International Speedway Corporation Reports Financial Results For The First Quarter Of Fiscal 2014

Total revenue for the first quarter ended February 28, 2014 was approximately $131.8 million, compared to revenue of approximately $128.6 million in the prior-year period.  Operating income was approximately $22.3 million during the period compared to operating income of approximately $25.1 million in the first quarter of fiscal 2013.  Year-over-year comparability was impacted by:

• On January 31, 2014, Speedway Motorsports, Inc. ("SMI") abandoned its interest and rights in SMISC, LLC, the Company's 50/50 joint venture which owns and operates Motorsports Authentics, LLC ("MA"), consequently bringing our ownership of MA to 100.0 percent. MA's operations were consolidated subsequent to the date of SMI's abandonment.  Prior to January 31, 2014, MA was accounted for as an equity investment in our financial statements.  As a result of SMI's abandonment of their interest in MA, we recorded other income of approximately $5.4 million representing the fair value of MA, over the carrying value, as of January 31, 2014.  In addition we recognized a tax benefit of approximately $1.8 million;
• During the three months ended February 28, 2013, we expensed approximately $0.9 million, or $0.01 per diluted share, of certain ongoing carrying costs related to our Staten Island property. There were no comparable costs in the same period of fiscal 2014;
• During the first quarter of fiscal 2013, we recognized a charge relating to a legal judgment of litigation involving certain ancillary facility operations of approximately $0.6 million, or $0.01 per diluted share. There was no comparable event in the same period of fiscal 2014;
• During the three months ended February 28, 2014, we recognized approximately $0.4 million, or less than $0.01 per diluted share, in marketing and consulting costs that are included in general and administrative expense related to DAYTONA Rising. During the three months ended February 28, 2013, we recognized approximately $0.3 million, or less than $0.01 per diluted share, of similar costs;
• During the three months ended February 28, 2014, we recognized approximately $3.0 million, or $0.04 per diluted share of accelerated depreciation that was recorded due to the shortening the service lives of certain assets associated with DAYTONA Rising.  There were no comparable amounts in the same period of fiscal 2013;
• During the three months ended February 28, 2014, we recognized approximately $2.2 million, or $0.03 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 February 28, 2013, we recognized approximately $1.5 million, or $0.02 per diluted share,  of losses associated with asset retirements primarily attributable to the removal of assets not fully depreciated in connection with certain capital improvements; and
• During the three months ended February 28, 2014, we capitalized approximately $0.9 million, or $0.01 per diluted share, of interest related to DAYTONA Rising. There was no interest capitalized related to DAYTONA Rising in the same period of fiscal 2013.

Net income for the first quarter ended February 28, 2014 was approximately $19.9 million, or $0.43 per diluted share, compared to net income of approximately $13.5 million, or $0.29 per diluted share, in the prior year period.  Excluding certain marketing and consulting costs incurred associated with DAYTONA Rising, accelerated depreciation, losses associated with the retirements of certain other long-lived assets, DAYTONA Rising project capitalized interest, MA fair value adjustment and income tax benefit, and net gain on sale of certain assets, non-GAAP (defined below) net income for the first quarter of 2014 was $15.5 million, or $0.33 per diluted share.  Non-GAAP net income for the fiscal first quarter of 2013 was $15.5 million, or $0.33 per diluted share. 

GAAP to Non-GAAP Reconciliation

The following financial information is presented below using other than U.S. generally accepted accounting principles ("non-GAAP") and is reconciled to comparable information presented using GAAP.  Non-GAAP net income and diluted earnings per share below are derived by adjusting amounts determined in accordance with GAAP for certain items presented in the accompanying selected operating statement data, net of taxes.

The adjustments for 2013 relate to carrying costs of our Staten Island property, legal judgment, marketing and consulting costs incurred associated with DAYTONA Rising, losses associated with the retirements of certain other long-lived assets and net gain on sale of certain assets.

The adjustments for 2014 relate to marketing and consulting costs incurred associated with DAYTONA Rising, accelerated depreciation, losses associated with the retirements of certain other long-lived assets, DAYTONA Rising project capitalized interest, MA fair value adjustment and income tax benefit, and net gain on sale of certain assets.

The Company believes such non-GAAP information is useful and meaningful and is used by investors to assess its core operations, which consist of the ongoing promotion of racing events at its major motorsports entertainment facilities. Such non-GAAP information adjusts for items that are not considered to be reflective of the Company's continuing core operations at its motorsports entertainment facilities. The Company believes that such non-GAAP information improves the comparability of its operating results and provides a better understanding of the performance of its core operations for the periods presented. The Company uses 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. The Company uses both GAAP and non-GAAP information in evaluating and operating its business and as such deemed it important to provide such information to investors.

On the corporate partnership front, the first quarter was strong not only for the Speedweeks results but also with the announcement of the Toyota founding partnership for DAYTONA Rising.  At this point for fiscal 2014 we have agreements in place for approximately 87.0 percent of our gross marketing partnership revenue target.  We have 2 of our 20 NASCAR Sprint Cup Series event entitlements and 3 of our fifteen NASCAR Nationwide Series event entitlements either open or not announced.  This is compared to last year at this time when we had approximately 88.0 percent of gross marketing partnership revenue target sold, entitlements for all 20 NASCAR Sprint Cup events announced, and 1 NASCAR Nationwide entitlement either open or not announced.  We were very well positioned with corporate sales agreements in place and the number of major event entitlements secured for the 2013 season.  While we are slightly behind these marks at this point for 2014, we compare well with the trends of previous years.  As well, we are in discussions with prospective partners on over half of the open entitlements.

External Growth and Other Initiatives

Capital Spending

The Company competes for the consumers' discretionary dollar with many entertainment options such as concerts and other major sporting events, not just other motorsport events. To better meet its customers' expectations, ISC is committed to improving the guest experience at its facilities through on-going capital improvements that position it for long-term growth.

In June 2013, ISC's board of directors endorsed a capital allocation plan for fiscal 2013 through fiscal 2017 to not exceed $600.0 million in capital expenditures over that period.  The five-year capital expenditure plan encompasses all the capital expenditures for ISC's 13 major motorsports facilities, including DAYTONA Rising, as well as any equity commitments to undertake ONE DAYTONA.  Of the endorsed five-year capital expenditure plan, DAYTONA Rising will account for between $375.0 million to $400.0 million of the $600.0 million.

With the majority of the capital expenditures for DAYTONA Rising occurring in fiscal 2014 and 2015, we estimate capital expenditures across all of ISC's existing facilities, exclusive of capitalized interest, will be approximately $200.0 million for fiscal 2014 and approximately $180.0 million for fiscal 2015.  With a target completion date of DAYTONA Rising in January 2016, capital expenditures will then decrease significantly with an expectation of capital expenditures for projects at all of ISC's existing facilities, exclusive of capitalized interest, to be between $60.0 million to $70.0 million in fiscal 2016 and fiscal 2017.   

For the three months ended February 28, 2014, the Company spent approximately $31.2 million on capital expenditures for projects at its existing facilities. In comparison, the Company spent approximately $6.1 million for the three months ended February 28, 2013, on capital expenditures for projects at its existing facilities.

The Company reviews its capital expenditure program periodically and modifies it as required to meet current business needs.

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