1997 Treasurer's Report

This is the text of the report delivered at the recent Sports Car Club of America National Convention by outgoing Treasurer and Area 4 Director Peter Hylton. The actual report included several charts which are not ...

This is the text of the report delivered at the recent Sports Car Club of America National Convention by outgoing Treasurer and Area 4 Director Peter Hylton. The actual report included several charts which are not represented here.


1997 Sports Car Club of America Treasurer's Report

After four years of standing before you giving detailed and involved explanations of our financial situation, I had a strong temptation to simplify my report somewhat this year. Thus, my first draft went like this: "We made some money, We spent some money. We had a little left over. Thank you and have a nice cruise." However, upon further reflection, I was convinced that a bit more detail was called for. Moreover, as we complete the most successful financial year that I have had the opportunity to oversee, I thought that it would be appropriate to place our current situation in perspective by looking at the trends of the past decade and a half.

The core organization, SCCA Incorporated, had another good year. Our major club competition area, Club Racing, is projected to end the fiscal year with a surplus of $649,000. The Rally/Solo area will be comprised of a $13,000 loss in Road Rally, a $2000 surplus in Pro Rally, and an $18,000 loss in Solo, assuming that current projections to the March 31 yearend hold true. These numbers fit into the long term picture as shown in the following chart.


As you can see, these areas have had their ups and downs but are still in a strong position relative to the long term trend. One other department within SCCA Inc. which adds significantly to our financial picture is Corporate Services. This department, servicing the needs of the corporate community was formed during my first year as treasurer and has thus far earned cumulative surpluses of over $300,000 for the club. This year it is expected to post a surplus of $34,000. Regional and Member Relations is expected to end the year at a negative $136,000 and Administration will show a $344,000 loss. The final department, Risk Management is projected to show a surplus of $79,000, which per our discussions of the last year, will help protect our exposure as we continue to assume more risk through increased insurance deductibles. This is part of our effort to control long range insurance expenses. It is worthy of note that by use of an in-house counsel, and by better management of our legal fees, we have dropped our legal expenses from an annual high of $371,000 a few years ago, to around $26,000 this year. Summing the departmental results, leaves us at an overall projected surplus of $253,000, which when combined with depreciation charges of about $120,000, gives us an anticipated positive cash flow of $373,000 for the core corporation.

SCCA Pro Racing Ltd., one of our wholly owned subsidiaries, has made tremendous improvement this year. As you know, the SCCA Board of Directors took aggressive steps to reorganize and reposition Pro Racing two years ago. A significant initial investment was made in the first year, resulting in a loss. Some truly unfortunate situations arose which caused another significant loss the second year, as I explained in last year's report. This year, however, after shedding ourselves of the responsibility and exposure of television production, and entering into a multi-year contract with several cable TV channels, we found ourselves headed for the black. I was fully expecting a yearend profit of over $100,000 for this current fiscal year. However, a very unfortunate situation arose involving the bankrupcy of certain parties who owed money to Pro Racing. The end result is that we have had to write off approximately $100,000 in anticipated income. Thus I currently project that Pro Racing will end the year at a more modest $11,000 surplus. With depreciation charges of over $48,000, the year end result for Pro Racing is a positive cash flow of about $59,000 for the fiscal year about to end. The following chart shows how this fits into the long term trend of Pro Racing activity both before and after the split into two corporations.


You can clearly see the positive spikes associated with the two periods during which we had major series sponsors. You can also see the downturn during the reinvestment period of the last two years, which I discussed. Now, our investment is prepared to pay off in terms of higher respect and greater exposure than ever for SCCA Pro Racing. And this will hopefully lead once again to new sponsorship opportunities which will boost us to new heights.

At this point I would like to pause to dazzle you with yet another statistic. During the years indicated on these charts, the SCCA staff size has grown by 64%. Some members have contended that this is unwarranted growth brought on by a desire to reduce the work done by each staff member. However, a look at our income trend shows that our income has increased by 380%. This means that we have experienced a net growth in income per employee of nearly 200%. This is in addition to providing more programs and better services in most areas, which, while financially intangible, is nonetheless important. I think that anyone who visits our national office will quickly decide that it is not a smoking lounge for slackers. It is full of hard working and aggressive employees who have played a major role in the growth of SCCA.

This brings me to the ever popular point in my report where I discuss SCCA Enterprises. What can I say about Enterprises? When I was elected to the Board, I was firmly of the opinion that SCCA should never have gotten into the car building business. Six years later, I can say that nothing has changed my mind. However, by the time I joined this Board, we were so far along the road that the only options were to proceed down the path, trying to correct and recover from the early problems, or to simply shut the operation down, leaving our most popular class, and an immense number of cars and drivers, stranded. I will say with total openness that I strongly advocated that rather draconian measure for several years.

During my early period on this Board, I was repeatedly asked "How much money have we really put into Enterprises?" While that question has been answered in various ways across the years, I decided to try one last time to cut through all the complexities and answer the question as best I can. Thus comes Chart number 3.


As you can see, Enterprises was initially capitalized with a ludicrously small $10,000. Through its first three years of existence it only survived via repeated loans. Then, in 1989 all existing loans were converted to make our capital investment a more realistic $509,000. However, an additional loan of $400,000 was required before yearend. That's where things stood when I joined the Board in 1990. Loans continued to be granted through 1990 and 1991. However, the philosophy of the Directors had begun changing in 1990, and by the end of 1991 a "No More Loans" policy was initiated. This continued until 1994 when the Board faced a crisis - either shut the doors, eat the loss, and leave the class stranded with very limited engine and transmission supplies, or invest new money to permit the Ford Engine Program and a new management reorganization to put Enterprises back on track. It was at this time that I made my trademark statement that we would never see any of that money back until "pigs fly over a frozen hell," .....a quote that I am constantly reminded of, as witnessed by a few of the "flying pig" souvenirs that have been given to me as I depart the Board. Well, as you can see from the chart, the loan has not been repaid, but at least, some slight progress has been made in paying it down. While the total debt is not likely to be eliminated in the foreseeable future, at least the trend is finally in the right direction.

For this fiscal year, Enterprises is expected to finish with a profit of $118,000, combined with depreciation of around $24,000 to show a positive cash flow of over $142,000. This means that the consolidated accounts for SCCA and its subsidiaries are expected to show a surplus of over $381,000 and a positive cash flow of over $570,000.

So as I leave the post of Treasurer, SCCA holds cash and short term assets of slightly over $1.5 million, property assets of nearly $1.75 million and investment assets of over $0.5 million. Meanwhile we own our home, we have no significant outstanding litigation, and we have fairly normal operational liabilites. This means that our assets exceed our liabilities by well over $2.0 million with all three entities operating in the black. This will permit us to reinvest in some of our more important core activities, such as the new generation SportsCar magazine.

As I leave the Board, I wish to say that it has been an honor and a pleasure to serve the membership. And I hope that in some small way, my participation has helped to further the interests of this organization we all love. Thank you.

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