SPEEDWAY MOTORSPORTS INC, 10-Q filed on 5/2/2013
Quarterly Report
Document and Entity Information
3 Months Ended
Mar. 31, 2013
May 1, 2013
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Mar. 31, 2013 
 
Document Fiscal Year Focus
2013 
 
Document Fiscal Period Focus
Q1 
 
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
 
41,425,885 
CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2013
Dec. 31, 2012
Current Assets:
 
 
Cash and cash equivalents
$ 122,052 
$ 106,408 
Accounts and notes receivable, net
69,369 
36,382 
Prepaid and refundable income taxes
5,056 
6,125 
Inventories, net
10,248 
8,794 
Prepaid expenses
4,243 
3,552 
Deferred income taxes
741 
741 
Total Current Assets
211,709 
162,002 
Notes and Other Receivables:
 
 
Affiliates
3,586 
3,681 
Other
1,408 
1,493 
Other Assets
32,525 
27,830 
Property and Equipment, Net
1,137,029 
1,148,418 
Other Intangible Assets, Net
394,972 
394,972 
Goodwill
138,717 
138,717 
Total
1,919,946 
1,877,113 
Current Liabilities:
 
 
Current maturities of long-term debt
2,376 
17,709 
Accounts payable
17,653 
10,887 
Deferred race event and other income, net
93,177 
58,492 
Accrued interest
10,833 
6,231 
Accrued expenses and other current liabilities
16,802 
20,351 
Total Current Liabilities
140,841 
113,670 
Long-term Debt (Note 5)
528,349 
503,550 
Payable to Affiliate
2,594 
2,594 
Deferred Income, Net
8,853 
9,015 
Deferred Income Taxes
384,759 
385,736 
Other Liabilities
4,700 
4,672 
Total Liabilities
1,070,096 
1,019,237 
Commitments and Contingencies (Notes 2, 4, 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 - 41,426,000 in 2013 and 41,433,000 in 2012
453 
453 
Additional Paid-in Capital
247,503 
246,978 
Retained Earnings
689,113 
696,727 
Treasury stock at cost, shares - 3,885,000 in 2013 and 3,830,000 in 2012
(87,219)
(86,282)
Total Stockholders' Equity
849,850 
857,876 
Total
$ 1,919,946 
$ 1,877,113 
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Mar. 31, 2013
Dec. 31, 2012
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
41,426,000 
41,433,000 
Common Stock, outstanding
41,426,000 
41,433,000 
Treasury Stock at cost, shares
3,885,000 
3,830,000 
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Revenues:
 
 
Admissions
$ 21,756 
$ 22,469 
Event related revenue
23,789 
24,702 
NASCAR broadcasting revenue
30,439 
29,433 
Other operating revenue
8,238 
8,198 
Total Revenues
84,222 
84,802 
Expenses and Other:
 
 
Direct expense of events
15,209 
14,989 
NASCAR purse and sanction fees
19,286 
18,755 
Other direct operating expense
4,981 
5,054 
General and administrative
22,117 
21,879 
Depreciation and amortization
13,741 
13,916 
Interest expense, net
10,910 
10,436 
Other expense (income), net
110 
(46)
Total Expenses and Other
86,354 
84,983 
Loss from Continuing Operations Before Income Taxes
(2,132)
(181)
Provision for Income Taxes
799 
63 
Loss from Continuing Operations
(1,333)
(118)
Loss from Discontinued Operation
(35)
(28)
Net Loss
$ (1,368)
$ (146)
Basic Loss Per Share:
 
 
Continuing Operations
$ (0.03)
$ 0.00 
Discontinued Operation
$ 0.00 
$ 0.00 
Net Loss
$ (0.03)
$ 0.00 
Weighted Average Shares Outstanding
41,427 
41,443 
Diluted Loss Per Share:
 
 
Continuing Operations
$ (0.03)
$ 0.00 
Discontinued Operation
$ 0.00 
$ 0.00 
Net Loss
$ (0.03)
$ 0.00 
Weighted Average Shares Outstanding
41,438 
41,451 
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (USD $)
In Thousands
Total
Outstanding Common Stock
Additional Paid-In Capital
Retained Earnings
Treasury Stock
Beginning Balance at Dec. 31, 2012
$ 857,876 
$ 453 
$ 246,978 
$ 696,727 
$ (86,282)
Beginning Balance (in shares) at Dec. 31, 2012
 
41,433 
 
 
 
Net loss
(1,368)
 
 
(1,368)
 
Share-based compensation (in shares)
 
48 
 
 
 
Share-based compensation
525 
 
525 
 
 
Quarterly cash dividends of $0.15 per share of common stock
(6,246)
 
 
(6,246)
 
Repurchases of common stock (in shares)
 
(55)
 
 
 
Repurchases of common stock at cost
(937)
 
 
 
(937)
Ending Balance at Mar. 31, 2013
$ 849,850 
$ 453 
$ 247,503 
$ 689,113 
$ (87,219)
Ending Balance (in shares) at Mar. 31, 2013
 
41,426 
 
 
 
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (Parenthetical)
3 Months Ended
Mar. 31, 2013
Quarterly cash dividends, per share of common stock
$ 0.15 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Cash Flows from Operating Activities:
 
 
Net loss
$ (1,368)
$ (146)
Loss from discontinued operation
35 
28 
Cash used by operating activities of discontinued operation
(35)
(28)
Adjustments to reconcile loss from continuing operations to net cash provided by operating activities:
 
 
Deferred loan cost amortization
706 
630 
Interest expense accretion of debt discount and premium, net
216 
441 
Depreciation and amortization
13,741 
13,916 
Amortization of deferred income
(1,001)
(972)
Deferred income tax provision
(1,959)
(200)
Share-based compensation
525 
497 
Changes in operating assets and liabilities:
 
 
Accounts and notes receivable
(32,939)
(30,067)
Prepaid and refundable income taxes
1,069 
158 
Inventories
(1,454)
(1,215)
Prepaid expenses
(691)
(312)
Accounts payable
7,046 
4,969 
Deferred race event and other income
35,487 
42,419 
Accrued interest
4,602 
3,482 
Accrued expenses and other liabilities
(3,259)
(4,936)
Deferred income
53 
496 
Other assets and liabilities
48 
(96)
Net Cash Provided By Operating Activities
21,822 
29,064 
Cash Flows from Financing Activities:
 
 
Borrowings under long-term debt
105,000 
 
Principal payments on long-term debt
(95,750)
(4,500)
Payment of debt refinancing costs
(5,634)
 
Dividend payments on common stock
(6,246)
(6,241)
Repurchases of common stock
(937)
(784)
Net Cash Used By Financing Activities
(3,567)
(11,525)
Cash Flows from Investing Activities:
 
 
Payments for capital expenditures
(2,648)
(8,661)
Increase in other non-current assets
 
(15)
Repayment of notes and other receivables
37 
51 
Net Cash Used By Investing Activities
(2,611)
(8,625)
Net Increase In Cash and Cash Equivalents
15,644 
8,914 
Cash and Cash Equivalents at Beginning of Period
106,408 
87,368 
Cash and Cash Equivalents at End of Period
122,052 
96,282 
Supplemental Cash Flow Information:
 
 
Cash paid for interest, net of amounts capitalized
6,454 
7,015 
Supplemental Non-Cash Investing and Financing Activities Information:
 
 
(Decrease) increase in accounts payable for capital expenditures
$ (280)
$ 1,174 
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 Raceway or SR) (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. (Legend Cars) (formerly known as 600 Racing), Oil-Chem Research Corporation (Oil-Chem), SMI Trackside LLC (SMI Trackside), Speedway Funding LLC, Speedway Motorsports International Limited (BVI) and consolidated foreign entity (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 Notes 1 and 2 to the Consolidated Financial Statements in the Company’s 2012 Annual Report on Form 10-K (2012 Annual Report) for further description of its business operations, properties and scheduled events.

Racing Events—In 2013, we plan 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. We also plan to hold six NASCAR Camping World Truck Series, three NASCAR K&N Pro Series, four NASCAR Whelen Modified Tour, two IndyCar Series, six major National Hot Rod Association (NHRA), one ARCA and three World of Outlaws (WOO) racing events. In 2012, we held 24 major annual racing events sanctioned by NASCAR, including 13 Sprint Cup and 11 Nationwide Series racing events. We also held eight NASCAR Camping World Truck Series, four NASCAR K&N Pro Series, four NASCAR Whelen Modified Tour, two IndyCar Series, six major NHRA, 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 2012 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 2012 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. There were no significant racing schedule changes for the three months ended March 31, 2013 as compared to 2012.

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 Sonoma Raceway, 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. The NASCAR Trust has the ability to significantly influence MA’s operations and results.

As further described in Note 2 to the Consolidated Financial Statements in our 2012 Annual Report, the carrying value of our equity investment in MA was reduced to $0 as of December 31, 2009. Under equity method accounting, we are no longer recording our 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, our first quarter 2013 and 2012 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):

 

     First Quarter  
     2013      2012  

Net sales

   $ 4,342           $ 6,130       

Gross profit

     1,435             2,241       

Loss from continuing operations

     (1,208)          (400)    

Net loss

     (1,208)           (400)     

Income Taxes—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 2012 Annual Report for additional information on our accounting for income taxes.

The effective income tax rate for the three months ended March 31, 2013 was 37.5%. The Company’s effective income tax rate for the three months ended March 31, 2012 was 34.8%, and 40.4% excluding the negative impact of interest on uncertain tax positions reflected in that period. Income tax liabilities for unrecognized tax benefits approximate $1,004,000 as of March 31, 2013 and December 31, 2012, and are included in other noncurrent liabilities, all of which would favorably impact the Company’s effective tax rate if recognized. Interest and penalties recognized on uncertain tax positions amounted to $18,000 for each of the three months ended March 31, 2013 and 2012. As of March 31, 2013 and December 31, 2012, the Company had $789,000 and $771,000 accrued for the payment of interest and penalties on uncertain tax positions, which is included in other noncurrent liabilities. As of March 31, 2013, 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 2012 by the California Franchise Tax Board, and 2009 through 2012 by all other taxing jurisdictions to which the Company is subject. The Company’s 2011 federal income tax return is under examination by the Internal Revenue Service, which began in March 2013. There was no change or activity for unrecognized tax benefits during the three months ended March 31, 2013 or 2012.

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 March 31, 2013 and 2012 amounted to $1,002,000 and $943,000.

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 $2,599,000 and $2,508,000 in the three months ended March 31, 2013 and 2012. There were no deferred direct-response advertising costs at March 31, 2013 or December 31, 2012.

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.

The following table presents estimated fair values and categorization levels of the Company’s financial instruments as of March 31, 2013 and December 31, 2012 (in thousands):

 

               March 31, 2013      December 31, 2012  
      Level    Class    Carrying Value      Fair Value      Carrying Value      Fair Value  

Assets

                 

Cash and cash equivalents

   1    R    $   122,052           $   122,052       $   106,408           $   106,408   

Floating rate notes receivable

   2    NR      2,290             2,290         2,385             2,385   

Cash surrender values

   2    NR      4,692             4,692         4,621             4,621   

Liabilities

                 

Floating rate revolving Credit Facility, including Term Loan

   2    NR      —               —           95,000             95,000   

6 3/4% Senior Notes Payable due 2019

   1    NR      254,816             267,500         150,000             159,000   

8 3/4% Senior Notes payable due 2016

   1    NR      271,069             289,781         270,758             292,875   

Other long-term debt

   2    NR      4,840             4,840         5,501             5,501   

 

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.

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 lessee on roadway and pipeline logistics to prevent interference of TMS or lessee 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 $802,000 and $806,000 recognized in the three months ended March 31, 2013 and 2012. Deferred revenue recognizable through December 2013 is reflected as current liabilities in deferred race event and other income.

Recently Issued Accounting Standards—The Financial Accounting Standards Board (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 permits entities to assess qualitative factors when testing indefinite-lived intangible assets for impairment results similar to the goodwill impairment testing guidance in Update 2011-08 “Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment”. 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. 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. 2013-02 “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” which requires entities to report the effects of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if amounts being reclassified are required under US generally accepted accounting principles (GAAP) to be reclassified in entirety to net income. For other than such amounts, entities are required to cross-reference other disclosures required under US GAAP that provide additional information about those amounts. The guidance is effective prospectively for reporting periods beginning after December 15, 2012, and entities are required to comply with this Update for all reporting periods presented, including interim periods. The Company’s adoption had no impact on its financial statements or disclosures as comprehensive income or loss equals net income or loss.

INVENTORIES
INVENTORIES

3. INVENTORIES

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

 

     March 31,
2013
     December 31,
2012
 

Souvenirs and apparel

   $ 3,523       $ 2,599   

Finished vehicles, parts and accessories

     6,019         5,591   

Micro-lubricant® and other

     706         604   
  

 

 

    

 

 

 

Total

   $ 10,248       $ 8,794   
  

 

 

    

 

 

 

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 March 31, 2013 and December 31, 2012, inventories reflect provisions of $4,687,000 and $4,757,000.

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. Acquired intangible assets are valued using the direct value method. 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.

 

We evaluate goodwill and other intangible assets for possible impairment annually in the second quarter, or when events or circumstances indicate possible impairment may have occurred. See Notes 2 and 5 to the Consolidated Financial Statements in our 2012 Annual Report for additional information on the Company’s goodwill and other intangible assets and assessment methodology and evaluation. Management’s latest annual assessment in the second quarter 2012 indicated the estimated fair value of each reporting unit and each indefinite-lived intangible asset substantially exceeded its associated carrying value except for two reporting units. As such, no goodwill or other indefinite-lived intangible asset impairment charges were found necessary at that time. However, management’s assessment found the estimated fair values for reporting units KyS and NHMS exceeded their carrying values by a relatively nominal amount with associated risk of failing step one of impairment testing. The aggregate carrying value of goodwill for these two units, both acquired in 2008, is approximately $89.1 million. Estimated fair values for those units exceeded aggregate goodwill carrying values by at least 7% based on projected discounted operating cash flows and profitability at the time of our last assessment. However, at this time, advance sales for upcoming major racing events later in 2013 at these two reporting units are lower than at this same time last year. Advance sales can often increase or decrease at different rates from year-to-year depending on various factors such as the timing and amounts of our advertising spending and other promotional efforts, the competitiveness and popularity of racing events and racecar drivers, along with economic, seasonal weather and other factors, many of which are out of management’s control. Should these reporting units or their indefinite-lived intangible assets not achieve projected cash flows or profitability, or should actual capital expenditures exceed current plans, estimated fair values could be reduced to below carrying values resulting in material non-cash impairment charges. Among other factors, our assessment assumes economic and industry condition improvements, and projected cash flow and profitability recovery, to pre-recession levels through modest annual growths rates for periods of approximately eight years depending on the associated projected revenue stream, and strategic amounts of planned capital expenditures. We also assumed that increases in contracted NASCAR television broadcasting rights revenues after 2014 would approximate at least those reflected in the recently negotiated eight-year contract beginning in 2015.

Management believes that no events or circumstances have occurred which indicate interim assessment for possible impairment is required as of March 31, 2013. Management believes the Company’s market capitalization decline below its consolidated shareholder’s equity is not an indicator of impairment. 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.

There were no changes in the gross carrying value of goodwill or other intangible assets during the three months ended March 31, 2013. As of March 31, 2013 and December 31, 2012, gross carrying values and accumulated amortization by class of intangible asset are as follows (dollars in thousands):

 

      March 31, 2013      December 31, 2012         
      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       $ (41     59         100       $ (41     59         5-6   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

Total

   $   395,013       $ (41   $   394,972       $   395,013       $ (41   $   394,972      
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

LONG-TERM DEBT
LONG-TERM DEBT

5. LONG-TERM DEBT

As further described below, the Company amended its Credit Facility and issued additional 2019 Senior Notes in the first quarter 2013, and plans to redeem all outstanding 2016 Senior Notes in the second quarter 2013.

Amendment of Bank Credit Facility—In February 2013, the Company’s Credit Facility was amended (the 2013 Credit Facility or Credit Facility) which, among other things: (i) provides for a five-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 five-year $250,000,000 senior secured term loan (the 2013 Term Loan or Term Loan) with a six-month delayed draw period; (iii) matures in February 2018; (iv) allows the Company to increase revolving commitments or establish a term loan (or a combination of the two) up to an aggregate additional $100,000,000 with certain lender commitment conditions; (v) allows for 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 (vi) limits annual capital expenditures to $75,000,000. The amended Term Loan requires minimum quarterly principal payments of at least 5% of the initial amount drawn on an annualized basis (or $12,500,000 in a twelve month period assuming an initial draw of $250,000,000). As further discussed below, the Company repaid $95,000,000 of Term Loan borrowings with proceeds from the add-on offering of 2019 Senior Notes in the first quarter 2013. At March 31, 2013 and December 31, 2012, outstanding borrowings under the Credit Facility were $0 and $95,000,000, respectively. At March 31, 2013, outstanding letters of credit amounted to $887,000.

Interest is based, at the Company’s option, upon LIBOR plus 1.25% to 2.00% or Bank of America’s base rate plus 0.25% to 1.00%. The 2013 Credit Facility also contains a commitment fee ranging from 0.25% to 0.40% of unused amounts available for borrowing, with lenders receiving at least a 0.40% fee for six months on any delayed 2013 Term Loan borrowings until initially funded. The interest rate margins on borrowings and the commitment fee are adjustable periodically based upon certain consolidated total leverage ratios. The 2013 Credit Facility requires that the Company maintain certain ratios of funded debt to EBITDA and earnings before interest and taxes (EBIT) to interest expense. The amended Credit Facility also contains other affirmative and negative financial covenants and restrictions, and indebtedness is secured by a pledge of all capital stock and limited liability company interests of the Guarantors, generally on the same terms and conditions as before amendment. Prior to 2013 amendment, interest was based on 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%, and the commitment fee ranged from 0.35% to 0.55% of unused amounts available for borrowing.

2019 Senior Notes and Add-on Offering in 2013—In 2011, the Company completed a private placement offering of 6 3/4% senior notes (the 2019 Senior Notes) in aggregate principal amount of $150,000,000 issued at par, and a subsequent exchange offer for substantially identical notes registered under the Securities Act. In January 2013, the Company completed a private placement add-on offering to the existing 2019 Senior Notes in aggregate principal amount of $100,000,000 issued at 105% of par, and net proceeds after commissions and fees approximated $103,408,000. The proceeds were used to repay $95,000,000 of Credit Facility borrowings, representing all facility borrowings then outstanding, and the remainder was used for general corporate purposes. The Company commenced an exchange offer for substantially identical notes registered under the Securities Act in April 2013. The add-on notes are identical to the existing 2019 Senior Notes with the same terms and conditions, and governed by the same indenture. The 2019 Senior Notes mature in February 2019, and interest payments are due semi-annually on February 1 and August 1. Debt issuance premium and associated deferred loan costs are being amortized over the remaining note term through February 2019. As of March 31, 2013, the 2019 Senior Notes carrying value of $254,816,000 is reported net of unamortized issuance premium of $4,816,000.

2016 Senior Notes and Planned Early Redemption in 2013—In 2009, the Company completed a private placement offering of 8 3/4% senior notes (the 2016 Senior Notes) in aggregate principal amount of $275,000,000 issued at 96.8% of par, and a subsequent exchange offer for substantially identical notes registered under the Securities Act. As of March 31, 2013 and December 31, 2012, the 2016 Senior Notes carrying value of $271,069,000 and $270,758,000 is reported net of unamortized issuance discount of $3,931,000 and $4,242,000, respectively. The 2016 Senior Notes are scheduled to mature in June 2016 and interest payments are due semi-annually on June 1 and December 1. The Company plans to redeem all outstanding 2016 Senior Notes in the second quarter 2013. The Trustee of the notes delivered an irrevocable notice of redemption to note holders on the Company’s behalf on April 15, 2013. Under the notice, the Company is required to redeem all 2016 Senior Notes at a redemption premium of 104.375% of par on or after June 1, 2013 plus accrued interest as provided for under the 2016 Senior Notes Indenture. The Company plans to use borrowings under the 2013 Credit Facility, including Term Loan borrowings, to fund the planned redemption. Also, cash on hand could be used to fund part of the planned redemption, including redemption premium or other transaction costs. Assuming all 2016 Senior Notes are redeemed as of June 1, 2013, we anticipate reflecting a material charge to earnings in the second quarter 2013 for associated redemption premium of $12.0 million, unamortized net deferred loan costs of $2.7 million, unamortized issuance discount of $3.7 million, and settlement payment and transaction costs which presently are undeterminable.

Other Terms and Conditions—The 2013 Credit Facility, 2016 Senior Notes and 2019 Senior Notes contain certain requirements and restrictive financial covenants and limitations on capital expenditures, speedway or other 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 2013 Credit Facility, 2016 Senior Notes Indenture and 2019 Senior Notes Indenture also contain cross-default provisions. The Company was in compliance with all applicable covenants under these debt agreements as of March 31, 2013. See Note 5 to the Consolidated Financial Statements included in the Company’s 2012 Annual Report for additional information on these debt agreements, including dividend, redemption and right of payment provisions.

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 March 31, 2013 and December 31, 2012, their combined carrying values of $4,840,000 and $5,501,000 reflect discounts of $410,000 and $499,000, respectively, based on effective interest rates of 6% and 7%.

Subsidiary Guarantees—Amounts outstanding under the 2013 Credit Facility, 2016 Senior Notes and 2019 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 2019 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
March 31:
 
      2013      2012  

Gross interest costs

   $ 11,092          $ 10,652      

Less: capitalized interest costs

     (36)           (155)     
  

 

 

    

 

 

 

Interest expense

     11,056            10,497      

Interest income

     (146)           (61)     
  

 

 

    

 

 

 

Interest expense, net

   $ 10,910          $ 10,436      
  

 

 

    

 

 

 

Weighted-average interest rate on Credit Facility borrowings

     2.7%         2.8%   

 

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 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
March 31:
 
      2013      2012  

Loss from continuing operations applicable to common stockholders and assumed conversions

   $ (1,333)         $ (118)     
  

 

 

    

 

 

 

Weighted average common shares outstanding

     41,427            41,443      

Dilution effect of assumed conversions:

     

 

Common stock equivalents—stock awards

     11            8      
  

 

 

    

 

 

 

Weighted average common shares outstanding and assumed conversions

     41,438            41,451      
  

 

 

    

 

 

 

Basic loss per share

   $ (0.03)         $ (0.00)     
  

 

 

    

 

 

 

Diluted loss per share

   $ (0.03)         $ (0.00)     
  

 

 

    

 

 

 

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

     941            1,229      

Stock Repurchase Program—The Company’s Board of Directors has 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, 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 months ended March 31, 2013, the Company repurchased 30,000 shares of common stock for $519,000. As of March 31, 2013, the Company could repurchase up to an additional 214,000 shares under the current authorization. As of and through March 31, 2013, treasury stock includes 98,000 shares of common stock delivered to the Company in satisfaction of tax withholding obligations of holders of vested restricted shares issued under our equity compensation plans.

Declaration of Cash Dividends—On February 13, 2013, the Company’s Board of Directors declared a quarterly cash dividend of $0.15 per share of common stock aggregating $6,246,000, which was paid on March 15, 2013 to shareholders of record as of March 1, 2013. On April 16, 2013, the Company’s Board of Directors declared a quarterly cash dividend of $0.15 per share of common stock aggregating approximately $6.2 million payable on June 7, 2013 to shareholders of record as of May 17, 2013. These quarterly cash dividends are being paid using available cash and cash equivalents on hand.

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 March 31, 2013 and December 31, 2012 include $3,586,000 and $3,681,000 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 March 31, 2014, is classified as a noncurrent asset in the accompanying consolidated balance sheet. Changes in the amount due from December 31, 2012 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 $95,000 and $92,000 in the three months ended March 31, 2013 and 2012. Any increases pertain to note receivable arrangements in place before July 30, 2002.

Amounts payable to affiliate at March 31, 2013 and December 31, 2012 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 March 31, 2014.

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 $166,000 and $138,000 in the three months ended March 31, 2013 and 2012. At March 31, 2013 and December 31, 2012, 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 $11,000 and $96,000 in the three months ended March 31, 2013 and 2012. There were no vehicles sold to SAI in the three months ended March 31, 2013 or 2012. Also, SMI Properties sold merchandise to SAI totaling $170,000 and $143,000 in the three months ended March 31, 2013 and 2012. Amounts due from SAI at March 31, 2013 and December 31, 2012 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 $572,000 and $583,000 for the three months ended March 31, 2013 and 2012. At March 31, 2013 and December 31, 2012, approximately $190,000 and $137,000 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 March 31, 2013 and 2012, merchandise purchases approximated $414,000 and $383,000, and merchandise sales and event related commissions approximated $573,000 and $598,000, respectively. At March 31, 2013, net amounts due to MA approximated $304,000, and at December 31, 2012, net amounts due from MA approximated $491,000. These amounts are reflected in current assets and current liabilities as applicable.

The foregoing related party balances as of March 31, 2013 and December 31, 2012, and transactions for the three months ended March 31, 2013 and 2012, are summarized below (in thousands):

 

      2013      2012  

Notes and other receivables

   $ 3,559       $ 4,336   

Amounts payable to affiliates

     2,594         2,594   

Merchandise and vehicle purchases

     425         479   

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

     1,410         1,419   

Rent expense

     166         138   

Interest income

     25         29   

Interest expense

     25         26   

 

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. On July 27, 2012, BNP France filed a motion for judgment on the pleadings. The Court conducted oral argument on October 17, 2012, and the decision is pending. Discovery and motions practice are ongoing in this matter.

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. 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 or restricted stock unit 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 three months ended March 31, 2013 and 2012. All grants under the 2004 Plan are to be settled in shares of common stock, vest 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. Forfeitures in any given year result from differences between the Company’s actual results for the previous year as compared to the defined full year earnings target. The following is a summary of restricted stock and restricted stock units granted, vested and forfeited under the Incentive Compensation Plan during the three months ended March 31, 2013 and 2012 (shares in thousands):

 

     Three Months Ended March 31:
      2013   2012
      Restricted Stock  

Restricted Stock

Units

  Restricted Stock  

Restricted Stock

Units

Outstanding, beginning of period

   60   60   63   63

Granted

   35   35   35   35

Vested

   (24)   (24)   (30)   (17)

Forfeited

   (12)   (12)   (8)   (8)

Outstanding, end of period

   59   59   60   73

In the three months ended March 31, 2013 and 2012, the Company repurchased 25,000 and 17,000 shares of common stock for $418,000 and $267,000 from executive management employees to settle income taxes on 48,000 and 47,000 shares that vested during the period, respectively. An additional 12,320 restricted stock units granted under the Incentive Compensation Plan in 2009 vested on April 21, 2012 and were settled in shares of common stock. Also, 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 three months ended March 31, 2012.

2008 Formula Restricted Stock Plan, Amended and Restated as of April 17, 2012—The 2008 Formula Restricted Stock Plan (the 2008 Formula Plan) is for the benefit of the Company’s outside directors, and is scheduled to terminate in February 2018. On the first business day following each annual meeting, each non-employee director who is then a member of the Board receives a grant of restricted stock consisting of the number of shares equaling $75,000 divided by the average closing sale price for the twenty days immediately preceding the grant date, rounded up to the nearest whole share. 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. The Company awarded 4,167 shares of restricted stock to each of the Company’s four non-employee directors on April 17, 2013. An aggregate of 17,200 shares granted to non-employee directors on April 18, 2012 vested on April 15, 2013, and 15,556 shares granted in 2011 vested on April 16, 2012. All restricted stock awards were granted and vested in accordance with plan provisions.

New 2013 Stock Incentive Plan—The 2004 Plan is scheduled to expire by its terms on February 18, 2014. In February 2013, the Company’s Board of Directors adopted a new 2013 Stock Incentive Plan (the 2013 Plan) which was approved by stockholders at the 2013 Annual Meeting. The 2013 Plan allows the Company, among other things, to continue to provide equity-based incentives to attract and retain key employees, directors and other individuals providing services to the Company. Awards under the 2013 Plan may be in the form of incentive stock options, nonqualified stock options, stock appreciation rights (SARs), restricted stock, restricted stock units and other stock awards. Approval of the 2013 Plan did not amend or modify the 2004 Plan and the Company will continue to have the right to grant awards under the 2004 Plan until its expiration. Approval of the 2013 Plan and termination of the 2004 Plan will not adversely affect rights under any outstanding awards previously granted under the 2004 Plan.

Under the 2013 Plan, 3,500,000 shares of SMI’s common stock will be reserved for issuance, subject to various restrictions and adjustments including the following: (i) if shares subject to award under the 2013 Plan are forfeited, or the award otherwise terminates or is canceled for any reason without the issuance of such shares, those shares will be available for future awards; (ii) no individual may be granted options or SARs aggregating more than 300,000 shares of common stock during any calendar year; (iii) in the case of awards other than options or SARs that are intended to be “performance-based compensation”, no individual may be granted an aggregate of more than 100,000 shares of common stock during any calendar year; and (iv) with respect to any cash-based stock award that is intended to be a performance award, the maximum cash payment that may be paid during any one calendar year to an individual is $10,000,000.

Employee Stock Purchase Plan—No shares were granted to employees under the Employee Stock Purchase Plan for calendar years 2013 or 2012.

 

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 restricted stock or restricted stock units granted in 2013 or 2012 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. No stock options were granted or exercised under the 1994 Stock Option Plan, 2004 Stock Incentive Plan and Formula Stock Option Plan during the three months ended March 31, 2013 or 2012.

Share-based compensation cost for the three months ended March 31, 2013 and 2012 totaled $525,000 and $497,000, before income taxes of $197,000 and $201,000, respectively, and is included in general and administrative expense. There were no capitalized share-based compensation costs at March 31, 2013 or December 31, 2012. As of March 31, 2013, there was approximately $2,588,000 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 1.0 year. As of March 31, 2013, all stock options are vested and there was no unrecognized compensation cost related to stock options granted under the 2004 Plan, the 1994 Plan or the Formula Stock Option Plan.

See Note 11 to the Consolidated Financial Statements in our 2012 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 Notes 1 and 2 to the Consolidated Financial Statements in our 2012 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 SMIP subsidiary non-event motorsports and non-motorsports merchandising, 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 or loss excludes interest, taxes, other income or expense 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 months ended March 31, 2013 and 2012, and as of March 31, 2013 and December 31, 2012 is as follows (in thousands):

 

      Three Months Ended March 31:  
     2013      2012  
      Motorsports
Event
Related
     All
Other
     Consolidated      Motorsports
Event
Related
     All
Other
     Consolidated  

Revenues

   $ 79,024       $ 5,198       $ 84,222       $ 79,508       $ 5,294       $ 84,802   

Depreciation and amortization

     13,680         61         13,741         13,850         66         13,916   

Segment operating income

     8,123         765         8,888         9,260         949         10,209   

Capital expenditures

     2,635         13         2,648         8,647         14         8,661   
      March 31, 2013      December 31, 2012  

Other intangibles

   $ 394,972         —         $ 394,972       $ 394,972         —         $ 394,972   

Goodwill

     138,717         —           138,717         138,717         —           138,717   

Total assets

     1,893,666       $ 26,280         1,919,946         1,852,150       $ 24,963         1,877,113   

The following table reconciles segment operating income above to consolidated loss before income taxes (both from continuing operations) for the three months ended March 31, 2013 and 2012 (in thousands):

 

      Three Months Ended
March 31:
 
      2013     2012  

Total segment operating income from continuing operations

   $ 8,888      $ 10,209   

Adjusted for:

    

Interest expense, net

     (10,910     (10,436

Other (expense) income, net

     (110     46   
  

 

 

   

 

 

 

Consolidated loss from continuing operations before income taxes

   $ (2,132   $ (181 )

 

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. As of December 31, 2012, SMIL owned an interest in one foreign entity owning certain oil and gas mineral rights in Russia, which has been reflected as fully impaired since December 31, 2008 because of significant uncertainties about its economic viability. The Company finalized dissolution of this foreign interest in early 2013 with no resulting financial statement impact. At March 31, 2013 and December 31, 2012, there were no assets, liabilities or outstanding standby letters of credit associated with discontinued operations. The Company has no continuing involvement or ownership interest in these discontinued operations.

During the three months ended March 31, 2013 and 2012, the Company incurred legal fees and other costs associated with efforts to sell or dissolve its remaining foreign investment interests and recover previously reserved receivables (see Note 8 for information on legal proceedings associated with oil and gas activities). No associated income tax benefits have been reflected in any period presented. While the Company plans to continue litigation of the matter to maximize potential recovery value, future legal costs are not expected to be significant. See Note 14 to the Consolidated Financial Statements in our 2012 Annual Report for additional information on historical activities, accounting policies, and uncertainty involving fully reserved receivables associated with these discontinued operations.

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. There were no significant racing schedule changes for the three months ended March 31, 2013 as compared to 2012.

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 Sonoma Raceway, 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. The NASCAR Trust has the ability to significantly influence MA’s operations and results.

As further described in Note 2 to the Consolidated Financial Statements in our 2012 Annual Report, the carrying value of our equity investment in MA was reduced to $0 as of December 31, 2009. Under equity method accounting, we are no longer recording our 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, our first quarter 2013 and 2012 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):

 

      First Quarter  
              2013                      2012          

Net sales

   $ 4,342           $ 6,130       

Gross profit

     1,435             2,241       

Loss from continuing operations

     (1,208)          (400)    

Net loss

     (1,208)           (400)     

Income Taxes—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 2012 Annual Report for additional information on our accounting for income taxes.

The effective income tax rate for the three months ended March 31, 2013 was 37.5%. The Company’s effective income tax rate for the three months ended March 31, 2012 was 34.8%, and 40.4% excluding the negative impact of interest on uncertain tax positions reflected in that period. Income tax liabilities for unrecognized tax benefits approximate $1,004,000 as of March 31, 2013 and December 31, 2012, and are included in other noncurrent liabilities, all of which would favorably impact the Company’s effective tax rate if recognized. Interest and penalties recognized on uncertain tax positions amounted to $18,000 for each of the three months ended March 31, 2013 and 2012. As of March 31, 2013 and December 31, 2012, the Company had $789,000 and $771,000 accrued for the payment of interest and penalties on uncertain tax positions, which is included in other noncurrent liabilities. As of March 31, 2013, 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 2012 by the California Franchise Tax Board, and 2009 through 2012 by all other taxing jurisdictions to which the Company is subject. The Company’s 2011 federal income tax return is under examination by the Internal Revenue Service, which began in March 2013. There was no change or activity for unrecognized tax benefits during the three months ended March 31, 2013 or 2012.

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 March 31, 2013 and 2012 amounted to $1,002,000 and $943,000.

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 $2,599,000 and $2,508,000 in the three months ended March 31, 2013 and 2012. There were no deferred direct-response advertising costs at March 31, 2013 or December 31, 2012.

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.

The following table presents estimated fair values and categorization levels of the Company’s financial instruments as of March 31, 2013 and December 31, 2012 (in thousands):

 

                 March 31, 2013      December 31, 2012  
      Level    Class      Carrying Value      Fair Value      Carrying Value      Fair Value  

Assets

                 

Cash and cash equivalents

   1      R         $  122,052             $  122,052         $  106,408             $  106,408   

Floating rate notes receivable

   2      NR         2,290             2,290         2,385             2,385   

Cash surrender values

   2      NR         4,692             4,692         4,621             4,621   

Liabilities

                 

Floating rate revolving Credit Facility, including Term Loan

   2      NR         —               —           95,000             95,000   

6 3/4% Senior Notes Payable due 2019

   1      NR         254,816             267,500         150,000             159,000   

8 3/4% Senior Notes payable due 2016

   1      NR         271,069             289,781         270,758             292,875   

Other long-term debt

   2      NR         4,840             4,840         5,501             5,501   

 

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.

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 lessee on roadway and pipeline logistics to prevent interference of TMS or lessee 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 $802,000 and $806,000 recognized in the three months ended March 31, 2013 and 2012. Deferred revenue recognizable through December 2013 is reflected as current liabilities in deferred race event and other income.

Recently Issued Accounting Standards—The Financial Accounting Standards Board (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 permits entities to assess qualitative factors when testing indefinite-lived intangible assets for impairment results similar to the goodwill impairment testing guidance in Update 2011-08 “Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment”. 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. 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. 2013-02 “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” which requires entities to report the effects of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if amounts being reclassified are required under US generally accepted accounting principles (GAAP) to be reclassified in entirety to net income. For other than such amounts, entities are required to cross-reference other disclosures required under US GAAP that provide additional information about those amounts. The guidance is effective prospectively for reporting periods beginning after December 15, 2012, and entities are required to comply with this Update for all reporting periods presented, including interim periods. The Company’s adoption had no impact on its financial statements or disclosures as comprehensive income or loss equals net income or loss.

SIGNIFICANT ACCOUNTING POLICIES AND OTHER DISCLOSURES (Tables)

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

 

      First Quarter  
              2013                      2012          

Net sales

   $ 4,342           $ 6,130       

Gross profit

     1,435             2,241       

Loss from continuing operations

     (1,208)          (400)    

Net loss

     (1,208)           (400)     

The following table presents estimated fair values and categorization levels of the Company’s financial instruments as of March 31, 2013 and December 31, 2012 (in thousands):

 

               March 31, 2013      December 31, 2012  
      Level    Class    Carrying Value      Fair Value      Carrying Value      Fair Value  

Assets

                 

Cash and cash equivalents

   1    R    $   122,052           $   122,052       $   106,408           $   106,408   

Floating rate notes receivable

   2    NR      2,290             2,290         2,385             2,385   

Cash surrender values

   2    NR      4,692             4,692         4,621             4,621   

Liabilities

                 

Floating rate revolving Credit Facility, including Term Loan

   2    NR      —               —           95,000             95,000   

6 3/4% Senior Notes Payable due 2019

   1    NR      254,816             267,500         150,000             159,000   

8 3/4% Senior Notes payable due 2016

   1    NR      271,069             289,781         270,758             292,875   

Other long-term debt

   2    NR      4,840             4,840         5,501             5,501   

 

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.

INVENTORIES (Tables)
Inventories

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

 

     March 31,
2013
     December 31,
2012
 

Souvenirs and apparel

   $ 3,523       $ 2,599   

Finished vehicles, parts and accessories

     6,019         5,591   

Micro-lubricant® and other

     706         604   
  

 

 

    

 

 

 

Total

   $ 10,248       $ 8,794   
  

 

 

    

 

 

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

As of March 31, 2013 and December 31, 2012, gross carrying values and accumulated amortization by class of intangible asset are as follows (dollars in thousands):

 

      March 31, 2013      December 31, 2012         
      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       $ (41     59         100       $ (41     59         5-6   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

Total

   $   395,013       $ (41   $   394,972       $   395,013       $ (41   $   394,972      
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    
LONG-TERM DEBT (Tables)
Interest Expense, Net

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

 

      Three Months Ended
March 31:
 
      2013      2012  

Gross interest costs

   $ 11,092          $ 10,652      

Less: capitalized interest costs

     (36)           (155)     
  

 

 

    

 

 

 

Interest expense

     11,056            10,497      

Interest income

     (146)           (61)     
  

 

 

    

 

 

 

Interest expense, net

   $ 10,910          $ 10,436      
  

 

 

    

 

 

 

Weighted-average interest rate on Credit Facility borrowings

     2.7%         2.8%  
PER SHARE AND OTHER EQUITY INFORMATION (Tables)
Basic and Diluted Earnings or Loss Per Share from Continuing Operations

The following schedule reconciles basic and diluted 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
March 31:
 
      2013      2012  

Loss from continuing operations applicable to common stockholders and assumed conversions

   $ (1,333)         $ (118)     
  

 

 

    

 

 

 

Weighted average common shares outstanding

     41,427            41,443      

Dilution effect of assumed conversions:

     

 

Common stock equivalents—stock awards

     11            8      
  

 

 

    

 

 

 

Weighted average common shares outstanding and assumed conversions

     41,438            41,451      
  

 

 

    

 

 

 

Basic loss per share

   $ (0.03)         $ (0.00)     
  

 

 

    

 

 

 

Diluted loss per share

   $ (0.03)         $ (0.00)     
  

 

 

    

 

 

 

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

     941            1,229  
RELATED PARTY TRANSACTIONS (Tables)
Related Party Balances and Transactions

The foregoing related party balances as of March 31, 2013 and December 31, 2012, and transactions for the three months ended March 31, 2013 and 2012, are summarized below (in thousands):

 

      2013      2012  

Notes and other receivables

   $ 3,559       $ 4,336   

Amounts payable to affiliates

     2,594         2,594   

Merchandise and vehicle purchases

     425         479   

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

     1,410         1,419   

Rent expense

     166         138   

Interest income

     25         29   

Interest expense

     25         26  
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 three months ended March 31, 2013 and 2012 (shares in thousands):

 

     Three Months Ended March 31:
      2013   2012
     

Restricted Stock

  Restricted Stock
Units
  Restricted Stock   Restricted Stock
Units

Outstanding, beginning of period

   60   60   63   63

Granted

   35   35   35   35

Vested

   (24)   (24)   (30)   (17)

Forfeited

   (12)   (12)   (8)   (8)

Outstanding, end of period

   59   59   60   73
SEGMENT DISCLOSURES (Tables)

Segment information on continuing operations for the three months ended March 31, 2013 and 2012, and as of March 31, 2013 and December 31, 2012 is as follows (in thousands): 

      Three Months Ended March 31:  
     2013      2012  
      Motorsports
Event
Related
     All
Other
     Consolidated      Motorsports
Event
Related
     All
Other
     Consolidated  

Revenues

   $ 79,024       $ 5,198       $ 84,222       $ 79,508       $ 5,294       $ 84,802   

Depreciation and amortization

     13,680         61         13,741         13,850         66         13,916   

Segment operating income

     8,123         765         8,888         9,260         949         10,209   

Capital expenditures

     2,635         13         2,648         8,647         14         8,661   
      March 31, 2013      December 31, 2012  

Other intangibles

   $ 394,972         —         $ 394,972       $ 394,972         —         $ 394,972   

Goodwill

     138,717         —           138,717         138,717         —           138,717   

Total assets

     1,893,666       $ 26,280         1,919,946         1,852,150       $ 24,963         1,877,113  

The following table reconciles segment operating income above to consolidated loss before income taxes (both from continuing operations) for the three months ended March 31, 2013 and 2012 (in thousands): 

      Three Months Ended
March 31:
 
      2013     2012  

Total segment operating income from continuing operations

   $ 8,888      $ 10,209   

Adjusted for:

    

Interest expense, net

     (10,910     (10,436

Other (expense) income, net

     (110     46   
  

 

 

   

 

 

 

Consolidated loss from continuing operations before income taxes

   $ (2,132   $ (181
  

 

 

   

 

 

 
Description of Business - Additional Information (Detail) (Subsequent Event)
12 Months Ended
Dec. 31, 2013
Event
Dec. 31, 2012
Event
NASCAR
 
 
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
 
 
Number of racing events
24 
24 
NASCAR |
Sprint Cup Series
 
 
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
 
 
Number of racing events
13 
13 
NASCAR |
Nationwide Series
 
 
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
 
 
Number of racing events
11 
11 
NASCAR |
Camping World Trucks Series
 
 
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
 
 
Number of racing events
NASCAR |
K&N Pro Series
 
 
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
 
 
Number of racing events
NASCAR |
Whelen Modified Tour
 
 
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
 
 
Number of racing events
IndyCar Series
 
 
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
 
 
Number of racing events
National Hot Rod Association
 
 
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
 
 
Number of racing events
World of Outlaws
 
 
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
 
 
Number of racing events
Significant Accounting Policies and Other Disclosures - Additional Information (Detail) (USD $)
3 Months Ended 3 Months Ended 12 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Dec. 31, 2012
Dec. 31, 2009
Mar. 31, 2013
Oil and Gas Properties
Mar. 31, 2012
Oil and Gas Properties
Dec. 31, 2011
Oil and Gas Properties
Mar. 31, 2013
Motorsports Authentics
Dec. 31, 2009
Motorsports Authentics
Significant Accounting Policies [Line Items]
 
 
 
 
 
 
 
 
 
Facility naming rights agreement term
10 years 
 
 
 
 
 
 
 
 
Non-controlling interest in joint venture
 
 
 
 
 
 
 
50.00% 
50.00% 
Equity investment at fair value
 
 
 
$ 0 
 
 
 
 
 
Effective income tax rate
37.50% 
34.80% 
 
 
 
 
 
 
 
Effective income tax rate excluding impact of period specific item
 
40.40% 
 
 
 
 
 
 
 
Unrecognized tax benefits
1,004,000 
 
1,004,000 
 
 
 
 
 
 
Unrecognized tax benefits, interest and penalties recognized
18,000 
18,000 
 
 
 
 
 
 
 
Unrecognized tax benefits, interest and penalties accrued
789,000 
 
771,000 
 
 
 
 
 
 
Taxes collected from customers
1,002,000 
943,000 
 
 
 
 
 
 
 
Advertising expense
2,599,000 
2,508,000 
 
 
 
 
 
 
 
Lease term
 
 
 
 
 
 
2 years 
 
 
Other operating revenue
$ 4,981,000 
$ 5,054,000 
 
 
$ 802,000 
$ 806,000 
 
 
 
Summary of Financial Information on Motorsports Authentics (Detail) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Schedule of Equity Method Investments [Line Items]
 
 
Loss from continuing operations
$ (1,333)
$ (118)
Net loss
(1,368)
(146)
Motorsports Authentics
 
 
Schedule of Equity Method Investments [Line Items]
 
 
Net sales
4,342 
6,130 
Gross profit
1,435 
2,241 
Loss from continuing operations
(1,208)
(400)
Net loss
$ (1,208)
$ (400)
Estimated Fair Values and Categorization Levels of Financial Instruments (Detail) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2013
Dec. 31, 2012
Carrying Value |
Level 1 |
Fair Value, Measurements, Recurring
 
 
Assets
 
 
Cash and cash equivalents
$ 122,052 
$ 106,408 
Carrying Value |
Level 1 |
Fair Value, Measurements, Nonrecurring |
Senior Notes Due 2019
 
 
Liabilities
 
 
Senior Notes Payable
254,816 
150,000 
Carrying Value |
Level 1 |
Fair Value, Measurements, Nonrecurring |
Notes Due 2016
 
 
Liabilities
 
 
Senior Notes Payable
271,069 
270,758 
Carrying Value |
Level 2 |
Fair Value, Measurements, Nonrecurring
 
 
Assets
 
 
Floating rate notes receivable
2,290 
2,385 
Cash surrender values
4,692 
4,621 
Liabilities
 
 
Floating rate revolving Credit Facility, including Term Loan
 
95,000 
Other long-term debt
4,840 
5,501 
Fair Value |
Level 1 |
Fair Value, Measurements, Recurring
 
 
Assets
 
 
Cash and cash equivalents
122,052 
106,408 
Fair Value |
Level 1 |
Fair Value, Measurements, Nonrecurring |
Senior Notes Due 2019
 
 
Liabilities
 
 
Senior Notes Payable
267,500 
159,000 
Fair Value |
Level 1 |
Fair Value, Measurements, Nonrecurring |
Notes Due 2016
 
 
Liabilities
 
 
Senior Notes Payable
289,781 
292,875 
Fair Value |
Level 2 |
Fair Value, Measurements, Nonrecurring
 
 
Assets
 
 
Floating rate notes receivable
2,290 
2,385 
Cash surrender values
4,692 
4,621 
Liabilities
 
 
Floating rate revolving Credit Facility, including Term Loan
 
95,000 
Other long-term debt
$ 4,840 
$ 5,501 
Estimated Fair Values and Categorization Levels of Financial Instruments (Parenthetical) (Detail)
Mar. 31, 2013
Dec. 31, 2012
Senior Notes Due 2019
 
 
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 
Notes Due 2016
 
 
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
Mar. 31, 2013
Dec. 31, 2012
Schedule of Inventory [Line Items]
 
 
Souvenirs and apparel
$ 3,523 
$ 2,599 
Finished vehicles, parts and accessories
6,019 
5,591 
Micro-lubricant®and other
706 
604 
Total
$ 10,248 
$ 8,794 
Inventories - Additional Information (Detail) (USD $)
Mar. 31, 2013
Dec. 31, 2012
Schedule of Inventory [Line Items]
 
 
Inventory provisions
$ 4,687,000 
$ 4,757,000 
Goodwill and Other Intangible Assets - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Goodwill And Intangible Assets [Line Items]
 
Goodwill
$ 89.1 
Percentage of estimated fair values exceeded aggregate goodwill carrying values
7.00% 
Gross Carrying Values and Accumulated Amortization by Class of Intangible Asset (Detail) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Dec. 31, 2012
Mar. 31, 2013
Nonamortizable Race Event Sanctioning and Renewal Agreements
Dec. 31, 2012
Nonamortizable Race Event Sanctioning and Renewal Agreements
Mar. 31, 2013
Amortizable Race Event Sanctioning and Renewal Agreements
Dec. 31, 2012
Amortizable Race Event Sanctioning and Renewal Agreements
Mar. 31, 2013
Minimum
Amortizable Race Event Sanctioning and Renewal Agreements
Mar. 31, 2013
Maximum
Amortizable Race Event Sanctioning and Renewal Agreements
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
 
 
 
 
Gross Carrying Value
$ 395,013 
$ 395,013 
$ 394,913 
$ 394,913 
$ 100 
$ 100 
 
 
Accumulated Amortization
(41)
(41)
 
 
(41)
(41)
 
 
Net
$ 394,972 
$ 394,972 
$ 394,913 
$ 394,913 
$ 59 
$ 59 
 
 
Estimated Amortization Period
 
 
 
 
 
 
5 years 
6 years 
Long Term Debt - Additional Information (Detail) (USD $)
3 Months Ended 3 Months Ended 3 Months Ended 3 Months Ended 3 Months Ended 3 Months Ended 3 Months Ended 3 Months Ended
Mar. 31, 2013
Mar. 31, 2013
2012 Credit Facility
Dec. 31, 2012
2012 Credit Facility
Mar. 31, 2013
2012 Credit Facility
Standby Letters of Credit
Mar. 31, 2013
2012 Credit Facility
Minimum
Mar. 31, 2013
2012 Credit Facility
Minimum
Interest rate option one
Mar. 31, 2013
2012 Credit Facility
Minimum
Interest rate option three
Mar. 31, 2013
2012 Credit Facility
Maximum
Mar. 31, 2013
2012 Credit Facility
Maximum
Interest rate option one
Mar. 31, 2013
2012 Credit Facility
Maximum
Interest rate option three
Mar. 31, 2013
2012 Credit Facility
Before Amendment
Interest rate option three
Mar. 31, 2013
2012 Credit Facility
Before Amendment
Interest rate option two
Mar. 31, 2013
2012 Credit Facility
Before Amendment
Minimum
Mar. 31, 2013
2012 Credit Facility
Before Amendment
Minimum
Interest rate option one
Mar. 31, 2013
2012 Credit Facility
Before Amendment
Minimum
Interest rate option three
Mar. 31, 2013
2012 Credit Facility
Before Amendment
Maximum
Mar. 31, 2013
2012 Credit Facility
Before Amendment
Maximum
Interest rate option one
Mar. 31, 2013
2012 Credit Facility
Before Amendment
Maximum
Interest rate option three
Mar. 31, 2013
2012 Credit Facility
Subject to Maintaining Certain Financial Covenants
Mar. 31, 2013
2012 Credit Facility
Term Loan
Mar. 31, 2013
2012 Credit Facility
Term Loan
Minimum
Mar. 31, 2013
2012 Credit Facility
Revolving Credit Facility
Mar. 31, 2013
2012 Credit Facility
Revolving Credit Facility
Standby Letters of Credit
Mar. 31, 2013
2012 Credit Facility
Revolving Credit Facility
Swingline Loans
Mar. 31, 2013
2012 Credit Facility
Revolving Credit Facilities
Mar. 31, 2013
2019 Senior Notes
Jan. 31, 2013
2019 Senior Notes
Mar. 31, 2013
2019 Senior Notes
Minimum
Mar. 31, 2013
2016 Senior Notes
Dec. 31, 2012
2016 Senior Notes
Dec. 31, 2009
2016 Senior Notes
Mar. 31, 2013
2016 Senior Notes
Twelve months period beginning June 1, 2013
Maximum
Mar. 31, 2013
Non-Interest Bearing Debt Obligation One
Installment
Mar. 31, 2013
Non-Interest Bearing Debt Obligation Two
Installment
Mar. 31, 2013
Non-Interest Bearing Debt Obligation
Dec. 31, 2012
Non-Interest Bearing Debt Obligation
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit Facility, term
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5 years 
 
5 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit Facility, maximum borrowing capacity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 250,000,000 
 
$ 100,000,000 
$ 50,000,000 
$ 10,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
Credit Facility, maturity period
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6 months 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit Facility, maturity date
 
2018-02 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit Facility, aggregate additional borrowing capacity
 
100,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit Facility, maximum dividends payments and repurchases of securities permitted
 
50,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
75,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit Facility, maximum annual capital expenditures
 
75,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit Facility, quarterly principal payments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,750,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit Facility, percentage of initial drawn amount required as Quarterly payments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5.00% 
 
 
 
 
 
 
 
 
 
 
 
Credit Facility, amount required to be paid for maximum drawn amount per 12 month period
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12,500,000 
 
 
 
 
 
 
 
 
 
 
 
Credit Facility, repayment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
95,000,000 
 
 
 
 
 
95,000,000 
 
 
 
 
 
 
 
 
 
 
Credit Facility, outstanding borrowings
 
95,000,000 
887,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit Facility, interest rate, spread over LIBOR
 
 
 
 
 
1.25% 
 
 
2.00% 
 
1.00% 
 
 
1.75% 
 
 
2.75% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit Facility, interest rate, additional spread
 
 
 
 
 
 
0.25% 
 
 
1.00% 
 
 
 
 
0.75% 
 
 
1.75% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit Facility, commitment fee
 
 
 
 
0.25% 
 
 
0.40% 
 
 
 
 
0.35% 
 
 
0.55% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit Facility, interest rate, spread over the greater of Bank of America's prime rate and Federal Funds rate
 
 
 
 
 
 
 
 
 
 
 
0.50% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Senior notes, interest rate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6.75% 
 
 
8.75% 
 
 
 
 
 
 
 
Senior notes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
150,000,000 
100,000,000 
254,816,000 
271,069,000 
270,758,000 
275,000,000 
 
 
 
 
 
Senior notes, net proceeds after commission
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
103,408,000 
 
 
 
 
 
 
 
 
 
 
Senior notes, offering price as percentage of par
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
105.00% 
 
 
 
 
96.80% 
 
 
 
 
 
Debt obligation, unamortized premium
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,816,000 
 
 
 
 
 
 
 
 
 
 
Debt obligation, unamortized discount
3,700,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,931,000 
4,242,000 
 
 
 
 
410,000 
499,000 
Senior notes, maturity year