UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

o		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

INTERNATIONAL SPEEDWAY CORPORATION

(Exact name of registrant as specified in its charter)

FLORIDA (State or other jurisdiction of incorporation)		O-2384 (Commission File Number)		59-0709342 (I.R.S. Employer Identification No.)

ONE DAYTONA BOULEVARD, DAYTONA BEACH, FLORIDA (Address of principal executive offices)		32114 (Zip code)

Registrant’s telephone number, including area code: (386) 254-2700

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 þ NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES o NO þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date:

Class A Common Stock		27,633,206 shares		as of May 31, 2010
Class B Common Stock		20,531,394 shares		as of May 31, 2010

 

 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INTERNATIONAL SPEEDWAY CORPORATION
Consolidated Balance Sheets

		November 30, 2009				May 31, 2010
		(Unaudited)
		(In Thousands, Except Share and Per Share Amounts)
ASSETS
Current Assets:
Cash and cash equivalents		$	158,572			$	166,634
Short-term investments			200				200
Receivables, less allowance of $1,200 in 2009 and 2010, respectively			41,934				48,462
Inventories			2,963				3,840
Income taxes receivable			4,015				—
Deferred income taxes			2,172				2,420
Prepaid expenses and other current assets			8,100				15,314
Total Current Assets			217,956				236,870
Property and Equipment, net of accumulated depreciation of $540,176 and $567,947, respectively			1,353,636				1,376,294
Other Assets:
Long-term restricted cash and investments			10,144				2,201
Equity investments			—				26,673
Intangible assets, net			178,610				178,610
Goodwill			118,791				118,791
Other			29,766				9,335
			337,311				335,610
Total Assets		$	1,908,903			$	1,948,774
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Current portion of long-term debt		$	3,387			$	54,856
Accounts payable			18,801				22,049
Deferred income			63,999				113,184
Income taxes payable			8,668				1,140
Other current liabilities			19,062				23,384
Total Current Liabilities			113,917				214,613
Long-Term Debt			343,793				266,302
Deferred Income Taxes			247,743				262,265
Long-Term Tax Liabilities			20,917				7,263
Long-Term Deferred Income			12,775				11,663
Other Long-Term Liabilities			30,481				30,017
Commitments and Contingencies			—				—
Shareholders’ Equity:
Class A Common Stock, $.01 par value, 80,000,000 shares authorized; 27,810,169 and 27,495,205 issued and outstanding in 2009 and 2010, respectively			278				275
Class B Common Stock, $.01 par value, 40,000,000 shares authorized; 20,579,682 and 20,531,394 issued and outstanding in 2009 and 2010, respectively			205				205
Additional paid-in capital			493,765				482,973
Retained earnings			665,274				693,270
Accumulated other comprehensive loss			(20,245	)			(20,072	)
Total Shareholders’ Equity			1,139,277				1,156,651
Total Liabilities and Shareholders’ Equity		$	1,908,903			$	1,948,774

     See accompanying notes

INTERNATIONAL SPEEDWAY CORPORATION
Consolidated Statements of Operations

		Three Months Ended
		May 31, 2009				May 31, 2010
		(Unaudited)
		(In Thousands, Except Share and Per Share Amounts)
REVENUES:
Admissions, net		$	43,680			$	35,695
Motorsports related			92,908				91,756
Food, beverage and merchandise			13,392				11,968
Other			2,398				2,747
			152,378				142,166
EXPENSES:
Direct:
Prize and point fund monies and NASCAR sanction fees			35,390				35,201
Motorsports related			31,953				32,115
Food, beverage and merchandise			9,249				8,780
General and administrative			25,569				25,909
Depreciation and amortization			18,489				18,425
Impairment of long-lived assets			15				433
			120,665				120,863
Operating income			31,713				21,303
Interest income			230				38
Interest expense			(5,509	)			(5,142	)
Equity in net loss from equity investments			(57,274	)			(474	)
Other income			163				—
(Loss) income from continuing operations before income taxes			(30,677	)			15,725
Income taxes			1,018				5,463
(Loss) income from continuing operations			(31,695	)			10,262
Loss from discontinued operations, net of income tax benefits of $32 and $0, respectively			(45	)			—
Net (loss) income		$	(31,740	)		$	10,262
Basic earnings per share:
(Loss) income from continuing operations		$	(0.65	)		$	0.21
Loss from discontinued operations			—				—
Net (loss) income		$	(0.65	)		$	0.21
Diluted earnings per share:
(Loss) income from continuing operations		$	(0.65	)		$	0.21
Loss from discontinued operations			—				—
Net (loss) income		$	(0.65	)		$	0.21
Dividends per share		$	0.14			$	0.16
Basic weighted average shares outstanding			48,565,438				48,151,840
Diluted weighted average shares outstanding			48,565,438				48,243,168

     See accompanying notes.

INTERNATIONAL SPEEDWAY CORPORATION
Consolidated Statements of Operations

		Six Months Ended
		May 31, 2009				May 31, 2010
		(Unaudited)
		(In Thousands, Except Share and Per Share Amounts)
REVENUES:
Admissions, net		$	91,516			$	74,232
Motorsports related			195,442				190,314
Food, beverage and merchandise			26,801				24,367
Other			4,738				5,279
			318,497				294,192
EXPENSES:
Direct:
Prize and point fund monies and NASCAR sanction fees			69,532				68,076
Motorsports related			61,062				59,862
Food, beverage and merchandise			18,726				17,267
General and administrative			50,504				50,492
Depreciation and amortization			36,880				36,784
Impairment of long-lived assets			85				656
			236,789				233,137
Operating income			81,708				61,055
Interest income			694				100
Interest expense			(11,779	)			(10,755	)
Equity in net loss from equity investments			(58,913	)			(1,549	)
Other income			334				—
Income from continuing operations before income taxes			12,044				48,851
Income taxes			18,551				13,102
(Loss) income from continuing operations			(6,507	)			35,749
Loss from discontinued operations, net of income tax benefits of $63 and $25, respectively			(87	)			(47	)
Net (loss) income		$	(6,594	)		$	35,702
Basic earnings per share:
(Loss) income from continuing operations		$	(0.13	)		$	0.74
Loss from discontinued operations			—				—
Net (loss) income		$	(0.13	)		$	0.74
Diluted earnings per share:
(Loss) income from continuing operations		$	(0.13	)		$	0.74
Loss from discontinued operations			—				—
Net (loss) income		$	(0.13	)		$	0.74
Dividends per share		$	0.14			$	0.16
Basic weighted average shares outstanding			48,557,010				48,209,102
Diluted weighted average shares outstanding			48,557,010				48,312,954

     See accompanying notes.

INTERNATIONAL SPEEDWAY CORPORATION
Consolidated Statement of Shareholders’ Equity

		Class A				Class B
		Common				Common												Accumulated
		Stock				Stock				Additional								Other				Total
		$.01 Par				$.01 Par				Paid-in				Retained				Comprehensive				Shareholders’
		Value				Value				Capital				Earnings				Loss				Equity
														(Unaudited)
														(In Thousands)
Balance at November 30, 2009		$	278			$	205			$	493,765			$	665,274			$	(20,245	)		$	1,139,277
Activity 12/1/09 — 5/31/10:
Comprehensive income
Net income			—				—				—				35,702				—				35,702
Gain on currency translation			—				—				—				—				9				9
Interest rate swap amortization			—				—				—				—				2,506				2,506
Interest rate swap fair value			—				—				—				—				(2,342	)			(2,342	)
Total comprehensive income																							35,875
Cash dividend declared ($0.16 per share)			—				—				—				(7,706	)			—				(7,706	)
Reacquisition of previously issued common stock			(3	)			—				(11,040	)			—				—				(11,043	)
Income tax benefit related to stock-based compensation			—				—				(585	)			—				—				(585	)
Stock-based compensation			—				—				833				—				—				833
Balance at May 31, 2010		$	275			$	205			$	482,973			$	693,270			$	(20,072	)		$	1,156,651

     See accompanying notes.

INTERNATIONAL SPEEDWAY CORPORATION
Consolidated Statements of Cash Flows

		Six Months Ended
		May 31, 2009				May 31, 2010
		(Unaudited)
		(In Thousands)
OPERATING ACTIVITIES
Net (loss) income		$	(6,594	)		$	35,702
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization			36,880				36,784
Stock-based compensation			1,187				833
Amortization of financing costs			270				291
Amortization of interest rate swap			—				2,506
Deferred income taxes			4,650				3,253
Loss from equity investments			58,913				1,549
Impairment of long-lived assets, non-cash			85				656
Other, net			(334	)			4
Changes in operating assets and liabilities:
Receivables, net			(19,380	)			(6,528	)
Inventories, prepaid expenses and other assets			(13,445	)			(9,660	)
Accounts payable and other liabilities			(5,836	)			(9,745	)
Deferred income			48,057				48,073
Income taxes			(10,533	)			(6,731	)
Net cash provided by operating activities			93,920				96,987
INVESTING ACTIVITIES
Capital expenditures			(41,382	)			(51,149	)
Proceeds from equity investments/affiliates			12,500				—
Equity investments and advances to affiliates			(432	)			(14,174	)
Decrease in restricted cash			14,931				7,943
Other, net			(1,016	)			—
Net cash used in investing activities			(15,399	)			(57,380	)
FINANCING ACTIVITIES
Payment of long-term debt			(150,859	)			(26,090	)
Reacquisition of previously issued common stock			(246	)			(5,455	)
Net cash used in financing activities			(151,105	)			(31,545	)
Net (decrease) increase in cash and cash equivalents			(72,584	)			8,062
Cash and cash equivalents at beginning of period			218,920				158,572
Cash and cash equivalents at end of period		$	146,336			$	166,634

     See accompanying notes.

International Speedway Corporation

Notes to Consolidated Financial Statements

May 31, 2010

(Unaudited)

1. Basis of Presentation

The accompanying consolidated financial statements have been prepared in compliance with Rule 10-01 of Regulation S-X and accounting principles generally accepted in the United States but do not include all of the information and disclosures required for complete financial statements. The balance sheet at November 30, 2009, has been derived from the audited 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”). 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.

Unless indicated otherwise, all disclosures in the notes to the consolidated financial statements relate to continuing operations.

Because of the seasonal concentration of racing events, the results of operations for the three and six months ended May 31, 2009 and 2010 are not indicative of the results to be expected for the year.

2. New Accounting Pronouncements

In accordance with the Accounting Standards Codification (“ASC”) 805-50, “Business Combinations,” the topic was issued to retain the purchase method of accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities are recognized in the purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value, and requires the expensing of acquisition-related costs as incurred. ASC 805-50 is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company’s adoption of this statement in fiscal 2010 did not have an impact on its financial position and results of operations.

In accordance with the ASC 810-10, “Consolidation,” minority interests will be recharacterized as noncontrolling interests and will be reported as a component of equity separate from the parent’s equity, and purchases or sales of equity interests that do not result in a change in control will be accounted for as equity transactions. In addition, net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement and upon a loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in earnings. This portion of ASC 810-10 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years, except for the presentation and disclosure requirements, which will apply retrospectively. The Company’s adoption of this statement in fiscal 2010 did not have an impact on its financial position and results of operations.

Also, in accordance with ASC 810-10, the improvement of financial reporting by enterprises involved with variable interest entities was made by addressing (1) the effects on certain provisions of FASB Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities,” as a result of the elimination of the qualifying special-purpose entity concept in the ASC 860-10, “Transfers and Servicing,” and (2) constituent concerns about the application of certain key provisions of Interpretation 46(R), including those in which the accounting and disclosures under the Interpretation do not always provide timely and useful information about an enterprise’s involvement in a variable interest entity. This portion of ASC 810-10 is effective for financial statements issued for fiscal years beginning after November 15, 2009, with earlier adoption prohibited. The Company’s adoption of this statement in fiscal 2010 did not have an impact on its financial position and results of operations.

In accordance with the ASC 260-10-45, “Earnings Per Share,” instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in computing earnings per share under the two-class method. ASC 260-10-45 affects entities that accrue dividends on share-based payment awards during the associated service period when the return of dividends is not required if employees forfeit such awards. ASC 260-10-45 is effective for fiscal years and interim periods beginning after December 15, 2008. The Company’s adoption of this statement in fiscal 2010 did not have an impact on its financial position and results of operations.

In accordance with the ASC 323-10, “Investments — Equity Method and Joint Ventures,” questions that have arisen regarding the application of the equity method subsequent to the issuance of SFAS No. 141R and SFAS No. 160. This portion of ASC 323-10 is effective for fiscal years beginning after December 15, 2008, and interim periods within those years. Early application is not permitted. The Company’s adoption of this statement in fiscal 2010 did not have an impact on its financial position and results of operations.

Accounting Standards Update (ASU) 2010-06, “Improving Disclosures about Fair Value Measurements”, an amendment to ASC 820, “Fair Value Measurements and Disclosures”, was issued to provide more information regarding the transfers in and out of Levels 1 and 2 inputs as well as additional disclosures about Level 3 inputs. The disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The Company’s adoption of these amendments in fiscal 2010 did not have an impact on its financial position and results of operations.

3. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share for the three and six months ended May 31, 2009 and 2010 (in thousands, except share and per share amounts):

		Three Months Ended								Six months ended
		May 31,				May 31,				May 31,				May 31,
		2009				2010				2009				2010
Basic and diluted:
(Loss) income from continuing operations		$	(31,695	)		$	10,262			$	(6,507	)		$	35,749
Loss from discontinued operations			(45	)			—				(87	)			(47	)
Net (loss) income		$	(31,740	)		$	10,262			$	(6,594	)		$	35,702
Basic earnings per share denominator:
Weighted average shares outstanding			48,565,438				48,151,840				48,557,010				48,209,102
Basic earnings per share:
(Loss) income from continuing operations		$	(0.65	)		$	0.21			$	(0.13	)		$	0.74
Loss from discontinued operations			—				—				—				—
Net (loss) income		$	(0.65	)		$	0.21			$	(0.13	)		$	0.74
Diluted earnings per share denominator:
Weighted average shares outstanding			48,565,438				48,151,840				48,557,010				48,209,102
Common stock options			—				3,574				—				2,174
Contingently issuable shares			—				87,754				—				101,678
Diluted weighted average shares outstanding			48,565,438				48,243,168				48,557,010				48,312,954
Diluted earnings per share:
(Loss) income from continuing operations		$	(0.65	)		$	0.21			$	(0.13	)		$	0.74
Loss from discontinued operations			—				—				—				—
Net (loss) income		$	(0.65	)		$	0.21			$	(0.13	)		$	0.74
Anti-dilutive shares excluded in the computation of diluted earnings per share			349,187				259,827				355,868				265,708

4. Equity and Other Investments

Hollywood Casino at Kansas Speedway

On December 1, 2009, 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 subsidiary of ISC, was selected by the Kansas Lottery Gaming Facility Review Board to develop and operate a gaming facility in the Northeast Zone (Wyandotte County, Kansas). On February 12, 2010, Kansas Entertainment received the final approval under the Kansas Expanded Lottery Act, along with its gaming license from the Kansas Racing and Gaming Commission. Construction of the Hollywood-themed and branded entertainment destination facility began in April 2010 with a planned opening in the first half of 2012.

The initial phase of this project, approved by the Kansas Lottery Commission, comprises approximately 190,000 square feet, including a 100,000 square foot casino gaming floor. The facility includes features such as a high energy bar, dining and entertainment options and a 1,500 space parking structure, as well as capacity for approximately 2,300 slot machines and 86 table games (including 25 poker tables). Prior to the commencement of vertical construction, Kansas Entertainment is working constructively with the Kansas Lottery Commission to finalize the optimum scope and mix of gaming operations and amenities. Kansas Entertainment anticipates partially funding the first phase of the development with equity contributions of approximately $60.0 million from each partner. In addition, Kansas Entertainment currently plans to pursue financing of approximately $170.0 million to $180.0 million, including gaming equipment, preferably on a project secured non-recourse basis. Penn is the managing member of Kansas Entertainment and will be responsible for the development and operation of the casino and hotel.

The Company has accounted for Kansas Entertainment as an equity investment in its financial statements as of May 31, 2010. The Company’s 50.0 percent portion of Kansas Entertainment’s net loss is approximately $0.5 million and $1.5 million, for the three and six months ended May 31, 2010, related to certain start up costs, and is included in equity in net loss from equity investments in its consolidated statements of operations. There were no operations included in its consolidated statements of operations in the same period in fiscal 2009.

Motorsports Authentics

The Company is partners with Speedway Motorsports, Inc. in a 50/50 joint venture, SMISC, LLC, which, through its wholly owned subsidiary Motorsports Authentics, LLC conducts business under the name Motorsports Authentics (“MA”). MA designs, promotes, markets and distributes motorsports licensed merchandise.

In fiscal 2009, MA management and ownership considered various approaches to optimize performance in MA’s various distribution channels. As the challenges were assessed, it became apparent that there was significant risk in future business initiatives in mass apparel, memorabilia and other yet to be developed products. These initiatives had previously been deemed achievable and were included in projections that supported the carrying value of inventory, goodwill and other intangible assets on MA’s balance sheet. This analysis, combined with a long-term macroeconomic outlook that was less robust than previously expected, triggered MA’s review of certain assets under ASC 350 and ASC 360 and our evaluation under ASC 320-10.

In the fiscal third quarter 2009, MA, suffering financial stress from the recession, ceased paying certain guaranteed royalties under several license agreements where estimated royalties payable based on projected sales were less than stipulated guaranteed minimum royalties payable (“unearned royalties”). All earned royalties that were due have been paid. MA had received notices from certain licensors alleging default under the license agreements should MA not pay unearned royalties within stipulated cure periods.

As a result of the foregoing which triggered the Company’s evaluation performed under ASC 320-10 it recognized significant impairments of its equity investment in MA during the second and fourth quarters of fiscal 2009, resulting in a reduction to the carrying value of its investment in MA to zero at November 30, 2009. MA’s management, with the assistance of an independent appraisal firm, completed their review in the fourth quarter of fiscal 2009, concluding that the fair value of MA’s goodwill and intangible assets should be reduced to zero.

Going into fiscal 2010, MA management and ownership continued to explore business strategies in conjunction with certain motorsports industry stakeholders that allow the possibility for MA to operate profitably in the future. As with any business in this adverse economic environment, management must find the optimal business model for long-term viability. In addition to revisiting the business vision for MA, management, with support of ownership, has undertaken certain initiatives to improve inventory controls and buying cycles, as well as implemented changes to make MA a more efficiently operated and profitable company. The Company believes a revised MA business vision, which includes the successful resolution of license agreement terms and favorable license

terms in the future, along with focus on core competencies, streamlined operations, reduced operating costs and inventory risk, are necessary for MA to survive as a profitable operation in the future.

In July 2010, industry stakeholders have created the NASCAR Teams Licensing Trust (“Trust”) that is represented by a Board of Directors that includes representatives from NASCAR, the sanctioning body, and from 11 participating NASCAR Teams. Under this new agreement, the Trust brings a new structure to the licensing business that will be more efficient for the industry. The benefit to the licensees is a more focused and streamlined licensing business that will reduce cost, foster more efficient administrative processes and allow for more cohesive retail and marketing strategies.

The Trust will represent four key categories — die-cast, toys, apparel and trackside retail rights — and will grant the rights of any NASCAR driver that is participating in the licensing categories included in the Trust. This should allow the industry to more efficiently manage costs and increase revenues, while providing a wider selection of products for fans.

Concurrent with the creation of the Trust, MA management, ownership and industry stakeholders negotiated MA’s release from future guaranteed minimum royalties as well as the current unearned guaranteed minimum royalties payable to NASCAR team licensors. With respect to the one agreement secured by parent company guarantees, MA and the parent companies negotiated a settlement amount to eliminate future guaranteed minimum royalties.

As a result of the settlement, the Company’s remaining guaranty exposure, to one NASCAR team licensor, has been reduced to approximately $5.5 million and will be satisfied upon MA making certain payments to the team through January 2013. While it is possible that some obligation under this guarantee may occur in the future, the amount the Company ultimately could pay, if any, cannot be estimated at this time. In any event, the Company does not believe that the ultimate financial outcome will have a material impact on our financial position or results of operations.

The Company’s 50.0 percent portion of Motorsports Authentics’ net loss from operations, including the previously discussed impairment recognized in the second quarter of fiscal 2009, are approximately $57.3 million and approximately $58.9 million, for the three month and six month periods ended May 31, 2009, and are included in equity in net income (loss) from equity investments in its consolidated statements of operations. Under equity method accounting the Company discontinued applying the equity method since the carrying value of its investment in MA was zero November 30, 2009 and May 31, 2010. Based on this, the Company did not recognize any net loss from operations of MA during the three and six months ended May 31, 2010, respectively.

Staten Island Property

In connection with the Company’s efforts to develop a major motorsports entertainment facility in the New York metropolitan area, its subsidiary, 380 Development, LLC, purchased 676 acres located in the New York City borough of Staten Island in early fiscal 2005 and began improvements including fill operations on the property. In December 2006, the Company announced its decision to discontinue pursuit of the speedway development on Staten Island. In October 2009, the Company announced that it had entered into a definitive agreement with KB Marine Holdings LLC (“KB Holdings”) under which KB Holdings would acquire 100.0 percent of the outstanding equity membership interests of 380 Development for a total purchase price of $80.0 million. The purchase and sale agreement (“Agreement”) called for the transaction to close no later than February 25, 2010, subject to certain conditions, including KB Holdings securing the required equity commitments to acquire the property and performing its obligations under the Agreement. As a result of KB Holdings’ failure to perform its obligations, the closing did not occur on February 25, 2010.

On April 19, 2010, the Company executed an amendment to the Agreement which provided an extension to KB Holdings to close the transaction on or before June 30, 2010. Under the terms of that extension, the maximum purchase price to be paid by KB Holdings is $88.0 million, however, certain price reductions were available if the closing were to occur before June 30. The closing did not occur on June 30 and the Company is presently negotiating a further extension to the Agreement. While the Company remains optimistic that a closing will occur, there can be no assurance that it will reach an agreement with KB Holdings on a further extension, or that KB Holdings will secure the required equity commitments and proceed to closing.

5. Goodwill and Intangible Assets

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, 2009
		Gross Carrying				Accumulated				Net Carrying
		Amount				Amortization				Amount
Amortized intangible assets:
Food, beverage and merchandise contracts		$	10			$	6			$	4
Total amortized intangible assets			10				6				4
Non-amortized intangible assets:
NASCAR — sanction agreements			177,813				—				177,813
Other			793				—				793
Total non-amortized intangible assets			178,606				—				178,606
Total intangible assets		$	178,616			$	6			$	178,610

						May 31, 2010
		Gross Carrying				Accumulated				Net Carrying
		Amount				Amortization				Amount
Amortized intangible assets:
Food, beverage and merchandise contracts		$	10			$	6			$	4
Total amortized intangible assets			10				6				4
Non-amortized intangible assets:
NASCAR — sanction agreements			177,813				—				177,813
Other			793				—				793
Total non-amortized intangible assets			178,606				—				178,606
Total intangible assets		$	178,616			$	6			$	178,610

The following table presents current and expected amortization expense of the existing intangible assets as of May 31, 2010 for each of the following periods (in thousands):

Amortization expense for the six months ended May 31, 2010		$	0
Estimated amortization expense for the year ending November 30:
2010		$	1
2011			1
2012			1
2013			1

There were no changes in the carrying value of goodwill during the three months ended May 31, 2010.

6. Long-Term Debt

Long-term debt consists of the following (in thousands):

		November 30,				May 31,
		2009				2010
5.4 percent Senior Notes		$	149,950			$	149,955
5.8 percent Bank Loan			2,109				1,880
4.8 percent Revenue Bonds			1,807				1,675
6.8 percent Revenue Bonds			2,285				1,733
6.3 percent Term Loan			51,300				51,149
TIF bond debt service funding commitment			64,729				64,766
2006 Credit Facility			75,000				50,000
			347,180				321,158
Less: current portion			3,387				54,856
		$	343,793			$	266,302

On April 23, 2004, the Company completed an offering of $300.0 million principal amount of unsecured senior notes in a private placement. On September 27, 2004, the Company completed an offer to exchange these unsecured senior notes for registered senior notes with substantially identical terms (“2004 Senior Notes”). At May 31, 2010, outstanding 2004 Senior Notes totaled approximately $150.0 million, net of unamortized discounts and premium, which is comprised of $150.0 million principal amount unsecured senior notes, which bear interest at 5.4 percent and are due April 2014. The 2004 Senior Notes require semi-annual interest payments on April 15 and October 15 through their maturity. The 2004 Senior Notes may be redeemed in whole or in part, at the option of the Company, at any time or from time to time at redemption prices as defined in the indenture. The Company’s wholly-owned domestic subsidiaries are guarantors of the 2004 Senior Notes. The 2004 Senior Notes also contain various restrictive covenants. Total gross proceeds from the sale of the 2004 Senior Notes were $300.0 million, net of discounts of approximately $431,000 and approximately $2.6 million of deferred financing fees. The deferred financing fees are being treated as additional interest expense and amortized over the life of the 2004 Senior Notes on a straight-line method, which approximates the effective yield method. In March 2004, the Company entered into interest rate swap agreements to effectively lock in the interest rate on approximately $150.0 million of the 4.2 percent Senior Notes. The Company terminated these interest rate swap agreements on April 23, 2004 and received approximately $2.2 million, which was amortized over the life of the 4.2 percent Senior Notes that matured in April 2009.

In June 2008, the Company entered into an interest rate swap agreement to effectively lock in a substantial portion of the interest rate exposure on approximately $150.0 million notional amount in anticipation of refinancing the $150.0 million 4.2 percent Senior Notes that matured in April 2009. This interest rate swap was designated and qualified as a cash flow hedge under ASC 815, “Accounting for Derivatives and Hedging.” As a result of the uncertainty with the U.S. credit markets, in February 2009, the Company amended and re-designated its interest rate swap agreement as a cash flow hedge. This amended agreement, with a principal notional amount of $150.0 million and an estimated fair value of a liability totaling $26.8 million at May 31, 2010, expires in February 2011. The estimated fair value is based on relevant market information and quoted market prices at May 31, 2010 and is recognized in other comprehensive loss or interest expense in the consolidated financial statements. As part of the re-designation, the fair value of the interest rate swap arrangement totaling approximately $23.2 million was frozen in other comprehensive income. During the three and six months ended May 31, 2010, the Company amortized approximately $1.2 million and $2.5 million, respectively, of this balance which is reflected in interest expense in the consolidated statement of operations. During fiscal 2010, the Company expects to amortize up to approximately $4.7 million of this balance in interest expense in the consolidated statement of operations. The Company plans to wait for a situation that it believes optimal to enter into a refinancing.

The Company’s wholly-owned subsidiary, Raceway Associates, which owns and operates Chicagoland Speedway and Route 66 Raceway, has the following debt outstanding at May 31, 2010:

	•		A bank term loan (“5.8 percent Bank Loan”) consisting of a construction and mortgage note with an original 20 year term due June 2018, a current interest rate of 5.8 percent and a monthly payment of $48,000 principal and interest. The interest rate and monthly payments will be adjusted on June 1, 2013. At May 31, 2010, outstanding principal on the 5.8 percent Bank Loan was approximately $1.9 million. On June 30, 2010, the Company repaid the outstanding balance on the 5.8 percent Bank Loan.
	•		Revenue bonds payable (“4.8 percent Revenue Bonds”) consisting of economic development revenue bonds issued by the City of Joliet, Illinois to finance certain land improvements. The 4.8 percent Revenue Bonds have an interest rate of 4.8 percent and a monthly payment of $29,000 principal and interest. At May 31, 2010, outstanding principal on the 4.8 percent Revenue Bonds was approximately $1.7 million.
	•		Revenue bonds payable (“6.8 percent Revenue Bonds”) that are special service area revenue bonds issued by the City of Joliet, Illinois to finance certain land improvements. The 6.8 percent Revenue Bonds are billed and paid as a special assessment on real estate taxes. Interest payments are due on a semi-annual basis at 6.8 percent with principal payments due annually. Final maturity of the 6.8 percent Revenue Bonds is January 2012. At May 31, 2010, outstanding principal on the 6.8 percent Revenue Bonds was approximately $1.7 million.

In July 2008, a wholly-owned subsidiary of the Company entered into a construction term loan agreement (“6.3 percent Term Loan”) to finance the construction of the Company’s headquarters building. The 6.3 percent Term Loan has a 25 year term due October 2034, an interest rate of 6.3 percent, and a current monthly payment of approximately $292,000. At May 31, 2010, the outstanding principal on the 6.3 percent Term Loan was approximately $51.1 million.

In January 1999, the Unified Government, issued approximately $71.3 million in taxable special obligation revenue (“TIF”) bonds in connection with the financing of construction of Kansas Speedway. At May 31, 2010, outstanding TIF bonds totaled approximately $64.8 million, net of the unamortized discount, which is comprised of a $15.9 million principal amount, 6.2 percent term bond due December 1, 2017 and $49.7 million principal amount, 6.8 percent term bond due December 1, 2027. The TIF bonds are repaid by the 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 bond financing documents contain various restrictive covenants.

The Company currently has a $300.0 million revolving credit facility (“2006 Credit Facility”) which contains a feature that allows the Company to increase the credit facility to a total of $500.0 million, subject to certain conditions. The 2006 Credit Facility is scheduled to mature in June 2011, and accrues interest at LIBOR plus 30.0-80.0 basis points, based on the Company’s highest debt rating as determined by specified rating agencies. The 2006 Credit Facility contains various restrictive covenants. At May 31, 2010, the Company had approximately $50.0 million outstanding under the Credit Facility. As of July 6, 2010, the Company repaid an additional $50.0 million of the 2006 Credit Facility.

Total interest expense from continuing operations incurred by the Company was approximately $5.5million and $5.1 million for the three months ended May 31, 2009 and 2010, respectively, and approximately $11.8 million and $10.8 million for the six months ended May 31, 2009 and 2010, respectively. Total interest capitalized for the three months ended May 31, 2009 and 2010 was approximately $0.6 million and $0.5 million, respectively, and approximately $1.3 million and $0.8 million for the six months ended May 31, 2009 and 2010, respectively.

Financing costs of approximately $4.3 million and $4.0 million, net of accumulated amortization, have been deferred and are included in other assets at November 30, 2009 and May 31, 2010, respectively. These costs are being amortized on a straight-line method, which approximates the effective yield method, over the life of the related financing.

7. Financial Instruments

Various inputs are considered when determining the carrying values of cash and cash equivalents, accounts receivable, short-term investments, accounts payable, and accrued liabilities which approximate fair value due to the short-term maturities of these assets and liabilities. These inputs are summarized in the three broad levels 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)

At May 31, 2010, the Company had money market funds totaling approximately $55.4 million which are included in cash and cash equivalents in its consolidated balance sheets. All inputs used to determine fair value are considered level 1 inputs.

Fair values of long-term debt are based on quoted market prices at the date of measurement. The Company’s credit facilities approximate fair value as they bear interest rates that approximate market. Fair value related to the interest rate swap is based on quoted market prices and discounted cash flow methodology. These inputs used to determine fair value are considered level 2 inputs. The fair value of the remaining long-term debt, as determined by quotes from financial institutions, was approximately $275.9 million compared to the carrying amount of approximately $272.2 million and approximately $266.5 million compared to the carrying amount of approximately $271.2 million at November 30, 2009 and May 31, 2010, respectively. The Company carries its interest rate swap agreement at its estimated fair value of a liability totaling approximately $26.8 million at May 31, 2010.

The Company had no level 3 inputs as of May 31, 2010.

8. Capital Stock

Stock Purchase Plan

The Company’s approved stock purchase plan (the “Plan”) allows the Company to purchase up to $250.0 million of its outstanding Class A common shares. The timing and amount of any shares repurchased under the Plan will depend on a variety of factors, including price, corporate and regulatory requirements, capital availability and other market conditions. The Plan may be suspended or discontinued at any time without prior notice. No shares have been or will be knowingly purchased from Company insiders or their affiliates.

Since inception of the Plan through May 31, 2010, the Company has purchased 5,099,797 shares of its Class A common shares, for a total of approximately $218.0 million. Included in these totals are the purchases of 185,070 shares of its Class A common shares during the six months ended May 31, 2010, at an average cost of approximately $28.53 per share (including commissions), for a total of approximately $5.3 million. There were no purchases of its Class A common shares pursuant to the Plan during the three months ended May 31, 2010. At May 31, 2010, the Company has approximately $32.0 million remaining repurchase authority under the current Plan.

9. Long-Term Stock Incentive Plan

In May 2010, the Company awarded and issued a total of 35,008 restricted shares of the Company’s Class A common shares to certain officers and managers under the Company’s Long-Term Stock Incentive Plan (the “2006 Plan”). The shares of restricted stock awarded in May 2010, 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 $30.56 per share. In accordance with ASC 718, “Compensation – Stock Compensation” the Company is recognizing stock-based compensation on its restricted shares awarded on the accelerated method over the requisite service period.

10. Income Taxes

As of May 31, 2010, in accordance with ASC 740, “Income Taxes,” the Company has a total liability of approximately $7.3 million for uncertain tax positions, inclusive of tax, interest, and penalties. Of this amount, approximately $5.2 million represents income tax liability for uncertain tax positions related to various federal and state income tax matters. If the accrued liability was de-recognized, approximately $3.4 million of taxes would impact the Company’s consolidated statement of operations as a reduction to its effective tax rate. Included in the balance sheet at May 31, 2010 are approximately $1.8 million of items of which, under existing tax laws, the ultimate deductibility is certain but for which the timing of the deduction is uncertain. Because of the impact of deferred income tax accounting, a deduction in a subsequent period would result in a deferred tax asset. Accordingly, upon de-recognition, the tax benefits associated with the reversal of these timing differences would have no impact, except for related interest and penalties, on the Company’s effective income tax rate.

The Company recognizes interest and penalties related to uncertain tax positions as part of its provision for federal and state income taxes. As of May 31, 2010, the Company has accrued approximately $1.9 million of interest and $0.1 million of penalties related to uncertain tax positions. If the accrued interest was de-recognized, approximately $1.3 million would impact the Company’s consolidated statement of operations as a reduction to its effective tax rate.

Settlement with Internal Revenue Service

Effective May 28, 2009, the Company entered into a definitive settlement agreement (the “Settlement”) with the Internal Revenue Service (the “Service”). The Settlement concludes an examination process the Service opened in fiscal 2002 that challenged the tax depreciation treatment of a significant portion of the Company’s motorsports entertainment facility assets. The Company believes the Settlement reached an appropriate compromise on this issue. As a result of the Settlement, the Company is currently pursuing settlements on similar terms with the appropriate state tax authorities. Based on settlements and ongoing discussions with certain states during the six months ended May 31, 2010, the Company de-recognized potential interest and penalties totaling approximately $6.2 million or $0.13 per diluted share. This de-recognition of interest and penalties was recognized in the income tax expense in the Company’s consolidated statement of operations. Under these terms, the Company expects to pay between $1.0 million and $2.0 million in total to finalize the remaining settlements with various states. The Company believes that it has provided adequate reserves related to these various state matters including interest charges through May 31, 2010, and, as a result, does not expect that such an outcome would have a material adverse effect on results of operations.

Effective Income Tax Rates

The tax treatment of providing a valuation allowance related to losses incurred by our MA equity investment, partially offset by the reduction in income taxes due to the interest income related to the Settlement with the Service, are the principal causes of the decreased and increased effective income tax rate during the three and six months ended May 31, 2009, respectively. The de-recognition of potential interest and penalties associated with the aforementioned state settlements is the principal cause of the reduced effective income tax rate during the three and six months ended May 31, 2010, respectively.

As a result of the above items, the Company’s effective income tax rate (decreased) from the statutory income rate to approximately (3.3) percent and increased from the statutory income rate to approximately 154.0 percent for the three and six months ended May 31, 2009, respectively, and decreased from the statutory income rate to approximately 34.7 percent and 26.8 percent for the three and six months ended May 31, 2010, respectively.

11. 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 the American Historic Racing Motorcycle Association, AMA Pro Racing, the Automobile Racing Club of America, the American Sportbike Racing Association — Championship Cup Series, the Federation Internationale de L’Automobile, the Federation Internationale Motocycliste, Grand American Road Racing Association (“Grand American”), Historic Sportscar Racing, Indy Racing League, National Association for Stock Car Auto Racing (“NASCAR”), National Hot Rod Association (“NHRA”), 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, Grand American and AMA Pro Racing each of which sanctions some of the Company’s principal racing events, are entities controlled by one or more members of the France Family Group which controls approximately 70.0 percent of the combined voting power of the outstanding stock of the Company, as of May 31, 2010, and some members of which serve as directors and officers of the Company. Standard NASCAR sanction agreements require event promoters to pay sanction fees and prize and point fund monies for each sanctioned event conducted. The prize and point fund monies are distributed by NASCAR to participants in the events. Prize and point fund monies paid by the Company to NASCAR and its subsidiaries from continuing operations for disbursement to competitors, which are exclusive of NASCAR and its subsidiaries sanction fees, totaled approximately $29.5 million and $29.2 million for the three months ended May 31, 2009 and 2010, respectively, and $59.4 million and $58.3 million for the six months ended May 31, 2009 and 2010, respectively. There were no prize and point fund monies paid by the Company to NASCAR and its subsidiaries related to the discontinued operations for the three and six months ended May 31, 2009, respectively, and the six months ended May 31, 2010.

Under current agreements, NASCAR contracts directly with certain network providers for television rights to the entire NASCAR Sprint Cup, Nationwide and Camping World Truck series schedules. Event promoters share in the television rights fees in accordance with the provision of the sanction agreement for each NASCAR Sprint Cup, Nationwide and Camping World Truck series event. Under the terms of this arrangement, NASCAR retains 10.0 percent of the gross broadcast rights fees allocated to each NASCAR Sprint Cup, Nationwide and Camping World Truck series event as a component of its sanction fees. 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. 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 from continuing operations received from NASCAR for the NASCAR Sprint Cup, Nationwide and Camping World Truck series events conducted at its wholly-owned facilities, and recorded as part of motorsports related revenue, were approximately $58.4 million and $61.0 million for the three months ended

May 31, 2009 and 2010, respectively, and $122.6 million and $126.1 million for the six months ended May 31, 2009 and 2010, respectively. There were no television broadcast and ancillary rights fees received from NASCAR related to discontinued operations during the three and six months ended May 31, 2009, respectively, and the six months ended May 31, 2010.

12. Commitments and Contingencies

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 the 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, 2010, the Unified Government had approximately $2.6 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 $3.9 million at May 31, 2010. At May 31, 2010, there were no amounts drawn on the standby letters of credit.

Current Litigation

From time to time, the Company is a party to routine litigation incidental to its business. The Company does not believe that the resolution of any or all of such litigation will have a material adverse effect on its financial condition or results of operations.

In addition to such routine litigation incident to its business, the Company was a party to the litigation described below.

In July 2005, Kentucky Speedway, LLC filed a civil action in the Eastern District of Kentucky against NASCAR and the Company which alleged that “NASCAR and ISC have acted, and continue to act, individually and in combination and collusion with each other and other companies that control motorsports entertainment facilities hosting NASCAR NEXTEL Cup Series, to illegally restrict the award of ... NASCAR NEXTEL Cup Series [races].” The complaint was amended in 2007 to seek, in addition to damages, an injunction requiring NASCAR to “develop objective factors for the award of NEXTEL Cup races,” “divestiture of ISC and NASCAR so that the France Family and anyone else does not share ownership of both companies or serve as officers or directors of both companies,” “ISC’s divestiture of at least eight of its 12 racetracks that currently operate a NEXTEL Cup race” and prohibiting further alleged violations of the antitrust laws. The complaint did not ask the court to cause NASCAR to award a NEXTEL Cup race to the Kentucky Speedway. Other than some vaguely conclusory allegations, the complaint failed to specify any specific unlawful conduct by the Company. Pre-trial “discovery” in the case was concluded and based upon all of the factual and expert evidentiary materials adduced the Company was more firmly convinced than ever that the case was without legal or factual merit.

On January 7, 2008, the Company’s position was vindicated when the Federal District Court Judge hearing the case ruled in favor of ISC and NASCAR and entered a judgment which stated that all claims of the plaintiff, Kentucky Speedway, LLC, were thereby dismissed, with prejudice, at the cost of the plaintiff. The Opinion and Order of the court entered on the same day concluded that Kentucky Speedway had failed to make its case.

On January 11, 2008, Kentucky Speedway filed a Notice of Appeal to the United States Court of Appeal for the Sixth Circuit. In a written opinion dated December 11, 2009, the Sixth Circuit Court of Appeals agreed with the District Court that Kentucky Speedway had failed to make out its case and affirmed the judgment of the District Court in favor of us and NASCAR. On December 28, 2009, Kentucky Speedway filed a petition for rehearing with the Sixth Circuit Court of Appeals wherein Kentucky Speedway requested the Sixth Circuit to reconsider its ruling in favor of us and NASCAR. On February 18, 2010, this petition for rehearing was denied. On May 19, 2010, the 90 day period that Kentucky Speedway had to petition the United States Supreme Court for a writ of certiorari expired. Accordingly, this litigation has now concluded.

13. Segment Reporting

The following tables provide segment reporting of the Company for the three and six months ended May 31, 2009 and 2010 (in thousands):

		Three Months Ended May 31, 2009
		Motorsports				All
		Event				Other				Total
Revenues		$	143,170			$	9,361			$	152,531
Depreciation and amortization			16,293				2,196				18,489
Operating income			31,643				70				31,713
Capital expenditures			10,096				11,244				21,340
Total assets			1,710,393				341,479				2,051,872
Equity investments			18,695				130				18,825

		Three Months Ended May 31, 2010
		Motorsports				All
		Event				Other				Total
Revenues		$	132,912			$	9,945			$	142,857
Depreciation and amortization			16,349				2,076				18,425
Operating income			21,171				132				21,303
Capital expenditures			22,041				5,208				27,249
Total assets			1,648,836				299,938				1,948,774
Equity investments			—				26,673				26,673

		Six Months Ended May 31, 2009
		Motorsports				All
		Event				Other				Total
Revenues		$	302,851			$	16,620			$	319,471
Depreciation and amortization			32,443				4,437				36,880
Operating income (loss)			82,494				(786	)			81,708
Capital expenditures			23,640				17,742				41,382

		Six Months Ended May 31, 2010
		Motorsports				All
		Event				Other				Total
Revenues		$	278,471				16,892				295,363
Depreciation and amortization			32,584				4,200				36,784
Operating income (loss)			62,093				(1,038	)			61,055
Capital expenditures			31,924				19,225				51,149

Intersegment revenues were approximately $0.2 million and $0.7 million for the three months ended May 31, 2009 and 2010, respectively, and approximately $1.0 million and $1.2 million for the six months ended May 31, 2009 and 2010, respectively.

14. Condensed Consolidating Financial Statements

In connection with the 2004 Senior Notes, the Company is required to provide condensed consolidating financial information for its subsidiary guarantors. All of the Company’s wholly-owned domestic subsidiaries have, jointly and severally, fully and unconditionally guaranteed, to each holder of 2004 Senior Notes and the trustee under the Indenture for the 2004 Senior Notes, the full and prompt performance of the Company’s obligations under the indenture and the 2004 Senior Notes, including the payment of principal (or premium, if any) and interest on the 2004 Senior Notes, on an equal and ratable basis.

The subsidiary guarantees are unsecured obligations of each subsidiary guarantor and rank equally in right of payment with all senior indebtedness of that subsidiary guarantor and senior in right of payment to all subordinated indebtedness of that subsidiary guarantor. The subsidiary guarantees are effectively subordinated to any secured indebtedness of the subsidiary guarantor with respect to the assets securing the indebtedness.

In the absence of both default and notice, there are no restrictions imposed by the Company’s 2006 Credit Facility, 2004 Senior Notes, or guarantees on the Company’s ability to obtain funds from its subsidiaries by dividend or loan. The Company has not presented separate financial statements for each of the guarantors, because it has deemed that such financial statements would not provide the investors with any material additional information.

Included in the tables below, are condensed consolidating balance sheets as of November 30, 2009 and May 31, 2010, condensed consolidating statements of operations for the three and six months ended May 31, 2009 and 2010, and condensed consolidating statements of cash flows for the six months ended May 31, 2009 and 2010, of: (a) the Parent; (b) the guarantor subsidiaries; (c) the non-guarantor subsidiaries; (d) elimination entries necessary to consolidate Parent with guarantor and non-guarantor subsidiaries; and (e) the Company on a consolidated basis (in thousands).

		Condensed Consolidating Balance Sheet at November 30, 2009
						Combined
		Parent				Guarantor				Non-Guarantor
		Company				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Current assets		$	89,474			$	136,326			$	1,490			$	(9,334	)		$	217,956
Property and equipment, net			30,816				1,321,580				1,240				—				1,353,636
Advances to and investments in subsidiaries			3,227,202				698,362				997				(3,926,561	)			—
Other assets			24,024				313,287				—				—				337,311
Total Assets		$	3,371,516			$	2,469,555			$	3,727			$	(3,935,895	)		$	1,908,903
Current liabilities		$	4,788			$	84,547			$	612			$	23,970			$	113,917
Long-term debt			924,310				330,716				—				(911,233	)			343,793
Deferred income taxes			13,726				233,728				289				—				247,743
Other liabilities			45,374				18,799				—				—				64,173
Total shareholders’ equity			2,383,318				1,801,765				2,826				(3,048,632	)			1,139,277
Total Liabilities and Shareholders’ Equity		$	3,371,516			$	2,469,555			$	3,727			$	(3,935,895	)		$	1,908,903

		Condensed Consolidating Balance Sheet at May 31, 2010
						Combined
		Parent				Guarantor				Non-Guarantor
		Company				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Current assets		$	126,232			$	117,282			$	3,861			$	(10,505	)		$	236,870
Property and equipment, net			35,612				1,339,752				930				—				1,376,294
Advances to and investments in subsidiaries			3,168,530				687,966				4,166				(3,860,662	)			—
Other assets			3,747				331,863				—				—				335,610
Total Assets		$	3,334,121			$	2,476,863			$	8,957			$	(3,871,167	)		$	1,948,774
Current liabilities		$	79,087			$	147,071			$	3,115			$	(14,660	)		$	214,613
Long-term debt			842,088				262,693				3,220				(841,699	)			266,302
Deferred income taxes			28,245				233,729				291				—				262,265
Other liabilities			34,062				14,881				—				—				48,943
Total shareholders’ equity			2,350,639				1,818,489				2,331				(3,014,808	)			1,156,651
Total Liabilities and Shareholders’ Equity		$	3,334,121			$	2,476,863			$	8,957			$	(3,871,167	)		$	1,948,774

		Condensed Consolidating Statement of Operations
		For The Three Months Ended May 31, 2009
						Combined
		Parent				Guarantor				Non-Guarantor
		Company				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Total revenues		$	386			$	177,391			$	30			$	(25,429	)		$	152,378
Total expenses			8,245				137,498				351				(25,429	)			120,665
Operating (loss) income			(7,859	)			39,893				(321	)			—				31,713
Interest and other expense, net			(1,981	)			(55,312	)			(505	)			(4,592	)			(62,390	)
Loss from continuing operations			(6,468	)			(19,809	)			(826	)			(4,592	)			(31,695	)
Net loss			(6,468	)			(19,854	)			(826	)			(4,592	)			(31,740	)

		Condensed Consolidating Statement of Operations
		For The Three Months Ended May 31, 2010
						Combined
		Parent				Guarantor				Non-Guarantor
		Company				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Total revenues		$	682			$	165,148			$	10			$	(23,674	)		$	142,166
Total expenses			7,801				136,482				254				(23,674	)			120,863
Operating (loss) income			(7,119	)			28,666				(244	)			—				21,303
Interest and other income (expense), net			5,372				(44	)			(26	)			(10,880	)			(5,578	)
(Loss) income from continuing operations			(3,523	)			24,935				(270	)			(10,880	)			10,262
Net (loss) income			(3,523	)			24,935				(270	)			(10,880	)			10,262

		Condensed Consolidating Statement of Operations
		For The Six Months Ended May 31, 2009
						Combined
		Parent				Guarantor				Non-Guarantor
		Company				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Total revenues		$	796			$	391,113			$	30			$	(73,442	)		$	318,497
Total expenses			16,348				293,532				351				(73,442	)			236,789
Operating (loss) income			(15,552	)			97,581				(321	)			—				81,708
Interest and other expense , net			5,275				(58,184	)			(334	)			(16,421	)			(69,664	)
(Loss) income from continuing operations			(17,202	)			27,771				(655	)			(16,421	)			(6,507	)
Net (loss) income			(17,202	)			27,684				(655	)			(16,421	)			(6,594	)

		Condensed Consolidating Statement of Operations
		For The Six Months Ended May 31, 2010
						Combined
		Parent				Guarantor				Non-Guarantor
		Company				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Total revenues		$	1,370			$	358,395			$	71			$	(65,644	)		$	294,192
Total expenses			15,614				282,644				523				(65,644	)			233,137
Operating (loss) income			(14,244	)			75,751				(452	)			—				61,055
Interest and other expense , net			2,231				(1,089	)			(52	)			(13,294	)			(12,204	)
(Loss) income from continuing operations			(14,342	)			63,889				(504	)			(13,294	)			35,749
Net (loss) income			(14,342	)			63,842				(504	)			(13,294	)			35,702

		Condensed Consolidating Statement of Cash Flows
		For The Six Months Ended May 31, 2009
						Combined
		Parent				Guarantor				Non-Guarantor
		Company				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Net cash (used in) provided by operating activities		$	(36,773	)		$	145,775			$	1,374			$	(16,456	)		$	93,920
Net cash provided by (used in) investing activities			135,271				(166,752	)			(374	)			16,456				(15,399	)
Net cash used in financing activities			(150,246	)			(859	)			—				—				(151,105	)

		Condensed Consolidating Statement of Cash Flows
		For The Six Months Ended May 31, 2010
						Combined
		Parent				Guarantor				Non-Guarantor
		Company				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Net cash (used in) provided by operating activities		$	(8,115	)		$	158,447			$	602			$	(53,947	)		$	96,987
Net cash provided by (used in) investing activities			60,491				(171,827	)			9				53,947				(57,380	)
Net cash used in financing activities			(30,455	)			(1,090	)			—				—				(31,545	)

PART I. FINANCIAL INFORMATION

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

General

The general nature of our business is a motorsports-themed amusement enterprise, furnishing amusement to the public in the form of motorsports-themed entertainment. We derive 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, net” revenue includes ticket sales for all of our racing events, activities at Daytona 500 EXperience and other motorsports activities and amusements, net of any applicable taxes.

“Motorsports related” revenue primarily includes television and ancillary media rights fees, promotion and sponsorship fees, hospitality rentals (including luxury suites, chalets and the hospitality portion of club seating), advertising revenues, royalties from licenses of our trademarks and track rentals.

“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.

Direct expenses include (i) prize and point fund monies and National Association for Stock Car Auto Racing’s (“NASCAR”) sanction fees, (ii) motorsports related expenses, which include labor, advertising, costs of competition paid to sanctioning bodies other than NASCAR and other expenses associated with the promotion of all of our motorsports events and activities, and (iii) food, beverage and merchandise expenses, consisting primarily of labor and costs of goods sold.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. While our estimates and assumptions are based on conditions existing at and trends leading up to the time the estimates and assumptions are made, actual results could differ materially from those estimates and assumptions. We continually review our accounting policies, how they are applied and how they are reported and disclosed in the financial statements.

The following is a summary of our critical accounting policies and estimates and how they are applied in the preparation of the financial statements.

Basis of Presentation and Consolidation. We consolidate all entities we control by ownership of a majority voting interest and variable interest entities for which we are the primary beneficiary. Our judgment in determining if we are the primary beneficiary of a variable interest entity includes assessing our level of involvement in establishing the entity, determining whether we provide more than half of any management, operational or financial support to the entity, and determining if we absorb the majority of the entity’s expected losses or returns.

We apply the equity method of accounting for our investments in joint ventures and other investees whenever we can exert significant influence on the investee but do not have effective control over the investee. Our consolidated net income includes our share of the net earnings or losses from these investees. Our judgment regarding the level of influence over each equity method investee includes considering factors such as our ownership interest, board representation and policy making decisions. We periodically evaluate these equity investments for potential impairment where a decline in value is determined to be other than temporary. We discontinue applying the equity method should our investment(s) (and net advances) be reduced to zero and would not provide for additional losses unless and until the carrying value is increased from additional investments by us or as a result of future operating profits, if any. We eliminate all significant intercompany transactions from financial results.

Revenue Recognition. Advance ticket sales and event-related revenues for future events are deferred until earned, which is generally once the events are conducted. The recognition of event-related expenses is matched with the recognition of event-related revenues.

NASCAR contracts directly with certain network providers for television rights to the entire NASCAR Sprint Cup, Nationwide and Camping World Truck series schedules. Event promoters share in the television rights fees in accordance with the provision of the sanction agreement for each NASCAR Sprint Cup, Nationwide and Camping World Truck series event. Under the terms of this arrangement, NASCAR retains 10.0 percent of the gross broadcast rights fees allocated to each NASCAR Sprint Cup, Nationwide and Camping World Truck series event as a component of its sanction fees. 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. Ultimately, the promoter retains 65.0 percent of the net cash proceeds from the gross broadcast rights fees allocated to the event.

Our revenues from marketing partnerships are paid in accordance with negotiated contracts, with the identities of partners and the terms of sponsorship changing from time to time. Some of our marketing partnership agreements are for multiple facilities and/or events and include multiple specified elements, such as tickets, hospitality chalets, suites, display space and signage for each included event. The allocation of such marketing partnership revenues between the multiple elements, events and facilities is based on relative fair value. The sponsorship revenue allocated to an event is recognized when the event is conducted.

Revenues and related costs from the sale of merchandise to retail customers, internet sales and direct sales to dealers are recognized at the time of sale.

Accounts Receivable. We regularly review the collectability of our accounts receivable. An allowance for doubtful accounts is estimated based on historical experience of write-offs and future expectations of conditions that might impact the collectability of accounts.

Business Combinations. All business combinations are accounted for under the acquisition method. Whether net assets or common stock is acquired, fair values are determined and assigned to the purchased assets and assumed liabilities of the acquired entity. The excess of the cost of the acquisition over fair value of the net assets acquired (including recognized intangibles) is recorded as goodwill. Business combinations involving existing motorsports entertainment facilities commonly result in a significant portion of the purchase price being allocated to the fair value of the contract-based intangible asset associated with long-term relationships manifest in the sanction agreements with sanctioning bodies, such as NASCAR, Grand American and/or Indy Racing League (“IRL”). The continuity of sanction agreements with these bodies has historically enabled the facility operator to host motorsports events year after year. While individual sanction agreements may be of terms as short as one year, a significant portion of the purchase price in excess of the fair value of acquired tangible assets is commonly paid to acquire anticipated future cash flows from events promoted pursuant to these agreements which are expected to continue for the foreseeable future and therefore, in accordance with Accounting Standards Codification (“ASC”) 805-50, “Business Combinations,” are recorded as indefinite-lived intangible assets recognized apart from goodwill.

Capitalization and Depreciation Policies. Property and equipment are stated at cost. Maintenance and repairs that neither materially add to the value of the property nor appreciably prolong its life are charged to expense as incurred. Depreciation and amortization for financial statement purposes are provided on a straight-line basis over the estimated useful lives of the assets. When we construct assets, we capitalize costs of the project, including, but not limited to, certain pre-acquisition costs, permitting costs, fees paid to architects and contractors, certain costs of our design and construction subsidiary, property taxes and interest.

We must make estimates and assumptions when accounting for capital expenditures. Whether an expenditure is considered an operating expense or a capital asset is a matter of judgment. When constructing or purchasing assets, we must determine whether existing assets are being replaced or otherwise impaired, which also is a matter of judgment. Our depreciation expense for financial statement purposes is highly dependent on the assumptions we make about our assets’ estimated useful lives. We determine the estimated useful lives based upon our experience with similar assets, industry, legal and regulatory factors, and our expectations of the usage of the asset. Whenever events or circumstances occur which change the estimated useful life of an asset, we account for the change prospectively.

Interest costs associated with major development and construction projects are capitalized as part of the cost of the project. Interest is typically capitalized on amounts expended using the weighted-average cost of our outstanding borrowings, since we typically do not borrow funds directly related to a development or construction project. We capitalize interest on a project when development or construction activities begin, and cease when such activities are substantially complete or are suspended for more than a brief period.

Impairment of Long-lived Assets, Goodwill and Other Intangible Assets. Our consolidated balance sheets include significant amounts of goodwill and other intangible assets and long-lived assets which could be subject to impairment.

•

In fiscal 2009, we recorded a before-tax charge of approximately $16.7 million as an impairment of long-lived assets primarily attributable to the reduction of the carrying value of our Staten Island property and impairment charges relating to certain other long-lived assets.

As of May 31, 2010, goodwill and other intangible assets and property and equipment accounts for approximately $1,673.7 million, or 85.9 percent of our total assets. We account for our goodwill and other intangible assets in accordance with ASC 350 and for our long-lived assets in accordance with ASC 360.

We follow applicable authoritative guidance on accounting for goodwill and other intangible assets which specifies, among other things, non-amortization of goodwill and other intangible assets with indefinite useful lives and requires testing for possible impairment, either upon the occurrence of an impairment indicator or at least annually. We complete our annual testing in our fiscal fourth quarter, based on assumptions regarding our future business outlook and expected future discounted cash flows attributable to such assets (using the fair value assessment provision of applicable authoritative guidance), supported by quoted market prices or comparable transactions where available or applicable.

Our latest annual assessment of goodwill and other intangible assets in the fourth quarter of fiscal 2009 indicated there had been no impairment and that no reporting units were at risk of failing step one of the goodwill impairment test. In connection with our fiscal 2009 assessment of goodwill and intangible assets for possible impairment we used the methodology described above.

We believe our methods used to determine fair value and evaluate possible impairment were appropriate, relevant, and represent methods customarily available and used for such purposes. Despite the current adverse economic trends, particularly credit availability, the decline in consumer confidence and the rise in unemployment, which have recently contributed to the decrease in attendance related as well as corporate partner revenues for certain of our motorsports events during fiscal 2009, we believe there has been no significant change in the long-term fundamentals of our ongoing motorsports event business. The Company believes its present operational and cash flow outlook further support its conclusion. While the Company continues to review and analyze many factors that can impact its business prospects in the future, its analysis is subjective and is based on conditions existing at, and trends leading up to, the time the estimates and assumptions are made. Different conditions or assumptions, or changes in cash flows or profitability, if significant, could have a material adverse effect on the outcome of the impairment evaluation and the Company’s future condition or results of operations.

In addition, our growth strategy includes investing in certain joint venture opportunities. In these equity investments we exert significant influence on the investee but do not have effective control over the investee, which adds an additional element of risk that can adversely impact our financial position and results of operations.

Self-Insurance Reserves. We use a combination of insurance and self-insurance for a number of risks including general liability, workers’ compensation, vehicle liability and employee-related health care benefits. Liabilities associated with the risks that we retain are estimated by considering various historical trends and forward-looking assumptions related to costs, claim counts and payments. The estimated accruals for these liabilities could be significantly affected if future occurrences and claims differ from these assumptions and historical trends.

Income Taxes. The tax law requires that certain items be included in our tax return at different times than when these items are reflected in our consolidated financial statements. Some of these differences are permanent, such as expenses not deductible on our tax return. However, some differences reverse over time, such as depreciation expense, and these temporary differences create deferred tax assets and liabilities. Our estimates of deferred income taxes and the significant items giving rise to deferred tax assets and liabilities reflect our assessment of actual future taxes to be paid on items reflected in our financial statements, giving consideration to both timing and probability of realization. Actual income taxes could vary significantly from these estimates due to future changes in income tax law or changes or adjustments resulting from final review of our tax returns by taxing authorities, which could also adversely impact our cash flow.

In the ordinary course of business, there are many transactions and calculations where the ultimate tax outcome is uncertain. Accruals for uncertain tax positions are provided for in accordance with the requirements of ASC 740, “Income Taxes.” Under this guidance, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50.0 percent likelihood of being realized upon the ultimate settlement. This interpretation also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and income tax disclosures. Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns. Although we believe the estimates are reasonable, no assurance can be given that the final outcome of these matters will not be different than what is reflected in the historical income tax provisions and accruals. Such differences could have a material impact on the income tax provision and operating results in the period in which such determination is made.

Derivative Instruments. From time to time, we utilize derivative instruments in the form of interest rate swaps and locks to assist in managing our interest rate risk. We do not enter into any interest rate swap or lock derivative instruments for trading purposes. We account for the interest rate swaps and locks in accordance with ASC 815, “Derivatives and Hedging.”

Contingent Liabilities. Our determination of the treatment of contingent liabilities in the financial statements is based on our view of the expected outcome of the applicable contingency. In the ordinary course of business, we consult with legal counsel on matters related to litigation and other experts both within and outside our Company. We accrue a liability if the likelihood of an adverse outcome is probable and the amount of loss is reasonably estimable. We disclose the matter but do not accrue a liability if either the likelihood of an adverse outcome is only reasonably possible or an estimate of loss is not determinable. Legal and other costs incurred in conjunction with loss contingencies are expensed as incurred.

Equity and Other Investments

Hollywood Casino at Kansas Speedway

On December 1, 2009, 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 subsidiary of ISC, was selected by the Kansas Lottery Gaming Facility Review Board to develop and operate a gaming facility in the Northeast Zone (Wyandotte County, Kansas). On February 12, 2010, Kansas Entertainment received the final approval under the Kansas Expanded Lottery Act, along with its gaming license from the Kansas Racing and Gaming Commission. Construction of the Hollywood-themed and branded entertainment destination facility began in April 2010 with a planned opening in the first half of 2012 (See “Future Liquidity – Hollywood Casino at Kansas Speedway”).

We have accounted for Kansas Entertainment as an equity investment in our financial statements as of May 31, 2010. Our 50.0 percent portion of Kansas Entertainment’s net loss is approximately $0.5 million and $1.5 million, for the three and six months ended May 31, 2010, related to certain start up costs, and is included in equity in net loss from equity investments in our consolidated statements of operations. There were no operations included in our consolidated statements of operations in the same period in fiscal 2009.

Motorsports Authentics

We are partners with Speedway Motorsports, Inc. in a 50/50 joint venture, SMISC, LLC, which, through its wholly owned subsidiary Motorsports Authentics, LLC conducts business under the name Motorsports Authentics (“MA”). MA designs, promotes, markets and distributes motorsports licensed merchandise.

In fiscal 2009, MA management and ownership considered various approaches to optimize performance in MA’s various distribution channels. As the challenges were assessed, it became apparent that there was significant risk in future business initiatives in mass apparel, memorabilia and other yet to be developed products. These initiatives had previously been deemed achievable and were included in projections that supported the carrying value of inventory, goodwill and other intangible assets on MA’s balance sheet. This analysis, combined with a long-term macroeconomic outlook that was less robust than previously expected, triggered MA’s review of certain assets under ASC 350 and ASC 360 and our evaluation under ASC 320-10.

In the fiscal third quarter 2009, MA, suffering financial stress from the recession, ceased paying certain guaranteed royalties under several license agreements where estimated royalties payable based on projected sales were less than stipulated guaranteed minimum royalties payable (“unearned royalties”). All earned royalties that were due have been paid. MA had received notices from certain licensors alleging default under the license agreements should MA not pay unearned royalties within stipulated cure periods.

As a result of the foregoing which triggered our evaluation performed under ASC 320-10 we recognized significant impairments of our equity investment in MA during the second and fourth quarters of fiscal 2009, resulting in a reduction to the carrying value of our investment in MA to zero at November 30, 2009. MA’s management, with the assistance of an independent appraisal firm, completed their review in the fourth quarter of fiscal 2009, concluding that the fair value of MA’s goodwill and intangible assets should be reduced to zero.

Going into fiscal 2010, MA management and ownership continued to explore business strategies in conjunction with certain motorsports industry stakeholders that allow the possibility for MA to operate profitably in the future. As with any business in this adverse economic environment, management must find the optimal business model for long-term viability. In addition to revisiting the business vision for MA, management, with support of ownership, has undertaken certain initiatives to improve inventory controls and

buying cycles, as well as implemented changes to make MA a more efficiently operated and profitable company. We believe a revised MA business vision, which includes the successful resolution of license agreement terms and favorable license terms in the future, along with focus on core competencies, streamlined operations, reduced operating costs and inventory risk, are necessary for MA to survive as a profitable operation in the future.

In July 2010, industry stakeholders have created the NASCAR Teams Licensing Trust (“Trust”) that is represented by a Board of Directors that includes representatives from NASCAR, the sanctioning body, and from 11 participating NASCAR Teams. Under this new agreement, the Trust brings a new structure to the licensing business that will be more efficient for the industry. The benefit to the licensees is a more focused and streamlined licensing business that will reduce cost, foster more efficient administrative processes and allow for more cohesive retail and marketing strategies.

The Trust will represent four key categories — die-cast, toys, apparel and trackside retail rights — and will grant the rights of any NASCAR driver that is participating in the licensing categories included in the Trust. This should allow the industry to more efficiently manage costs and increase revenues, while providing a wider selection of products for fans.

Concurrent with the creation of the Trust, MA management, ownership and industry stakeholders negotiated MA’s release from future guaranteed minimum royalties as well as the current unearned guaranteed minimum royalties payable to NASCAR team licensors. With respect to the one agreement secured by parent company guarantees, MA and the parent companies negotiated a settlement amount to eliminate future guaranteed minimum royalties.

As a result of the settlement, our remaining guaranty exposure, to one NASCAR team licensor, has been reduced to approximately $5.5 million and will be satisfied upon MA making certain payments to the team through January 2013. While it is possible that some obligation under this guarantee may occur in the future, the amount we ultimately could pay, if any, cannot be estimated at this time. In any event, we do not believe that the ultimate financial outcome will have a material impact on our financial position or results of operations.

Our 50.0 percent portion of Motorsports Authentics’ net loss from operations, including the previously discussed impairment recognized in the second quarter of fiscal 2009, are approximately $57.3 million and approximately $58.9 million, for the three month and six month periods ended May 31, 2009, and are included in equity in net income (loss) from equity investments in our consolidated statements of operations. Under equity method accounting we discontinued applying the equity method since the carrying value of our investment in MA was zero November 30, 2009 and May 31, 2010. Based on this, we did not recognize any net loss from operations of MA during the three and six months ended May 31, 2010, respectively.

Stock Purchase Plans

An important component of our capital allocation strategy is returning capital to shareholders. We have solid operating margins that generate substantial operating cash flow. Using these internally generated proceeds, we have returned a significant amount of capital to shareholders primarily through our share repurchase program.

Our approved stock purchase plan (the “Plan”) allows us to purchase up to $250.0 million of its outstanding Class A common shares. The timing and amount of any shares repurchased under the Plan will depend on a variety of factors, including price, corporate and regulatory requirements, capital availability and other market conditions. The Plan may be suspended or discontinued at any time without prior notice. No shares have been or will be knowingly purchased from our insiders or their affiliates.

Since inception of the Plan through May 31, 2010, we have purchased 5,099,797 shares of our Class A common shares, for a total of approximately $218.0 million. Included in these totals are the purchases of 185,070 shares of our Class A common shares during the six months ended May 31, 2010, at an average cost of approximately $28.53 per share (including commissions), for a total of approximately $5.3 million. There were no purchases of its Class A common shares pursuant to the Plan during the three months ended May 31, 2010. At May 31, 2010, we have approximately $32.0 million remaining repurchase authority under the current Plan.

Income Taxes

Settlement with Internal Revenue Service

Effective May 28, 2009, we entered into a definitive settlement agreement (the “Settlement”) with the Internal Revenue Service (the “Service”). The Settlement concludes an examination process the Service opened in fiscal 2002 that challenged the tax depreciation treatment of a significant portion of our motorsports entertainment facility assets. We believe the Settlement reached an appropriate compromise on this issue. As a result of the Settlement, we are currently pursuing settlements on similar terms with the appropriate state tax authorities. Based on settlements and ongoing discussions with certain states, during the six months ended May 31, 2010 we

de-recognized potential interest and penalties totaling approximately $6.2 million or $0.13 per diluted share. This de-recognition of interest and penalties was recognized in the income tax expense in our consolidated statement of operations. Under these terms, we expect to pay between $1.0 million and $2.0 million in total to finalize the remaining settlements with various states. We believe that we have provided adequate reserves related to these various state matters including interest charges through May 31, 2010, and, as a result, do not expect that such an outcome would have a material adverse effect on results of operations.

Effective Income Tax Rates

The tax treatment of providing a valuation allowance related to losses incurred by our MA equity investment, partially offset by the reduction in income taxes due to the interest income related to the Settlement with the Service, are the principal causes of the decreased and increased effective income tax rate during the three and six months ended May 31, 2009, respectively. The de-recognition of potential interest and penalties associated with the aforementioned state settlements is the principal cause of the reduced effective income tax rate during the three and six months ended May 31, 2010, respectively.

As a result of the above items, our effective income tax rate (decreased) from the statutory income rate to approximately (3.3) percent and increased from the statutory income rate to approximately 154.0 percent for the three and six months ended May 31, 2009, respectively, and decreased from the statutory income rate to approximately 34.7 percent and 26.8 percent for the three and six months ended May 31, 2010, respectively.

Future Trends in Operating Results

Economic conditions, including those affecting disposable consumer income and corporate budgets such as employment, business conditions, interest rates and taxation rates, may impact our ability to sell tickets to our events and to secure revenues from corporate marketing partnerships. We believe that adverse economic trends, particularly credit availability, the rise in unemployment and the decline in consumer confidence, significantly contributed to the decrease in attendance for certain of our motorsports entertainment events during fiscal 2009. We have seen many of these trends persist in 2010 and expect they will continue to adversely impact our business, which negatively impacts our attendance-related as well as corporate partner revenues.

Admissions

An important component of our operating strategy has been our long-standing practice of focusing closely on supply and demand when evaluating ticket pricing and adjusting capacity at our facilities. By effectively managing ticket prices and seating capacity, we can stimulate ticket renewals and advance sales. Advance ticket sales result in earlier cash flow and reduce the potential negative impact of actual and forecasted inclement weather on ticket sales. With any ticketing program, we first examine our pricing structure to ensure that prices are in line with market demand. When determined necessary, as has been the case during this period of sustained economic downturn, we will adjust pricing on inventory.

While we have not had a sell-out at any of our events since February 2008, we have had capacity crowds at certain events since then. We have also experienced a compressed sales cycle with our customers making their ticket purchasing decisions closer to the event date. To address this and to be sensitive to the economic challenges that many of our fans face, in 2009, we lowered prices on over 150,000 seats, or 15.0 percent of our grandstand capacity for NASCAR Sprint Cup events across the Company. For our 2010 events, we expanded our reduced pricing to approximately 500,000 seats throughout our facilities as well as unbundling a substantial number of tickets to better respond to consumer demand. In addition to pricing, we are providing our customers that renew early various incentives as well as special access privileges. We have also created ticket packages that provide added value opportunities, making it more affordable for our fans to attend live events. As we want to develop the next generation motorsports fan, we have expanded our youth initiative to encourage families to attend.

We believe, based on our research and analysis, our pricing levels and initiatives are on target with demand. It is important that we maintain the integrity of our pricing model by rewarding our best and loyal customers. We do not adjust pricing inside of the sales cycle and avoid rewarding last-minute ticket buyers by discounting tickets. Further, we limit and monitor the availability of promotional tickets. All of these factors could have a detrimental effect on our pricing model and long-term value of our business. We believe it is more important to encourage advance ticket sales and maintain price integrity to achieve long-term growth than to capture short-term incremental revenue.

Corporate Partnerships

With regard to corporate marketing partner relationships, we believe that our presence in key markets, impressive portfolio of events and attractive fan demographics are beneficial and help to mitigate adverse economic trends as we continue to pursue renewal and expansion of existing marketing partnerships and establish new corporate relationships.

Due to the current economic conditions which began to deteriorate in the latter part of fiscal 2008, and extended throughout fiscal 2009, we experienced a slowdown in corporate spending. In addition, the process of securing sponsorship deals has become more time consuming as corporations are more closely scrutinizing their marketing budgets. While we expect these trends to continue throughout 2010, we are seeing encouraging signs of interest from corporate partners. We have recently signed deals with Ruiz Foods, Papa John’s Pizza, and Toyota Motor Sales. We have also signed a letter of intent with Lowe’s for its Kobalt Tools brand to serve as the title sponsor for the Phoenix NASCAR Sprint Cup Series event in November. Royal Purple Synthetic Oil has signed a multiyear deal to be the title sponsor for the NASCAR Nationwide Series event in May held at Darlington.

We continue to believe that revenues from our corporate marketing relationships will grow over the long term, contributing to strong earnings and cash flow stability and predictability.

Television Broadcast and Ancillary Media Rights

Domestic broadcast and ancillary media rights fees revenues are an important component of our revenue and earnings stream. Starting in 2007, NASCAR entered into new combined eight-year agreements with FOX, ABC/ESPN, TNT and SPEED for the domestic broadcast and related rights for its three national touring series — Sprint Cup, Nationwide and Camping World Truck. The agreements total approximately $4.5 billion over the eight-year period from 2007 through 2014. This results in an approximate $560.0 million gross average annual rights fee for the industry, a more than 40.0 percent increase over the previous contract average of $400.0 million annually. The industry rights fees will be approximately $545.0 million for 2010, and will increase, on average, by approximately three percent per year through the 2014 season. The annual increase is expected to vary between two and four percent per year over the period.

FOX and TNT have been strong supporters of NASCAR racing since 2001, and both have played a major role in the sport’s climb in popularity. We have, and expect to continue to see, ongoing broadcast innovation in their coverage of NASCAR racing events. Also notable was the return of ESPN to the sport in 2007, which it helped build throughout the 1980s and 1990s. ESPN’s coverage and weekly ancillary NASCAR-related programming continues to promote the sport across various properties. Further, ESPN broadcasts substantially all of the NASCAR Nationwide Series, providing that series with the continuity and promotional support that will allow it to flourish. We are pleased with ABC’s recent decision to broadcast the majority of its NASCAR Sprint Cup series events on its cable channel, ESPN. ESPN, with a subscriber base at approximately 100 million, has the proven ability to attract younger viewers as well as create more exposure. Also, cable broadcasters can support a higher investment through subscriber fees not available to traditional networks, which is a potential benefit when NASCAR negotiates the next consolidated domestic broadcast and ancillary media rights contract.

While the media landscape continues to evolve, we continue to believe NASCAR’s position in the sports and entertainment landscape remains strong. It is expected that ratings will fluctuate year to year. The long-term ratings health of NASCAR Sprint Cup series events remains robust as they are the second highest-rated regular season sport on television. In addition, the NASCAR Nationwide series is the second highest rated motorsports series on television and the NASCAR Camping World Truck series is the third highest rated motorsports series on cable television.

These long-term contracts give significant cash flow visibility to us, race teams and NASCAR over the contract term. Television broadcast and ancillary rights fees from continuing operations received from NASCAR for the NASCAR Sprint Cup, Nationwide and Camping World Truck series events conducted at our wholly-owned facilities under these agreements, and recorded as part of motorsports related revenue, were approximately $58.4 million and $61.0 million for three months ended May 31, 2009 and 2010, respectively, and $122.6 million and $126.1 million for the six months ended May 31, 2009 and 2010, respectively. Operating income generated by these media rights were approximately $42.8 million and $45.0 million for the three months ended May 31, 2009 and 2010, respectively, and $90.0 million and $92.6 million for the six months ended May 31, 2009 and 2010, respectively.

As media rights revenues fluctuate so do the variable costs tied to the percentage of broadcast rights fees required to be paid to competitors as part of NASCAR Sprint Cup, Nationwide and Camping World Truck series sanction agreements. NASCAR prize and point fund monies, as well as sanction fees (“NASCAR direct expenses”), are outlined in the sanction agreement for each event and are negotiated in advance of an event. As previously discussed, included in these NASCAR direct expenses are 25.0 percent of the gross domestic television broadcast rights fees allocated to our NASCAR Sprint Cup, Nationwide and Camping World Truck series events, as part of prize and point fund money (See “Critical Accounting Policies and Estimates – Revenue Recognition”). These annually negotiated contractual amounts paid to NASCAR contribute to the support and growth of the sport of NASCAR stock car racing through payments to the teams and sanction fees paid to NASCAR. As such, we do not expect these costs to materially decrease in the future as a percentage of admissions and motorsports related income. We anticipate any operating margin improvement to come primarily from economies of scale and controlling costs in areas such as motorsports related and general and administrative expenses.

Sanctioning Bodies

Our success has been, and is expected to remain, dependent on maintaining good working relationships with the organizations that sanction events at our facilities, particularly with NASCAR, whose sanctioned events at our wholly-owned facilities accounted for approximately 89.7 percent of our revenues in fiscal 2009. NASCAR continues to entertain and discuss proposals from track operators regarding potential realignment of NASCAR Sprint Cup Series dates to more geographically diverse and potentially more desirable markets where there may be greater demand, resulting in an opportunity for increased revenues to the track operators. NASCAR has previously approved realignments of certain NASCAR Sprint Cup and other events at our facilities. We believe that these realignments have provided, and will continue to provide, incremental net positive revenue and earnings as well as further enhance the sport’s exposure in highly desirable markets, which we believe benefits the sport’s fans, teams, sponsors and television broadcast partners as well as promoters. We currently expect to petition NASCAR to realign a Sprint Cup and certain other support events to Kansas Speedway for the 2011 racing season.

Capital Improvements

From a capital expenditure at existing facilities standpoint, we anticipate annual capital spending levels to be in the range of our annual expense for depreciation and amortization. Our top priority in capital expenditures will always be fan and competitor safety, as well as critical maintenance and regulatory compliance. In addition, as we compete for the consumers’ discretionary dollar with other entertainment options, we may make prudent enhancements to our facilities with the intention of improving the guest experience to keep the top line revenues from weakening. Major examples of these efforts include:

	Fiscal 2008
	•		We installed track lighting at Chicagoland as well as improved certain electrical infrastructure in certain camping areas. In addition to enhancing the guest experience, we now have the flexibility to run events later in the day in the event of inclement weather;
	•		We repaved Darlington Raceway (“Darlington”) and constructed a tunnel in Turn 3 that provides improved access for fans and allows emergency vehicles to easily enter and exit the infield area of the track. These collective projects mark the largest one-time investment in the 50-year history of the storied South Carolina facility;
	•		We enhanced seating at Michigan International Speedway (“Michigan”) to provide wider seats, seatbacks and more leg room for fans. We also added incremental camping capacity and new shower/restroom facilities for our on-site overnight guests, as well as installed a state-of-the-art 110-foot, three-sided LED scoreboard for fans to more easily follow the on-track competition. Finally, we added additional branded way-finding signage to help pedestrians, motorists and campers find their way in, out and around the 1,400-acre racetrack property; and
	•		We constructed new media centers at Watkins Glen International (“Watkins Glen”) and Homestead, which we believe increased appeal to media content providers, sports journalists, racing team owners and drivers and others involved in the motorsports industry.
	Fiscal 2009
	•		We enhanced the fan experience in the fronstretch grandstand seats at Daytona by replacing bench seats with new wider stadium style seats and greater legroom
	•		We completed a multi-phased project at Michigan to improve facility way finding and branding signage. In addition, to enhance fan enjoyment we updated the PA system throughout the grandstands at Michigan.
	•		We constructed a new leader board at Homestead, which is the prototype for future tracks.
	Fiscal 2010
	•		We constructed a new media center at Michigan as part of the terrace suite redevelopment project which we believe has increased appeal to media content providers, sports journalists, racing team owners and drivers and others involved in the motorsports industry;. To further enhance our guest experience, we are made further grandstand enhancements at Michigan to provide wider seats, seatbacks and more leg room for fans.
	•		We made frontstretch fan improvements and superstretch hospitality improvements at Daytona which included the addition of the Superstretch Fan Zone and improved tram infrastructure. In addition, we constructed a new 1/4 mile Flat Track facility which hosted successful AMA motorcycle events this spring.
	•		We completed the first phase of a major seat enhancement project at Talladega by installing new wider stadium style seats and increased leg room. Phase II is underway and will be completed for the fall event weekend.
	•		We have constructed a new state of the art LED leader board and video screens at Richmond.

In addition, for fiscal 2010 we anticipate capital spending on a variety of other projects.

Growth Strategies

Our growth strategies also include exploring ways to grow our businesses through acquisitions, developments and joint ventures. This has most recently been demonstrated through the acquisitions of the additional interests in Raceway Associates, owner and operator of Chicagoland and Route 66, and our planned real estate development joint ventures (see “Hollywood Casino at Kansas Speedway” and “Daytona Development Project”).

Current Litigation

From time to time, we are a party to routine litigation incidental to our business. We does not believe that the resolution of any or all of such litigation will have a material adverse effect on its financial condition or results of operations.

In addition to such routine litigation incident to its business, we were a party to the litigation described below.

In July 2005, Kentucky Speedway, LLC filed a civil action in the Eastern District of Kentucky against NASCAR and us which alleged that “NASCAR and ISC have acted, and continue to act, individually and in combination and collusion with each other and other companies that control motorsports entertainment facilities hosting NASCAR NEXTEL Cup Series, to illegally restrict the award of ... NASCAR NEXTEL Cup Series [races].” The complaint was amended in 2007 to seek, in addition to damages, an injunction requiring NASCAR to “develop objective factors for the award of NEXTEL Cup races,” “divestiture of ISC and NASCAR so that the France Family and anyone else does not share ownership of both companies or serve as officers or directors of both companies,” “ISC’s divestiture of at least eight of its 12 racetracks that currently operate a NEXTEL Cup race” and prohibiting further alleged violations of the antitrust laws. The complaint did not ask the court to cause NASCAR to award a NEXTEL Cup race to the Kentucky Speedway. Other than some vaguely conclusory allegations, the complaint failed to specify any specific unlawful conduct by us. Pre-trial “discovery” in the case was concluded and based upon all of the factual and expert evidentiary materials adduced we were more firmly convinced than ever that the case was without legal or factual merit.

On January 7, 2008, our position was vindicated when the Federal District Court Judge hearing the case ruled in favor of ISC and NASCAR and entered a judgment which stated that all claims of the plaintiff, Kentucky Speedway, LLC, were thereby dismissed, with prejudice, at the cost of the plaintiff. The Opinion and Order of the court entered on the same day concluded that Kentucky Speedway had failed to make its case.

On January 11, 2008, Kentucky Speedway filed a Notice of Appeal to the United States Court of Appeal for the Sixth Circuit. In a written opinion dated December 11, 2009, the Sixth Circuit Court of Appeals agreed with the District Court that Kentucky Speedway had failed to make out its case and affirmed the judgment of the District Court in favor of us and NASCAR. On December 28, 2009, Kentucky Speedway filed a petition for rehearing with the Sixth Circuit Court of Appeals wherein Kentucky Speedway requested the Sixth Circuit to reconsider its ruling in favor of us and NASCAR. On February 18, 2010, this petition for rehearing was denied. On May 19, 2010, the 90 day period that Kentucky Speedway had to petition the United States Supreme Court for a writ of certiorari expired. Accordingly, this litigation has now concluded.

Postponement and/or Cancellation of Major Motorsports Events

We promote outdoor motorsports entertainment events. Weather conditions affect sales of, among other things, tickets, food, drinks and merchandise at these events. Poor weather conditions prior to an event, or even the forecast of poor weather conditions, could have a negative impact on us, particularly for walk-up ticket sales to events which are not sold out in advance. If an event scheduled for one of our facilities is delayed or postponed because of weather or other reasons such as, for example, the general postponement of all major sporting events in the United States following the September 11, 2001 terrorism attacks, we could incur increased expenses associated with conducting the rescheduled event, as well as possible decreased revenues from tickets, food, drinks and merchandise at the rescheduled event. If such an event is cancelled, we would incur the expenses associated with preparing to conduct the event as well as losing the revenues, including any live broadcast revenues, associated with the event, to the extent such losses were not covered by insurance.

Seasonality and Quarterly Results

We derive most of our income from a limited number of NASCAR-sanctioned races. As a result, our business has been, and is expected to remain, highly seasonal based on the timing of major racing events. For example, in fiscal years 2008 and prior, one of our NASCAR Sprint Cup races was traditionally held on the Sunday preceding Labor Day. Accordingly, the revenues and expenses for that race and/or the related supporting events may be recognized in either the fiscal quarter ending August 31 or the fiscal quarter ending November 30.

Future schedule changes as determined by NASCAR or other sanctioning bodies, as well as our request for event realignment or the acquisition of additional, or divestiture of existing, motorsports facilities could impact the timing of our major events in comparison to prior or future periods.

Because of the seasonal concentration of racing events, the results of operations for the three and six month periods ended May 31, 2009 and 2010 are not indicative of the results to be expected for the year.

GAAP to Non-GAAP Reconciliation

The following financial information is presented below using other than U.S. generally accepted accounting principles (“non-GAAP”), and is reconciled to comparable information presented using GAAP. Non-GAAP net income and diluted earnings per share below are derived by adjusting amounts determined in accordance with GAAP for certain items presented in the accompanying selected operating statement data, net of taxes.

We believe such non-GAAP information is useful and meaningful, and is used by investors to assess our core operations, which consist of the ongoing promotion of racing events at our major motorsports entertainment facilities. Such non-GAAP information identifies and separately displays the equity investment earnings and losses and adjusts for items that are not considered to be reflective of our continuing core operations at our motorsports entertainment facilities. We believe that such non-GAAP information improves the comparability of the operating results and provides a better understanding of the performance of our core operations for the periods presented. We use this non-GAAP information to analyze the current performance and trends and make decisions regarding future ongoing operations. This non-GAAP financial information may not be comparable to similarly titled measures used by other entities and should not be considered as an alternative to operating income, net income or diluted earnings per share, which are determined in accordance with GAAP. The presentation of this non-GAAP financial information is not intended to be considered independent of or as a substitute for results prepared in accordance with GAAP. Management uses both GAAP and non-GAAP information in evaluating and operating the business and as such deemed it important to provide such information to investors.

The adjustments for 2009 relate to a charge for Motorsports Authentics — equity in net loss from equity investment, accelerated depreciation for certain office and related buildings in Daytona Beach, impairments of certain other long-lived assets, and interest income related to the Settlement with the Service.

The adjustments for 2010 relate to the Hollywood Casino at Kansas Speedway — equity in net loss from equity investment, impairments of certain other long-lived assets, amortization of interest rate swap, and de-recognition of interest and penalties related to the previously discussed state tax settlements.

		Three Months Ended								Six Months Ended
		May 31,				May 31,				May 31,				May 31,
		2009				2010				2009				2010
		(Unaudited)								(Unaudited)
Net (loss) income		$	(31,740	)		$	10,262			$	(6,594	)		$	35,702
Loss from discontinued operations, net of tax			45				—				87				47
(Loss) income from continuing operations			(31,695	)			10,262				(6,507	)			35,749
Equity in net loss from equity investments, net of tax			57,274				291				58,913				937
Consolidated income from continuing operations excluding equity in net loss from equity investments			25,579				10,553				52,406				36,686
Adjustments, net of tax:
Additional depreciation			319				—				638				—
Impairment of long-lived assets			9				267				52				396
Amortization of interest rate swap			—				754				—				1,517
Interest income from IRS settlement			(8,923	)			—				(8,923	)			—
State tax settlements			—				(744	)			—				(6,163	)
Non-GAAP net income		$	16,984			$	10,830			$	44,173			$	32,436
Per share data:
Diluted (loss) earnings per share		$	(0.65	)		$	0.21			$	(0.13	)		$	0.74
Loss from discontinued operations, net of tax			0.00				—				0.00				—
(Loss) income from continuing operations			(0.65	)			0.21				(0.13	)			0.74
Equity in net loss from equity investments, net of tax			1.17				0.01				1.21				0.02
Consolidated income from continuing operations excluding equity in net loss from equity investments			0.52				0.22				1.08				0.76
Adjustments, net of tax:
Additional depreciation			0.01				—				0.01				—
Impairment of long-lived assets			0.00				0.01				0.00				0.01
Amortization of interest rate swap			—				0.01				—				0.03
Interest income from IRS settlement			(0.18	)			—				(0.18	)			—
State tax settlements			—				(0.02	)			—				(0.13	)
Non-GAAP diluted earnings per share		$	0.35			$	0.22			$	0.91			$	0.67

Comparison of the Results for the Three and Six Months Ended May 31, 2009 to the Results for the Three and Six Months Ended May 31, 2010.

The following table sets forth, for each of the indicated periods, certain selected statement of operations data as a percentage of total revenues:

		Three Months Ended								Six Months ended
		May 31,				May 31,				May 31,				May 31,
		2009				2010				2009				2010
		(unaudited)								(unaudited)
Revenues:
Admissions, net			28.6	%			25.1	%			28.7	%			25.2	%
Motorsports related			61.0				64.6				61.4				64.7
Food, beverage and merchandise			8.8				8.4				8.4				8.3
Other			1.6				1.9				1.5				1.8
Total revenues			100.0				100.0				100.0				100.0
Expenses:
Direct expenses:
Prize and point fund monies and NASCAR sanction fees			23.2				24.7				21.8				23.1
Motorsports related			21.0				22.6				19.2				20.3
Food, beverage and merchandise			6.1				6.2				5.9				5.9
General and administrative			16.8				18.2				15.8				17.2
Depreciation and amortization			12.1				13.0				11.6				12.5
Impairment on long-lived assets			0.0				0.3				0.0				0.2
Total expenses			79.2				85.0				74.3				79.2
Operating income			20.8				15.0				25.7				20.8
Interest income and other			0.1				0.0				0.2				0.0
Interest expense			(3.6	)			(3.6	)			(3.7	)			(3.7	)
Equity in net loss from equity investments			(37.5	)			(0.3	)			(18.5	)			(0.5	)
Other income			0.1				0.0				0.1				0.0
(Loss) income from continuing operations before income taxes			(20.1	)			11.1				3.8				16.6
Income taxes			0.7				3.9				5.8				4.5
(Loss) income from continuing operations			(20.8	)			7.2				(2.0	)			12.1
Loss from discontinued operations			0.0				—				0.0				0.0
Net (loss) income			(20.8	)%			7.2	%			(2.0	)%			12.1	%