Talking up a undervalued stock or just a smart buy?
Speedway Motorsports, Inc. (“SMI” or NYSE: TRK) today announced that the Special Committee of its Board of Directors has retained Morgan Stanley & Co. as financial advisor to assist the Special Committee in the review of the previously disclosed in April non-binding proposal from Sonic Financial Corporation.
Sonic is a company owned and controlled by O. Bruton Smith and his family. They want to acquire all the outstanding shares of common stock of the Company, other than the shares held by Sonic Financial, O. Bruton Smith, his family and entities controlled by Mr. Smith and his family, for cash consideration of $18.00 per share. The stock is currently trading in the $18.40 range.
Whether this is simply a legal ploy that allows the Smith family to take over Speedway at a bargain price by demonstrating due diligence, or just exhaust noise designed to talk the stock up remains to be seen.
Speedway Motorsports is an American corporation that owns and manages racing facilities that host NASCAR, IndyCar Series, NHRA, World of Outlaws and other motor racing series. The company’s headquarters are located at Charlotte Motor Speedway, in the suburbs of Charlotte, NC.
Speedway, through its subsidiaries, owns and operates the following premier facilities: Atlanta Motor Speedway, Bristol Motor Speedway, Charlotte Motor Speedway, Kentucky Speedway, Las Vegas Motor Speedway, New Hampshire Motor Speedway, Sonoma Raceway and Texas Motor Speedway.
The Company also provides souvenir merchandising services through its SMI Properties subsidiaries; manufactures and distributes smaller-scale, modified racing cars and parts through its US Legend Cars International subsidiary; and produces and broadcasts syndicated motorsports programming to radio stations nationwide through its Performance Racing Network subsidiary.
The Special Committee considering the offer has also engaged Simpson Thacher & Bartlett LLP as its legal advisor.
In an SEC filing, Speedway said, “The Special Committee continues to evaluate and consider the proposal as well as other alternatives that may be available to the Company. Nothing in this communication shall constitute a solicitation to buy or an offer to sell shares of SMI’s common stock. There can be no assurance that any definitive offer will be made, that any agreement will be executed or that this or any other transaction will be approved or consummated.”
Speedway Motorsports, Inc. reported fourth quarter 2018 total revenues of $56.4 million, a net loss of $12.4 million or $0.30 per diluted share, and an adjusted non-GAAP net loss of $10.9 million or $0.27 per diluted share. Full year 2018 total revenues were $461.9 million, net income was $40.4 million or $0.99 per diluted share, and adjusted non-GAAP net income was $41.1 million or $1.00 per diluted share. These non-GAAP results were “within management’s expectations.”
Speedway said that these results are not directly comparable year-over-year because:
Charlotte Motor Speedway held inaugural NASCAR Monster Energy Cup and Xfinity Series races on its new ROVAL™ combined road course and superspeedway in the third quarter 2018, and comparable NASCAR events were held in the fourth quarter 2017.
The fourth quarter and full year 2017 GAAP results reflect a non-recurring material income tax benefit from the federal Tax Cuts and Jobs Act enacted in December 2017.
The Company’s admissions and certain event related revenues and operating costs were negatively impacted by poor weather or extreme heat for an unusually high number of major events. NASCAR and other racing weekends at seven of eight speedways, other than Kentucky Speedway, were adversely impacted in 2018. Also,
“Management believes many revenue categories continue to be negatively impacted by changing demographics, evolving media content consumption, the lingering effects of lower consumer and corporate spending, and underemployment in certain demographic groups.”
Fourth Quarter Comparison
- Total revenues of $56.4 million in 2018 compared to $77.4 million in 2017
- Accelerated depreciation and removal costs on retired assets aggregating $2.0 million pre-tax, $1.5 million after-tax or $0.04 per diluted share in 2018, and $7.8 million pre-tax, $4.9 million after-tax or $0.12 per diluted share in 2017
- Non-recurring benefits of income tax law changes of $119.4 million or $2.91 per diluted share in 2017
- Net loss of $12.4 million or $0.30 per diluted share in 2018 compared to net income of $113.7 million or $2.77 per diluted share in 2017
- Adjusted non-GAAP net loss of $10.9 million or $0.27 per diluted share in 2018 compared to $907,000 or $0.02 per diluted share in 2017
Full Year Comparison
- Total revenues of $461.9 million in 2018 compared to $458.4 million in 2017
Accelerated depreciation and removal costs on retired assets aggregating $2.0 million pre-tax, $1.5 million after-tax or $0.04 per diluted share in 2018, and $12.4 million pre-tax, $7.8 million after-tax or $0.19 per diluted share in 2017 - Non-recurring benefits of income tax law changes of $908,000 or $0.02 per diluted share in 2018, and $119.4 million or $2.91 per diluted share in 2017
- Impairment charge for goodwill of $1.1 million pre-tax, $698,000 after-tax or $0.02 per diluted share in 2017
- Net income of $40.4 million or $0.99 per diluted share in 2018 compared to $148.2 million or $3.61 per diluted share in 2017
- Adjusted non-GAAP net income of $41.1 million or $1.00 per diluted share in 2018 compared to $37.3 million or $0.91 per diluted share in 2017
Press Release: Speedway Motorsports unveiled on Sunday its plans for Welcome Home Patriots, an initiative to improve the lives of active and post-servicemen and servicewomen.
Welcome Home Patriots is designed to close the gap between the military community and the civilian community by partnering with companies whose mission is to give back to America’s troops after their careers in the U.S. Armed Forces – and to provide a welcoming race-day VIP experience for them at SMI’s world-class motorsports facilities from coast to coast.
The initiative is designed to provide three tangible benefits:
Salute – Members of the U.S. Armed Forces and their families will be thanked for their courage, commitment and sacrifice in part with unique race-day experiences
Engage – Civilians will be included in the initiative as a means to strengthen the military-civilian relationship and create a better understanding of common values.
Enable – Connections to job and service providers will assist, advise and facilitate needs as military members transition back to civilian life.
“When a soldier enters training, the concept of individual is replaced with the concept of team,” said Speedway Motorsports, Inc. President and CEO Marcus Smith. “After active duty, transitioning back to civilian society as an individual can be challenging. Our goal with Welcome Home Patriots is to bridge that gap and let these American heroes know they are supported and appreciated.”
Speedway Motorsports’ new Vice President of Armed Forces Affairs, retired U.S. Army Maj. Gen. Chuck Swannack. A 1971 graduate of West Point and a native of Winston-Salem, N.C., Swannack served more than three decades in the Army, culminating as the commanding general of the 82nd Airborne division at Fort Bragg and leading his troops in combat during Operation Iraqi Freedom. After supporting children in need for the last five years as the executive director of Speedway Children’s Charities, Swannack looks forward to his next mission – supporting veterans.