Speedway Motorsports, Inc.

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Speedway Motorsports, Inc.

Post Office Box 600
U.S. Highway 29 North
Concord, North Carolina 28026
U.S.A.
Telephone: (704) 455-3239
Fax: (704) 455-2547
Web site: http://www.speedwaymotorsports.com

Public Company
Incorporated: 1994
Employees: 970
Sales: $229.8 million (1998)
Stock Exchanges: New York
Ticker Symbol: TRK
NAIC: 711212 Racetracks; 339932 Game, Toy, and Children’s Vehicle Manufacturing

Speedway Motorsports, Inc. is a leading promoter, marketer, and sponsor of motorsports entertainment in the United States, operating six racetracks that host dozens of National Association for Stock Car Auto Racing-sanctioned events. Speedway Motorsports also sanctions its own racing series called the Legends Car Racing Circuit, which features ⅝-scale vehicles that the company manufactures and sells to amateur racing enthusiasts. The company is the product of O. Bruton Smith’s aggressive attempt to develop the largest racetrack operation in the country. Starting with Charlotte Motor Speedway, Smith added Atlanta Motor Speedway in 1990, Bristol Motor Speedway and Sears Point Raceway in 1996, Texas Motor Speedway in 1997, and Las Vegas Motor Speedway in 1999. Smith owns 67 percent of Speedway Motorsports, presiding as chairman and chief executive officer of the company.

Late 1950s Origins

Although Speedway Motorsports did not exist until 1994, the legacy of the organization stretches back 35 years earlier, back to the early career of the company’s founder, O. Bruton Smith. Smith made an attempt at establishing himself as a professional driver, but failed, settling instead on being near the sport that would prove to be his lifelong passion. Smith began promoting races at small dirt tracks in his native North Carolina during the 1950s, work that kept him employed in the racing world while he hatched plans for his dream project. Smith wanted to build a premier racetrack, a facility that would stand as a monument of the automobile racing world. In 1959, he formed Charlotte Motor Speedway (CMS) to build a $600,000 facility. Smith was able to raise $450,000 through financing arrangements, and broke ground on the ambitious project—the first example of the lofty vision that would later characterize his business approach to the sport of stock car racing. As construction was underway, however, Smith found it difficult to raise the remaining $150,000 he needed to complete CMS. His attempt to create a regional epicenter of stock car racing failed. By 1961, CMS was exhausted of funds and had entered reorganization proceedings dictated by the U.S. bankruptcy code. Smith left town, relocating in Illinois where he embarked on another career as a car dealer. However, Smith would later achieve his success in the racing industry by demonstrating the same ambitiousness that had forced his retreat in 1961.

While in Illinois, Smith proved he was a shrewd businessman, perhaps overly shrewd considering that in the 1960s a federal judge ruled Smith had defrauded some business partners, as reported in the March 30, 1997 issue of the St. Louis Post-Dispatch. His car dealership, Town & Country Ford, Inc., developed into a lucrative business, eventually ranking as the sixth largest car dealership chain in the United States. Smith would need the steady and heavy stream of cash provided by his car dealership because by the early 1970s he was attracted again to the prospect of CMS. The court-appointed directors of the speedway were at an impasse. The directors began to squabble, and Smith stepped in, using the substantial cash he was accumulating with Town & Country Ford to buy back shares in CMS. By 1975, he owned nearly all of the racetrack he had left nearly 15 years earlier, exerting his newfound influence from his office as CMS’s new chief executive officer. The same year Smith gained executive control over the racetrack, H.A. “Humpy” Wheeler joined CMS. A year later, in 1976, Wheeler was named general manager of CMS; together, Smith and Wheeler would develop the North Carolina speedway company into stock car racing’s largest racetrack operator.

Smith’s reemergence into the arena of stock car racing occurred at a pivotal point in the sport’s history. Since its inception, stock car racing had been a local and regional pursuit populated by drivers who generally owned their own teams and by tracks that were individually owned. It was a product of the Southeast that stayed tied to its roots, attracting little national following. The dynamics of the sport would radically change, however, transforming stock car racing into a multibillion-dollar business. In the new lucrative era of stock car racing, track owners operated multiple speedways, facilities that were located in markets large and small, from coast to coast. The growth of the sport from its rural Southeastern beginnings to its modern dimensions as a national phenomenon was aided by the formation of the sport’s sanctioning body, the National Association for Stock Car Auto Racing (NASCAR) in 1947, and by several developments that coincided with Smith’s return to CMS. During the mid-1970s, tobacco giant R.J. Reynolds began funneling vast sums of sponsorship money into the sport for the first time in its history, providing a financial foundation for stock car racing’s future growth. In 1979, network television broadcasters began airing NASCAR races live, providing many throughout the country with their first glimpse of the sport.

Stock car racing was beginning to grow beyond its historical proportions, but of equal importance to the growth of the sport was the presence of Smith in the industry. As he had with CMS, Smith demonstrated no wariness in staking everything he had on grandiose projects, believing that massive, luxuriant facilities were central to stock car racing’s, and his own, success. Smith’s reputation as a risk taker was cemented during the 1990s, stock car racing’s decade of prolific growth. Not coinci-dentally, the popularity of NASCAR-controlled events and the growth of stock car racing itself mirrored the rapid development of CMS into a multi-speed way track operator named Speedway Motorsports.

Acquisitions and Growth in the 1990s

Smith first began developing a portfolio of speedway properties in 1990. Smith positioned himself on the vanguard of the industry’s growth with the acquisition of Atlanta Motor Speedway (AMS), his second racetrack and his first step toward accumulating speedways and other related properties. As he had done with CMS during the 1980s, Smith constructed additional grandstand seating at AMS, adding luxury suites, improving concession facilities, and, in an example of his far-reaching vision of stock car racing’s potential, developing condominiums that overlooked the speedways. At the heart of Smith’s strategy was controlling a number of speedways near large, metropolitan markets, each capable of seating legions of spectators and each offering a breadth of conveniences and luxury services. By controlling massive, state-of-the-art racing complexes, Smith hoped his speedways would be awarded popular NASCAR-sanctioned events, none more coveted than the NASCAR Winston Cup series. As the popularity of stock car racing grew during the 1990s, so too did the revenue-generating potential of hosting a Winston Cup race, which, if included on a speedway’s annual schedule of events, nearly guaranteed profitability for the racetrack. Smith, as he made his first advance on the acquisition front, endeavored to create racing facilities that, in consideration of their size and proximity to large markets, could not be denied the opportunity to host Winston Cup events. Toward this end, Smith aggressively pursued the expansion of his stock car racing holdings, convinced that massive investment in the sport would be substantiated by its widespread appeal.

In 1992, Smith’s maverick ways and his faith in stock car racing’s potential were evinced by two decisions he made. The year marked the debut of nighttime racing at CMS, the first speedway in the country to offer nighttime races. Also in 1992, the company developed the Legends Car Racing Circuit, giving aficionados of stock car racing the chance to compete in ⅝-scale versions of the cars driven by early NASCAR drivers. Smith’s company manufactured and sold the cars, developing a racing schedule that was sanctioned through a subsidiary named 600 Racing. While the foray into amateur racing proved a prudent move, creating a meaningful tributary of revenue ($5.7 million by 1994, and $10.9 million by 1998), Smith’s primary focus was on adding more speedways to his name, an objective that gained momentum by the mid-1990s.

In December 1994, Smith formed Speedway Motorsports. If outside observers and competitors did not perceive the formation of Speedway as the beginning of Smith’s aggressive assault on stock car racing, then his next, unprecedented move, must have made the signal clear. In February 1995, Speedway Motorsports became the first company in its industry to offer shares of stock to the public in a $68 million initial public offering (IPO). Wheeler, named president and chief operating officer of Speedway Motorsports upon its formation, explained the decision to take the company public in a March 30, 1997 interview with the St Louis Post-Dispatch: “What we saw was that NASCAR was heading into a strong power curve. We felt there would be a 10-12-year period of strong growth and we needed the capital to take advantage of it.” Speedway Motorsports stock debuted at $18 per share, unleashing the acquisitive ambitions of Smith and marking the beginning of a frenetic period of growth for the company.

Company Perspectives:

The operating subsidiaries of Speedway Motorsports have a 38-year history in which we have dedicated our talents to growing the entire motorsports entertainment industry.

Speedway Motorsports’ IPO touched off a trend in the industry, as Smith’s fellow competitors followed his lead into the public spotlight. Within a year, Dover Downs Entertainment, Grand Prix Association of Long Beach, and Penske Motorsports had all gone public. One other company began life as a publicly traded concern in 1996: Daytona Beach, Florida’s International Speedway Corporation, Smith’s closest rival. The rivalry between Speedway Motorsports and International Speedway was an intriguing one, a battle that was competitive yet one that necessitated a display of diplomacy by each company. The same family that founded and controlled International Speedway also founded and controlled NASCAR, the organization that bestowed the all-important Winston Cup events to racetrack operators and upon whose beneficence Smith’s fortunes rested. The France family was careful to avoid any inference of favoritism between NASCAR and International Speedway. (Bill France served as International Speedway’s chief executive officer and as NASCAR’s president.) However, the relationship between the two companies had an undeniable effect on the personality of International Speedway, creating a company whose strategy stood in sharp contrast to the strategy pursued by Speedway Motorsports. Speedway Motorsports was a risk-taking company, assuming an aggressive and ambitious posture that it inherited from Smith. International Speedway, on the other hand, inherited the legacy of NASCAR, making the company far more cautious and conservative in its expansion strategy. Accordingly, Speedway Motorsports was apt to build a 150,000-seat facility in a large market, banking on drawing a capacity crowd, while International Speedway erected smaller facilities in smaller markets, preferring to nurture stock car racing’s development before erecting a massive stadium. Wheeler, in a June 28, 1999 interview with Knight-Ridder/Tribune Business News, explained the differences between the two companies succinctly, remarking, “Our first priority is to build a company, and theirs is to build a sport.”

1995 IPO, Further Expansion

The differences between Speedway Motorsports and its closest rival were readily discernible after Smith took the company public in 1995. With the proceeds from the IPO, Smith was able to actualize his vision and hotly pursue the $2-billion business that stock car racing represented by the mid-1990s. In 1996, Speedway Motorsports acquired two racing facilities, Bristol Motor Speedway, located in Bristol, Tennessee, in January, and Sears Point Raceway, located near San Francisco, in November. The following year, the company furthered its reputation as the industry’s most ambitious racetrack operator by completing the construction of Texas Motor Speedway, a $250 million facility that seated 150,000 spectators, twice the capacity of the new racetracks International Speedway was building at the time. Some observers were shocked by Smith’s audacity in building a massive complex in uncharted territory for stock car racing, but the popularity of the sport and the increasing revenue it was generating bore out the construction of the Fort Worth, Texas, stadium. By the late 1990s, stock car racing was the fastest-growing sport, as well as the largest spectator sport, in the country. The Winston Cup Series races drew more than 6.1 million spectators in 1997, excluding the 123 million viewers who watched the races on television. Each Winston Cup race generated between $60 million and $80 million in revenue, attracting crowds ranging between 100,000 and 150,000. Sales of NASCAR-licensed products hurtled toward $900 million, drastically more than the $80 million collected from merchandise sales in 1990. During this meteoric upward swing, Speedway Motorsports had increased its total seating capacity from 176,000 in 1993 to 551,000 by 1998, fueling a more than threefold increase in ticket revenues. Smith, whose racetracks hosted nine of the 35 Winston Cup Series events in 1997, had positioned Speedway Motorsports to take advantage of the sport’s enormous growth, astutely remaining one step ahead of the popularity that surprised some of stock car racing’s onlookers. Speedway Motorsports stood atop its industry as the largest racetrack owner in the United States, eclipsing the stature of International Speedway and the industry’s third-ranking contender, Penske Motorsports.

In 1999, Smith pressed ahead with expansion and reached another precedent-setting agreement that galvanized his reputation as an industry pioneer. With attendance figures up 91 percent from the total recorded in 1990, Smith inaugurated 1999 by acquiring Las Vegas Motor Speedway in January. Smith paid $215 million for the facility, eclipsing the $200-million bid offered by International Speedway, which had been confident that the Nevada racetrack would be theirs. In March 1999, International Speedway looked on in surprise again when Smith’s company announced a first in stock car racing’s history. He sold the naming rights to his flagship CMS facility to home improvement retailer Lowe’s Companies Inc. For the right to rename CMS “Lowe’s Motor Speedway” and to secure exclusive home improvement category marketing rights at Speedway Motorsports six speedways, the retailer paid Smith’s company $35 million for a ten-year agreement. The naming rights agreement sent a shock-wave throughout the industry, but just as Smith appeared to be loping toward the 21st century with all competitors safely in the distance, the historically conservative International Speedway made its most aggressive move ever. The announcement by the France family-controlled company set the stage for stock car racing’s biggest battle in the decade ahead.

Key Dates:

1959:: O. Bruton Smith begins development of Charlotte Motor Speedway.
1961:: Charlotte Motor Speedway declares bankruptcy.
1975:: Smith regains control of Charlotte Motor Speedway and is named chief executive officer.
1990:: Atlanta Motor Speedway is acquired.
1992:: Smith develops the Legends Car Racing Circuit.
1994:: Speedway Motorsports is formed and incorporated in December.
1996:: Bristol Motor Speedway and Sears Point Raceway are acquired.
1997:: Texas Motor Speedway opens and hosts largest sporting event in Texas history.
1999:: Las Vegas Motor Speedway is acquired; naming rights to Charlotte Motor Speedway are sold to Lowe’s Companies Inc.

In May 1999, International Speedway revealed it was acquiring the industry’s third largest racetrack owner, Penske Motorsports. The $623 million deal delivered a decided blow to Smith’s Speedway Motorsports, unseating his company from the number one position in the industry. Perhaps more profound were the implications of the transaction, which greatly enlarged International Speedway’s geographic coverage into markets both large and small. As Smith endeavored to secure two Winston Cup Series events at each of his speedways, industry pundits, following the merger of International Speedway and Penske Motorsports, were projecting that the sport’s future was not in a cluster of events held at a small number of facilities but in thinning out the schedule of NASCAR-sanctioned events to cover a greater geographic area. Taking this perspective into consideration, International Speedway stood better poised to receive the riches bred by NASCAR-sanctioned events, but few doubted Smith’s resolve in offering his riposte to International Speedway’s usurpation in the decade ahead.

Principal Subsidiaries

Atlanta Motor Speedway, Inc.; Bristol Motor Speedway, Inc.; Charlotte Motor Speedway, Inc.; Las Vegas Motor Speedway LLC; SPR Acquisition Corporation d/b/a Sears Point Raceway; Texas Motor Speedway, Inc.; Speedway Systems LLC d/b/a Finish Line Events; 600 Racing, Inc.; INEX Corporation; The Speedway Club, Inc.; Oil-Chem Research Corporation; Speedway Funding Corporation; Sonoma Funding Corporation.