Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended May 31, 2019
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission file number: 000-02384
INTERNATIONAL SPEEDWAY CORPORATION
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation)
(I.R.S. Employer Identification No.)
ONE DAYTONA BOULEVARD,
DAYTONA BEACH, FLORIDA
(Address of principal executive offices)
Registrant’s telephone number, including area code:(386) 254-2700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Class A Common Stock - $.01 par value
NASDAQ/National Market System
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock — $.10 par value
Class B Common Stock — $.01 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ý NO ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
YES ý NO ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Smaller reporting company
Emerging growth company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO ý
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date:
The accompanying consolidated interim financial statements have been prepared in compliance with Rule 10-01 of Regulation S-X and accounting principles generally accepted in the United States ("U.S. GAAP") for interim financial information but do not include all of the information and disclosures required for complete financial statements. The consolidated balance sheet at November 30, 2018, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The statements should be read in conjunction with the consolidated financial statements and notes thereto included in the latest Annual Report on Form 10-K for International Speedway Corporation and its wholly owned subsidiaries (the “Company” or “ISC”). In management’s opinion, the statements include all adjustments which are necessary for a fair presentation of the results for the interim periods. All such adjustments are of a normal recurring nature.
Because of the seasonal concentration of racing events, the results of operations for the three and six months ended May 31, 2018, and 2019, are not indicative of the results to be expected for the year.
On May 22, 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with NASCAR Holdings, Inc. (“NASCAR”) and Nova Merger Sub, Inc. ("Merger Sub"), a wholly owned subsidiary of NASCAR, providing for the merger of Merger Sub with and into the Company (the “Merger”), with the Company surviving the merger as a wholly owned subsidiary of NASCAR. NASCAR, which sanctions many of the Company’s principal racing events, is wholly owned by certain members of the France Family Group, which also holds shares of ISC’s Class A common stock, par value $.01 par value per share (“Class A Common Stock”), and Class B common stock, par value $.01 par value per share (“Class B Common Stock,” and, collectively with the Class A Common Stock, the “Company Common Stock”) representing over 74.7 percent of the combined voting power of the Company’s outstanding stock. The France Family Group consists of James C. France (the Company’s Chairman of the Board), Lesa France Kennedy (the Company’s Vice Chairwoman and Chief Executive Officer) and Brian Z. France (a director of the Company), and members of their respective families and entities controlled by the natural person members of the group.
At the effective time of the Merger (the “Effective Time”), subject to the satisfaction of the conditions set forth in the Merger Agreement, holders of Company Common Stock (other than holders who have elected to dissent from the Merger and seek appraisal rights under the Florida Business Corporations Act and holders of the Rollover Shares (as defined below)) will be entitled to receive $45.00 in cash for each share held, without interest (the “Merger Consideration”), subject to applicable withholding taxes. Prior to the Effective Time, the members of the France Family Group (other than Brian Z. France, his children, and certain related entities) (such members of the France Family Group, the “Rollover Shareholders”) will cause to be contributed pursuant to a rollover letter agreement between such shareholders and NASCAR, shares of Company Common Stock (the “Rollover Shares”) to NASCAR or a related entity and, as a result, such Rollover Shareholders will not receive the Merger Consideration. After the closing of the Merger, the Company will be a private company and wholly-owned subsidiary of NASCAR.
The Merger is subject to the approval of the Merger Agreement by (i) the holders of at least a majority of the aggregate voting power of shares of Class A Common Stock and Class B Common Stock, voting together as a single class, and (ii) the holders of at least a majority of the aggregate voting power of all outstanding shares of Company Common Stock not held by NASCAR and its affiliates, the France Family Group and certain officers and directors of the Company. NASCAR has agreed in the Merger Agreement to cause the Rollover Shareholders to vote all of their shares of Company Common Stock in favor of the Merger. The Board of Directors of the Company (the “Board”), based upon the unanimous recommendation of a special committee of the Board, has unanimously approved and adopted the Merger Agreement, the Merger and the other transactions contemplated thereby and recommended to the shareholders of the Company that they approve the Merger Agreement. The Merger is also conditioned upon the satisfaction or waiver of certain customary closing conditions, including, among others, the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1986, as amended.
If the Merger Agreement is terminated under certain specified circumstances, the Company could be required to pay NASCAR a termination fee of $78,000,000 or to reimburse certain expenses of NASCAR up to $15,000,000, and under other specified circumstances, NASCAR could be required to pay the Company a termination fee of $117,000,000. Subject to certain limitations, either party may terminate the Merger Agreement if the Merger has not been consummated by February 22, 2020.
The foregoing description of the Merger Agreement and the transactions contemplated thereby is only a summary and does not purport to be complete. It is qualified in its entirety by reference to the full text of the Merger Agreement, which was filed as Exhibit 2.1 to the Company’s Report on Form 8-K filed on May 22, 2019.
2. New Accounting Pronouncements
On January 5, 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017-01, Clarifying the Definition of a Business (ASC 805). Under ASC 805, a business is defined as having a set of assets along with 3 elements or activities—inputs, processes, and outputs. However, confusion occurs when a business does not always have outputs. In addition, all the inputs and processes that a seller uses in operating a set are not required if market participants can acquire the set and continue to produce outputs, for example, by integrating the acquired set with their own inputs and processes. As a result, this definition of a business under ASC 805 led some transactions to be accounted for as a business combination (see Note 5). The update has refined the definition of a business. Now, to be considered a business, an acquisition would have to include an input and a substantive process that together significantly contributes to the ability to create outputs. Public business entities should apply the amendments in this update to annual periods beginning after December 15, 2017, including interim periods within those periods. The amendments in this update were adopted in the first quarter of fiscal 2019.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The main objective of this update is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For public business entities that are U.S. Securities and Exchange Commission (SEC) filers, the amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For all other public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently evaluating the impact of adopting this new guidance on its financial position, results of operations, statement of comprehensive income, and cash flows, and will adopt the provisions of this statement in the first quarter of fiscal 2021.
In May 2014, the FASB, in conjunction with the International Accounting Standards Board ("IASB"), issued Accounting Standards update ("ASU") No. 2014-09, "Revenue from Contracts with Customers" (ASC 606), which supersedes the existing revenue recognition requirements under U.S. GAAP and eliminates industry-specific guidance. The new revenue recognition standard provides a five step analysis of transactions to determine when and how revenue is recognized. The new model requires revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. The new guidance includes updated disclosure requirements regarding the qualitative and quantitative information of ISC’s nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.
During 2016, the FASB issued additional interpretive guidance relating to the standard which covered the topics of principal versus agent considerations and identifying performance obligations and licensing. The standard, along with the subsequent clarifications issued, are effective for reporting periods beginning after December 15, 2017, including interim reporting periods, making it effective for our fiscal year beginning December 1, 2018. The guidance permits two methods of adoption: the full retrospective method, which applies to each prior reporting period presented, and the modified retrospective method, in which the cumulative effect of initially applying the new guidance is recognized as of the date of initial application as an adjustment to the opening balance of retained earnings. The Company has adopted ASC 606 and the related modifications as of December 1, 2018 using the modified retrospective transition and the impact of adopting this new guidance did not result in a material difference in its consolidated financial statements (see note 3).
In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842): Leases". The objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. To meet that objective, the FASB is amending the FASB Accounting Standards Codification and creating Topic 842, Leases. This update, along with International Financial Reporting Standards 16, Leases, are the result of the FASB’s and the IASB’s efforts to meet that objective and improve financial reporting. For a public business entity, the amendments in this update are effective for fiscal years beginning after December 15, 2018, including
interim periods within those fiscal years. Early adoption of the amendments in this update is permitted for all entities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company is currently evaluating the impact of adopting this new guidance on its financial position, results of operations, and cash flows, and will adopt the provisions of this statement in the first quarter of fiscal 2020.
In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments". The objective of this update is to provide specific guidance on eight cash flow classification issues and reduce the existing diversity in practice. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The amendments in this update should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. The Company adopted the provisions of this statement in the first quarter of fiscal 2019 and the impact of adopting this new guidance did not result in a material difference in its consolidated statement of cash flows.
In January 2017, the FASB issued ASU No. 2017-04, "Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment". The objective of this update is to simplify the subsequent measurement of goodwill, eliminating Step 2 from the goodwill impairment test, which test is measuring goodwill impairment loss by comparing the implied fair value of a reporting unit's goodwill to the carrying amount of that goodwill. Instead, under the amendments in this update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. An entity should apply the amendments in this update on a prospective basis. An entity is required to disclose the nature of and reason for the change in accounting principle upon transition. That disclosure should be provided in the first annual period and in the interim period within the first annual period when the entity initially adopts the amendments in this update. A public business entity that is a U.S. Securities and Exchange Commission ("SEC") filer should adopt the amendments in this update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact of adopting this new guidance on its financial position, results of operations, and cash flows, and will adopt the provisions of this statement in the first quarter of fiscal 2021.
In December 2017, the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") No. 118 (as further clarified by FASB ASU 2018-05, "Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118)" to provide guidance for companies that may not have completed their accounting for the income tax effects of the Tax Cuts and Jobs Act of 2017 (Tax Act) in the period of enactment, which is the period that includes December 22, 2017. SAB No. 118 provides for a provisional one year measurement period for entities to finalize their accounting for certain income tax effects related to the Tax Act. SAB No. 118 provides guidance where: (i) the accounting for the income tax effect of the Tax Act is complete and reported in the Tax Act's enactment period, (ii) the accounting for the income tax effect of the Tax Act is incomplete and reported as provisional amounts based on reasonable estimates (to the extent determinable) subject to adjustments during a limited measurement period until complete, and (iii) accounting for the income tax effect of the Tax Act is not reasonably estimable (no related provisional amounts are reported in the enactment period) and entities would continue to apply accounting based on tax law provisions in effect prior to the Tax Act enactment until provisional amounts are reasonably estimable. SAB No. 118 requires disclosure of the reasons for incomplete accounting additional information or analysis needed, among other relevant information. The Company finalized its provisional amounts in the fourth quarter of fiscal 2018 (see Note 12 - Income Taxes).
In February 2018, the FASB issued ASU No. 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income". The amendments in this update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Tax Act and will improve the usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendments in this update also require certain disclosures about stranded tax effects. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption of the amendments in this update is permitted, including adoption in any interim period: (1) for public business entities for reporting periods for which financial statements have not yet been issued and (2) for all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this update should be applied either in the period of
adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Act is recognized. The Company is currently evaluating the impact of adopting this new guidance on its financial position, results of operations, statement of comprehensive income, and cash flows, and will adopt the provisions of this statement in the first quarter of fiscal 2020.
3. Revenues with Customers
The Company has applied the provisions of ASC 606 and all related appropriate guidance based on the modified retrospective method, which was applied only to the contracts which were not completed as of the date of initial application. As per the new guidance, the Company recognizes revenue under the core principle to depict the transfer of control to its customers in an amount reflecting the consideration to which it expects to be entitled. In order to achieve that core principle, the Company has applied the following five-step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied.
The Company’s contracts with customers provide for multiple promised goods and services, including admissions, food, beverage and merchandise, corporate partnerships, television broadcast and radio programming content. The Company typically analyzes the contract and identifies the performance obligations by evaluating whether the promised goods and services are capable of being distinct within the context of the contract at contract inception. Promised goods and services that are not distinct at contract inception are combined. The next step after identifying the performance obligations is determining the transaction price, which includes the impact of variable consideration, based on contractually fixed amounts and an estimation of variable consideration. The Company allocates the transaction price to each performance obligation based on relative stand-alone selling price. Judgment is exercised to determine the stand-alone selling price of each distinct performance obligation. The Company estimates the standalone selling price by reference to the total transaction price less the sum of the observable stand-alone selling prices of other goods or services promised in the contract. In general, transaction price is determined by estimating the fixed amount of consideration to which we are entitled for transfer of goods and services and all relevant sources and components of variable consideration. Variable consideration is estimated by the Company based on the expected value approach. The Company will then estimate variable consideration for a particular type of performance obligation, such method is consistently applied. The Company will constrain estimates of variable consideration based on its expectation of recovery from the customer. Revenues are generally recognized when control of the promised goods or services is transferred to their customers either at a point in time or over time, in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services.
Most of the Company’s contracts have one performance obligation, the promotion of a unique motorsport event, and all consideration is allocated to that performance obligation and recognized at a point in time contemporaneous with the date of the event.
For advertising, revenue is recognized when the advertisement is broadcasted and the customer simultaneously receives and consumes benefits as the advertisements are broadcasted.
The Company may enter into multiple contracts with a single counter party at or near the same time. The Company will combine contracts and account for them as a single contract when one or more of the following criteria are met: (i) the contracts are negotiated as a package with a single commercial objective, (ii) consideration to be paid in one contract depends on the price or performance of the other contract, and (iii) goods or services promised are a single performance obligation.
Under ASC 606, the transaction price of a non-monetary exchange that has commercial substance is based on the fair value of the non-cash consideration received.
Under ASC 606, consideration payable to a customer includes cash amounts that an entity pays, or expects to pay, to the customer. Consideration payable to a customer also includes credit or other items that can be applied against amounts owed to the entity. The Company accounts for consideration payable to a customer as a reduction of the transaction price and, therefore, of revenue unless the payment to the customer is in exchange for a distinct good or service that the customer transfers to the entity.
The Company may have contracts where there is a significant timing difference between payment and the time when control of the goods or services is transferred to the customer. The Company has adopted the practical expedient and does not adjust for the promised amount of consideration for the effects of a significant financing component if it expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.
The following is a description of principal activities from which the Company generates its revenue:
The Company’s business consists principally of promoting racing events at its major motorsports entertainment facilities. The Company derives revenues primarily from (i) admissions to motorsports events and motorsports themed amusement activities held at our facilities, (ii) revenue generated in conjunction with or as a result of motorsports events and motorsports themed amusement activities conducted at our facilities, and (iii) catering, concession and merchandising services during or as a result of these events and amusement activities.
“Admissions” revenue includes ticket sales for all of our racing events and other motorsports activities and amusements, net of any applicable taxes. Advance ticket sales and event-related revenues for future events are deferred until earned, which is generally once the events are conducted.
“Motorsports and other event related” revenue primarily includes television and ancillary media rights fees, promotion and sponsorship fees, royalties from licenses of our trademarks, fees paid by third party promoters for management of non-motorsport events, hospitality rentals (including luxury suites, chalets and the hospitality portion of club seating), advertising revenues, parking and camping revenues, track rental fees, syndication of numerous racing events, and programs through our own radio network, MRN.
“Food, beverage and merchandise” revenue includes revenues from concession stands, direct sales of souvenirs, hospitality catering, programs and other merchandise, and fees paid by third party vendors for the right to occupy space to sell souvenirs and concessions at our motorsports entertainment facilities.
The delivery of MRN services is recognized utilizing the output method and the measure of progress is when the advertisements are aired over the MRN network.
The delivery of all other event related services mentioned above are not considered as a separate performance obligation because our customers cannot receive the relevant benefits unless we also fulfill our obligation to deliver the event. Event related revenue is recognized on an event by event basis based on the fees allocated to the performance obligation within the underlying contractual arrangement.
Other revenue primarily includes revenues derived from leasing commercial space in our office and retail operations, including those at ONE DAYTONA and the Shoppes at ONE DAYTONA.
Disaggregation of revenue
In the following table, revenue is disaggregated by product line and timing of transfer of products and services. The table is in line with our reportable segments (see Note 15 - Segment Reporting).
Three Months Ended
Six Months Ended
May 31, 2018
May 31, 2019
May 31, 2018
May 31, 2019
Corporate Sales and Other Event Related
Food, Beverage and Merchandise
The Company’s rights to consideration for work completed, but not billed at the reporting date, is classified as a receivable, as it has an unconditional right to payment or only conditional for the passage of time. The Company has no recorded contract assets as of May 31, 2019.
Consideration received in advance from customers is recorded as a contract liability, if a contract exists under ASC 606, until services are delivered or obligations are met and revenue is earned. Contract liability represents the excess of amounts invoiced over amounts recognized as revenues. Contract liabilities to be recognized in the succeeding twelve-month period are classified as current contract liabilities and the remaining amounts, if any, are classified as non-current contract liabilities. Contract liabilities are predominately related to motorsports and other event related revenues, and to a lesser extent, Admissions and Food, Beverage and Merchandise revenues. Contract liabilities of approximately $78.0 million and $7.2 million are included in current and long-term deferred revenues, respectively, on the Consolidated Balance Sheets as of May 31, 2019. For the period ended May 31, 2019, we recognized revenue associated with contract liabilities of approximately $35.1 million that were included in the contract liabilities balance at the beginning of the period.
Significant changes in the contract liabilities balances during the period are discussed below.
Transaction price allocated to the remaining performance obligations
The Company applies the optional exemptions and does not disclose: a) information about remaining performance obligations that have an original expected duration of one year or less or b) transaction price allocated to unsatisfied performance obligations for which variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation in accordance with the series guidance.
The typical duration of all event related and other contracts is one year or less and, as a result, the Company applies the optional exemptions and does not disclose information about remaining performance obligations that have an original expected duration of one year or less.
The Company has also elected to not disclose transaction price allocated to unsatisfied performance obligations for which variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service for event related promises for those contracts that contain percentage of the sales. The fees are variable for this type of contract, and the uncertainty related to the final fee, is resolved within the current year.
Changes in Accounting Policies
The Company adopted ASC 606 with an initial application as of the first quarter of fiscal year 2019, using the Modified Retrospective transition method, and applied ASC 606 to contracts with customers that were not completed as of the date of initial application. Comparative information has not been adjusted as the application of ASC 606 resulted in similar reportable activity as under ASC 605, "Revenue Recognition - Multiple-Deliverable Revenue Arrangements", except for that disclosed below.
Unbilled Income and Deferred Income Recognition for Sponsorship Agreements
The Company previously recognized a receivable for unbilled revenue and a liability in deferred income for an amount equal to the remaining performance obligation at any reporting period. Under ASC 606, the Company will recognize a receivable and a contract liability prior to performance by either party, only if the entity has an unconditional right to payment. The Company has determined it does not have an unconditional right to receive unbilled revenue for remaining performance obligations. Accordingly, the Company will net the amount of unbilled revenue and associated deferred income at any reporting date.
Impact on the Consolidated Balance Sheet as of May 31, 2019:
Balance sheet accounts impacted by changes in accounting policies:
Balances without adoption of ASC 606
Impact of Total Assets
Impact of Total Liabilities and Stockholders’ equity
There was no impact on the Consolidated Statement of Comprehensive Income.
Impact on the Consolidated Statement of Cash Flows for the six months endedMay 31, 2019:
Cash flow items impacted by changes in accounting policies:
Balances without adoption of ASC 606
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Accounts payable and other liabilities
Impact of net adjustments to cash (used in) provided by operating activities
4. Earnings Per Share
Basic earnings per share is calculated using the Company's weighted-average outstanding common shares. Diluted earnings per share is calculated using the Company's weighted-average outstanding common shares including the dilutive effect of stock awards as determined under the treasury stock method. In periods when the Company recognizes a net loss, it excludes the impact of outstanding stock awards from the diluted loss per share calculation as their inclusion would have an anti-dilutive effect.
The following table sets forth the computation of basic and diluted earnings per share for the three and six months ended May 31, 2018 and 2019, respectively (in thousands, except share and per share amounts):
Three Months Ended
Six Months Ended
May 31, 2018
May 31, 2019
May 31, 2018
May 31, 2019
Weighted average shares outstanding
Effect of dilutive securities
Diluted weighted average shares outstanding
Basic and diluted earnings per share
Anti-dilutive shares excluded in the computation of diluted earnings per share
5. Equity and Other Investments
Hollywood Casino at Kansas Speedway
Kansas Entertainment, LLC, (“Kansas Entertainment”) a 50/50 joint venture of Penn Hollywood Kansas, Inc. (“Penn”), a subsidiary of Penn National Gaming, Inc., and Kansas Speedway Development Corporation (“KSDC”), a wholly owned indirect subsidiary of ISC, operates the Hollywood-themed casino and branded destination entertainment facility overlooking turn two at Kansas Speedway. Penn, as the managing member of Kansas Entertainment, is responsible for the operations of the casino.
The Company has accounted for Kansas Entertainment as an equity investment in the consolidated financial statements as of May 31, 2018 and 2019. The Company's 50.0 percent portion of Kansas Entertainment’s net income, which is before income taxes as the joint venture is a disregarded entity for income tax purposes, was approximately $6.2 million and $7.0 million for the three months ended May 31, 2018 and 2019, respectively, and approximately $10.6 million and $12.5 million for the six months ended May 31, 2018 and 2019, respectively, and is included in Equity in net income from equity investments in the Consolidated Statements of Operations.
Pre-tax cash distributions from Kansas Entertainment for the six months ended May 31, 2018 and 2019, are recognized on the Company's Consolidated Statement of Cash Flows as follows (in thousands):
Six Months Ended
May 31, 2018
May 31, 2019
Distribution from profits
Distribution in excess of profits
Fairfield Inn Hotel at ONE DAYTONA
Daytona Hotel Two, LLC ("Fairfield"), a joint venture of Daytona Hospitality Group II, LLC ("DHGII"), a subsidiary of Prime-Shaner Groups, and Daytona Beach Property Holdings Retail, LLC ("DBR"), a wholly owned indirect subsidiary of ISC, was formed to own, construct and operate a Fairfield Inn hotel. The hotel is situated within the ONE DAYTONA development. In June 2016, DBR contributed land to the joint venture as per the agreement. Construction of the hotel was completed and operations commenced in December 2017. DHGII is the managing member of Fairfield. DHGII was responsible for the development of Fairfield and manages ongoing operations of the hotel.
As per the partnership agreement, our 33.25 percent share of equity is limited to the Company's non-cash land contribution and it will share in the profits from the joint venture proportionately to its equity ownership. The Company has accounted for the joint venture in Fairfield as an equity investment in its consolidated financial statements as of May 31, 2019. The Company's 33.25 percent portion of Fairfield’s net income, which is before income taxes as the joint venture is a disregarded entity for income tax purposes, was approximately $0.1 million and none for the three months ended May 31, 2018 and 2019, respectively. For the six months ended May 31, 2019, the equity investment had losses in excess of its carrying value of approximately $0.1 million. The Company will resume application of the equity method only after its share of unrecognized net income equals the share of net losses not recognized during the period the equity method was suspended. For the six months ended May 31, 2018, the Company's share of net income was $0.1 million, and is included in net income from equity investments in the Company's Consolidated Statements of Operations.
Pre-tax cash distributions from Fairfield for the six months ended May 31, 2018 and 2019, totaled approximately $0.1 million and $0.1 million, respectively.
The DAYTONA Marriott Autograph Collection Hotel at ONE DAYTONA
Daytona Hotel One, LLC ("The DAYTONA"), a joint venture of Daytona Hospitality Group, LLC ("DHG"), a subsidiary of Prime-Shaner Groups, and DBR, was formed to own, construct and operate The DAYTONA. The hotel is situated within the ONE DAYTONA development. DHG is the managing member of The DAYTONA. DHG is responsible for the development of The DAYTONA and will manage the operations of the hotel.
As per the partnership agreement, our 34.0 percent share of equity is limited to the Company's non-cash land contribution and it will share in the profits from the joint venture proportionately to its equity ownership. The Company has accounted for the joint venture in The DAYTONA as an equity investment in the Company's consolidated financial statements as of May 31, 2019. The Company's 34.0 percent portion of The DAYTONA’s net loss, which is before income taxes as the joint venture is a disregarded entity for income tax purposes, was approximately $0.6 million for the three and six months ended May 31, 2019, respectively, which includes pre-opening costs of approximately $0.3 million, and is included in net income from equity investments in the Company's Consolidated Statements of Operations. There were no comparable amounts for the three and six months ended May 31, 2018 as the hotel commenced operations in April 2019.
Residential Project at ONE DAYTONA
Daytona Apartment Holdings, LLC, a joint venture of Daytona Residential Group, LLC, a subsidiary of Prime Group, and DBR, was formed to own, construct, and operate the residential component of the ONE DAYTONA project. The joint venture is structured similarly to the Fairfield and The DAYTONA joint ventures, where the Company's share of equity will be limited to the Company's non-cash land contribution and it will share in the profits from the joint venture proportionately to its equity ownership. In March 2019, the Company's land contribution of approximately $3.7 million towards the residential component was finalized. Vertical construction of the residential project has commenced and some units are expected to open in the fourth quarter of fiscal 2019. As per the partnership agreement, the Company's 31.0 percent share of equity will be limited to its non-cash land contribution and it will share in the profits from the joint venture proportionately to its equity ownership, which is
before income taxes as the joint venture is a disregarded entity for income tax purposes. For the three and six months ended May 31, 2019 and May 31, 2018, the Company had no recorded costs included in net income from equity investments in the Company's Consolidated Statements of Operations.
A Community Development District ("CDD") has been established for the purpose of installing and maintaining public infrastructure at ONE DAYTONA (see "Future Liquidity - ONE DAYTONA"). The CDD is a local, special purpose government framework authorized by Chapter 190 of the Florida Statutes for managing and financing infrastructure to support community development. The CDD has negotiated agreements with the City of Daytona Beach and Volusia County for a total of up to $40.0 million in incentives to finance a portion of the infrastructure required for the ONE DAYTONA project. In October 2018, the CDD purchased certain infrastructure assets and specific easement rights from ONE DAYTONA. ONE DAYTONA received approximately $20.0 million of the total incentive amount in cash, with $10.5 million to be received in annual payments derived from a long-term note receivable issued by the CDD. The first payment of the note receivable is expected in fiscal 2019 with maturity no later than fiscal 2046. As of May 31, 2019, no payments have been received. The remainder of the incentives can be received based on certain criteria met by the project through fiscal 2046.
The ISC Board of Directors approved the purchase of certain assets, including trademarks and certain other intellectual property, from Racing Electronics and certain other assets required to support the business services of Racing Electronics. The asset acquisitions were completed in January 2019 for a total cost of approximately $8.2 million in cash. The acquisition meets the criteria of a business combination in accordance with ASC 805, "Business Combinations".
The following table summarizes the Company's preliminary acquisition accounting based on the fair values of the assets acquired (in thousands):
As of January 4, 2019
Property and equipment
Trade names and trademarks
Track access rights
Purchase price consideration
Acquisition accounting and valuation processes with respect to inventory (included in prepaid expenses and other current assets in the Consolidated Balance Sheets), property and equipment, intangible assets, and goodwill, related to the acquisition completed, are preliminary and subject to adjustments within the required one year period. The preliminary track access rights will be amortized over thirty years. The trade names and trademarks is an indefinite-lived intangible asset and is not amortized.
The results of operations of Racing Electronics are included in the Company's unaudited condensed consolidated statements of operations subsequent to the closing date of the acquisition and included in the Motorsports Event segment. For the three and six months ended May 31, 2019, net revenues generated from the acquisition were approximately $5.0 million and $6.9 million, respectively, and operating income generated from the acquisition was approximately $0.3 million and $0.2 million, respectively, which includes approximately $0.3 million of non-recurring, non-capitalizable acquisition costs, recognized as an expense in general and administrative costs on the Consolidated Statement of Operations.
The gross carrying value, accumulated amortization and net carrying value of the major classes of intangible assets relating to the Motorsports Event segment are as follows (in thousands):
November 30, 2018
Amortized intangible assets:
Total amortized intangible assets
Non-amortized intangible assets:
NASCAR — sanction agreements
Total non-amortized intangible assets
Total intangible assets
May 31, 2019
Amortized intangible assets:
Total amortized intangible assets
Non-amortized intangible assets:
NASCAR — sanction agreements
Total non-amortized intangible assets
Total intangible assets
The increase of approximately $1.0 million in the net carrying amount of non-amortized intangible assets and $0.3 million in net carrying amount of amortized intangible assets, for the six months ended May 31, 2019, as compared to the fiscal year ended November 30, 2018, is primarily due to the acquisition of certain assets, including trademarks and other intellectual property from Racing Electronics.
The following table presents current and expected amortization expense of the existing intangible assets for each of the following periods (in thousands):
Amortization expense for the six months ended May 31, 2019
Remaining estimated amortization expense for the year ending November 30:
2023 and thereafter
The increase of approximately $0.5 million in the carrying value of goodwill during the six months ended May 31, 2019, relates to the acquisition of certain assets from Racing Electronics.
Long-term debt consists of the following (in thousands):
November 30, 2018
May 31, 2019
Unamortized Discount and Debt Issuance Costs
Unamortized Discount and Debt Issuance Costs
4.63 percent Senior Notes
3.95 percent Senior Notes
6.25 percent Term Loan
TIF bond debt service funding commitment
Revolving Credit Facility
Less: current portion
The Company's $65.0 million principal amount of senior unsecured notes (“4.63 percent Senior Notes”) bear interest at 4.63 percent and are due January 2021. The 4.63 percent Senior Notes require semi-annual interest payments on January 18 and July 18 through their maturity. The 4.63 percent Senior Notes may be redeemed in whole or in part, at the Company’s option, at any time or from time to time at redemption prices as defined in the indenture. Certain of the Company’s wholly owned domestic subsidiaries are guarantors of the 4.63 percent Senior Notes. Certain restrictive covenants of the 4.63 percent Senior Notes require that the Company's ratio of its Consolidated Funded Indebtedness to its Consolidated EBITDA ("leverage ratio") does not exceed 3.50 to 1.0, and its Consolidated EBITDA to Consolidated Interest Expense ("interest coverage ratio") is not less than 2.0 to 1.0. In addition, the Company may not permit the aggregate of certain Priority Debt to exceed 15.0 percent of its Consolidated Net Worth. The 4.63 percent Senior Notes contain various other affirmative and negative restrictive covenants including, among others, limitations on liens, sales of assets, mergers and consolidations and certain transactions with affiliates. As of May 31, 2019, the Company was in compliance with its various restrictive covenants. At May 31, 2019, outstanding principal on the 4.63 percent Senior Notes was approximately $65.0 million.
The Company's $100.0 million principal amount of senior unsecured notes (“3.95 percent Senior Notes”) bear interest at 3.95 percent and are due September 2024. The 3.95 percent Senior Notes require semi-annual interest payments on March 13 and September 13 through their maturity. The 3.95 percent Senior Notes may be redeemed in whole or in part, at the Company's option, at any time or from time to time at redemption prices as defined in the indenture. Certain of the Company's wholly owned domestic subsidiaries are guarantors of the 3.95 percent Senior Notes. Certain restrictive covenants of the 3.95 percent Senior Notes require that the Company's leverage ratio does not exceed 3.50 to 1.0, and its interest coverage ratio is not less than 2.0 to 1.0. In addition, the Company may not permit the aggregate of certain Priority Debt to exceed 15.0 percent of its Consolidated Net Worth. The 3.95 percent Senior Notes contain various other affirmative and negative restrictive covenants including, among others, limitations on liens, sales of assets, mergers and consolidations and certain transactions with affiliates. As of May 31, 2019, the Company was in compliance with its various restrictive covenants. At May 31, 2019, outstanding principal on the 3.95 percent Senior Notes was approximately $100.0 million.
The term loan (“6.25 percent Term Loan”), related to the Company’s International Motorsports Center, has a 25 year term due October 2034, an interest rate of 6.25 percent, and a current monthly payment of approximately $323,000. At May 31, 2019, the outstanding principal on the 6.25 percent Term Loan was approximately $45.5 million.
At May 31, 2019, the outstanding taxable special obligation revenue (“TIF”) bond, in connection with the financing of Kansas Speedway, totaled approximately $46.3 million, net of the unamortized discount, which is comprised of a $46.6 million principal amount, 6.75 percent term bond due December 1, 2027. The TIF bond is repaid by the Unified Government of Wyandotte County/Kansas City, Kansas (“Unified Government”) with payments made in lieu of property taxes (“Funding Commitment”) by the Company’s wholly owned subsidiary, Kansas Speedway Corporation (“KSC”). Principal (mandatory redemption) payments per the Funding Commitment are payable by KSC on October 1 of each year. The semi-annual interest component of the Funding Commitment is payable on April 1 and October 1 of each year. KSC granted a mortgage and security interest in the Kansas project for its Funding Commitment obligation.
The Company's $300.0 million revolving credit facility (“2016 Credit Facility”) contains a feature that allows the Company to increase the credit facility to a total of $500.0 million, subject to certain conditions and provides for separate sub-limits of $25.0 million for standby letters of credit and $10.0 million for swing line loans. The 2016 Credit Facility is scheduled to mature five years from the date of inception, with two1-year extension options, extending the maturity to September 2023. Interest accrues, at the Company's option, at either LIBOR plus 100.0 — 162.5 basis points or a base rate loan at the highest of:
i) Wells Fargo Bank's prime lending rate, ii) the Federal Funds rate, as in effect from time to time, plus 0.5 percent, and iii) one month LIBOR plus 1.0 percent. The 2016 Credit Facility also contains a commitment fee ranging from 0.125 percent to 0.225 percent of unused amounts available for borrowing. The interest rate margin on the LIBOR borrowings and commitment fee are variable depending on the better of the Company's debt rating as determined by specified rating agencies or its leverage ratio. Certain of the Company's wholly owned domestic subsidiaries are guarantors on the 2016 Credit Facility. The 2016 Credit Facility requires that the Company's leverage ratio does not exceed 3.50 to 1.0 (4.0 to 1.0 for the four quarters ending after any Permitted Acquisition), and its interest coverage ratio is not less than 2.5 to 1.0. The 2016 Credit Facility also contains various other affirmative and negative restrictive covenants including, among others, limitations on indebtedness, investments, sales of assets, certain transactions with affiliates, entering into certain restrictive agreements and making certain restricted payments as detailed in the agreement. As of May 31, 2019, the Company was in compliance with its various restrictive covenants. At May 31, 2019, the Company had no outstanding borrowings under its credit facility. Financing costs related to the credit facility, net of accumulated amortization, of approximately $1.2 million, have been deferred and are included in other assets as of May 31, 2019.
Financing costs are being amortized on a straight-line method, which approximates the effective yield method, over the life of the related financing. At November 30, 2018 and May 31, 2019, the Company recorded deferred financing costs of approximately $3.0 million and $2.7 million, respectively, net of accumulated amortization.
Total interest expense incurred by the Company for the three and six months ended May 31, 2018 and 2019, respectively, is as follows (in thousands):
Three Months Ended
Six Months Ended
May 31, 2018
May 31, 2019
May 31, 2018
May 31, 2019
Less: capitalized interest
Net interest expense
8. Financial Instruments
In accordance with the “Financial Instruments” Topic, ASC 825-10, and in accordance with the “Fair Value Measurements and Disclosures” Topic, ASC 820-10, additional clarification and disclosure is required about the use of fair value measurements. These topics discuss key considerations in determining fair value in such markets and expanding disclosures on recurring fair value measurements, using unobservable inputs (Level 3).
Various inputs are considered when determining the carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities. These items approximate fair value due to the short-term maturities of these assets and liabilities. The Company's note receivable is a variable-based financial instrument and, therefore, its carrying value approximates its fair value. The Company’s credit facilities approximate fair value as they bear interest rates that approximate market. Fair values of long-term debt are based on quoted market prices at the date of measurement and determined by quotes from financial institutions. There have been no changes or transfers between category levels or classes.
These inputs are summarized in the three broad levels and two classes listed below:
Level 1 — observable market inputs that are unadjusted quoted prices for identical assets or liabilities in active markets
Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, credit risk, etc.)
Level 3 — significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments)
Recurring (R) - measured at fair value on recurring basis, subsequent to initial recognition.
Non-recurring (NR) - measured at fair value on nonrecurring basis, subsequent to initial recognition.
The following table presents estimated fair values and categorization levels of the Company's financial instruments as of November 30, 2018 and May 31, 2019, respectively (in thousands):
November 30, 2018
May 31, 2019
Money market funds
The Company had no level 3 inputs as of May 31, 2019.
9. Capital Stock
Stock Purchase Plan
The Company has a share repurchase program (“Stock Purchase Plan”), under which it is authorized to purchase up to
$530.0 million of its outstanding Class A common shares. The timing and amount of any shares repurchased under the Stock
Purchase Plan will depend on a variety of factors, including price, corporate and regulatory requirements, capital availability
and other market conditions. The Stock Purchase Plan may be suspended or discontinued at any time without prior notice. The Company currently has no active 10b5-1 plans. No shares have been or will be knowingly purchased from Company insiders or their affiliates.
Since inception of the Stock Purchase Plan, through May 31, 2019, the Company has purchased 10,566,002 shares of its Class A common shares, for a total of approximately $391.3 million. The Company did not purchase any shares of its Class A common shares during the six months endedMay 31, 2019. At May 31, 2019, the Company had approximately $138.7 million remaining repurchase authority under the current Stock Purchase Plan.
In April 2019, the Company's Board of Directors approved an annual dividend of $0.49 per share, for a total of approximately $21.3 million, paid on June 28, 2019, to common stockholders of record on May 31, 2019.
10. Long-Term Stock Incentive Plan
In April 2017, the Company's Board of Directors approved the 2017 Long Term Incentive Plan (the "2017 Plan"), as its 2006 Long Term Incentive Plan had expired in 2016. The Company has reserved an aggregate of 1,500,000 shares (subject to adjustment for stock splits and similar capital changes) of Class A Common Stock for grants under the 2017 Plan. Awards under the 2017 Plan will contain such terms and conditions not inconsistent with the 2006 Long Term Incentive Plan.
In May 2019, the Company awarded and issued a total of 83,298 restricted shares of the Company’s Class A common shares to certain officers and managers under the 2017 Plan. The shares of restricted stock awarded in May 2019, vest at the rate of 50.0 percent on the third anniversary of the award date and the remaining 50.0 percent on the fifth anniversary of the award date. The weighted average grant date fair value of these restricted share awards was $44.12 per share. In accordance with ASC 718, “Compensation — Stock Compensation” the Company is recognizing stock-based compensation on these restricted shares awarded on the accelerated method over the requisite service period.
11. Comprehensive Income
Comprehensive income is the change in equity of an enterprise except those resulting from shareholder transactions. Accumulated other comprehensive loss consists of the following (in thousands):
November 30, 2018
May 31, 2019
Terminated interest rate swap, net of tax benefit of $1,050 and $918, respectively
On December 22, 2017, new tax legislation, commonly referred to as the Tax Cuts and Jobs Act of 2017, was enacted, which significantly changed the existing U.S. tax laws. The Tax Act reduced the corporate Federal income tax rate from 35.0 percent to 21.0 percent, eliminated the corporate alternative minimum tax, allowed 100.0 percent expensing of certain qualified capital investments through 2022 (retroactive to September 27, 2017), and further limited the deductibility of certain executive compensation, among other provisions. Under current accounting guidance, the Company recognized the effects of the Tax Act as of the enactment date.
During the first quarter of fiscal 2018, as a result of the Tax Act, the Company incurred a material, non-cash reduction of our deferred income tax liabilities and a corresponding material income tax benefit of approximately $143.9 million primarily due to the Federal income tax rate reduction from 35.0 percent to 21.0 percent.
The Company's effective income tax rate was approximately 22.9 percent and 23.9 percent for the three and six months ended May 31, 2019, respectively, and approximately 22.2 percent and (232.8) percent for the three and six months ended May 31, 2018, respectively.
The increase in the effective income tax rate for the six months ended May 31, 2019, as compared to the same period in the prior year, is substantially due to the material income tax benefit and income tax rate reduction associated with the Tax Act, including the aforementioned reduction in deferred income tax liability, in the first quarter of fiscal 2018. The slight increase in the three months ended May 31, 2019, as compared to the same period in the prior year, is predominately due to changes in state income tax rates.
In March 2018, the Company was notified that its 2014 federal income tax return is under examination by the Internal Revenue Service.
13. Related Party Disclosures and Transactions
All of the racing events that take place during the Company’s fiscal year are sanctioned by various racing organizations such as National Association for Stock Car Auto Racing (“NASCAR”), the American Historic Racing Motorcycle Association, the American Motorcyclist Association, the Automobile Racing Club of America ("ARCA"), the American Sportbike Racing Association — Championship Cup Series, the Federation Internationale de L’Automobile, the Federation Internationale Motocycliste, International Motor Sports Association (“IMSA”) - a wholly owned subsidiary of NASCAR, Historic Sportscar Racing, IndyCar Series, National Hot Rod Association, the Porsche Club of America, the Sports Car Club of America, the Sportscar Vintage Racing Association, the United States Auto Club and the World Karting Association.
NASCAR and IMSA, which sanction many of the Company’s principal racing events, are members of the France Family Group, which controls approximately 74.7 percent of the combined voting power of the outstanding stock of the Company as of May 31, 2019, and some members of which serve as directors and officers of the Company.
Under current agreements, NASCAR contracts directly with certain network providers for television rights to the entire Monster Energy NASCAR Cup, Xfinity and Gander Outdoors Truck series schedules. Under the terms of this arrangement, NASCAR retains 10.0 percent of the gross broadcast rights fees allocated to each Monster Energy NASCAR Cup, Xfinity and Gander Outdoors Truck series event as a component of its sanction fees. The Company, as the promoter, records 90.0 percent of the gross broadcast rights fees as revenue and then records 25.0 percent of the gross broadcast rights fees as part of its awards to the competitors, included in NASCAR event management fees (discussed below). Ultimately, the promoter retains 65.0 percent of the net cash proceeds from the gross broadcast rights fees allocated to the event. The Company’s television broadcast and ancillary rights fees received from NASCAR for the Monster Energy NASCAR Cup, Xfinity, and Gander Outdoors Truck series events conducted at its wholly owned facilities, and recorded as part of motorsports related revenue, were approximately $95.0 million and $97.7 million for the three months ended May 31, 2018 and 2019, respectively, and approximately $160.1 million and $165.7 million for the six months ended May 31, 2018 and 2019, respectively. The Company recorded prize money of approximately $25.9 million and $26.9 million for the three months ended May 31, 2018 and 2019, respectively, and approximately $43.9 million and $45.8 million for the six months ended May 31, 2018 and 2019, respectively, included in NASCAR event management fees (discussed below) related to the aforementioned 25.0 percent of gross broadcast rights fees ultimately paid to competitors.
Standard NASCAR and IMSA sanction agreements require racetrack operators to pay event management fees (collectively "NASCAR event management or NEM fees"), which include prize and point fund monies for each sanctioned event conducted, as well as fees paid to NASCAR for sanctioning and officiating of the events. The prize and point fund monies are distributed by NASCAR to participants in the events. Total NEM fees paid by the Company were approximately $50.2 million and $52.3 million for the three months ended May 31, 2018 and 2019, respectively, and approximately $80.0 million and $83.2 million for the six months ended May 31, 2018 and 2019, respectively.
In October 2002, the Unified Government issued subordinate sales tax special obligation revenue bonds (“2002 STAR Bonds”) totaling approximately $6.3 million to reimburse the Company for certain construction already completed on the second phase of the Kansas Speedway project and to fund certain additional construction. The 2002 STAR Bonds, which require annual debt service payments and are due December 1, 2022, will be retired with state and local taxes generated within Kansas Speedway’s boundaries and are not the Company’s obligation. KSC has agreed to guarantee the payment of principal and any required premium and interest on the 2002 STAR Bonds. At May 31, 2019, the Unified Government had approximately $0.5 million outstanding on 2002 STAR Bonds. Under a keepwell agreement, the Company has agreed to provide financial assistance to KSC, if necessary, to support KSC’s guarantee of the 2002 STAR Bonds.
In connection with the Company’s automobile and workers’ compensation insurance coverages and certain construction contracts, the Company has standby letter of credit agreements in favor of third parties totaling approximately $3.1 million at May 31, 2019. At May 31, 2019, there were no amounts drawn on the standby letters of credit.
In September 2018, the Company announced a Comprehensive Ticket and Travel Protection Program that allows guests who purchase a grandstand ticket the ability to exchange tickets for a rescheduled NASCAR event at an ISC facility for a future NASCAR event within the ISC portfolio, certain restrictions apply. Should an event be rescheduled to a different date due to inclement weather, and a guest chooses to take advantage of ISC's Weather Protection Program, revenue related to that grandstand ticket would be deferred until earned, which is when the guest's selected event is conducted. At May 31, 2019, there were no events rescheduled due to inclement weather that would require the deferral of revenues.
The Company is from time to time a party to routine litigation incidental to its business. Management does not believe that the resolution of any or all of such litigation will have a material adverse effect on the Company’s financial condition or results of operations.
Mergers, such as the one proposed in the Merger Agreement, which the Company previously discussed in its report on Form 10-K for the fiscal year ended November 30, 2018, often attract litigation from minority shareholders. On December 14, 2018 a putative class-action shareholder lawsuit was filed in the Seventh Judicial Circuit of Volusia County, Florida by attorneys on behalf of the Firemen's Retirement System of St. Louis related to the Merger Agreement. The complaint names as defendants: the Company, its directors, its CFO, NASCAR Holdings, and certain of the Family Stockholders, and alleges breach of fiduciary duty and for aiding and abetting those breaches. The parties to the litigation have reached an agreement-in-principle to settle the litigation, subject to the negotiation of appropriate documentation. The Company currently maintains Directors & Officers Insurance. Applicable insurance policies contain certain customary limitations, conditions and exclusions and are subject to a self-insured retention amount.
On April 13, 2019, SunTrust Equipment and Finance Leasing Corp. filed a complaint against the Company in the Northern District of Georgia for Declaratory Judgment, Breach of Contract and Possession of Personal Property. The complaint relates to subleases the Company entered into with DC Solar Distribution, Inc., which has subsequently filed for bankruptcy. ISC has filed a motion to dismiss the complaint. The motion has been fully briefed and is pending before the court.
The general nature of the Company’s business is a motorsports themed amusement enterprise, furnishing amusement to the public in the form of motorsports themed entertainment. The Company’s motorsports event operations consist principally of racing events at its major motorsports entertainment facilities. The reporting units within the motorsports segment portfolio are reviewed together as the nature of the products and services, the production processes used, the type or class of customer using our products and services, and the methods used to distribute our products or provide their services are consistent in objectives and principles, and predominately uniform and centralized throughout the Company. The consolidated industry domestic media rights contract, which continues through the 2024 NASCAR season, continues to be the single-largest contributor to the Company's earnings. These media rights are allocated to specific events, are not facility based, and are derived through a corporate contract, which affects all of the motorsports event facilities within the motorsports event segment. Similarly, corporate sponsorship partnership revenue is primarily derived from corporate contracts, negotiated by the Company's corporate sales team, and allocated to multiple, or all, motorsports entertainment facilities depending on the specific arrangement. Thus, the disclosure of these revenue streams, as they relate to each reporting unit, is not practical.
The Company’s remaining business units, which are comprised of the radio network production and syndication of numerous racing events and programs, non-motorsports events, certain souvenir merchandising operations not associated with the promotion of motorsports events at the Company’s facilities, construction management services, financing and licensing operations, equity investments and retail and commercial leasing operations are included in the “All Other” segment.
The Company evaluates financial performance of the business units on operating profit after allocation of corporate general and administrative (“G&A”) expenses. Corporate G&A expenses are allocated to business units based on each business unit’s net revenues to tota