International Speedway Corporation (NASDAQ:ISCA)
(OTC Bulletin Board:ISCB)
(“ISC”) today reported
financial results for its fiscal third quarter ended
August 31, 2016.
"We are pleased with our third quarter results, which exceeded
expectations," stated Lesa France Kennedy, ISC Chief Executive
Officer. "Revenues for the quarter increased as a result of
contracted broadcast rights and strong corporate
partnerships. We realized increased admissions for comparable
events during the quarter driven by the Coke Zero 400 and a second
consecutive sell-out of reserved grandstands for the NASCAR event
at Watkins Glen. We also hosted two successful music
festivals at Auto Club Speedway and Michigan, entertaining guests
to a star-studded line-up over multiple days."
"With three races complete, the 2016 Chase for the NASCAR Sprint
Cup Championship is surging into the next round with great story
lines and exciting competition. For the first time this
elimination format is expanded to the Xfinity and Camping World
Truck series, promising to deliver a thrilling showdown for all
three series at the Ford Championship Weekend in Homestead-Miami
Speedway."
"Construction for ONE DAYTONA is progressing nicely. We
expect Cobb Theatres to open later this year and Bass Pro Shops in
early 2017. The Fairfield Inn has commenced vertical
construction and is expected to be complete in the later part of
2017. VCC was awarded the role of general contractor and will
oversee construction of the retail, dining and entertainment
component, including Victory Circle and the parking garage.
We recently announced several new tenants to ONE DAYTONA. We
are excited about the opportunities ONE DAYTONA will bring,
creating synergy with the Daytona International Speedway 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 completion of ONE DAYTONA in
late 2017."
"Last week we announced amendment and extension of our $300
million revolving credit facility, ensuring a strong capital
structure for the Company into the future."
Third Quarter Comparison
Total revenues for the third quarter ended August 31, 2016
were approximately $129.0 million, compared to revenues of
approximately $125.5 million in the third quarter of fiscal
2015. Operating income was approximately $3.7 million
during the period compared to approximately $7.1 million loss
in the third quarter of fiscal 2015. Quarter-over-quarter
comparability was impacted by:
- In the third quarter of fiscal 2015 we hosted an Xfinity event
at Chicagoland Speedway ("Chicagoland") and an IndyCar event at
Auto Club Speedway of Southern California ("Auto Club Speedway"),
for which there were no comparable events in fiscal 2016;
- In the third quarter of fiscal 2016 we hosted the HARD summer
music festival at Auto Club Speedway. Comparatively, in the
third quarter of fiscal 2015, we hosted the Phish Magnaball music
festival at Watkins Glen International ("Watkins Glen"). For
these aforementioned music festivals we earned a facility rental
and certain other fees, as well as provided concession
operations;
- During the three months ended August 31, 2015, we had
recognized non-recurring transactions of approximately $0.7 million
of inventory sold to Fanatics and wholesale transactions by
Motorsports Authentics ("MA"), which drove a total of $1.0 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 August 31, 2015, we
recognized approximately $0.4 million, or $0.00 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 August 31, 2016;
- During the three months ended August 31, 2015, we
recognized approximately $1.0 million, or $0.01 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 August 31, 2016;
- During the three months ended August 31, 2016, we
recognized approximately $0.2 million, or less than $0.01 per
diluted share, of losses primarily attributable to demolition
and/or asset relocation costs in connection with ONE DAYTONA and
facility capital improvements. During the three months ended
August 31, 2015, we recognized approximately
$5.4 million, or $0.07 per diluted share, of losses primarily
attributable to demolition and/or asset relocation costs in
connection with DAYTONA Rising and capacity management
initiatives;
- During the three months ended August 31, 2016, we
capitalized approximately $0.4 million, or less than $0.01 per
diluted share, of interest related to ONE DAYTONA. During the three
months ended August 31, 2015, we capitalized approximately
$1.2 million, or $0.01 per diluted share, of interest related
to DAYTONA Rising; and
- During the three months ended August 31, 2016, we received
a favorable settlement relating to certain ancillary operations of
approximately $1.1 million, or $0.02 per diluted share. There
was no comparable transaction in the prior year.
Net income for the third quarter was approximately
$2.2 million, or $0.05 per diluted share, compared to net loss
of approximately $4.0 million, or $0.08 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, legal settlement, DAYTONA Rising and ONE DAYTONA project
capitalized interest, and net gain on sale of certain assets,
non-GAAP net income, as defined below, was $1.4 million, or
$0.03 per diluted share, as compared to a net loss of
$0.5 million, or $0.01 per diluted share, for the third
quarter of fiscal 2016 and 2015, respectively (see "GAAP to
Non-GAAP Reconciliation").
Year-to-Date Comparison
Total revenues for the nine months ended August 31, 2016
were approximately $439.2 million, compared to revenues of
approximately $426.1 million for the same period in fiscal
2015. Operating income was approximately $58.6 million
for the nine months ended August 31, 2016 compared to
approximately $33.7 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 ("Daytona");
- In the second quarter of fiscal 2016, we hosted an IndyCar
event held at Phoenix International Raceway ("Phoenix").
Comparatively, in the third quarter of fiscal 2015, we held an
IndyCar event at Auto Club Speedway;
- In the second and third quarters of fiscal 2015, we hosted a
NASCAR Mexico series event held at Phoenix, and NASCAR Xfinity
series event at Chicagoland, respectively, for which there was no
comparable event in fiscal 2016;
- In the second and third quarters of fiscal 2016 we hosted the
Country 500 music festival at Daytona and HARD summer music
festival at Auto Club Speedway, respectively. Comparatively,
in the third quarter of fiscal 2015, we hosted the Phish Magnaball
music festival at Watkins Glen. For these aforementioned music
festivals we earned a facility rental and certain other fees, as
well as provided concession operations;
- For the nine months ended August 31, 2015, we had
recognized non-recurring transactions of approximately
$6.5 million of inventory sold to Fanatics and
$4.0 million of wholesale transactions by MA, which drove a
total of $12.0 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 nine months ended August 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 nine months ended August 31, 2015, we recognized
approximately $1.1 million, or $0.01 per diluted share, of
similar costs;
- During the nine months ended August 31, 2015, we
recognized approximately $6.9 million, or $0.09 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 nine months ended August 31, 2016;
- During the nine months ended August 31, 2016, we
recognized approximately $1.1 million, or $0.01 per diluted
share, of losses primarily attributable to removal of certain
assets not fully depreciated, and demolition costs, in connection
with facility capital improvements and capacity management
initiatives. During the nine months ended August 31, 2015, we
recognized approximately $11.6 million, or $0.15 per diluted
share, of similar losses in connection with DAYTONA Rising and
capacity management initiatives;
- During the nine months ended August 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, and
$0.4 million, or less than $0.01 per diluted share, of
interest related to ONE DAYTONA. During the nine months ended
August 31, 2015, we recognized approximately
$5.0 million, or $0.06 per diluted share, of similar interest
capitalization related to DAYTONA Rising;
- 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 fiscal
year; and
- In the third quarter of fiscal 2016, we received a favorable
settlement relating to certain ancillary operations of
approximately $1.1 million, or $0.02 per diluted share. There
was no comparable transaction in the prior fiscal year.
Net income for the nine months ended August 31, 2016 was
approximately $43.9 million, or $0.95 per diluted share,
compared to net income of approximately $24.4 million, or
$0.52 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, legal settlement, DAYTONA Rising
and ONE DAYTONA 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 $35.3 million, or $0.76 per
diluted share, and $32.9 million, or $0.70 per diluted share
for the nine months ended August 31, 2016 and August 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.
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 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.
The adjustments for fiscal 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), capitalized interest related to the DAYTONA Rising
project, and net gain on sale of certain assets (predominately
associated the sale of trailers in association with the transition
of merchandise operations).
The adjustments for fiscal 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
include the removal of grandstands at Richmond International
Raceway ("Richmond")) and other facility capital improvements,
legal settlement, capitalized interest related to the DAYTONA
Rising and ONE DAYTONA projects, 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
Staten Island property.
Amounts are in thousands, except per share data, which is shown
net of income taxes, (unaudited):
|
Three Months Ended August 31, 2015 |
|
(Loss) Income Before Taxes |
Income Tax Effect |
Net (Loss) Income |
(Loss) Earnings Per Share |
GAAP |
$ |
(6,311 |
) |
$ |
(2,355 |
) |
$ |
(3,956 |
) |
$ |
(0.08 |
) |
Adjustments: |
|
|
|
|
DAYTONA Rising project |
420 |
|
165 |
|
255 |
|
0.00 |
|
Accelerated depreciation |
974 |
|
381 |
|
593 |
|
0.01 |
|
Losses on retirements of long-lived
assets |
5,365 |
|
2,103 |
|
3,262 |
|
0.07 |
|
Capitalized interest |
(1,156 |
) |
(453 |
) |
(703 |
) |
(0.01 |
) |
Net gain on sale of certain
assets |
32 |
|
13 |
|
19 |
|
0.00 |
|
Non-GAAP |
$ |
(676 |
) |
$ |
(146 |
) |
$ |
(530 |
) |
$ |
(0.01 |
) |
|
|
|
|
|
|
Three Months Ended August 31, 2016 |
|
Income Before Taxes |
Income Tax Effect |
Net Income |
Earnings Per Share |
GAAP |
$ |
3,529 |
|
$ |
1,356 |
|
$ |
2,173 |
|
$ |
0.05 |
|
Adjustments: |
|
|
|
|
Losses on retirements of long-lived
assets |
176 |
|
68 |
|
108 |
|
0.00 |
|
Legal settlement |
(1,084 |
) |
(418 |
) |
(666 |
) |
(0.02 |
) |
Capitalized interest |
(360 |
) |
(139 |
) |
(221 |
) |
0.00 |
|
Non-GAAP |
$ |
2,261 |
|
$ |
867 |
|
$ |
1,394 |
|
$ |
0.03 |
|
|
|
|
|
|
|
Nine Months Ended August 31, 2015 |
|
Income Before Taxes |
Income Tax Effect |
Net Income |
Earnings Per Share |
GAAP |
$ |
38,870 |
|
$ |
14,518 |
|
$ |
24,352 |
|
$ |
0.52 |
|
Adjustments: |
|
|
|
|
DAYTONA Rising project |
1,097 |
|
430 |
|
667 |
|
0.01 |
|
Accelerated depreciation |
6,945 |
|
2,723 |
|
4,222 |
|
0.09 |
|
Losses on retirements of long-lived
assets |
11,626 |
|
4,557 |
|
7,069 |
|
0.15 |
|
Capitalized interest |
(5,018 |
) |
(1,967 |
) |
(3,051 |
) |
(0.06 |
) |
Net gain on sale of certain
assets |
(621 |
) |
(243 |
) |
(378 |
) |
(0.01 |
) |
Non-GAAP |
$ |
52,899 |
|
$ |
20,018 |
|
$ |
32,881 |
|
$ |
0.70 |
|
|
|
|
|
|
|
Nine Months Ended August 31, 2016 |
|
Income Before Taxes |
Income Tax Effect |
Net Income |
Earnings Per Share |
GAAP |
$ |
71,826 |
|
$ |
27,924 |
|
$ |
43,902 |
|
$ |
0.95 |
|
Adjustments: |
|
|
|
|
DAYTONA Rising project |
787 |
|
304 |
|
483 |
|
0.01 |
|
Losses on retirements of long-lived
assets |
1,106 |
|
429 |
|
677 |
|
0.01 |
|
Legal settlement |
(1,084 |
) |
(418 |
) |
(666 |
) |
(0.02 |
) |
Capitalized interest |
(987 |
) |
(381 |
) |
(606 |
) |
(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 |
$ |
57,740 |
|
$ |
22,489 |
|
$ |
35,251 |
|
$ |
0.76 |
|
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 over 100.0
percent of our gross marketing partnership revenue target, which is
an increase of approximately 12.0 percent compared to fiscal 2015,
primarily related to DAYTONA Rising. We have sold all but one
NASCAR Sprint Cup race entitlement. 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 an open
entitlement for one NASCAR Xfinity series event. 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 2017.
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 $130.0 million for fiscal 2016
and approximately $40.0 million for fiscal 2017, consisting of
remaining payments to contractors for the completion of DAYTONA
Rising in fiscal 2016 and certain planned capital projects at our
remaining 12 motorsports facilities (see "Capital
Expenditures");
- From 2017 through 2021 we expect a total of $500.0 million in
capital expenditures for existing facilities, which includes the
$40.0 million for 2017 carried over from the 2013 $600.0 million
plan. This allocation will fund a reinvestment at Phoenix,
the first phase of redevelopment at Richmond, as well as all other
maintenance and guest experience capital expenditures for the
remaining existing facilities. In 2017 we will begin the
redevelopment of Phoenix with completion targeted in late 2018. We
expect to provide information on annual capital expenditure amounts
for fiscal 2017 through 2021 as part of our fiscal 2017 guidance in
late January 2017, however with the Phoenix construction planned
for 2017 and 2018 we expect spending to be somewhat
front-loaded. While many components of these expected
projects will exceed weighted average cost of capital, considerable
maintenance capital expenditures will likely result in a blended
return of this invested capital in the mid to low single
digits;
- In addition to the aforementioned $500 million in capital
expenditures for existing facilities, we expect we will have an
additional $95.0 million of capital expenditures in fiscal 2016
through 2017 related to phase one of ONE DAYTONA with approximately
forty percent and sixty percent recorded in fiscal 2016 and 2017,
respectively. We expect this investment to exceed our
weighted average cost of capital (see "ONE DAYTONA");
- Return of capital to shareholders is a significant pillar of
our capital allocation. In fiscal 2016 we increased our
dividend approximately 58.0 percent to $0.41 per share. We
expect dividends to increase in 2017 and beyond by approximately
four to five percent annually. For the nine months ended
August 31, 2016, we repurchased 1,098,525 shares of ISCA on the
open market at a weighted average share price of $34.04 for a total
of approximately $37.4 million. For 2017 through 2021 we
expect our return of capital program will be approximately $280
million, comprised of close to $100 million in total annual
dividends and the balance being open market repurchase of ISCA
shares over the five year period. At this time we expect this
spending to be evenly allocated per year, although we will scale
the repurchase program to buy opportunistically; and
- We will continue to explore development and/or acquisition
opportunities beyond the initiatives discussed above that build
shareholder value and exceed our weighted average cost of
capital. Should additional development and/or acquisitions be
pursued, we will provide discrete information on timing, scope,
cost and expected returns of such opportunities.
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
motorsports facility 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
below Operating Income in our consolidated statement of
operations.
The aforementioned represents certain components of our capital
allocation plan for fiscal 2016 and beyond. 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.
Capital expenditures for projects, including those related to
DAYTONA Rising, was approximately $110.2 million for the nine
months ended August 31, 2016. In comparison, the Company
spent approximately $105.7 million on capital expenditures for
projects for the same period in fiscal 2015. Remaining
capital expenditures associated with the $600.0 million
capital expenditure plan will total approximately $21.2 million for
the remainder of fiscal 2016.
We review the capital expenditure program periodically and
modify it as required to meet current business needs.
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.
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 provides an
immediate incremental lift in Daytona's revenues of approximately
$20.0 million, and 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.
In May 2016, Axalta joined Toyota, Florida Hospital, Chevrolet
and Sunoco as Founding Partners at Daytona International Speedway's
new motorsports stadium. With each partnership extending over
10 years, the Founding partners received sponsorship rights for a
dedicated entry point ("fan injector"), as well as innovative fan
engagement space, and interior and exterior branding space, that
will enhance the overall guest experience.
Despite not incurring additional long-term debt to fund 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
$13.8 million and $56.6 million, during the three and nine
months ended August 31, 2016, respectively. Since inception of the
project, we have spent approximately $389.4 million and have
approximately $10.6 million remaining to be spent. As part of
DAYTONA Rising, we identified existing assets that were impacted by
the redevelopment and that those assets required accelerated
depreciation or losses on asset retirements. During the nine months
ended August 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 new
assets placed in service for 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 was 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 starting in fiscal
2016 is estimated to be between approximately $100.0 million
and $105.0 million.
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.
We have 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.
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.
In March 2015, we 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 is working closely with
ISC’s development resources on the project. The Legacy Development
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 our Kansas Speedway.
We have completed the design for the first phase of ONE
DAYTONA. This first phase will be comprised of three
components: retail, dining and entertainment (“RD&E”); hotels;
and residential.
The RD&E component of phase one will be owned and operated
100.0 percent by us. The expected total square footage for the
RD&E first phase is approximately 300,000 square feet. We
expect to spend approximately $95.0 million in fiscal 2016 through
2017 on the RD&E component of ONE DAYTONA’s first phase.
Other sources of funds will include the public incentives discussed
above and land to be contributed to the project. In September
2016, we announced VCC has been selected as general contractor to
oversee construction of the RD&E component of phase one
including Victory Circle and the parking garage. VCC has an
outstanding national reputation for quality and a proven track
record leading and managing the development and construction of
some of the country’s most engaging mixed-use developments.
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 MidiCi: The Neapolitan Pizza Company, Rock
Bottom Restaurant & Brewery and Oklahoma Joe's BBQ. 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 are also building a 105-room
select-service Fairfield Inn & Suites by Marriott 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 venture.
Prime Group 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. Prime Group is proceeding with
the development in ONE DAYTONA for 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.
We continue with site work on the property, along with vertical
construction of Cobb Theatres, Bass Pro Shops and the Fairfield Inn
& Suites. We are targeting phase one completion in late fiscal
2017. At stabilization we expect this first phase on ONE DAYTONA to
deliver annual revenue and EBITDA of approximately $12.0 million
and approximately $9.0 million, respectively, and deliver an
unlevered return above our weighted average cost of capital. We
expect to add leverage to ONE DAYTONA’s phase one
post-stabilization.
Any future phases will be subject to prudent business
considerations for which we will provide discrete cost and return
disclosures.
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
August 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 $3.5 million and $3.3
million for the three months ended August 31, 2015 and 2016,
respectively, and approximately $11.2 million and
$11.5 million for the nine months ended August 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 nine
months ended August 31, 2016, totaling approximately $19.0
million, consist of approximately $12.3 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 approximately $6.7 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 nine months ended
August 31, 2015, totaling $24.8 million, consisted of
approximately $12.1 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 $12.7 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 to be approximately $27.0 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
and capitalized interest 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 reiterating its previously announced 2016 full year
non-GAAP guidance. The earnings outlook is our best estimate
of financial results for fiscal 2016, which includes results for
the first nine months of the year and expectations for the fourth
quarter. At this time, the Company is most comfortable
towards the lower end of the range.
- 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 be approximately $27.0 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.
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. We have extended our allocation plan to extend
through fiscal 2021, demonstrating our ongoing commitment to
building long-term value. 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 has postponed the conference call with
investors previously scheduled for today at 9:00 a.m. Eastern
Time. The conference call has been postponed due to inclement
weather conditions at the Company’s headquarters in Daytona Beach,
FL as a result of Hurricane Matthew. The Company will
reschedule the conference call to a later date, to be
announced. The Company will notify investors by distributing
a release containing the rescheduled date and time prior to the
call.
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 |
|
Nine Months Ended |
|
|
August 31, 2015 |
|
August 31, 2016 |
|
August 31, 2015 |
|
August 31, 2016 |
|
|
(Unaudited) |
REVENUES: |
|
|
|
|
|
|
|
|
Admissions, net |
|
$ |
24,038 |
|
|
$ |
22,835 |
|
|
$ |
87,842 |
|
|
$ |
85,163 |
|
Motorsports and other event
related |
|
86,628 |
|
|
90,245 |
|
|
289,143 |
|
|
309,970 |
|
Food, beverage and merchandise |
|
10,521 |
|
|
10,845 |
|
|
36,830 |
|
|
29,450 |
|
Other |
|
4,303 |
|
|
5,061 |
|
|
12,237 |
|
|
14,594 |
|
|
|
125,490 |
|
|
128,986 |
|
|
426,052 |
|
|
439,177 |
|
EXPENSES: |
|
|
|
|
|
|
|
|
Direct: |
|
|
|
|
|
|
|
|
NASCAR event management fees |
|
31,824 |
|
|
31,330 |
|
|
104,022 |
|
|
105,894 |
|
Motorsports and other event
related |
|
34,503 |
|
|
31,973 |
|
|
92,091 |
|
|
92,920 |
|
Food, beverage and merchandise |
|
9,266 |
|
|
8,553 |
|
|
30,671 |
|
|
22,358 |
|
General and administrative |
|
27,446 |
|
|
27,221 |
|
|
80,982 |
|
|
81,289 |
|
Depreciation and amortization |
|
24,224 |
|
|
25,996 |
|
|
72,990 |
|
|
77,028 |
|
Losses on asset retirements |
|
5,365 |
|
|
176 |
|
|
11,626 |
|
|
1,106 |
|
|
|
132,628 |
|
|
125,249 |
|
|
392,382 |
|
|
380,595 |
|
Operating (loss)
income |
|
(7,138 |
) |
|
3,737 |
|
|
33,670 |
|
|
58,582 |
|
Interest income |
|
41 |
|
|
71 |
|
|
85 |
|
|
157 |
|
Interest expense |
|
(2,668 |
) |
|
(3,625 |
) |
|
(6,738 |
) |
|
(10,398 |
) |
Equity in net income
from equity investments |
|
3,486 |
|
|
3,346 |
|
|
11,232 |
|
|
11,485 |
|
Other |
|
(32 |
) |
|
— |
|
|
621 |
|
|
12,000 |
|
(Loss) income before
income taxes |
|
(6,311 |
) |
|
3,529 |
|
|
38,870 |
|
|
71,826 |
|
Income taxes |
|
(2,355 |
) |
|
1,356 |
|
|
14,518 |
|
|
27,924 |
|
Net (loss) income |
|
$ |
(3,956 |
) |
|
$ |
2,173 |
|
|
$ |
24,352 |
|
|
$ |
43,902 |
|
|
|
|
|
|
|
|
|
|
Dividends per
share |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
0.26 |
|
|
$ |
0.41 |
|
(Loss) earnings per
share: |
|
|
|
|
|
|
|
|
Basic and diluted |
|
$ |
(0.08 |
) |
|
$ |
0.05 |
|
|
$ |
0.52 |
|
|
$ |
0.95 |
|
|
|
|
|
|
|
|
|
|
Basic weighted average
shares outstanding |
|
46,647,480 |
|
|
45,720,814 |
|
|
46,611,656 |
|
|
46,189,413 |
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding |
|
46,647,480 |
|
|
45,734,854 |
|
|
46,626,223 |
|
|
46,203,963 |
|
|
|
|
|
|
|
|
|
|
Comprehensive (loss)
income |
|
$ |
(3,792 |
) |
|
$ |
2,339 |
|
|
$ |
24,845 |
|
|
$ |
44,400 |
|
Consolidated Balance Sheets(In
Thousands, Except Share and Per Share Amounts) |
|
|
|
November 30, 2015 |
|
August 31, 2015 |
|
August 31, 2016 |
|
|
(Unaudited) |
ASSETS |
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
160,548 |
|
|
$ |
169,249 |
|
|
$ |
265,329 |
|
Receivables, less allowance |
|
42,112 |
|
|
34,912 |
|
|
42,846 |
|
Inventories |
|
1,639 |
|
|
1,692 |
|
|
1,731 |
|
Income taxes receivable |
|
572 |
|
|
15,224 |
|
|
1,492 |
|
Deferred income taxes |
|
— |
|
|
2,825 |
|
|
— |
|
Prepaid expenses and other current
assets |
|
60,673 |
|
|
73,065 |
|
|
22,817 |
|
Total Current
Assets |
|
265,544 |
|
|
296,967 |
|
|
334,215 |
|
|
|
|
|
|
|
|
Property and Equipment,
net |
|
1,448,964 |
|
|
1,425,681 |
|
|
1,450,279 |
|
Other Assets: |
|
|
|
|
|
|
Equity investments |
|
103,249 |
|
|
107,721 |
|
|
95,864 |
|
Intangible assets, net |
|
178,626 |
|
|
178,628 |
|
|
178,630 |
|
Goodwill |
|
118,791 |
|
|
118,791 |
|
|
118,791 |
|
Other |
|
4,489 |
|
|
7,409 |
|
|
6,775 |
|
|
|
405,155 |
|
|
412,549 |
|
|
400,060 |
|
Total Assets |
|
$ |
2,119,663 |
|
|
$ |
2,135,197 |
|
|
$ |
2,184,554 |
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
Current
Liabilities: |
|
|
|
|
|
|
Current portion of long-term
debt |
|
$ |
3,074 |
|
|
$ |
3,222 |
|
|
$ |
3,115 |
|
Accounts payable |
|
56,968 |
|
|
49,868 |
|
|
26,116 |
|
Deferred income |
|
38,243 |
|
|
83,842 |
|
|
84,053 |
|
Other current liabilities |
|
20,344 |
|
|
18,894 |
|
|
20,358 |
|
Total Current
Liabilities |
|
118,629 |
|
|
155,826 |
|
|
133,642 |
|
|
|
|
|
|
|
|
Long-Term Debt |
|
262,762 |
|
|
267,726 |
|
|
262,386 |
|
Deferred Income
Taxes |
|
336,232 |
|
|
342,081 |
|
|
396,550 |
|
Long-Term Deferred
Income |
|
6,969 |
|
|
7,287 |
|
|
6,245 |
|
Other Long-Term
Liabilities |
|
1,856 |
|
|
2,258 |
|
|
2,443 |
|
Commitments and
Contingencies |
|
— |
|
|
— |
|
|
— |
|
Shareholders’
Equity: |
|
|
|
|
|
|
Class A Common Stock, $.01 par
value, 80,000,000 shares authorized |
|
263 |
|
|
264 |
|
|
255 |
|
Class B Common Stock, $.01 par
value, 40,000,000 shares authorized |
|
199 |
|
|
199 |
|
|
197 |
|
Additional paid-in capital |
|
449,136 |
|
|
448,386 |
|
|
440,479 |
|
Retained earnings |
|
946,940 |
|
|
914,658 |
|
|
945,182 |
|
Accumulated other comprehensive
loss |
|
(3,323 |
) |
|
(3,488 |
) |
|
(2,825 |
) |
Total Shareholders’
Equity |
|
1,393,215 |
|
|
1,360,019 |
|
|
1,383,288 |
|
Total Liabilities and
Shareholders’ Equity |
|
$ |
2,119,663 |
|
|
$ |
2,135,197 |
|
|
$ |
2,184,554 |
|
Consolidated Statements of Cash
Flows(In Thousands) |
|
|
|
|
|
Nine Months Ended |
|
|
August 31, 2015 |
|
August 31, 2016 |
|
|
(Unaudited) |
OPERATING
ACTIVITIES |
|
|
|
|
Net income |
|
$ |
24,352 |
|
|
$ |
43,902 |
|
Adjustments to reconcile net income
to net cash provided by operating activities: |
|
|
|
|
Gain on sale of Staten Island
property |
|
— |
|
|
(13,631 |
) |
Depreciation and amortization |
|
72,990 |
|
|
77,028 |
|
Stock-based compensation |
|
2,194 |
|
|
2,391 |
|
Amortization of financing
costs |
|
1,333 |
|
|
1,328 |
|
Interest and other consideration
received on Staten Island note receivable |
|
3,486 |
|
|
1,162 |
|
Deferred income taxes |
|
(12,548 |
) |
|
60,005 |
|
Income from equity investments |
|
(11,232 |
) |
|
(11,485 |
) |
Distribution from equity
investee |
|
12,094 |
|
|
12,347 |
|
Loss on retirements of long-lived
assets, non-cash |
|
428 |
|
|
892 |
|
Other, net |
|
(602 |
) |
|
(225 |
) |
Changes in operating assets and
liabilities: |
|
|
|
|
Receivables, net |
|
(7,314 |
) |
|
(734 |
) |
Inventories, prepaid expenses and
other assets |
|
(7,024 |
) |
|
(19,054 |
) |
Accounts payable and other
liabilities |
|
6 |
|
|
555 |
|
Deferred income |
|
48,538 |
|
|
45,086 |
|
Income taxes |
|
(9,365 |
) |
|
(945 |
) |
Net cash provided by
operating activities |
|
117,336 |
|
|
198,622 |
|
INVESTING
ACTIVITIES |
|
|
|
|
Capital expenditures |
|
(105,737 |
) |
|
(110,234 |
) |
Distribution from equity
investee |
|
12,656 |
|
|
6,653 |
|
Equity investments and advances to
affiliate |
|
— |
|
|
(130 |
) |
Proceeds from sale of Staten Island
property |
|
— |
|
|
66,728 |
|
Proceeds from sale of assets |
|
— |
|
|
472 |
|
Other, net |
|
103 |
|
|
(6 |
) |
Net cash used in
investing activities |
|
(92,978 |
) |
|
(36,517 |
) |
FINANCING
ACTIVITIES |
|
|
|
|
Payment of long-term debt |
|
(846 |
) |
|
(631 |
) |
Exercise of Class A common
stock options |
|
— |
|
|
136 |
|
Cash dividend paid |
|
(12,127 |
) |
|
(18,859 |
) |
Reacquisition of previously issued
common stock |
|
(983 |
) |
|
(37,970 |
) |
Net cash used in
financing activities |
|
(13,956 |
) |
|
(57,324 |
) |
Net increase in cash
and cash equivalents |
|
10,402 |
|
|
104,781 |
|
Cash and cash
equivalents at beginning of period |
|
158,847 |
|
|
160,548 |
|
Cash and cash
equivalents at end of period |
|
$ |
169,249 |
|
|
$ |
265,329 |
|
International Speedway Corporation
Investor Relations
(386) 681-6516
International Speedway (NASDAQ:ISCA)
Historical Stock Chart
From Jul 2024 to Aug 2024
International Speedway (NASDAQ:ISCA)
Historical Stock Chart
From Aug 2023 to Aug 2024