This summary is based on the first quarter fiscal 2007 earnings call conducted by International Speedway Corp. (ISCA: chart) on April 3, 2007.
Key Investors Issues
- Earnings per share fell to 67 cents compared to 83 cents in the prior year quarter.
- Revenue fell to $185.2 million from $193.9 million in the previous year.
- During the quarter, the firm purchased 209,736 shares for approximately $11 million.
First Quarter Fiscal 2007 Financial Highlights
The firm had another solid quarter of revenue and earnings which are primarily impacted by two factors.
- While the average annual right fees for the new combined television agreements are substantially higher than the former agreements, 2007 rights fees are approximately 12% less than the 2006 rights fees resulting in lower motorsports-related revenue.
- The firm closed on the acquisition of Raceway Associates, owners and operators of Chicagoland Speedway on February 2, 2007. Since then, the results have been included in the firm’s consolidate operations. Prior to closing the firm had account for their operations as an equity investment.
Admissions revenue was relatively flat in the first quarter at $55.3 million.
This was primarily due to slightly lower-tended support events partially offset by higher weighted average ticket prices at certain NASCAR events throughout Speedweeks.
Motorsports-related income decreased to $108.4 million in the quarter including $61.1 million in television and ancillary rights.
The decrease is primarily attributed with the previously discussed step-down and broadcast rights fees relating to the new agreement since start of this year. The decrease is partially offset by increased sponsorship, hospitality, and advertising revenue.
Food, beverage, and merchandise revenue decreased to $19.2 million.
The decrease was primarily driven by slightly lower attendance and inclement weather during Speedweeks, and to a lesser extent, lower online and merchandise sales due to a transition of the online operation to a third-party.
The decrease in NASCAR direct expenses $32.5 million which primarily attributable to the lower television broadcast right fees, a percentage of which are paid as part of the prize money.
- Motorsports-related expense in the first quarter was flat compared to prior year at $30.9 million primarily due to effective event management during the quarter.
- The decrease in food, beverage, and merchandise expense to $10.8 million for the quarter was primarily attributable to margin improvements in all areas of this business, as well as, lower variable cost due to the slightly lower revenue discussed earlier.
- General and administrative expenses increased to $27.2 million for the quarter. The increase was primarily related to legal fees for the Kentucky litigation and certain expenses related to the firm’s development efforts in Denver and costs related to the growth of the firm’s business.
Depreciation and amortization during the quarter was $17.9 million.
The increase was primarily related to the additional depreciation of approximately $2.6 million associated with one of the buildings in the Daytona office complex, which the firm stopped using in the first quarter of 2007 and no longer use. In addition, depreciation on the recently acquired assets of Raceway Associates, the track repaving at Talladega and seat and suite additions at Phoenix, as well as, certain other Speedway projects placed in service since last year’s first quarter contributed to the increase.
The firm is pursuing a commercial mixed-use project on property that it owns across from Daytona International Speedway.
The total project is anticipated to be comprised of retail, entertainment, office and residential components and lodging designed to complement the speedway to enhance and extend the guests’ experience. If results from the ongoing study and other considerations are favorable and the firm proceeds with the project, it is expected that several existing buildings including corporate headquarter offices, which are not fully depreciated will be raised during the next 6 to 24 months. This will result in a non-cash charge relating to additional depreciation of approximately $12 million in total or 14 cents per diluted share after-tax over the remaining three quarters of fiscal 2007.
Interest income increased to $1.4 million primarily due to higher average cash and short-term investment balances and higher yields as compared to the prior year.
Interest expense for the quarter was flat at approximately $4 million. Higher capitalized interest and lower fees related to the firm’s credit facility were almost entirely offset by interest expense on borrowings associated with the acquisition of Raceway Associates. The $4.3 million net loss from equity investments relates to the firm’s interest in Motorsports Authentics and the firm’s share of the loss from operations of Raceway Associates prior to February 2nd, 2007. The firm continues to anticipate that Motorsports Authentics will be profitable for the full fiscal year of 2007.
