| SPEEDWAY MOTORSPORTS INC ITEM 1A RISK FACTORS Set forth below are some of the risks and uncertainties that, if they were to occur, could materially adversely affect our business or that could cause our actual results to differ materially from the results contemplated by the forward-looking statements contained in this report or other public statements we make |
| Shareholders and prospective investors should carefully consider and evaluate all of the risk factors described below |
| These risk factors may change from time to time and may be amended, supplemented, or superseded by updates to the risk factors contained in periodic reports on Form 10-Q and Form 10-K that we file with the SEC in the future |
| Consumer and corporate spending can significantly impact operating results – Our business depends on discretionary consumer and corporate spending |
| Many factors related to discretionary consumer spending, including economic conditions affecting disposable consumer income such as employment, rising fuel prices, interest and tax rates and inflation, can significantly impact our operating results |
| Annual Report on Form 10-K 14 ______________________________________________________________________ [41]Table of Contents factors related to corporate spending such as general economic and other business conditions, including consumer spending, rising fuel prices, interest and tax rates, hurricanes and other natural disasters, elevated terrorism alerts, terrorism attacks, military actions, and inflation, as well as various industry conditions, including corporate marketing and promotional spending and interest levels, can also significantly impact our operating results |
| These factors can affect attendance at our events, suite rentals, sponsorship, advertising and hospitality spending, concession and souvenir sales, as well as the financial results of present and potential sponsors of our facilities and events and of the industry |
| Negative factors such as challenging economic conditions, public concerns over additional national security incidents and air travel, particularly when combined, can impact corporate and individual customer spending, and each negative factor can have varying effects on our operating results |
| There can be no assurance that consumer and corporate spending will not be adversely impacted by economic conditions, thereby possibly impacting our operating results and growth |
| Bad weather adversely affects the profitability of our motorsports events – We promote outdoor motorsports events |
| Weather conditions surrounding these events affect sales of tickets, concessions and souvenirs, among other things |
| Although we sell tickets well in advance of our events, poor weather conditions can have a material effect on our results of operations particularly because we promote a finite number of premier events |
| Due to weather conditions, we may be required to move a race event to the next raceable day, which would increase our costs for the event and could negatively impact our walk-up admissions, if any, and food, beverage and souvenir sales |
| Poor weather can affect current periods as well as successive events in future periods |
| Failure to be awarded a NASCAR event or deterioration in our relationship with NASCAR could adversely affect our profitability – Our success has been and will remain dependent to a significant extent upon maintaining a good working relationship with the organizations that sanction the races we promote at our facilities, particularly NASCAR, the sanctioning body for NEXTEL Cup, Busch Series and Craftsman Truck Series races |
| Each NASCAR event is awarded on an annual basis |
| Although we believe that our relationship with NASCAR is good, NASCAR is under no obligation to continue to license SMI to sponsor any event |
| Nonrenewal of a NASCAR event license would have a material adverse effect on our financial condition and future results of operations |
| We cannot assure you that we will continue to obtain NASCAR licenses to sponsor races at such facilities |
| Our strategy has included growth through the addition of motorsports facilities |
| Failure to obtain NASCAR events for any future additional motorsports facility could have a material adverse effect on us |
| Similarly, NASCAR is not obligated to modify its race schedules to allow us to schedule our races more efficiently or favorably |
| National or local catastrophes, elevated terrorism alerts or natural disasters could have a significant adverse impact on our operating results – Terrorism alerts and natural disasters, including hurricanes and flooding, can impact regional and national consumer and corporate spending sentiment, including significant increases in fuel prices and other consumer costs |
| Should difficulties, restrictions or public concerns regarding air travel or military-related actions continue or increase, if additional national or local terrorist, catastrophic or other incidents occur, or if natural disasters occur, there can be no assurance that consumer and corporate spending will not be adversely impacted, thereby possibly materially impacting our operating results and growth |
| Increased costs associated with, and inability to obtain, adequate insurance could adversely affect our profitability and financial condition – Heightened concerns and challenges regarding property, casualty, liability, business interruption, and other insurance coverage have resulted from the national incidents on September 11, 2001 |
| We have a material investment in property and equipment at each of our six speedway facilities, which are generally located near highly populated cities and which hold motorsports events typically attended by large numbers of fans |
| These operational, geographical and situational factors, among others, have resulted in, and may continue to result in, significant increases in insurance premium costs and difficulties obtaining sufficiently high policy limits |
| We cannot assure you that future increases in such insurance costs and difficulties obtaining high policy limits will not adversely impact our profitability, thereby possibly impacting our operating results and growth |
| Our insurance coverage may not be adequate if a catastrophic event occurred – While management attempts to obtain, and believes it presently has, reasonable policy limits of property, casualty, liability, and business interruption insurance, including coverage for acts of terrorism, with financially sound insurers, we cannot guarantee that our policy limits for property, casualty, liability, and business interruption insurance currently in force, including coverage for acts of terrorism, would be adequate should one or multiple catastrophic events occur at or near any of our speedway facilities, or that our insurers would have adequate financial resources to sufficiently or fully pay our related claims or damages |
| Once our present coverage expires, we cannot guarantee that adequate coverage limits will be available, offered at reasonable costs, or offered by insurers with sufficient financial soundness |
| The occurrence of such an incident or incidents affecting any one or more of our speed - - Speedway Motorsports, Inc |
| Annual Report on Form 10-K 15 ______________________________________________________________________ [42]Table of Contents way facilities could have a material adverse effect on our financial position and future results of operations if asset damage and/or company liability was to exceed insurance coverage limits or if an insurer was unable to sufficiently or fully pay our related claims or damages |
| The occurrence of additional national incidents, in particular incidents at sporting events, entertainment or other public venues, may significantly impair our ability to obtain such insurance coverage in the future |
| We may incur significant costs from partial self-insurance – We use a combination of insurance and self-insurance to manage various risks associated with our speedway and other properties, and motorsports events and other business risks |
| We may increase the marketing of certain products using self-insured promotional warranty programs which could subject us to increased risk of loss should the number and amount of claims significantly increase |
| Also, we may increase our bulk petroleum business for which we intend to obtain customary insurance with experienced carriers |
| We have increased and may further increase our self-insurance limits, which could subject us to increased risk of loss should the number of incidents, damages, casualties or other claims below such self-insured limits increase |
| Management cannot guarantee that the number of uninsured losses will not increase |
| An increase in the number of uninsured losses could have a material adverse effect on our financial position and future results of operations |
| Liability for personal injuries and product liability claims could significantly affect our financial condition and results of operations – Motorsports can be dangerous to participants and to spectators |
| We maintain insurance policies that provide coverage within limits that are sufficient, in management’s judgment, to protect us from material financial loss due to liability for personal injuries sustained by persons on our premises in the ordinary course of business |
| Nevertheless, there can be no assurance that such insurance will be adequate at all times and in all circumstances |
| Postponement, cancellation or relocation of major motorsports events could adversely affect us – If an event scheduled for one of our facilities is postponed because of weather, national security, natural disasters or other reasons, we could incur increased expenses associated with conducting the rescheduled event, as well as possible decreased revenues from admissions, food, beverage and souvenir sales generated 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 associated with the event, including live broadcast revenues, to the extent such losses were not covered by insurance |
| If a cancelled event is part of the NASCAR NEXTEL Cup or Busch Series, the amount of money we receive from television revenues for all of our NASCAR-sanctioned events in the series that experienced the cancellation could be reduced |
| This would occur if, as a result of the cancellation and without regard to whether the cancelled event was scheduled for one of our facilities, NASCAR experienced a reduction in television revenues |
| NASCAR has announced it would consider potential track realignment of NEXTEL Cup Series racing events to desirable, potentially more profitable market venues of speedway operators |
| While relocation of any NEXTEL Cup event among our speedways we now or may own in the future could result in a net increase in our future operating profitability, long-lived assets of a speedway from where a NEXTEL Cup racing event may move could become impaired resulting in a material impairment charge that adversely affects our financial condition or future results of operations |
| Strong competition in the motorsports industry and with other professional and amateur sports could hinder our ability to maintain or improve our position in the industry – Motorsports promotion is a competitive industry |
| We compete in regional and national markets to promote events, especially NASCAR-sanctioned events, and to a lesser extent, other NASCAR, IRL, CCWS, NHRA and WOO sanctioned events |
| We believe our principal competitors are other motorsports promoters of NEXTEL Cup and Busch Series or equivalent events |
| Certain of our competitors have resources that exceed ours |
| NASCAR is owned by Bill France, Jr, Jim France, and the France family, who also control ISC ISC presently hosts several NEXTEL Cup and Busch Series races |
| We compete regionally and nationally with ISC and other NASCAR related speedways to sponsor NASCAR events, especially NEXTEL Cup and Busch Series events, and, to a lesser extent, with other speedway owners to sponsor IRL, CCWS and NHRA sanctioned events |
| We compete for spectator interest with all forms of professional and amateur spring, summer, and fall sports, such as football, baseball, basketball and hockey, conducted in and near Atlanta, Bristol, Charlotte, Las Vegas, Dallas-Fort Worth, and San Francisco, and regionally and nationally, many of which have resources that exceed ours, and with a wide range of other available entertainment and recreational activities |
| These competing events and activities may be held on the same days as our events |
| We cannot assure you that we will maintain or improve our position in light of such competition |
| The loss of our key personnel could adversely affect our operations and growth – Our success depends to a great extent upon the availability and performance of our senior management, particularly O Bruton Smith, our Chairman and Chief Executive Officer, HA Wheeler, our President and Chief Operating Officer, William R Brooks, our Chief Financial Speedway Motorsports, Inc |
| Annual Report on Form 10-K 16 ______________________________________________________________________ [43]Table of Contents Officer, Executive Vice President and Treasurer, and Marcus G Smith, our Executive Vice President of National Sales and Marketing, none of whom are subject to employment agreements |
| O Bruton Smith and Wheeler have managed SMI as a team for over 30 years, and Mr |
| Brooks has been part of the management team for over 20 years |
| Marcus Smith is the son of Mr |
| Their experience within the industry, especially their working relationship with NASCAR, continues to be of considerable importance to us |
| The loss of any of our key personnel due to illness, retirement or otherwise, or our inability to attract and retain key employees in the future could have a material adverse effect on our operations and business plans |
| Costs associated with capital improvements could adversely affect our profitability – We believe significant growth in our revenues depends, in large part, on consistent investment in facilities |
| Therefore, we expect to continue to make substantial capital improvements in our facilities to meet long-term increasing demand, to increase spectator entertainment value, and to increase revenue |
| We frequently have a number of significant capital projects underway |
| Numerous factors, many of which are beyond our control, may influence the ultimate costs and timing of various capital improvements at our facilities, including: • undetected soil or land conditions; • additional land acquisition costs; • increases in the cost of construction materials and labor; • unforeseen changes in design; • litigation, accidents or natural disasters affecting the construction site; and • national or regional economic changes |
| In addition, actual costs could vary materially from our estimates if those factors or our assumptions about the quality of materials or workmanship required or the cost of financing such construction were to change |
| Construction is also subject to state and local permitting processes, which if changed, could materially affect the ultimate cost |
| Recent amendments to our Credit Facility significantly increase the amount of permitted expenditures for capital projects, investments in and transactions for motorsports and ancillary businesses – As further described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – 2005 Credit Facility Amendments” below, our amended Credit Facility, among other things, increased the sub-limit for standby letters of credit to dlra75dtta0 million and allows annual capital expenditures of up to dlra80dtta0 million, plus up to an additional dlra150dtta0 million for certain specified capital expenditures during the two-year period of fiscal 2005 and 2006 |
| As further described in “Properties” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Capital Expenditures” below, we plan to continue to make substantial capital expenditures and investments |
| The profitability or success of future capital projects and investments are subject to numerous factors, conditions and assumptions, many of which are beyond our control |
| The sub-limit for standby letters was increased in anticipation of possible increases in our bulk petroleum business and other business transactions |
| As of December 31, 2005, we had outstanding standby letters of credit of approximately dlra52dtta0 million associated with bulk petroleum transactions |
| Our bulk petroleum business involves financial and operational risks different from those of our other operations as further described below and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations, Significant Recent Developments – Bulk Petroleum Transactions” and “Critical Accounting Policies and Accounting estimates – Realization of Receivables and Inventories” |
| We may seek further increases in our available limits for standby letters of credit depending on the needs and outcome of our bulk petroleum business |
| Significant negative or unfavorable outcomes could reduce our available cash and cash investments resulting in lower investment interest or earnings, reduce our ability to service current or future indebtedness, require additional borrowings resulting in higher debt service and interest costs, higher than anticipated depreciation expense, among other negative consequences, and could have a material adverse effect our future financial condition or results of operations |
| Future impairment of our property and equipment, goodwill and other intangible assets and equity investments in associated entities could adversely affect our profitability – As of December 31, 2005, we have net property and equipment of dlra979dtta7 million, net goodwill and other intangible assets of dlra159dtta9 million and equity investments in associated entities of dlra136dtta8 million |
| Also, as further described in “Properties” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Capital Expenditures” below, we plan to continue to make substantial capital investments |
| As described in Note 2 to the Consolidated Financial Statements, we periodically evaluate long-lived assets for possible impairment based on expected future undiscounted operating cash flows and profitability attributable to such assets or when indications of possible impairment occur |
| The evaluation is subjective and based on conditions, trends and assumptions existing at the time of evaluation |
| While we believe no impairment exists at December 31, 2005, different conditions or assumptions, or changes in cash flows or profitability, if significantly negative or unfavorable, could have a material adverse effect on the outcome of our impairment evaluation and our financial Speedway Motorsports, Inc |
| Annual Report on Form 10-K 17 ______________________________________________________________________ [44]Table of Contents condition or future results of operations |
| The profitability or success of future capital projects and investments are subject to numerous factors, conditions and assumptions, many of which are beyond our control, and if significantly negative or unfavorable, could become impaired and materially adversely affect our future financial condition or results of operations |
| See “Postponement, cancellation or relocation of major motorsports events could adversely affect us” above for related discussion on impairment considerations |
| Our equity investments in associated entities consist primarily of our 50prca owned joint venture Motorsports Authentics, whose operations are presently comprised of Action and Team Caliber |
| The carrying value of these equity investments is sizable and could become impaired for changes in profitably, operating cash flows, market, economic conditions, and other factors that could adversely impact their recovery |
| Resulting profits or losses could be affected by or depend on future demand, trends, and other market conditions and factors such as the success of motorsports, the popularity of its licensed drivers and teams, particularly NASCAR’s NEXTEL Cup Series, competition for Action and Team Caliber products, and the success of Action and Team Caliber management in achieving sustained profitability and successful integration |
| Their ability to compete successfully and profitably depends on a number of factors both within and outside management’s control |
| There may be increases in our investment in these associated entities, including additional equity contributions or loans to MA Lack of closeness or competitiveness in NASCAR NEXTEL Cup Series races or championship points race can significantly impact operating results – The lack of closeness or competitiveness of NEXTEL Cup Series races or the championship points race in any particular racing season can significantly impact our operating results |
| These factors can affect attendance at the NEXTEL Cup racing events, as well as other events surrounding the weekends such NEXTEL Cup races are promoted |
| There can be no assurance that attendance will not be adversely impacted by the lack of a close or competitive racing or championship points race in any particular season, thereby possibly impacting our operations and growth |
| Our revenues depend on the promotional success of our marketing campaigns – Similar to many companies, we spend significant amounts on advertising, promotional and other marketing campaigns for our speedways and other business activities |
| Such marketing activities include, among others, promotion of ticket sales, luxury suite rentals, hospitality and other services for our speedway events and facilities, and advertising associated with our wholesale and retail distribution of racing and other sports related souvenir merchandise and apparel, micro-lubricant™ products, and Legends Car activities |
| There can be no assurance that such advertising, promotional and other marketing campaigns will be successful or will generate revenues or profits |
| Government regulation of certain motorsports sponsors could negatively impact the availability of promotion, sponsorship and advertising revenue for us – The motorsports industry generates significant revenue each year from the promotion, sponsorship and advertising of various companies and their products, some of which are subject to government regulation |
| Advertising of the liquor industry is generally subject to greater governmental regulation than advertising by other sponsors of our events |
| Certain of our sponsorship contracts are terminable upon the implementation of adverse regulations |
| The alcoholic beverage industry has provided substantial financial support to the motorsports industry through, among other things, the purchase of advertising time, the sponsorship of racing teams and the sponsorship of racing series such as the Busch Series, and generally are subject to greater governmental regulation than are other sponsors of our events |
| We are unaware of any proposed additional governmental regulation that would materially limit the availability to motorsports of promotion, sponsorship or advertising revenue from the alcoholic beverage industry |
| We cannot assure you that the alcoholic beverage industry will continue to sponsor motorsports events, suitable alternative sponsors could be located, or NASCAR will continue to sanction individual racing events sponsored by the alcohol industry at any of our facilities |
| Implementation of further restrictions on the advertising or promotion of alcoholic beverage products could adversely affect us |
| Our chairman owns a majority of SMI’s common stock and will control any matter submitted to a vote of our stockholders – As of March 1, 2006, Mr |
| O Bruton Smith, our Chairman and Chief Executive Officer, beneficially owned, directly and indirectly, approximately 66dtta1prca of the undiluted outstanding shares of our common stock |
| Smith will continue to control the outcome of substantially all issues submitted to our stockholders, including the election of all of our directors |
| Our current or future indebtedness could adversely affect the financial health of our company, our operations, ability to pay dividends, or prevent us from fulfilling our obligations under our debt agreements – We have a significant amount of indebtedness |
| As of December 31, 2005, we had total outstanding long-term debt of approximately dlra430dtta2 million, and the Credit Facility permits additional borrowings of up to dlra146dtta9 million |
| Our substantial indebtedness and ability to increase our outstanding borrowings could: • make it more difficult for us to satisfy our debt obligations; Speedway Motorsports, Inc |
| Annual Report on Form 10-K 18 ______________________________________________________________________ [45]Table of Contents • increase our vulnerability to general adverse economic and industry conditions or a downturn in our business; • limit our ability to fund future working capital, capital expenditures costs, acquisitions, debt service and other general corporate requirements, and dividends; • require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, dividends and other general corporate purposes; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; • subject us to the risks that interest rates and our interest expense will increase; and • place us at a competitive disadvantage compared to our competitors that have less debt |
| In addition, our debt agreements contain financial and other restrictive covenants, including, among other things, limits or restrictions on our ability to borrow additional funds, make acquisitions, create liens on our properties and make investments |
| Failing to comply with those covenants could result in an event of default which, if not cured or waived, could have a material adverse effect on us |
| Despite current indebtedness levels, the Company or new lines of business may be able to incur substantially more debt |
| In addition, they may be able to secure this additional debt with Company, subsidiary or new business assets |
| This could further exacerbate the risks associated with our substantial leverage |
| If new debt is added to our and our subsidiaries’ current debt levels, the related risks they and we now face could intensify |
| Restrictions imposed by terms of our indebtedness could limit our ability to respond to changing business and economic conditions and to secure additional financing – The indenture for our Senior Subordinated Notes restricts, among other things, our and our subsidiaries’ ability to do any of the following: • incur additional debt; • pay dividends or make distributions; • incur liens; • make specified types of investments; • apply net proceeds from certain asset sales; • engage in transactions with affiliates; • merge or consolidate; • restrict dividends or other payments from subsidiaries; • sell equity interests of subsidiaries; • sell, assign, transfer, lease, convey or otherwise dispose of assets; and • incur indebtedness that is subordinate in right of payment to any senior indebtedness and senior in right of payment to the Senior Subordinated Notes |
| Our Credit Facility contains more extensive and restrictive covenants than the indenture for the Senior Subordinated Notes |
| In addition to covenants of the type described above, the Credit Facility requires us to maintain specified financial ratios and satisfy certain financial condition tests, as well as limits our ability for acquisitions, capital expenditures and investments |
| Our ability to meet those covenants, financial ratios and tests can be affected by events beyond our control, and there can be no assurance that we will meet those tests |
| A breach of any of these covenants would result in a default under the Credit Facility |
| If there were an event of default under the Credit Facility, the lenders could elect to declare all amounts outstanding, including accrued interest or other obligations, to be immediately due and payable |
| If we were unable to repay these amounts, such lenders could proceed against the collateral, if any, granted to them to secure that indebtedness |
| If any senior indebtedness were to be accelerated, we cannot assure you that our assets would be sufficient to repay in full the senior indebtedness and our other indebtedness |
| The Credit Facility and the Senior Subordinated Notes indentures contain cross-default provisions |
| As a result of these covenants, our ability to respond to changing business and economic conditions and to secure additional financing, if needed, may be significantly restricted |
| We may be prevented from engaging in transactions that might otherwise be considered beneficial to us |
| Should we pursue further development and/or acquisition opportunities, the timing, size and success as well as associated potential capital commitments of which are unknown at this time, we may need to raise additional capital through debt and/or equity financings |
| There can be no assurance that adequate debt and equity financing will be available on satisfactory terms or will be permitted under the covenants of the Senior Subordinated Notes or the Credit Facility |
| Failure to obtain further financing could have a negative effect on our business and operations |
| Our bulk petroleum business incurs financial and operational risks different from those of our other operations – From time to time, we engage in the purchase and sale of bulk petroleum and related products and commodity transactions with petroleum and other companies who conduct business in the United States and certain foreign countries |
| We also have profit and loss sharing arrangements with certain entities on the purchasing and selling of specified bulk petroleum products |
| These bulk petroleum products consist of crude oil and associated distillates of crude oil |
| From time to time, we also enter into commodity hedges associated with petroleum products and utilize letters of credit issued by recognized financial institutions for the purchase and sale of bulk petroleum products |
| To date, these bulk petroleum activities have comprised a relatively insignificant part of our business |
| Annual Report on Form 10-K 19 ______________________________________________________________________ [46]Table of Contents petroleum profit margins could be affected by factors such as purchase price, sales price, transaction, unrecoverable and other operating costs, and could be less than those on our other operations |
| Our bulk petroleum operations are or will be subject to risks ordinarily experienced by any new business, risks ordinarily associated with conducting business in foreign countries, as well as risks generally associated with petroleum products, such as environmental risks, commodities, hedging and similar risks common to transactions of this nature |
| The accounting for bulk petroleum, including underlying hedge, transactions can be affected by many factors, including contract terms, title transfer, settlement timing, underlying hedge terms and other transactional terms or conditions |
| Future transactions and resulting gains or losses, if any, could be reported on either a gross or net basis depending on the underlying transactional terms and conditions |
| While revenues could become significant, resulting profit margins could be affected by market and other factors such as transaction, unrecoverable and other operating costs, and could be less than those on existing operations |
| Also, future gains or losses on hedging and derivative contracts could be significant depending on fluctuations in market prices of the associated covered petroleum products and timing differences between maturities of hedges and sales of petroleum products |
| Depending on settlement timing and other transactional factors, accounts receivable, inventories, liabilities, and outstanding letters of credit could significantly increase during and between reporting periods |
| At this time, management is unable to determine whether resulting revenues or profits or losses could be material |
| Other factors that can adversely impact our bulk petroleum business, as well as operations conducted in foreign countries, include current and future market demand, regional and global market and economic conditions, including geopolitical situations, elevated terrorism alerts, terrorist attacks or military actions in and surrounding specific countries or regions, government actions that restrict transactions, access to or transfers of assets or funds, global petroleum product supply and demand, regional or worldwide natural disasters such as hurricanes that adversely impact supply channels, merchandising, distribution and operating costs, changes or deterioration in customer financial condition and creditworthiness, and other factors |
| See “Management’s Discussion and Analysis of Financial Condition and Results of Operations, Significant Recent Developments – Bulk Petroleum Transactions” and “Critical Accounting Policies and Accounting estimates – Realization of Receivables and Inventories” below, and Note 2 to the Consolidated Financial Statements – “Bulk Petroleum Transactions” and “Concentrations of Credit Risk” for additional information on bulk petroleum transactions |
| Changes in income tax laws could adversely affect our financial condition and results of operations – At December 31, 2005, net deferred tax liabilities totaled dlra186dtta5 million, including deferred tax assets of dlra14dtta2 million |
| These net deferred tax liabilities will likely reverse in future years and could negatively impact cash flows from operations in the years in which reversal occurs |
| At December 31, 2005, valuation allowances of dlra1dtta7 million have been provided against deferred tax assets because management is unable to determine whether ultimate realization is more likely than not |
| Also, we filed a change in tax accounting method in 2005 that is expected to reduce our tax depreciation expense for certain previous years and is being included in federal and state taxable income over four years beginning in 2005 |
| As of December 31, 2005, the change resulted in reclassifying noncurrent deferred income taxes of approximately dlra18dtta7 million to current accrued income taxes and accelerating the payment of additional noncurrent deferred income tax liabilities of approximately dlra83dtta5 million in 2006 through 2008 |
| Accelerated taxes of approximately dlra18dtta7 million were paid in 2005, after using alternative minimum tax credit carryforwards of approximately dlra9dtta1 million |
| These accelerated amounts should be substantially recovered in succeeding years from increased tax depreciation as these assets continue to be depreciated for tax purposes over long periods |
| Changes in tax laws, assumptions, estimates or method used in the accounting for income taxes, if significantly negative or unfavorable, could have a material adverse effect on amounts or timing of realization or settlement |
| Such effects could result in a material acceleration of income taxes currently payable or valuation charges for realization uncertainties, which could have a material adverse effect on our financial condition or future results of operations |
| Environmental costs may negatively impact our financial condition – Solid waste landfilling has occurred on and around the property at LMS for many years |
| If damage to persons or property or contamination of the environment is determined to have been caused by the conduct of our business or by pollutants used, generated or disposed of by us, or which may be found on our property, we may be held liable for such damage and may be required to pay the cost of investigation or remediation, or both, of such contamination or damage |
| The amount of such liability, as to which we are self-insured, could be material |
| State and local laws relating to the protection of the environment also can include noise abatement laws that may be applicable to our racing events |
| Changes in federal, state or local laws, regulations or requirements, or the discovery of previously unknown conditions, could require additional expenditures by us for remediation and compliance |
| Land use laws may negatively impact our growth – Our development of new motorsports facilities (and, to a lesser extent, the expansion of existing facilities) requires compliance with Speedway Motorsports, Inc |
| Annual Report on Form 10-K 20 ______________________________________________________________________ [47]Table of Contents applicable federal, state and local land use planning, zoning and environmental regulations |
| Regulations governing the use and development of real estate may prevent us from acquiring or developing prime locations for motorsports facilities, substantially delay or complicate the process of improving existing facilities, and/or increase the costs of any such activities |
| The market price of our common stock could be adversely affected by future exercises or future grants of stock-based options or other compensation, or the sale of shares held by key personnel – The market price for our common stock could be adversely affected by the sale of approximately 2cmam189cmam000 shares of our common stock issuable upon the exercise of various options and rights under our equity compensation plans |
| The market price for our common stock could also be adversely affected by the issuance or sale of approximately 2cmam846cmam000 shares of our common stock available for grant under our equity compensation plans, or the sale of approximately 29cmam001cmam000 shares of our common stock available for resale in compliance with Rule 144 under the Securities Act of 1933, as amended, including shares held by Mr |
| Smith, our Chairman and Chief Executive Officer |