DAYTONA BEACH, Fla.,
July 2, 2015 /PRNewswire/ -- International Speedway
Corporation (NASDAQ Global Select Market: ISCA; OTC Bulletin Board:
ISCB) ("ISC") today reported financial results for its fiscal
second quarter ended May 31, 2015.
"We are pleased to report second quarter results again exceeding
our expectations," stated ISC Chief Executive Officer Lesa France Kennedy. "The attendance
upturn that started with Talladega in the Contender round of the
2014 Championship Chase continues to build, and this is the third
consecutive quarter we have seen an increase in average ticket
price for comparable events, demonstrating a solid trend in the
resurgence of our core business." Second quarter non-GAAP
revenue, operating income and EPS exceed the 2014 quarter after
normalizing for the Darlington Cup weekend move to the fourth
quarter in 2015, the Fanatics merchandise strategy transition and
DAYTONA Rising related depreciation.
"DAYTONA Rising is thundering towards the finish line with
50,000 new stadium seats completed for this weekend's Coke Zero 400
and supporting events. Yesterday we announced a multi-year
partnership that will make Chevrolet the project's third Founding
Partner. Chevrolet has been an integral part of the ISC
family for many years and we look forward to continuing our strong
relationship. As part of their activation at DAYTONA Rising
and other ISC facilities, Chevrolet will present its iconic
automotive brand through a variety of interactive fan
experiences."
"Tickets are going fast for the inaugural DAYTONA Rising season,
particularly the 2016 Daytona 500. We haven't seen this kind
of response since the Daytona 500's 50th anniversary, which
demonstrates the demand being driven by the reimagining of this
historic facility."
France Kennedy concluded, "We are
confident about our financial condition and our strategic
initiatives to grow our business. We maintain a solid balance
sheet that makes possible strategic developments and acquisitions
that build shareholder value. As well we are executing
consumer and corporate programs that complement our industry's
long-term broadcast agreements, all supporting revenue growth."
Second Quarter Comparison
Total revenue for the second quarter ended May 31, 2015 was
approximately $164.0 million,
compared to revenue of approximately $190.3
million in the prior-year period. Operating income was
approximately $19.2 million
during the period compared to operating income of approximately
$34.7 million in the second quarter
of fiscal 2014. Year-over-year comparability was impacted
by:
- The NASCAR Sprint Cup and Xfinity Series events held at
Darlington Raceway ("Darlington") in the second quarter of fiscal
2014 will be held in the fourth quarter of fiscal 2015.
- In 2015, NASCAR and NASCAR Team Properties announced a 10-year
agreement with Fanatics Retail Group Concessions ("Fanatics") to
operate NASCAR's entire at-track merchandise business and deliver
fans an enhanced, experiential at-track shopping environment. As
part of the agreement, Fanatics will be the exclusive retailer of
NASCAR and driver merchandise trackside for all 38 NASCAR Sprint
Cup Series events. In addition, Fanatics also contracted with ISC
for 10 years of exclusive retail merchandise rights for its track
trademarks and certain other intellectual property at all ISC
tracks. Consequently, ISC's wholly owned subsidiaries, Americrown
and Motorsports Authentics ("MA"), beginning in January 2015, no longer provide at-track
merchandise to fans at motorsports events and therefore will no
longer recognize related sales revenues and operating expenses.
Instead, the Company will receive a percentage of sales from
Fanatics, recorded as part of Food, Beverage and Merchandise
Revenue. For the second quarter of fiscal 2015, ISC recognized
revenue and expense related to merchandise operations of
approximately $3.9 million and
$2.7 million, respectively. Included
in this amount are approximately $1.4
million of commission from Fanatics, non-recurring
transactions of approximately $1.2
million for inventory sold to Fanatics and approximately
$1.2 million of wholesale
transactions by MA, which drive a total of approximately
$2.3 million in expense, including
product costs associated with the non-recurring transactions, and
other non-recurring costs related to the transition of trackside
merchandise operations to Fanatics. This compares to the second
quarter of fiscal 2014, where ISC recognized revenue and expense
related to merchandise operations of approximately $14.4 million and $11.0
million, respectively, which included direct sales of
trackside merchandise.
- During the three months ended May 31,
2015, the Company recognized approximately $0.4 million, or less than $0.01 per diluted share, in marketing and
consulting costs that are included in general and administrative
expense related to DAYTONA Rising. During the three months ended
May 31, 2014, the Company recognized
approximately $0.3 million, or less
than $0.01 per diluted share, of
similar costs;
- During the three months ended May 31,
2015, the Company recognized approximately $2.1 million, or $0.03 per diluted share, of accelerated
depreciation that was recorded due to shortening the service lives
of certain assets associated with DAYTONA Rising and other
projects. During the three months ended May
31, 2014, the Company recognized approximately $3.0 million, or $0.04 per diluted share, of similar costs related
to DAYTONA Rising and capacity management initiatives;
- During the three months ended May 31,
2015, the Company recognized approximately $4.7 million, or $0.06 per diluted share, of losses primarily
attributable to demolition and/or asset relocation costs in
connection with DAYTONA Rising and other capital improvements.
During the three months ended May 31,
2014, the Company recognized approximately $1.2 million, or $0.02 per diluted share, of similar losses in
connection with DAYTONA Rising and capacity management initiatives;
and
- During the three months ended May 31,
2015, the Company capitalized approximately $1.3 million, or $0.02 per diluted share, of interest related to
DAYTONA Rising. During the three months ended May 31, 2014, the Company recognized
approximately $1.4 million, or
$0.02 per diluted share, of similar
interest capitalization.
Net income for the second quarter ended May 31, 2015 was
approximately $13.4 million, or
$0.29 per diluted share, compared to
net income of approximately $21.5
million, or $0.46 per diluted
share, in the prior year period. Excluding certain marketing
and consulting costs incurred associated with DAYTONA Rising,
accelerated depreciation, losses associated with the retirements of
certain other long-lived assets, DAYTONA Rising project capitalized
interest, and net gain on sale of certain assets, non-GAAP (defined
below) net income for the second quarter of 2015 was $16.5 million, or $0.35 per diluted share. Non-GAAP net
income for the fiscal second quarter of 2014 was $23.4 million, or $0.50 per diluted share. The year-over-year
decrease in non-GAAP net income and diluted earnings per share is
driven primarily by the change in timing of the Darlington NASCAR
events discussed above, non-recurring net revenues and expenses
related to the transition of merchandise operations to Fanatics and
depreciation expense for assets placed in service during 2015
related to DAYTONA Rising prior to the completion of renovations in
2016.
Year-to-Date Comparison
For the six months ended May 31, 2015, total revenues were
$300.6 million, compared to
$322.1 million in 2014.
Operating income for the six-month period was $40.8 million compared to $57.1 million in the prior year.
Year-over-year comparability was impacted by:
- The NASCAR Sprint Cup and Xfinity Series events held at
Darlington in the second quarter of fiscal 2014 will be held in the
fourth quarter of fiscal 2015.
- On January 31, 2014, Speedway
Motorsports Inc. ("SMI") abandoned its interest and rights in our
50/50 partnership MA, consequently bringing the Company's ownership
of MA to 100.0 percent. MA's operations are included in the
Company's consolidated operations subsequent to the date of SMI's
abandonment. Prior to January 31,
2014, MA was accounted for as an equity investment in the
Company's financial statements. As a result of SMI's abandonment of
their interest in MA, the Company recorded other income of
approximately $5.4 million
representing the fair value of MA, over the carrying value, as of
January 31, 2014. In addition the
Company recognized tax benefits relating to MA of approximately
$1.8 million for the six months ended
May 31, 2014. There was no comparable
event in the same period of fiscal 2015;
- In 2015, as noted above NASCAR and NASCAR Team Properties
announced a 10-year agreement with Fanatics to operate NASCAR's
entire at-track merchandise business and deliver fans an enhanced,
experiential at-track shopping environment. As a result, ISC's
wholly owned subsidiaries, Americrown and MA, beginning in
January 2015, no longer provide
at-track merchandise to fans at motorsports events and therefore
will no longer recognize related sales revenues and operating
expenses. Instead, the Company will receive a percentage of sales
from Fanatics, recorded as part of Food, Beverage and Merchandise
Revenue. For the six months ended May 31,
2015, ISC recognized revenue and expense related to
merchandise operations of approximately $12.7 million and $11.0
million, respectively. Included in this amount are
approximately $2.4 million of
commission from Fanatics, non-recurring transactions of
approximately $6.1 million for
inventory sold to Fanatics and approximately $4.1 million of wholesale transactions by MA,
which drive a total of approximately $9.9
million in expense, including product costs associated with
the non-recurring transactions, other non-recurring costs related
to the transition of trackside merchandise operations to Fanatics,
as well as partial period operating expenses incurred prior to the
transition of Americrown and MA merchandise operations, for which
there was no related revenue. This compares to the six months ended
May 31, 2014, where ISC recognized
revenue and expense related to merchandise operations of
approximately $21.7 million and
$16.4 million, respectively, which
included direct sales of trackside merchandise and excludes the
partial period pre-consolidation operation of MA prior to SMI's
abandonment of its MA interest.
- During the six months ended May 31,
2015, the Company recognized approximately $0.7 million, or $0.01 per diluted share, in marketing and
consulting costs that are included in general and administrative
expense related to DAYTONA Rising. During the six months ended
May 31, 2014, the Company recognized
approximately $0.6 million, or
$0.01 per diluted share, of similar
costs;
- During the six months ended May 31,
2015, the Company recognized approximately $6.0 million, or $0.08 per diluted share, of accelerated
depreciation that was recorded due to shortening the service lives
of certain assets associated with DAYTONA Rising and other
projects. During the six months ended May
31, 2014, the Company recognized approximately $6.0 million, or $0.08 per diluted share, of similar costs related
to DAYTONA Rising and capacity management initiatives;
- During the six months ended May 31,
2015, the Company recognized approximately $6.3 million, or $0.08 per diluted share, of losses primarily
attributable to demolition and/or asset relocation costs in
connection with DAYTONA Rising and other capital improvements.
During the six months ended May 31,
2014, the Company recognized approximately $3.4 million, or $0.05 per diluted share, of similar losses in
connection with DAYTONA Rising and capacity management initiatives;
and
- During the six months ended May 31,
2015, the Company capitalized approximately $3.9 million, or $0.05 per diluted share, of interest related to
DAYTONA Rising. During the six months ended May 31, 2014, the Company recognized
approximately $2.4 million, or
$0.03 per diluted share, of similar
interest capitalization.
Net income for the six months ended May 31, 2015 was
$28.3 million, or $0.61 per diluted share, compared to a net income
of $41.4 million, or $0.89 per diluted share in 2014. Excluding
certain marketing and consulting costs incurred associated with
DAYTONA Rising, accelerated depreciation, losses associated with
the retirements of certain other long-lived assets, DAYTONA Rising
project capitalized interest, and net gain on sale of certain
assets, non-GAAP (defined below) net income for the six months
ended May 31, 2015, was $33.4
million, or $0.72 per
diluted share. This is compared to non-GAAP net income for
the first six months of 2014 of $38.9 million, or $0.84 per diluted share. The year-over-year
decrease in non-GAAP net income and diluted earnings per share is
driven primarily by the change in timing of the Darlington NASCAR
events discussed above, non-recurring net revenues and expenses
related to the transition of merchandise operations to Fanatics and
depreciation expense for assets placed in service during 2015
related to DAYTONA Rising prior to completion of renovations in
2016.
GAAP to Non-GAAP Reconciliation
The following financial information is presented below using
other than U.S. 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.
We believe such non-GAAP information is useful and meaningful,
and is used by investors to assess our core operations, which
consist of the ongoing promotion of racing events at our major
motorsports entertainment facilities. Such non-GAAP information
identifies and separately displays and adjusts for items that are
not considered to be reflective of our continuing core operations
at our motorsports entertainment facilities. We believe that such
non-GAAP information improves the comparability of the operating
results and provides a better understanding of the performance of
our core operations for the periods presented. We use this non-GAAP
information to analyze the current performance and trends and make
decisions regarding future ongoing 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. The
presentation of this non-GAAP financial information is not intended
to be considered independent of or as a substitute for results
prepared in accordance with GAAP. Management uses both GAAP and
non-GAAP information in evaluating and operating the business and
as such deemed it important to provide such information to
investors.
The adjustments for 2014 relate to marketing and consulting
costs incurred associated with DAYTONA Rising, accelerated
depreciation, losses associated with the retirements of certain
other long-lived assets, DAYTONA Rising project capitalized
interest, MA fair value adjustment and income tax benefits, and net
loss on sale of certain assets.
The adjustments for 2015 relate to marketing and consulting
costs incurred associated with DAYTONA Rising, accelerated
depreciation, losses associated with the retirements of certain
other long-lived assets, DAYTONA Rising project capitalized
interest, and net gain on sale of certain assets.
|
Three Months
Ended
|
|
Six Months
Ended
|
|
May 31,
2014
|
|
May 31,
2015
|
|
May 31,
2014
|
|
May 31,
2015
|
|
(Unaudited)
|
|
(In Thousands, Except
Per Share Amounts)
|
Net income
|
$
|
21,469
|
|
|
$
|
13,355
|
|
|
$
|
41,364
|
|
|
$
|
28,308
|
|
Adjustments, net of
tax:
|
|
|
|
|
|
|
|
DAYTONA Rising
project
|
155
|
|
|
228
|
|
|
390
|
|
|
412
|
|
Accelerated
depreciation
|
1,828
|
|
|
1,257
|
|
|
3,649
|
|
|
3,629
|
|
Losses on asset
retirements
|
742
|
|
|
2,844
|
|
|
2,092
|
|
|
3,807
|
|
DAYTONA Rising
project capitalized interest
|
(862)
|
|
|
(777)
|
|
|
(1,438)
|
|
|
(2,348)
|
|
MA fair value
adjustment and income tax benefits
|
—
|
|
|
—
|
|
|
(7,212)
|
|
|
—
|
|
Net loss/(gain) on
sale of certain assets
|
53
|
|
|
(381)
|
|
|
46
|
|
|
(397)
|
|
Non-GAAP net
income
|
$
|
23,385
|
|
|
$
|
16,526
|
|
|
$
|
38,891
|
|
|
$
|
33,411
|
|
Per share
data:
|
|
|
|
|
|
|
|
Diluted earnings per
share
|
$
|
0.46
|
|
|
$
|
0.29
|
|
|
$
|
0.89
|
|
|
$
|
0.61
|
|
Adjustments, net of
tax:
|
|
|
|
|
|
|
|
DAYTONA Rising
project
|
0.00
|
|
|
0.00
|
|
|
0.01
|
|
|
0.01
|
|
Accelerated
depreciation
|
0.04
|
|
|
0.03
|
|
|
0.08
|
|
|
0.08
|
|
Losses on asset
retirements
|
0.02
|
|
|
0.06
|
|
|
0.05
|
|
|
0.08
|
|
DAYTONA Rising
project capitalized interest
|
(0.02)
|
|
|
(0.02)
|
|
|
(0.03)
|
|
|
(0.05)
|
|
MA fair value
adjustment and income tax benefits
|
—
|
|
|
—
|
|
|
(0.16)
|
|
|
—
|
|
Net loss/(gain) on
sale of certain assets
|
0.00
|
|
|
(0.01)
|
|
|
0.00
|
|
|
(0.01)
|
|
Non-GAAP diluted
earnings per share
|
$
|
0.50
|
|
|
$
|
0.35
|
|
|
$
|
0.84
|
|
|
$
|
0.72
|
|
On the corporate partnership front, at this point for fiscal
2015 the Company has agreements in place for approximately 97.0
percent of its gross marketing partnership revenue target and one
open event entitlement for a NASCAR Sprint Cup event. This is
compared to last year at this time when the Company had
approximately 94.0 percent of gross marketing partnership
revenue target sold and an open entitlement for one NASCAR Xfinity
series event. According to recent research published by
NASCAR, the appeal of our sport to corporate partners continues to
increase as demonstrated by the steady increase in participation by
Fortune 500 companies, up not only from 2014 but also from
pre-recession years.
External Growth and Other Initiatives
Capital Spending
The Company competes for the consumers' discretionary dollar
with many entertainment options such as concerts and other major
sporting events, not just other motorsport events. To better meet
its customers' expectations, ISC is committed to improving the
guest experience at its facilities through on-going capital
improvements that position it for long-term growth.
In June 2013, ISC's board of
directors endorsed a capital allocation plan for fiscal 2013
through fiscal 2017 to not exceed $600.0
million in capital expenditures over that period. The
five-year capital expenditure plan encompasses all the capital
expenditures for ISC's 13 major motorsports facilities, including
DAYTONA Rising and the equity portion of a funding of ONE
DAYTONA. DAYTONA Rising will account for approximately
$400.0 million, excluding
capitalized interest, of the $600.0 million of the five-year capital
expenditure plan.
With the majority of the capital expenditures for DAYTONA Rising
occurring in fiscal 2014 and 2015, the Company estimates capital
expenditures, exclusive of capitalized interest, across all of
ISC's existing facilities will be approximately $220.0 million for fiscal 2015, based on the
timing of construction payments. With a target completion
date for DAYTONA Rising in January
2016, capital expenditures will then decrease significantly
with an expectation of capital expenditures for projects at all of
ISC's existing facilities, exclusive of capitalized interest, to be
between $50.0 to $60.0 million in
fiscal 2016 and fiscal 2017.
For the six months ended May 31, 2015, the Company spent
approximately $75.9 million on
capital expenditures for projects at its existing facilities, of
which $67.7 million is related to
DAYTONA Rising, with the remainder associated with a variety of
other improvements and renovations. In comparison, the Company
spent approximately $74.7 million for the six months ended
May 31, 2014, on capital expenditures for projects at its
existing facilities, of which $65.2
million was related to DAYTONA Rising.
The Company reviews its capital expenditure program periodically
and modifies it in accordance with its then current assessment of
future financial position and as required to meet current business
needs.
DAYTONA Rising: Reimagining an American Icon
DAYTONA Rising is the redevelopment of the frontstretch of
Daytona International Speedway, ISC's 56-year-old flagship
motorsports facility, to enhance the event experience for its fans,
marketing partners, broadcasters and the motorsports industry.
The vision for DAYTONA Rising places an emphasis on enhancing
the complete fan experience, beginning with five expanded and
redesigned fan entrances, or injectors. Each injector will
lead directly to a series of escalators and elevators that will
transport fans to any of three different concourse levels, each
featuring spacious and strategically-placed social "neighborhoods"
along the nearly mile-long frontstretch.
A total of 11 neighborhoods, each measuring the size of a
football field, will enable fans to meet and socialize during
events without ever missing any on-track action, thanks to dozens
of strategically-placed video screens in every neighborhood. The
central neighborhood, dubbed the "World Center of Racing," features
open sight-lines enabling fans to catch all the on-track action
while celebrating the history of Daytona International Speedway and
its many unforgettable moments throughout more than 50 years of
racing.
Every seat in Daytona's frontstretch will be replaced with
wider, more comfortable seating that will provide pristine
sight-lines. There will also be twice as many restrooms and
three times as many concessions throughout the facility.
During Budweiser Speedweeks 2015, fans experienced some of DAYTONA
Rising's new amenities including first ever vertical
transportation, approximately 40,000 new grandstand seats on the
frontstretch near Turn 1, and new concessions and
restrooms. The Company is opening an additional 10,000 new
grandstand seats and supporting amenities in Turn 4 for the 2015
Coke Zero 400.
Since commencement of construction, three Founding Partners have
been announced, Toyota, Florida Hospital and most recently,
Chevrolet, with partnerships extending over 10 years.
Founding partners receive sponsorship rights for a dedicated
injector, as well as approximately 20,000 square feet of innovative
fan engagement space that will enhance the overall guest
experience, and nearly 50,000 square feet of interior and exterior
branding space.
In July 2015, the Company
announced Chevrolet's multi-year Founding Partnership agreement for
DAYTONA Rising. Chevrolet will have branding rights for one
of the "neighborhoods" located near its injector. The
football field-sized neighborhood will feature a custom bar, retail
and dining areas, as well as dozens of video screens.
Additionally, Chevrolet will serve as an official partner of "The
Great American Race," the DAYTONA 500, and receive official pace
car rights in select years. In addition to the Founding
Partner status with DAYTONA Rising, Chevrolet extended its pace car
rights at Darlington Raceway, Phoenix International Raceway and
Watkins Glen International for various NASCAR and IMSA events.
We continue to see strong interest from prospective corporate
partners seeking to establish long-term marketing positions with
our DAYTONA Rising project, such as this week's announcement that
Fifth Third Bank will become the official bank of the "World Center
of Racing" and will integrate its ATMs into the redeveloped
Speedway beginning in 2016. Additionally, Fifth Third Bank will
serve as an official partner of the DAYTONA 500 and the Coke Zero
400 Powered By Coca-Cola. The multi-year agreement will also
provide Fifth Third Bank with fan engagement and corporate
hospitality opportunities for entertaining guests at the Speedway,
as well as the ability to use certain marks and logos in Fifth
Third Bank promotions. Other founding and official partner
discussions are underway and we anticipate more announcements in
the coming months.
The Company currently anticipates DAYTONA Rising to cost
approximately $400.0 million,
excluding capitalized interest, which it expects to fund from cash
on hand, cash from its operations, and it may use borrowings on its
credit facility for a limited period of time. In June 2014, Florida Governor Rick
Scott signed House Bill 7095 creating the Florida Sports
Development Program and establishing a process for distributing
state tax revenue for the construction or improvement of
professional sports franchise facilities. The DAYTONA Rising
project was among the eligible applicants to receive sales tax
incentives based on the project's capital investment and amount of
sales tax generated by the facility. The Company filed its
application and received approval from the state's Department of
Economic Opportunity. Allocation of funds for the
approved applications was not considered during the 2015 session of
the Florida Legislature. A timetable for consideration is
unknown at this time.
Total spending incurred for DAYTONA Rising was $67.7 million during the six months ended
May 31, 2015. Based on the Company's current
expectations of DAYTONA Rising, it has identified existing assets
that are expected to be impacted by the redevelopment and that
those assets will require accelerated depreciation, or losses on
asset retirements, totaling approximately $50.0 million over the approximate 26-month
project time span. During the six months ended May 31, 2015,
the Company recognized accelerated depreciation and losses on
disposal of assets totaling approximately $9.8 million, with a total of approximately
$37.8 million recognized since the
inception of the project.
Despite the Company not anticipating the need for additional
long-term debt to fund this project, accounting rules dictate that
the Company capitalize a portion of the interest on existing
outstanding debt during the construction period. The Company
estimates it will record approximately $11.0
million to $13.0 million of capitalized interest from fiscal
2013 through fiscal 2016. As a result of these assets going
into service during fiscal 2015 and 2016, depreciation expense
related directly to DAYTONA Rising will increase incrementally by
approximately $12.0 million to $14.0
million in fiscal 2015, and an additional $9.0 million to $10.0
million in fiscal 2016, respectively. Total depreciation
expense for fiscal 2015 is estimated to be between approximately
$93.0 million and $97.0 million, and approximately
$95.0 million to $105.0 million in fiscal 2016, and then
decreasing, due to lower capital spending, to approximately
$85.0 million to $95.0 million
beginning in fiscal 2019.
The Company expects that by providing its fans with a better
experience as well as an expansive platform for its marketing
partners, including an elevated hospitality experience, DAYTONA
Rising, upon completion in 2016, is expected to provide an
immediate incremental lift in Daytona International Speedway's
revenues of approximately $20.0
million, and earnings before interest, taxes, depreciation
and amortization ("EBITDA") lift of approximately $15.0 million with a mid-single-digit growth
rate. The Company also currently anticipates the project to be
accretive to its net income per share within three years of
completion. While these forward looking amounts are management's
projections and the Company believes they are reasonable, its
actual results may vary from these estimates due to unanticipated
changes in projected attendance, lower than expected ticket prices,
and/or lower than forecasted corporate sponsorships. The Company
does not know whether these expectations will ultimately prove
correct and actual revenues and operating results may differ
materially from these estimates.
ONE DAYTONA
In June 2013, the Company entered
into a 50/50 joint venture with Atlanta based Jacoby Development, Inc. ("JDI")
to develop ONE DAYTONA, the proposed premier mixed use and
entertainment destination across from Daytona International
Speedway. In March 2015, the
Company announced a change in its business relationship with JDI
and that we assumed 100.0 percent interest in ONE DAYTONA.
JDI remains involved in the project through a consultative
arrangement.
Also in March 2015, the Company
announced Legacy Development, a leading national development group,
as development consultant for ONE DAYTONA. Intensely focused
on innovative destination retail and mixed-use projects, Legacy
Development will work closely with ISC's development resources on
the project. The Legacy team is a natural fit for the project,
having served as the developer for Legends Outlets Kansas City, a
mixed-use retail destination across from the Company's Kansas
Speedway.
Shaner Hotels and Prime Hospitality Group ("PHG") have been
selected as hotel partners. They have executed a franchise
agreement with Marriott International for an exclusive 145-room
full service Autograph Collection hotel at ONE DAYTONA.
The Company continues to refine the conceptual design for the
first phase of ONE DAYTONA. Bass Pro Shops, America's most popular
outdoor store, and Cobb Theatres, the highly respected
Southeastern-based exhibitor, have executed leases to anchor ONE
DAYTONA. The Company is in active discussions with other
potential tenants for ONE DAYTONA. The Company has approved land
use entitlements for ONE DAYTONA to allow for up to 1.4
million square feet of retail/dining/entertainment, 2,500
seats in a movie theater, 660 hotel rooms, 1,350 units of
residential, 567,000 square feet of additional office space
and 500,000 square feet of commercial/industrial space. We
anticipate announcing our revised plans for the first phase of ONE
DAYTONA in the next few months, including scope of the development,
a range of investment, expected returns and sources of funding in
addition to equity committed.
A Community Development District ("CDD") has been established
for the purpose of installing and maintaining public infrastructure
at ONE DAYTONA. The CDD is a local, special purpose government
framework authorized by Chapter 190 of the Florida Statutes for
managing and financing infrastructure to support community
development.
The CDD has negotiated agreements with the City of Daytona Beach and Volusia County for a total of $40.0 million in incentives to finance a portion
of the estimated $53.0 million in
infrastructure required to move forward with the ONE DAYTONA
project. The Company is currently proceeding with the leasing phase
of the project while simultaneously completing the various
necessary requirements for the CDD to access the incentives to
start infrastructure work.
Hollywood Casino at Kansas Speedway
Kansas Entertainment, LLC, ("Kansas Entertainment") a 50/50
joint venture of Penn Hollywood Kansas, Inc. ("Penn"), a subsidiary
of Penn National Gaming, Inc. and Kansas Speedway Development
Corporation ("KSDC"), a wholly owned indirect subsidiary of ISC,
operates the Hollywood-themed
casino and branded destination entertainment facility, overlooking
turn two at Kansas Speedway. Penn, as the managing member of
Kansas Entertainment, is responsible for the operations of the
casino.
We have accounted for Kansas Entertainment as an equity
investment in our financial statements as of May 31, 2014 and
2015. Our 50.0 percent portion of Kansas Entertainment's net
income is approximately $2.8 million
and $4.5 million for the three months
ended May 31, 2014 and 2015, respectively, and $4.4 million and $7.7
million for the six months ended May 31, 2014 and 2015,
respectively, and is included in income from equity investments in
our consolidated statements of operations.
For the first six months of the 2015 fiscal year, the Company
has received cash distributions from the casino totaling
approximately $13.5 million.
Subsequent to the quarter, the Company received an additional cash
distribution of approximately $6.0
million. The Company expects, for its 2015 fiscal year, that
its share of the cash flow from the casino's operations will be
approximately $30.0 million to $31.0
million, compared to $22.0
million received in fiscal 2014. Approximately
$4.5 million of the increase is
non-recurring and a result of transitioning from quarterly to
monthly distributions in 2015, with the balance resulting from
improvement in operating results.
Per the Development Agreement with the Unified Government of
Wyandotte County/Kansas City, Kansas ("Unified Government"),
the casino is subject to a 1.0 percent of gross gaming revenue
payment if it had not commenced construction on the adjacent hotel
by the second anniversary of its opening, which was February 2014, for which the Unified Government
provided certain extensions of the required commencement
date. On April 6, 2015, Kansas
Entertainment notified the Unified Government of its intentions to
not commence construction of a hotel at this time. Kansas
Entertainment will revisit this decision periodically.
As a result of its decision to not move forward with a hotel by
the deadline, Kansas Entertainment was subject to the 1.0 percent
of gross gaming revenue payment, which was made in April
2015. Kansas Entertainment began accruing for this payment in
February 2014. Included in the
Company's income from equity investment amounts for the six months
ended May 31, 2015 is approximately $0.4 million expense related to this payment, for
a total of approximately $0.9 million
recorded since February 2014. Future payments will be made by
Kansas Entertainment quarterly. We expect our share of this
payment to be approximately $0.6
million per year, which will continue to be reflected in
equity income from equity investments. If Kansas
Entertainment does commence construction on a hotel in the future,
the monthly 1.0 percent of gross gaming revenue payments would
cease.
Outlook
ISC is narrowing its previously announced 2015 full year
non-GAAP guidance toward the upper range, reflecting the positive
momentum from its consumer and corporate marketing strategies and
favorable results from its equity investment in the Hollywood
Casino at Kansas Speedway:
- Revenue: $625.0 million to $635.0
million
- EBITDA margin: 29.5% to 30.5%
- Operating margin: 15.5% to 16.5%
- Effective tax rate: 38.5% to 39.5%
- Diluted earnings per share: $1.20 to
$1.30
Included in the Company's fiscal 2015 non-GAAP earnings
guidance, in addition to approximately $12.0 million to $14.0 million in depreciation expense for assets
placed in service during 2015 related to DAYTONA Rising, are
non-recurring revenue and expenses related to the transition of
merchandising operations. For fiscal 2015 we expect a net
decline in food, beverage and merchandise revenue and expense of
approximately $27.0 million to $28.0
million and $23.0 million to $24.0
million. This includes non-recurring revenue of
$10.0 million, related to sales
of inventory to Fanatics and wholesale transactions, and
$12.0 million of expense, including
product costs associated with the non-recurring transactions, other
non-recurring costs related to the transition of trackside
merchandise operations to Fanatics, as well as partial period
operating expenses incurred prior to the transition of Americrown
and MA merchandise operations for which there was no related
revenue.
The Company is also updating guidance for EBITDA to range
between $185.0 million to $195.0
million. Incremental to ISC's EBITDA estimate are cash
distributions from its equity investment in the Hollywood Casino,
estimated to range between $30.0 million to
$31.0 million.
ISC's fiscal 2015 non-GAAP earnings per share guidance excludes
any income statement impact attributable to the completion of
the DAYTONA Rising project, including non-capitalized costs and
accelerated depreciation for removal of assets not fully
depreciated, partially offset by capitalized interest
expense. Also excluded are potential non-capitalized costs or
charges that could be recognized related to the Company's ONE
DAYTONA development, start up and/or financing costs should the
Company's Hollywood Casino at Kansas Speedway joint venture pursue
construction of an adjacent hotel, any costs related to legal
settlements; gain or loss on sale of fixed assets; accelerated
depreciation and future loss on retirements or relocation of
certain long-lived assets which could be recorded as part of
capital improvements other than DAYTONA Rising resulting from
removal of assets prior to the end of their actual useful life.
In closing, Ms. France Kennedy
stated, "We maintain a solid financial position, developed over
many years, that affords us the ability to follow our disciplined
capital allocation strategy and maintain our leadership position in
the motorsports industry. Building on this foundation we will
continue to execute our five year, $600 million capital
allocation plan through 2017. For the future, we are well
positioned to balance the strategic capital needs of our business
with returning capital to our shareholders."
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 (888) 694-4641
five to ten minutes prior to the scheduled start time and request
to be connected to the ISC earnings call, ID number 69157009.
A live Webcast will also be available at that time on the
Company's Web site, www.internationalspeedwaycorporation.com, under
the "Investor Relations" section. A replay will be available
two hours after the end of the call through midnight Thursday, July 16, 2015. To access, dial
(855) 859-2056 and enter the code 69157009, 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; Auto Club Speedway of
Southern CaliforniaSM
near Los Angeles; Kansas Speedway®
in Kansas City, Kansas; Phoenix
International Raceway® in Arizona;
Chicagoland Speedway® and Route 66 RacewaySM near
Chicago, Illinois;
Homestead-Miami SpeedwaySM in Florida; Martinsville Speedway® in
Virginia; Darlington Raceway® in
South Carolina; and Watkins Glen
International® in New York.
The Company also owns and operates Motor Racing
NetworkSM, the nation's largest independent sports radio
network, and Americrown Service CorporationSM, a
subsidiary that provides catering services, food and beverage
concessions, and with its subsidiary Motorsports Authentics,
produces and markets motorsports-related merchandise. In
addition, the Company has a 50 percent interest in the Hollywood
Casino at Kansas Speedway. For more information, visit the
Company's Web site at www.internationalspeedwaycorporation.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.
(Tables Follow)
Consolidated
Statements of Operations
|
(In Thousands, Except
Share and Per Share Amounts)
|
|
|
|
Three Months
Ended
|
|
|
May 31,
2014
|
|
May 31,
2015
|
|
(Unaudited)
|
REVENUES:
|
|
|
|
|
Admissions,
net
|
|
$
|
35,695
|
|
|
$
|
33,260
|
|
Motorsports
related
|
|
128,389
|
|
|
115,084
|
|
Food, beverage and
merchandise
|
|
22,734
|
|
|
11,574
|
|
Other
|
|
3,493
|
|
|
4,092
|
|
|
|
190,311
|
|
|
164,010
|
|
EXPENSES:
|
|
|
|
|
Direct:
|
|
|
|
|
Prize and point fund
monies and NASCAR sanction fees
|
|
51,202
|
|
|
44,902
|
|
Motorsports
related
|
|
35,291
|
|
|
34,090
|
|
Food, beverage and
merchandise
|
|
17,436
|
|
|
8,962
|
|
General and
administrative
|
|
27,635
|
|
|
27,400
|
|
Depreciation and
amortization
|
|
22,788
|
|
|
24,757
|
|
Losses on asset
retirements
|
|
1,220
|
|
|
4,682
|
|
|
|
155,572
|
|
|
144,793
|
|
Operating
income
|
|
34,739
|
|
|
19,217
|
|
Interest
income
|
|
59
|
|
|
25
|
|
Interest
expense
|
|
(2,703)
|
|
|
(2,602)
|
|
Equity in net income
from equity investments
|
|
2,795
|
|
|
4,502
|
|
Other
|
|
(86)
|
|
|
627
|
|
Income before income
taxes
|
|
34,804
|
|
|
21,769
|
|
Income
taxes
|
|
13,335
|
|
|
8,414
|
|
Net income
|
|
$
|
21,469
|
|
|
$
|
13,355
|
|
|
|
|
|
|
Dividends per
share
|
|
$
|
0.24
|
|
|
$
|
0.26
|
|
Earnings per
share:
|
|
|
|
|
Basic and
diluted
|
|
$
|
0.46
|
|
|
$
|
0.29
|
|
Basic weighted
average shares outstanding
|
|
46,535,179
|
|
|
46,603,052
|
|
Diluted weighted
average shares outstanding
|
|
46,548,843
|
|
|
46,618,333
|
|
|
|
|
|
|
Comprehensive
income
|
|
$
|
21,634
|
|
|
$
|
13,520
|
|
Consolidated
Statements of Operations
|
(In Thousands, Except
Share and Per Share Amounts)
|
|
|
|
Six Months
Ended
|
|
|
May 31,
2014
|
|
May 31,
2015
|
|
(Unaudited)
|
REVENUES:
|
|
|
|
|
Admissions,
net
|
|
$
|
65,750
|
|
|
$
|
63,804
|
|
Motorsports
related
|
|
213,617
|
|
|
202,515
|
|
Food, beverage and
merchandise
|
|
35,942
|
|
|
26,309
|
|
Other
|
|
6,791
|
|
|
7,934
|
|
|
|
322,100
|
|
|
300,562
|
|
EXPENSES:
|
|
|
|
|
Direct:
|
|
|
|
|
Prize and point fund
monies and NASCAR sanction fees
|
|
78,353
|
|
|
72,198
|
|
Motorsports
related
|
|
58,115
|
|
|
57,588
|
|
Food, beverage and
merchandise
|
|
27,538
|
|
|
21,405
|
|
General and
administrative
|
|
52,015
|
|
|
53,536
|
|
Depreciation and
amortization
|
|
45,561
|
|
|
48,766
|
|
Losses on asset
retirements
|
|
3,440
|
|
|
6,261
|
|
|
|
265,022
|
|
|
259,754
|
|
Operating
income
|
|
57,078
|
|
|
40,808
|
|
Interest
income
|
|
82
|
|
|
44
|
|
Interest
expense
|
|
(5,836)
|
|
|
(4,070)
|
|
Equity in net income
from equity investments
|
|
4,414
|
|
|
7,746
|
|
Other
|
|
5,372
|
|
|
653
|
|
Income before income
taxes
|
|
61,110
|
|
|
45,181
|
|
Income
taxes
|
|
19,746
|
|
|
16,873
|
|
Net income
|
|
$
|
41,364
|
|
|
$
|
28,308
|
|
|
|
|
|
|
Dividends per
share
|
|
$
|
0.24
|
|
|
$
|
0.26
|
|
Earnings per
share:
|
|
|
|
|
Basic and
diluted
|
|
$
|
0.89
|
|
|
$
|
0.61
|
|
Basic weighted
average shares outstanding
|
|
46,525,303
|
|
|
46,593,547
|
|
Diluted weighted
average shares outstanding
|
|
46,539,546
|
|
|
46,607,669
|
|
|
|
|
|
|
Comprehensive
income
|
|
$
|
41,692
|
|
|
$
|
28,637
|
|
Consolidated
Balance Sheets
|
(In Thousands, Except
Share and Per Share Amounts)
|
|
|
|
November 30,
2014
|
|
May 31,
2014
|
|
May 31,
2015
|
|
|
(Unaudited)
|
ASSETS
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
158,847
|
|
|
$
|
218,183
|
|
|
$
|
183,458
|
|
Receivables, less
allowance
|
|
27,598
|
|
|
48,304
|
|
|
49,364
|
|
Inventories
|
|
4,030
|
|
|
6,671
|
|
|
2,173
|
|
Income taxes
receivable
|
|
6,202
|
|
|
3,126
|
|
|
12,919
|
|
Deferred income
taxes
|
|
2,789
|
|
|
3,122
|
|
|
2,789
|
|
Prepaid expenses and
other current assets
|
|
8,099
|
|
|
14,805
|
|
|
72,526
|
|
Total Current
Assets
|
|
207,565
|
|
|
294,211
|
|
|
323,229
|
|
|
|
|
|
|
|
|
Property and
Equipment, net
|
|
1,381,190
|
|
|
1,322,540
|
|
|
1,412,121
|
|
Other
Assets:
|
|
|
|
|
|
|
Equity
investments
|
|
122,565
|
|
|
129,687
|
|
|
115,486
|
|
Intangible assets,
net
|
|
178,629
|
|
|
179,284
|
|
|
178,625
|
|
Goodwill
|
|
118,791
|
|
|
118,791
|
|
|
118,791
|
|
Other
|
|
68,911
|
|
|
73,057
|
|
|
7,485
|
|
|
|
488,896
|
|
|
500,819
|
|
|
420,387
|
|
Total
Assets
|
|
$
|
2,077,651
|
|
|
$
|
2,117,570
|
|
|
$
|
2,155,737
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
Current portion of
long-term debt
|
|
$
|
3,435
|
|
|
$
|
3,012
|
|
|
$
|
3,294
|
|
Accounts
payable
|
|
41,491
|
|
|
43,383
|
|
|
39,202
|
|
Deferred
income
|
|
33,043
|
|
|
82,682
|
|
|
85,080
|
|
Other current
liabilities
|
|
18,813
|
|
|
29,636
|
|
|
30,210
|
|
Total Current
Liabilities
|
|
96,782
|
|
|
158,713
|
|
|
157,786
|
|
|
|
|
|
|
|
|
Long-Term
Debt
|
|
268,311
|
|
|
271,154
|
|
|
267,924
|
|
Deferred Income
Taxes
|
|
354,276
|
|
|
359,356
|
|
|
357,490
|
|
Long-Term Deferred
Income
|
|
9,548
|
|
|
7,488
|
|
|
7,407
|
|
Other Long-Term
Liabilities
|
|
2,302
|
|
|
2,471
|
|
|
2,064
|
|
Commitments and
Contingencies
|
|
—
|
|
|
—
|
|
|
—
|
|
Shareholders'
Equity:
|
|
|
|
|
|
|
Class A Common
Stock, $.01 par value, 80,000,000 shares authorized
|
|
262
|
|
|
261
|
|
|
264
|
|
Class B Common
Stock, $.01 par value, 40,000,000 shares authorized
|
|
200
|
|
|
200
|
|
|
199
|
|
Additional paid-in
capital
|
|
447,518
|
|
|
445,819
|
|
|
447,641
|
|
Retained
earnings
|
|
902,433
|
|
|
876,418
|
|
|
918,614
|
|
Accumulated other
comprehensive loss
|
|
(3,981)
|
|
|
(4,310)
|
|
|
(3,652)
|
|
Total Shareholders'
Equity
|
|
1,346,432
|
|
|
1,318,388
|
|
|
1,363,066
|
|
Total Liabilities and
Shareholders' Equity
|
|
$
|
2,077,651
|
|
|
$
|
2,117,570
|
|
|
$
|
2,155,737
|
|
Consolidated
Statements of Cash Flows
|
(In
Thousands)
|
|
|
|
Six Months
Ended
|
|
|
May 31,
2014
|
|
May 31,
2015
|
|
|
(Unaudited)
|
OPERATING
ACTIVITIES
|
|
|
|
|
Net income
|
|
$
|
41,364
|
|
|
$
|
28,308
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Gain on assumption of
controlling interest in equity investee
|
|
(5,447)
|
|
|
—
|
|
Depreciation and
amortization
|
|
45,561
|
|
|
48,766
|
|
Stock-based
compensation
|
|
1,119
|
|
|
1,438
|
|
Amortization of
financing costs
|
|
888
|
|
|
889
|
|
Interest received on
Staten Island note receivable
|
|
—
|
|
|
2,324
|
|
Deferred income
taxes
|
|
(7,387)
|
|
|
3,003
|
|
Income from equity
investments
|
|
(4,414)
|
|
|
(7,746)
|
|
Distribution from
equity investee
|
|
4,988
|
|
|
8,321
|
|
Loss on asset
retirements, non-cash
|
|
267
|
|
|
379
|
|
Other, net
|
|
118
|
|
|
(644)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
Receivables,
net
|
|
(21,111)
|
|
|
(21,766)
|
|
Inventories, prepaid
expenses and other assets
|
|
(8,129)
|
|
|
(5,701)
|
|
Accounts payable and
other liabilities
|
|
(2,402)
|
|
|
(3,558)
|
|
Deferred
income
|
|
45,887
|
|
|
49,896
|
|
Income
taxes
|
|
14,124
|
|
|
(7,049)
|
|
Net cash provided by
operating activities
|
|
105,426
|
|
|
96,860
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
Capital
expenditures
|
|
(74,708)
|
|
|
(75,928)
|
|
Distribution from
equity investee and affiliate
|
|
5,012
|
|
|
5,179
|
|
Equity investments
and advances to affiliate
|
|
(946)
|
|
|
—
|
|
Proceeds from sale of
Staten Island property
|
|
6,314
|
|
|
—
|
|
Cash included in
assumption of ownership interest in equity investee
|
|
4,686
|
|
|
—
|
|
Other, net
|
|
248
|
|
|
43
|
|
Net cash used in
investing activities
|
|
(59,394)
|
|
|
(70,706)
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
Payment of long-term
debt
|
|
(353)
|
|
|
(560)
|
|
Reacquisition of
previously issued common stock
|
|
(323)
|
|
|
(983)
|
|
Net cash used in
financing activities
|
|
(676)
|
|
|
(1,543)
|
|
Net increase in cash
and cash equivalents
|
|
45,356
|
|
|
24,611
|
|
Cash and cash
equivalents at beginning of period
|
|
172,827
|
|
|
158,847
|
|
Cash and cash
equivalents at end of period
|
|
$
|
218,183
|
|
|
$
|
183,458
|
|
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SOURCE International Speedway Corporation