or loss per share from continuing operations (where computations are anti-dilutive, reported basic and diluted per share amounts are the same) (in thousands except per share amounts):

 

                                                                                   
     Three Months Ended
June  30:
    Six Months Ended
June 30:
 
     2012     2011     2012     2011  

Income (loss) from continuing operations applicable to
common stockholders and assumed conversions

  $ 26,961         $ (28,094)        $ 26,843         $ (29,338)     
 

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding

    41,451           41,553           41,447           41,574      

Dilution effect of assumed conversions:

       

Common stock equivalents—stock awards

    8          —           8           —      
 

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding
and assumed conversions

    41,459           41,553           41,455           41,574      
 

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings (loss) per share

  $ 0.65         $ (0.68)        $ 0.65         $ (0.71)     
 

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings (loss) per share

  $ 0.65         $ (0.68)        $ 0.65         $ (0.71)     
 

 

 

   

 

 

   

 

 

   

 

 

 

Anti-dilutive common stock equivalents excluded in
computing diluted earnings (loss) per share

    1,033           1,397           1,037           1,397      

To date in 2012, the Company’s Board of Directors has approved the following quarterly cash dividends on common stock, which are being paid using available cash and cash equivalents on hand (in thousands except per share amounts):

 

Declaration date

     February 22, 2012         April 17, 2012         July 19, 2012   

Record date

     March 5, 2012         May 18, 2012         August 17, 2012   

Paid or payable to shareholders

     March 15, 2012         June 8, 2012         September 7, 2012   

Aggregate quarterly cash dividend

     $6,241         $6,220         Approximately $6,200   

Dividend per common share

     $0.15         $0.15         $0.15   
RELATED PARTY TRANSACTIONS (Tables)
Related Party Balances and Transactions

The foregoing related party balances as of June 30, 2012 and December 31, 2011, and transactions for the three and six months ended June 30, 2012 and 2011, are summarized below (in thousands):

 

                                                                                   
                    June 30,
2012
     December 31,
2011
 

Notes and other receivables

         $ 4,330           $ 4,386       

Amounts payable to affiliates

           2,594             2,594       
      Three Months Ended
June 30:
     Six Months Ended
June 30:
 
      2012      2011      2012      2011  

Merchandise and vehicle purchases

   $ 99           $ 233           $ 578           $ 650       

Merchandise and vehicle sales and event related
commissions, and reimbursed shared expenses

     1,408             1,368             2,827             2,803       

Rent expense

     173             138             311             280       

Interest income

     28             32             57             64       

Interest expense

     26             26             52             51       
STOCK COMPENSATION PLANS (Tables)
Restricted Stock and Restricted Stock Units

The following is a summary of restricted stock and restricted stock units granted, vested and forfeited under the Incentive Compensation Plan during the six months ended June 30, 2012 and 2011 (shares in thousands):

 

      Six Months Ended June 30:
      2012   2011
      Restricted Stock   Restricted Stock
Units
  Restricted Stock   Restricted Stock
Units

Outstanding, beginning of period

       63         63         67         47  

Granted

       35         35         35         35  

Vested

       (30 )       (30 )       (27 )       (7 )

Forfeited

       (8 )       (8 )       (12 )       (12 )

Outstanding, end of period

       60         60         63         63  
SEGMENT DISCLOSURES (Tables)
Segment information on continuing operations for the three and six months ended June 30, 2012 and 2011, and as of June 30, 2012 and December 31, 2011 is as follows (in thousands):

 

                                                                                                                             
      Three Months Ended June 30:  
      2012      2011  
      Motorsports
Event
Related
     All
Other
     Consolidated      Motorsports
Event
Related
    All
Other
     Consolidated  

Revenues

   $ 175,954       $ 5,069       $ 181,023       $ 148,142      $ 4,937       $ 153,079   

Depreciation and amortization

     14,032         61         14,093         13,258        65         13,323   

Impairment of goodwill (Note 4)

                             48,609                48,609   

Segment operating income (loss)

     54,591         1,080         55,671         (4,681 )     491         (4,190 )

Capital expenditures

     8,854         51         8,905         23,723        133         23,856   
      Six Months Ended June 30:  
      2012      2011  
      Motorsports
Event
Related
     All
Other
     Consolidated      Motorsports
Event
Related
    All
Other
     Consolidated  

Revenues

   $ 255,462       $ 10,363       $ 265,825       $ 230,093      $ 9,661       $ 239,754   

Depreciation and amortization

     27,882         127         28,009         26,440        133         26,573   

Impairment of goodwill (Note 4)

                             48,609                48,609   

Segment operating income

     63,851         2,029         65,880         7,710        803         8,513   

Capital expenditures

     17,501         65         17,566         53,049        137         53,186   
      June 30, 2012      December 31, 2011  

Other intangibles

   $ 394,984               $ 394,984         394,960      $       $ 394,960   

Goodwill intangibles

     138,717                 138,717         138,717                138,717   

Total assets

     1,910,660       $ 26,482         1,937,142       $ 1,879,606        25,037         1,904,643   

The following table reconciles segment operating income or loss above to consolidated income or loss before income taxes (both from continuing operations) for the periods indicated (in thousands):

 

                                                                                   
      Three Months Ended
June 30:
    Six Months Ended
June  30:
 
      2012     2011     2012     2011  

Total segment operating income (loss) from continuing
operations

   $ 55,671      $ (4,190   $ 65,880      $ 8,513   

Adjusted for:

        

Interest expense, net

     (10,240     (10,114     (20,676     (21,361

Loss on early debt redemption and refinancing (Note 5)

            (23            (7,456

Other income, net

     49        12        95        32   
  

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated income (loss) from continuing operations
before income taxes

   $ 45,480      $ (14,315   $ 45,299      $ (20,272 )
  

 

 

   

 

 

   

 

 

   

 

 

 
Description of Business - Additional Information (Detail) (USD $)
3 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2011
Jun. 30, 2011
Dec. 31, 2011
NASCAR
Event
Dec. 31, 2011
NASCAR
Sprint Cup Series
Event
Dec. 31, 2011
NASCAR
Nationwide Series
Event
Dec. 31, 2011
NASCAR
Camping World Trucks Series
Event
Dec. 31, 2011
NASCAR
K&N Pro Series
Event
Dec. 31, 2012
NASCAR
Planned Racing Events
Event
Dec. 31, 2012
NASCAR
Planned Racing Events
Sprint Cup Series
Event
Dec. 31, 2012
NASCAR
Planned Racing Events
Nationwide Series
Event
Dec. 31, 2012
NASCAR
Planned Racing Events
Camping World Trucks Series
Event
Dec. 31, 2012
NASCAR
Planned Racing Events
K&N Pro Series
Event
Dec. 31, 2011
IndyCar Series
Event
Dec. 31, 2012
IndyCar Series
Planned Racing Events
Event
Dec. 31, 2011
National Hot Rod Association
Event
Dec. 31, 2012
National Hot Rod Association
Planned Racing Events
Event
Dec. 31, 2011
World of Outlaws
Event
Dec. 31, 2012
World of Outlaws
Planned Racing Events
Event
Dec. 31, 2011
US Legend Cars
Event
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Change in net unrealized loss on marketable equity securities
$ 22,000 
$ 19,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of racing events
 
 
23 
13 
10 
24 
13 
11 
Significant Accounting Policies and Other Disclosures - Additional Information (Detail) (USD $)
3 Months Ended 6 Months Ended 3 Months Ended 6 Months Ended
Jun. 30, 2012
Jun. 30, 2011
Jun. 30, 2012
Jun. 30, 2011
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2011
Kentucky Speedway
Jun. 30, 2012
Texas Motor Speedway
Jun. 30, 2012
Texas Motor Speedway
Jun. 30, 2012
Motorsports Authentics
Dec. 31, 2011
Motorsports Authentics
Dec. 31, 2009
Motorsports Authentics
Significant Accounting Policies [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
Number of facility naming rights agreement
 
 
 
 
 
 
 
 
 
 
 
Facility naming rights agreement term
 
 
10 years 
 
 
 
 
 
 
 
 
 
Non-controlling interest in joint venture
 
 
 
 
 
 
 
 
 
50.00% 
 
 
Equity investment
 
 
 
 
 
 
 
 
 
 
 
$ 0 
Contingent guarantee
 
 
 
 
 
 
 
 
 
1,200,000 
1,200,000 
 
Effective income tax rate
40.70% 
40.00% 
40.70% 
40.00% 
 
 
 
 
 
 
 
 
Income tax liabilities for unrecognized tax benefits
1,004,000 
552,000 
1,004,000 
552,000 
1,004,000 
2,879,000 
 
 
 
 
 
 
Interest and penalties recognized on uncertain tax positions
19,000 
20,000 
37,000 
237,000 
 
 
 
 
 
 
 
 
Interest and penalties accrued on uncertain tax positions
734,000 
 
734,000 
 
697,000 
 
 
 
 
 
 
 
Taxes collected from customers
1,602,000 
1,754,000 
2,545,000 
3,000,000 
 
 
 
 
 
 
 
 
Advertising expense
6,848,000 
5,581,000 
9,356,000 
8,148,000 
 
 
 
 
 
 
 
 
Deferred race event income associated with tickets exchanged for Sprint Cup event
 
 
 
 
 
 
589,000 
 
 
 
 
 
Lease term
 
 
 
 
 
 
 
2 years 
 
 
 
 
Lease expiration date
 
 
 
 
 
 
 
2013-12 
 
 
 
 
Upfront cash payment, recognized amount
 
 
 
 
 
 
 
$ 801,000 
$ 1,607,000 
 
 
 
Summary of Financial Information on Motorsports Authentics Operating Results (Detail) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended 3 Months Ended 6 Months Ended
Jun. 30, 2012
Jun. 30, 2011
Jun. 30, 2012
Jun. 30, 2011
Jun. 30, 2012
Motorsports Authentics
Jun. 30, 2011
Motorsports Authentics
Jun. 30, 2012
Motorsports Authentics
Dec. 31, 2011
Motorsports Authentics
Schedule of Equity Method Investments [Line Items]
 
 
 
 
 
 
 
 
Net sales
 
 
 
 
$ 10,997 
$ 10,858 
$ 17,127 
$ 16,698 
Gross profit
 
 
 
 
4,958 
4,489 
7,199 
6,512 
Income (loss) from continuing operations
26,961 
(28,094)
26,843 
(29,338)
1,632 
493 
1,232 
(1,256)
Net income (loss)
$ 26,950 
$ (28,273)
$ 26,804 
$ (29,791)
$ 1,632 
$ 493 
$ 1,232 
$ (1,256)
Reconciliation of Change in Total Unrecognized Tax Benefits and Other Information (Detail) (USD $)
6 Months Ended
Jun. 30, 2012
Jun. 30, 2011
Reconciliation of Unrecognized Tax Benefits [Line Items]
 
 
Beginning of period
$ 1,004,000 
$ 2,879,000 
Increases (decreases) for tax positions of current year
   
   
Increases for tax positions of prior years
 
358,000 
Decreases for tax positions of prior years
 
(2,196,000)
Increases (decreases) for settlements with taxing authorities
 
(489,000)
Reductions for lapse of applicable statute of limitations
   
   
End of period
$ 1,004,000 
$ 552,000 
Estimated Fair Values and Categorization Levels of Financial Instruments (Detail) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2012
Dec. 31, 2011
Carrying Value |
Level 1 |
Fair Value, Measurements, Recurring
 
 
Assets
 
 
Cash and cash equivalents
$ 111,142 
$ 87,368 
Carrying Value |
Level 1 |
Fair Value, Measurements, Nonrecurring |
2011 Senior Notes
 
 
Liabilities
 
 
Senior Notes Payable
150,000 
150,000 
Carrying Value |
Level 1 |
Fair Value, Measurements, Nonrecurring |
2009 Senior Notes
 
 
Liabilities
 
 
Senior Notes Payable
270,137 
269,517 
Carrying Value |
Level 2 |
Fair Value, Measurements, Nonrecurring
 
 
Assets
 
 
Floating rate notes receivable
2,575 
2,765 
Cash surrender values
4,460 
4,319 
Liabilities
 
 
Floating rate revolving Credit Facility, including Term Loan
127,500 
145,000 
Other long-term debt
6,791 
8,040 
Fair Value |
Level 1 |
Fair Value, Measurements, Recurring
 
 
Assets
 
 
Cash and cash equivalents
111,142 
87,368 
Fair Value |
Level 1 |
Fair Value, Measurements, Nonrecurring |
2011 Senior Notes
 
 
Liabilities
 
 
Senior Notes Payable
156,325 
150,750 
Fair Value |
Level 1 |
Fair Value, Measurements, Nonrecurring |
2009 Senior Notes
 
 
Liabilities
 
 
Senior Notes Payable
298,375 
298,375 
Fair Value |
Level 2 |
Fair Value, Measurements, Nonrecurring
 
 
Assets
 
 
Floating rate notes receivable
2,575 
2,765 
Cash surrender values
4,460 
4,319 
Liabilities
 
 
Floating rate revolving Credit Facility, including Term Loan
127,500 
145,000 
Other long-term debt
$ 6,791 
$ 8,040 
Estimated Fair Values and Categorization Levels of Financial Instruments (Parenthetical) (Detail)
Jun. 30, 2012
Dec. 31, 2011
2011 Senior Notes
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Senior notes payable, interest rate
6.75% 
6.75% 
Senior notes payable, due date
2019 
2019 
2009 Senior Notes
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Senior notes payable, interest rate
8.75% 
8.75% 
Senior notes payable, due date
2016 
2016 
Inventories (Detail) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2012
Dec. 31, 2011
Schedule of Inventory [Line Items]
 
 
Souvenirs and apparel
$ 3,342 
$ 2,867 
Finished vehicles, parts and accessories
5,834 
5,149 
Micro-lubricant®and other
563 
614 
Total
$ 9,739 
$ 8,630 
Inventories - Additional Information (Detail) (USD $)
Jun. 30, 2012
Dec. 31, 2011
Schedule of Inventory [Line Items]
 
 
Inventory provisions
$ 5,156,000 
$ 5,765,000 
Goodwill and Other Intangible Assets - Additional Information (Detail) (USD $)
3 Months Ended 6 Months Ended 6 Months Ended 3 Months Ended 12 Months Ended
Jun. 30, 2012
Jun. 30, 2011
Jun. 30, 2012
Jun. 30, 2011
Dec. 31, 2011
Jun. 30, 2012
Amortizable Race Event Sanctioning and Renewal Agreements
Jun. 30, 2011
New Hampshire Motor Speedway, Incorporated
Dec. 31, 2008
New Hampshire Motor Speedway, Incorporated
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
 
 
 
 
Non-cash goodwill impairment charge
 
$ 48,609,000 
 
$ 48,609,000 
 
 
$ 48,609,000 
 
Race date intangibles
394,984,000 
 
394,984,000 
 
394,960,000 
 
127,400,000 
 
Cash purchase price, net
8,905,000 
23,856,000 
17,566,000 
53,186,000 
 
 
 
330,100,000 
Increase in amortizable other intangible assets
 
 
 
 
 
$ 30,000 
 
 
Gross Carrying Values and Accumulated Amortization by Class of Intangible Asset (Detail) (USD $)
In Thousands, unless otherwise specified
6 Months Ended
Jun. 30, 2012
Dec. 31, 2011
Jun. 30, 2012
Nonamortizable Race Event Sanctioning and Renewal Agreements
Dec. 31, 2011
Nonamortizable Race Event Sanctioning and Renewal Agreements
Jun. 30, 2012
Amortizable Race Event Sanctioning and Renewal Agreements
Dec. 31, 2011
Amortizable Race Event Sanctioning and Renewal Agreements
Jun. 30, 2012
Minimum
Amortizable Race Event Sanctioning and Renewal Agreements
Jun. 30, 2012
Maximum
Amortizable Race Event Sanctioning and Renewal Agreements
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
 
 
 
 
Gross Carrying Value
$ 395,013 
$ 394,983 
$ 394,913 
$ 394,913 
$ 100 
$ 70 
 
 
Accumulated Amortization
(29)
(23)
 
 
(29)
(23)
 
 
Net
$ 394,984 
$ 394,960 
$ 394,913 
$ 394,913 
$ 71 
$ 47 
 
 
Estimated Amortization Period
 
 
 
 
 
 
5 years 
6 years 
Long Term Debt - Additional Information (Detail) (USD $)
3 Months Ended 6 Months Ended 6 Months Ended 6 Months Ended 6 Months Ended 6 Months Ended 1 Months Ended 6 Months Ended
Jun. 30, 2011
Jun. 30, 2012
Jun. 30, 2011
Jun. 30, 2012
2011 Credit Facility
Dec. 31, 2011
2011 Credit Facility
Jun. 30, 2012
2011 Credit Facility
Minimum
Jun. 30, 2012
2011 Credit Facility
Maximum
Jun. 30, 2012
2011 Credit Facility
Interest rate option one
Minimum
Jun. 30, 2012
2011 Credit Facility
Interest rate option one
Maximum
Jun. 30, 2012
2011 Credit Facility
Interest rate option two
Jun. 30, 2012
2011 Credit Facility
Interest rate option three
Jun. 30, 2012
2011 Credit Facility
Interest rate option three
Minimum
Jun. 30, 2012
2011 Credit Facility
Interest rate option three
Maximum
Jun. 30, 2012
2011 Credit Facility
Subject to Maintaining Certain Financial Covenants
Jun. 30, 2012
2011 Credit Facility
Before Amendment
Interest rate option one
Minimum
Jun. 30, 2012
2011 Credit Facility
Before Amendment
Interest rate option one
Maximum
Jun. 30, 2012
2011 Credit Facility
Before Amendment
Interest rate option two
Jun. 30, 2012
2011 Credit Facility
Before Amendment
Interest rate option three
Jun. 30, 2012
2011 Credit Facility
Before Amendment
Interest rate option three
Minimum
Jun. 30, 2012
2011 Credit Facility
Before Amendment
Interest rate option three
Maximum
Jun. 30, 2012
2011 Credit Facility
Revolving Credit Facility
Jun. 30, 2012
2011 Credit Facility
Revolving Credit Facility
Standby Letters of Credit
Jun. 30, 2012
2011 Credit Facility
Revolving Credit Facility
Swingline Loans
Jun. 30, 2012
2011 Credit Facility
Term Loan
Dec. 31, 2011
2011 Credit Facility
Term Loan
Jun. 30, 2012
2011 Credit Facility
Term Loan
Minimum
Feb. 28, 2011
2011 Senior Notes
Jun. 30, 2012
2011 Senior Notes
Dec. 31, 2011
2011 Senior Notes
Jun. 30, 2012
2011 Senior Notes
Beginning February 1, 2015
Maximum
Jun. 30, 2012
2011 Senior Notes
Before February 1, 2014
Maximum
Jun. 30, 2012
2009 Senior Notes
Dec. 31, 2011
2009 Senior Notes
Dec. 31, 2009
2009 Senior Notes
Jun. 30, 2012
2009 Senior Notes
Twelve months period beginning June 1, 2013
Maximum
Jun. 30, 2012
2009 Senior Notes
On or before June 1, 2012
Maximum
Jun. 30, 2012
Senior Subordinated Notes
Jun. 30, 2012
Senior Subordinated Notes
Minimum
Jun. 30, 2012
Senior Subordinated Notes
Maximum
Jun. 30, 2012
Non-Interest Bearing Debt Obligation One
Installment
Jun. 30, 2012
Non-Interest Bearing Debt Obligation Two
Installment
Jun. 30, 2012
Non-Interest Bearing Debt Obligation
Dec. 31, 2011
Non-Interest Bearing Debt Obligation
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit Facility, term
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4 years 
 
 
4 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit Facility, maximum borrowing capacity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 100,000,000 
$ 50,000,000 
$ 10,000,000 
$ 150,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit Facility, maturity date
 
 
 
2015-01 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit Facility, aggregate additional borrowing capacity
 
 
 
50,000,000