SPECIAL EVENT (DAYTONA) - International Speedway Reports Record Revenues for the Third Quarter of Fiscal 2007
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DAYTONA BEACH, Fla., Oct. 4, 2007 -- International Speedway Corporation (BULLETIN BOARD: ISCB) ("ISC") today reported results for the fiscal third quarter ended August 31, 2007.
"We are pleased to report record revenues for the 2007 third quarter," said ISC President Lesa France Kennedy. "The consolidation of results from events at Chicagoland Speedway and Route 66 Raceway was the primary driver of the year-over-year growth. In addition, higher combined corporate partner spending for sponsorship, hospitality and advertising for comparable events contributed to the increase."
Third Quarter Comparison
Total revenues for the third quarter increased to $196.3 million, compared to revenues of $178.9 million in the prior-year period. Operating income was $48.2 million during the third quarter compared to $51.8 million in the third quarter of fiscal 2006.
Year-over-year comparability was impacted by:
-- Lower television broadcast rights fees from NASCAR's consolidated
contracts that began in 2007.
-- The consolidation of Raceway Associates LLC (owner and operator of
Chicagoland Speedway and Route 66 Raceway).
-- The timing of Kansas Speedway's IRL IndyCar and NASCAR Craftsman Truck
weekend, which was held in the third quarter of 2006 and in the second
quarter of 2007.
-- Accelerated depreciation of $6.9 million, or $0.08 per diluted share
after tax, associated with certain existing offices and buildings that
are expected to be razed during the next three to 21 months as part of
the Company's previously announced Daytona Live! project.
-- The 2007 third quarter recognition of $1.6 million, or $0.03 per
diluted share after tax, in deferred income tax expense attributable to
enactment of an income-based tax system in the state of Michigan.
-- The write-down by Motorsports Authentics ("MA") of certain inventory
and related assets, which is included in ISC's equity losses. ISC's 50
percent portion was $12.4 million, or $0.24 per diluted share after
tax.
Net income for the 2007 third quarter was $9.5 million, or $0.18 per diluted share, compared to net income of $34.3 million, or $0.64 per diluted share, in the prior year. Excluding the aforementioned accelerated depreciation, increased deferred income tax expense and inventory-related
charges at MA, non-GAAP (defined below) net income for the 2007 third quarter was $27.9 million, or $0.53 per diluted share.
Year-to-Date Comparison
For the nine months ended August 31, 2007, total revenues increased to $563.0 million from $544.9 million in 2006. Operating income for the nine months ended August 31, 2007, was $149.0 million compared to $182.4 million in the prior year.
Year-over-year comparability was impacted by:
-- The aforementioned decrease in NASCAR television rights fees, and the
acquisition and consolidation of Raceway Associates LLC.
-- Impairment charges of $9.2 million, or $0.11 per diluted share after
tax, primarily attributable to ISC's previously announced decision to
discontinue speedway development efforts in Kitsap County, Washington.
To a lesser extent, the impairment charges include estimated costs for
fill removal on the Company's Staten Island property.
-- Accelerated depreciation of $14.2 million, or $0.17 per diluted share
after tax, for certain office and related buildings in Daytona Beach,
which is substantially related to the Company's Daytona Live! project.
-- The previously discussed 2007 third quarter increase in deferred income
tax expense of $1.6 million, or $0.03 per diluted share after tax,
attributable to the change in Michigan state income tax laws.
-- The aforementioned write-down by Motorsports Authentics of certain
inventory and related assets, which is included in ISC's equity losses.
ISC's 50 percent portion was $12.4 million, or $0.24 per diluted share
after tax.
Net income was $63.7 million, or $1.20 per diluted share, for the first nine months of 2007. In the first nine months of 2006, net income was $109.0 million, or $2.05 per diluted share. Excluding the accelerated depreciation, impairment charges, increased deferred income tax expense and inventory- related charges at MA, non-GAAP (defined below) net income for the first nine months of 2007 was $92.4 million, or $1.75 per diluted share.
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended Nine Months Ended
August 31, August 31, August 31, August 31,
2006 2007 2006 2007
Net income $34,272 $9,517 $109,012 $63,726
Net loss, net of tax, from:
Discontinued operations 27 30 146 56
Income from continuing
operations 34,299 9,547 109,158 63,782
Adjustments, net of tax:
Additional depreciation - 4,262 - 8,689
Impairment of long-lived
assets - 69 - 5,937
Michigan income tax - 1,595 - 1,595
Inventory-related write-down
of equity investment - 12,414 - 12,414
Non-GAAP net income $34,299 $27,887 $109,158 $92,417
Per share data:
Diluted earnings per share $0.64 $0.18 $2.05 $1.20
Net loss, net of tax, from:
Discontinued operations - - - -
Income from continuing
operations 0.64 0.18 2.05 1.20
Adjustments, net of tax:
Additional depreciation - 0.08 - 0.17
Impairment of long-lived
assets - - - 0.11
Michigan income tax - 0.03 - 0.03
Inventory-related write-down
of equity investment - 0.24 - 0.24
Non-GAAP diluted earnings
per share $0.64 $0.53 $2.05 $1.75
2007 Third Quarter Highlights
An overview of the significant major event weekends held in the third quarter of 2007 includes:
-- Three weekends of exciting IRL IndyCar racing at Watkins Glen
International, Richmond International Raceway, and Michigan
International Speedway.
-- Route 66 Raceway hosted a successful weekend of NHRA POWERade Nationals
racing.
-- Michigan hosted a NASCAR NEXTEL Cup, NASCAR Craftsman Truck and ARCA
event weekend in June that posted lower than anticipated attendance-
related revenue due to weak economic conditions in the region. In
addition to thrilling on-track competition, highlights of the weekend
included the implementation of several fan-friendly initiatives and a
reduction in post-race traffic to approximately two hours following the
Citizens Bank 400.
-- Daytona International Speedway hosted a NEXTEL Cup, Busch and Grand-Am
racing weekend, highlighted by the second closest finish in Cup
history. While the racing was outstanding, attendance-related revenues
were lower than anticipated. The Pepsi 400 weekend has experienced
inclement weather over the last few years. These recent weather issues
coupled with the more regional consumer selling area for this event
impacted ticket sales.
-- Chicagoland Speedway hosted a successful NEXTEL Cup and Busch series
weekend in mid-July. Recently, the track announced it will install
lighting in time for its 2008 NEXTEL Cup and Busch weekend. Lighting
will allow events to be run later in the day when temperatures are
cooler, further enhance the atmosphere of the races, and provide a
hedge against the potential for inclement weather conditions.
-- Watkins Glen hosted a successful NEXTEL Cup, Busch and Grand-Am series
weekend, highlighted by increased attendance of more than five percent
over the prior year.
-- The Company, with its partners Group Motorise International, hosted a
successful Busch and Grand-Am series weekend at the historic Circuit
Gilles Villeneuve in Montreal, Canada, anchored by the inaugural NAPA
200 Busch race. A strong crowd was on-hand for the weekend's events
and ISC looks forward to building upon the success of its first
international event.
-- NEXTEL Cup and Busch series racing returned to Michigan in August.
Despite a considerable increase in attendance over the facility's June
event weekend, inclement weather forced the postponement of the 3M
Performance 400 until Tuesday. This marked the first time a Michigan
Cup race had been postponed due to weather in 30 years.
Corporate partner spending remains strong for ISC, highlighted by the sold out inventory of NEXTEL Cup and Busch series race entitlements. During the quarter, the Company secured its remaining Cup entitlements with LifeLock at Kansas Speedway and Sharp Aquos at California. Also, as previously announced, ISC signed a comprehensive 10-year multi-track sponsorship agreement with Coca-Cola. This milestone agreement debuts in 2008 with the 50th running of the Daytona 500(R).
"Corporate partners continue to be drawn to ISC's strong collection of assets and premier events," continued Ms. France Kennedy. "Leading up to the 50th running of the Daytona 500, we have partnered with Kroger to launch the largest in-store retail promotion in the history of motorsports, reaching nearly all 2,500 Kroger and subsidiary stores nationwide including Fry's, Ralph's, King Sooper and others. In addition, companies representing more than 40 brands, including Holiday Inn, UPS and others, are spending a combined $100 million in activation during our year-long promotion. The high level of corporate participation in this comprehensive and broad-reaching campaign further demonstrates the strength and value delivered by an ISC partnership."
Recent Developments
To date in the fourth quarter:
-- California Speedway hosted a NEXTEL Cup and Busch event weekend on
Labor Day weekend. Despite very exciting racing, the weekend posted
less than anticipated results primarily due to inclement weather. The
region experienced an intense heat wave with temperatures of 100
degrees and higher during the week leading up to the races. In
addition, the temperature on the day of the Cup race was a record 113
degrees and marked the hottest day of the year. By comparison, weather
in the area during this time of the year usually measures in the low to
mid 90's.
-- Richmond hosted a weekend of exciting NEXTEL Cup and Busch series
racing, anchored by the Chevy Rock and Roll 400. The facility posted
its 32nd consecutive NEXTEL Cup sellout for the race before the Chase
for the Championship, including the additional grandstands added for
2007. Also, attendance for the Emerson Radio 250 Busch Series race
posted a solid increase over the prior year.
-- Chicagoland hosted an exciting season finale weekend for the IRL
IndyCar Series. Dario Franchitti narrowly passed Scott Dixon for the
victory and the 2007 series championship.
-- Last weekend, ISC hosted its first race in the NEXTEL Cup Chase for the
Championship at Kansas Speedway. The facility once again recorded
sold-out attendance for both its NEXTEL Cup and Busch events, despite a
rain-shortened LifeLock 400.
For the remainder of the fourth quarter, Talladega will host a NEXTEL Cup, Truck and ARCA weekend. Advanced ticket sales are trending slightly behind the prior year due to certain unique factors for the 2006 race weekend. In addition, nearly 75 percent of ticket holders travel from out of state for Talladega's race weekends, making them more susceptible to challenges in consumer spending and high fuel prices. Nonetheless, the facility expects to host a crowd in 2007 significantly higher than 2005 and the Company remains positive in the long-term trends for this facility.
Also in the fourth quarter, Martinsville Speedway will host a weekend of NEXTEL Cup and Craftsman Truck racing, followed by consecutive weekends of NEXTEL Cup, Busch and Craftsman Truck series racing at Phoenix International Raceway and the Ford Championship Weekend at Homestead-Miami Speedway.
External Growth Initiatives
The Company, in a 50/50 joint venture with The Cordish Company, continues to pursue a commercial mixed-use development project on 71 acres it owns across from Daytona International Speedway. Local market studies and further project analysis are ongoing and, if results of these analyses are favorable and the joint venture proceeds with the development, it is expected that certain existing corporate headquarter offices, which are not fully depreciated, and other buildings will be razed during the next three to 21 months.
The Company also continues to pursue the possibility of developing motorsports entertainment facilities in the metropolitan markets of Denver and New York, as well as in the Pacific Northwest. ISC believes these regions represent an attractive long-term opportunity for future growth.
On Staten Island, ISC has recently entered into negotiations with ProLogis for the sale of the 676-acre property the Company currently owns. ProLogis is the world's largest owner, manager and developer of distribution facilities, with a proven track record of developing projects that positively impact the communities in which they are located. The Company will provide more information upon execution of any definitive agreement, and hopes to close the transaction by calendar year-end. In the interim, ISC is continuing clean-up efforts on the property in accordance with the consent order signed with the New York Department of Environmental Conservation ("DEC"). All outstanding issues have been resolved with the DEC concerning non-compliant fill, and fill removal from the property is underway.
Other Developments
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. ISC continues to expect fiscal 2007 litigation costs related to its defense will range between $6.0 million and $7.0 million, or $0.07 to $0.08 per diluted share after tax. Pretrial discovery in the case was recently concluded and, based on all of the evidentiary materials reviewed, ISC believes more strongly than ever that the vague allegations of the complaint are totally without merit. At this point the Company also believes the likelihood of a materially adverse result appears to be remote, although there is always a level of uncertainty in litigation. ISC will continue to vigorously defend itself in this matter.
Regarding Motorsports Authentics, the Company's 50/50 merchandising joint venture with Speedway Motorsports, newly appointed President and Chief Executive Officer Mark Dyer and his management team have made important changes to the business and are finalizing plans for 2008. In July, their preliminary review indicated a loss for MA for 2007 of between $15 million and $20 million, the primary contributor of which was the impact of Dale Earnhardt Jr.'s decision to leave Dale Earnhardt, Inc. at the end of the 2007 racing season. This change resulted in a significant reduction and cancellations of pending and anticipated merchandise orders.
Since July, several additional significant team and driver changes for 2008 have been announced, which have further negatively affected the salability of existing merchandise. The combined impact of the additional changes and better visibility on the full impact of Dale Earnhardt Jr.'s move to Hendrick Motorsports has resulted in a revised estimate of a non-GAAP loss between $20 million and $25 million for MA in 2007. This estimate excludes the previously discussed 2007 third quarter charges to reflect the write-down of certain inventory and related balances primarily associated with the previously mentioned team and driver changes, and other excess 2007 merchandise on-hand.
The Company believes this revised estimate addresses the significant operating issues related to 2007 for MA. In addition, it is important to note that 2007 has been very unusual in the total number of high-profile driver and team changes, the timing of which is earlier than usual and exacerbates current year sales and inventory issues. Lastly, while MA continues to find ways to optimize results for 2007, their efforts are primarily focused on ensuring that the company is on solid footing to begin 2008.
"While we are clearly disappointed with the challenges at Motorsports Authentics for 2007, we are encouraged by the efforts underway to position MA for future long-term success," added Ms. France Kennedy. "These efforts include implementing more rigorous buying and inventory control systems, improved distribution models and limiting future exposure to changing market dynamics. We continue to believe the sale of licensed merchandise represents a significant opportunity for the Company, and expect that MA has the potential for generating solid growth in earnings and cash flow for ISC."
Share Repurchase Program
In the third quarter, the Company purchased 495,000 shares of its Class A Common Stock for $25.0 million, bringing the total number of shares purchased to one million since the program was initiated in December 2006. ISC believes its capital allocation strategy reflects a balanced approach that will enhance shareholder value and further position the Company for long-term success.
Outlook
ISC has further refined its financial guidance for fiscal 2007. The Company now expects full year total revenues to range between $810 million and $815 million. ISC also expects non-GAAP earnings for fiscal 2007 to range between $2.70 and $2.75 per diluted share. This estimate excludes the previously discussed additional depreciation, impairment charges, deferred income tax expense and inventory-related equity investment charges.
ISC expects earnings before interest, taxes, depreciation and amortization ("EBITDA")(1) and operating margins for the 2007 fourth quarter and full year to range as follows:
Quarter Year
Ending Ending
11/30/2007 11/30/2007
EBITDA margin 43% - 44% 40% - 41%
Operating margin 36% - 37% 32% - 33%
1. EBITDA is a non-GAAP financial measure used by the Company as an
important indicator of its operating margin.
"Looking ahead to 2008, several key indicators are pointing to the start of a successful year for ISC," Ms. France Kennedy concluded. "Both corporate and consumer demand for the 50th running of the Daytona 500 are very strong, and renewal trends for other events are positive. We continue to closely monitor consumer spending and broader macro-economic factors, and remain focused on providing a premium experience to our fans. From an industry perspective, the full-time introduction of the Car of Tomorrow and the series name changes to the Sprint Cup and the Nationwide Series should continue to drive overall awareness for the sport. We remain very positive on the outlook of our business and are focused on building long-term value for our shareholders."
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(R) in Florida (home of the Daytona 500(R)); Talladega Superspeedway(R) in Alabama; Michigan International Speedway(R) located outside Detroit; Richmond International Raceway(R) in Virginia; California Speedway(SM) near Los Angeles; Kansas Speedway(R) in Kansas City, Kansas; Phoenix International Raceway(R) in Arizona; Chicagoland Speedway(R) and Route 66 Raceway(SM) near Chicago, Illinois; Homestead-Miami Speedway(SM) in Florida; Martinsville Speedway(R) in Virginia; Darlington Raceway(R) in South Carolina; and Watkins Glen International(R) 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(R) Radio, the nation's largest independent sports radio network; the Daytona 500 Experience(SM), the "Ultimate Motorsports Attraction" in Daytona Beach, Florida, the official attraction of NASCAR(R); and Americrown Service Corporation, a subsidiary that provides catering services, food and beverage concessions, and produces and markets motorsports-related merchandise. In addition, ISC has an indirect 50 percent interest in a business called Motorsports Authentics(R), 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.
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended Nine Months Ended
August 31, August 31, August 31, August 31,
2006 2007 2006 2007
REVENUES:
Admissions, net $56,918 $62,970 $161,718 $175,518
Motorsports related 100,541 113,689 316,788 324,095
Food, beverage and
merchandise 19,410 17,663 59,435 57,028
Other 2,023 1,978 6,969 6,380
178,892 196,300 544,910 563,021
EXPENSES:
Direct expenses:
Prize and point fund
monies and NASCAR
sanction fees 30,320 35,067 99,422 101,341
Motorsports related 41,620 47,099 104,886 116,886
Food, beverage and
merchandise 12,430 10,605 37,000 33,506
General and
administrative 28,391 31,383 79,589 90,127
Depreciation and
amortization 14,323 23,825 41,565 62,973
Impairment of long-lived
assets - 108 - 9,184
127,084 148,087 362,462 414,017
Operating income 51,808 48,213 182,448 149,004
Interest income 1,363 1,402 3,384 3,699
Interest expense (2,713) (4,041) (9,613) (11,781)
Equity in net income (loss)
from equity investments 5,451 (17,145) 768 (21,756)
Income from continuing
operations before income
taxes 55,909 28,429 176,987 119,166
Income taxes 21,610 18,882 67,829 55,384
Income from continuing
operations 34,299 9,547 109,158 63,782
Loss from discontinued
operations, net of income
tax benefits of $60 and $40,
and $208 and $126,
respectively (27) (30) (146) (56)
Net income $34,272 $9,517 $109,012 $63,726
Basic earnings per share:
Income from continuing
operations $0.64 $0.18 $2.05 $1.21
Loss from discontinued
operations - - - -
Net income $0.64 $0.18 $2.05 $1.21
Diluted earnings per share:
Income from continuing
operations $0.64 $0.18 $2.05 $1.20
Loss from discontinued
operations - - - -
Net income $0.64 $0.18 $2.05 $1.20
Dividends per share $- $- $0.08 $0.10
Basic weighted average
shares outstanding 53,177,570 52,473,146 53,162,611 52,791,267
Diluted weighted average
shares outstanding 53,272,124 52,583,820 53,262,895 52,905,851
Consolidated Balance Sheets
(In Thousands)
(Unaudited)
November 30, August 31,
2006 2007
ASSETS
Current Assets:
Cash and cash equivalents $59,681 $57,009
Short-term investments 78,000 39,250
Receivables, less allowance of $1,000 in 2006
and 2007 52,699 57,886
Inventories 3,976 6,195
Deferred income taxes 995 1,311
Prepaid expenses and other current assets 8,251 35,466
Total Current Assets 203,602 197,117
Property and Equipment, net of accumulated
depreciation of $371,219 and $412,194,
respectively 1,157,313 1,281,383
Other Assets:
Equity investments 175,915 112,201
Intangible assets, net 149,314 179,019
Goodwill 99,507 118,605
Deposits with Internal Revenue Service 110,813 117,936
Other 25,595 27,644
561,144 555,405
Total Assets $1,922,059 $2,033,905
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $770 $2,565
Accounts payable 29,577 21,257
Deferred income 124,254 192,319
Income taxes payable 22,477 19,723
Other current liabilities 19,226 28,068
Total Current Liabilities 196,304 263,932
Long-Term Debt 367,324 375,654
Deferred Income Taxes 191,642 206,705
Long-Term Deferred Income 10,808 16,070
Other Long-Term Liabilities 866 5,744
Commitments and Contingencies - -
Shareholders' Equity:
Class A Common Stock, $.01 par value, 80,000,000
shares authorized; 31,078,307 and 30,603,208
issued and outstanding in 2006 and 2007,
respectively 311 306
Class B Common Stock, $.01 par value, 40,000,000
shares authorized; 22,100,263 and 21,646,210
issued and outstanding in 2006 and 2007,
respectively 221 216
Additional paid-in capital 698,396 650,709
Retained earnings 456,187 514,569
Total Shareholders' Equity 1,155,115 1,165,800
Total Liabilities and Shareholders' Equity $1,922,059 $2,033,905
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
Nine Months Ended
August 31, August 31,
2006 2007
OPERATING ACTIVITIES
Net income $109,012 $63,726
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 41,565 62,973
Stock-based compensation 2,019 3,233
Amortization of financing costs 410 388
Deferred income taxes 13,462 16,004
(Income) loss from equity investments (768) 21,756
Impairment of long-lived assets, non-cash - 6,143
Excess tax benefits relating to stock-based
compensation (185) (169)
Other, net (105) 1,314
Changes in operating assets and liabilities:
Receivables, net (9,844) (3,315)
Inventories, prepaid expenses and other
assets (23,866) (28,737)
Deposits with Internal Revenue Service - (7,123)
Accounts payable and other liabilities 6,957 9,465
Deferred income 55,996 58,515
Income taxes (325) (2,576)
Net cash provided by operating activities 194,328 201,597
INVESTING ACTIVITIES
Capital expenditures (81,282) (70,439)
Proceeds from asset disposals 161 -
Purchase of equity investments (124,565) -
Acquisition of business, net of cash acquired - (87,111)
Proceeds from affiliate 128 67
Proceeds from short-term investments 52,050 105,120
Purchases of short-term investments (124,150) (66,370)
Other, net (374) 58
Net cash used in investing activities (278,032) (118,675)
FINANCING ACTIVITIES
Proceeds under credit facility 80,000 65,000
Payments under credit facility (80,000) (65,000)
Payment of long-term debt - (29,311)
Exercise of Class A common stock options 145 357
Cash dividends paid (4,270) (5,292)
Excess tax benefits relating to stock-based
compensation 185 169
Reacquisition of previously issued common stock (460) (51,517)
Deferred financing costs (368) -
Net cash used in financing activities (4,768) (85,594)
Net decrease in cash and cash equivalents (88,472) (2,672)
Cash and cash equivalents at beginning of period 130,758 59,681
Cash and cash equivalents at end of period $42,286 $57,009