International Speedway Corporation (NASDAQ:ISCA)
(OTC:ISCB)
(“ISC”) today reported financial
results for its fiscal second quarter ended May 31, 2016.
"We are pleased with our results for the second quarter," stated
Lesa France Kennedy, ISC Chief Executive Officer. "Revenues
increased year-over-year driven by contracted broadcast rights
increases and strong corporate partnerships. While we
experienced attendance related revenue challenges at some events,
we remain confident that our consumer marketing initiatives are
working and positioning ISC for continued growth."
"DAYTONA Rising has been well received by industry stakeholders
and is on track to meet or exceed expectations of delivering an
incremental $15 million EBITDA by the end of fiscal 2016.
Last weekend we ran the Coke Zero 400 at Daytona, which realized
increases in all areas of revenue and attendance, adding to the
success of events held earlier this year during Speedweeks and
Bikeweek. Also, in the second quarter, we hosted the
inaugural Country 500 music festival at Daytona, premiering top
country music artists for an enthusiastic crowd during the
three-day event."
"Construction for ONE DAYTONA has commenced with land and
infrastructure improvements underway. Cobb Theatres has gone
vertical and we expect construction of the Bass Pro Shops location
to commence in the near future. We are excited about the
opportunities ONE DAYTONA will bring, creating synergy with DAYTONA
Rising through enhanced customer and partner experiences and
leveraging our real estate on a year-round basis, while creating
value for our shareholders. We are targeting the opening of
ONE DAYTONA in 2017."
"During the second quarter we completed the sale of the interest
in our Staten Island property, which resulted in a gain of
approximately $13.6 million and cash received of approximately
$67.0 million, further strengthening ISC's financial
position. During the quarter, we also announced a 58%
increase in our dividend, demonstrating our commitment to
delivering shareholder value."
Second Quarter Comparison
Total revenues for the second quarter ended May 31, 2016
were approximately $167.6 million, compared to revenues of
approximately $164.0 million in the second quarter of fiscal
2015. Operating income was approximately $23.7 million during
the period compared to approximately $19.2 million in the second
quarter of fiscal 2015. Quarter-over-quarter comparability
was impacted by:
- In the second quarter of fiscal 2016, we hosted an IndyCar
event held at Phoenix International Raceway ("Phoenix"), for which
there was no comparable event in the prior year. Also, in the
second quarter of fiscal 2015, we hosted a NASCAR Mexico series
event held at Phoenix, for which there was no comparable event in
fiscal 2016;
- In the second quarter of fiscal 2016, we hosted the Country 500
music festival at Daytona, for which we earned a facility rental
and certain other fees, as well as provided concession
operations. There was no comparable event in the prior
year;
- During the three months ended May 31, 2015, we had
recognized non-recurring transactions of approximately
$2.4 million of inventory sold to Fanatics and wholesale
transactions by Motorsports Authentics ("MA"), which drove a total
of $2.7 million in expense including product costs associated with
these transactions and costs related to the transition of trackside
merchandise operations to Fanatics, for which there was no related
revenue. There were no comparable transactions in the same period
of fiscal 2016;
- During the three months ended May 31, 2015, we recognized
approximately $0.4 million, or less than $0.01 per diluted
share, in non-recurring, pre-opening costs that are included in
general and administrative expense related to DAYTONA Rising.
There were no similar costs during the three months ended
May 31, 2016;
- During the three months ended May 31, 2015, we 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. There were no similar costs during the three months
ended May 31, 2016;
- During the three months ended May 31, 2015, we 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 capacity management
initiatives. There were no similar costs incurred during the
three months ended May 31, 2016;
- During the three months ended May 31, 2015, we capitalized
approximately $1.3 million, or $0.02 per diluted share, of interest
related to DAYTONA Rising. There was no similar interest
capitalization during the three months ended May 31, 2016;
and
- In the second quarter of fiscal 2016, we completed an
assignment of all rights, title and interest in the mortgage and
underlying promissory note of our Staten Island property. As a
result, we recorded a gain of approximately $13.6 million, or 0.18
per diluted share, comprised of deferred gain, interest, and other
consideration paid. The deferred gain of $1.9 million is
included in Other operating revenue in our consolidated statement
of operations, and the interest, of approximately $11.4 million,
and additional consideration, of approximately $0.3 million,
received is included in Other in our consolidated statement of
operations (see "Capital Allocation"). There was no comparable
transaction in the prior year.
Net income for the second quarter was approximately $21.9
million, or $0.47 per diluted share, compared to net income of
approximately $13.4 million, or $0.29 per diluted share, in the
prior year period. Excluding non-recurring, pre-opening costs
associated with DAYTONA Rising, accelerated depreciation, losses
associated with the retirements of certain other long-lived assets,
DAYTONA Rising project capitalized interest, gain on sale of our
Staten Island property, and net gain on sale of certain assets,
non-GAAP net income, as defined below, was $13.4 million, or
$0.29 per diluted share, and $16.5 million, or $0.35 per diluted
share, for the second quarter of fiscal 2016 and 2015, respectively
(see "GAAP to Non-GAAP Reconciliation").
Year-to-Date Comparison
Total revenues for the six months ended May 31, 2016 were
approximately $310.2 million, compared to revenues of approximately
$300.6 million for the same period in fiscal 2015. Operating
income was approximately $54.8 million for the six months ended
May 31, 2016 compared to approximately $40.8 million for the
same period in fiscal 2015. Year-over-year comparability was
impacted by:
- Year-over-year increases in operating revenues and expenses are
significantly driven by the completion of the DAYTONA Rising
project prior to the first quarter of fiscal 2016 events at Daytona
International Speedway;
- In the second quarter of fiscal 2016, we hosted an IndyCar
event held at Phoenix, for which there was no comparable event in
the prior year. In the second quarter of fiscal 2015, we
hosted a NASCAR Mexico series event held at Phoenix, for which
there was no comparable event in fiscal 2016:
- In the second quarter of fiscal 2016, we hosted the Country 500
music festival at Daytona, for which we earned a facility rental
and certain other fees, as well as provided concession
operations. There was no comparable event in the prior
year;
- For the six months ended May 31, 2015, we had recognized
non-recurring transactions of approximately $6.1 million of
inventory sold to Fanatics and $4.2 million of wholesale
transactions by Motorsports Authentics ("MA"), which drove a total
of $11.0 million in expense including product costs associated with
these transactions, 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. There were no comparable transactions in the same period
of fiscal 2016;
- During the six months ended May 31, 2016 we recognized
approximately $0.8 million, or $0.01 per diluted share, in
non-recurring, pre-opening costs that are included in general and
administrative expense related to DAYTONA Rising, all of which were
incurred in the first quarter of fiscal 2016. During the six months
ended May 31, 2015, we recognized approximately $0.7 million,
or $0.01 per diluted share, of similar costs;
- During the six months ended May 31, 2015, we 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. There were no similar costs during the six months
ended May 31, 2016;
- During the six months ended May 31, 2016, we recognized
approximately $0.9 million, or $0.01 per diluted share, of losses
primarily attributable to demolition and/or asset relocation costs
in connection with capacity management initiatives and facility
capital improvements. During the six months ended May 31,
2015, we recognized approximately $6.3 million, or $0.08 per
diluted share, of similar losses in connection with DAYTONA Rising
and capacity management initiatives;
- During the six months ended May 31, 2016, we capitalized
approximately $0.6 million, or $0.01 per diluted share, of
interest related to DAYTONA Rising, all of which was incurred in
the first quarter of fiscal 2016. During the six months ended
May 31, 2015, we recognized approximately $3.9 million,
or $0.05 per diluted share, of similar interest capitalization;
and
- In the second quarter of fiscal 2016, we completed an
assignment of all rights, title and interest in the mortgage and
underlying promissory note of our Staten Island property. As a
result, we recorded a gain of approximately $13.6 million, or 0.18
per diluted share, comprised of deferred gain, interest, and other
consideration paid. The deferred gain of $1.9 million is
included in Other operating revenue in our consolidated statement
of operations, and the interest, of approximately $11.4 million,
and additional consideration, of approximately $0.3 million,
received is included in Other in our consolidated statement of
operations. There was no comparable transaction in the prior
year.
Net income for the six months ended May 31, 2016 was
approximately $41.7 million, or $0.90 per diluted share,
compared to net income of approximately $28.3 million, or
$0.61 per diluted share, in the prior year period. Excluding
non-recurring, pre-opening costs associated with DAYTONA Rising,
accelerated depreciation, losses associated with the retirements of
certain other long-lived assets, DAYTONA Rising project capitalized
interest, gain on sale of Staten Island, and net gain on sale of
certain assets, non-GAAP net income as defined below was
$33.9 million, or $0.73 per diluted share, and
$33.4 million, or $0.72 per diluted share for the six months
ended May 31, 2016 and May 31, 2015, respectively (see
"GAAP to Non-GAAP Reconciliation").
GAAP to Non-GAAP Reconciliation
The following financial information is presented below using
other than U.S. generally accepted accounting principles
(“non-GAAP”) and includes certain non-GAAP financial measures as
identified in the reconciliation below. The non-GAAP financial
measures disclosed herein do not have standard meaning and may vary
from the non-GAAP financial measures used by other companies or how
we may calculate those measures in other instances from time to
time. Non-GAAP financial measures, such as EBITDA, which we
interpret to be calculated as GAAP operating income, plus
depreciation, amortization and other non-cash gain or losses,
should not be considered a substitute for, or superior to, measures
of financial performance prepared in accordance with
U.S. generally accepted accounting principles ("GAAP"). Also,
our “core” financial measures should not be construed as an
inference by us that our future results will be unaffected by those
items, which are excluded from our “core” financial measures.
The following financial information 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.
We believe such non-GAAP information is useful and meaningful,
and is used by investors to assess the performance of our core
operations, which primarily consists of the ongoing promotions of
racing events at our major motorsports entertainment facilities.
Such non-GAAP information separately identifies, 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 2015 relate to non-recurring, pre-opening
costs incurred associated with DAYTONA Rising, accelerated
depreciation, losses associated with the retirements of certain
other long-lived assets (predominately associated with DAYTONA
Rising), DAYTONA Rising project capitalized interest, and net gain
on sale of certain assets (predominately associated with the sale
of trailers in association with the transition of merchandise
operations).
The adjustments for 2016 relate to non-recurring, pre-opening
costs incurred associated with DAYTONA Rising, losses associated
with the retirements of certain other long-lived assets related to
capacity management initiatives (which predominately includes the
removal of grandstands at Richmond International Raceway
("Richmond")), DAYTONA Rising project capitalized interest, net
gain on sale of certain assets (predominately associated with the
sale of trailers in association with the transition of merchandise
operations), and gain on sale of the Staten Island property.
Amounts are in thousands, except per share data, which is shown
net of income taxes, (unaudited):
|
Three Months Ended May 31, 2015 |
|
IncomeBefore Taxes |
Income TaxEffect |
Net Income |
Earnings PerShare |
GAAP |
$ |
21,769 |
|
$ |
8,414 |
|
$ |
13,355 |
|
$ |
0.29 |
|
Adjustments: |
|
|
|
|
DAYTONA
Rising project |
375 |
|
147 |
|
228 |
|
0.00 |
|
Accelerated depreciation |
2,083 |
|
826 |
|
1,257 |
|
0.03 |
|
Losses on
retirements of long-lived assets |
4,682 |
|
1,838 |
|
2,844 |
|
0.06 |
|
DAYTONA
Rising project capitalized interest |
(1,287 |
) |
(510 |
) |
(777 |
) |
(0.02 |
) |
Net gain
on sale of certain assets |
(627 |
) |
(246 |
) |
(381 |
) |
(0.01 |
) |
Non-GAAP |
$ |
26,995 |
|
$ |
10,469 |
|
$ |
16,526 |
|
$ |
0.35 |
|
|
|
|
|
|
|
Three Months Ended May 31, 2016 |
|
IncomeBefore Taxes |
Income TaxEffect |
Net Income |
Earnings PerShare |
GAAP |
$ |
36,156 |
|
$ |
14,258 |
|
$ |
21,898 |
|
$ |
0.47 |
|
Adjustments: |
|
|
|
|
Losses on
retirements of long-lived assets |
10 |
|
4 |
|
6 |
|
0.00 |
|
Gain on
sale of Staten Island |
(13,631 |
) |
(5,262 |
) |
(8,369 |
) |
(0.18 |
) |
Net gain
on sale of certain assets |
(213 |
) |
(82 |
) |
(131 |
) |
0.00 |
|
Non-GAAP |
$ |
22,322 |
|
$ |
8,918 |
|
$ |
13,404 |
|
$ |
0.29 |
|
|
|
|
|
|
|
Six Months Ended May 31, 2015 |
|
IncomeBefore Taxes |
Income TaxEffect |
Net Income |
Earnings PerShare |
GAAP |
$ |
45,181 |
|
$ |
16,873 |
|
$ |
28,308 |
|
$ |
0.61 |
|
Adjustments: |
|
|
|
|
DAYTONA
Rising project |
677 |
|
265 |
|
412 |
|
0.01 |
|
Accelerated depreciation |
5,971 |
|
2,342 |
|
3,629 |
|
0.08 |
|
Losses on
retirements of long-lived assets |
6,261 |
|
2,454 |
|
3,807 |
|
0.08 |
|
DAYTONA
Rising project capitalized interest |
(3,862 |
) |
(1,514 |
) |
(2,348 |
) |
(0.05 |
) |
Net gain
on sale of certain assets |
(653 |
) |
(256 |
) |
(397 |
) |
(0.01 |
) |
Non-GAAP |
$ |
53,575 |
|
$ |
20,164 |
|
$ |
33,411 |
|
$ |
0.72 |
|
|
|
|
|
|
|
Six Months Ended May 31, 2016 |
|
IncomeBefore Taxes |
Income TaxEffect |
Net Income |
Earnings PerShare |
GAAP |
$ |
68,297 |
|
$ |
26,568 |
|
$ |
41,729 |
|
$ |
0.90 |
|
Adjustments: |
|
|
|
|
DAYTONA
Rising project |
787 |
|
304 |
|
483 |
|
0.01 |
|
Losses on
retirements of long-lived assets |
930 |
|
360 |
|
570 |
|
0.01 |
|
DAYTONA
Rising project capitalized interest |
(627 |
) |
(242 |
) |
(385 |
) |
(0.01 |
) |
Gain on
sale of Staten Island |
(13,631 |
) |
(5,262 |
) |
(8,369 |
) |
(0.18 |
) |
Net gain
on sale of certain assets |
(277 |
) |
(107 |
) |
(170 |
) |
0.00 |
|
Non-GAAP |
$ |
55,479 |
|
$ |
21,621 |
|
$ |
33,858 |
|
$ |
0.73 |
|
|
Corporate Sales
NASCAR is a powerful brand with a loyal fan base that we believe
is aware of, appreciates and supports corporate participation to a
greater extent than fans of any other sports property. The
combination of brand power and fan loyalty provides an attractive
platform for robust corporate partnerships. The number
of FORTUNE 500 companies invested in NASCAR remains
higher than any other sport. More than one-in-four FORTUNE
500 companies, and one-in-two FORTUNE 100 companies,
use NASCAR as part of their marketing strategy and the trend is
increasing. The number of FORTUNE 500 companies investing in
NASCAR increased 7.0 percent in fiscal 2015 versus the prior year;
and is a 20.0 percent improvement versus fiscal 2008.
For fiscal 2016, we have agreements in place for approximately
96.0 percent of our gross marketing partnership revenue target,
which is projected to increase approximately 11.0 percent compared
to fiscal 2015, primarily related to DAYTONA Rising. We have
one of our available 20 NASCAR Sprint Cup Series event entitlements
either open or not announced and two of our 14 NASCAR Xfinity
Series event entitlements either open or not announced. This
is compared to last year at this time when we had approximately
97.0 percent of our gross marketing partnership revenue target sold
and had entitlements for one NASCAR Sprint Cup entitlement either
open or not announced. With the vast majority of our event
entitlements secured, we can focus more resources on official
status categories, which will better position us to meet our gross
marketing partnership revenue target for fiscal 2016.
External Growth, Financing-Related and Other
Initiatives
Capital Allocation
We have established a long-term capital allocation plan to
ensure we generate sufficient cash flow from operations to fund our
working capital needs, capital expenditures at existing facilities,
return of capital through payments of an annual cash dividend, and
repurchase of our shares under our Stock Purchase Plan. In
addition, we have used the proceeds from offerings of our
Class A Common Stock, the net proceeds from the issuance of
long-term debt, borrowings under our credit facilities, and state
and local mechanisms to fund acquisitions and development
projects.
The current capital allocation plan contemplates the
following:
- Capital expenditures remaining under the existing $600.0
million capital expenditure plan adopted by our Board of Directors
in June 2013, total approximately $170.0 million for fiscal 2016
and 2017, consisting of remaining payments to contractors for the
completion of DAYTONA Rising and certain planned capital projects
at our remaining 12 motorsports facilities (see "Capital
Expenditures"). A capital expenditure plan for our existing
facilities covering years subsequent to 2017 is being developed
over the next 9 months as a component of our comprehensive capital
allocation program covering future years;
- Additional capital expenditures related to phase one of the ONE
DAYTONA project will be approximately $120.0 million to $150.0
million in fiscal 2016 through 2017. Sources of funds will
include, in addition to between $90.0 million to $100.0 million
ultimately financed with borrowings, the public incentives
discussed below and land to be contributed to the project.
Additional guidance will be provided as costs and returns for the
first phase of the project are finalized; and
- Returning capital to shareholders is an important component of
the overall capital allocation strategy. In February 2016, we
announced we amended the price parameters of our share repurchase
program with intention to make up to $37.0 million in
open market repurchases of ISCA shares through fiscal year
end November 30, 2016. The Company has authorized its
agent to purchase shares under revised parameters, which encompass
price, corporate and regulatory requirements, capital availability
and other market conditions. The objective of the revised
parameters is to buy back shares on an opportunistic, but
consistent, basis in fiscal 2016. Through May 31, 2016, we
have purchased 757,671 shares on the open market for a total of
$25.9 million.
Additionally, on April 13, 2016, the ISC Board of Directors
approved an annual dividend of $0.41 per share, for a total payout
of $18.9 million, paid on June 30, 2016 to common stockholders of
record as of May 31, 2016. The dividend approved for fiscal
2016 is an increase of approximately 58.0% over the dividend paid
in fiscal 2015 of $0.26 per share. At this time, we are targeting a
total payout of approximately $56.0 million in fiscal 2016 through
a combination of share repurchases and dividends.
The objective for the future is to deliver a sustainable return
of capital program through a balance of dividend yield and share
repurchases. We will review our return of capital programs
and make adjustments, if necessary, on a quarterly basis.
In addition to sources of working capital and available
borrowings, our ability to execute our capital allocation plans are
supported by the following:
- Federal tax legislation passed in December 2015 provides for
extension of 7-year depreciation for tax purposes on certain assets
placed in service during fiscal 2015 through 2016, and bonus
depreciation on capital expenditures placed in service fiscal 2015
through 2019. While the tax legislation does not impact our
overall tax liability, it does impact the timing of the annual
payment of cash taxes. Cash taxes paid for federal and state
taxes in fiscal 2015 was approximately $45.0 million. As a result
of this legislation, which was passed subsequent to our fiscal 2015
year-end, but retroactive for all assets placed in service during
2015, we received a tax refund of approximately $47.0 million in
fiscal 2016 related to overpayment of estimated taxes in prior
years, primarily attributable to depreciation for assets placed in
service related to DAYTONA Rising. Cash tax payments for fiscal
2016 are currently estimated to be between $30.0 million and
$35.0 million. Cash tax payments for fiscal 2017 are currently
estimated to be between $55.0 million to $60.0 million;
and
- In March 2016, we completed an assignment of all rights, title
and interest in the mortgage and underlying promissory note to an
affiliate of Matrix Development Group, a New York/New Jersey area
developer, and received the remaining principal balance of $66.4
million, plus additional consideration of approximately $0.3
million. We have no further commitments or contingencies
related to the property or its sale. As a result, in the second
quarter of fiscal 2016, we recorded a gain of approximately $13.6
million. The deferred gain of $1.9 million is included in
Other operating revenue in our consolidated statement of
operations, and the interest, and additional consideration,
received is included in Other in our consolidated statement of
operations.
The aforementioned represents certain components of our capital
allocation plan for fiscal 2016. This capital allocation plan
is reviewed annually, or more frequently, if necessary, based on
changes in business conditions.
Capital Expenditures
An important strategy for our future growth will come from
investing in our major motorsports facilities to enhance the live
event experience and better enable us to effectively compete with
other entertainment venues for consumer and corporate spending. To
better meet our customers' expectations, we are committed to
improving the guest experience at our facilities through on-going
capital improvements that position us for long-term growth.
In June 2013, our 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 capital
expenditures, excluding capitalized interest, for ISC's 13 major
motorsports facilities, including approximately $400.0 million for
DAYTONA Rising.
Capital expenditures for projects at existing facilities,
including those related to DAYTONA Rising, were approximately
$81.8 million for the six months ended May 31,
2016. In comparison, we spent approximately
$75.9 million on capital expenditures for projects at our
existing facilities for the same period in fiscal 2015. Remaining
capital expenditures associated with the $600.0 million capital
expenditure plan will total approximately $88.2 million for the
remainder of fiscal 2016 and 2017.
DAYTONA Rising: Reimagining an American
Icon
DAYTONA Rising is the redevelopment of the frontstretch at
Daytona, ISC's 58-year-old flagship motorsports facility, to
enhance the event experience for our fans, marketing partners,
broadcasters and the motorsports industry.
On May 9, 2016, we announced Axalta as the fifth Founding
Partner at Daytona International Speedway's new motorsports
stadium. The multi-year agreement (beginning in fiscal 2017) will
provide Axalta with naming rights for the Center injector as well
as branding rights within specific areas of the “World Center of
Racing” zone, the central "neighborhood" overlooking the famed
start/finish line inside the new stadium. The "World Center of
Racing" zone is roughly the area of two football fields and
celebrates the history and legacy of racing at Daytona while
featuring retail and dining areas, dozens of video screens and open
sight-line views of the racetrack. Axalta will join Toyota, Florida
Hospital, Chevrolet and Sunoco as Founding Partners.
By providing our fans with a better experience as well as an
expansive platform for our marketing partners, including an
elevated hospitality experience, DAYTONA Rising is expected to
provide an immediate incremental lift in Daytona's revenues of
approximately $20.0 million, and an earnings before interest,
taxes, depreciation and amortization ("EBITDA”) lift of
approximately $15.0 million, approximately $2.1 million of which
was recognized in fiscal 2015, with a mid-single-digit growth rate.
We also currently anticipate the project to be accretive to our net
income per share within three years of completion. While these
forward-looking amounts are management’s projections and we believe
they are reasonable, our 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. We do not know whether these expectations
will ultimately prove correct and actual revenues and operating
results may differ materially from these estimates.
Despite not anticipating the need for additional long-term debt
to conclude funding on this project, accounting rules dictated that
we capitalize a portion of the interest on existing outstanding
debt during the construction period. We recorded approximately
$14.6 million of capitalized interest from fiscal 2013 through the
opening of the facility in fiscal 2016.
Total spending incurred for DAYTONA Rising was approximately
$10.8 million and $42.8 million, during the three and six months
ended May 31, 2016, respectively. Since inception of the project,
we have spent approximately $375.6 million and have
approximately $24.4 million remaining to be spent. As part of
DAYTONA Rising, we have identified existing assets that were
expected to be impacted by the redevelopment and that those assets
required accelerated depreciation or losses on asset retirements.
During the six months ended May 31, 2016, there were no
significant losses on disposal of assets and no accelerated
depreciation recorded, with a total of approximately
$45.4 million recognized since the inception of the
project.
In addition, our depreciation expense related directly to
DAYTONA Rising increased incrementally by approximately
$11.9 million in fiscal 2015, and is expected to increase by
an additional $15.0 million to $16.0 million in fiscal
2016. The incremental increase in depreciation expense for fiscal
2015 is based on the timing of opening approximately 40.0 percent
of the new stadium for Budweiser Speedweeks 2015 and an additional
approximate 10.0 percent of the new stadium for the 2015
Coke Zero 400.
As a result, our total depreciation expense for fiscal 2016 is
estimated to be between approximately $100.0 million and
$105.0 million annually, in fiscal 2016, and then decreasing,
due to lower capital spending, to approximately $85.0 million to
$95.0 million beginning in fiscal 2019.
In June 2014, House Bill 7095 was signed in Florida creating the
Florida Sports Development Program, establishing a process for
distributing state tax revenue for the construction or improvement
of professional sports 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. In 2014 and 2015, we filed applications
and received approvals from the state's Department of Economic
Opportunity. Allocation of funds for the approved applications was
not considered during the 2015 or 2016 sessions of the Florida
Legislature.
ONE DAYTONA
Since June 2013, we have pursued development of ONE DAYTONA, the
proposed premier mixed use and entertainment destination across
from Daytona International Speedway.
We have crafted a strategy that will create synergy with DAYTONA
Rising, enhance customer and partner experiences, monetize real
estate on International Speedway Blvd and leverage our real estate
on a year-round basis.
ONE DAYTONA phase one boasts approximately 300,000 square feet
of premier retail, dining and entertainment district, two hotels
including a Marriott Autograph Collection property, The DAYTONA,
and a Fairfield Inn and Suites, along with a residential community.
A Community Development District ("CDD") has been established for
the purpose of installing and maintaining public infrastructure at
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. We are in active discussions
with other potential tenants for ONE DAYTONA and have recently
announced leases with P.F. Chang's, Hy’s Toggery, It’s Sugar,
Tervis, Jeremiah’s Italian Ice, Venetian Nails, Kilwins
Confections, and Guitar Center. Additional leases will be announced
in the near future.
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 that will be
known as The Daytona. They have also decided to move forward with
their option to build a Fairfield Inn & Suites by Marriott as a
flag for their approximately 105-room selected service hotel within
ONE DAYTONA. As part of the partnership agreement, our
portion of equity will be limited to our land contribution and we
will share in the profits from the joint ventures.
PHG has been selected as the partner for ONE DAYTONA’s
residential development. Following an extensive request for
proposal process, ONE DAYTONA chose the Florida developer based on
their command of market demographics, development experience and
expert property management systems. PHG is proceeding with the
development in ONE DAYTONA for an approximately 276 luxury
apartment rental units that will add additional critical mass to
the overall ONE DAYTONA campus. Similar to the hotel partnership,
our portion of equity will be limited to our land contribution and
we will share in the profits from the joint venture.
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. We are
currently proceeding with the leasing phase of the project while
simultaneously completing the various necessary requirements for
the CDD to access the incentives.
We have commenced site work on the property and began vertical
construction on the Cobb Theatres, while preparations for
additional vertical construction is under way. We are targeting the
opening of ONE DAYTONA in 2017. Any future phases will be subject
to prudent business considerations.
We estimate the total cost for developing phase one to be
between approximately $120.0 million and $150.0 million.
Sources of funds will include, in addition to $90.0 million to
$100.0 million ultimately financed with borrowings, the public
incentives discussed above and land to be contributed to the
project.
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 is the managing member of Kansas Entertainment and is
responsible for the operations of the casino.
We have accounted for Kansas Entertainment as an equity
investment in the consolidated financial statements as of
May 31, 2015 and 2016. The Company's 50.0 percent portion
of Kansas Entertainment’s net income, which is before income taxes
as the joint venture is a disregarded entity for income tax
purposes, was approximately $4.5 million and $4.2 million for
the three months ended May 31, 2015 and 2016, respectively,
and approximately $7.7 million and $8.1 million for the
six months ended May 31, 2015 and 2016, respectively, and is
included in income from equity investments in the consolidated
statements of operations.
Pre-tax distributions from Kansas Entertainment for the six
months ended May 31, 2016, totaling approximately $10.4
million, consist of approximately $8.7 million received as a
distribution from its profits, included in net cash provided by
operating activities on the Company's consolidated statement of
cash flows, with the remaining approximately $1.6 million received,
recognized as a return of capital from investing activities on the
Company's consolidated statement of cash flows. Pre-tax
distributions from Kansas Entertainment for the six months ended
May 31, 2015, totaling $13.5 million, consisted of
approximately $8.3 million received as a distribution from its
profits, included in net cash provided by operating activities on
the Company's consolidated statement of cash flows, with the
remaining approximate $5.2 million received, recognized as a
return of capital from investing activities on the Company's
consolidated statement of cash flows.
For fiscal 2016, cash distributions from the casino joint
venture are estimated between $27.0 million to $28.0 million.
Fiscal 2016 Financial Outlook
ISC’s reported quarterly and year to date earnings are presented
under GAAP. In an effort to enhance the comparability and
understandability of our forward looking financial guidance, we
adjust for certain non-recurring items that will be included in our
future GAAP reporting to provide information that we believe best
represents our expectations for our core business performance.
For fiscal 2016, our non-GAAP guidance excludes:
- any non-recurring pre-opening income statement
impact attributable to the completion of the DAYTONA Rising
project, including non-capitalized costs and losses associated with
retirements of certain other long-lived assets, partially offset by
capitalized interest expense;
- potential non-recurring and non-capitalized costs or charges
that could be recognized related to our ONE DAYTONA
development;
- start up and/or financing costs should our Hollywood
Casino at Kansas Speedway joint venture pursue
construction of an adjacent hotel;
- any costs or income related to legal settlements;
- the gain on the sale of our Staten Island property;
- gain or loss on sale of other assets;
- accelerated depreciation and future loss on retirements, mostly
non-cash, or relocation of certain long-lived assets, which could
be recorded as part of capital improvements other than DAYTONA
Rising resulting in removal of assets prior to the end of their
actual useful life.
ISC is narrowing its previously announced 2016 full year
non-GAAP guidance to the following:
- Revenue: $658.0 million to $665.0 million
- EBITDA margin: 32.1% to 32.6%
- Operating margin: 16.3% to 17.0%
- Effective tax rate: 38.5% to 39.0%
- Diluted earnings per share: $1.45 to $1.55
The Company's guidance for EBITDA is to range
between $211.0 million to $217.0 million.
Incremental to ISC's EBITDA estimate are pre-tax cash distributions
from its equity investment in the Hollywood Casino, estimated
to range between $27.0 million to $28.0 million. With
the completion of DAYTONA Rising in the first quarter of 2016, the
Company will recognize less capitalized interest in subsequent
quarters; as a result, interest expense is expected to range
between $15.0 million to $15.5 million on a non-GAAP basis.
Contributing significantly to the growth in fiscal 2016 are
contracted revenues associated with the industry's 10-year
broadcast agreement and elements of DAYTONA Rising, which were
largely recognized in the first quarter. Event schedules and
results for fiscal third through fourth quarters are expected to be
comparable to fiscal 2015.
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 fiscal 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 55813344.
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 transcript and a replay
will be available two hours after the end of the call through
midnight Tuesday, July 19, 2016. To access, dial (855)
859-2056 and enter the code 55813344, 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, and food and beverage concessions. In addition, the
Company has a 50.0 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 |
|
Six Months Ended |
|
|
May 31, 2015 |
|
May 31, 2016 |
|
May 31, 2015 |
|
May 31, 2016 |
|
|
(Unaudited) |
REVENUES: |
|
|
|
|
|
|
|
|
Admissions, net |
|
$ |
33,260 |
|
|
$ |
30,473 |
|
|
$ |
63,804 |
|
|
$ |
62,328 |
|
Motorsports and other event related |
|
115,084 |
|
|
121,002 |
|
|
202,515 |
|
|
219,725 |
|
Food,
beverage and merchandise |
|
11,574 |
|
|
10,289 |
|
|
26,309 |
|
|
18,605 |
|
Other |
|
4,092 |
|
|
5,797 |
|
|
7,934 |
|
|
9,533 |
|
|
|
164,010 |
|
|
167,561 |
|
|
300,562 |
|
|
310,191 |
|
EXPENSES: |
|
|
|
|
|
|
|
|
Direct: |
|
|
|
|
|
|
|
|
NASCAR
event management fees |
|
44,902 |
|
|
46,484 |
|
|
72,198 |
|
|
74,564 |
|
Motorsports and other event related |
|
34,090 |
|
|
36,067 |
|
|
57,588 |
|
|
60,947 |
|
Food,
beverage and merchandise |
|
8,962 |
|
|
7,559 |
|
|
21,405 |
|
|
13,805 |
|
General
and administrative |
|
27,400 |
|
|
27,776 |
|
|
53,536 |
|
|
54,068 |
|
Depreciation and amortization |
|
24,757 |
|
|
25,986 |
|
|
48,766 |
|
|
51,032 |
|
Losses on
asset retirements |
|
4,682 |
|
|
10 |
|
|
6,261 |
|
|
930 |
|
|
|
144,793 |
|
|
143,882 |
|
|
259,754 |
|
|
255,346 |
|
Operating income |
|
19,217 |
|
|
23,679 |
|
|
40,808 |
|
|
54,845 |
|
Interest income |
|
25 |
|
|
56 |
|
|
44 |
|
|
86 |
|
Interest expense |
|
(2,602 |
) |
|
(3,684 |
) |
|
(4,070 |
) |
|
(6,773 |
) |
Equity in net income
from equity investments |
|
4,502 |
|
|
4,169 |
|
|
7,746 |
|
|
8,139 |
|
Other |
|
627 |
|
|
11,936 |
|
|
653 |
|
|
12,000 |
|
Income before income
taxes |
|
21,769 |
|
|
36,156 |
|
|
45,181 |
|
|
68,297 |
|
Income taxes |
|
8,414 |
|
|
14,258 |
|
|
16,873 |
|
|
26,568 |
|
Net income |
|
$ |
13,355 |
|
|
$ |
21,898 |
|
|
$ |
28,308 |
|
|
$ |
41,729 |
|
|
|
|
|
|
|
|
|
|
Dividends per
share |
|
$ |
0.26 |
|
|
$ |
0.41 |
|
|
$ |
0.26 |
|
|
$ |
0.41 |
|
Earnings per
share: |
|
|
|
|
|
|
|
|
Basic and
diluted |
|
$ |
0.29 |
|
|
$ |
0.47 |
|
|
$ |
0.61 |
|
|
$ |
0.90 |
|
|
|
|
|
|
|
|
|
|
Basic weighted average
shares outstanding |
|
46,603,052 |
|
|
46,231,560 |
|
|
46,593,547 |
|
|
46,424,992 |
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding |
|
46,618,333 |
|
|
46,246,727 |
|
|
46,607,669 |
|
|
46,439,802 |
|
|
|
|
|
|
|
|
|
|
Comprehensive
income |
|
$ |
13,520 |
|
|
$ |
22,065 |
|
|
$ |
28,637 |
|
|
$ |
42,061 |
|
Consolidated Balance Sheets |
(In Thousands, Except Share and Per Share
Amounts) |
|
|
|
November 30, 2015 |
|
May 31, 2015 |
|
May 31, 2016 |
|
|
(Unaudited) |
ASSETS |
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
160,548 |
|
|
$ |
183,458 |
|
|
$ |
303,978 |
|
Receivables, less allowance |
|
42,112 |
|
|
49,364 |
|
|
41,150 |
|
Inventories |
|
1,639 |
|
|
2,173 |
|
|
1,788 |
|
Income
taxes receivable |
|
572 |
|
|
12,919 |
|
|
— |
|
Deferred
income taxes |
|
— |
|
|
2,789 |
|
|
— |
|
Prepaid
expenses and other current assets |
|
60,673 |
|
|
72,526 |
|
|
16,981 |
|
Total Current
Assets |
|
265,544 |
|
|
323,229 |
|
|
363,897 |
|
|
|
|
|
|
|
|
Property and Equipment,
net |
|
1,448,964 |
|
|
1,412,121 |
|
|
1,455,945 |
|
Other Assets: |
|
|
|
|
|
|
Equity
investments |
|
103,249 |
|
|
115,486 |
|
|
101,038 |
|
Intangible assets, net |
|
178,626 |
|
|
178,625 |
|
|
178,627 |
|
Goodwill |
|
118,791 |
|
|
118,791 |
|
|
118,791 |
|
Other |
|
4,489 |
|
|
7,485 |
|
|
4,422 |
|
|
|
405,155 |
|
|
420,387 |
|
|
402,878 |
|
Total Assets |
|
$ |
2,119,663 |
|
|
$ |
2,155,737 |
|
|
$ |
2,222,720 |
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
Current
Liabilities: |
|
|
|
|
|
|
Current
portion of long-term debt |
|
$ |
3,074 |
|
|
$ |
3,294 |
|
|
$ |
3,102 |
|
Accounts
payable |
|
56,968 |
|
|
39,202 |
|
|
30,810 |
|
Deferred
income |
|
38,243 |
|
|
85,080 |
|
|
93,650 |
|
Income
taxes payable |
|
— |
|
|
— |
|
|
2,654 |
|
Other
current liabilities |
|
20,344 |
|
|
30,210 |
|
|
37,082 |
|
Total Current
Liabilities |
|
118,629 |
|
|
157,786 |
|
|
167,298 |
|
|
|
|
|
|
|
|
Long-Term Debt |
|
262,762 |
|
|
267,924 |
|
|
262,514 |
|
Deferred Income
Taxes |
|
336,232 |
|
|
357,490 |
|
|
392,833 |
|
Long-Term Deferred
Income |
|
6,969 |
|
|
7,407 |
|
|
6,372 |
|
Other Long-Term
Liabilities |
|
1,856 |
|
|
2,064 |
|
|
2,246 |
|
Commitments and
Contingencies |
|
— |
|
|
— |
|
|
— |
|
Shareholders’
Equity: |
|
|
|
|
|
|
Class A Common Stock, $.01 par value, 80,000,000 shares
authorized |
|
263 |
|
|
264 |
|
|
256 |
|
Class B Common Stock, $.01 par value, 40,000,000 shares
authorized |
|
199 |
|
|
199 |
|
|
199 |
|
Additional paid-in capital |
|
449,136 |
|
|
447,641 |
|
|
442,754 |
|
Retained
earnings |
|
946,940 |
|
|
918,614 |
|
|
951,239 |
|
Accumulated other comprehensive loss |
|
(3,323 |
) |
|
(3,652 |
) |
|
(2,991 |
) |
Total Shareholders’
Equity |
|
1,393,215 |
|
|
1,363,066 |
|
|
1,391,457 |
|
Total Liabilities and
Shareholders’ Equity |
|
$ |
2,119,663 |
|
|
$ |
2,155,737 |
|
|
$ |
2,222,720 |
|
Consolidated Statements of Cash
Flows |
(In Thousands) |
|
|
|
Six Months Ended |
|
|
May 31, 2015 |
|
May 31, 2016 |
|
|
(Unaudited) |
OPERATING
ACTIVITIES |
|
|
|
|
Net income |
|
$ |
28,308 |
|
|
$ |
41,729 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
Gain on
sale of Staten Island property |
|
— |
|
|
(13,631 |
) |
Depreciation and amortization |
|
48,766 |
|
|
51,032 |
|
Stock-based compensation |
|
1,438 |
|
|
1,532 |
|
Amortization of financing costs |
|
889 |
|
|
887 |
|
Interest
and other consideration received on Staten Island note
receivable |
|
2,324 |
|
|
1,162 |
|
Deferred
income taxes |
|
3,003 |
|
|
56,392 |
|
Income
from equity investments |
|
(7,746 |
) |
|
(8,139 |
) |
Distribution from equity investee |
|
8,321 |
|
|
8,714 |
|
Loss on
retirements of long-lived assets, non-cash |
|
379 |
|
|
896 |
|
Other,
net |
|
(644 |
) |
|
(227 |
) |
Changes
in operating assets and liabilities: |
|
|
|
|
Receivables, net |
|
(21,766 |
) |
|
962 |
|
Inventories, prepaid expenses and other assets |
|
(5,701 |
) |
|
(10,846 |
) |
Accounts
payable and other liabilities |
|
(3,558 |
) |
|
(5,218 |
) |
Deferred
income |
|
49,896 |
|
|
54,810 |
|
Income
taxes |
|
(7,049 |
) |
|
3,190 |
|
Net cash provided by
operating activities |
|
96,860 |
|
|
183,245 |
|
INVESTING
ACTIVITIES |
|
|
|
|
Capital
expenditures |
|
(75,928 |
) |
|
(81,778 |
) |
Distribution from equity investee |
|
5,179 |
|
|
1,636 |
|
Proceeds
from sale of Staten Island property |
|
— |
|
|
66,728 |
|
Proceeds
from sale of assets |
|
— |
|
|
472 |
|
Other,
net |
|
43 |
|
|
(2 |
) |
Net cash used in
investing activities |
|
(70,706 |
) |
|
(12,944 |
) |
FINANCING
ACTIVITIES |
|
|
|
|
Payment
of long-term debt |
|
(560 |
) |
|
(418 |
) |
Reacquisition of previously issued common stock |
|
(983 |
) |
|
(26,453 |
) |
Net cash used in
financing activities |
|
(1,543 |
) |
|
(26,871 |
) |
Net increase in cash
and cash equivalents |
|
24,611 |
|
|
143,430 |
|
Cash and cash
equivalents at beginning of period |
|
158,847 |
|
|
160,548 |
|
Cash and cash
equivalents at end of period |
|
$ |
183,458 |
|
|
$ |
303,978 |
|
|
CONTACT:
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International Speedway (NASDAQ:ISCA)
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International Speedway (NASDAQ:ISCA)
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From Jul 2023 to Jul 2024