International Speedway Reports Results For The Third Quarter Of Fiscal 2004
~Results at High End of Expectations; Company Reiterates Fourth Quarter Guidance~ ~Announces Renewal of Multi-Year, Multi-Track Agreement with Pepsi~ ~Receives Proposal for Public/Private Partnership to Develop Motorsports Facility in Pacific Northwest~
DAYTONA BEACH, Fla., Oct. 7 -- International Speedway Corporation (BULLETIN BOARD: ISCB) ("ISC") today reported results for the third quarter and nine months ended August 31, 2004.
Third Quarter Comparison
Total revenues for the third quarter were $156.5 million compared to revenues of $160.5 million in the prior-year period. Prior period financial statements have been restated to reflect discontinued operations, net of tax, related to the previously announced sale of North Carolina Speedway. Operating income was $50.8 million during the period compared to $59.9 million in the third quarter of fiscal 2003. Net income for the third quarter of fiscal 2004 was $68.1 million, or $1.28 per diluted share, compared to net income of $36.0 million, or $0.68 per diluted share, in the prior-year period.
The timing of the Company's Labor Day NASCAR NEXTEL Cup and Busch series weekend significantly impacted results for this year's third quarter. Results for the 2003 third quarter include the Labor Day Cup/Busch weekend at Darlington, while the 2004 Labor Day weekend events at California will be included in 2004 fourth quarter results. Third quarter fiscal 2004 results also include, net of tax, a $36.3 million, or $0.68 per diluted share, gain on the sale of North Carolina's assets and a $0.7 million pre-tax non-cash charge for the net book value of assets removed related to the Daytona infield renovation project.
Year to Date Comparison
For the nine months ended August 31, 2004, total revenues increased to $419.9 million from $400.0 million in 2003. Prior period financial statements have been restated to reflect discontinued operations, net of tax, related to the sale of North Carolina. Operating income for the nine-month period was $121.3 million compared to $133.1 million in the prior year.
Year to date net income was $101.9 million, or $1.92 per diluted share, in 2004, which includes:
* Income, net of tax, from the discontinued operations of North Carolina of $3.1 million, or $0.06 per diluted share;
* the after-tax gain of $36.3 million, or $0.68 per diluted share, on the sale of North Carolina;
* the third quarter $0.7 million pre-tax non-cash charge for the net book value of assets removed related to the Daytona infield renovation project;
* a second quarter non-cash pre-tax charge of $13.2 million, or $0.16 per diluted share, for the impairment of Nazareth's long-lived assets; and
* a second quarter combined pre-tax charge of $6.6 million, or $0.08 per diluted share, associated with refinancing the Company's Senior Notes.
As stated above, results for the nine months ended August 31, 2003 include the Labor Day Cup event held at Darlington, while the 2004 Labor Day weekend event at California will be recorded in the fourth quarter.
In the first nine months of 2003, net income was $73.8 million, or $1.39 per diluted share, which includes:
* Income, net of tax, from the discontinued operations of North Carolina of $1.7 million, or $0.03 per diluted share;
* a non-cash pre-tax charge of $2.8 million, or $0.03 per diluted share, for the net book value of assets removed at Homestead-Miami Speedway; and
* a revenue contribution to ISC's Food, Beverage and Merchandise Income of $1.6 million, or $0.02 per diluted share, related to the Company's ongoing activities to audit third party vendors' sales reports for prior years.
GAAP to Non-GAAP Reconciliation
The following financial information is presented below using other than generally accepted accounting principles ("non-GAAP"), and is reconciled to comparable information presented using GAAP. Non-GAAP net income and diluted earnings per share below are derived by adjusting amounts determined in accordance with GAAP for certain items presented in the accompanying selected operating statement data, net of taxes. The adjustments relate to: (1) the presentation of North Carolina Speedway's operations and sale as discontinued; (2) the impairment of long-lived assets at Nazareth Speedway; (3) the write- off of the net book value of certain undepreciated assets removed in connection with a major track reconfiguration project at Homestead-Miami Speedway; and (4) charges associated with refinancing the majority of the Company's long-term debt. We believe such non-GAAP information is useful and meaningful to investors, and is used by investors and us to assess our core operations.
This non-GAAP financial information may not be comparable to similarly titled measures used by other entities and should not be considered as alternatives to operating income, net income or diluted earnings per share, which are determined in accordance with GAAP.
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended Nine Months Ended
Aug. 31 Aug. 31 Aug. 31 Aug. 31
2003 2004 2003 2004
Net income $35,953 $68,090 $73,809 $101,942
Net loss (income), net of
tax, from:
Discontinued operations
of North Carolina 547 (50) (1,742) (3,074)
Gain on sale of North
Carolina -- (36,337) (36,337)
Income from continuing
operations 36,500 31,703 72,067 62,531
Adjustments, net of tax:
Impairment of long-lived
assets at Nazareth -- -- -- 8,591
Homestead-Miami track
reconfiguration -- -- 1,726 --
Interim interest on debt
redeemed -- -- -- 995
Loss on early redemption
of debt -- -- -- 3,028
Non-GAAP net income $36,500 $31,703 $73,793 $75,145
Diluted earnings per share $0.68 $1.28 $1.39 $1.92
Net loss (income), net of
tax, from:
Discontinued operations
of North Carolina 0.01 -- (0.03) (0.06)
Gain on sale of North
Carolina -- (0.68) -- (0.68)
Income from continuing
operations 0.69 0.60 1.36 1.18
Adjustments, net of tax:
Impairment of long-lived
assets at Nazareth -- -- -- 0.16
Homestead-Miami track
reconfiguration -- -- 0.03 --
Interim interest on debt
redeemed -- -- -- 0.02
Loss on early redemption
of debt -- -- -- 0.06
Non-GAAP diluted earnings
per share $0.69 $0.60 $1.39 $1.42
Highlights of the third quarter of 2004 include:
* Capacity crowds for Michigan's two NASCAR NEXTEL Cup races;
* sold-out attendance for Chicagoland's NEXTEL Cup and Busch weekend and Kansas' IRL IndyCar and NASCAR Craftsman Truck weekend;
* increased attendance for Watkins Glen's NEXTEL Cup event, Michigan's Busch and Craftsman Truck races and the IndyCar events at Richmond, Michigan and Nazareth; and
* despite a two-hour delay to the start of the NEXTEL Cup Pepsi 400 due to inclement weather, Daytona's race weekend posted record revenue, even after excluding the increase from NASCAR's broadcast rights revenue.
"ISC posted an excellent quarter with revenues up over ten percent on a comparable event basis," commented Lesa France Kennedy, President of ISC. "Revenue growth was driven by increased broadcast rights fees and higher sales primarily attributable to Americrown's expanded merchandising operations as of the beginning of this year. Also contributing to overall top line results were higher sponsorship, camping, hospitality, advertising and other motorsports related revenues for comparable events held in the quarter."
The 2004 third quarter benefited from ISC's renewal of its multi-year, multi-track official status agreement with Pepsi. Other than the collective ten-year deals Nextel has with the Company's facilities, Pepsi's agreement marks the single largest marketing partnership announced by ISC to date. Pepsi continues its status as the official soft drink of ISC and its facilities. In addition, Pepsi remains title sponsor of the July NEXTEL Cup race in Daytona.
Ms. Kennedy continued, "We are very excited to announce that we have extended our longstanding relationship with Pepsi. Our key market penetration and strengthening nationwide presence raises our value to major corporate partners. In addition, our focus on relationship management helps ISC's sponsors maximize their return on investment. We remain committed to securing similar multi-year, multi-track agreements, further enhancing revenue visibility and stability for the Company."
Recent Events
To date in the fourth quarter, ISC has hosted several successful major events, including:
* The inaugural Pop Secret 500 weekend at California Speedway, the result of realignment of the NEXTEL Cup schedule. The event, which finished "under the lights," posted a more than 50 percent attendance increase over the same Labor Day weekend race held at Darlington in 2003.
* Richmond posted record weekend attendance and a sold-out NEXTEL Cup Chevy Rock and Roll 400. The final race before the Chase for the NEXTEL Cup featured thrilling door-to-door racing as drivers competed for an opportunity to become the first NEXTEL Cup Champion. Television viewership grew 15% over the prior year, resulting in the largest television audience for an event at the facility.
* Chicagoland recorded sold-out attendance for its IRL IndyCar and ARCA racing weekend.
* California hosted an exciting Craftsman Truck/IRL IndyCar weekend highlighted by Tony Kanaan's clinching of the 2004 IndyCar Championship with his second place finish in the Toyota Indy 400.
* Talladega posted increased attendance for its successful ARCA/NEXTEL Cup weekend. Dale Earnhardt Jr. recorded his fifth win of the season and fifth career victory at Talladega, placing him second only to his father, Dale Earnhardt, for most career victories at the facility. Viewership for the event was strong as overnight results posted a six percent increase over the prior year.
For the remainder of the fourth quarter, the Company will host a sold-out NASCAR NEXTEL Cup/Busch series weekend at Kansas, and a Craftsman Truck/NEXTEL Cup weekend at newly acquired Martinsville Speedway. In addition, ISC will host three consecutive NASCAR triple-header weekends at Phoenix, Darlington and the season finale Ford Championship Weekend at Homestead-Miami Speedway in November. Advanced ticket sales for these events are trending ahead of the prior year.
Regarding the Company's ongoing expansion efforts in the New York metropolitan area, due diligence continues on the collection of land parcels identified on Staten Island. The land purchase will depend on the outcome of that process. However, even if the property is purchased, the ultimate decision to develop a motorsports facility will be based on the overall results of a detailed feasibility study, including estimated construction cost, availability of public financing, permitting considerations, traffic and transportation analyses, and other necessary project reviews. The Company remains optimistic for its prospects to bring NASCAR racing to New York City.
In the Pacific Northwest, the Company has identified a preferred site for the development of a motorsports facility in Snohomish County, approximately 30 miles north of Seattle, Washington, the country's 12th largest media market. On October 6, City of Marysville and Snohomish County officials presented a proposal for a public/private partnership to Washington's Legislative Committee on Economic Development and International Relations. While it is too early to know if any public participation will materialize, as it will require approval by the Washington Legislature, ISC is excited to take this important next step toward building a major motorsports venue in this underserved region of the country.
Outlook
The Company reiterates its previously issued fourth quarter guidance for revenues of $220 to $225 million and earnings of $0.98 to $1.00 per diluted share.
"As evidenced by the strength of our advanced ticket sales, we are on track for another record fourth quarter," Ms. France Kennedy continued. "We are especially excited about hosting our first NEXTEL Cup and Craftsman Truck events since purchasing Martinsville in July. Advanced sales for the Subway 500 race weekend are trending solidly ahead of 2003 -- a testament to the excellent show put on there year after year. The facility and its outstanding management team have made a wonderful addition to the ISC family, and we look forward to contributing to their future success."
Ms. France Kennedy concluded, "Supported by our strong business fundamentals, we expect to post solid results during fiscal 2005. Contributing to next year's growth will be increased capacity at our facilities, including 1,600 grandstand seats at Kansas, and 900 club seats and six incremental luxury suites at Michigan. On the external developmental front, our efforts in New York and the Pacific Northwest are proceeding well, and we look forward to working diligently to bring those projects to fruition. Finally, industry initiatives including Nextel's sponsorship, Realignment and the Chase for the NEXTEL Cup are yielding important long-term results and we expect the sport's positive momentum will continue to build in 2005."
International Speedway Corporation is a leading promoter of motorsports activities in the United States, currently promoting more than 100 events annually. The Company owns and/or operates 11 of the nation's major motorsports facilities, including Daytona International Speedway in Florida (home of the Daytona 500); Talladega Superspeedway in Alabama; Michigan International Speedway located outside Detroit; Richmond International Raceway in Virginia; California Speedway near Los Angeles; Kansas Speedway in Kansas City, Kansas; Phoenix International Raceway in Arizona; Homestead-Miami Speedway in Florida; Martinsville Speedway in Virginia; Darlington Raceway in South Carolina; and Watkins Glen International in New York. Other track ownership includes Nazareth Speedway in Pennsylvania and an indirect 37.5% interest in Raceway Associates, LLC, which owns and operates Chicagoland Speedway and Route 66 Raceway near Chicago, Illinois.
The Company also owns and operates MRN Radio, the nation's largest independent sports radio network; DAYTONA USA, the "Ultimate Motorsports Attraction" in Daytona Beach, Florida, the official attraction of NASCAR; and subsidiaries which provide catering services, food and beverage concessions, and produce and market motorsports-related merchandise under the trade name "Americrown." For more information, visit the Company's Web site at www.iscmotorsports.com.
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended Nine Months Ended
August 31, August 31,
2003 2004 2003 2004
REVENUES:
Admissions, net $62,673 $56,735 $150,975 $147,358
Motorsports related
income 74,806 75,753 191,944 211,709
Food, beverage and
merchandise income 21,612 22,083 52,766 55,769
Other income 1,449 1,912 4,320 5,030
160,540 156,483 400,005 419,866
EXPENSES:
Direct expenses:
Prize and point fund
monies and NASCAR
sanction fees 26,329 23,278 68,786 69,919
Motorsports related
expenses 31,610 33,041 74,960 79,957
Food, beverage and
merchandise expenses 12,053 14,997 29,547 35,748
General and
administrative expenses 20,169 23,243 59,765 66,503
Depreciation and
amortization 10,470 11,159 30,980 33,179
Impairment of long-
lived assets -- -- -- 13,217
Homestead-Miami Speedway
track reconfiguration -- -- 2,829 --
100,631 105,718 266,867 298,523
Operating income 59,909 50,765 133,138 121,343
Interest income 554 1,065 1,245 2,824
Interest expense (5,834) (4,833) (17,617) (17,301)
Loss on early redemption
of debt -- -- -- (4,988)
Equity in net income from
equity investments 5,176 5,253 2,154 2,318
Income from continuing
operations before income
taxes 59,805 52,250 118,920 104,196
Income taxes 23,305 20,547 46,853 41,665
Income from continuing
operations 36,500 31,703 72,067 62,531
(Loss) income from
discontinued operations,
net of income taxes (547) 50 1,742 3,074
Gain on sale of
discontinued operations,
net of income taxes -- 36,337 -- 36,337
Net income $35,953 $68,090 $73,809 $101,942
Basic earnings per share:
Income from continuing
operations $0.69 $0.60 $1.36 $1.18
(Loss) income from
discontinued operations (0.01) -- 0.03 0.06
Gain on sale of
discontinued
operations -- 0.68 -- 0.68
Net income $0.68 $1.28 $1.39 $1.92
Diluted earnings per share
Income from continuing
operations $0.69 $0.60 $1.36 $1.18
(Loss) income from
discontinued operations (0.01) -- 0.03 0.06
Gain on sale of
discontinued
operations -- 0.68 -- 0.68
Net income $0.68 $1.28 $1.39 $1.92
Dividends per share $0.00 $0.00 $0.06 $0.06
Basic weighted average
shares outstanding 53,064,693 53,092,962 53,054,252 53,079,888
Diluted weighted average
shares outstanding 53,135,632 53,194,807 53,127,718 53,175,098
Consolidated Balance Sheets
(In Thousands)
November 30, 2003 August 31, 2004
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $223,973 $286,133
Short-term investments 201 200
Receivables, less allowance of
$1,500 in 2003 and 2004 37,996 46,104
Inventories 5,496 9,600
Prepaid expenses and other
current assets 4,078 17,950
Total Current Assets 271,744 359,987
Property and Equipment, net of
accumulated depreciation of $235,672
and $254,247, respectively 884,623 926,662
Other Assets:
Equity investments 33,706 36,023
Intangible assets, net 1,033 149,000
Goodwill 92,542 98,688
Other 20,144 21,828
147,425 305,539
Total Assets $1,303,792 $1,592,188
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term
debt $232,963 $7,390
Accounts payable 15,739 32,710
Deferred income 106,998 159,847
Income taxes payable 6,877 3,667
Other current liabilities 13,928 18,432
Total Current Liabilities 376,505 222,046
Long-Term Debt 75,168 369,893
Deferred Income Taxes 113,414 161,483
Long-Term Deferred Income 11,894 11,772
Other Long-Term Liabilities 346 198
Commitments and Contingencies -- --
Shareholders' Equity:
Class A Common Stock, $.01 par
value, 80,000,000 shares
authorized; 28,359,173 and
28,692,895 issued and outstanding
at November 30, 2003 and
August 31, 2004, respectively 283 287
Class B Common Stock, $.01 par
value, 40,000,000 shares
authorized; 24,858,610 and
24,575,152 issued and outstanding
at November 30, 2003 and
August 31, 2004, respectively 249 246
Additional paid-in capital 694,719 696,846
Retained earnings 34,602 133,314
Accumulated other comprehensive
loss (333) (89)
729,520 830,604
Less: unearned compensation-
restricted stock (3,055) (3,808)
Total Shareholders' Equity 726,465 826,796
Total Liabilities and Shareholders'
Equity $1,303,792 $1,592,188
Consolidated Statements of Cash Flows
Nine Months Ended August 31,
2003 2004
(Unaudited)
(In Thousands)
OPERATING ACTIVITIES
Net income $73,809 $101,942
Adjustments to reconcile net
income to net cash provided by
operating activities:
Gain on sale of discontinued
operations -- (63,926)
Depreciation and amortization 32,500 34,022
Amortization of unearned
compensation 1,280 1,270
Amortization of financing
costs 240 91
Deferred income taxes 25,958 48,069
Undistributed loss from
equity investments (2,154) (2,318)
Impairment of long-lived
assets -- 13,217
Homestead-Miami Speedway
track reconfiguration 2,829 --
Loss on early redemption of
debt -- 4,988
Other, net (49) 608
Changes in operating assets
and liabilities:
Receivables, net (11,735) (4,267)
Inventories, prepaid
expenses and other assets (11,723) (17,861)
Accounts payable and
other liabilities 4,185 6,117
Deferred income 32,359 48,785
Income taxes payable 8,987 (3,152)
Net cash provided by operating
activities 156,486 167,585
INVESTING ACTIVITIES
Capital expenditures (42,116) (71,524)
Proceeds from asset disposals 178 85
Acquisition of business -- (193,745)
Proceeds from sale of
discontinued operations -- 100,391
Proceeds from affiliate 4,075 --
Proceeds from short-term
investments 200 200
Purchases of short-term
investments (200) (200)
Other, net (1,034) (477)
Net cash used in investing activities (38,897) (165,270)
FINANCING ACTIVITIES
Proceeds from long-term debt -- 299,570
Payment of long-term debt (5,500) (231,500)
Payment of long-term debt
redemption premium -- (5,340)
Proceeds from interest rate
swaps -- 2,771
Cash dividends paid (3,193) (3,196)
Deferred financing costs -- (2,473)
Reacquisition of previously
issued common stock (336) (386)
Exercise of Class A common stock
options -- 399
Net cash (used in) provided by
financing activities (9,029) 59,845
Net increase in cash and cash
equivalents 108,560 62,160
Cash and cash equivalents at
beginning of period 109,263 223,973
Cash and cash equivalents at end of
period $217,823 $286,133