International Speedway Reports Results for the First Quarter of Fiscal 2007
~Company Reiterates Full-Year Financial Guidance~
DAYTONA BEACH, Fla., April 3 -- International Speedway Corporation (BULLETIN BOARD: ISCB) ("ISC") today reported results for the fiscal first quarter ended February 28, 2007.
"We are pleased to report solid revenue and earnings for the first quarter, despite the year-over-year decline in broadcast revenue due to the start of NASCAR's new eight-year combined television agreements," said ISC President Lesa France Kennedy. "We hosted several successful events during the first quarter, and posted a nearly double-digit increase in corporate sponsorship revenue."
First Quarter Comparison
Total revenues for the first quarter decreased to $185.2 million, compared to revenues of $193.9 million in the prior-year period. Operating income was $65.8 million during the period compared to $78.5 million in the first quarter of fiscal 2006. Net income was $35.8 million, or $0.67 per diluted share, compared to net income of $44.1 million, or $0.83 per diluted share, in the prior year.
Results for the first quarter of fiscal 2007 include additional depreciation of $2.6 million, or $0.03 per diluted share after tax, associated with a building located in the ISC's office complex in Daytona Beach, which the Company is not currently using and does not intend to use in the future.
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 adjustment relates to the additional depreciation in the first quarter associated with a building structure located in the Company's office complex in Daytona Beach, which the Company is not currently using and does not intend to use in the future. The Company believes such non-GAAP information is useful and meaningful to investors, and is used by investors and ISC to assess 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
February 28, 2006 February 28, 2007
Net income $44,053 $35,819
Net loss, net of tax, from:
Discontinued operations 78 20
Income from continuing operations 44,131 35,839
Adjustments, net of tax:
Additional depreciation - 1,612
Non-GAAP net income $44,131 $37,451
Per share data:
Diluted earnings per share $0.83 $0.67
Net loss, net of tax, from:
Discontinued operations - -
Income from continuing operations 0.83 0.67
Adjustments, net of tax:
Additional depreciation - 0.03
Non-GAAP diluted earnings per share $0.83 $0.70
2007 First Quarter Highlights
An overview of the significant major event weekends held in the first quarter of 2007 includes:
-- Speedweeks 2007 kicked off in exciting fashion with the Grand American
Road Racing Series Rolex 24 at Daytona. World-class competitors from
several prominent racing series competed in the country's premier
sports car endurance race. The on-track competition was outstanding
and the margin of victory was the third closest in the event's history.
Notably, the 2007 Rolex 24 at Daytona posted a double-digit percentage
increase in attendance over the prior year.
-- Attendance for the 29th Annual Budweiser Shootout was comparable to the
prior year. Unfortunately, unseasonably cold weather impacted walk-up
sales for several events later during Speedweeks, most notably the
Chevy Silverado HD 250 NASCAR Craftsman Truck Series race. Attendance
for the Orbitz 300 NASCAR Busch Series race was flat with the prior
year.
-- A sold-out crowd was on hand once again for the 49th annual Daytona
500. This year's event featured one of the most exciting finishes in
recent history. Kevin Harvick captured the checkered flag by a margin
of 0.02 seconds over Mark Martin, registering the closest finish since
the advent of computer scoring in 1993.
-- California Speedway hosted an exciting weekend of NEXTEL Cup, Busch and
Craftsman Truck racing highlighted by back-to-back wins by Matt Kenseth
on Saturday and Sunday. Grandstand attendance for the Auto Club 500
was slightly up over the prior year, and the weekend also enjoyed
increased corporate sponsorship.
During the first fiscal quarter, ISC completed the acquisition of the remaining 62.5 percent of Raceway Associates, LLC, owner and operator of Chicagoland Speedway and Route 66 Raceway in Joliet, Illinois. While the acquisition is accretive to full year fiscal 2007 revenue and earnings, the facility did not host any events in the fiscal first quarter.
The Company continues to see strong growth in corporate sponsorship revenue, posting a nearly double-digit percentage increase over the prior year period. Contributing to the growth was a new relationship with DirecTV as the first ever presenting sponsor for Speedweeks. Also, ISC signed Citizens Bank, a subsidiary of Michigan-based Citizens Republic Bancorp, as title sponsor of Michigan Speedway's June NEXTEL Cup race. ISC currently has three open entitlements for its NEXTEL Cup events and two in each of the Busch, IRL IndyCar and Craftsman Truck series for 2007. The Company expects to announce additional agreements over the coming months.
"Interest from corporate advertisers looking to tap into the business- building opportunities in major motorsports continues to grow, and we are developing unique and innovative marketing platforms to meet their needs," Ms. France Kennedy continued. "We were very excited to announce our first ever presenting sponsorship with DirecTV this past quarter, and we look forward to working closely with existing and future partners to drive continued growth in corporate sponsorship revenues."
Recent Developments
To date in the fiscal second quarter, Daytona hosted Bike Week in early March highlighted by the AMA Supercross and Daytona 200, both presented by Honda. In addition, Homestead-Miami Speedway held a very successful IndyCar, Grand American and USAC racing weekend, posting a double-digit percentage increase in attendance. Most recently, Martinsville Speedway hosted a weekend of Craftsman Truck and NEXTEL Cup racing, highlighted by a near sold-out crowd for the Goody's Cool Orange 500. Fans were treated to outstanding on-track competition and the second NEXTEL Cup race with NASCAR's new Car of Tomorrow.
For the remainder of the second quarter, ISC will host four consecutive weekends of NEXTEL Cup and Busch series racing at Phoenix International Raceway, Talladega Superspeedway, Richmond International Raceway and Darlington Raceway.
During the first quarter, the Company announced it is exploring the possibility of pursuing a public-private partnership in Colorado to develop a motorsports entertainment facility in Adams County near Denver International Airport. ISC is currently evaluating a number of land parcels, and looks forward to working with public officials to explore the feasibility of a public/private partnership that will bring considerable economic impact to the metro-Denver region.
In Washington, on April 2, 2007, ISC announced that despite agreeing to substantial changes to the required legislation to help fund the speedway development, it has recently become apparent that additional modifications would be proposed to the bill. Due to the increased risk that the collective modifications would have a significant negative impact on the project's financial model, ISC felt it was in its best long-term interest to discontinue its efforts at the site located in Kitsap County. As a result, the Company will record a non-cash pre-tax charge in the fiscal 2007 second quarter of approximately $5.5 million to $6.5 million, or $0.07 to $0.08 per diluted share after-tax, to reflect the write-off of certain capitalized costs including legal, consulting, capitalized interest and other project-specific costs. The Company still believes the Pacific Northwest represents an attractive long-term opportunity, and remains interested in a speedway development project in the region.
ISC continues to search for a suitable site for a potential speedway development in the metropolitan New York area. The Company strongly believes a premier facility in the nation's number one media market is a significant long-term opportunity. In addition, ISC continues to evaluate alternatives for the 676 acres currently owned on Staten Island, including the sale of the acreage in parcels or as a whole, or the potential development of the property with a third party.
The New York State Department of Environmental Conservation ("DEC") has directed ISC to prepare a fill removal plan for the fill containing constituents above the regulatory thresholds. The Company is in the early stages of preparing the plan in partnership with the DEC. Cost estimates for the fill removal can not be reasonably estimated at this time, but ISC does not expect them to be material.
Regarding the Kentucky Speedway, LLC civil action filed in July 2005 against NASCAR and ISC, the Company is proceeding with the preparation of its defense. For 2007, ISC expects litigation costs related to its defense to range between $4.5 million and $5.5 million, or $0.05 to $0.06 per diluted share. Based upon the materials produced during the discovery process, ISC continues to believe that the vague allegations of the complaint are totally without merit, and the Company will defend itself vigorously in this matter.
As previously announced, the Company is pursuing a commercial mixed-use development project on its acreage owned across from Daytona International Speedway. If results from an ongoing study and other considerations are favorable and the Company proceeds with the project, it is expected that several existing corporate headquarter offices and other buildings, which are not fully depreciated, will be razed during the next six to 24 months. This will result in a non-cash charge relating to additional depreciation of approximately $12 million in total, or $0.14 per diluted share after tax, over the remaining three quarters of fiscal 2007.
Outlook
ISC reiterates its previous full year guidance range of revenues between $800 and $820 million, and non-GAAP earnings of $3.10 to $3.20 per diluted share. In addition, the Company expects second quarter earnings before interest, taxes, depreciation and amortization ("EBITDA")(1) and operating margins to range from 36 to 37 percent and 27 to 28 percent, respectively. It is important to note that the financial guidance does not include the additional depreciation recorded in the fiscal first quarter, the second quarter non-cash charge related to the Company's decision to discontinue pursuit of a speedway development project in Kitsap County, Washington, and any additional depreciation associated with the potential Daytona redevelopment project.
"We expect to post another solid year for ISC in fiscal 2007," Ms. France Kennedy concluded. "We recently finalized the acquisition of Chicagoland Speedway and Route 66 Raceway, and we look forward to their immediate contribution to the Company's success. We also anticipate corporate sponsorship-related revenues to remain strong, and believe that the category will maintain its momentum over the next several years. We are, however, closely monitoring the current and future economic trends and their potential impact on consumer discretionary spending. We believe we are well-positioned to weather any near-term economic challenges due to our nationwide reach, strength in corporate sponsorship and significant revenue visibility related to the broadcast rights agreements. Lastly, our proven business plan allows us to capitalize on both external and internal growth opportunities to generate long-term shareholder value."
(1) EBITDA is a non-GAAP financial measure used by the Company as an
important indicator of its operating margin.
Conference Call Details
The management of ISC will host a conference call today with investors at 9:00 a.m. Eastern Time. To participate, dial toll free (800) 418-7236 five to ten minutes prior to the scheduled start time and request to be connected to the ISC earnings call, identification number 8622695. A live Webcast will also be available at that time on the Company's Web site, www.iscmotorsports.com, under the "Investor Relations" section.
A replay will be available one hour after the end of the call through midnight Tuesday, April 10, 2007. To access, dial (877) 519-4471 and enter the code 8622695, or visit the "Investor Relations" section of the Company's Web site.
International Speedway Corporation is a leading promoter of motorsports activities, currently promoting more than 100 racing events annually as well as numerous other motorsports-related activities. The Company owns and/or operates 13 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; Chicagoland Speedway and Route 66 Raceway near Chicago, Illinois; Homestead-Miami Speedway in Florida; Martinsville Speedway in Virginia; Darlington Raceway in South Carolina; and Watkins Glen International in New York. In addition, ISC is a limited partner with Group Motorise International in the organization and promotion of certain events at Circuit Gilles Villeneuve in Montreal, Canada.
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, ISC 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 www.iscmotorsports.com.
Statements made in this release that express the Company's or management's beliefs or expectations and which are not historical facts or which are applied prospectively are forward-looking statements. It is important to note that the Company's actual results could differ materially from those contained in or implied by such forward-looking statements. The Company's results could be impacted by risk factors, including, but not limited to, weather surrounding racing events, government regulations, economic conditions, consumer and corporate spending, military actions, air travel and national or local catastrophic events. Additional information concerning factors that could cause actual results to differ materially from those in the forward- looking statements is contained from time to time in the Company's SEC filings including, but not limited to, the 10-K and subsequent 10-Qs. Copies of those filings are available from the Company and the SEC. The Company undertakes no obligation to release publicly any revisions to these forward-looking statements that may be needed to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. The inclusion of any statement in this release does not constitute an admission by International Speedway or any other person that the events or circumstances described in such statement are material.
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
Three Months Ended
February 28, 2006 February 28, 2007
(Unaudited)
REVENUES:
Admissions, net $55,520 $55,310
Motorsports related 114,323 108,433
Food, beverage and merchandise 21,863 19,164
Other 2,228 2,272
193,934 185,179
EXPENSES:
Direct expenses:
Prize and point fund monies
and NASCAR sanction fees 34,536 32,462
Motorsports related 30,814 30,943
Food, beverage and merchandise 13,165 10,849
General and administrative 23,493 27,248
Depreciation and amortization 13,463 17,907
115,471 119,409
Operating income 78,463 65,770
Interest income 934 1,358
Interest expense (4,068) (4,040)
Equity in net loss from equity
investments (2,497) (4,317)
Income from continuing operations
before income taxes 72,832 58,771
Income taxes 28,701 22,932
Income from continuing operations 44,131 35,839
Loss from discontinued operations,
net of income tax benefits of
$83 and $48 (78) (20)
Net income $44,053 $35,819
Basic earnings per share:
Income from continuing operations $0.83 $0.67
Loss from discontinued operations - -
Net income $0.83 $0.67
Diluted earnings per share:
Income from continuing operations $0.83 $0.67
Loss from discontinued operations - -
Net income $0.83 $0.67
Dividends per share $- $-
Basic weighted average shares
outstanding 53,144,014 53,093,944
Diluted weighted average shares
outstanding 53,249,635 53,216,404
Consolidated Balance Sheets
(In Thousands)
November 30, February 28,
2006 2007
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $59,681 $98,626
Short-term investments 78,000 200
Receivables, less allowance of
$1,000 in 2006 and 2007 52,699 122,346
Inventories 3,976 6,583
Deferred income taxes 995 1,125
Prepaid expenses and other
current assets 8,251 16,373
Total Current Assets 203,602 245,253
Property and Equipment, net of
accumulated depreciation of
$371,219 and $388,222, respectively
Other Assets:
Equity investments 175,915 129,623
Intangible assets, net 149,314 195,070
Goodwill 99,507 99,507
Deposits with Internal Revenue
Service 110,813 117,936
Other 25,595 27,849
561,144 569,985
Total Assets $1,922,059 $2,117,691
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $770 $2,584
Accounts payable 29,577 23,012
Deferred income 124,254 197,413
Income taxes payable 22,477 31,651
Other current liabilities 19,226 23,445
Total Current Liabilities 196,304 278,105
Long-Term Debt 367,324 441,641
Deferred Income Taxes 191,642 196,308
Long-Term Deferred Income 10,808 16,075
Other Long-Term Liabilities 866 4,663
Commitments and Contingencies - -
Shareholders' Equity:
Class A Common Stock, $.01 par
value, 80,000,000 shares authorized;
31,078,307 and 31,011,622 issued and
outstanding at November 30, 2006 and
February 28, 2007, respectively 311 310
Class B Common Stock, $.01 par value,
40,000,000 shares authorized;
22,100,263 and 21,963,363 issued and
outstanding at November 30, 2006 and
February 28, 2007, respectively 221 220
Additional paid-in capital 698,396 688,363
Retained earnings 456,187 492,006
Total Shareholders' Equity 1,155,115 1,180,899
Total Liabilities and Shareholders'
Equity $1,922,059 $2,117,691
Consolidated Statements of Cash Flows
(In Thousands)
Three Months Ended
February 28, 2006 February 28, 2007
(Unaudited)
OPERATING ACTIVITIES
Net income $44,053 $35,819
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 13,463 17,907
Stock-based compensation 620 695
Amortization of financing costs 141 128
Deferred income taxes 5,674 4,536
Loss from equity investments 2,497 4,317
Other, net - 42
Changes in operating assets
and liabilities:
Receivables, net (82,749) (67,775)
Inventories, prepaid
expenses and other
assets (7,476) (10,217)
Deposits with Internal
Revenue Service - (7,123)
Accounts payable and
other liabilities 12,154 8,260
Deferred income 54,282 63,614
Income taxes 14,466 9,188
Net cash provided by operating activities 57,125 59,391
INVESTING ACTIVITIES
Capital expenditures (22,811) (37,107)
Proceeds from asset disposals 49 -
Purchase of equity investments (124,476) -
Acquisition of businesses, net
of cash acquired - (87,002)
Proceeds from affiliate - 67
Proceeds from short-term investments 28,000 83,250
Purchases of short-term investments (20,000) (5,450)
Other, net 523 (8)
Net cash used in investing activities (138,715) (46,250)
FINANCING ACTIVITIES
Proceeds under credit facility 80,000 65,000
Payments under credit facility (30,000) -
Payment of long-term debt - (28,452)
Exercise of Class A common stock
options 43 256
Reacquisition of previously
issued common stock - (11,000)
Net cash provided by financing activities 50,043 25,804
Net (decrease) in cash and cash
equivalents (31,547) 38,945
Cash and cash equivalents at
beginning of period 130,758 59,681
Cash and cash equivalents at end of
period $99,211 $98,626