International Speedway Corporation Reports Financial results for the Second Quarter of Fiscal 2018

~Reaffirms Full Year 2018 Guidance~

DAYTONA BEACH, Fla., July 05, 2018 (GLOBE NEWSWIRE) -- International Speedway Corporation (NASDAQ Global Select Market:ISCA) (OTC Bulletin Board:ISCB) ("ISC") today reported financial results for its fiscal second quarter ended May 31, 2018.

"Our overall financial results for second quarter are in line with expectations and the 2018 outlook, despite admissions headwinds faced during the quarter," stated Lesa France Kennedy, ISC Chief Executive Officer. "Revenue for events held during the quarter was impacted by weather, construction at ISM Raceway, and a general trend of lower sales at live sporting events. We remain committed to our consumer focused sales and marketing initiatives, providing segmented experiences desired by fans for a good value, which have proven to yield positive results against these trends."

"The developments at ISM Raceway and Richmond Raceway are progressing nicely. At ISM Raceway, new renovations are on schedule, as the last remaining grandstand and media structures were recently removed. At the spring event in Richmond, fans experienced a preview of the future infield. These revitalized facilities will immerse guests into race day activities that can only be experienced at NASCAR events. Both projects will be completed in the fourth quarter of 2018."

"Development at ONE DAYTONA continues. Many tenants have recently completed construction and commenced operations, including first-to-market brands Hy's Toggery, Kasa Living and Clair de Lune. We eagerly await additional tenant openings in the near future. Entertainment is also a focus for ONE DAYTONA, with Victory Circle fast becoming the development's focal point, already hosting events from live music and car shows to meet and greets and community festivals. We anticipate ONE DAYTONA to be the epicenter for retail, dining and entertainment in the Daytona Beach area."

"During the quarter, we announced a 9.3 percent increase to our annual dividend for 2018, further demonstrating our commitment to deliver shareholder value."

Second Quarter Comparison

Total revenues for the three months ended May 31, 2018 were approximately $171.7 million, compared to revenues of approximately $165.3 million for the same period in fiscal 2017. Operating income was approximately $17.3 million during the period compared to approximately $18.4 million for the same period in fiscal 2017. Period-over-period comparability was impacted by:

  • In the second quarter of fiscal 2018, we hosted the Country 500 music festival at Daytona International Speedway ("Daytona"), whereby due to certain changes in contractual agreements, a higher amount of event revenues and expenses was recorded in fiscal 2018 as compared to fiscal 2017. Concessions revenue and expense were recorded similarly for both periods. Overall attendance and concession sales in fiscal 2018 were significantly impacted by tropical storm Alberto, prior to, and during, the event;
  • In the second quarter of fiscal 2018, we received lease rents, and incurred operating expenses, related to ONE DAYTONA as a result of certain tenants commencing operations in the period, for which there was no comparable activity in the same period of fiscal 2017 (see "External Growth, Financing-Related and Other Initiatives - ONE DAYTONA");
  • During the three months ended May 31, 2018, we recognized $1.8 million of revenue related to insurance proceeds. There was no comparable activity in fiscal 2017;
  • During the three months ended May 31, 2017, we received a favorable settlement relating to certain facility operations of approximately $1.0 million, or $0.01 per diluted share. There was no comparable activity in fiscal 2018;
  • During the three months ended May 31, 2018, we recognized approximately $0.1 million, or less than $0.01 per diluted share, in non-recurring costs that are included in general and administrative expense related to The ISM Raceway Project (see "External Growth, Financing-Related and Other Initiatives - The ISM Raceway Project Powered by DC Solar"). During the three months ended May 31, 2017, we recognized approximately $0.1 million, or less than $0.01 per diluted share, in similar costs related to The ISM Raceway Project;
  • During the three months ended May 31, 2018, we recognized approximately $0.3 million, or $0.01 per diluted share, of accelerated depreciation due to shortening the service lives of certain assets associated with The ISM Raceway Project and other capital improvements, including the infield project at Richmond Raceway (see "External Growth, Financing-Related and Other Initiatives - Richmond Raceway"). During the three months ended May 31, 2017, we recognized $2.0 million, or $0.03 per diluted share, of similar costs associated with The ISM Raceway Project;
  • During the three months ended May 31, 2018, we recognized approximately $0.1 million, or less than $0.01 per diluted share, of asset retirement losses primarily attributable to demolition and/or asset relocation costs in connection with facility optimization initiatives and ONE DAYTONA. During the three months ended May 31, 2017, we recognized approximately $0.3 million, or less than $0.01 per diluted share of similar losses related to The ISM Raceway Project;
  • During the three months ended May 31, 2018, we recognized total capitalized interest of approximately $0.8 million, or $0.02 per diluted share, primarily associated with The ISM Raceway Project and, to a lesser extent, ONE DAYTONA. During the three months ended May 31, 2017, we capitalized interest of approximately $0.6 million, or $0.01 per diluted share, associated with ONE DAYTONA and approximately $0.2 million, or less than $0.01 per diluted share, related to The ISM Raceway Project; and,
  • During the three months ended May 31, 2018, our effective tax rate decreased primarily as a result of tax legislation associated with the Tax Cuts and Jobs Act, and to a lesser extent, one-time cumulative reductions in certain state tax liabilities.

Net income for the three months ended May 31, 2018, was approximately $16.7 million, or $0.38 per diluted share, compared to approximately $13.2 million, or $0.29 per diluted share, in the prior year period. Excluding legal settlement, non-recurring costs associated with The ISM Raceway Project, accelerated depreciation related to The ISM Raceway Project and other capital improvements including the infield project at Richmond, losses associated with the retirements of certain other long-lived assets, and capitalized interest associated with ONE DAYTONA and The ISM Raceway Project, non-GAAP net income, as defined below, was $16.4 million, or $0.37 per diluted share, as compared to $13.6 million, or $0.30 per diluted share, for the three months ended May 31, 2018 and 2017, respectively (see "GAAP to Non-GAAP Reconciliation").

Year-to-Date Comparison

Total revenues for the six months ended May 31, 2018 were approximately $320.6 million, compared to revenues of approximately $313.2 million for the same period in fiscal 2017. Operating income was approximately $49.8 million during the period compared to approximately $52.2 million for the same period in fiscal 2017. Period-over-period comparability was impacted by:

  • In the first quarter of fiscal 2017, we hosted the Ferrari World Finals at Daytona International Speedway, for which there was no comparable event in fiscal 2018;
  • In the second quarter of fiscal 2018, we hosted the Country 500 music festival at Daytona, whereby due to certain changes in contractual agreements, a higher amount of event revenues and expenses was recorded in fiscal 2018 as compared to fiscal 2017. Concessions revenue and expense were recorded similarly for both periods. Overall attendance and concession sales in fiscal 2018 were significantly impacted by tropical storm Alberto, prior to, and during, the event;
  • During the six months ended May 31, 2018, we received lease rents, and incurred operating expenses, related to ONE DAYTONA as a result of certain tenants commencing operations in the period, for which there was no comparable activity in the same period of fiscal 2017 (see "External Growth, Financing-Related and Other Initiatives - ONE DAYTONA");
  • During the six months ended May 31, 2018, we recognized $1.8 million of revenue related to insurance proceeds. There was no comparable activity in fiscal 2017;
  • In the second quarter of fiscal 2017, we received a favorable settlement relating to certain facility operations of approximately $1.0 million, or $0.01 per diluted share. There was no comparable activity in fiscal 2018;
  • During the six months ended May 31, 2018, we recognized approximately $0.2 million, or less than $0.01 per diluted share, in non-recurring costs that are included in general and administrative expense related to The ISM Raceway Project (see "External Growth, Financing-Related and Other Initiatives - The ISM Raceway Project Powered by DC Solar"). During the six months ended May 31, 2017, we recognized approximately $0.2 million, or less than $0.01 per diluted share, in similar costs related to The ISM Raceway Project;
  • During the six months ended May 31, 2018, we recognized approximately $1.2 million, or $0.02 per diluted share, of accelerated depreciation due to shortening the service lives of certain assets associated with The ISM Raceway Project and other capital improvements, including the infield project at Richmond Raceway (see "External Growth, Financing-Related and Other Initiatives - Richmond Raceway"). During the six months ended May 31, 2017, we recognized $2.7 million, or $0.04 per diluted share, of similar costs associated with The ISM Raceway Project;
  • During the six months ended May 31, 2018, we recognized approximately $1.2 million, or $0.02 per diluted share, of asset retirement losses primarily attributable to demolition and/or asset relocation costs in connection with facility optimization initiatives, and to a lesser extent, ONE DAYTONA. During the six months ended May 31, 2017, we recognized approximately $0.3 million, or less than $0.01 per diluted share, of similar losses related to The ISM Raceway Project;
  • During the six months ended May 31, 2018, we recognized total capitalized interest of approximately $1.7 million, or $0.03 per diluted share, of which approximately $1.5 million, or $0.03 per diluted share, was associated with The ISM Raceway Project and $0.2 million, or less than $0.01 per diluted share, associated with ONE DAYTONA. During the six months ended May 31, 2017, we recognized total capitalized interest of approximately $1.4 million, or $0.02 per diluted share, of which approximately $1.1 million, or $0.02 per diluted share, associated with ONE DAYTONA and approximately $0.3 million, or less than $0.01 per diluted share, related to The ISM Raceway Project; and
  • During the six months ended May 31, 2018, our effective tax rate decreased primarily as a result of tax legislation associated with the Tax Cuts and Jobs Act, and to a lesser extent, one-time cumulative reductions in certain state tax liabilities. Additionally, in the first quarter of fiscal 2018, we recorded a non-recurring, non-cash income tax benefit related to the Tax Cuts and Jobs Act of approximately $143.9 million, or $3.25 per diluted share.

Net income for the six months ended May 31, 2018, was approximately $186.0 million, or $4.21 per diluted share, compared to approximately $34.5 million, or $0.77 per diluted share, in the prior year period. Excluding legal settlement, non-recurring costs associated with The ISM Raceway Project, accelerated depreciation related to The ISM Raceway Project and other capital improvements including the infield project at Richmond, losses associated with the retirements of certain other long-lived assets, capitalized interest associated with ONE DAYTONA and The ISM Raceway Project, and the income tax benefit related to the Tax Cuts and Jobs Act, non-GAAP net income, as defined below, was $42.8 million, or $0.97 per diluted share, as compared to $35.0 million, or $0.78 per diluted share, for the six months ended May 31, 2018 and 2017, respectively (see "GAAP to Non-GAAP Reconciliation").

GAAP to Non-GAAP Reconciliation

The following discussion and analysis of our financial condition and results of operations is presented below using financial measures other than U.S. generally accepted accounting principles ("non-GAAP"). Non-GAAP financial measures, such as Adjusted EBITDA (see below for management interpretation of Adjusted EBITDA), 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"). 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. The financial information, presented in the tables that follow, has been reconciled to comparable GAAP measures (see "Adjusted EBITDA" below).

The non-GAAP financial measures identified in the tables that follow include adjusted income before taxes, adjusted net income and adjusted diluted earnings per share. These non-GAAP financial measures are derived by adjusting amounts for certain items, presented in the accompanying selected operating statement data that have been determined in accordance with GAAP. The financial measures, income before taxes, net income and diluted earnings per share, should not be construed as an inference by us that our future results will be unaffected by those items, which have been excluded to achieve our adjusted, non-GAAP 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 consist 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 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 2017 relate to non-recurring costs incurred associated with The ISM Raceway Project, accelerated depreciation (associated with The ISM Raceway Project), legal settlement, losses associated with the retirements of certain other long-lived assets (associated with The ISM Raceway Project), and capitalized interest (associated with ONE DAYTONA and The ISM Raceway Project).

The adjustments for fiscal 2018 relate to non-recurring costs incurred associated with The ISM Raceway Project, losses associated with the retirements of certain other long-lived assets in connection with facility optimization initiatives and ONE DAYTONA, accelerated depreciation (related to The ISM Raceway Project and other capital improvements including the infield project at Richmond), capitalized interest related to The ISM Raceway Project and ONE DAYTONA, and the income tax benefit related to the Tax Cuts and Jobs Act.

Amounts are in thousands, except per share data, which is shown net of income taxes, (unaudited):

   
  Three Months Ended May 31, 2017
  Income Before
Taxes
Income Tax
Effect
Net Income Earnings Per
Share
GAAP $ 21,410   $ 8,183   $ 13,227   $ 0.29  
Adjustments:        
The ISM Raceway Project 89   34   55   0.00  
Accelerated depreciation 2,040   780   1,260   0.03  
Losses on retirements of long-lived assets 283   108   175   0.00  
Legal settlement (980 ) (375 ) (605 ) (0.01 )
Capitalized interest (812 ) (310 ) (502 ) (0.01 )
Non-GAAP $ 22,030   $ 8,420   $ 13,610   $ 0.30  
         
  Three Months Ended May 31, 2018
  Income Before
Taxes
Income Tax
Effect
Net Income Earnings Per
Share
GAAP $ 21,440   $ 4,770   $ 16,670   $ 0.38  
Adjustments:        
The ISM Raceway Project 111   29   82   0.00  
Accelerated depreciation 301   79   222   0.01  
Losses on retirements of long-lived assets 132   33   99   0.00  
Capitalized interest (844 ) (220 ) (624 ) (0.02 )
Non-GAAP $ 21,140   $ 4,691   $ 16,449   $ 0.37  
         
  Six Months Ended May 31, 2017
  Income Before
Taxes
Income Tax
Effect
Net Income Earnings Per
Share
GAAP $ 55,732   $ 21,232   $ 34,500   $ 0.77  
Adjustments:        
The ISM Raceway Project 247   94   153   0.00  
Accelerated depreciation 2,686   1,027   1,659   0.04  
Legal settlement (980 ) (375 ) (605 ) (0.01 )
Losses on retirements of long-lived assets 283   108   175   0.00  
Capitalized interest (1,441 ) (550 ) (891 ) (0.02 )
Non-GAAP $ 56,527   $ 21,536   $ 34,991   $ 0.78  
         
  Six Months Ended May 31, 2018
  Income Before
Taxes
Income Tax
Effect
Net Income Earnings Per
Share
GAAP $ 55,893   $ (130,123 ) $ 186,016   $ 4.21  
Adjustments:        
The ISM Raceway Project 216   56   160   0.00  
Accelerated depreciation 1,154   301   853   0.02  
Losses on retirements of long-lived assets 1,248   325   923   0.02  
Capitalized interest (1,672 ) (436 ) (1,236 ) (0.03 )
Benefit of income tax law change   143,900   (143,900 ) (3.25 )
Non-GAAP $ 56,839   $ 14,023   $ 42,816   $ 0.97  
                         

Adjusted EBITDA

In an effort to enhance the comparability and understandability of certain 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 business performance. We calculate Adjusted EBITDA, a non-GAAP financial measure, as GAAP operating income, plus depreciation, amortization, impairment/losses on retirements of long-lived assets, other previously stated non-GAAP adjustments, and cash distributions from equity investments. We have not reconciled the non-GAAP forward-looking measure to its most directly comparable GAAP measure, such as those of ONE DAYTONA and The ISM Raceway Project (see "External Growth, Financing-Related and Other Initiatives"). Such reconciliations would require unreasonable efforts to estimate and quantify various necessary GAAP components largely because forecasting or predicting our future operating results is subject to many factors not in our control or not readily predictable, as detailed in the Risk Factors section of the Company's previously publicly filed documents, including Forms 10-K and 10-Q, with the SEC, any or all of which can significantly impact our future results. These components, and other factors, could significantly impact the amount of the future directly comparable GAAP measures, which may differ significantly from their non-GAAP counterparts.

The following schedule reconciles the Company's financial performance prepared in accordance with GAAP to the non-GAAP financial measure of Adjusted EBITDA (in thousands):

       
  Three Months Ended   Six Months Ended
  May 31, 2017   May 31, 2018   May 31, 2017   May 31, 2018
               
Net Income (GAAP) $ 13,227     $ 16,670     $ 34,500     $ 186,016  
Adjustments:              
Income tax expense (benefit) 8,183     4,770     21,232     (130,123 )
Interest income (251 )   (732 )   (368 )   (1,253 )
Interest expense 3,067     2,900     6,319     5,785  
Other (2 )       (14 )   (15 )
Equity in net income from equity investments (5,799 )   (6,351 )   (9,426 )   (10,659 )
Operating Income (GAAP) $ 18,425     $ 17,257     $ 52,243     $ 49,751  
Adjustments:              
Depreciation and amortization 28,269     26,859     54,770     53,598  
Impairments/losses on retirements of long-lived assets 374     195     404     1,357  
Other Non-GAAP adjustments (1) (891 )   111     (733 )   216  
Cash distributions from equity investments 5,600     6,375     9,850     11,625  
Adjusted EBITDA (non-GAAP) $ 51,777     $ 50,797     $ 116,534     $ 116,547  

(1) Other Non-GAAP adjustments include:

  1. 2017 adjustments for the three and six month periods relate to a legal settlement of approximately $1.0 million, offset by costs associated with The ISM Raceway Project of approximately $0.1 million and $0.2 million, respectively; and
  2. 2018 adjustments for the three and six month periods relate to costs associated with The ISM Raceway Project of approximately $0.1 million and $0.2 million, respectively.

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 nearly half of the FORTUNE 100 companies use NASCAR as part of their marketing strategy. The number of FORTUNE 500 companies investing in NASCAR has either grown or sustained for five consecutive years, and has increased approximately 30.0 percent since 2008.

For fiscal 2018, we have corporate partnership agreements in place for approximately 91.0 percent of our gross marketing partnership revenue target, as compared to approximately 94.0 percent for the same period in fiscal 2017. The fiscal 2018 revenue target is approximately 8.0 percent greater than fiscal 2017, primarily related to the ISM Raceway and Richmond Raceway projects. For fiscal 2018, we sold all race entitlements for Monster Energy NASCAR Cup series events and have only one NASCAR Xfinity race entitlement open for an event in the fourth quarter. This is compared to last year at this time when we had entitlements for one Monster Energy NASCAR Cup and one NASCAR Xfinity series events open.

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.

We continue to operate under a five-year capital allocation plan adopted by the Board of Directors, covering fiscal years 2017 through 2021. Components of this plan include:

  • Capital expenditures for existing facilities up to $500.0 million from fiscal 2017 through fiscal 2021. This allocation will fund a reinvestment at ISM Raceway, as well as all other maintenance and guest experience capital expenditures for the remaining existing facilities. In 2017 we began the redevelopment of ISM Raceway (see "The ISM Raceway Project Powered by DC Solar") and the infield at Richmond (see "Richmond Raceway") with completion for both projects targeted in late 2018, therefore, we expect spending for capital expenditures under this plan to be somewhat front-loaded. While many components of these expected projects will exceed weighted average cost of capital, considerable maintenance capital expenditures, approximately $40.0 million to $60.0 million annually, will likely result in a blended return on this invested capital in the low-to-mid single digits;
  • In addition to the aforementioned $500.0 million in capital expenditures for existing facilities, we expect we will have an additional approximate $107.0 million of capital expenditures, exclusive of capitalized interest and net of public incentives, related to phase one of ONE DAYTONA and the Shoppes at ONE DAYTONA (see "ONE DAYTONA"). We expect the returns of this investment to exceed our weighted average cost of capital; and
  • Return of capital to shareholders through dividends and share repurchases is a significant pillar of our capital allocation. In fiscal 2018 we increased our dividend approximately 9.3 percent to $0.47 per share. We expect dividends to increase in 2019 and beyond, by approximately four to five percent annually. Concerning share repurchases, for the six months ended May 31, 2018, we repurchased 156,241 shares of ISCA on the open market at a weighted average share price of $41.08 for a total of approximately $6.4 million. At May 31, 2018, we had approximately $165.2 million remaining repurchase authority under the current $530.0 million Stock Purchase Plan.

For fiscal 2017 through 2021 we expect our return of capital program to be approximately $280.0 million, comprised of close to $100.0 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.

Our cash position and future liquidity has been further enhanced by the following:

  • In fiscal 2017, we recorded a non-recurring tax benefit of approximately $48.2 million related to the worthlessness of ISC's investment in Motorsports Authentics. As a result, our cash position improved approximately $24.6 million as of fiscal 2017. In the second quarter of fiscal 2018, we received a refund of estimated payments made during 2017 of approximately $19.8 million. The balance of approximately $3.8 million will be received in subsequent periods.
  • In December 2017, Congress passed the Tax Cut and Jobs Act ("Tax Act"). We expect the Tax Act to favorably impact our future liquidity, primarily a result of the lower single corporate tax rate from 35.0 percent to 21.0 percent, which will lower our effective tax rate and annual tax liability. Additionally, Tax Reform provides for 100.0 percent expensing of certain capital investments through 2022. We will continue to evaluate the details of Tax Act and the impact on ISC.

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.

The aforementioned represents certain components of our capital allocation plan for fiscal 2017 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 The ISM Raceway Project and ONE DAYTONA, were approximately $65.0 million for the six months ended May 31, 2018. In comparison, we spent approximately $40.6 million on capital expenditures for projects for the same period in fiscal 2017. For fiscal 2018, we expect capital expenditures associated with the aforementioned capital allocation plan to range between approximately $120.0 million and $130.0 million for existing facilities, including ISM Raceway and Richmond Raceway projects, and an additional approximate $20.0 million in capital expenditures related to construction for ONE DAYTONA, excluding the receipt of public incentives (see "ONE DAYTONA").

We review the capital expenditure program periodically and modify it as required to meet current business needs.

ONE DAYTONA

Since June 2013, we have pursued development of ONE DAYTONA, a premier mixed-use and entertainment destination across from Daytona International Speedway, which has crafted a strategy that will create synergy with Daytona International Speedway, enhance customer and partner experiences, monetize real estate on International Speedway Blvd. and leverage our real estate on a year-round basis. Complementing ONE DAYTONA is the retail property adjacent to the development, known as the Shoppes at ONE DAYTONA.

We have approved land use entitlements for ONE DAYTONA to allow for up to 1.4 million square feet of retail/dining/entertainment, a 2,500-seat movie theater, 660 hotel rooms, 1,350 residential units, 567,000 square feet of additional office space and 500,000 square feet of commercial/industrial space.

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 ("Legacy") is working closely with ISC's development staff on the project. Legacy's 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.

The design for the first phase of ONE DAYTONA is comprised of three components: retail, dining and entertainment ("RD&E"); hotels; and residential.

The RD&E component of phase one is owned 100.0 percent by us. The expected total square footage for the RD&E first phase is approximately 300,000 square feet. We expect cash spent to be approximately $95.0 million in fiscal 2016 through 2019 on the RD&E component of ONE DAYTONA's first phase. Other sources of funding towards the overall ONE DAYTONA project will include the public incentives discussed below and land contributed to the joint ventures associated with the project. In September 2016, we announced VCC had 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.

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", as well as a 105-room select-service Fairfield Inn & Suites by Marriott. The Fairfield Inn and Suites opened in December 2017, while The DAYTONA is currently under construction and expected to be complete in early fiscal 2019. As part of the partnership agreement, our portion of equity will be limited to our land contribution and we will share proportionately in the profits from the joint ventures.

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 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 proportionately in the profits from the joint venture.

In April 2017, our Board approved an additional approximate $12.0 million of capital expenditures to further develop Volusia Point, which was previously purchased in 2011. Volusia Point is our retail property adjacent to ONE DAYTONA and has been re-branded as the Shoppes at ONE DAYTONA ("the Shoppes"). Several new tenants have executed lease agreements in the Shoppes as a result of the revitalization. We expect the improvements to the Shoppes will generate an incremental EBITDA of approximately $1.0 million to the ONE DAYTONA pro-forma through increased square footage and securing tenants for currently vacant spaces (see "GAAP to Non-GAAP Reconciliation - Adjusted EBITDA" for discussion on Non-GAAP financial forward looking measures).

Several new-to-market tenants have already commenced operations at ONE DAYTONA with additional tenants commencing operations throughout fiscal 2018. Bass Pro Shops®, America's most popular outdoor store, and Cobb Theatres, the highly respected Southeastern-based exhibitor, are anchor tenants of ONE DAYTONA. Leasing remains strong and we are expecting to exceed our lease occupancy goals for 2018.

At stabilization in fiscal 2020, we expect this first phase of ONE DAYTONA and the Shoppes to deliver a combined incremental annual revenue and EBITDA of approximately $13.0 million and approximately $10.0 million, respectively, and deliver an unlevered return above our weighted average cost of capital (see "GAAP to Non-GAAP Reconciliation - Adjusted EBITDA" for discussion on Non-GAAP financial forward looking measures).

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 up to $40.0 million in incentives to finance a portion of the infrastructure required for the ONE DAYTONA project. The CDD will purchase certain infrastructure assets, and specific easement rights, from ONE DAYTONA. ONE DAYTONA expects to receive approximately $22.0 million of the total incentive amount in cash in fiscal 2018, and the remaining to be received in annual payments derived from a long-term note receivable issued by the CDD, with the first payment of the note receivable expected in fiscal 2019 and the term not to exceed 30 years.

Total capital expenditures for ONE DAYTONA and the Shoppes, excluding capitalized interest and net of anticipated public incentives, are expected to be approximately $107.0 million. From inception, through May 31, 2018, capital expenditures totaled approximately $97.4 million, exclusive of capitalized interest and labor. At this time, there is no project specific financing in place for ONE DAYTONA. Ultimately, we may secure financing for the project upon stabilization. However, accounting rules dictate that we capitalize a portion of the interest on existing outstanding debt during the construction period. From inception, through May 31, 2018, we recorded approximately $3.6 million of capitalized interest related to ONE DAYTONA, and expect approximately $3.8 million to be recorded by completion of construction.

Any future phases will be subject to prudent business considerations for which we will provide discrete cost and return disclosures.

The ISM Raceway Project Powered by DC Solar

On November 30, 2016, we announced our Board of Directors had approved a multi-year redevelopment project to elevate the fan experience at ISM Raceway, our 53-year-old motorsports venue previously known as Phoenix Raceway. The redevelopment is expected to focus on new and upgraded seating areas, vertical transportation options, new concourses, enhanced hospitality offerings and an intimate infield experience with greater accessibility to pre-race activities.

Earlier in 2017, we announced a multi-year partnership with DC Solar that included naming the project 'The ISM Raceway Project Powered by DC Solar' during the redevelopment phase. Subsequently, in September 2017, we announced a long-term partnership with ISM Connect, a pioneer in smart venue technology, which included naming rights to ISM Raceway. Beginning in fiscal 2018, the venue is now known as ISM Raceway.

The ISM Raceway Project is included in our aforementioned $500.0 million capital allocation plan covering fiscal years 2017 through 2021. The ISM Raceway Project is expected to cost approximately $178.0 million, including maintenance capital, before capitalized interest. Okland Construction ("Okland") has been selected as general contractor of the project. Effective November 30, 2016, ISM Raceway entered into a Design-Build Agreement with Okland. The Design-Build Agreement obligates ISM Raceway to pay Okland approximately $136.0 million for the completion of the work described in the Design-Build Agreement. This amount is a guaranteed maximum price to be paid for the work, which may not change absent a requested change in the scope of work by ISM Raceway.

Based on our current plans for ISM Raceway, it has identified existing assets that are expected to be impacted by the redevelopment and will require accelerated depreciation, totaling between approximately $6.0 million and $6.5 million in non-cash charges over the approximate 22-month project time span. From inception, through May 31, 2018, we recorded approximately $6.1 million of accelerated depreciation associated with the project.

Despite not anticipating the need for additional long-term debt to fund this project, accounting rules dictate that we capitalize a portion of the interest on existing outstanding debt during the construction period. We estimate that we will record approximately $6.0 million to $6.5 million of capitalized interest from fiscal 2017 through fiscal 2018.

From inception, through May 31, 2018, we have incurred total capital expenditures related to The ISM Raceway Project, exclusive of capitalized interest and labor, of approximately $90.0 million. From inception, through May 31, 2018, we recorded approximately $2.8 million of capitalized interest related to The ISM Raceway Project.

Upon completion, the redevelopment is expected to provide a full fiscal year incremental lift in ISM Raceway's EBITDA of approximately $8.5 million to $9.0 million (see "GAAP to Non-GAAP Reconciliation - Adjusted EBITDA" for discussion on Non-GAAP financial forward looking measures). We began recognizing revenue and expense associated with the project, as a result of assets placed in service and/or benefits provided to partners, beginning late fiscal 2017. We expect to recognize the full fiscal year incremental financial lift in fiscal 2019 and sustained thereafter.

Richmond Raceway

In June 2017, the Board of Directors approved a capex project for the redevelopment of the infield of Richmond Raceway ("Richmond Reimagined"). The new infield will offer a variety of enhanced amenities for fans, teams, sponsors and other stakeholders to the iconic Richmond infield. Fan access is the focus of Richmond Reimagined, which will showcase new Monster Energy NASCAR Cup Series garages with a fan-viewing walkway. The new infield continues the track's mission of being the most fan-friendly track on NASCAR's schedule.

Richmond Reimagined is included in our aforementioned $500.0 million capital allocation plan covering fiscal years 2017 through 2021. The project is expected to cost approximately $30.0 million, which includes maintenance capital, before capitalized interest. Groundbreaking occurred immediately following the Monster Energy NASCAR Cup Series event in September 2017. Richmond Reimagined is expected to be completed by September 2018. Through May 31, 2018, we recorded approximately $1.2 million of non-cash charges related to accelerated depreciation associated with 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, 2017 and 2018. Our 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 $9.4 million and $10.6 million for the six months ended May 31, 2017 and 2018, respectively, and is included in Equity in net income from equity investments in the consolidated statements of operations.

Pre-tax distributions from Kansas Entertainment for the six months ended May 31, 2018, totaling approximately $11.6 million, consists of approximately $11.1 million received as a distribution from its profits, included in net cash provided by operating activities on our consolidated statement of cash flows, with the remaining approximate $0.5 million received, recognized as a return of capital from investing activities on our consolidated statement of cash flows. Pre-tax distributions from Kansas Entertainment for the six months ended May 31, 2017, totaling $9.9 million, consisted of approximately $9.9 million received as a distribution from its profits, included in net cash provided by operating activities on our consolidated statement of cash flows.

For fiscal 2018, cash distributions from Kansas Entertainment are estimated to be approximately $25.0 million to $26.0 million.

Fiscal 2018 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 2018, our non-GAAP guidance excludes:

  • any non-recurring income statement impact attributable to the completion of The ISM Raceway Project, including accelerated depreciation and non-capitalized costs and losses associated with retirements of certain other long-lived assets, partially offset by capitalized interest expense;
  • any non-recurring and non-capitalized costs or charges and capitalized interest related to our ONE DAYTONA development;
  • 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 The ISM Raceway Project resulting from removal of assets prior to the end of their actual useful life;
  • 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;
  • gain or loss on sale of other assets; and
  • any one-time, non-recurring income tax charges or benefits.

ISC is reiterating its 2018 full fiscal year non-GAAP guidance. The earnings outlook is our best estimate of financial results for fiscal 2018.

  • Revenue: $680.0 million to $695.0 million
  • Operating margin: 15.5% to 16.5%
  • Effective tax rate: 26.0% to 27.0%
  • Diluted earnings per share: $1.90 to $2.10

Our guidance for Adjusted EBITDA is to range between $241.0 million to $252.0 million, which includes between $25.0 million and $26.0 million in cash distributions received from our investment in the Hollywood Casino and approximately $3.0 million related to ONE DAYTONA, (see "GAAP to Non-GAAP Reconciliation" for our definition of Adjusted EBITDA and discussion on Non-GAAP financial forward looking measures).

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 a long-term capital allocation plan that extends 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 will host a conference call 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 4459737.

A live Webcast will also be available at that time on our website, www.internationalspeedwaycorporation.com, under the "Investor Relations" section. A replay will be available two hours after the end of the call through midnight Thursday, July 19, 2018. To access, dial (855) 859-2056 and enter the code 4459737, or visit the "Investor Relations" section of our website.

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. We own and/or operate 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 Raceway® in Virginia; Auto Club Speedway of Southern California℠ near Los Angeles; Kansas Speedway® in Kansas City, Kansas; ISM Raceway near Phoenix, Arizona; Chicagoland Speedway® and Route 66 Raceway℠ near Chicago, Illinois; Homestead-Miami Speedway℠ in Florida; Martinsville Speedway® in Virginia; Darlington Raceway® in South Carolina; and Watkins Glen International® in New York.

We also own and operate Motor Racing Network℠, the nation's largest independent sports radio network and Americrown Service Corporation℠, a subsidiary that provides catering services, and food and beverage concessions. In addition, we own ONE DAYTONA, the retail, dining and entertainment development across from Daytona International Speedway, and have a 50.0 percent interest in the Hollywood Casino at Kansas Speedway. For more information, visit our website at www.internationalspeedwaycorporation.com.

Statements made in this release that express ISC'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 ISC's actual results could differ materially from those contained in or implied by such forward-looking statements. ISC'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 ISC's SEC filings including, but not limited to, the 10-K and subsequent 10-Qs. Copies of those filings are available from ISC and the SEC. ISC 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, 2017   May 31, 2018   May 31, 2017   May 31, 2018
    (Unaudited)
REVENUES:                
Admissions, net   $ 28,662     $ 25,677     $ 59,997     $ 56,239  
Motorsports and other event related   122,322     133,328     225,834     239,114  
Food, beverage and merchandise   9,517     6,906     18,659     14,856  
Other   4,774     5,768     8,739     10,345  
    165,275     171,679     313,229     320,554  
EXPENSES:                
Direct:                
NASCAR event management fees   48,270     50,180     77,246     80,045  
Motorsports and other event related   34,728     44,607     60,783     70,642  
Food, beverage and merchandise   7,244     5,198     13,269     10,827  
Other operating expenses   656     1,038     858     2,247  
General and administrative   27,309     26,345     53,656     52,087  
Depreciation and amortization   28,269     26,859     54,770     53,598  
Losses on asset retirements   374     195     404     1,357  
    146,850     154,422     260,986     270,803  
Operating income   18,425     17,257     52,243     49,751  
Interest income   251     732     368     1,253  
Interest expense   (3,067 )   (2,900 )   (6,319 )   (5,785 )
Equity in net income from equity investments   5,799     6,351     9,426     10,659  
Other   2         14     15  
Income before income taxes   21,410     21,440     55,732     55,893  
Income tax expense (benefit)   8,183     4,770     21,232     (130,123 )
Net income   $ 13,227     $ 16,670     $ 34,500     $ 186,016  
                 
Dividends per share   $ 0.43     $ 0.47     $ 0.43     $ 0.47  
Earnings per share:                
Basic and diluted   $ 0.29     $ 0.38     $ 0.77     $ 4.21  
                 
Basic weighted average shares outstanding   44,857,837     44,158,611     44,960,205     44,177,342  
                 
Diluted weighted average shares outstanding   44,871,255     44,169,681     44,974,365     44,189,676  
                 
Comprehensive income   $ 13,394     $ 16,870     $ 34,834     $ 186,405  
Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Amounts)
 
    November 30, 2017   May 31, 2017   May 31, 2018
        (Unaudited)
ASSETS            
Current Assets:            
Cash and cash equivalents   $ 256,702     $ 312,075     $ 327,133  
Receivables, less allowance   37,269     55,870     52,600  
Income taxes receivable   21,867         2,854  
Prepaid expenses and other current assets   9,749     19,251     23,427  
Total Current Assets   325,587     387,196     406,014  
             
Property and Equipment, net   1,479,743     1,448,829     1,510,321  
Other Assets:            
Equity investments   86,200     91,968     85,234  
Intangible assets, net   178,637     178,634     178,564  
Goodwill   118,400     118,791     118,331  
Other   19,625     15,970     22,517  
    402,862     405,363     404,646  
Total Assets   $ 2,208,192     $ 2,241,388     $ 2,320,981  
LIABILITIES AND SHAREHOLDERS' EQUITY            
Current Liabilities:            
Current portion of long-term debt   $ 3,854     $ 3,489     $ 3,884  
Accounts payable   23,936     32,271     42,282  
Deferred income   38,521     91,453     92,360  
Income taxes payable       3,541      
Other current liabilities   19,249     36,113     36,367  
Total Current Liabilities   85,560     166,867     174,893  
             
Long-Term Debt   255,612     259,082     255,254  
Deferred Income Taxes   396,046     406,572     259,328  
Long-Term Deferred Income   8,251     5,413     8,108  
Other Long-Term Liabilities   2,801     2,377     2,681  
Commitments and Contingencies            
Shareholders' Equity:            
Class A Common Stock, $.01 par value, 80,000,000 shares authorized   241     246     241  
Class B Common Stock, $.01 par value, 40,000,000 shares authorized   197     197     197  
Additional paid-in capital   430,114     434,158     430,134  
Retained earnings   1,031,361     968,801     1,191,747  
Accumulated other comprehensive loss   (1,991 )   (2,325 )   (1,602 )
Total Shareholders' Equity   1,459,922     1,401,077     1,620,717  
Total Liabilities and Shareholders' Equity   $ 2,208,192     $ 2,241,388     $ 2,320,981  
Consolidated Statements of Cash Flows
(In Thousands)
 
    Six Months Ended
    May 31, 2017   May 31, 2018
    (Unaudited)
OPERATING ACTIVITIES        
Net income   $ 34,500     $ 186,016  
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization   54,770     53,598  
Stock-based compensation   1,707     1,585  
Amortization of financing costs   841     806  
Deferred income taxes   (3,220 )   (136,870 )
Income from equity investments   (9,426 )   (10,659 )
Distribution from equity investee   9,850     11,138  
Loss on retirements of long-lived assets, non-cash   404     2,601  
Other, net   99     (233 )
Changes in operating assets and liabilities:        
Receivables, net   (20,425 )   (15,331 )
Prepaid expenses and other assets   (7,414 )   (16,521 )
Accounts payable and other liabilities   (10,905 )   (7,364 )
Deferred income   51,462     53,696  
Income taxes   4,119     19,013  
Net cash provided by operating activities   106,362     141,475  
INVESTING ACTIVITIES        
Capital expenditures   (40,568 )   (65,019 )
Distribution from equity investee       487  
Proceeds from sale of assets   14     418  
Other, net   (8 )    
Net cash used in investing activities   (40,562 )   (64,114 )
FINANCING ACTIVITIES        
Payment of long-term debt   (444 )   (473 )
Deferred financing fees   (43 )    
Exercise of Class A common stock options   358     718  
Reacquisition of previously issued common stock   (17,323 )   (7,175 )
Net cash (used in) provided by financing activities   (17,452 )   (6,930 )
Net increase in cash and cash equivalents   48,348     70,431  
Cash and cash equivalents at beginning of period   263,727     256,702  
Cash and cash equivalents at end of period   $ 312,075     $ 327,133  
                 

CONTACT:
Investor Relations
(386) 681-6516

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