CONFIDENTIAL
CORPORATE OVERVIEW
Prepared: September 2003 By Michael D. Allweiss Chairman/CEO OffshoreRacingLeague 100 2d Ave. N.E. Ste. 704S 727-821-APBA (2722)
Mallweiss@aol.com
__________________________________ This document and its contents are confidential and the property of KHAMAN HOLDINGS, INC.. No reproduction of all or any part of this plan or any redistribution thereof is permissible without the prior written consent of KHAMAN HOLDINGS, INC. This business plan is intended to convey information only, and shall not constitute or be construed as an offer to sell or the solicitation of an offer to buy securities.
Table of Contents
Executive Summary ..........................................................................................................................................4 HISTORY 4 THE BUSINESS .............................................................................................................................................................6 APBA OFFSHORE RACING LEAGUE ............................................................................................................................7 THE NEW COMPANY .................................................................................................................................................11 THE OPPORTUNITY ...................................................................................................................................................13 The Offshore Racing League (ORL)..............................................................................................................15 THE PRODUCT...........................................................................................................................................................16 THE SPEC RACING PROGRAM ...................................................................................................................................17 Super Cat (Numbers Only) -.................................................................................................................20 Super Cat Light (Numbers Only) - ......................................................................................................23 Super V (Numbers Only) - ....................................................................................................................24 Super V Light (Numbers Only) -...........................................................................................................25 Factory I and II - ..................................................................................................................................26 Outlaw ..................................................................................................................................................28 STADIUM STYLE RACING -........................................................................................................................................30 The Offshore Powerboat Racing Circuits ............................................................................................31
Overview – ....................................................................................................................................32 The ORL National Circuit – GMC Pro Grade Championship Series ...........................................34 The Season – .................................................................................................................34 Site Selection Criteria –.................................................................................................34 Venues –36 National Race Format –.................................................................................................37 Pro Series Championships.............................................................................................38 The ORL Divisional Circuits –......................................................................................................39 Overview 39 Purpose 40 The Divisional Circuits and Management .....................................................................40 Divisional Circuit Sponsor Opportunities .....................................................................41 ORL MANAGEMENT.................................................................................................................................................42 ORL DIVISIONS AND AFFILIATES..............................................................................................................................47 OBJECTIVES – IN GENERAL ......................................................................................................................................49 ECONOMICS OF ORL ................................................................................................................................................51 Overview ..............................................................................................................................................51 Revenues ...............................................................................................................................................55
Series Sponsorships .......................................................................................................................56 Competitor Contingency Sponsorships .........................................................................................57 National Television Advertising ....................................................................................................57 Sanction Fees.................................................................................................................................58 Entry Fees......................................................................................................................................58 Boat Registration Fees ..................................................................................................................59 Membership Fees ..........................................................................................................................59 Licensing........................................................................................................................................61 2
Apparel 61 Merchandise ..................................................................................................................61 Racing Related Products and Services ..........................................................................61 Expenses ...............................................................................................................................................62
Event Related Expenses ................................................................................................................63 National Staff.................................................................................................................63 Prize Money and Insurance ...........................................................................................64 Television Production ....................................................................................................64 General Overhead ..........................................................................................................................67 Administrative ...............................................................................................................................67 PROMOTION AND PUBLIC RELATIONS .......................................................................................................................69 INTERNET 70 THE MARKET............................................................................................................................................................71 THE COMPETITION....................................................................................................................................................73 NEWCO .........................................................................................................................................................74 5.8 5.9
COMPANY VISION AND GOALS..............................................................................................................76 MARKET ANALYSIS ..............................................................................................................................78
5.10.5 .............................................................................................................................Membership Marketing.......................................................................................................................................78 7.2.3 THE FAMILY ORIENTED ENTERTAINMENT FESTIVALS ......................................................................................78 Injecting Professionalism into the Sport ........................................................................................................88 Strong Business Model ..................................................................................................................................94 5.10
MARKETING PLAN................................................................................................................................96
5.10.1 Overview ..........................................................................................................................96 TELEVISION MARKETING..........................................................................................................................................97
Local Television, Radio, and Print Marketing/Advertising...........................................97
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Executive Summary History The American Powerboat Association (“APBA”) is a New York not-forprofit corporation founded in 1903 that, among other things, had historically acted as the primary organizational and sanctioning body for offshore powerboat racing and related special events throughout the United States and North America. APBA also is the national governing authority in the United States for the Union Internationale de Motonautique (“UIM”), which is the worldwide governing body for all forms of powerboat racing. Historically, APBA had conducted its offshore racing operations through an unincorporated division known as the Offshore Category (the “Category”). The functions of the Category included oversight and management of racing competition, including technical rule making, event rules enforcement, and event production and television production of those events at both the national and divisional/divisional levels. APBA transferred all of these functions in April 2000 through an exclusive license agreement, to APBA Offshore Powerboat Racing, LLC (“LLC”) a Florida for-profit limited liability company, which had been formed by a group of then Category members (the “LLC Founders”). In March of 2003, a dispute arose between the LLC and APBA over fee payments and corporate governance issues, which led certain APBA officials to
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purportedly terminate the license. The LLC initiated litigation against these officials in Florida shortly thereafter claiming that they acted without legal authority thus damaging the LLC. The APBA officials then filed an action in New York seeking a declaration from the state supreme court that they had that authority. In July of 2003 the New York court ruled against these officials. As a consequence all parties, including the LLC and the LLC Founders, recently reached a global settlement of all outstanding issues. The settlement produced a new license (the “License”) between the LLC Founders and their newly formed Florida corporation, KHAMAN Holdings, Inc. (hereinafter “KHAMAN”) and the APBA. The License becomes effective November 1, 2003. The License grants KHAMAN full right, power and authority to exercise all aspects of the sport of offshore power boat racing (and related activities and special events) under the APBA name and sanctioning authority and, correspondingly, provides that APBA will not, itself or through any other party or in any manner, conduct any such activities. Under the new License KHAMAN assumes all responsibility and authority relating to, and conducting the foregoing business activities of the former Category and other business activities relating to the sport including but not being limited to membership marketing and sales, licensing and merchandising, poker run event sanctioning and production, endurance run sanctioning and production, speed record run sanctioning and production, marine manufacturer show production, television production and promotion of such 5
events, product development and sales, and sponsorship sales. The new license also permits KHAMAN to opt out of the arrangement within five years or sooner if management believes that there is no longer any value in the APBA relationship. The Business Over the past 5 years, APBA Offshore management has revolutionized the sport by: 1) developing and executing a NASCAR (National Association of Stock Car Automobile Racing) style rules model which emphasizes close, exciting competition for fans, sponsors and competitors, and 2) creating a new stadium style racing format which brings the action close to fixed shore locations such as downtown waterfronts and parks, where admission can be charged, VIP and corporate entertainment and hospitality venues can be established, marketed and sold, and where concessions, merchandise, apparel, product expositions and vendor booths can be marketed and sold as well. The result is a fabulously exciting motorsports entertainment business capable of generating huge event crowds and significant television audiences with a very broad demographic that appeals to a wide variety of potential sponsors and business partners. For the first time in the history of the sport, offshore power boat racing has become a legitimate, credible motorsport that thrills audiences both at the race site and on television with speed, high flying and colorful racing craft,
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passing, come from behind victories and photo finishes. To capitalize on the opportunity presented by the successful development of the racing product and the new License, KHAMAN shall create two separate and distinct but related businesses, one to operate the sanctioning body business and the other to operate the event promotion business. The first business is the Offshore Racing League, Inc. (“ORL”) a newly formed Florida corporation ___% owned by KHAMAN that shall operate and manage the sanctioning body business. In other words, the ORL will be to offshore boat racing what NASCAR is to stock car racing. The second business, a yet to be formed Florida corporation, shall be a private motorsports entertainment and promotional company that serves as the exclusive promoter/producer of all ORL events (“Newco”).
APBA Offshore Racing League The ORL will be the organization that performs the traditional functions of the sanctioning body, to wit: technical and competition rules making and enforcement; competition and competitor management; national series sponsorship sales and marketing; national contingency sponsorship sales; prize purse development and payout, national and divisional points tracking and championships, membership sales, marketing and fulfillment, licensing of team
7
and ORL merchandise and apparel; securing national television networks for distribution of the TV product; production of national series television; racing and non-racing membership programs; National Medical, Safety and Rescue programs; Marine mammal protection programs; event production and management of race related activities such as medical, safety and rescue, race course management, dry, wet, and hot pit management, etc. In short, ORL shall be responsible for the development and management of the actual boat racing product and related aspects of the business. The principal revenue centers of the ORL are as follows: 1.
Series Sponsorships
2.
Competitor Contingency Sponsorships
3.
National Television Advertising
4.
Sanction Fees
5.
Entry Fees
6.
Boat Registration Fees
7.
Membership Fees
8.
Licensing a. Apparel b. Merchandise c. Racing Related Products and Services
The principal expense areas of the ORL are as follows: 8
1.
Administrative
2.
Payroll
3.
Marketing
4.
Advertising
5.
Event Related Travel
6.
Television Production
7.
Television Time Buys
8.
Equipment
9.
Legal
10.
Insurance
11.
Prize and Contingency Purses
APBA ORL is uniquely positioned for rapid growth and to become the next successful motorsports entertainment property in large part due to the following: 1.
ORL has an exclusive 5year license agreement with the APBA thus creating a very strong barrier to entry to a start-up organization;
2.
The ORL has secured General Motors and GMC as the Title Sponsor of its national racing circuit for the 2004-2005 seasons. This flagship sponsorship parallels NASCAR landing its first major sponsor, Winston, in 1971;
3.
ORL faces virtually no competition in its niche market – high performance professional powerboat racing events and entertainment; 9
4.
ORL racing offers a unique, exciting, and rich television product that combines extreme competition, beautiful destinations and an upscale lifestyle in fast paced 60minute programs;
5.
ORL boasts a very experienced and diverse management/operations team that over the past several years has created an effective and profitable sanctioning body with an incredibly fresh and exciting motorsports entertainment product;
6.
The new license also will yield as much as $200,000.00 - $300,000.00 in additional revenue to the core sanctioning body business, thus enabling it to commence operations immediately without a significant infusion of new capital.
Offshore powerboat racing, moreover, is the last frontier of motorsports both in terms of entertainment value and as a business opportunity. The U.S. is saturated with various forms of automobile racing many of which have become indistinguishable to the general consumer and thus of questionable value to new sponsors. NASCAR, which is the dominant force in U.S. automobile racing today, moreover, has become too expensive for many companies to participate in any meaningful way. Further, traditional powerboat racing in general has not had any commercial success due mainly to the amateur nature of the governing associations such as APBA, and most event organizers. The demand for entertaining outdoor events 10
remains high, however, among consumers as well as companies that recognize event marketing as an effective sales and marketing tool. ORL racing, with the speed, excitement, pageantry, professionalism and affordability it offers, thus presents a unique motorsports entertainment opportunity for consumers and a related event marketing opportunity for these companies. All of the above factors, efforts and resulting successes have created an opportunity for a new and separate company dedicated to the potentially far more profitable event promotion and related ancillary entertainment aspects of the business (concerts, event sponsorships and media, event planning, and production, festivals, etc.). Through the successful development of a new company dedicated to the sale, marketing, promotion and production of Offshore’s events, the sport and thus the overall business will grow faster and become far more profitable over the next 5-10 years.
This new company is the second business to which the
following discussion is addressed.
The New Company Newco will be similar in concept to International Speedway Corporation http://www.iscmotorsports.com/ (“ISC�), which is the publicly held entity dedicated to
the acquisition and development of the speedways which host NASCAR events. 1 The function of Newco shall be to develop and implement the following businesses 1
List the other businesses of ISC
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related to ORL and its core sanctioning body business: 1) Owner, operator, promoter, producer of all of ORL’s race venues; 2) Develop new venues in major markets; 3) Develop a national radio/internet broadcast network similar to MRN which is owned and operated by ISC; 4) Develop event related catering services, food and beverage concessions, and merchandise sales businesses for its event venues; 5) Develop ORL’s interactive rights business such as its official website and those related to its events; 6) Develop a national sponsorship sales, marketing and promotions company which can generate event related sponsorship sales as well as national sponsorship sales for ORL – for which it would receive commissions – and fulfill those sponsorships with limited outside assistance. KHAMAN or its designee shall seek to raise approximately $1,000,000.00 $1,500,000.00 from outside investors for Newco in order to begin the development and implementation of the foregoing six businesses. KHAMAN shall seek funding primarily from three sources: 1) Current race team owners and participants; 2) Performance boating enthusiasts who currently participate in poker runs, attend ORL events and serve as volunteers for these events; and 3) individuals and entities that are located in currently successful ORL event venues. The goal is to create this entity and hire the appropriate staff and management to commence operations no later than January 1, 2004.
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The Opportunity The demand for such events and the corresponding opportunities for both consumers and corporate America are what create the business opportunity for Newco, and thus the investment opportunity for potential shareholders. Here is how: First, from an event production standpoint, ORL events do not require massive infrastructure like a speedway, road course or a downtown street race where expenditures for construction, maintenance, repairs and facilities management can reach well into the multi-millions of dollars. On the contrary, to create an ORL “racetrack” Newco needs only a large body of water like a lake, ocean, bay or river, within close proximity to a fixed viewing location such as a beach or public park, and 6-10 “turnbouys”, which cost approximately $100 each. Second, the actual costs to produce the event are low relative to other motorsport events. For example, most of the physical labor necessary to execute the on-land and on-water event plan can be satisfied through volunteers. So labor costs are minimal. Indeed, most of the related labor costs for the events arise from sales and marketing personnel whose job it is to generate revenue. The facilities required for the event are minimal as well since the viewing venues, whether a beach or park, already exist. While there may be some costs such as leasing a park, securing grandstands, and city services such as police, fire, medical personnel, security, port-o-lets and waste management, these expenses rarely exceed 5 figures
13
for an entire event weekend. The bottomline is that a high quality turnkey ORL event can be produced for roughly $250,000.00 including sanction fees. 2 These events on the other hand can be extremely profitable for Newco. For example, a properly marketed and advertised event can generate on-site crowds of 10,000 – 20,000 or more. Ticket sales alone thus could cover 50% or more of the event production costs. Apparel and merchandise sales are yet another source of potentially $50,000 - $75,000 in revenue per event. An ORL event also offers a unique corporate hospitality and entertainment opportunity capable of generating another $50,000 - $100,000 in VIP sales at each event. Then of course, there are local and divisional sponsorship opportunities which should generate another $250,000 - $500,000 in event revenue. Thus, the events each should generate $100,000 - $250,000 in net profit. With a minimum of ten national events per year Newco should be able ultimately to generate $1,000,000 - $2,500,000 in net profits from its core event production business alone.
2
financials for event company
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The Offshore Racing League (ORL)
Newco will produce a significant return on investment for its shareholders because the ORL, free to concentrate exclusively on its racing product, shall achieve its primary strategic goal and objective: to become a nationally recognized, highly respected, top tier professional sports entertainment property. In short, the ORL will create an exciting motorsports entertainment product that the public demands and that city, county, state and national leaders compete to secure for their communities. Newco then will market and sell the ORL events and the related
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apparel and merchandise, licensing, concessions, tickets, local, divisional and national sponsorships, and ORL interactive rights. The Product Traditional offshore racing events were participant oriented endurance runs covering vast distances mostly on ocean courses well out of sight of land and obviously, spectators, and thus of limited commercial value to any sponsor. The racing was boring. There was very little passing, few winners over the course of a season; a high rate of attrition and few close finishes. The rules were controlled by the team owners and thus were convoluted and poorly enforced. This led to checkbook racing where the teams with the most money won. Often there were more classes than there were boats so participants could almost guarantee themselves a checkered flag, which further eroded the credibility of the racing product. This also led to a very high rate of turnover in participants and thus an inconsistency in the “product� that made it nearly impossible to develop a dedicated fan base. Certainly fans had no idea what was happening on the water as organizers often placed 50 or more boats from 20 or so different classes in a race at the same time. In short, there was no racing product and therefore, no event product for anyone but the participants. Today, ORL has moved in shore and become a consumer based, spectator friendly motorsport that places a premium on competition as entertainment and
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connecting the consumer with the corporate sponsor. While racers remain one of the core groups of customers, the racing, race boats and the race teams form the foundation of the ORL product. This fundamental shift in philosophy was necessary to transform the sport from a participant based club/hobby not-for-profit business to a for-profit consumer based professional motorsport entertainment business capable of attracting significant outside investment. The primary ingredients to future successful growth of the ORL product are: 1) The Spec Racing Program for the boats, engines and propulsion systems, and 2) the Stadium Style Racing format for the events. The Spec Racing Program The first key component to the continued growth and development of the ORL product is a stable fleet of race boats and teams that remains so regardless of the state of the economy, and close, exciting competition for spectators and television viewers. In short, the racing related entertainment, excitement and fun generate fan interest, which in turn generates sponsor interest. ORL management thus places a premium on creating a close competitive racing “show” for the event and for television. After years of research and analysis ORL management determined that to create such a show it must develop, implement and strictly enforce a very tight, yet stable technical and competition rules program (“Spec Racing Program”) that produces a fast, agile, yet tough racing fleet with reliable
17
propulsion systems across all 6 of its featured racing classes. The boats also must be audio-visually stimulating to the average fan/spectator/viewer. As opposed to the technology based rules model that dominated offshore racing for so many years, the goals and objectives of the ORL Spec Racing Program are as follows: • Relatively low cost, affordable, “level playing field” racing for competitors and participating marine industry manufacturers; • Participation of the marine industry from a competition and financial perspective; • Closer more exciting competitive racing through correspondingly tight yet stable competition based technical rules management and enforcement; • Multiple winners throughout the season; • Close finishes; • Close, dramatic national championship battles designed to be settled at the last event of the year; • The racers are the “stars”; • Winners and champions decided by skill, courage and preparation NOT by who has the biggest checkbook; The Spec Racing Program thus has four essential components: 1) tight length, weight, height, beam and manufacturer production based rules and restrictions for the boats; 2) engines produced by one to two CRE approved suppliers that also 18
must be sealed, certified and matched by CRE prior to competition; 3) approved sterndrive systems produced by one to two CRE approved suppliers, with limited permitted modifications; and 4) Strict requirements on commercial availability as well as limitations on development of propellers. Accordingly, ORL has entered into a management agreement with an independent Florida company, Certified Racing Equipment, Inc. (“CRE�) to develop and manage the rules and the technical inspection process, and conduct the research and development programs that are integral to the Spec Racing Program. Over time, the Spec Racing Program has produced and will continue to produce more competitors, less participant turnover, better professional competition and thus an exciting, entertaining experience for consumers. The stability and consistency of the Spec Racing Program also produces a stable cost environment for the racing teams relative to their equipment purchase, repair and maintenance programs, and thus will yield a far better return on investment once their sponsorship and prize revenues increase. Similarly, the costs of the ORL technical and competition rules development and enforcement program will remain relatively constant as well thus producing increasing margins as revenues grow. Indeed, despite the economic downturn since 2001, the Spec Racing Program has produced 70-80 boat racing fleets at national events whereas in the past such downturns generally led to severe reductions and fleets in the 30-40 boat range. Management thus believes that the Spec Racing Program will produce fleets of 100 19
boats or more per event simply with a turnaround in the economy.3 More importantly, the Spec Racing Program combined with the consolidation of classes from 12 in 1999 to 6 today, means more boats in the premier classes. This, in turn will lead not only to better more exciting racing, but more events and thus more opportunities for Newco as the classes can be separated and run at different venues and times.
More boats, more competitors and more events also leads to more
revenue and with the stable costs associated with the Spec Racing Program, more profits for ORL and the race teams.
Super Cat (Numbers Only) 20 Boats Nationally 38’ to 40' Catamaran 9500lbs 1600 Total Horsepower 140mph Top Speed
Super Cat is the premier ORL class. In 2004, ORL will continue with its single approved sterndrive, the Mercury Racing SSM #6, which has proven to be a tough, resilient, safe and cost effective system for the teams especially with the long duty cycle and limited repair and maintenance required, and its fixed hull
3
100 boats average in 2000 with the introduction of the spec racing program
20
rules. ORL will, however, commence the transition from a multi-approved builder varying spec engine program to a single approved builder fixed spec engine program. This same basic system (GM and Mercury Racing supplied engines, Mercury and Imco supplied drives) has been utilized by Offshore for years in the Factory, Super V, Super V Light and Super Cat Light classes with great success. The sole ORL/CRE approved engine provider, Sterling Performance, is the unquestioned leader in marine propulsion systems over 600 horsepower and has actually designed and built the engines for every national champion and the last 3 world champion Super Cats. In addition, the contract requires Sterling to pay ORL a $150,000.00 guaranteed sponsorship fee plus royalties, which helps pay for television and other costs associated with the class. The goals of the spec engine program are to: 1) increase competitive balance throughout the fleet; 2) develop a “5 race engine�; 3) reduce maintenance and operating costs for the majority of the teams during an entire season; 4) increase reliability and durability; 5) increase performance and acceleration so the Super Cats can negotiate the tighter multi-turn ORL courses more effectively and safely; and 6) increase the number of teams that can afford to field competitive Super Cat entries. To accomplish these goals, the ORL has developed a transition plan that minimizes the financial impact on the teams and should at the very least maintain the size of the current Super Cat fleet. First, Sterling will retrofit every currently 21
existing engine regardless of the builder, to a specific specification. The retrofit cost shall not exceed $15,000/engine, which is the approximate cost of a normal rebuild today. Second, each engine will be matched on a dyno then sealed and certified to ensure each competitor has the same amount of horsepower and torque, but cannot perform their own upgrades to gain an advantage over their competition. Third a newly designed engine shall also be made available at an initial cost of approximately $45,000.00ea. which is low relative to other motorsports and certainly to the old-style huge horsepower engines formerly used in APBA. Fourth, the new and retrofitted engines will be designed to operate with minimal maintenance over 5 races, which will lead to drastically lower operating costs for the teams. Indeed, teams will be required to use the same engines a minimum of two to three times before changing and the maintenance and rebuild fees will be fixed for everyone. Fifth, while the engines ultimately will be assigned to the teams at random to ensure the integrity of the program, during the interim period when there are retrofitted engines in the mix, a commercially reasonable engine-claiming rule will be established. With a stable, relatively low cost engine program that guarantees each competitor matched engines the national Super Cat fleet should grow to a consistent 10-15 competitive boats at each event. This should also increase competitive balance throughout the fleet, thus furthering the goals of the program. 22
Finally with more boats ORL receives more revenue from entry fees, registration fees, and royalties from the Sterling contract, and Newco receives more quality opportunities with an improved and consistent show to promote at each event. Super Cat Light (Numbers Only) -
15 Boats Nationally 36’ to 38’ Catamaran 8000lbs 1100 Total horsepower 115mph Top Speed
The Boats: Slightly smaller versions of the Super Cats, these boats are 8000lb twin engine racing catamarans (canopies only) ranging from 35’-38’. Top Speeds are approximately 120mph. Manufacturers include Marine Technologies, Skater, Eliminator, Motion and Specter.
The Engines and Drives: The engines are stock Mercury Racing 502cid HP500 EFI’s, and new for the 2003 season include the Mercury Racing HP525 EFI and the GM Vortec HP3 8100. All engines are dyno tested, sealed and certified to be within a certain specification by Offshore through CRE, to ensure competitive balance. CRE is negotiating with Mercury to transfer the inspection, tech, repair, sealing and certification, and rebuild programs to them for Mercury engines and to 23
Innovation Marine for the GM engines. The Mercury Bravo One, Sportmaster, XZ, XR, and Imco, and Mercury #6SSM drives may be used.
Super V (Numbers Only) 15 Boats Nationally Up to 40' V-Bottom 1100 Total Horsepower 110mph Top Speed
The Boats: Super V’s are the biggest and fastest of Offshore’s V-Bottom classes. Super V’s are 8000lb twin engine racing v-bottoms (canopies only) ranging from 38’- 40’. Top Speeds are approximately 110mph. Manufacturers include Fountain, Extreme, Cigarette, Donzi, Outer Limits, Skater and Wellcraft.
The Engines and Drives: The primary engine is the GM Vortec HP3 – 8100 496cid. Mercury Racing HP525 EFI engines currently existing in registered boats are also approved for competition, however, beginning in 2004, no new engines other than the Vortec shall be permitted. The engines are CRE dyno tested, sealed and certified for competition. Innovation Marine is the sub-contractor to CRE that 24
performs these services. CRE personnel, however, oversee the program and conduct random spot checks through the season to ensure compliance with the rules. The Mercury Bravo XR, XZ and Sportmaster drives are approved as are the standard and 4x4 Imco drives. The Mercury Racing SSM #6 drive is also approved with a weight penalty. Super V Light (Numbers Only) 10 Boats Nationally Up to 40' V-Bottom 550 Total Horsepower 90mph Top Speed
The Boats: Slightly smaller versions of the Super V’s, these boats are 5000lb single engine racing v-bottoms (canopies only) ranging from 28’-32’. Top Speeds are approximately 95mph. Manufacturers include Extreme, Phantom, Activator, Warlock and Eliminator.
The Engines and Drives: Same as Super V.
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Factory I and II 35 Boats Nationally Up to 30’ V-Bottom 500 Total Horsepower 80mph Top Speed
35 Boats Nationally Up to 39’ V-Bottom 1000 Total Horsepower 90mph Top Speed
Factory 2 (designated by F2) The Boats: These boats are stock 35' to 39' twin-engine production based vbottoms with a fixed weight of 8300lbs. These boats appear virtually identical to the pleasure performance v-bottoms that can be purchased from a local new boat dealer. Minimum production number and dealer network requirements ensure that
26
the boats are not dedicated race boats produced by non-mainstream builders. Top speeds are approximately 85 mph. Manufacturers include Donzi, Baja, Fountain, Cigarette, Formula, Hustler, Warlock and Eliminator.
The Engines and Drives: Beginning in 2004, CRE will produce a single 475hp engine from the GM Vortec 8100, 496cid platform. Innovation and GM Powertrain will assist in the design and production of the engine. A lease program in the $6000-$7000/season range will be available as will an engine purchase program that will cost substantially less than the Mercury Racing HP 525 that was used in 2003 as the standard Factory Class engine. The engines are CRE dyno tested, sealed and certified for competition by Innovation. CRE oversees the program and will conduct random spot checks through the season to ensure compliance with the rules. Full on-site parts and service will be available as part of the program. CRE also will be offering a trade-in program for used HP500 and HP525 engines that will be designed to produce at a minimum a zero cost transition to the new spec for participating teams. The Mercury Bravo XR, XZ and Sportmaster, and standard Imco drives are approved for competition.
Factory 1 (designated by F1) The Boats: Slightly smaller versions of the Factory 2 boats, these boats are stock 26' to 30' single engine production based v-bottoms with a fixed weight of 4750lbs. 27
These boats appear virtually identical to the pleasure performance v-bottoms that can be purchased from a local new boat dealer. Minimum production number and dealer network requirements ensure that the boats are not dedicated race boats produced by non-mainstream builders. Top speeds are approximately 80 mph. Manufacturers include Baja, Fountain, Formula, Hustler, Extreme, Activator, Kryptonite, Warlock and Eliminator. The Engines and Drives: The engines and drives are the same as the Factory 2 boats.
Outlaw
100 boats nationally 24-40’ 400hp-4000hp, Gas, Diesel, Turbine 60-200mph
This is Offshore’s grass roots divisional racing series and caters to the high performance offshore sports boat market. The purpose of the series is to develop new racers for the Pro Series classes. One of the most exciting aspects of offshore performance power boating is the great diversity of engine and boat products offered to consumers. The Outlaw Series shall be promoted as an exciting yet cost 28
effective way to showcase these products while complimenting the featured racing offered by the Factory and Super Series boats.
Reindl Powerboats V-24 Series
The Boats: Exclusively 24’ Ocke Mannerfelt Design V-24’s manufactured and sold by Reindl Powerboats. Known as the “Bat Boats”. The Engines and Drives: Currently the Volvo Penta 315hp small block and DPX stern drive.
Outlaw Performance Series o PX – 110mph+ - Any boat and engine combination o P1 – 100-110mph - Any boat and engine combination o P2 – 90-100mph - Any boat and engine combination o P3 – 80-90mph - Any boat and engine combination o P4 – 70-80mph - Any boat and engine combination o P5 – 60-70mph - Any boat and engine combination, provided, however, that twin engine boats over 28’ capable of speeds in this range must compete in P4.
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Stadium Style Racing -
BEACHES
DOWNTOWN
BRIDGES
ORL races will be conducted using the “Stadium Style Racing” format where the race boats compete on a relatively short (4-5miles) multi-directional “roadcourse” style track situated immediately adjacent to fixed facilities such as major downtown piers, bridges, or beaches. The key elements to the ORL Stadium Style Racing program are as follows: • Spectator Excitement – Spectators can view the entire course from land based primary viewing areas mere yards away from the racing action where they can literally feel the spray of the boats and the roar of the engines. • Sponsor to Consumer Contact – Event venues are selected based on the close proximity of the “racetrack”, dry pits, sponsor and vendor exposition
30
areas, and primary viewing areas to ensure corporate sponsors, close, easy access to the contact the fan/consumer throughout the event. • “Apocalypse Now Effect” - With up to 15 TV and rescue helicopters flying directly overhead less than 50 feet off of the water and on the decks of the race boats as they scream through the “stadium”, the visual senses of the fans are stimulated beyond anything ever experienced at a typical motorsports event; • Safety – These stadium courses, although more challenging and potentially more dangerous, ORL commits greater rescue and safety assets to the teams than ever before. Indeed, the Air/Sea Rescue program is entertainment in and of itself as rescue divers deploy from helicopters from 20-50 feet above accident scene mere yards from the spectators. • Short Courses - With multiple right and left hand turns to create more thrilling, faster racing the 4-5 mile ORL courses create a super speedway effect that often produces “trading paint” between competitors; • Low Production Costs – The “Stadium” costs approximately $700 in course buoys. All other on-water production elements involve volunteers using their own boats and equipment, and they love being part of the organization and often times many will travel from event to event at their own expense. The Offshore Powerboat Racing Circuits
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Overview –
Since entering into the License Offshore has sanctioned a national racing circuit consisting of 8-10 events per year, including a year-end World Championship. Today the national circuit is sponsored by General Motors under a 4-year contract and is known as “The GMC Pro Grade Championship Series. Under the License ORL also holds the exclusive sanctioning rights to the fourdivisional/divisional series, which collectively consist of another 15-20 races. These series are commonly known as: the Pacific Offshore Series for the Western Division; the Great Lakes Silver Cup Series for the Central Division; and the Northeast and Southeast Divisional series for these sections of the country, respectively. Offshore has sanctioned both national and divisional races in California, Florida, Maryland, Canada, Texas, Michigan, New York, Georgia, Massachusetts, North Carolina, Ohio, Arizona, New Jersey, and the Bahamas. By necessity Offshore has focused most of its resources on the development of the Spec Racing Program and national circuit and thus left the divisional series and events to be managed primarily by volunteer members of APBA affiliated clubs. As a result there has been virtually no joint planning or coordination between Offshore and the clubs, which has led to scheduling conflicts and other issues including a lack of development of these series, and significant missed revenue opportunities for Offshore. In 2003, moreover, Offshore sanctioned AND 32
produced all of its 9 National Pro Series events thus enabling it to control all sales and marketing, licensing, promotion, production rights, concessions and all other event related revenue/profit centers. Unfortunately, Offshore did not have the appropriate human and financial resources to adequately develop these profit centers, which resulted in a further loss of revenue. Under the new license these problems will be corrected through the development of a comprehensive national and supporting divisional series racing and related event business. The primary objective will be to organize and centralize the planning and coordination process of the various series within the ORL much like how NASCAR manages its national and divisional series (Winston Cup, Busch Series, Craftsman Truck, Winston West, etc.). While the ultimate goal will be to create a minimum of two major national professional circuits (15-20 total events) and four complimentary divisional circuits (15-20 additional events) for which Newco would serve as the exclusive producer and promoter. This in turn will produce more revenue for the sanctioning body business of the ORL. More importantly, the Divisional racing circuits need more professional management and given the even lower production costs associated with these events, this need presents an additional business opportunity for Newco.
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The ORL National Circuit – GMC Pro Grade Championship Series
The Season – Initially the ORL National Circuit, currently known as the GMC Pro Grade Championship Series, will consist of a minimum of 9-10 separate events, starting in April and culminating in a World Championships to be held annually in November.4 The goal again will be to produce 15-20 national events each season starting as early as February or March, in the South to take advantage of the warmer weather, and ending in late November or early December for the same reason. Additionally, a late November/early December season finale also should help ORL to secure a broadcast network contract to televise its World Championships live, given that all other motorsports have concluded their seasons by then yet the demand for such content remains high among fans.
Site Selection Criteria – Ultimately, Newco and the ORL will work together to determine the best venues for the national circuit using the following site selection criteria: • Body of water sufficient to stage a 4-5 mile racecourse located adjacent to a fixed facility such as a public park, downtown waterfront, pier, or beach that
4 Attach
tentative 2004 schedule
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can be gated for purposes of charging admission to a minimum of 10,000 spectators. • The facility should be sufficient to stage the “ORL Experience” consisting of race boat staging (Dry Pits), spectator viewing including main grandstands, VIP, Corporate Hospitality, sponsor display, vendors, concessions, and product exposition areas, so that fans can watch the races, interact with the teams, view the boats and other sponsor displays and products, buy the official foods and beverages, and purchase licensed ORL and Newco apparel and merchandise. • The facility should be capable of staging a concert and related festival in the same area. • Adequate parking within walking distance of the race viewing facility. The need for shuttles or remote parking should be avoided in order to provide fans an easy experience. • Close proximity to a resort hotel preferably within walking distance and certainly no more than 10-15 minutes away by automobile. • Close proximity to a major metropolitan area, preferably a top 20 TV market, major airport, and active business community. • Close proximity to sufficient support facilities such as marinas, crane and fueling areas, boat ramps, grocery stores, and service stations.
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Venues – There are a number of venues within North America that satisfy most if not all of these criteria. • Milwaukee, WI • Detroit, MI • St. Petersburg, FL • Tampa, FL • San Diego, CA, • Toronto, Canada • Orange Beach, AL • New York, NY • Cleveland, OH • Long Beach, CA • Savannah, GA • Charleston, SC • Hilton Head, SC • Chicago, IL • Ft. Lauderdale, FL • Miami, FL • Corpus Christi, TX • Sarasota, FL 36
• Fort Myers, FL • Key West, FL • Seattle, WA
National Race Format – These events will generally include 2 days of weekend competition. This competition schedule is designed to permit the public to arrive early, experience the boats and teams, secure their merchandise and apparel, food and beverage, view the racing, repeat the process between events, and once Happy Hour concludes on Saturday, proceed to the ORL Experience area for the evening entertainment.
Race Boats - Super Series, Factory Series and Outlaw Series boats are eligible to compete at the event. At this type of event the Outlaw Series boats will compete on Saturday with the Super and Factory Series boats competing on Sunday in separate races. The Sunday boats will also participate in an organized testing session called “Happy Hour” at the conclusion of the last race on Saturday. The boats will be required to test on the established racecourse to enhance the entertainment experience for the fans. The personnel and equipment costs to ORL are essentially fixed regardless of the venue.
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Course and Race Length – The courses will be not more than 5 miles and not less than 3 miles. • Saturday - There shall be 1-2 races on Saturday with each lasting approximately 45minutes and no more than 45 minutes in between races for refueling of the TV and Rescue helicopters. Happy Hour shall commence within 15 minutes of conclusion of last race. Racing will start at 12pm and all competition and testing should be complete by no later than 4:30pm followed immediately by the Winner’s Circle ceremony. • Sunday - On Sunday there shall be two races. The early race shall consist of the Super V classes and the second race shall consist of the Super Cat classes. The racing shall begin at 1pm with the second race at 3pm. Each race should last approximately 1 hour with no more than 1 hour between race #1 and race #2. The racing should conclude by no later than 4:30pm followed immediately by the Winner’s Circle ceremony.
Pro Series Championships Pro Series National Championship Points will be awarded at every Pro Series event to each boat competing in the event. The boat accumulating the most points through the entire season in its respective class will be awarded the Pro Series National Championship for that class.
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Pro Series Sponsorship Opportunities ORL sponsorship opportunities are set forth in the attached PowerPoint presentation. Based on the performance of management over the past 4 years, ORL will generate a minimum of $1,000,000.00 in annual series related sponsorship revenues.
The ORL Divisional Circuits –
Overview APBA currently sanctions Divisional races in four divisions throughout North America: West, Central, Northeast and Southeast. These events have been smaller in size and scope typically than the national events occurring mostly in smaller communities and catering to divisionally based racing teams and fans. The West, through POPRA, and the Central Division, through the Great Lakes Silver Cup Series (“GLSCS”) generally produce 6-8 races annually which also are televised on the Outdoor Network. A large group of racers from POPRA and GLSCS also typically attend the annual World Championships. Due to the independent Offshore Performance Association’s (“OPA”) presence in the Northeast and the number of national events in the Southeast, moreover, there has been very little Divisional racing in these divisions of the country.
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Purpose Notwithstanding the foregoing, however, ORL management believes that Divisional racing can form a solid backbone for the business. Specifically, Divisional Racing offers more opportunities to expand the ORL membership ranks through relatively inexpensive grass roots racing programs. Divisional Racing further offers more opportunities for Newco to add quality profitable events to its portfolio and thus more sales opportunities, both incremental and value-adds, for new and existing corporate series, divisional and local sponsors. Divisional Racing also broadens the reach of ORL and Newco, the sport and, therefore, the benefits to more people.
The Divisional Circuits and Management Commencing with the 2004 season, the ORL shall sanction Divisional events in four distinct divisional racing circuits in the West, Central, Northeast and Southeast divisions of the United States and Canada. POPRA and GLSCS will manage the West and Central Division divisional circuits, respectively. The ORL intends to secure a mutually beneficial working relationship with OPA to manage the Northeast divisional circuit and will directly manage the Southeast divisional circuit from the central office. These individual organizations shall each be referred to as a Divisional Management Organization or “DMO�. ORL also will appoint an eleven member volunteer advisory council consisting of one representative from 40
each division as well as one from each of the six primary racing classes, and a chairman to assist with the management of the Divisional Racing Program. This new body will be known as the Offshore Advisory Council (“OAC”). Initially, management will encourage the OAC and each DMO to limit the number of races in each division to 5-6 including Pro Series events. This would enable the organizations to coordinate the Divisional and Pro Series schedules, thus making it easier on and creating more options for the racers. This should also make it easier for the ORL and Newco to oversee and assist the DMO’s with their businesses and thus improve those businesses. The Company’s goal is for these divisional events, although initially smaller in scope, to nevertheless use the same basic Stadium Style Racing format as Pro Series events. In short, these events will offer the same classes competing under the same format, and where possible will be produced by Newco or at the very least overseen by Newco. These events also should be held in locations strategically selected as potential Pro Tour sites.
Divisional Circuit Sponsor Opportunities ORL and Newco also will offer series sponsorship opportunities for each Division. The opportunities are set forth in the attached PowerPoint Presentation. Again with the organization and centralization of the Divisional Racing Program within ORL, sales of Divisional series related sponsorships, both incremental and value adds to existing sponsors should increase. 41
ORL Management Michael Allweiss – Chairman, CEO & President Mr. Allweiss, 40, manages every facet of the ORL’s day-to-day activities and is responsible for the formulation and implementation of the company’s strategic plan. He became Chairman of the Category in 1999 and then succeeded to his current position when the LLC was formed in 2000. He has served as a member of the Category governing board and legal counsel for the Category. He has also served on APBA’s national legal committee and on APBA’s national board of directors. He is an accomplished racer as well achieving boat racing’s highest honor in 1998 when he was inducted into the APBA Hall of Champions. In addition to being a top competitor, Mr. Allweiss has produced several major APBA Offshore events including 2 World Championships, a National Championships, and
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3 national races including the inaugural Savannah Offshore Grand Prix and World Speed Runs.
Allen Allweiss – General Counsel Mr. Allweiss, 68, manages ORL legal affairs. He is a Former Executive V.P for Subsidiary Operations and General Counsel for the Home Shopping Network. He has been a practicing attorney for over 40 years and has served as legal counsel for the Category. He also is a former member of the Category governing board and a successful former racing competitor as well, winning a national championship and establishing a world speed record for his class in 1975.
Gordon Kraft – Executive Director of New Business Development (FILL IN)
Mark Nemschoff — National Sponsorship Sales Owner/CEO of Nemschoff Chairs, Inc., a large Wisconsin based family owned company, which is the leading healthcare furniture specialist, as well as several other manufacturing related businesses. (FILL IN)
Nigel Hook – National Sponsorship Sales (FILL IN) 43
Steve Miklos – Executive Director of Competition Mr. Miklos also serves as the General Manager for CRE. He is responsible for the formulation of technical and competition rules and policy as well as the products and services for CRE. He was largely responsible for the creation of the Factory Series and current Super Series technical and competition rule platforms. As a racer Mr. Miklos is a National and World Champion, and 4 time world speed record holder. He still competes on a regular basis to stay connected to the sport. He also is the Chairman/CEO of Suncoast Toner Cartridge, Inc. a leading supplier of remanufactured toner cartridges, as well as several successful small businesses. (FILL IN)
Jim Poplin – Vice President of National Race Operations Mr. Poplin also serves as the Chief Medical, Safety and Rescue Officer for ORL. He is responsible for the design, implementation and management of the race operations plan at all Pro Series events, including but not being limited to the medical, safety and rescue, and risk management programs. Mr. Poplin is a retired firefighting paramedic and works outside of boat racing as the Chief of the Hamilton County, Tennessee Special Tactics & Rescue Services, a special operations tactical team on which many Offshore rescue team members also share membership. 44
Theodore “Ted” Zoli – Executive Director of Special Projects Mr. Zoli, 61, briefly served as the President and Chief Operating Officer for Offshore before assuming his current post. He was originally retained in July of 2002 after a very successful and varied business career including Torington Industries for which he served as President for the past 30 years. Mr.Zoli assists each aspect of the business as an advisor and consultant, including but not being limited to national race operations, and marine industry and race team communications. He is a successful former racer and team owner as well.
National Staff Chiefs Other key members of the ORL team include:
Randy Hegwood – Mr. Hegwood is the National Race Operations Director. His duties include general race logistics management and implementation functions for Offshore at Pro Series events.
Deanna Richardson – Ms. Richardson serves as the Executive Assistant to the CEO. She also implements and manages the implementation of the Pro Series sponsorship fulfillment program; and acts as the liason between executive
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management and executive staff and related support staff/personnel, Offshore and Pro Series sponsors, the television division, other divisions and affiliates.
John Potts & Robby Brooks
– Mr. Potts and Mr. Brooks are Co-Executive
Producers of ORL Television. Each has over 20 years experience in the television production industry. They are responsible for the production, assembly and management of the television production crews, television production logistics, distribution, sales and marketing, content and creative for the shows and sponsorship television benefits fulfillment. (FILL IN)
Mike Tomlinson – Mr. Tomlinson serves as the Chief Referee for ORL and has done so for the last 10 years. As such he manages the rulebook and rule enforcement process. (FILL IN)
Paul Abreu – Mr. Abreu serves as the Chief Technical Inspector for ORL and has done so since 2000. Prior to that he served for 20 seasons as an assistant inspector, and assistant referee, as well as the chief inspector for POPRA. He manages the technical inspection process at Pro Series Events. (FILL IN)
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Dee Kimes – Ms. Kimes serves as the Chief Scorer for ORL and has done so for the past 15 years. She manages the timing and scoring process at all Pro Series events. (FILL IN)
Andrew Corn – Website Director (FILL IN) NOTE:
The complete APBA ORL Organizational Chart is attached hereto as
Exhibit “A” ORL Divisions and Affiliates
ORL Events Produces and manages several different ORL controlled events, and manages independently produced ORL sanctioned events, such as ORL powerboat races, ORL personal watercraft races, boat shows, poker runs, speed record runs, endurance runs, and ORL fishing tournaments.
ORL Television Produces the television programs of ORL sanctioned or produced events and manages ORL’s programming, broadcast and distribution rights and properties.
ORL Internet 47
Produces and maintains Offshore’s website and related video and audio broadcasts of Offshore sanctioned/produced events including the delivery of relevant up to date information to current and potential members, sponsors, and consumers, and online sales of memberships and merchandise.
ORL Sales and Marketing Develops, implements and manages all Sales/Marketing, Public Relations, Publicity, Celebrity Participation and general promotion of the business and its activities on the national series level.
ORL Membership Products and Services Develops, implements and manages Offshore’s racing and non-racing membership programs, including racer and consumer programs, products and services.
ORL Licensing Develops implements and manages all licensing relationships for Offshore including merchandising and apparel but excluding racing and marine performance related products and services.
Certified Racing Equipment
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Administers the technical rulemaking and enforcement programs for Offshore’s racing activities, and also administers the sales and licensing of “APBA Offshore Proven” marine related products and services to race teams, and outside third party vendors of boats and marine related products and services. This is a separate Florida corporation that holds a license from Offshore to perform its functions.
Objectives – In General
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1.Continue to develop a competition based rules model for its racing operations that emphasizes: a. Competitive balance for all participants; b. Affordable racing for all participants; c. Close, exciting competition for everyone - multiple winners 2.Continue to develop a professional staff that effectively develops, implements and manages the rules making and enforcement process with fairness and integrity. 3.Continue to develop a professional staff that effectively manages the offshore racing specific logistics and operations at the events. 4.Develop a strong, stable national racing series schedule with events in major metropolitan areas or destination locations. 5.Develop a strong national sponsorship and racer contingency sales program. 6.Develop a strong prize money program for the race teams. 7.Produce first class, high quality, exciting television entertainment. 8.Produce an exciting, interactive, informative and entertaining Internet presence. 9.Produce high quality product licensing, merchandising and apparel programs. 10.Produce effective and informative public relations and media programs. 11.Produce consumer oriented affinity membership programs. Conduct business in a manner that enhances and promotes the ORL brand and the sport of offshore powerboat racing for the
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benefit of all of our business partners.
Economics of ORL Overview
The sanctioning body business has experienced tremendous growth since 1998 when the Category still operated under the control of APBA. Specifically, in 1998 total revenues were less than $350,000. The average fleet count at national races was less than 50 boats and the World Championships that year yielded only 68 boats. In 1998 APBA had two primary competitors in the offshore powerboat
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racing sanctioning body business: US Offshore (USO) and SBI. Both organizations achieved similar results that year. In 1999, which was the first year under current Chairman Michael D. Allweiss and the last year the Category operated under APBA control, series sponsorship sales increased to approximately $350,000 and total revenues exceeded $1million. The average fleet count increased to over 65 boats per event and the World Championships had over 100 boats in attendance. In 2000, Offshore’s first year of operations, sponsorship sales exceeded $750,000 and total revenues were slightly less than $2million. Offshore had a tax loss of only $187,000. The average fleet count increased to over 90 boats per race and 146 teams attended the World Championships.
In 2001 Offshore’s sponsorship revenues grew to over $1,000,000.00 despite the severe downturn in the U.S. and World economies. Total revenues exceeded $2million for the first time in APBA history. The financial bottom-line for Offshore improved substantially over the previous year due to Management’s decision to drop its TNN television package in favor of increased coverage on Speedvision while maintaining its full compliment of sponsors. The loss from operations was approximately $100,000. The total Pro Series boat count was down slightly in 2001 due primarily to class consolidation and the economy.
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In 2002 sponsorship sales declined approximately 20% due to a number of factors including the continued economic recession, the severe decline in the sponsorship and advertising markets overall, the virtual depression experienced by Offshore’s primary sponsorship market, the high performance marine industry, and Offshore producing its own national events. Overall revenues also decreased due to a further reduction in the number of teams able to participate due to the continuing economic recession. In 2003, the number of participants increased by about 10% over the previous year. Unfortunately, Offshore experienced four significant yet unforeseeable negative events that impacted the business financially. First, certain members of APBA unlawfully attempted to terminate the original License. Second, these same members unlawfully attempted to rescind a properly approved corporate restructuring of APBA that provided substantial financial benefits to Offshore and protected its long term interests and investment in the sport. Third, Mercury Racing management, angered by what it perceived as GM’s encroachment on its market, unlawfully terminated its sponsorship agreement with Offshore and refused to pay the remaining $100,000 balance due. Mercury Racing, though one of its top executives, Fred Hauenstein, also assisted the efforts of the above referenced APBA members, and publicly yet falsely accused Offshore of failing to perform its contractual obligations and questioned its future under the License. Fourth, the LLC finance member reneged on his obligations to fund 53
company operations through the balance of the year after causing the company to incur costs it otherwise would not have incurred, including on sales and marketing personnel who failed to produce any offsetting revenue. These led to expensive and time-consuming litigation; uncertainty among sponsors, racers, fans, potential sponsors and event sites, a loss of focus on the core business and a refocusing of human and financial resources on expensive nonrevenue producing activities, which led to a substantial loss of income. Nevertheless, management prevailed in all related litigation and secured a favorable settlement, which included a new and improved License arrangement with APBA. The settlement also enabled management to lawfully reconstitute their ownership group by eliminating certain members, and restructure the business, in the form of KHAMAN and the ORL. Most of the past obligations have been satisfied through loans from the remaining LLC members and drastic reductions in overhead during the past 90 days. By virtue of these aggressive moves by management, the expected annual cash infusion from 2004 memberships, boat registrations and World Championships entry fees, will enable the ORL segment of the business to commence the 2004 season in a relatively stable financial condition, thus paving the way for the implementation of the new business plan including the creation and capitalization of Newco. Overall, the economics of the ORL are favorable for future growth and profitability, thus increasing the value of the enterprise to third party investors or 54
purchasers. Specifically, with the successful development and implementation of Newco, the ORL fixed costs will remain very stable over the next 3 years even while revenues grow at a faster rate. In other words, while revenues grow fixed expenses will not, thus increasing ORL profitability. The reasons are three fold: 1) the core sanctioning body business relies primarily on volunteer labor for the execution of its event production responsibilities; 2) national series sponsorship sales primarily are executed and managed by ORL shareholders who are compensated through commissions, with some outside commission sales assistance; and 3) ORL derives revenues primarily from sources which do not require additional personnel as those revenues increase. Most of the benefits contained in series sponsorship packages for example are self-executing, such as those related to television, or are fulfilled on site by dedicated volunteers such as signage placement and VIP hospitality. Revenues
The 2004 revenue projections for ORL are attached hereto as Exhibit _. ORL is profitable upon start-up assuming a slight increase in national series sponsorship revenue; provided that Newco assumes the event production business and corresponding expenses, and pays ORL a $50,000.00 sanction fee for each Pro Series event. In the first year, however, the profit shall be applied against the remaining past due expenses and the debt owed to the LLC members, which ORL
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assumed from the LLC. In the first 5 years, the profit shall be further limited by ORL’s agreement to limit sanction fee increases in order to assist the growth and development of Newco’s business. By the end of this initial 5year period, however, Newco should be profitable and thus able to pay fair market value sanction fees to ORL. Series Sponsorships Series sponsorships typically consist of a package of benefits that includes television commercials, in-focus exposure, in-show brand features, on site display opportunities, VIP opportunities, and on-site signage. Management has consistently generated $500,000 - $750,000 in national series sponsorship income over the past four years. The GM contract runs through 2005 and pays ORL $400,000.00 annually. The Sterling contract runs through 2006 and pays a minimum of $150,000 annually thus yielding a guaranteed $550,000 each of the next two years. ORL also has secured an additional $155,000 in verbal commitments for next season and projects another $290,000 in sales over the next 5-6 months based on current discussions with interested potential sponsors. The ORL has secured these sponsorships and commitments primarily through the efforts of its ownership group. Michael Allweiss, Mr. Nemschoff and Mr. Hook will continue those efforts on a commission only basis, and they project annual sales to grow to $1,500,000 by 2006. With the formation of Newco and its corresponding assumption of the event production business, and formation of its 56
own national sales staff, ORL Management does not expect to add new sales personnel for at least the next 3 years. Series sponsorships represent approximately 38% of ORL gross revenues. Due to its relatively fixed overhead and event production costs, however, ORL profit margins will grow corresponding with the projected increase in ORL generated sales. Competitor Contingency Sponsorships These sponsorships generally come from marine related product suppliers. Teams receive product and/or money for using the product and finishing usually in the top three at an event and/or for the season high points race. ORL must develop such a program to attract more competitors and lengthen the commitment of current racers. ORL will receive only a very small percentage of any such sponsorship to administer the program. Management will spend the 2004 season to research and develop a workable program for implementation in 2005. The financials do not reflect any income from this source for the first three seasons.
National Television Advertising For the next three seasons ORL shall continue marketing and selling its television inventory as part of bundled series sponsorship packages. Thus, management does not anticipate any revenue derived from sales of strictly commercial inventory or in-show graphics and features.
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Sanction Fees Sanction fees are monies paid to the sanctioning body for the right to produce an ORL sanctioned event. The Pro Series sanction fee provides the producer with a guaranteed event date on the Pro Series calendar at which the top Pro Series boats will compete for national championship points. In 2004-2005Newco will pay ORL a set sanction fee of $50,000 for each Pro Series event. Beginning in 2006 the sanction fee shall increase 15% annually through 2008 at which time management will re-evaluate the fee structure along with Newco management. This fee arrangement will allow Newco to become profitable sooner but still return a slight profit to the ORL. The sanction fees represent approximately 20% of ORL gross revenues. Entry Fees ORL charges entry fees to competitors to enter Pro Series events in accordance with a published fee schedule. The fees are set on a class-by-class basis. Historically the conducting club retains entry fees for divisional events. Going forward, however, ORL will standardize the fee structure for Newco produced events and the fees will be split according to an agreed upon schedule. This arrangement will yield more revenue for both ORL and Newco. Currently, Pro Series entry fees account for approximately 22% of ORL gross revenues.
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Boat Registration Fees ORL also charges a one time annual equipment registration fee for each individual raceboat that competes in any ORL sanctioned event. These fees should be increased on an annual basis to keep pace with inflation. Currently, these fees account for approximately 6% of ORL gross revenues. Membership Fees ORL shall produce a comprehensive, valuable, consumer oriented affinity membership. The current total membership of ORL, consisting of racers, race officials and non-racers, is approximately 1500. The purpose of the plan is to increase ORL annual membership revenue and significantly grow the customer base in order to efficiently and cost effectively serve its licensing and merchandising program and thus increase its overall net earnings. Other sanctioning bodies such as NHRA (85,000 members), SCCA (55,000 members), and the AMA (250,000 members), have done this with great success. Once Newco is created and properly capitalized, ORL shall engage in a concerted membership campaign to grow its non-racing membership. This plan will have several key components:
• First, ORL will develop several levels of membership from a low cost base package to a high-end premium package that will be offered on a limited and
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semi-exclusive basis. Direct mail, Internet, television, event and voice relay shall be used to market and advertise the membership program;
• Second, ORL will leverage its relationships with its marine industry sponsors to include these packages as an added value to the products sold to the sponsors' customers. For example, as a method of further promoting Formula products and its relationship with ORL, Formula will include APBA ORL membership displays in its dealerships and/or include the memberships as part of each boat sold. This way a sponsor can get the word to its customers about its relationship with ORL and drive these customers to ORL events where it can continue to develop the customer relationship;
• ORL shall expand its current relationship with MBNA as part of the base membership marketing program;
• ORL shall include an insurance component as part of its base membership package in much the same way SCCA and NHRA do in their respective programs; Membership fees currently account for approximately 10% of ORL gross revenues.
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Licensing Apparel Merchandise (FILL IN WITH LEROY BUSH INFORMATION) ORL currently has no licensing plan with respect to merchandise and apparel however, management is working on such a plan. Historically, sanctioning bodies make very little revenue marketing and selling merchandise and apparel that exclusively feature its logos. The key to a profitable program is to market and sell the stars of the sport and team merchandise and apparel bearing the ORL logo. ORL charges a license fee for use of the logo either in the form of a flat fee or a percentage of sales. The most cost effective way for ORL to generate license fee revenue is to grant third parties the right to market and sell the merchandise and apparel, thus eliminating any costs associated with that and with fulfillment.
Racing Related Products and Services CRE handles this part of the ORL business and while it currently accounts for less than 1% of ORL gross revenues it has the greatest potential to generate significant financial returns in the future. For example, CRE was responsible for validating the GM Vortec 8100 HP3 engine now in use in the Super V and Super Cat Light classes, and thus the GMC title sponsorship. CRE has also developed solid business relationships with Sterling, Herring Propellers, Hydromotive 61
Propellers, Imco Sterndrives, and Innovation Marine, the largest re-power center in the United States. Together, these entities control a huge segment of the very profitable high performance marine propulsion market. Going forward, CRE will design and implement a business strategy to strengthen, tighten and take further advantage of these alliances to produce additional revenue for itself and ORL.
Expenses
The 2004 expense projections for ORL are attached hereto as Exhibit _. The traditional sanctioning body business has long been profitable. Indeed, Management has been acutely focused on developing the racing product over the past several years. Unfortunately, the lack of professional promoters willing to develop the event side of the business left management to handle this critical task. Management, however, had neither the human nor financial resources to adequately address the need for a comprehensive event production and promotion program. When combined with the APBA and Mercury Racing related problems in 2003, this event issue became more acute particularly from a financial perspective. This also led to management’s decision to restructure the business and create Newco. Provided that Newco assumes the event production business and corresponding expenses, and pays ORL a $50,000.00 sanction fee for each Pro Series event, ORL can focus on the traditional sanctioning body business. This in turn, will lead to a much-improved product for Newco to market and sell, and long 62
term profitability for the entire business. The 2 primary categories of expense are Event Related and General Overhead.
Event Related Expenses Event related costs constitute the largest category of ORL expenses, accounting for roughly 65% of the total. These expenses can be classified as: 1) staff related such as compensation, expense reimbursements and travel/lodging; 2) hard costs that are primarily comprised of prize money and event insurance; and 3) television, which will be handled separately below. National Staff Management anticipates adding very few additional staff over the next three years so those costs should remain relatively stable. This is primarily due to the Spec Racing Program, which requires far less personnel to manage and enforce effectively even if the number of competitors and registered race boats increase significantly over that period. In addition, much of the on-site personnel is made up of local volunteers who are managed by the national staff. As Newco and ORL solidify a consistent national schedule, the amount of time necessary to manage these volunteers also decreases thus enabling ORL to tightly control the growth of its event related staff even more.
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Prize Money and Insurance Insurance costs may rise 10-15% over the next three seasons, but the additional revenue generated by the small increases in sanction fees will cover these increases. Prize money on the other hand is a fixed expense that will rise only with a commensurate increase in revenues. Nevertheless, one of management’s chief goals is to double the prize payouts at the Pro Series events by the 2006 season from $50,000 to $100,000. Management anticipates being able to do this by taking advantage of the increased margins created by increasing series sponsorship revenue over the relatively fixed expenses associated with the Spec Racing Program. Increased prize purses are important to the overall success of both ORL and Newco in that it helps to professionalize and stabilize a larger more consistent base of national and divisional competitors as demonstrated historically in other sports. Television Production Television is a critical component to the future growth and success of the ORL and Newco. The leaders of the two most widely recognized motorsports in the world, NASCAR and Formula One, recognized this early on and designed their respective businesses around an aggressive television product and distribution plan. However, NASCAR did not secure its current groundbreaking television package until its member racetrack owners ceded their authority to negotiate
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individual network contracts to the sanctioning body. ORL already has exclusive authority to negotiate the television deals for all of the National and Divisional racing events. With Newco and ORL closely aligned, however, management for both organizations shall work together during any future network negotiations to secure the best deal for the overall business. In 2003, television accounted for approximately 30% of ORL gross expenses. Program Distribution Plan For the 2003 season Offshore had contracted for a minimum of 20 hours of programming on the Fox Speed Channel (“Speed�). The contract required Offshore to buy this time for $150,000. To date, Offshore has produced the requisite number of programs but has not paid any of the time buy. Discussions between management and Speed are ongoing and it appears that the network will continue to take the programming for the time being. Speed has indicated, however, that it is not inclined to enter into talks about 2004 and beyond without a commitment from Offshore to pay the time buy for 2003. ORL thus may have to assume that obligation in order to secure a new deal. Another potential option is for GMC and ORL to approach Speed together on restructuring the relationship. Speed has indicated it might consider a plan that eliminates the past and any future time buys if GMC increases its advertising spending with the network. Management has had very limited discussions with GMC on this subject but plans to aggressively pursue this option in the offseason.
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In the short term, Speed remains the best option for the ORL television product. The Outdoor Life Network (“OLN”), with similar distribution, is another option as is the much smaller Outdoor Network. In the long term, ORL should secure a broadcast network contract to televise at least one of its World Championships races live. Ultimately, the distribution plan should include a package with Speed for most national and divisional events, and a broadcast network for tape delay broadcasts of designated “major” events, and at least one live broadcast of the World Championships on an annual basis. Program Content Plan For the short term the content plan for the GMC Pro Grade Series events is as follows:
• ORL Television shall produce a one-hour season preview show featuring the top teams from each of the 6 primary classes, with particular emphasis, however, on the Super Cats and Super V’s. • ORL Television shall produce two separate and distinct one-hour shows for each of the regular Pro Series season events. One show will be dedicated to the v-bottom classes featuring Super V while the other show will be dedicated to the catamaran classes, featuring Super Cat. • ORL Television shall produce a one-hour mid-season review show. • ORL Television shall produce a one-hour Worlds Preview Show.
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• ORL Television shall produce three additional worlds programs, one featuring the mid-week races and the other two featuring the weekend “finals”. • ORL Television shall produce a one-hour season in review show.
General Overhead This category includes the general expenses necessary to operate the ORL on a day-to-day basis and accounts for roughly 35% of the total expense budget. This figure includes the annual license fee that ORL must pay to APBA under the new License. Administrative The Administrative expenses to operate the ORL, including rent, utilities, salaries, commissions, travel and general office account for approximately 30% of the total expense budget. Over the next three years the ORL will not need to expand either its office space or the number of paid full time employees because the operation is fully automated. The official ORL website offers a host of online services including event registration, annual equipment registration and membership application and processing. The Spec Racing Program also significantly reduces the volume of participant inquiries so from a customer service
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standpoint the ORL is adequately staffed even assuming significant growth in membership. The Spec Racing Program also requires only minor maintenance from a rules review and amendment standpoint, thus obviating the need for any additional personnel dedicated to that task. The same applies to the enforcement aspects of the Program at the events. The technical inspection team is adequately staffed and compensated for the next three years even assuming a 30% increase in the fleet. Moreover, even if the need for additional personnel arose, these would be part-time modestly paid sub-contractors who would render services on an event-by-event basis.
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Promotion and Public Relations
(FILL IN)
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Internet Drew Corn manages the website. He is currently redesigning the site for the upcoming season. Adding a “Store� is his top priority and he is working with Tim Green on this project. The site will be used for news, information on upcoming events, event results, and company generated press releases relating to events and the overall business. (FILL IN)
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The Market The relevant market of potential consumers of the ORL and Newco products is the recreational boating industry. In 2001 nearly 70,000,000 people participated in recreational boating activities in the United States. Consumers, moreover, spent more than $25,000,000,000.00 at retail in 2001 for new and used boats, motors and engines, trailers, accessories and other associated costs. In addition, there are now over 15 million registered powerboat owners in the US alone and that number is growing annually. These numbers should grow as the US economy continues its recovery. ORL is uniquely positioned to capitalize on this growing market for three main reasons: First, the primary and nearly exclusive event sales and marketing tool for the marine industry today is the boatshow. These exhibitions are generally static displays of available boats, engines and marine accessories but offer little to no entertainment value to the consumer. ORL events offer the same display opportunities, plus a unique entertainment, VIP and corporate hospitality 71
environment sponsors. In addition, ORL events offer perfect opportunities for poker runs that benefit the high performance boat builders and dealers, and excursion/getaway opportunities for cruiser and yacht makers and their dealers. ORL events also offer a very different interactive experience for consumers from the high-pressure environment of the typical boat show. Second, since GM provides nearly all of the engines for the inboard marine industry, ORL offers GM a unique opportunity to communicate its “under the hatch under the hood� message directly to its target truck and SUV customers (i.e. nonGM vehicle owners who do own GM powered boats) without the usual competition from other automakers. In short, GM values the ORL relationship because it produces incremental truck and SUV sales in a cost effective manner. Third, GM is the exclusive supplier of inboard engines to Brunswick owned Mercury Marine, which in turn is the largest supplier of marine power to the multibillion dollar portfolio of Brunswick owned boat companies. Since Mercury historically has been the dominant force in offshore racing engine and propulsion systems, it has a similar opportunity to communicate directly with its target customers at every level of its product offerings without interference from its competition. The synergies of all three companies create a very compelling business case for a joint sales, marketing and promotional effort around the ORL events and television product.
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The Competition In 1998 APBA had two primary competitors in the offshore powerboat racing sanctioning body business: US Offshore (“USO�) and Superboat International Productions, Inc. ("SBI") which is a small organization based in Key West, Florida. Limiting the scope of the industry to domestic offshore powerboat racing, today the competition comes from only SBI, which has no national infrastructure and a very small membership base in comparison to ORL. USO is out of business and SBI has lost virtually all of its corporate support and national television exposure and is averaging approximately 20 boats per event. Also, SBI has no coherent event-marketing program and suffers from chronic gross undercapitalization. SBI also caters to outdated and non-conforming equipment that is generally uncompetitive or illegal for ORL competition.
SBI, however, is a
potential acquisition target and management has undertaken some very preliminary discussions with people close to SBI ownership for that purpose.
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NEWCO OVERVIEW Over the next four years, Offshore’s primary strategic goal and objective will be to become the premier offshore boat racing sanctioning body in the United States and thus a well recognized, highly respected, and financially successful motorsport entertainment property. To do this Offshore must concentrate on developing its core sanctioning body business. The elements of this business: o Racing Product – includes racing classes and related technical and competition rules, as well as management and support personnel. o Race Event Organization – includes sanctioned events produced by independent organizers and by the affiliated events company. o Membership – includes racer and consumer programs, products and services. o Sponsorship Sales – includes series, event and contingency programs. o Television – includes the production and distribution of race events related television programs. o Internet – includes the design and maintenance of an official website which delivers relevant up to date information, and audio and videocasts of its events to current and potential members, sponsors, and consumers, as well as potential members and sponsors. o Promotion of the Business – Public Relations, Publicity and general promotion of the business and its activities. Management firmly believes that for the business to grow and be successful, the sanctioning body must be strong and stable. Thus, the goals and objectives for 2002-2005 can be summarized as follows: o Near Term – 2002 Season 74
Raise $500,000 in operating capital Complete the 2002 schedule but eliminate St. Petersburg and Atlantic City and add the Bahamas Collect remaining accounts receivable Resolve Crouse and TNN litigation Create $199.00 premium fan/consumer oriented membership and sell 150 of such memberships by year end Communications • Create email database and identified groups for mass communications for racers, members and staff. • Vision
o Short Term – 2003 Season National Sponsorship Sales Contingency Sponsorship Sales Event Sponsorship Sales Television Internet Promotion and Public Relations o Intermediate Term – 2002-2005 Class Rules Development Technical Rules Development Competition Rules Development Staff Schedule Membership National Sponsorship Sales Contingency Sponsorship Sales Event Sponsorship Sales Television Internet Promotion and Public Relations Capital Raising Campaign o Long Term – 5-10 Years Exit Strategy
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Offshore will seek strategic licensing relationships with qualified business partners to help it design and execute many of these programs. Additionally, Offshore seeks approximately $1.0 million in financing to enhance the operations and management of Offshore’s business activities and further assist it in the achievement of its goals and objectives. The funds will be used primarily: 1. To develop a national sponsorship and racer contingency sales organization; 2. To develop a national race event production/logistics organization. 3. To build a management team that will allow APBA Offshore to grow and develop its national and divisional racing series. 4. To allow Offshore to expand the scope of its television, public relations, promotional, membership, retail sales and internet programs.
5.4
Projected Use of Funds
The Company intends to use a portion of the funds raised to hire the necessary professional personnel, purchase the necessary equipment, and satisfy any shortfalls in the Company’s cash flow needs for the first year of operation 5.5
Exit Strategy
5.8
Company Vision and Goals
5.8.1
Vision The Company’s vision is to create a total motorsports entertainment company which produces made for television championship offshore powerboat races and supporting family oriented festivals that benefit worthy charities, on a for profit basis.
5.8.2
Core Philosophy 76
.3
Core Purpose The core purpose of the Company will be to establish offshore powerboat racing as a premiere American motorsport which rewards its participants and their families, as well as its fans, volunteers and charities, with a wonderful all around entertainment and life experience.
5.8.4 Core Values •The customer is always right •The racers always come first. •Sacrifice in the short-term and the long-term will take care of itself. •Reward positive attitudes and enthusiasm among employees. •Reward the volunteers. •Cultivate a culture of honesty and integrity within the organization. •Turn problems into opportunities. •Believe and you can achieve. •Teamwork. •Charity and Service
5.8.5
Goals
5.8.5.1 Intermediate Goals: 1-10 years • • • • •
Create viable for profit motor-sports entertainment production company. Establish credibility of entity as well as the look and feel of our product. Increase membership to 100,000. Average 100 raceboats at all Pro-Tour Events. Produce 26 1 hour TNN shows each season.
5.8.5.2 Near Term Goals 1999 • • • •
Establish infrastructure Implement business model Implement new racing specs Finalize licensing deal with APBA 77
2000 • • • • •
5.9
Capitalize the entity Successfully produce 4 profitable Pro Tour Series events, each with a minimum of $100,000 in prize money, and at least 10 TNN shows. Increase membership to 10,000. Implement the Super Series, Factory Series and Outlaw Series competition models. Break-even
Market Analysis
5.10.5 Membership Marketing
5.11
Operations
The Company will essentially become a motorsports entertainment company, producing and managing events and television broadcasts of the racing associated with those events. It will sell event and television related entitlement sponsorships as well as offshore racing related merchandise. The Company also will deal with rules and technical issues relating to the boats and the conduct of its races and must deal with all of these issues from an operations standpoint on a daily basis. 6. 7.
Racing
7.2.3 The Family Oriented Entertainment Festivals Each Pro Tour and Divisional Tour event will be held in conjunction with a family oriented entertainment festival designed to generate profits for the company through area and event sponsorships, admissions charges, merchandise sales, participation fees, and concession sales. These festivals will generally be 3-5 days long. The standard model will include most if not all of the following events, areas and activities:
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• • • • • • • • • • •
Golf, fishing and/or tennis tournament(s) Charity auction Manufacturer's expo Kid's activities areas Wet and Dry pit viewing areas National act concerts on at least one evening Fireworks show on at least one evening Boat show Retail merchandising and sponsor display/sampling areas Winner's Circle Offshore powerboat racing
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Introduction APBA Offshore Launches A New Era of Professional Offshore Powerboat Racing For the past 100 years offshore powerboat racing has been little more than an unorganized, unstructured, hobby for rich boys and their expensive toys. The revolution from hobby to professional motorsports entertainment franchise actually began in 2000. That is when a group of entrepreneurs entered into an exclusive 99year License with the American Power Boat Association (APBA) the largest and oldest governing body for powerboat racing in the United States. The revolution is now over and the businessmen have won. 81
Today, APBA Offshore launches a new era of professional offshore powerboat racing with the laser like aim of becoming the next great motorsport entertainment property. o Company Profile APBA o 100 years old - oldest motorsport sanctioning group in the United States o Exclusive national authority for UIM – world governing authority for all of boat racing o Offshore holds an exclusive 99year License Agreement from APBA to operate, manage, market and sell the sport of offshore racing and related events Depth of Mgmt o Marketing o Public Relations o Operations o Legal o Finance o Membership o Sponsorships o Television o Technology o Entertainment o Celebrities o Event Management and Marketing o Competition Management o Investor Relations o Innovation – why we are different from any other motorsports entertainment company – “More than just a sanctioning body” The lowest cost operator o Leveraging of higher margins with lower overhead as revenues grow resulting in huge 82
percentage of revenue dropping to bottom-line. “Cashcow” o Biggest, most colorful and aesthetically exciting racing machines of any kind yet the least expensive to buy, power and campaign relative to other top tier national professional motorsports Ve r t i c a l l y i n t e g r a t e d m a r i n e m o t o r s p o r t s entertainment company o Event production, management and sales capabilities, television production and related sales capabilities o Participant Membership Program o Rules-making and enforcement o Competition management. o Affinity Membership Program o Owns and maintains exclusive control over the licensing, sales and marketing and production rights to the events, the Pro Series and all related television. o Stadium Style Racing Past o Long courses o Out of sight of spectators o Participant driven sport o What fans? o High attrition rates due to uncontrolled technical rules model Today o Short courses, more thrilling and dangerous and faster racing o Closer more exciting competitive racing through corresponding tight competition based technical rules management. o We trade paint! 83
o Spectator Excitement – view the entire course from primary viewing areas with the fleet only yards away – feel the spray and the roar. o “Apocalypse Now Effect” with tv and rescue helicopters flying directly overhead less than 50 feet off of the water and on the decks of the race boats as they scream through the “stadium” o Courses are more challenging and dangerous with the greater rescue and safety assets committed to the teams. o Air/Sea Rescue program is entertainment in and of itself. o Our “Stadium” costs = $700 in course buoys AND we only have to buy buoys once every few years!!!! o Greatest motorsport entertainment value to the spectators, sponsors and participants = low, low ticket prices affordable for the entire family o Huge Growth Opportunity Relevant Market o Over 70 million people participated in recreational boating in the United States in 2001 o Over $25Billion spent on new and used boats and equipment in 2001 o High level of brand loyalty o Upper Income Demographic o Cross Marketing potential with non-marine related retailers and consumer products and services Number of Events o Pre-APBA Offshore Acquisition – 6 with only 2 secure, none in major markets or true destinations, and none controlled or owned by Offshore – direct satellite television only 84
o 2002 - 8 nationally televised Pro Series events 12 smaller divisional events o The Future – 100% Growth + expansion into other areas such as bill fishing tournaments, boat shows and endurance jet craft racing Media (Television, Radio, Internet, Print) o Pre ABBA Offshore Acquisition – direct satellite television only – 12million home penetration; no radio; no internet and no official website; small black and white newsletter o 2002 – Fox Speed Channel – over 50million home penetration, over 80 hours of tape delay programming, time buy/barter; live radio at each event; live internet broadcast at each event on APBA Offshore.com; color program at each event, 120 page program for the World Championships o The Future – Major Broadcast Networks and Cable, Live Programming, Rights Fees, Pay Per View, Special Features, Movie; APBA Radio Network; live internet streaming video of each event on APBA Offshore.com; Annual Guide to the sport, APBA Offshore Magazine Membership Programs o Pre-APBA Offshore Acquisition – Participants = 300; General = 800 o 2002 – Participants = 700; General = 1300 o The Future – Participants = 2000; General = 80,000 Licensing, Branding and Co-branding o Pre-APBA Offshore Acquisition - None o 2002 – minimal o The Future o Merchandise o Apparel 85
o Die Casts and Toys o Product Endorsements = “APBA Offshore Race Proven” o Games Video Online o Race Marine Products and Services (“Certified Racing Equipment - CRE”) o Recreational Marine Products and Services Sponsorships o Pre-APBA Offshore Acquisition – 3 sponsors and $150,000 cash, minimal in-kind o 2002 – 100+ sponsors and $3,000,000+ cash and in-kind o The Future - $25,000,000+ Admissions – the “Gate” o Pre-APBA Offshore Acquisition - $0 o 2002 – $600,000 (Avg. $10/person) with only 4 venues gated o The Future - $10,000,000+ (does not include VIP) Concessions (Parking, Beverage, Food, etc.) o Pre-APBA Offshore Acquisition - $0 o 2002 – $100,000 o The Future - $5,500,000+ Concerts o Pre-APBA Offshore Acquisition - $0 o 2002 – 1st Major Concert to be introduced at the upcoming Key West World Event o The Future – “APBA Offshore Rocks” Concert Series o Marine Industry Competition Pre-APBA Acquisition – highly fragmented and loosely regulated with multiple sanctioning groups 86
2002 – APBA Offshore is the unquestioned leader in boat racing with one small private niche group remaining The Future – APBA Offshore becomes the premier marketing vehicle for the marine industry in North America and the Caribbean o Marketing, Advertising, Public Relations and Promotion Pre-APBA Acquisition – very limited television exposure, no promotion, marketing or advertising of any kind 2002 – Aggressive and highly integrated program including public relations, national television, radio, and internet, plus direct mail, print advertising, cable television advertising, telemarketing, signage and billboards, cross promotions and cooperative advertising, brochure distribution plan, newspaper inserts and flyers, government relations (TDC’s and CVB’s) etc. on an event by event basis The Future – Exponential increase in these programs for each event as well as a series basis, cross promotions and advertising with other “noncompetitive” sports and entertainment o Celebrity Involvement Pre-APBA acquisition – None 2002 – Teen Singing Idols Nick Carter and Aaron Carter, Darian Hatcher (NHL), Rusty Wallace (Team Owner), Rock Group “No Secrets” with more under negotiation for appearances at the Worlds. Celebrity involvement this year resulted in an expansion of the APBA Offshore fan demographic to include a much younger audience and guarantee a long term, loyal fan base The Future – APBA Offshore Celebrity Advisory Board led by prominent Manhattan Entertainment 87
Attorney Steven Beer. Comprehensive Celebrity Program to include promotions, special appearance, APBA Offshore product endorsements, enhanced media exposure, broader demographics o Economic Impact to Participating Communities Pre-APBA Acquisition – minimal; small attendance and participation bases 2002 - $6-12million based on the venue and length of event The Future – exponential growth with increase in exposure, fan and participant bases
Strategic Objectives • Inject professionalism into the sport • Broaden the sport’s appeal and accessibility • Create multiple channels for marketing
Injecting Professionalism into the Sport • Brought law and order o Established guidelines, regulation, management • Leveled the playing field o Introduced and enforced boat weight and power plant limitations, cracked down on infractions o Ensured tight competition-based technical rules management
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Results: o o o o
Greater pro sports legitimacy and credibility More participants, rid the sport of infractors Closer races, more competitive excitement Previously highly fragmented and loosely regulated with multiple sanctioning groups –> APBA Offshore today is the unquestioned leader in boat racing with one small private niche group remaining
Broadening the Sport’s Appeal and Accessibility: Revolutionizing the Competitive Arena o
Past: Participant driven sport, long courses, out of sight of spectators, high attrition rate => what fans?
o o o
Today: Stadium Style Racing Short courses More thrilling and dangerous and faster racing Multiple spectator viewing areas: Entire course can be seen, with fleet only yards away TV and rescue helicopters fly directly overhead, less than 50 feet off the water and on the race boat decks Courses are more challenging and dangerous with the greater rescue and safety assets committed to the teams
o o
Results: o Spectator-friendly venue draws more audiences o Greater viewer excitement in more competitive, thrilling races o “Apocalypse Now Effect”: Air/Sea Rescue program is entertainment in and of itself 89
Broadening the Sport’s Appeal and Accessibility: Media (Television, Radio, Internet, Print) o Pre APBA Offshore Acquisition: direct satellite television only – 12 million home penetration; no radio; no internet and no official website; small black and white newsletter o Today: Fox Speed Channel – over 50 million home penetration, over 80 hours of tape delay programming, time buy/barter; live radio at each event; live internet broadcast at each event on APBA Offshore.com; color program at each event, 120 page program for the World Championships
Broadening the Sport’s Appeal: Celebrity Involvement
Pre-APBA acquisition: None
Today: Teen pop idols Nick Carter and Aaron Carter, NHL All-Star defenseman Derian Hatcher, NASCAR champion Rusty Wallace, up-and-coming pop sensation “No Secrets” with more under negotiation for appearances at the Worlds.
Results to date: o
Expansion of the APBA Offshore fan demographic to include a much younger audience Cultivating a long term, loyal fan base 90
Broadening the Sport’s Appeal and Accessibility: Marketing, Advertising, Public Relations and Promotion
Pre-APBA Acquisition – very limited television exposure, no promotion, marketing or advertising of any kind
Today – Aggressive and highly integrated program including public relations, national television, radio, and internet, plus direct mail, print advertising, cable television advertising, telemarketing, signage and billboards, cross promotions and cooperative advertising, brochure distribution plan, newspaper inserts and flyers, government relations (TDC’s and CVB’s) etc. on an event by event basis
Results: • Exponential increase in awareness • Phenomenal increase in sponsorships • Pre-APBA Offshore Acquisition – 3 sponsors and $150,000 cash, minimal in-kind • 2002 – 100+ sponsors and $3,000,000+ cash and in-kind • Future projections: $25,000,000+ Broadening the Sport’s Appeal and Accessibiltiy: More Events •
Pre-APBA Offshore Acquisition: 6 with only 2 secure, none in major markets or true destinations, and none controlled or owned by Offshore – direct satellite television only 91
2002: 8 nationally televised Pro Series events, with 12 smaller divisional events
•
Creating Multiple Channels for Marketing: Innovating SpectatorFriendly Event Sites • VIP and sponsor hospitality tents • Closed area grandstands • High-quality radio headsets for play-by-play Results to date: • • • •
Gate admissions revenues: $600,000 for 2002 tour to date, with only 4 venues gated – compared with $0 pre-APBA Offshore acquisition Future projections: $10,000,000+ (does not include VIP) Concessions (Parking, Beverage, Food, etc.): $100,000 for 2002 tour to date – compared with $0 pre-APBA Offshore acquisition Future projections: $5,500,000+
Creating Multiple Channels for Marketing: Licensing, Branding and Cobranding •
Pre-APBA Offshore Acquisition: None
•
Today: Developing aggressive plan that includes APBA OS-branded merchandise: 92
• • •
Apparel, die casts and toys, video and online games Product endorsements (“APBA Offshore Race Proven”) Recreational marine products and services (“Certified Racing Equipment - CRE”)
Creating Multiple Channels for Marketing: Membership Programs Pre-APBA Offshore acquisition 300 participants; general = 800 Today: 700 participants; general = 1300 The Future: 2000 participants; general = 80,000
• • •
APBA Offshore is Positioned for Breakthrough Success • Huge growth opportunity • Depth of management • Strong business model
Huge Growth Opportunity: Relevant Market • • • •
Over 70 million people participated in recreational boating in the United States in 2001 Over $25Billion spent on new and used boats and equipment in 2001 High level of brand loyalty Upper Income Demographic
Depth of Management: More Than Just a Sanctioning Body 93
• • • • • • • • • • • • • •
Marketing Public Relations Operations Legal Finance Membership Sponsorships Television Technology Entertainment Celebrities Event Management and Marketing Competition Management Investor Relations
Strong Business Model •
Lowest cost operator: “cash cow”: New “stadium” costs = $700 in course buoys AND we only have to buy buoys once every few years!!!! ==> Leveraging of higher margins with lower overhead as revenues grow resulting in huge percentage of revenue dropping to bottom line
•
Greatest motorsport entertainment value to the spectators, sponsors and participants = low, low ticket prices affordable for the entire family
Vertically integrated marine motorsports entertainment company
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Event production, management and sales capabilities, television production and related sales capabilities Participant Membership Program Rules-making and enforcement Competition management. Affinity Membership Program Owns and maintains exclusive control over the licensing, sales and marketing and production rights to the events, the Pro Series and all related television.
• • • • • •
Looking Ahead… The Future of APBA Offshore: Media •
Major Broadcast Networks and Cable, Live Programming, Rights Fees, Pay Per View, Special Features, Movie; APBA Radio Network; live internet streaming video of each event on APBA Offshore.com; Annual Guide to the sport, APBA Offshore Magazine
The Future of APBA Offshore: Celebrity Involvement • APBA Offshore Celebrity Advisory Board o Led by prominent NY entertainment attorney Steven Beer o Comprehensive Celebrity Program to include promotions, special appearances, APBA Offshore product endorsements, enhanced media exposure, broader demographics o Concerts: 1st major concert to be introduced at the upcoming Key West World Event; “APBA Offshore Rocks” Concert Series 95
The Future of APBA Offshore: Marketing, Branding, Licensing
Exponential increase in marketing/promotional/ advertising programs for each event as well as a series basis, cross promotions and advertising with other “non-competitive” sports and entertainment Cross marketing potential with non-marine related retailers and consumer products and services APBA OS branded merchandise opportunities
The Future of APBA Offshore: Beyond Power Boating Growth + expansion into other areas such as bill fishing tournaments, boat shows and endurance jet craft racing
The Future of APBA Offshore APBA Offshore becomes the premier marketing vehicle for the marine industry in North America and the Caribbean 5.10
Marketing Plan
5.10.1 Overview APBA Offshore intends to use a multi-tiered marketing formula similar to that utilized by several successful motorsports entertainment companies. The purpose of this program will be to produce value for sponsors and members, and revenue and, thus, profits for its investors. The formula consists of the following components: • • •
Event Marketing Television Marketing Local Television, Radio and Print Marketing/Advertising 96
•
Membership Marketing
The primary difference between this and what the Division has done in the past is that the Company will now be well capitalized and fully staffed to take advantage of the incremental opportunities it has missed because of shortfalls in these areas. 5.10.2
Event Marketing
In addition to the racing, the event marketing model consists of family oriented outdoor charity festivals supporting the race action. These festivals generally include live music concerts, with at least one national level feature act, kids play areas, sponsor exposition areas, boat shows, dry pit and wet pit areas, corporate hospitality, fireworks shows and "Tastes" featuring the local area's finest restaurants. The model is designed to safely attract the most number of fans as possible in a concentrated area to maximize sponsor exposure. Revenue is generated through national, divisional and local sponsorships, as well as admission charges, and sales of food, beverage and retail merchandise like t-shirts, hats, replicas and pins. The model also emphasizes creating a first class event for the racers and their families while treating volunteers as the most valued assets of the organization. All Offshore events will have the same basic look and feel with the Pro Tour Series events larger and more national in scale than the Divisional Tour events.
.3
Television Marketing The television marketing model consists of televised broadcasts of the racing action on TNN and Speedvision. The TNN shows will feature the Super Boats and Factory Boats from Pro Tour events, while the Divisional races including the Outlaw boats will be carried on Speedvision. The shows will depart from the traditional "as if live" coverage model usually accorded boat racing events. Instead these shows will employ a hipper style featuring music, story telling and character development as well as highlights of the best racing action for that event. Revenues from the shows will be generated through the sale of entitlements and straight media advertising.
.4
Local Television, Radio, and Print Marketing/Advertising With its staffing and capitalization needs met, the Company now also will be able to promote its events more thoroughly on a local level through local and divisional television, newspaper and radio advertising. The plan also is to work with Cox Enterprises to implement a more comprehensive national media plan similar to that used for the World Championships. Here the Division works with several Cox owned radio stations to sell local and divisional sponsorships and lever those stations' relationships with other media outlets to thoroughly promote the event and all of its corresponding activities, as well as the chosen local charity. 97
Of course the Company intends to thoroughly develop and strengthen its relationships with industry media such as Powerboat, Hot Boat, Boating, and Raceboat International, as well as other national non-traditional media outlets.
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