SPEEDWAY MOTORSPORTS INC, 10-Q filed on 8/5/2013
Quarterly Report
Document And Entity Information
6 Months Ended
Jun. 30, 2013
Aug. 2, 2013
Document and Entity Information [Abstract]
 
 
Entity Registrant Name
SPEEDWAY MOTORSPORTS INC 
 
Document Type
10-Q 
 
Current Fiscal Year End Date
--12-31 
 
Entity Common Stock, Shares Outstanding
 
41,403,053 
Amendment Flag
false 
 
Entity Central Index Key
0000934648 
 
Entity Current Reporting Status
Yes 
 
Entity Voluntary Filers
No 
 
Entity Filer Category
Accelerated Filer 
 
Entity Well-known Seasoned Issuer
No 
 
Document Period End Date
Jun. 30, 2013 
 
Document Fiscal Year Focus
2013 
 
Document Fiscal Period Focus
Q2 
 
CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2013
Dec. 31, 2012
Current Assets:
 
 
Cash and cash equivalents
$ 120,289 
$ 106,408 
Accounts and notes receivable, net
58,716 
36,382 
Prepaid and refundable income taxes
 
6,125 
Inventories, net
9,443 
8,794 
Prepaid expenses
3,941 
3,552 
Deferred income taxes
741 
741 
Total Current Assets
193,130 
162,002 
Notes and Other Receivables:
 
 
Affiliates
3,490 
3,681 
Other
1,750 
1,493 
Other Assets
29,482 
27,830 
Property and Equipment, Net
1,126,139 
1,148,418 
Other Intangible Assets, Net
394,972 
394,972 
Goodwill (Note 4)
49,680 
138,717 
Total
1,798,643 
1,877,113 
Current Liabilities:
 
 
Current maturities of long-term debt
14,538 
17,709 
Accounts payable
18,993 
10,887 
Deferred race event and other income, net
70,113 
58,492 
Accrued income taxes
4,508 
 
Accrued interest
7,458 
6,231 
Accrued expenses and other current liabilities
20,576 
20,351 
Total Current Liabilities
136,186 
113,670 
Long-term Debt (Note 5)
494,240 
503,550 
Payable to Affiliate
2,594 
2,594 
Deferred Income, Net
7,638 
9,015 
Deferred Income Taxes
377,424 
385,736 
Other Liabilities
4,703 
4,672 
Total Liabilities
1,022,785 
1,019,237 
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 – 41,414,000 in 2013 and 41,433,000 in 2012
453 
453 
Additional Paid-in Capital
248,114 
246,978 
Retained Earnings
615,088 
696,727 
Treasury Stock at cost, shares – 3,917,000 in 2013 and 3,830,000 in 2012
(87,797)
(86,282)
Total Stockholders' Equity
775,858 
857,876 
Total
$ 1,798,643 
$ 1,877,113 
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parentheticals) (USD $)
Jun. 30, 2013
Dec. 31, 2012
Preferred stock par value (in Dollars per share)
$ 0.10 
$ 0.10 
Preferred stock, shares authorized (in Shares)
3,000,000 
3,000,000 
Preferred stock, shares issued (in Shares)
Common stock, par value (in Dollars per share)
$ 0.01 
$ 0.01 
Commons stock, shares authorized (in Shares)
200,000,000 
200,000,000 
Common Stock, shares issued (in Shares)
41,414,000 
41,433,000 
Common Stock, shares outstanding (in Shares)
41,414,000 
41,433,000 
Treasury Stock at cost, shares (in Shares)
3,917,000 
3,830,000 
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $)
Share data in Thousands, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Revenues:
 
 
 
 
Admissions
$ 34,194,000 
$ 39,018,000 
$ 55,950,000 
$ 61,487,000 
Event related revenue
53,495,000 
55,667,000 
77,284,000 
80,369,000 
NASCAR broadcasting revenue
80,712,000 
78,040,000 
111,151,000 
107,473,000 
Other operating revenue
8,362,000 
8,298,000 
16,600,000 
16,496,000 
Total Revenues
176,763,000 
181,023,000 
260,985,000 
265,825,000 
Expenses and Other:
 
 
 
 
Direct expense of events
33,739,000 
34,532,000 
48,948,000 
49,521,000 
NASCAR purse and sanction fees
48,432,000 
47,191,000 
67,718,000 
65,946,000 
Other direct operating expense
5,286,000 
5,083,000 
10,267,000 
10,137,000 
General and administrative
23,882,000 
24,453,000 
45,999,000 
46,332,000 
Depreciation and amortization
13,822,000 
14,093,000 
27,563,000 
28,009,000 
Interest expense, net
9,241,000 
10,240,000 
20,151,000 
20,676,000 
Impairment of goodwill (Note 4)
89,037,000 
 
89,037,000 
 
Loss on early debt redemption and refinancing (Note 5)
18,467,000 
 
18,467,000 
 
Other expense (income), net
133,000 
(49,000)
243,000 
(95,000)
Total Expenses and Other
242,039,000 
135,543,000 
328,393,000 
220,526,000 
(Loss) Income from Continuing Operations Before Income Taxes
(65,276,000)
45,480,000 
(67,408,000)
45,299,000 
Provision for Income Taxes
(2,508,000)
(18,519,000)
(1,709,000)
(18,456,000)
(Loss) Income from Continuing Operations
(67,784,000)
26,961,000 
(69,117,000)
26,843,000 
Loss from Discontinued Operation
(27,000)
(11,000)
(62,000)
(39,000)
Net (Loss) Income
$ (67,811,000)
$ 26,950,000 
$ (69,179,000)
$ 26,804,000 
Basic (Loss) Income Per Share:
 
 
 
 
Continuing Operations (in Dollars per share)
$ (1.64)
$ 0.65 
$ (1.67)
$ 0.65 
Discontinued Operation (in Dollars per share)
$ 0.00 
$ 0.00 
$ 0.00 
$ 0.00 
Net (Loss) Income (in Dollars per share)
$ (1.64)
$ 0.65 
$ (1.67)
$ 0.65 
Weighted Average Shares Outstanding (in Shares)
41,424 
41,451 
41,426 
41,447 
Diluted (Loss) Income Per Share:
 
 
 
 
Continuing Operations (in Dollars per share)
$ (1.64)
$ 0.65 
$ (1.67)
$ 0.65 
Discontinued Operation (in Dollars per share)
$ 0.00 
$ 0.00 
$ 0.00 
$ 0.00 
Net (Loss) Income (in Dollars per share)
$ (1.64)
$ 0.65 
$ (1.67)
$ 0.65 
Weighted Average Shares Outstanding (in Shares)
41,441 
41,459 
41,439 
41,455 
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited) (USD $)
In Thousands, except Share data
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Treasury Stock [Member]
Total
Balance, January 1, 2013 at Dec. 31, 2012
$ 453 
$ 246,978 
$ 696,727 
$ (86,282)
$ 857,876 
Balance, January 1, 2013 (in Shares) at Dec. 31, 2012
41,433,000 
 
 
 
 
Net loss
 
 
(69,179)
 
(69,179)
Share-based compensation
 
1,080 
 
 
1,080 
Share-based compensation (in Shares)
64,000 
 
 
 
 
Exercise of stock options
 
56 
 
 
56 
Exercise of stock options (in Shares)
3,000 
 
 
 
15.83 
Quarterly cash dividends of $0.15 per share of common stock
 
 
(12,460)
 
(12,460)
Repurchases of common stock
 
 
 
(1,515)
(1,515)
Repurchases of common stock (in Shares)
(86,000)
 
 
 
 
Balance, June 30, 2013 at Jun. 30, 2013
$ 453 
$ 248,114 
$ 615,088 
$ (87,797)
$ 775,858 
Balance, June 30, 2013 (in Shares) at Jun. 30, 2013
41,414,000 
 
 
 
 
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited) (Parentheticals) (Common Stock [Member], USD $)
6 Months Ended
Jun. 30, 2013
Common Stock [Member]
 
Quarterly cash dividends, per share of common stock (in Dollars per share)
$ 0.15 
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $)
6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Cash Flows from Operating Activities:
 
 
Net (loss) income
$ (69,179,000)
$ 26,804,000 
Loss from discontinued operation, net of tax
62,000 
39,000 
Cash used by operating activities of discontinued operation
(62,000)
(39,000)
Adjustments to reconcile (loss) income from continuing operations to net cash provided by operating activities:
 
 
Impairment of goodwill
89,037,000 
 
Loss on early debt redemption and refinancing, non-cash
6,386,000 
 
Deferred loan cost amortization
1,361,000 
1,252,000 
Interest expense accretion of debt discount and premium, net
294,000 
872,000 
Depreciation and amortization
27,563,000 
28,009,000 
Amortization of deferred income
(3,094,000)
(3,087,000)
Deferred income tax provision
(8,275,000)
10,584,000 
Share-based compensation
1,080,000 
969,000 
Changes in operating assets and liabilities:
 
 
Accounts and notes receivable
(22,889,000)
(22,130,000)
Prepaid refundable and accrued income taxes
10,633,000 
7,315,000 
Inventories
(649,000)
(1,109,000)
Prepaid expenses
(389,000)
(127,000)
Accounts payable
7,862,000 
10,820,000 
Deferred race event and other income
13,226,000 
13,398,000 
Accrued interest
1,227,000 
(17,000)
Accrued expenses and other liabilities
515,000 
(763,000)
Deferred income
138,000 
1,217,000 
Other assets and liabilities
(12,000)
88,000 
Net Cash Provided By Operating Activities
54,835,000 
74,095,000 
Cash Flows from Financing Activities:
 
 
Borrowings under long-term debt
355,000,000 
 
Principal payments on long-term debt
(371,500,000)
(19,000,000)
Payment of debt refinancing and amendment costs
(5,779,000)
 
Dividend payments on common stock
(12,460,000)
(12,461,000)
Exercise of common stock options
56,000 
 
Repurchases of common stock
(1,515,000)
(1,392,000)
Net Cash Used By Financing Activities
(36,198,000)
(32,853,000)
Cash Flows from Investing Activities:
 
 
Payments for capital expenditures
(5,118,000)
(17,566,000)
Proceeds from sales of property and equipment
64,000 
 
Increase in other non-current assets
 
(30,000)
Repayment of notes and other receivables
298,000 
128,000 
Net Cash Used By Investing Activities
(4,756,000)
(17,468,000)
Net Increase In Cash and Cash Equivalents
13,881,000 
23,774,000 
Cash and Cash Equivalents at Beginning of Period
106,408,000 
87,368,000 
Cash and Cash Equivalents at End of Period
120,289,000 
111,142,000 
Supplemental Cash Flow Information:
 
 
Cash paid for interest, net of amounts capitalized
19,185,000 
20,825,000 
Cash paid for income taxes
600,000 
600,000 
Increase in accounts payable for capital expenditures
244,000 
3,308,000 
Increase in deferred income for exchange of property and equipment
 
$ 1,247,000 
Note 1 - Description Of Business
Nature of Operations [Text Block]

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.


Note 2 - Significant Accounting Policies And Other Disclosures
Significant Accounting Policies And Other Disclosures [Text Block]

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 ReportingThe 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 and six months ended June 30, 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.


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 second quarter and year-to-date 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):


   

Second Quarter

   

Year-to-Date

 
   

2013

   

2012

   

2013

   

2012

 

Net sales

  $ 10,650     $ 10,997     $ 14,992     $ 17,127  

Gross profit

    4,537       4,958       5,972       7,199  

Income from continuing operations

    1,463       1,632       255       1,232  

Net income

    1,463       1,632       255       1,232  

Income TaxesThe 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 and six months ended June 30, 2013 was 37.1%, excluding the negative impact of recording tax benefits of approximately $2.3 million related to the 2013 goodwill impairment charge of $89.0 million (a significant portion had no tax benefit) as further described in Note 4 and a one-time benefit of state income tax restructuring. The Company’s consolidated financial statements for the three months ended June 30, 2013 reflect a one-time tax benefit, decreasing income tax expense and deferred income taxes, of approximately $4.1 million resulting from strategic state tax restructuring in the first quarter 2013 which was effective January 1, 2013. Although this benefit should have been recorded in the first quarter 2013, the Company believes the impact was not material to the prior or current quarter. The effective income tax rate for the three and six months ended June 30, 2012 was 40.7%. Income tax liabilities for unrecognized tax benefits approximate $1,004,000 as of June 30, 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 $19,000 for each of the three months ended June 30, 2013 and 2012, and $37,000 for each of the six months ended June 30, 2013 and 2012. As of June 30, 2013 and December 31, 2012, the Company had $807,000 and $771,000 accrued for the payment of interest and penalties on uncertain tax positions, which is included in other noncurrent liabilities. As of June 30, 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 and six months ended June 30, 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 June 30, 2013 and 2012 amounted to $1,521,000 and $1,602,000, and for the six months ended June 30, 2013 and 2012 amounted to $2,523,000 and $2,545,000.


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 $5,996,000 and $6,848,000 for the three months ended June 30, 2013 and 2012, and $8,595,000 and $9,356,000 for the six months ended June 30, 2013 and 2012. There were no deferred direct-response advertising costs at June 30, 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 June 30, 2013 and December 31, 2012 (in thousands):


             

June 30, 2013

   

December 31, 2012

 
   

Level

 

Class

 

Carrying Value

   

Fair Value

   

Carrying Value

   

Fair Value

 

Assets

                                         

Cash and cash equivalents

    1  

R

  $ 120,289     $ 120,289     $ 106,408     $ 106,408  

Floating rate notes receivable

    2  

NR

    2,195       2,195       2,385       2,385  

Cash surrender values

    2  

NR

    4,763       4,763       4,621       4,621  
                                           

Liabilities

                                         

Floating rate revolving Credit Facility, including Term Loan

    2  

NR

    250,000       250,000       95,000       95,000  

6 ¾% Senior Notes Payable due 2019

    1  

NR

    254,610       262,500       150,000       159,000  

8 ¾% Senior Notes payable previously due 2016 (Note 5)

    1  

NR

                270,758       292,875  

Other long-term debt

    2  

NR

    4,168       4,168       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 $803,000 and $801,000 recognized in the three months ended June 30, 2013 and 2012, and $1,605,000 and $1,607,000 recognized in the six months ended June 30, 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 now applies this guidance to its 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.


The FASB issued Accounting Standards Update No. 2013-11 “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” whereby an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent those three items are not available at the reporting date under tax law of applicable jurisdictions to settle additional income taxes that would result from the disallowance of a tax position or such tax law does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and not combined with deferred tax assets. The assessment of whether deferred tax assets are available is based on unrecognized tax benefits and deferred tax assets existing at the reporting date, and should be made presuming disallowance of associated tax positions at that date. The guidance is effective for fiscal years and interim periods beginning after December 15, 2013, applies prospectively to all unrecognized tax benefits existing at the effective date, and does not require new recurring disclosures. Early and retrospective adoption is permitted. The Company is currently evaluating the potential impact that adoption may have on its financial statements.


Note 3 - Inventories
Inventory Disclosure [Text Block]

3. INVENTORIES


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


   

June 30,

2013

   

December 31,

2012

 

Souvenirs and apparel

  $ 3,060     $ 2,599  

Finished vehicles, parts and accessories

    5,505       5,591  

Micro-lubricant® and other

    878       604  

Total

  $ 9,443     $ 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 June 30, 2013 and December 31, 2012, inventories reflect provisions of $4,492,000 and $4,757,000.


Note 4 - Goodwill And Other Intangible Assets
Goodwill and Intangible Assets Disclosure [Text Block]

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.


Annual Assessment, Impairment of Goodwill—The Company evaluates goodwill and other intangible assets for possible impairment annually in the second quarter, or when events or circumstances indicate possible impairment may have occurred. 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. The inputs for measuring fair value are considered "Level 3" or unobservable inputs that are not corroborated by market data under applicable fair value authoritative guidance, as quoted market prices are not available. Management's latest annual assessment in the second quarter 2013, based predominately on management's best estimate of future discounted operating cash flows and profitability for all reporting units, 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 (NHMS and KyS acquired in 2008). 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 growth 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 multi-year contracts beginning in 2015.


As previously reported in our 2012 Annual Report and first quarter 2013 Form 10-Q, based on our 2012 annual assessment, the estimated fair values for reporting units NHMS and KyS exceeded their carrying values with associated risk of failing step one of impairment testing. The 2013 annual evaluation found the carrying values for NHMS and KyS exceeded estimated fair value reflecting lowered estimated future cash flows because the economic recovery has been slower and weaker than previous forecasts, and lower than anticipated revenues for certain 2013 major racing events at NHMS and KyS, further reducing visibility on profitability recovery. As such, a non-cash impairment charge of $89,037,000, before income tax benefits of $2,341,000, was reflected in the second quarter 2013 to reduce goodwill related to NHMS and KyS to estimated fair value of $0. Of that charge, goodwill for NHMS of $82,725,000 originated upon recording deferred tax liabilities associated with race date intangibles established under purchase method accounting rules over and above NHMS’s net cash purchase price of $330.1 million paid in 2008. Those accounting rules required establishing such deferred tax liabilities assuming the Company would ultimately sell NHMS assets, and not stock, for tax reporting purposes. Those accounting rules prohibit elimination or adjustment notwithstanding such ultimate payment of taxes was, and still is, believed unlikely and that no sale is being contemplated. The impairment does not pertain to or affect the underlying value of our race date intangibles. The 2013 charge and associated operations are included in our "motorsports event related" reporting segment (see Note 10).


Management believes the Company’s operational and cash flow forecasts support its conclusions. Management’s latest annual impairment assessment indicated no other impairment of goodwill or other intangible assets has occurred through and as of June 30, 2013. 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 our future financial condition or results of operations. The evaluations are subjective and based on conditions, trends and assumptions existing at the time of evaluation.


Changes in the gross carrying value of other intangible assets and goodwill during the six months ended June 30, 2013 are as follows (in thousands):


   

Other Intangible Assets

   

Goodwill

 

Balance, beginning of period

  $ 395,013     $ 138,717  

Increase from acquisitions

 

   

 

Decrease from impairment charges

 

      (89,037 )

Balance, end of period

  $ 395,013     $ 49,680  

At June 30, 2013, the carrying amounts for goodwill and other intangible assets include accumulated impairments of $146.2 million and $3.3 million, respectively. As of June 30, 2013 and December 31, 2012, gross carrying values and accumulated amortization by class of intangible asset are as follows (dollars in thousands):


   

June 30, 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            

Note 5 - Long-term Debt
Long-term Debt [Text Block]

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 redeemed 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 Term Loan); (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 based on 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, and borrowed $250,000,000 under the Term Loan to fund the redemption of the 2016 Senior Notes in the second quarter 2013. At June 30, 2013 and December 31, 2012, outstanding borrowings under the Credit Facility were $250,000,000 and $95,000,000 (all Term Loan borrowings). At June 30, 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. 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 ¾% 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 completed an exchange offer for substantially identical notes registered under the Securities Act in the second quarter 2013. The add-on notes are identical to the existing 2019 Senior Notes with the same terms and conditions, and are 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 June 30, 2013, the 2019 Senior Notes carrying value of $254,610,000 includes unamortized issuance premium of $4,610,000.


Early Redemption of 2016 Senior Notes in 2013— Effective June 1, 2013, the Company redeemed all outstanding 8 ¾% senior notes (the 2016 Senior Notes) in aggregate principal amount of $275,000,000 at 104.375% of par plus accrued interest. The 2016 Senior Notes originally issued at 96.8% of par were scheduled to mature in June 2016, with interest payments due June 1 and December 1, and had unamortized issuance discount of $4,242,000 at December 31, 2012. The Company used Term Loan borrowings of $250,000,000 and cash on hand of $37,081,000 to fund the redemption, including redemption premium and transaction costs. The second quarter 2013 loss on early debt redemption and refinancing represents a charge to earnings of $18,467,000, before income taxes of approximately $6.8 million, for associated redemption premium, unamortized net deferred loan costs and issuance discount, and transaction costs.


Other Terms and Conditions—The 2013 Credit Facility 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 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 June 30, 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 June 30, 2013 and December 31, 2012, their combined carrying values of $4,168,000 and $5,501,000 reflect discounts of $332,000 and $499,000, respectively, based on effective interest rates of 6% and 7%.


Subsidiary Guarantees—Amounts outstanding under the 2013 Credit Facility 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

June 30:

   

Six Months Ended

June 30:

 
   

2013

   

2012

   

2013

   

2012

 

Gross interest costs

  $ 9,409     $ 10,597     $ 20,501     $ 21,249  

Less: capitalized interest costs

    (53

)

    (286

)

    (89

)

    (441

)

Interest expense

    9,356       10,311       20,412       20,808  

Interest income

    (115

)

    (71

)

    (261

)

    (132

)

Interest expense, net

  $ 9,241     $ 10,240     $ 20,151     $ 20,676  

Weighted-average interest rate on Credit Facility borrowings

    2.2

%

    2.7

%

    2.3

%

    2.8

%


Note 6 - Per Share And Other Equity Information
Stockholders Equity And Earnings Per Share [Text Block]

6. PER SHARE AND OTHER EQUITY INFORMATION 


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


   

Three Months Ended

June 30:

   

Six Months Ended

June 30:

 
   

2013

   

2012

   

2013

   

2012

 

(Loss) income from continuing operations applicable to common stockholders and assumed conversions

  $ (67,784

)

  $ 26,961     $ (69,117

)

  $ 26,843  
                                 

Weighted average common shares outstanding

    41,424       41,451       41,426       41,447  

Dilution effect of assumed conversions:

                               

Common stock equivalents—stock awards

    17       8       13       8  

Weighted average common shares outstanding and assumed conversions

    41,441       41,459       41,439       41,455  
                                 
                                 

Basic (loss) earnings per share

  $ (1.64

)

  $ 0.65     $ (1.67

)

  $ 0.65  

Diluted (loss) earnings per share

  $ (1.64

)

  $ 0.65     $ (1.67

)

  $ 0.65  

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

    840       1,033       891       1,037  

Stock Repurchase ProgramThe 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 and six months ended June 30, 2013, the Company repurchased 32,000 and 62,000 shares of common stock for $578,000 and $1,097,000. As of June 30, 2013, the Company could repurchase up to an additional 182,000 shares under the current authorization. As of and through June 30, 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—To date in 2013, the Company’s Board of Directors has approved the following quarterly cash dividends on common stock, which are being paid using available cash and cash equivalents on hand (in thousands except per share amounts):


Declaration date

 

February 13, 2013

   

April 16, 2013

   

July 18, 2013

 

Record date

 

March 1, 2013

   

May 17, 2013

   

August 16, 2013

 

Paid or payable to shareholders 

 

March 15, 2013

   

June 7, 2013

   

September 6, 2013

 

Aggregate quarterly cash dividend

 

$6,246

   

$6,214

   

Approximately $6,200

 

Dividend per common share

 

$0.15

   

$0.15

   

$0.15

 

Note 9 - Stock Compensation Plans
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

9. STOCK COMPENSATION PLANS   


2004 Stock Incentive Plan, Amended and Restated as of February 10, 2009Awards 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 six months ended June 30, 2013 and 2012. To date, all grants under the 2004 Plan are to be settled in shares of common stock, vest in equal installments over three years or after 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. In the six months ended June 30, 2013 and 2012, the Company repurchased 25,000 and 22,000 shares of common stock for $418,000 and $359,000 from executive management employees to settle income taxes on 48,000 and 60,000 shares that vested during the period, respectively. 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 six months ended June 30, 2012.


The following is a summary of restricted stock and restricted stock units granted, vested and forfeited under the Incentive Compensation Plan during the six months ended June 30, 2013 and 2012 (shares in thousands):


   

Six Months Ended June 30:

 
   

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 )     (30 )

Forfeited

    (12 )     (12 )     (8 )     (8 )

Outstanding, end of period

    59       59       60       60  

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 have been 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 under the 1994 Stock Option Plan, 2004 Stock Incentive Plan or Formula Stock Option Plan during the three and six months ended June 30, 2013 or 2012. Options to purchase 3,500 shares of common stock at $15.83 per share granted under the 2004 Stock Incentive Plan were exercised by employees during the three and six months ended June 30, 2013. No stock options were exercised during the three or six months ended June 30, 2012.


Share-based compensation cost for the three months ended June 30, 2013 and 2012 totaled $555,000 and $472,000, before income taxes of $206,000 and $192,000, and for the six months ended June 30, 2013 and 2012 totaled $1,080,000 and $969,000, before income taxes of $400,000 and $395,000, respectively, and is included in general and administrative expense. There were no capitalized share-based compensation costs at June 30, 2013 or December 31, 2012. As of June 30, 2013, there was approximately $2,322,000 of total unrecognized compensation cost related to non-vested restricted stock and restricted stock units granted under the 2004 Plan and the 2008 Formula Plan that is expected to be recognized over a weighted average period of 0.9 year. As of June 30, 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.


Note 10 - Segment Disclosures
Segment Reporting Disclosure [Text Block]

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 and six months ended June 30, 2013 and 2012, and as of June 30, 2013 and December 31, 2012 is as follows (in thousands):


   

Three Months Ended June 30:

 
   

2013

   

2012

 
   

Motorsports

Event

Related

   

All

Other

   

Consolidated

   

Motorsports

Event

Related

   

All

Other

   

Consolidated

 

Revenues

  $ 171,592     $ 5,171     $ 176,763     $ 175,954     $ 5,069     $ 181,023  

Depreciation and amortization

    13,766       56       13,822       14,032       61       14,093  

Impairment of goodwill (Note 4)

    89,037    

      89,037    

   

   

 

Segment operating (loss) income

    (38,440

)

    1,005       (37,435

)

    54,591       1,080       55,671  

Capital expenditures

   

     

     

     

     

     

 

   

Six Months Ended June 30:

 
   

2013

   

2012

 
   

Motorsports

Event

Related

   

All

Other

   

Consolidated

   

Motorsports

Event

Related

   

All

Other

   

Consolidated

 

Revenues

  $ 250,616     $ 10,369     $ 260,985     $ 255,462     $ 10,363     $ 265,825  

Depreciation and amortization

    27,446       117       27,563       27,882       127       28,009  

Impairment of goodwill (Note 4)

    89,037    

      89,037    

   

   

 

Segment operating (loss) income

    (30,317

)

    1,770       (28,547

)

    63,851       2,029       65,880  

Capital expenditures

    5,100       18       5,118       17,501       65       17,566  

   

June 30, 2013

   

December 31, 2012

 

Other intangibles

  $ 394,972      

    $ 394,972     $ 394,972      

    $ 394,972  

Goodwill intangibles

    49,680    

      49,680       138,717    

      138,717  

Total assets

    1,772,582     $ 26,061       1,798,643       1,852,150     $ 24,963       1,877,113  

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


   

Three Months Ended

June 30:

   

Six Months Ended

June 30:

 
   

2013

   

2012

   

2013

   

2012

 

Total segment operating (loss) income from continuing operations

  $ (37,435

)

  $ 55,671     $ (28,547

)

  $ 65,880  

Adjusted for:

                               

Interest expense, net

    (9,241

)

    (10,240

)

    (20,151

)

    (20,676

)

Loss on early debt redemption and refinancing (Note 5)

    (18,467

)

 

      (18,467

)

 

 

Other (expense) income, net

    (133

)

    49       (243

)

    95  

Consolidated (loss) income from continuing operations before income taxes

  $ (65,276

)

  $ 45,480     $ (67,408

)

  $ 45,299  

Note 11 - Discontinued Oil And Gas Operations
Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

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 June 30, 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 and six months ended June 30, 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.


Accounting Policies, by Policy (Policies)

Quarterly ReportingThe 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 and six months ended June 30, 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

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 second quarter and year-to-date 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):

Income TaxesThe 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 and six months ended June 30, 2013 was 37.1%, excluding the negative impact of recording tax benefits of approximately $2.3 million related to the 2013 goodwill impairment charge of $89.0 million (a significant portion had no tax benefit) as further described in Note 4 and a one-time benefit of state income tax restructuring. The Company’s consolidated financial statements for the three months ended June 30, 2013 reflect a one-time tax benefit, decreasing income tax expense and deferred income taxes, of approximately $4.1 million resulting from strategic state tax restructuring in the first quarter 2013 which was effective January 1, 2013. Although this benefit should have been recorded in the first quarter 2013, the Company believes the impact was not material to the prior or current quarter. The effective income tax rate for the three and six months ended June 30, 2012 was 40.7%. Income tax liabilities for unrecognized tax benefits approximate $1,004,000 as of June 30, 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 $19,000 for each of the three months ended June 30, 2013 and 2012, and $37,000 for each of the six months ended June 30, 2013 and 2012. As of June 30, 2013 and December 31, 2012, the Company had $807,000 and $771,000 accrued for the payment of interest and penalties on uncertain tax positions, which is included in other noncurrent liabilities. As of June 30, 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 and six months ended June 30, 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.

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 $5,996,000 and $6,848,000 for the three months ended June 30, 2013 and 2012, and $8,595,000 and $9,356,000 for the six months ended June 30, 2013 and 2012. There were no deferred direct-response advertising costs at June 30, 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 June 30, 2013 and December 31, 2012 (in thousands):


             

June 30, 2013

   

December 31, 2012

 
   

Level

 

Class

 

Carrying Value

   

Fair Value

   

Carrying Value

   

Fair Value

 

Assets

                                         

Cash and cash equivalents

    1  

R

  $ 120,289     $ 120,289     $ 106,408     $ 106,408  

Floating rate notes receivable

    2  

NR

    2,195       2,195       2,385       2,385  

Cash surrender values

    2  

NR

    4,763       4,763       4,621       4,621  
                                           

Liabilities

                                         

Floating rate revolving Credit Facility, including Term Loan

    2  

NR

    250,000       250,000       95,000       95,000  

6 ¾% Senior Notes Payable due 2019

    1  

NR

    254,610       262,500       150,000       159,000  

8 ¾% Senior Notes payable previously due 2016 (Note 5)

    1  

NR

                270,758       292,875  

Other long-term debt

    2  

NR

    4,168       4,168       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 $803,000 and $801,000 recognized in the three months ended June 30, 2013 and 2012, and $1,605,000 and $1,607,000 recognized in the six months ended June 30, 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 now applies this guidance to its 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.


The FASB issued Accounting Standards Update No. 2013-11 “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” whereby an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent those three items are not available at the reporting date under tax law of applicable jurisdictions to settle additional income taxes that would result from the disallowance of a tax position or such tax law does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and not combined with deferred tax assets. The assessment of whether deferred tax assets are available is based on unrecognized tax benefits and deferred tax assets existing at the reporting date, and should be made presuming disallowance of associated tax positions at that date. The guidance is effective for fiscal years and interim periods beginning after December 15, 2013, applies prospectively to all unrecognized tax benefits existing at the effective date, and does not require new recurring disclosures. Early and retrospective adoption is permitted. The Company is currently evaluating the potential impact that adoption may have on its financial statements.

Note 2 - Significant Accounting Policies And Other Disclosures (Tables)
   

Second Quarter

   

Year-to-Date

 
   

2013

   

2012

   

2013

   

2012

 

Net sales

  $ 10,650     $ 10,997     $ 14,992     $ 17,127  

Gross profit

    4,537       4,958       5,972       7,199  

Income from continuing operations

    1,463       1,632       255       1,232  

Net income

    1,463       1,632       255       1,232  
             

June 30, 2013

   

December 31, 2012

 
   

Level

 

Class

 

Carrying Value

   

Fair Value

   

Carrying Value

   

Fair Value

 

Assets

                                         

Cash and cash equivalents

    1  

R

  $ 120,289     $ 120,289     $ 106,408     $ 106,408  

Floating rate notes receivable

    2  

NR

    2,195       2,195       2,385       2,385  

Cash surrender values

    2  

NR

    4,763       4,763       4,621       4,621  
                                           

Liabilities

                                         

Floating rate revolving Credit Facility, including Term Loan

    2  

NR

    250,000       250,000       95,000       95,000  

6 ¾% Senior Notes Payable due 2019

    1  

NR

    254,610       262,500       150,000       159,000  

8 ¾% Senior Notes payable previously due 2016 (Note 5)

    1  

NR

                270,758       292,875  

Other long-term debt

    2  

NR

    4,168       4,168       5,501       5,501  
Note 3 - Inventories (Tables)
Schedule of Inventory, Current [Table Text Block]
   

June 30,

2013

   

December 31,

2012

 

Souvenirs and apparel

  $ 3,060     $ 2,599  

Finished vehicles, parts and accessories

    5,505       5,591  

Micro-lubricant® and other

    878       604  

Total

  $ 9,443     $ 8,794  
Note 4 - Goodwill And Other Intangible Assets (Tables)
   

Other Intangible Assets

   

Goodwill

 

Balance, beginning of period

  $ 395,013     $ 138,717  

Increase from acquisitions

 

   

 

Decrease from impairment charges

 

      (89,037 )

Balance, end of period

  $ 395,013     $ 49,680  
   

June 30, 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            
Note 5 - Long-term Debt (Tables)
Interest Income and Interest Expense Disclosure [Table Text Block]
   

Three Months Ended

June 30:

   

Six Months Ended

June 30:

 
   

2013

   

2012

   

2013

   

2012

 

Gross interest costs

  $ 9,409