International Speedway Reports Record Results for the Second Quarter of Fiscal 2006
- Company Refines Full Year Revenue and Earnings Guidance -
DAYTONA BEACH, Fla., July 6 -- International Speedway Corporation today reported record results for the fiscal second quarter ended May 31, 2006.
"Television and media revenues combined with higher corporate sponsorship, hospitality and attendance-related revenues helped drive our record results for the second quarter," commented ISC President Lesa France Kennedy. "Broadcast rights fees for the NASCAR NEXTEL Cup and Busch series increased approximately 15 percent over the prior year. In addition, an increase in other motorsports-related revenue contributed to overall top line growth. We hosted several very successful NASCAR NEXTEL Cup events during the quarter, including the Dodge Charger 500, which achieved the earliest sellout in Darlington's long history. Looking to the remainder of 2006, overall consumer demand remains strong for our events and we continue on pace for another year of record results."
Second Quarter Comparison
Total revenues for the second quarter increased to $172.1 million, compared to revenues of $157.4 million in the prior-year period. Operating income was $52.2 million during the period compared to $46.9 million in the second quarter of fiscal 2005. Net income was $30.7 million, or $0.58 per diluted share, compared to net income of $26.5 million, or $0.50 per diluted share, in the prior year.
Year-to-Date Comparison
For the six months ended May 31, 2006, total revenues increased to $366.0 million from $336.9 million in 2005. Operating income for the six-month period was $130.6 million compared to $118.7 million in the prior year. Net income was $74.7 million, or $1.40 per diluted share, in 2006. In the first six months of 2005, net income was $67.6 million, or $1.27 per diluted share.
2006 Second Quarter Highlights
An overview of the significant major event weekends held in the second quarter of 2006 includes:
-- A successful Bike Week was held at Daytona International Speedway in
early March, highlighted by a double-digit increase in overall event
attendance.
-- Homestead-Miami Speedway hosted increased crowds for its open-wheel
and Grand American racing weekend, anchored by the IRL's kick-off race
for the 2006 season, the Toyota Indy 300.
-- Martinsville Speedway hosted a weekend of NASCAR Craftsman Truck and
NEXTEL Cup racing, highlighted by a sold-out crowd for the NEXTEL Cup
DirecTV 500 and a nearly 30 percent increase in attendance for the
Craftsman Truck Kroger 250.
-- Phoenix International Raceway hosted a successful weekend of NEXTEL
Cup and Busch racing, with a near capacity crowd on-hand for the
NEXTEL Cup SUBWAY Fresh 500. The weekend also featured the debut of
the facility's new Turn 1 grandstand and suite structure, including a
new club seating area which provides a luxurious fan experience. The
club area combines high-end cuisine with spectacular views of racing
action and the surrounding landscape in a plush environment. Fan
response was outstanding.
-- Talladega Superspeedway's NEXTEL Cup and Busch series weekend was
anchored by the NEXTEL Cup Aaron's 499, which was postponed to the
next day because of inclement weather. Positively impacting the
results of the weekend were increased attendance for the Aaron's 312
Busch event, and higher concessions and caterings sales.
-- Richmond International Raceway hosted another successful weekend of
NEXTEL Cup and Busch racing, highlighted by the facility's 29th
consecutive sellout for the NEXTEL Cup Crown Royal 400. The on-track
competition was outstanding as Dale Earnhardt Jr. captured his first
win of the season.
-- Darlington Raceway hosted a sold-out NEXTEL Cup Dodge Charger 500, the
earliest sellout in Darlington's history including the recent net
addition of approximately 3,000 seats. The facility also posted a
double-digit attendance increase for the Diamond Hill Plywood 200
Busch race on Friday.
The Company's second quarter results were also driven by increased corporate partner spending. ISC secured major entitlement agreements during the quarter for several NASCAR events, including Crown Royal, General Motors, Carfax and Goody's Headache Powder. ISC has titled all of its 2006 Busch races and has only one NEXTEL Cup race entitlement sponsorship open for 2006. The Company is in discussions with interested parties for the position. "Corporate partner spending continues to boost our results quarter after quarter," Ms. France Kennedy continued. "Sponsors increasingly recognize the value of an ISC partnership due to our broad national reach and ability to deliver a fully-integrated marketing platform including media production, hospitality planning, and activation strategies. They can also leverage our significant expertise to help maximize their at-track presence and generate brand awareness. We continue to expect strong growth in corporate sponsorship and hospitality for the next several years."
Recent Developments
To date in the fiscal third quarter, the Company has hosted IRL IndyCar weekends at Watkins Glen International and Richmond. In addition, Kansas Speedway hosted a successful IRL/Craftsman Truck weekend, highlighted by Sam Hornish Jr.'s 0.0793-second win over pole sitter Dan Wheldon in the Kansas Lottery Indy 300.
Michigan International Speedway hosted a NEXTEL Cup, Craftsman Truck and ARCA weekend in June, with overall attendance-related results falling short of Company expectations. ISC believes weak economic conditions in Michigan and the mid-west region of the country, particularly due to challenges in the automotive industry and the related high unemployment rate, contributed to the lower results. In addition, forecasted inclement weather during race week and rain on race day also impacted attendance levels for the weekend, as the 3M Performance 400 was shortened to only 129 of the scheduled 200 laps.
Daytona hosted a weekend of NEXTEL Cup, Busch and Grand American racing anchored by the 48th NEXTEL Cup Pepsi 400. Despite outstanding on-track competition highlighted by Tony Stewart's repeat victory in the Pepsi 400 and a visit by Vice President Dick Cheney, attendance-related results for the weekend were below expectations. The Company believes inclement weather trends experienced during this event over the last several years and rain during race week had a negative impact on ticket sales for this year's race. For the remainder of the third quarter, Chicagoland Speedway, Watkins Glen and Michigan will host NEXTEL Cup and Busch series weekends. In addition, Michigan will host an IRL IndyCar weekend and Martinsville will host a Busch race weekend.
"We believe the factors impacting our events at Michigan and Daytona's Pepsi 400 weekend are not indicative of broader industry trends, and our nation-wide footprint helps reduce their impact on our overall results," added Ms. France Kennedy. "Michigan is struggling with high unemployment compounded by well-documented issues facing the automotive industry. And, we do not think the results of the Pepsi 400 represent an overall softening of the Daytona market. In fact, overall attendance increased for Speedweeks 2006 and the Daytona 500 sold out earlier than recent years. Our outlook for consumer demand remains positive, supported by strong overall advanced ticket sales for our remaining events for the year."
ISC continues to make important progress on its facility development projects. In New York, the Company is proceeding with next steps in the land-use change process, including re-scheduling the required public scoping meeting. Concurrently, ISC is proceeding with its site improvement work as part of its overall construction plan. Importantly, this work also improves the marketability of the site should the Company decide not to proceed with the speedway project.
In the State of Washington, ISC continues to generate local and statewide support for its proposed facility development project. Company representatives and project supporters held a successful work session with the Legislative Committee on Economic Development and International Relations on May 31, during which they discussed the details and merits of the proposed motorsports and multi-use recreational facility project. ISC continues to solicit additional grassroots and legislative support for the project, and expects to decide on the best course of action later in the fiscal year including introduction of the necessary public financing legislation in the 2007 session of the Washington State Legislature.
Regarding the civil action filed in July 2005 by the Kentucky Speedway, LLC, against both NASCAR and ISC, the Company is moving forward with discovery and proceeding with preparation of its defense. Now that ISC is further along in the process and has better visibility, the Company expects related litigation costs to approximate $0.05 to $0.06 per diluted share in earnings for fiscal 2006. Based on evidentiary materials reviewed to date, ISC continues to believe the lawsuit is without merit, and intends to continue to vigorously defend itself.
Finally, the Company recently closed on a $300 million credit facility (the "Facility"), which replaced its previous $300 million credit facility. ISC elected to take advantage of favorable market conditions to secure the Facility, while maintaining its financial flexibility to capitalize on future growth opportunities.
Outlook
Primarily driven by the previously discussed lower than expected results at Michigan and Daytona, ISC anticipates its previous internal estimate for third quarter earnings will be impacted by approximately $0.10 to $0.12 per diluted share. The Company now expects third quarter earnings before interest, taxes, depreciation and amortization ("EBITDA")(1) and operating margins to range from 37 to 38 percent and 29 to 30 percent, respectively, of total revenues. Partially offsetting the third quarter decrease is the Company's anticipated strong fourth quarter results, supported by overall advance ticket sales trends that are currently almost ten percent ahead of last year.
As ISC has now reported six months of actual results, the Company is refining its 2006 full year guidance for total revenues to range between $785 and $795 million, driven by growth in all major categories. As a result, full year earnings are estimated at $3.20 to $3.25 per diluted share. At this point in the fiscal year, the Company is currently more comfortable at the lower end of the estimated range of earnings.
(1). EBITDA is a non-GAAP financial measure used by the Company as an
important indicator of its operating margin.
"Despite some regional challenges in the third quarter, we are very excited with our prospects for the remainder of the year and continue to expect full year record results," Ms. France Kennedy concluded. "Consumer demand remains strong, and we expect growth in corporate partner sponsorship and hospitality to contribute to our overall revenue and earnings growth. In addition, we continue to make progress in our efforts to maximize efficiencies by leveraging our scale and reducing operating costs moving into fiscal 2007 and beyond. We are excited about the remainder of this fiscal year and remain focused on enhancing long-term shareholder value."
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/.
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended Six Months Ended
May 31, 2005 May 31, 2006 May 31, 2005 May 31, 2006
REVENUES:
Admissions, net $48,510 $49,279 $104,294 $104,799
Motorsports related 88,700 101,925 188,969 216,247
Food, beverage and
merchandise 17,911 18,162 38,860 40,025
Other 2,326 2,717 4,756 4,945
157,447 172,083 336,879 366,016
EXPENSES:
Direct expenses:
Prize and point
fund monies and
NASCAR sanction
fees 31,625 34,566 63,109 69,101
Motorsports
related 31,292 32,453 59,727 63,266
Food, beverage
and merchandise 12,007 11,404 24,639 24,570
General and
administrative 23,071 27,705 46,242 51,198
Depreciation and
amortization 12,586 13,779 24,449 27,242
110,581 119,907 218,166 235,377
Operating income 46,866 52,176 118,713 130,639
Interest income 1,368 1,087 2,338 2,021
Interest expense (3,305) (2,832) (6,360) (6,900)
Equity in net loss from
equity investments (1,371) (2,186) (2,902) (4,683)
Income from continuing
operations before income
taxes 43,558 48,245 111,789 121,077
Income taxes 17,018 17,518 44,131 46,219
Income from continuing
operations 26,540 30,727 67,658 74,858
Loss from discontinued
operations, net of income
tax benefits of
$62, $65, $126 and
$148, respectively (39) (40) (92) (118)
Net income $26,501 $30,687 $67,566 $74,740
Basic earnings per share:
Income from
continuing
operations $0.50 $0.58 $1.27 $1.41
Loss from
discontinued
operations -- -- -- --
Net income $0.50 $0.58 $1.27 $1.41
Diluted earnings per
share:
Income from
continuing
operations $0.50 $0.58 $1.27 $1.40
Loss from
discontinued
operations -- -- -- --
Net income $0.50 $0.58 $1.27 $1.40
Dividends per share $0.06 $0.08 $0.06 $0.08
Basic weighted average
shares outstanding 53,127,314 53,165,845 53,114,430 53,155,050
Diluted weighted average
shares outstanding 53,231,643 53,266,521 53,227,585 53,258,199
Consolidated Balance Sheets
(In Thousands)
(Unaudited)
November 30, 2005 May 31, 2006
ASSETS
Current Assets:
Cash and cash equivalents $130,758 $86,583
Short-term investments 8,200 35,300
Receivables, less allowance of
$1,500 in 2005 and 2006 45,557 75,927
Inventories 6,528 7,390
Prepaid expenses and other
current assets 6,335 17,844
Total Current Assets 197,378 223,044
Property and Equipment, net of
accumulated depreciation of $315,313
and
$342,330, respectively 1,178,682 1,206,962
Other Assets:
Equity investments 51,160 170,926
Intangible assets, net 149,464 149,386
Goodwill 99,507 99,507
Deposits with Internal Revenue
Service 96,913 96,913
Other 23,965 23,053
421,009 539,785
Total Assets $1,797,069 $1,969,791
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term
debt $635 $635
Accounts payable 19,274 26,198
Deferred income 123,870 202,816
Income taxes payable 20,067 25,212
Other current liabilities 18,645 20,052
Total Current Liabilities 182,491 274,913
Long-Term Debt 368,387 368,241
Deferred Income Taxes 194,825 203,693
Long-Term Deferred Income 11,342 11,313
Other Long-Term Liabilities 69 41
Commitments and Contingencies -- --
Shareholders' Equity:
Class A Common Stock, $.01 par
value, 80,000,000 shares
authorized;
29,215,778 and 30,868,468
issued and outstanding at
November 30, 2005 and May
31, 2006, respectively 292 308
Class B Common Stock, $.01 par
value, 40,000,000 shares
authorized;
23,928,058 and 22,309,102
issued and outstanding at
November 30, 2005 and May
31, 2006, respectively 239 223
Additional paid-in capital 695,658 696,936
Retained earnings 343,766 414,123
Total Shareholders' Equity 1,039,955 1,111,590
Total Liabilities and Shareholders'
Equity $1,797,069 $1,969,791
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
Six Months Ended
May 31, 2005 May 31, 2006
OPERATING ACTIVITIES
Net income $67,566 $74,740
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and
amortization 24,449 27,242
Stock-based compensation 915 1,283
Amortization of financing
costs 288 282
Deferred income taxes 4,790 8,868
Loss from equity
investments 2,902 4,683
Other, net 431 (105)
Changes in operating assets
and liabilities:
Receivables, net (14,233) (30,370)
Inventories, prepaid
expenses and other
assets (11,018) (12,437)
Accounts payable and
other liabilities (9,825) 2,824
Deferred income 67,061 78,917
Income taxes (3,429) 5,157
Net cash provided by operating
activities 129,897 161,084
INVESTING ACTIVITIES
Capital expenditures (166,157) (54,290)
Proceeds from asset disposals 29 161
Purchase of equity investments -- (124,577)
Acquisition of businesses (764) --
Proceeds from affiliate 487 128
Proceeds from short-term
investments 208,390 50,600
Purchases of short-term
investments (231,150) (77,700)
Other, net 178 549
Net cash used in investing activities (188,987) (205,129)
FINANCING ACTIVITIES
Proceeds under credit facility -- 80,000
Payments under credit facility -- (80,000)
Payment of long-term debt (7,000) --
Exercise of Class A common stock
options 285 145
Excess tax benefits relating to
stock-based compensation -- 185
Reacquisition of previously
issued common stock (511) (460)
Deferred financing costs (10) --
Net cash used in financing activities (7,236) (130)
Net decrease in cash and cash
equivalents (66,326) (44,175)
Cash and cash equivalents at
beginning of period 160,978 130,758
Cash and cash equivalents at end of
period $94,652 $86,583