International Speedway Reports Record Results for the Fourth Quarter and Full Year of Fiscal 2005
~ Full-Year Total Revenues Increase 14 Percent ~
DAYTONA BEACH, Fla., Jan. 26 -- International Speedway Corporation today reported record results for the fiscal fourth quarter and full year ended November 30, 2005.
"This past year was highlighted by significant Company and industry developments, as well as increased revenue in all our major categories," commented Lesa France Kennedy, President of ISC. "Television and media contributed to full year revenue growth, led by the 17 percent average increase in contracted industry broadcast rights fees for the NASCAR NEXTEL Cup and Busch series. In addition, double-digit growth in corporate partner spending as well as higher admissions-related revenue contributed to the increase. During the year we completed major facility enhancements at Daytona, Michigan and Homestead-Miami that are designed to enhance the fan experience and create incremental revenue opportunities for the Company. Finally, we are excited about the future prospects of Motorsports Authentics, our merchandising joint venture with Speedway Motorsports."
Fourth Quarter Comparison
Total revenues for the fourth quarter increased to $236.7 million, compared to revenues of $231.3 million in the prior-year period. Operating income was $90.5 million during the period compared to $92.6 million in the fourth quarter of fiscal 2004. Net income was $55.0 million, or $1.03 per diluted share, compared to net income of $54.4 million, or $1.02 per diluted share, in the prior year.
The realignment of Darlington Raceway's NEXTEL Cup and Busch weekend, held in the fourth quarter of 2004, to Phoenix International Raceway in the second quarter of 2005 significantly impacted year-over-year results. In addition, 2005 fourth-quarter results include the IRL IndyCar event at Watkins Glen International, which was realigned from Nazareth Speedway after the 2004 race season. The long-lived assets of Nazareth are held for sale as of November 30, 2005. Therefore, its results are recorded as discontinued operations, net of tax, for all periods presented.
Full Year Comparison
For the twelve months ended November 30, 2005, total revenues increased to $740.1 million from $647.8 million in 2004. Operating income for the twelve- month period was $265.3 million compared to $228.4 million in the prior year. Net income for the twelve months ended November 30, 2005, was $159.4 million, or $2.99 per diluted share, and impacted by the following:
* The July 2004 acquisition of Martinsville Speedway resulted in an incremental NASCAR NEXTEL Cup and Craftsman Truck weekend in the second quarter of 2005.
* The inclusion of the NASCAR Busch Series and aforementioned IRL event weekends at Watkins Glen in the 2005 third and fourth quarters, respectively, which were realigned from Nazareth.
* The 2005 second quarter recovery of approximately $1.8 million, or $0.02 per diluted share, associated with ISC's allowable claim in the CART bankruptcy. The claim was based on the failure to return ISC's sanction fee paid to CART, less allowable expenses, for the 2003 event scheduled at California Speedway, which CART canceled because of the state of emergency due to wildfires in Southern California at the time.
Net income for the twelve months ended November 30, 2004 was $156.3 million, or $2.94 per diluted share, and included the following:
* A combined pre-tax charge included in the 2004 second quarter of $6.6 million, or $0.08 per diluted share, associated with refinancing the Company's Senior Notes.
* An after-tax gain of $36.3 million, or $0.68 per diluted share, on the sale of North Carolina Speedway's assets.
* A combined pre-tax non-cash charge of $1.0 million, or $0.01 per diluted share, related to the Daytona International Speedway infield and Michigan International Speedway frontstretch renovation projects.
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 the operations of North Carolina and Nazareth as discontinued; (2) the presentation of the sale of North Carolina as discontinued; (3) charges associated with refinancing the majority of the Company's long-term debt; and (4) the write-off of the net book value of certain undepreciated assets removed in connection with major track renovation projects at Daytona and Michigan. 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 an alternative 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 Twelve Months Ended
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
2004 2005 2004 2005
Net income $54,376 $55,044 $156,318 $159,361
Net loss (income), net of tax, from:
Discontinued operations of North
Carolina and Nazareth 65 (432) 6,315 (289)
Gain on the sale of discontinued
operations -- -- (36,337) --
Income from continuing operations 54,441 54,612 126,296 159,072
Adjustments, net of tax:
Interim interest on debt
redeemed -- -- 995 --
Loss on early redemption of debt -- -- 3,028 --
Track renovation projects at
Daytona and Michigan 204 -- 608 --
Non-GAAP net income $54,645 $54,612 $130,927 $159,072
Diluted earnings per share $1.02 $1.03 $2.94 $2.99
Net loss (income), net of tax, from:
Discontinued operations of North
Carolina and Nazareth -- -- 0.11 --
Gain on the sale of discontinued
operations -- -- (0.68) --
Income from continuing operations 1.02 1.03 2.37 2.99
Adjustments, net of tax:
Interim interest on debt
redeemed -- -- 0.02 --
Loss on early redemption of debt -- -- 0.06 --
Track renovation projects at
Daytona and Michigan -- -- 0.01 --
Non-GAAP diluted earnings per share $1.02 $1.03 $2.46 $2.99
2005 Fourth Quarter Highlights
An overview of the significant major event weekends held in the fourth quarter of 2005 includes:
* California hosted near-capacity crowds for its Labor Day NASCAR NEXTEL Cup race. Television viewership was again strong for the weekend. The Sony HD 500 posted record broadcast ratings for a Labor Day weekend Cup race, and the NASCAR Busch Series Ameriquest 300 event posted a 28 percent increase in average households.
* The following weekend, Richmond International Raceway hosted a capacity crowd for the NEXTEL Cup Chevy Rock and Roll 400, and record attendance for the Emerson Electronics 250 Busch series event.
* ISC hosted successful open wheel racing events during the fourth quarter, including IRL races at Chicagoland Speedway, Watkins Glen, and California, as well as Grand American Road Racing events at Phoenix and Watkins Glen.
* Talladega Superspeedway hosted NEXTEL Cup and ARCA racing highlighted by exciting on-track competition including 50 lead changes for the UAW-Ford 500 NEXTEL Cup event. As previously reported, the weekend's attendance-related revenue was below expectations primarily due to the impacts of the recent hurricanes on the Gulf Coast, a key selling region for the facility.
* Kansas Speedway once again hosted a sold-out crowd for its NEXTEL Cup and Busch weekend. The sell-out includes an additional 1,600 seats added this year, demonstrating the outstanding consumer demand in this key market. Television results for the weekend were very strong as the NEXTEL Cup Banquet 400 posted a six percent increase in average households.
* Martinsville hosted a capacity crowd for the sixth race in the Chase for the NASCAR NEXTEL Cup. In addition, the NEXTEL Cup Subway 500 posted a seven percent increase in average household viewership over the prior year.
* Phoenix hosted a NASCAR triple-header weekend in November, anchored by the sold-out Checker Auto Parts 500 NEXTEL Cup race. The event weekend also posted increased overall attendance from the prior year, highlighted by record attendance for the Chevy Silverado 150 Craftsman Truck race.
* The 2005 NASCAR season came to a thrilling conclusion at Homestead-Miami Speedway. Consumer demand for the NASCAR Ford Championship Weekend was outstanding. The NEXTEL Cup Ford 400 was sold out nearly three months in advance, and the facility's Busch and Craftsman Truck events posted significant double-digit attendance increases over the prior year.
Corporate sponsor spending contributed to the Company's record revenue for the fourth quarter of fiscal 2005. During the quarter the Company announced significant long-term official status agreements with Texas Instruments and Ford, which renewed its relationship with ISC and Homestead-Miami as the title sponsor of the NASCAR Championship Weekend. For the full year fiscal 2005, corporate partner spending posted a double-digit increase on a comparable event basis, demonstrating the continued strong interest by marketing partners in ISC. The Company leveraged relationships with over 450 corporate partners in 2005, including well-known brands like The Home Depot, AAA, Crown Royal and Office Depot.
"Corporate demand continues to strengthen due to the ongoing growth in NASCAR's popularity coupled with our unparalleled schedule of events," Ms. France Kennedy continued. "We posted significant increases in sponsorship and hospitality revenues during 2005, and we look forward to another strong year in sponsor related spending in 2006. Our corporate marketing initiatives and focus on partnership management allows us to identify new growth opportunities, while helping partners maximize their return on investment."
Recent Developments
The Company continues to make progress in its major development projects. In Metro New York, the Company continues with its local and governmental outreach efforts on Staten Island, while proceeding with the land use approval process and other aspects of its feasibility study. ISC is also conducting site improvement work, which is critical to the overall construction plan of the proposed facility and improves the marketability of the site should the speedway project not proceed.
In Seattle, ISC is continuing with its project due diligence to evaluate, among other factors, environmental impacts including traffic, noise, air quality and others, if necessary. Washington state legislation is required to create the public financing mechanism for construction of the facility. While the Company has secured significant local support, it believes it is in the best long-term interest of the project to not introduce the necessary legislation in the shortened session of the 2006 Washington Legislature. This session concludes in March 2006 and is already facing a full agenda of action items. ISC is currently evaluating all of its options, including introducing the legislation in the full 2007 session, and will decide on the best course of action for the project over the next several months.
Regarding the Kentucky Speedway, LLC civil action filed in July 2005 against NASCAR and ISC, the Company is awaiting a ruling on its motion to dismiss from the United States District Court, Eastern District of Kentucky (the "Court"). Should the Court deny ISC's motion, the Company will proceed with its defense, which could result in additional legal and related expenses in the low seven digits, or up to $0.04 per diluted share in earnings, for fiscal 2006. ISC maintains that the lawsuit is without merit, and intends to vigorously defend itself.
Outlook
Speedweeks 2006 kicks off on January 28 with the 44th running of the 24-hour Grand Am Rolex 24 at Daytona. PEE Channel will air 13 1/2 hours of live coverage from the nation's premier endurance race, and will also air the NASCAR Craftsman Truck Series race from Daytona. Speedweeks culminates with the 48th annual Daytona 500, the Great American Race. NBC and TNT will partner to air the NASCAR NEXTEL Cup Budweiser Shootout, the Gatorade Duel and Daytona 500, as well as the NASCAR Busch Series Hershey's Kissables 300.
ISC reiterates its previous financial estimates for full year revenues between $780 and $800 million, and net income of $3.20 to $3.30 per diluted share. In addition, the Company expects first quarter earnings before interest, taxes, depreciation and amortization ("EBITDA")(1) and operating margins to range from 46 to 47 percent and 39 to 40 percent, respectively. These estimates do not include the potential impact of legal expenses associated with the aforementioned Kentucky civil action.
"We are very excited for the start of the 2006 race season," concluded Ms. France Kennedy. "We expect to build off our success in 2005 and post another record year for the Company. Consumer and corporate demand remain very strong and we will continue to execute on our marketing initiatives designed to capitalize on the growing popularity of NASCAR racing. In addition, we continue to explore additional business opportunities to leverage our core competencies and drive future results. As always, our focus throughout all our endeavors is to provide long-term value to our shareholders."
(1) EBITDA is a non-GAAP financial measure used by the Company as an important indicator of its operating margin.
International Speedway Corporation is a leading promoter of motorsports activities in the United States, currently promoting more than 100 racing events annually as well as numerous other motorsports-related activities. The Company owns and/or operates 11 of the nation's major motorsports entertainment 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 motorsports entertainment facility ownership includes an indirect 37.5 percent 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." In addition, the Company has an indirect 50 percent interest in a business called Motorsports Authentics, which markets and distributes motorsports-related merchandise licensed by certain competitors in NASCAR racing. For more information, visit the Company's Web site at http://www.iscmotorsports.com/ .
(Tables Follow)
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
Three Months Ended Twelve Months Ended
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
2004 2005 2004 2005
(Unaudited)
REVENUES:
Admissions, net $76,388 $71,563 $222,545 $234,768
Motorsports related 125,247 134,325 334,943 408,514
Food, beverage and
merchandise 27,523 28,093 83,236 87,269
Other 2,096 2,749 7,124 9,578
231,254 236,730 647,848 740,129
EXPENSES:
Direct expenses:
Prize and point
fund monies and
NASCAR sanction
fees 50,497 47,296 119,322 136,816
Motorsports
related 35,485 42,173 113,073 134,395
Food, beverage
and merchandise 16,439 18,561 52,285 56,773
General and
administrative 24,585 24,812 90,307 95,987
Depreciation and
amortization 11,666 13,355 44,443 50,893
138,672 146,197 419,430 474,864
Operating income 92,582 90,533 228,418 265,265
Interest income 1,233 1,299 4,053 4,860
Interest expense (4,422) (3,107) (21,723) (12,693)
Loss on early redemption
of debt -- -- (4,988) --
Equity in net income from
equity investments 436 480 2,754 3,516
Income from continuing
operations before income
taxes 89,829 89,205 208,514 260,948
Income taxes 35,388 34,593 82,218 101,876
Income from continuing
operations 54,441 54,612 126,296 159,072
(Loss) income from
discontinued operations,
net of income taxes of
($0.3) million and
$0.2 million, and
($3.7) million and
$0, respectively (65) 432 (6,315) 289
Gain on the sale of
discontinued operations,
net of income taxes of
$27.6 million -- -- 36,337 --
Net income $54,376 $55,044 $156,318 $159,361
Basic earnings per share:
Income from
continuing
operations $1.03 $1.03 $2.38 $2.99
(Loss) income from
discontinued
operations (0.01) 0.01 (0.12) 0.01
Gain on sale of
discontinued
operations -- -- 0.68 --
Net income $1.02 $1.04 $2.94 $3.00
Diluted earnings per
share:
Income from
continuing
operations $1.02 $1.03 $2.37 $2.99
Loss from
discontinued
operations -- -- (0.11) --
Gain on sale of
discontinued
operations -- -- 0.68 --
Net income $1.02 $1.03 $2.94 $2.99
Dividends per share $-- $-- $0.06 $0.06
Basic weighted average
shares outstanding 53,098,185 53,143,565 53,084,437 53,128,533
Diluted weighted average
shares outstanding 53,205,911 53,250,512 53,182,776 53,240,183
Consolidated Balance Sheets
(In Thousands)
November 30,
2004 2005
ASSETS
Current Assets:
Cash and cash equivalents $160,978 $130,758
Short-term investments 115,000 8,200
Receivables, less allowance of
$1,500 in 2004 and 2005 52,798 45,557
Inventories 7,267 6,528
Prepaid expenses and other
current assets 5,032 6,335
Total Current Assets 341,075 197,378
Property and Equipment, net 969,095 1,178,682
Other Assets:
Equity investments 36,489 51,160
Intangible assets, net 148,989 149,464
Goodwill 99,265 99,507
Deposits with Internal Revenue
Service -- 96,913
Other 24,597 23,965
309,340 421,009
Total Assets $1,619,510 $1,797,069
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term
debt $7,505 $635
Accounts payable 28,854 19,274
Deferred income 114,518 123,870
Income taxes payable 25,241 20,067
Other current liabilities 15,078 18,645
Total Current Liabilities 191,196 182,491
Long-Term Debt 369,315 368,387
Deferred Income Taxes 165,617 194,825
Long-Term Deferred Income 11,503 11,342
Other Long-Term Liabilities 141 69
Commitments and Contingencies -- --
Shareholders' Equity:
Class A Common Stock, $.01 par
value, 80,000,000 shares
authorized; 28,858,934 and
29,394,344 issued and outstanding
in 2004 and 2005, respectively 289 295
Class B Common Stock, $.01 par
value, 40,000,000 shares
authorized; 24,409,903 and
23,928,058 issued and outstanding
in 2004 and 2005, respectively 244 239
Additional paid-in capital 696,882 699,879
Retained earnings 187,689 343,766
Accumulated other comprehensive
loss (22) --
885,082 1,044,179
Less: unearned compensation-
restricted stock 3,344 4,224
Total Shareholders' Equity 881,738 1,039,955
Total Liabilities and Shareholders'
Equity $1,619,510 $1,797,069
Consolidated Statements of Cash Flows
(In Thousands)
Year Ended November 30,
2004 2005
OPERATING ACTIVITIES
Net income $156,318 $159,361
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and
amortization 44,443 50,893
Discontinued operations
depreciation 1,244 --
Amortization of unearned
compensation 1,734 1,953
Amortization of financing
costs 250 569
Deferred income taxes 52,146 29,208
Undistributed income from
equity investments (2,754) (3,516)
Impairment of long-lived
assets 13,217 --
Gain on sale of
discontinued operations (63,926) --
Loss on early redemption of
debt 4,988 --
Other, net 1,028 (248)
Changes in operating assets
and liabilities:
Receivables, net (10,959) 7,304
Inventories, prepaid
expenses and other
assets (2,569) (644)
Deposits with Internal
Revenue Service -- (96,913)
Accounts payable and
other liabilities 9,215 (5,359)
Deferred income 3,187 9,191
Income taxes 18,424 (5,027)
Net cash provided by operating
activities 225,986 146,772
INVESTING ACTIVITIES
Capital expenditures (135,218) (248,850)
Proceeds from asset disposals 86 31
Acquisition of businesses (195,325) (12,660)
Proceeds from sale of
discontinued operations 100,391 --
Equity investments (2,008) (11,642)
Proceeds from short-term
investments 147,650 430,950
Purchases of short-term
investments (262,450) (324,150)
Proceeds from affiliate -- 487
Other, net (1,442) (377)
Net cash used in investing activities (348,316) (166,211)
FINANCING ACTIVITIES
Proceeds from long-term debt 299,570 --
Payment of long-term debt (231,890) (7,505)
Payment of long-term debt
redemption premium (5,340) --
Deferred financing fees (2,626) (10)
Proceeds from interest rate
swaps 2,771 --
Cash dividends paid (3,196) (3,199)
Reacquisition of previously
issued common stock (396) (511)
Exercise of Class A common stock
options 442 444
Net cash provided by (used in)
financing activities 59,335 (10,781)
Net decrease in cash and cash
equivalents (62,995) (30,220)
Cash and cash equivalents at
beginning of period 223,973 160,978
Cash and cash equivalents at end of
period $160,978 $130,758