International Speedway's CEO Discusses Q2 2013 Results - Earnings Call Transcript

| About: International Speedway (ISCA)

International Speedway (NASDAQ:ISCA)

Q2 2013 Earnings Conference Call

July 03, 2013 9:00 am ET

Executives

Charles N. Talbert - Senior Director of Investor and Corporate Communications

Lesa France Kennedy - Vice Chairwoman and Chief Executive Officer

John R. Saunders - President

Daniel W. Houser - Chief Financial Officer, Chief Accounting Officer, Senior Vice President and Treasurer

Analysts

Jaime M. Katz - Morningstar Inc., Research Division

Alvin C. Concepcion - Citigroup Inc, Research Division

Stephen Altebrando - Sidoti & Company, LLC

Timothy A. Conder - Wells Fargo Securities, LLC, Research Division

Barry L. Lucas - Gabelli & Company, Inc.

Operator

Good morning, and welcome to the International Speedway Corporation 2013 Second Quarter Conference Call. [Operator Instructions] As a reminder, this conference is being recorded on Wednesday, July 3, 2013. I would now like to turn the conference over to Charles Talbert. Mr. Talbert, please go ahead.

Charles N. Talbert

Thank you, operator. Good morning, everyone, and welcome to the International Speedway Conference Call. We are here to discuss the company's results for the second quarter ended May 31, 2013. With us on this morning's call are Lesa France Kennedy, Chief Executive Officer; John Saunders, President; and Dan Houser, Senior Vice President and Chief Financial Officer.

After our formal remarks, a question-and-answer period will follow. The operator will instruct you on procedures at that time. Before we start, I would like to address forward-looking statements that may be addressed on the call.

Forward-looking statements involve risks, uncertainties and assumptions. Actual future performance, outcomes and results may differ materially from those expressed in these forward-looking statements. Please refer to the documents filed by International Speedway Corporation with the SEC; specifically, the most recent reports on Form 10-K and 10-Q, which identify important risk factors which could cause actual results to differ from those contained in these forward-looking statements.

So with these formalities out of the way, I'll turn the call over to Lesa Kennedy. Lesa?

Lesa France Kennedy

Good morning, everybody, and thank you for participating on today's call. One of the most exciting and important steps I will undertake as CEO will be the redevelopment of our flagship facility, the Daytona International Speedway. This redevelopment, which we've named the Daytona Rising project, is a reimagining of an American icon to shape the vision of Daytona for the next 50 years. It will blend modern amenities with the heritage that race fans expect from our legendary Speedway.

The merits of this project are numerous. This is a strategic use of our capital that will ensure the long-term viability of Daytona, the most important venue to ISC and to the industry. The timing is right. The U.S. economy is expected to continue to show sustainable growth. And starting now will enable us to complete construction and be ready for the 2016 motorsport season. With our strong balance sheet, we have the strength to support this project, as evidenced by S&P recently stating that ISC's BBB investment grade credit rating and stable outlook will not be affected by the redevelopment. The vision for the Daytona Rising project places an emphasis on enhancing the complete fan experience, which is at the heart of NASCAR's Industry Action Plan.

We're confident that elevating the experience at the most important motorsports facility in North America will grow the DAYTONA 500 brand, our 12 other major motorsports facilities' brands and NASCAR's brand. And ultimately, it will influence attendance trends, corporate involvement in the sport and the long-term strength of broadcast media rights revenues.

John and Dan will have some further comments on the Daytona Rising project during their prepared remarks. So with that, I would like to thank all of you for joining us, and I'll now turn it over to John Saunders.

John R. Saunders

Thank you, Lesa, and good morning, everyone. During the quarter, we hosted 7 NASCAR Sprint Cup weekends. We were encouraged with the results at Phoenix, Auto Club Speedway and Kansas, which had flat to increased Sprint Cup event attendance during the quarter. Once again, however, weather played a factor at Talladega, driving decreased attendance during the quarter. Another factor contributing to decreased admissions revenue for the quarter was Richmond, which saw its average ticket price decrease in the mid-single digits.

For the quarter, our average Sprint Cup ticket price decreased 1.4%. Capacity utilization, or more accurately, excess capacity at certain ISC facilities, continues to contribute to lower average ticket prices. We are in the process of evaluating certain tracks to reduce capacity. Over the past few years, reductions in capacity have come primarily through providing our customers with wider seating and social zone expansions.

Further reductions under consideration include removing sections of seats that do not provide sufficient engagement for our customers. We want our customers to have good sight lines to the track and to the pits, where a lot of the strategy unfolds. We also want our customers to have equal access to our amenities, whether it's our pre-race experiences, points-of-sale or person-to-person engagement zones.

An engaged customer, one who understands the sport and has a good at-track experience, is more likely to return, which increases customer retention rates and lowers acquisition costs. Enhancing the at-track fan experience is essential to our growth strategy. Specific to admissions, the benefits of increasing capacity utilization includes stronger pricing power for our events as we rightsize the supply and demand dynamic. We have been subject to late ticket buying trends for a number of years, in part due to excess supply. Creating a sense of urgency can lead to selling our tickets sooner, thereby reducing the impact of actual or forecasted inclement weather.

As an example, Talladega was down 23% in advance sales the week leading into their event when rain was in the forecast. We also anticipate this initiative, in time, will drive to our weekend lead-in events, the Nationwide and Camping World Truck Series. The sooner we are able to achieve a sellout to the Sprint Cup event, the better positioned we are to promote our other series. All of these factors went into our decision to reduce the capacity of Daytona by eventually removing the Superstretch seating. At the conclusion of the redevelopment, Daytona will be comprised of approximately 101,000 permanent seats, with the potential to increase seating to 125,000. By moving all seating to the frontstretch, all attendees at Daytona will have the opportunity to enjoy full engagement of race day, including pre-race ceremonies, pit road action, new conveyances, cutting-edge food and beverage experiences, interactive hospitality zones, along with many other modern amenities.

We will still maintain entry-level pricing for our events, including the DAYTONA 500 with tickets below $100, as well as multiple other price points for all income levels. Improving attendance trends at our facilities will also positively influence corporate sales, which continues to provide us with strong revenue visibility. To date, we have agreements in place for over 94% of our gross marketing partnership revenue target for the year, and we have sold all of our NASCAR Sprint Cup and Nationwide event entitlements for 2013. We anticipate achieving our marketing partnership revenue targets for the year despite softness in our motor racing network media advertising and Sprint Vision sales.

We were pleased with the recent report that the number of Fortune 500 companies invested in NASCAR remains higher than any other sport. Nearly 1 in 4 Fortune 500 companies used NASCAR as part of their marketing mix. ISC's family of Fortune 500 companies is significant. Approximately 1/3 of our top 50 contracted partners are Fortune 500 companies. We also have a number of other blue-chip brands involved significantly in this sport, including MillerCoors and Toyota.

This is a revenue segment with strong growth opportunity due to the Daytona Rising project. The redevelopment will provide an expansive platform for our marketing partners. Hospitality will also be elevated with a completely revamped model. As part of the Daytona Rising project, we intend to pursue public incentives that are currently available to other major sports venues.

While we were disappointed in our unsuccessful bid for a public-private partnership with the state of Florida during the last legislative session and its effect on our scope, we intend to continue to vigorously pursue these various incentives. We have a great story of economic growth. Daytona International Speedway and ISC's operations in Daytona generate $1.6 billion in annual economic benefit to the state, and the Daytona Rising project will only increase the benefit we generate for Florida. We remain hopeful that the state will support private industries that are creating much needed jobs.

Separately, the performance of our Hollywood Casino at Kansas Speedway continues to remain strong. We expect the casino will provide cash distributions to ISC of approximately $20 million for our fiscal 2013 year. We're confident the operations of our Hollywood Casino at Kansas Speedway joint venture will significantly contribute to earnings and shareholder value for the years to come.

Now with that, I'll turn the call over to Dan Houser.

Daniel W. Houser

Thanks, John, and good morning, everyone. Overall, we are pleased with our second quarter and 6 months results. In most areas of our business, we're seeing encouraging signs of stabilization. Items affecting quarterly comparisons for our second quarter of 2013 include carrying costs related to Staten Island, a judgment following litigation involving certain ancillary facility operations, asset retirements primarily attributable to removal of assets not fully depreciated in connection with a variety of capital improvements and noncapital costs incurred with our Daytona Rising project. All of these are outlined in the earnings news release and are included in our GAAP to non-GAAP reconciliation where appropriate.

Taking a look at the income statement, admissions revenue for the second quarter decreased to $35.8 million, largely attributable to decreased attendance for a number of events held during the quarter, which includes the impact of an inclement weather at Talladega, as well as a lower weighted average ticket price for certain of the events. However, as John mentioned, we experience increased Sprint Cup attendance at Phoenix and Auto Club, and Kansas was stable year-over-year. Also, Martinsville Sprint Cup events saw its average ticket price increase in the low single digits. The increase in motorsports-related revenues to $126 million was primarily attributable to the contracted increases in television broadcast rights. Partially offsetting the increase were lower motor racing network advertising and Sprint Vision revenues. For the quarter, ISC's domestic television broadcast and ancillary revenue was $92.3 million, which includes $174,000 related to ancillary rights.

Food, beverage and merchandise revenue of $12.7 million was comparable to the same period in the prior year. Prize and point fund monies and NASCAR sanction fees increased to $50.1 million. The increase is due to higher television broadcast rights fees for the NASCAR Sprint Cup, Nation World (sic) [Nationwide] and Camping World Truck Series events, as standard NASCAR sanctioning agreements require a specific percentage of television broadcast rights fees be paid to competitors. The expected rise in sanction fees paid to NASCAR also contributed to the increase.

Motorsports-related expense increased to $34.9 million. The slight increase is primarily attributable to expenses related to track rentals and maintenance, and to a lesser extent, merit pay increases. Slightly offsetting this increase were decreases in other services and advertising in the period as compared to the prior year. The decrease in food, beverage and merchandise expense to $9.5 million was largely attributable to lower catering and merchandise sales, as well as improved margin on concession sales for events held during the quarter. Slightly offsetting the decrease was an increase in non-event catering. The margin improvement for the period is a result of streamlined menus aimed at reducing overall food costs by leveraging purchasing power.

General and administrative expense decreased to $26.4 million for the quarter. The decrease is primarily attributable to a settlement of litigation involving certain ancillary facility operations in fiscal 2012. Also contributing to the decrease were reductions in property tax. Slightly offsetting the decrease were increases related to certain administrative costs, including merit pay, as well as the Daytona Rising project. The minimal increase in depreciation and amortization expense to $19.7 million for the quarter was primarily attributable to ongoing capital spending for maintenance CapEx and other facility enhancements.

Loss on retirement of long-lived assets of approximately $748,000 is primarily attributable to the removal of assets not fully depreciated in connection with the grandstand seating at Talladega, as well as guest enhancements at our other facilities.

Interest income was comparable to the same period of the prior year. Interest expense increased to $3.9 million. The increase is due to lower capitalized interest, as well as interest on the $100 million principal 3.95% Senior Notes we issued in September. Significantly offsetting the increase was the redemption of the remaining $87 million principal 5.4% Senior Notes in March 2012, as well as having no amounts outstanding on our credit facility in the current year.

Equity and net income from equity investments of approximately $3.2 million represents our 50% equity interest in the Hollywood Casino at Kansas Speedway. As John mentioned, our current expectation for fiscal 2013 cash distributions from the casino to ISC will be approximately $20 million. ISC's equity income for the year will be approximately $8 million. In June, the casino received a property tax credit as a result of the casino successfully negotiating a resolution to its property tax appeal. Our share of the credit attributable to prior year property taxes will contribute approximately $1 million to our fiscal 2013 estimates.

Net income for the 3 months ended May 31, 2013, was approximately $22.4 million or $0.48 per diluted share on approximately 46.5 million shares. However, when you exclude carrying costs related to the Staten Island, a judgment following litigation involving certain ancillary facility operations, loss on retirements primarily attributable to removal of assets not fully depreciated in connection with capital improvements and cost associated with the Daytona Rising project, we posted earnings of $0.51 per diluted share for the 2013 fiscal second quarter. As described in the release, this is compared to non-GAAP net income for the 2012 second quarter of $0.52 per diluted share.

As for the balance sheet and future liquidity, at May 31, our combined cash and cash equivalents totaled $162.6 million. Current deferred income was approximately $85.2 million, and shareholders' equity was $1.3 billion. At the end of the quarter, total debt was approximately $276.6 million, which includes approximately $165 million in senior notes, $60.7 million in TIF bonds associated with Kansas Speedway, $50.1 million for our term loan on our headquarters office building and $818,000 in revenue bonds.

For our share repurchase program, we will continue to maintain opportunistic parameters based on the levels of our stock price. As such, during the second quarter, we did not purchase shares of our Class A common stock. We have approximately $62 million in remaining capacity on our $330 million authorization. On a quarterly basis, we review and adjust if necessary the parameters of our stock purchase plan.

As it relates to capital spending, for our 2013 fiscal second quarter, we spent $21.6 million on capital expenditures for projects at our existing facilities. Subsequent to our fiscal second quarter, our board endorsed a capital allocation plan for 2013 to 2017, not to exceed $600 million over that period. The 5-year plan encompasses CapEx for all of our 13 facilities, including the Daytona Rising project, and any equity commitments to undertake a proposed mixed use development across from Daytona International Speedway, which is still in the planning stage and is subject to a number of approvals, including potential public incentives.

This is consistent with our previous capital expenditure guidance that our average CapEx would range between $100 million and $120 million for several years. For fiscal 2013, we reiterate that our total capital expenditures at our existing facilities will be approximately $90 million, which includes spending for the Daytona Rising project.

The bulk of the Daytona Rising project construction will occur in fiscal 2014 and fiscal 2015. We are working through the construction schedule, but we estimate at this time, ISC's fiscal 2014 total CapEx will be approximately $215 million and ISC's total fiscal 2015 CapEx will be approximately $175 million. With a target completion date for Daytona in 2016 -- January 2016, spending will then decrease significantly with an expectation of capital expenditures for projects at all of ISC's existing facilities to be approximately $65 million in fiscal 2016 and fiscal 2017.

In terms of our 2013 financial outlook, we are reiterating our full year guidance of total revenues between $610 million and $625 million, non-GAAP earnings to range between $1.35 and $1.55 per diluted share, EBITDA margin to range between 31.5% and 32.5% and operating margin to range between 18.5% and 20%.

Our fiscal 2013 non-GAAP earnings per share guidance excludes any additional depreciation and future impairments and/or loss on retirement of long-lived assets, which could be recorded as part of capital improvements due to removal of assets prior to the end of their actual useful life, legal judgments and legal settlements, any income statement impact attributable to the Daytona Rising project and certain carrying costs, as well as any gain or loss on the sale of our Staten Island property and unanticipated further impairment of that property.

Finally, I'd like to spend a few minutes on the Daytona Rising project and our rationale for moving forward with this important investment. The Daytona Rising project will be one of the largest projects we have undertaken in terms of dollars and scope. However, it's importance to us and the industry is fundamental. To put in perspective Daytona's importance, the DAYTONA 500 is among the most valuable sports properties in the world. The DAYTONA 500 garners the highest TV ratings in NASCAR and, consequently, justifies the highest broadcast fees of any NASCAR motorsports event. The DAYTONA 500 commands the highest average ticket price and generates the most corporate sponsorship dollars of any event we host. In fact, if you're a corporate partner involved in NASCAR, the DAYTONA 500 is a must.

It is vital that we continue to elevate this brand to ensure that it remains the unrivaled pinnacle of motorsports facilities and its events the most prestigious, which will generate growing and enduring profitability and cash flow to the company. The rationale for this investment is plain and simple: We believe we can build a deeper emotional bond between our fans and Daytona and provide a level of value to sponsors never before seen in the sport. This will not only ensure our product remains relevant, but it will take our company and the sport to new heights.

With so many other forms of entertainment fighting for the consumer's wallet, we need to continue to grow Daytona's brand and NASCAR's brand, not to mention the competition that we face from the at-home experience, which impacts all professional sports. Many of the elements that we are incorporating into Daytona are standard in today's modern sports facilities. We will provide vertical transportation. We're going from no escalators to 40, 3 elevators to 13 elevators for fans and suite holders, increased points-of-sale for food, beverage and merchandise. Today, we have 160 permanent points-of-sale. Upon completion, we will have 476 permanent points-of-sale.

Seating. Today, the seats are 18 inches wide. Upon completion, all seats will be between 20 inches and 21 inches wide with arm rests. And restrooms. Today, we have 812 restroom fixtures. Upon completion, we will have almost 1,900. There are case studies of companies -- industries that fail to change with the times, who did not invest in their business or alienated their fans in a way that irreparably damaged their brand.

We are not only focused on our brand, but we are elevating the sport's prominence by providing our fans a better experience with increased points-of-sale for food, beverage and merchandise, as well as an expansive platform for our marketing partners, including an elevated hospitality experience. We estimate the Daytona Rising project, upon completion, will provide an immediate incremental lift to Daytona's revenues of approximately $20 million and EBITDA lift of approximately $15 million with a mid-single-digit growth rate, and that is conservatively. And we anticipate the project will be accretive to ISC's earnings within 3 years of completion.

Also, we anticipate capital expenditure avoidance due to this project of roughly $5 million annually. The revenue increases at Daytona I referenced will come from a combination of admissions, food, beverage and merchandise, sponsorship and hospitality sales. This doesn't, however, include the positive long-term benefits for our sport, the potential it will have to drive future broadcast revenues or how it will generate new interest across all our motorsports facilities. Stock car racing, as we know it today, began in Daytona over 50 years ago. It's only fitting that Daytona continues to carry the mantle for the next 50 years.

Accounting conventions during the construction period and also when Daytona comes online will influence our reported financials. Specific to the Daytona Rising project, we believe that there are assets with carrying values of approximately $50 million that may be impacted by the redevelopment and that those assets may require accelerated depreciation, impairments or losses on disposal over the next 26 months.

As the construction schedule becomes finalized, we will be better able to provide details on timing. While we leverage our revolver on a short-term basis, we will not take on additional long-term debt to fund the project. However, accounting rules will require that we capitalize a portion of the interest on our private placements during the construction period. We estimate approximately $22 million of Cap I [ph] from 2014 through 2016, with roughly half being realized in 2015.

And having an incremental $230 million in long-lived assets from this development, ISC's depreciation expense will increase between $17 million to $20 million beginning in 2016 to approximately $90 million to $105 million annually and then fall to approximately $95 million annually beginning in 2019 as we lower our capital spending.

In closing, focusing on the event experience will more deeply develop a fan's affinity for the sport. And with the appearance of full vibrant grandstands, we'll establish the sports credibility and create buzz with the millions of TV viewers, encouraging them to leave the living room and seek the at-track experience.

We look forward to speaking with you on our next earnings conference call in October, and I'll now turn the call back over to the operator for Q&A.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Jaime Katz with Morningstar.

Jaime M. Katz - Morningstar Inc., Research Division

Are you guys factoring in that legislation will effectively pass eventually on this project?

Daniel W. Houser

No, we haven't. We have not included that in any of the -- when we talk about the returns or anything like that. That would be an upside.

Jaime M. Katz - Morningstar Inc., Research Division

Do you have an idea of how probable it might be? I mean, I know that's hard to gauge but...

John R. Saunders

Yes, you're right. It is hard to gauge right at the moment, and we're still actively talking to the membership about that. But as you know, not a whole lot is getting done right now. And -- so I wouldn't put a probability factor on it, but we're actively, actively after it.

Daniel W. Houser

I would say -- I would add to my comment earlier that we have -- we've enjoyed this tax depreciation category, accelerated depreciation category, for many decades. It is in effect through right now. We have not included the extension of that when we look at returns and cash flow, but we certainly are hopeful and working hard to make sure that, that favorable provision endures.

Jaime M. Katz - Morningstar Inc., Research Division

And I think in the past, you guys were a little bit more conservative on whether or not this project would go forward without the legislation passing. And obviously, you are pursuing it anyway. So can you talk a little bit about maybe how the returns on the project differ with or without the legislation passing and what sort of hurdles you might have on it or what -- I mean, obviously, you're saying it's going to be accretive, but that doesn't really offer kind of what your internal thoughts are on it.

John R. Saunders

Well, Jaime, just for my clarification, are we talking about the depreciation discussions we have going on with the U.S. Congress or are we talking about public incentives here in the ...?

Jaime M. Katz - Morningstar Inc., Research Division

Public, public incentives. Because I would guess there's some other -- it would benefit you more with those public incentives to get people back to work, but maybe I'm incorrect about that, and you can correct me if I'm wrong.

Daniel W. Houser

Well, I would say that we certainly were very disappointed that the state didn't see fit to recognize the investments that we're making and the fact that we are really the Florida sports franchise. We're headquartered here. NASCAR is headquartered here. We hold the Super Bowl -- NASCAR racing here in Daytona Beach every year. And so there is a bit of sting on this end, undoubtedly. Again, we certainly were sober about our prospects. While we were -- we're optimistic, we knew there was no guarantee that we were going to come out of the situation with any benefit there. We certainly had to reevaluate some of the scope of the project without -- and I think primarily related to the midway area and some other things.

Jaime M. Katz - Morningstar Inc., Research Division

Is there a hurdle rate you're willing to offer on what you guys were looking -- or are expecting to achieve? Like is there some sort of like 10% ROIC? Or do you not offer that sort of granular information?

Daniel W. Houser

Well, I mean -- what we have been saying for a couple of years now, Jaime, is that we expect the [Cap I] (ph) to -- the CapEx to increase. That it would be a -- that some of this would be a long-term view and not necessarily an immediate, specific...

Jaime M. Katz - Morningstar Inc., Research Division

It's hard to quantify, it sounds like ...

Daniel W. Houser

You turn on those assets, but this is a -- there's a few things here that makes it complicated. There's a certain amount of what we're doing with this project that it was a -- was really -- would be a maintenance CapEx kind of thing. I mean, we've got seats over here, galvanized seats that are 18 inches wide, and the American food science has very successfully enlarged the size of the American consumer over 40, 50 years, and so you've got just things like -- we've got wood bench seatings at the premier facility of NASCAR that have been there since the very beginning. So there's things that just needed to be done. If you parsed out the things then, when we looked at kind of, okay, what was this minimum investment that really wouldn't drive any incremental revenue or return, how much was that, and then you start to look at the things that do drive return, yes, those meet a hurdle rate. But when you kind of look at the whole thing together, because it's a mix of really what we view it as being maintenance and just bringing the facility into an acceptable experience to some of the amazing things that we're going to be able to do here to benefit not only the consumer race fan, but our corporate fan -- our corporate customers, and I go back to the fact that if you are a company that's involved in the sport of NASCAR, you need and have to be at the DAYTONA 500. We need to have an experience that justifies that and grows that, and we think we've got some phenomenal opportunities. We're not ready to talk about them all yet because our marketing teams, our CMO Daryl Wolfe and his group, are working diligently on some exciting things, and we're looking forward to being able to talk about those as they unfold.

Jaime M. Katz - Morningstar Inc., Research Division

Okay. And then a really easy question. I think in the press release, you had said CapEx in 2016 and '17 was $60 million, and I think in the kind of prepared remarks, you said $65 million? Is that -- which one is right?

Daniel W. Houser

I mean, again, those are, I would say, $65 million -- $60 million to $65 million roughly. Again, we're -- keep in mind, we're -- and somewhat, we haven't even broken ground over here yet. We are working with the general contractor and trying to map things out. But we're doing our best to give some clear guidance on how that's going to flow, what it is going to do with -- basically to show you how CapEx will spike but then go down, how it's going to impact our capitalized interest, interest costs, et cetera.

Operator

Your next question comes from the line of Greg Badishkanian from Citi.

Alvin C. Concepcion - Citigroup Inc, Research Division

This is actually Alvin Concepcion in for Greg. Just another question on the Daytona project. You called out -- you expect low single-digit growth in admissions revenue, but there's going to be fewer permanent seats. So how much of an increase in weighted average ticket price would you expect overall at the track?

Daniel W. Houser

Well, Alvin, I think that first of all, we think we can drive an increase in admissions revenue from several factors. We're going to continue to have all levels of pricing. We'll have the tickets for the DAYTONA 500 that are under $100. We feel that, that's very, very important for the entry-level fan. But we're also able to do expanded segmentations in various experience and also ticket options for corporate customers and also drive admissions to the support events. Now some of these areas, we've got to do deference to Joie Chitwood and his team at Daytona International Speedway because I can't really get out in front of their marketing plans and their communications with the race fans themselves about what ticket prices are going to be, et cetera, et cetera. But we want to make sure that our fans out there understand that this is not being driven by raising everybody's ticket price. It's a very strategic and structured plan. And as time goes along and we're able to talk with our fan about that, we'll be able to talk with our audience more extensively on that.

John R. Saunders

And Alvin, this is John. What I would also add to what Dan was saying is that in the scripted remarks, when we talk about the removal of the Superstretch and all of the seats, the new seats being constructed on the frontstretch where everybody can be engaged and immersed in the total event, the significantly increased points-of-sale, restrooms and the ability for the fan, not just for the DAYTONA 500 but for the Coke Zero 400, the Rolex, the other support races like Nationwide and the Truck Series and our motorcycle event, all being concentrated in a well-designed frontstretch and having access not just to those points-of-sale, but you take for example the Sprint fan zone. That's a $90 ticket today. And folks on the Superstretch, while they can access that, it's over a mile away to get to it. So it's this kind of thinking that goes into and yet, as Dan pointed out, we're not quite there yet in terms of articulating what those weighted average ticket prices might be, but we believe the upside is very promising.

Alvin C. Concepcion - Citigroup Inc, Research Division

And just wanted to see if we could get an update on the remaining NASCAR TV contracts that are still up for renewal? What do you believe NASCAR should be able to get for these contracts? And I think there's been some indications by ESPN management that NASCAR is a must-have content for them. So I just wanted to get your updated view there.

John R. Saunders

Yes. And just as a reminder, we get our updates from NASCAR in a fairly periodic basis and then certainly, what we -- as you and others do read in the trade publications, we're fairly optimistic about the outlook. There was recent publicity about NBC potentially having an interest. We know that NASCAR either has or very shortly will be going into their exclusive periods of negotiation with TNT, ABC and ESPN. We know from earlier in the year that FOX was very pleased with the 2014 run that they had being essentially flat year-over-year but stronger in 18 to 49 men. And so the outlook is promising. We're not seeing anything, particularly with the media reports on the FOX renewal, which we haven't been formally advised as what those are, but at least the media reports, if you believe them, we're in a pretty good position. I wouldn't dare quantify what the total outlook would be. But perhaps by the end of this year, we'll know definitively.

Operator

Your next question comes from the line of Steve Altebrando from Sidoti & Company.

Stephen Altebrando - Sidoti & Company, LLC

I know you touched on it in the release a bit, but can you talk about any potential disruption or the magnitude of it for the DAYTONA 500 for '14 and '15?

John R. Saunders

Well, again, as Dan pointed out, we don't want to get too far ahead of the project team here. But very critical to the overall schedule, construction schedule, is making sure that nothing interferes with the DAYTONA 500. I can tell you that in working with the contractors and through our construction group, we're very confident that when you look at the entire portfolio of events across the ISC facilities, we're not going to see any loss of events through this construction period. And that's about all I could say at this point. But our schedule today, barring some unrelated issue to the redevelopment project, should be the same schedule throughout the period of this construction.

Stephen Altebrando - Sidoti & Company, LLC

Okay. And then in regards to the tax rebate in Kansas City, was that -- the $1 million, was that all recognized in this quarter?

Daniel W. Houser

No, that'll show up in the third quarter. Or at least -- the piece that's related to the prior year's adjustment. There's also -- will be some revision of our estimates for the current year and going forward, but yes, that adjustment will show up in Q3.

Stephen Altebrando - Sidoti & Company, LLC

Okay. And then I know you touched in the script about the ticket booking cycle and the importance. Is there any change in the booking cycle heading into the third quarter? It does look like deferred income -- that the year-over-year declines have moderated.

John R. Saunders

Yes, I mean, we -- as we've said on prior calls, we don't get a whole lot of visibility compared to 3, 4, 5 years ago in terms of the advance sale. And that's why I spoke at length about the need to address excess capacity. And we think that is very, very strategic to the long-term health of our business model. There is simply too many seats in inventory at several facilities in our portfolio, and the seats that we have today don't necessarily offer or project the best experience for our fans. Let's talk about the Superstretch, for example. People buying on entry-level pricing going to the Superstretch don't necessarily consume or get the opportunity to engage the entire experience that we would like. And particularly, if they're first timers, it makes it that more difficult to bring them back and build them into a retain model. So shrinking the capacity, it's the age-old supply-and-demand concept, and it's what we built this company on. And so we'll be talking in future calls about some capacity reductions, with the idea of bringing a tremendous amount of sense of urgency back into the ticket selling model. So if you do get a negative weather forecast or even rain for that matter, you've really hedged the risk.

Stephen Altebrando - Sidoti & Company, LLC

Okay. Actually, the last one. The renovation, does that change any of the parameters on the share repurchase or how you think about share repurchases? I mean, it looks like even with the renovation expansion, that leverage will essentially remain below 1x on a net basis?

Daniel W. Houser

Right now, we haven't changed it. It's more driven off of -- from our -- we've become more opportunistic about that approach. So I think that for the time being, until we see what happens with television, until we see what happens with Staten Island, we'll probably stay with our parameter set where they are.

Operator

Your next question comes from the line of Tim Conder with Wells Fargo Securities.

Timothy A. Conder - Wells Fargo Securities, LLC, Research Division

Just a couple of clarification points first, if I may. On the CapEx for it '13, Dan, did you say $90 million inclusive of Daytona? Because I think previously, you guys have said it was $90 million x Daytona.

Daniel W. Houser

No, it's $90 million including Daytona.

Timothy A. Conder - Wells Fargo Securities, LLC, Research Division

Okay, for '13, okay. And then it's very clear going forward what those were.

Daniel W. Houser

Yes, right, right.

Timothy A. Conder - Wells Fargo Securities, LLC, Research Division

And John and Dan both, I think in the previous question, you were talking about what FOX has already done on the TV. One thing related to that. In the current TV contract, when it began, the starting point was actually lower than when the prior contract ended. Where do you see or do you have any clarity at this point where the new starting point with what you get done with FOX is? Or will that be dependent on the collective contract? And I guess the other way to ask the question is, will the starting point of the new contract at least be equal to the ending point of the current contract?

Daniel W. Houser

Well, this is what I can say about that, Tim. I think that you know, as what was announced about the FOX contract, there was like a high 30% increase overall. If you take our current -- you take the current total contract, if you had -- if everything in it increased 25%, your curve with a 3% CAGR would keep going straight, okay? So you would build off of 2014 to 2015 without any decrease. So we think that, that would be an extremely conservative outcome at an overall increase of 25%, or hopefully, it's going to be well north of that. So in a long story short, we don't expect to have a dip. We don't expect to see a reset from 2014 to 2015.

Timothy A. Conder - Wells Fargo Securities, LLC, Research Division

Okay, okay. That's fair given everything that you know at this point, okay. One other clarification as it relates to Daytona. You said it's basically going to be accretive to net income, translate EPS within 3 years of completion. So you're saying by 2018 or '19, somewhere in that area, it would be accretive to EPS?

Daniel W. Houser

Yes. And we think we've got good opportunity to build -- I mean, again, we've got a very conservative outlook on this and where the recovery -- as far as on a macro level, it's hard to say where it's going. We see it as being fairly tepid, particularly with regards to our demographic. And I mean, we swing around -- the market swings day-to-day on what they think is going to happen, and we're probably not any better at predicting that than Ben Bernanke and his posse. So we hope that we will exceed expectations here.

Timothy A. Conder - Wells Fargo Securities, LLC, Research Division

Okay. And then I guess my final question is, in relation to Daytona and then maybe zoom out even from a larger perspective on ISC and the industry in general, I clearly understand where you're going and what you have to do with Daytona. I mean, all businesses, whether they are lodging or whatever, they have to update their physical product to keep everything else, the soft side of the product and the broad customer experience relevant. I fully understand that. And what you guys are doing is exciting and clearly fits into that mold. But where I struggle and continue to struggle here is the returns on capital. And the question has been asked earlier in this call, the returns on capital for the company and the industry continue to be challenged. How do we get those above mid-single digits where they've been for several years here? I mean -- and I know you gave some detail in the call this morning, but it just doesn't seem what we've got here that, that's really going to significantly drive that return on capital north even over the next 5 years. Any color or help that you guys can offer here?

Daniel W. Houser

Well, I think that I'd note a few things: One, I'd say is, let's wait and see what happens with television, because that's the single biggest pop item we've got out there. The other thing is that I think that we've, under the right economic tailwinds and the concerted effort coming out of the industry, dubbed the Industry Action Plan, working on so many multiple fronts to improve the profile of the sport, the appeal, the interest that we -- I think that the whole sport is doing all the right things in order to capitalize when we do have an economic tailwind. I think that our corporate business has been extremely encouraging, and we've got, I think, great potential there. And so I think that we've got good opportunity to drive increase -- as far as Daytona goes, we can quickly build out to 125 million (sic) [125,000] seats at a relative -- the cost to do that is relatively small compared to the infrastructure that's already have been built to accommodate those, and that could -- you would have a nice ROI on that. But as John was explaining, we're going to -- we're really looking at getting back -- getting the supply-demand equation back in our favor.

Operator

[Operator Instructions] And you have another question from the line of Barry Lucas with Gabelli & Company.

Barry L. Lucas - Gabelli & Company, Inc.

We've covered a lot of ground on Daytona. So with the time we have left, I'd like to come back to more of the current situation and the variance in revenue and attendance performance that you described between Kansas, Martinsville, Phoenix and Richmond in particular. So Richmond ASPs were down mid-20%. Is that the number you...

John R. Saunders

No. Mid-single digit.

Daniel W. Houser

Yes, mid-single digit.

Barry L. Lucas - Gabelli & Company, Inc.

Mid-single. And Martinsville was up in dollars. And Phoenix was up in attendance. Kansas was flat. So you've got 3 tracks. Kansas is a little bit better -- bigger. But Phoenix, Richmond and Martinsville, all comparably sized and certainly Richmond and Martinsville in the same state. So what is the -- what do you think the variance is between those facilities and what do you do to address the performance? Because there would seem to be -- I don't know if there's something that you're leaving on the table, and I'm sure you're spending a fair amount of time on it, but the physical facilities are not that different. The distances, especially in Virginia, are not that distant. So what do you think is going on there?

John R. Saunders

Well first of all, Barry, I assure you that we are not leaving anything on the table. We take this very seriously. A couple of comments, and then I'll bring it back to the whole capacity discussion. But in Phoenix, Auto Club Speedway and Martinsville, we had -- I mean, it was absolutely Chamber of Commerce weather. And it was forecasted -- it was 10 days out in front of these events, and these tracks had the largest walk-up crowds or the week of sales for tickets in their history. So that just shows you the magnitude of the weather impact. In the case of Kansas City, it was cold, and they managed to hold on. April, can go either way. But again, people are waiting to see what the forecast is going to be. I will also add that in Phoenix and Southern California, which were 2 markets that fell off early in our downturn, seem to have some level of improvement going on in the macroeconomic environment. Richmond is a tough one. And where we have seen what I would call the bulk of the fall-off has been right there in the greater Richmond area. And the reason for the decline in the average ticket price was essentially the track management executing against several industry action plans by doing promotional tickets. Now I don't mean free tickets, but I'm talking about working with Toyota or working with Sprint and -- where those companies are acquiring large blocks of tickets, but it's not at the price that -- but at the end of the day, to get out of this quagmire, we've got to get our capacity down. And as soon as we get that down and we get the pricing power, we get the opportunity to drive business to the ancillary events, we just simply have too many seats in the inventory, and it's time to do something about that in a way that's very -- and many of these seats that we have in the inventory, as I mentioned earlier about the Superstretch, compromise the experience. And we don't want to be selling those. We've got to be selling prime viewing, prime opportunity to engage everything that the sport has to offer. So capacity is -- strategically, capacity is the way that we're looking at building back. And whatever headwinds -- tailwinds we get from the economy, so be it. But right now, we think -- and by the way, these are still very large -- anywhere from 50,000, 80,000, 85,000, 90,000 people, still very large attendance. They're just not what we've been accustomed to back in the late '90s and the early part of the 2000s.

Barry L. Lucas - Gabelli & Company, Inc.

Great. John, maybe you could go back because you've taken some seating actions in Michigan, as I recall, and admitting that the economy is particularly challenged around Detroit. What does your experience tell you relative to the environment there when you've widened seats or taken out seats that don't have the better sight lines in terms of going forward?

John R. Saunders

We're not done yet with Phoenix. I mean, the capacity reduction that we've done company-wide, as I mentioned earlier, was largely just understanding that today's sports fan doesn't sit in an 18-inch seat. And in the case of Michigan, those seats, when you sat in them, your knees, they had no chair backs and when you sat in them, the knees were poking into the back of the person in front of you. That's just unacceptable in today's professional sports or entertainment market. So we certainly aren't out of the woods with any of these challenged facilities, but the feedback that we've been getting and some of the renewal rates that we're seeing in the various sections of these grandstands are either stabilized or improving.

Barry L. Lucas - Gabelli & Company, Inc.

Okay, that's helpful. One last housekeeping thing, if I may. First quarter versus second quarter, the motorsports revenues had a significant variance. You did talk a little bit about the MRN Network and ad sales there. But pretty -- I would have expected that was the same issue in the first quarter, but a pretty healthy gap in terms of...

Daniel W. Houser

Yes. Actually, it kind of relates to the number of events during the quarter that drives the MRN.

Barry L. Lucas - Gabelli & Company, Inc.

Okay, okay. If that's -- because you were up 4 -- as I look quarter-to-quarter, the motorsports revenue was plus 4.8 [ph] in 1Q and up 20 bps in the second quarter, and so you're saying that, that's primarily MRN? Because the broadcast rights fee increase should have been roughly comparable.

Daniel W. Houser

Right. MRN is the majority of it. There's kind of a mixed bag in some of the sponsorship pieces. And we did have -- the DAYTONA 500 speedway sponsorship was up significantly this year. So that's really what you're seeing. Overall, like we said, we expect to hit our corporate target this year. Very, very pleased with the corporate business side.

Operator

And I'm showing there are no further questions at this time. I'll turn the conference back over to John for any closing comments.

John R. Saunders

Well, I just want to thank everybody for joining us for our second quarter call. We look forward to seeing you in the third quarter. And we're excited about the redevelopment Daytona Rising project, and we'll keep you up to speed as we progress through that endeavor. So everybody, have a great day.

Operator

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

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