International Speedway Corporation F1Q10 (Qtr End 02/28/10) Earnings Call Transcript

Apr. 8.10 | About: International Speedway (ISCA)

International Speedway Corporation (NASDAQ:ISCA)

F1Q10 Earnings Call

April 8, 2010 9:00 am ET

Executives

Charles Talbert – Director of Investor and Corporate Communication

Lesa France Kennedy – Chief Executive Officer

John Saunders – President

Dan Houser – Senior Vice President and Chief Financial Officer

Analysts

Michael Walsh – Wells Fargo Securities

Greg Badishkanian – Citi

Barry Lucas – Gabelli & Company

Erik Keener – River Road Asset Management

Presentation

Operator

Good morning and welcome to the International Speedway Corporation 2010 first quarter results conference call. During the presentation, all participants will be in a listen-only mode. (Operator Instructions) I would now like to turn the conference over to Charles Talbert, Director of Investor and Corporate Communications for International Speedway. Mr. Talbert, please go ahead.

Charles Talbert

Thank you, operator. Good morning everyone and welcome to the International Speedway's conference call. We are here to discuss the company's results for the first quarter ended February 28, 2010. 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 with the SEC, specifically the most recent reports on form 10K and 10Q which identify important risk factors which could cause actual results to differ from those contained in these forward-looking statements. With these formalities out of the way, I will turn the call over to Lesa Kennedy, Lesa.

Lesa France Kennedy

Thank you, and good morning everyone. We appreciate you joining in this morning. Another terrific motorsports season is under way; and despite the continued challenging operating environment, I want to assure you that the fundamentals of our business remain sound. We believe by focusing on the core business and pursuing innovative consumer initiatives, we can continue to grow our business and back to the levels of a few years ago.

It all starts with our fans, our customers, and I am really proud of the efforts of all of our team. At all of our motorsports facilities we have made sure that our customers have a memorable experience at the races, and we'll never lose that focus. That's our number one goal.

We're making it more affordable to experience live motorsports; and also through facility enhancements and upgrades, we are ensuring that our guests have a great experience at our events. In addition to attractive ticket pricing and enhanced seating at certain facilities, we are also expanding our fan amenities.

Just for example in Daytona, in time for the Hershey's Milk and Milkshakes Speedweeks, we debuted a 136,000 square foot interactive fan area adjacent to our Superstretch grandstands. This fan zone will potentially appeal to a broader range of race fans and make this section of the facility attractive to families and groups that are looking for great value and an assortment of activities surrounding our race.

While we can't control the economy, we are doing everything in our power to make our company stronger and poised to capitalize on growth once the economy begins creating jobs. This is a key component of recovery, and we believe it needs to improve before we see meaningful growth in our business.

On a high note, I would also like to mention that we and Penn National have officially been awarded the casino management contract and the gaming license for our premier Hollywoodthemed casino at Kansas Speedway. We have no further hurdles to clear, and we will begin construction very soon. I look back in 2001 to the opening of the Kansas Speedway, and I am equally as excited about the opening of the Hollywood Casino in early 2012.

With that, I would like to thank all of you for joining; and I will now turn it over to John Saunders for further remarks.

John Saunders

Thanks, Lesa, and good morning everyone. We were pleased with the performance on our first quarter events, particularly with Hershey's Milk and Milkshakes Speedweeks at Daytona. We had a capacity crowd on hand for the 52nd running of the Daytona 500, and the week's events slightly exceeded our financial projections. The other major event during the quarter was a Sprint Cup and nationwide series weekend at AutoClub Speedway.

While still very early in the season, I am confident NASCAR's recent changes in competition, including modifications to the Sprint Cup car, are being embraced by race fans. Also, the 1:00 p.m. start time has provided consistency in the sport to create destination viewing. Most importantly, I think the racing has been second to none.

It's remarkable all the key stakeholders – the track operators, NASCAR, the team, sponsors, and our media partners – are responding appropriately to fan feedback to make the event experience even better. ISC is well positioned to grow the sport back to previous heights once this economy improves. As we previously mentioned, the economy challenges will continue to contribute to declines in most of our revenue categories for the year.

Despite this environment, we are reiterating our full year guidance of total revenues between $660 million and $680 million and non-GAAP earnings to range between $1.60 and $1.80 per diluted share after tax.

From a consumer perspective, ISC's ticket pricing initiatives continue to do well and be well received by the fans. Our entry-level ticket pricing is very affordable and encourages sampling of the sport. We have also decoupled tickets as well. That said, on a percentage basis compared to fiscal 2009, we expect attendance revenues to decrease in the high single digits for the year.

We remain strongly committed to pricing integrity. Our ticket pricing model is a fundamental part of ISC's long-term strategy. We are dedicated to providing our customers with an incredible experience at excellent value, but you will not see ISC's facilities discount our tickets in the sales cycle. Our view is once you start giving away tickets at vastly reduced prices or through baseless promotions, we – and this is key – as the promoter lose the ability to optimize supply and demand driven pricing during better economic times.

Turning to corporate spending, we're encouraged by the increased activity. We currently have agreements in place for 85% of our gross marketing partnership revenue target for fiscal 2010. For the remainder of the 2010 season, we have two Sprint Cup and one nationwide entitlement either open or not yet announced.

While we are seeing signs of renewed spending from our corporate partners, we are forecasting our motorsports-related revenue to decrease to mid-single digits. This does not include the domestic television ancillary media rights revenue. It's primarily comprised of sponsorship, hospitality, and advertising.

From an expense standpoint for 2010, we expect direct expenses, sanction fees, motorsports-related expenses, food, beverage, and merchandise expense to decrease to low single digits. We believe the majority of these reductions are sustainable. It is also important to note that our guiding principle in reducing costs and implementing process improvements is that these must not impair the fan experience and are a detriment to our guests or our business partners. Doing so would drive up our future cost of acquisition of retail as well as corporate partners.

I would like to briefly touch on television ratings. It is still too early to forecast final ratings for the year. NASCAR's first major event, the Daytona 500, had to be red-flagged for a considerable amount of time as we had to deal with the track surface. After that, the winter Olympics held in North America provided a significant amount of live viewing opportunities. As an example, the finals in men's hockey between USA and Canada directly competed with NASCAR's Las Vegas event and had a particularly significant impact on ratings.

We continue to believe consistent 1:00 p.m. start times, NASCAR's competition changes, and ABC's moving most of its events to ESPN are all positive for the sport and have the potential to positively affect ratings as we move through the season.

One more note on Staten Island. Our property sale was scheduled to close by February 25. That day has passed, but we are currently negotiating with the buyer to amend the agreement and provide an extension of the closing date. We remain hopeful that the buyer, KB Marine, will be successful in completing its due diligence process, including securing the required equity commitments to acquire the property. However, as of today I don't have a revised timeframe of when we believe this will close.

Now, with that, I would like to turn it over to Dan Houser for the financial review.

Dan Houser

Thanks, John. Good morning everyone. Thanks for joining us here today. We were pleased to post solid first quarter results which met our expectations, particularly in light of the challenging economic environment.

Year-over-year comparability is impacted by the following. A NASCAR Camping World Truck series event held at AutoClub speedway in the first quarter of fiscal 2009 was not held in the first quarter of fiscal 2010. Also during the first quarter, we amortized approximately $1.3 million related to an interest rate swap for which there was no comparable amortization in the same period of the prior year. This amortization was recorded in interest expense in the consolidated statement of operations.

Finally, based on favorable settlements and ongoing discussions with certain states connected with the settlement agreement reached last year for certain federal returns on appeal, we derecognized potential state interest and penalties totaling approximately $5.4 million or $0.11 per diluted share. This derecognition of interest and penalties was recognized in income tax expense, and we expect to pay between $1.5 million and $2.5 million in total to finalize the remaining settlements with the various states. We have provided adequate reserves related to these state matters in our balance sheet.

Looking at the income statement, admissions revenue for the first quarter decreased to $38.5 million. Economic conditions certainly contributed to the decrease. However, a large percentage of the first quarter yearoveryear admissions decrease was expected as part of longterm pricing, capacity optimization, and packaging strategies.

Speedweeks and its events schedule included certain multi-day ticket packages that we uncoupled this year. Also, as we mentioned last quarter, the new Superstretch fan zone at Daytona, which we believe makes this section of the facility attractive to families, necessitated the removal of over 12,000 grandstand seats. Through value pricing and capacity adjustments, we believe over time we will have the ability to optimize ticket pricing.

For the quarter, the weighted average ticket price for our Sprint Cup events decreased approximately 5%. Again, we were forecasting admissions revenue for the year to decrease in the high single digits. The decrease in motorsportsrelated revenue to $98.6 million was primarily driven by adverse economic conditions, resulting in lower sponsorship, suite, and hospitality revenues at our NASCAR events and, to a lesser extent, the previouslymentioned truck series events not being held at AutoClub Speedway.

Partially offsetting these decreases was an increase in the television broadcast and ancillary rights revenue. For the quarter, ISC's domestic television broadcast and ancillary rights were $65.1 million, with $63.7 million associated with the domestic broadcast contracts and $1.4 million of ancillary rights.

The decrease in food, beverage, and merchandise revenue to $12.4 million was primarily attributable to lower attendance. The decrease in NASCAR direct expenses to $32.9 million was primarily attributable to the truck series events at AutoClub Speedway not being held in fiscal 2010 and to a reduction in overall prize and point fund fees as compared to the same period in the prior year. These decreases were partially offset by the increase in TV and ancillary rights, a portion of which are paid to competitors as part of prize and point fund moneys.

Motorsports-related expense decreased to $27.7 million with the majority of the decrease associated with lower promotional, advertising, and other race-related expenses resulting from focused cost containment initiatives. Food, beverage, and merchandise expense decreased to $8.5 million for the quarter, primarily due to variable costs associated with lower merchandise, catering, and concession sales.

General and administrative expenses decreased to $24.6 million driven by focused cost containment initiatives. We reduced personnelrelated professional fees and various other costs associated with our ongoing business. Most important, we are sustaining the cost cuts achieved in 2008 and 2009 in both event and general expenses.

Depreciation and amortization during the first quarter were comparable to the prior year. The $223,000 impairment of longlived asset charges related to the removal of the net book value of certain assets retired from service primarily for the Superstretch project at Daytona.

The decrease in interest income to $62,000 is primarily due to lower interest rates on cash balances. Interest expense for the quarter decreased to approximately $5.6 million. The decrease is due to the funding of the April 2009 senior notes maturity and lower outstanding balance on our credit facility as compared to the same period of the prior year.

Partially offsetting the decrease is the amortization of the interest rate swap as well as interest on our new headquarters building loan. Equity and net loss of $1.1 million from equity investments represents 50% equity in the casino project at Kansas Speedway and relates to certain costs of the Kansas Racing and Gaming Commission allocated to the joint venture pursuant to the terms of the license agreement.

Our effective tax rate for the quarter decreased to 23.1%. The derecognition of interest and penalties associated with the previouslydiscussed state settlements is the principal cause of the reduced effective income tax rate. Excluding the derecognition of interest and penalties, our effective tax rate for the first quarter would have been 39.5%.

Income from continuing operations for the 2010 first quarter was $25.5 million or $0.53 per diluted share on approximately 48.4 million shares outstanding. However, when you exclude the impairment of long-lived assets, equity and net loss from equity investments, amortization of the interest rate swap, and the derecognition of interest and penalties related to the state settlements, we posted earnings of $0.45 per diluted share for the 2010 first quarter. As described in the release, this is compared to nonGAAP net income for the 2009 first quarter of $0.56 per diluted share.

Now for the balance sheet. At February 28, our combined cash and shortterm investments totaled $133 million, current deferred income was $120 million, and shareholders' equity was $1.2 billion. At the end of the quarter, total debt was approximately $347 million including $150 million in senior notes, $75 million in borrowings on our credit facility of which we paid down an additional $25 million early this month, $65 million in TIF bonds associated with Kansas, $51 million for the loan to construct our headquarters building, and $6 million in debt associated with Chicagoland and Route 66.

During the first quarter, we purchased approximately 185,000 shares of our class A stock for $5.3 million, bringing the total number of shares purchased from December 2006 through February 2010 to approximately 5.1 million shares. We currently have approximately $32 million in remaining capacity on our $250 million authorization.

While we continue to consider share repurchase an important component of our long-term capital allocation strategy, we anticipate maintaining strong cash reserves until we see a sustained return to the robust operating cash flows we enjoyed prior to the economic downturn.

As it relates to capital spending, for the 2010 first quarter we spent $23.9 million on capital expenditures, which includes $10.4 million for projects at are existing facilities. Of the remaining $13.5 million of spending, approximately $5.0 million relates to the construction of the new headquarters which is funded from longterm restricted cash and investments provided by the headquarters financing. The remaining balance is associated with additional capitalized spending for our Staten Island property and certain land purchases.

At quarterend, we had approximately $46.5 million in capital projects currently approved for our existing facilities. These projects include grandstand seating enhancements and infield improvements at Michigan, parking improvements at Daytona, grandstand seating enhancements at Talladega, and track enhancements at Watkins Glen. As a result of these currently approved projects and anticipated additional approvals, we expect our total fiscal 2010 capital expenditures at our existing facilities will be approximately $60 million to $80 million, depending on the timing of certain projects.

In terms of our financial outlook, we are reiterating our fiscal 2010 financial guidance of total revenues for the full year to range between $660 million and $680 million. The full year non-GAAP earnings are expected to range between $1.60 and $1.80 per diluted share.

I'd like to end my remarks with a brief discussion of our capital allocation strategy. Our expectation is to use free cash flow for capital expenditures, debt repayment, and for our share repurchase program. We focus on allocating funds to generate returns in excess of our cost of capital.

However, from a capital expenditures standpoint, our first and foremost top priority will always be fan and competitor safety as well as critical maintenance and regulatory compliance. A significant portion of our 2010 capital expenditures at out existing facilities will be allocated accordingly. These investments do not provide an immediate, directly traceable positive return on invested capital, but are required to maintain our facilities to be able to host our events.

In addition, as we compete for the consumer's discretionary dollar with other entertainment options, we need to make capital enhancements to upgrade our facilities. We're confident that our focus on driving incremental earnings by improving the fan experience will lead to increased ticket sales in the long run. Ultimately, these enhancements provide limited returns, but will help prevent further top line erosion.

We will continue to pay down debt with the expectation to have our revolver borrowings paid down substantially this year. As I stated earlier, until we see increased operating cash flows, we'll maintain a conservative share repurchase program with very opportunistic price parameters. We recognize the share repurchase program drives significant lowrisk return, but in this economic environment we will err on the side of caution with regards to our cash position.

We're committed to maintaining a healthy balance sheet with robust cash reserves that position us to take advantage of strategic investments that complement our core business and provide strong investment returns when they arrive. Those options include ancillary real estate developments such as our Kansas casino project that is expected to yield very high teens unlevered return, acquisitions as valuations become attractive, and potentially new market developments where substantial public incentives are available.

With that, I will turn it back over to the operator for the Q and A portion of the call. Thanks.

QuestionandAnswer Session

Operator

(Operator Instructions) Your first question comes from Michael Walsh – Wells Fargo Securities.

Michael Walsh – Wells Fargo Securities

I am sitting in for Tim Conrad. I have a few questions for you. I just wanted to see how advance ticket sales are doing compared to last year. And then secondly, on attendance for the Sprint Cup series, just wanted to see how you guys are selling that compared for total capacity.

John Saunders

From a cup perspective, advanced ticket sales are down year-over-year about 18% on units and about 23% on revenue, but it's important to note here that the sales cycle has compressed dramatically versus before this downturn in the economy.

What we're experiencing as we get closer to the events a significant run-up year-over-year of ticket orders three to five weeks out in front of the event. Yes, they're down. The advance sales are down. But the good news is we're continuing to experience significant run-ups as we come into the event week. And the second question?

Michael Walsh – Wells Fargo Securities

It was on capacity.

John Saunders

Right now, capacity year to date we're running at 81% of capacity. In 2009, we were roughly the low 90s, high 80s percentage-wise of capacity.

Michael Walsh – Wells Fargo Securities

Lastly, is there any new developments on MA JV?

John Saunders

The good news is it's cash flowing itself, and that's the objective that we're really looking for. We're also continuing to work with NASCAR and teams and industry stakeholders to find a transition strategy that is ultimately best for everyone with regards to licensed merchandise. We are optimistic about the way that's going, but we continue to hold to our position that we do not expect to put any cash into the business.

Operator

Your next question comes from Greg Badishkanian – Citi.

Greg Badishkanian – Citi

Just wondering if you could give us some updated thoughts on sponsorship revenues for 2010. I think previously you said it would be flat to down mid-single digits. Is that still the case?

John Saunders

Yes. That is an area that has been encouraging as far as signs of economic recovery. We feel much more so than what we're seeing as of yet on the consumer side. We're having a lot of activity in our corporate sales group where going into early 2009, I think, things were pretty sketchy for companies. There seems to be a lot more confidence, at least with regards to corporate profits at this point this year with a lot of companies continuing to finding the return in NASCAR and with ISC, so we our forecast and thoughts there are holding.

Greg Badishkanian – Citi

The EPS in the first quarter excluding all those items, a little bit different from what the street was expecting, but sounds like with the recent trends you have confidence in your fullyear guidance. Just wondering how did the first quarter do relative to your expectations when you originally provided guidance? And if you could provide some color on how the remaining quarters should play out.

Dan Houser

Thanks for this question, actually. We would point to the comments made about some of the moves that we made, particularly at Daytona, implementing the fan zone resulting in some seats coming out there. We think for the long run that decoupling some of, the resetting of pricing that we did is going to be very, very good for us in the long run. It helps us drive attendance to the front of the facility, which is where the optimal experience is.

As I said in my comments, we anticipated that a large percentage of that admissions revenue decrease was going to occur. I think that's why our numbers, you know we actually exceeded our expectations for the first quarter, but I think that's probably where we have kind of not been aligned as far as the street's expectations. We felt very good about our expectations for the year. You know just keep in mind that the fourth quarter is a very big quarter for us.

Operator

Your next question comes from Barry Lucas – Gabelli & Company.

Barry Lucas – Gabelli & Company

John, a question that relates to the one you just had. If you've placed 85% of the gross marketing partnership revenue target, where would that number have been a year ago?

John Saunders

Year-over-year? It's like low- to mid-single digits down from where we were last year. Again, feeling very good about the target and just from our perspective, I think that there's just a lot more activity in the market, a lot more discussions going on that makes our teams feel better at this point with what we have yet to cover than we probably felt last year at this time with the gap that we had to close.

Barry Lucas – Gabelli & Company

And you added Showtime as a sponsor this year and other either new categories or extending the business proposition to different types of companies that haven't been involved in NASCAR?

Dan Houser

I think it comes in really in both ways. We have a lot of new companies with us and we've also got a lot of renewals – 3M, Aflac, Bank of America, CARFAX, ConAgra, San Bernadino County out at AutoClub Speedway, Dollar General, FedEx – all examples of the people who are coming back and renewing with us. On the new business side, Bubba Burgers, COPD, HD, Kemp, Showtime, Lowe's.

What we are seeing is that the budgets for spending at the corporate level are not always as robust as they were in the past. I think that over time we are going to see that hopefully continue to grow. What we are hearing is that investment in the NASCAR sport and with the racetrack facilities is something that clearly they have experienced a measurable return in the past. It continues to be a solid spend and so there's a lot of, we're seeing enthusiasm with our corporate partners. That's the really encouraging thing for us.

John Saunders

One thing that I would add to that is that still speaks to the strength of these companies and the marketing value they get in NASCAR. It's been demonstrated and documented time after time of the return on investment these companies get. So fundamentally we feel very good about the marketing potential of our facilities and the events themselves.

Barry Lucas – Gabelli & Company

Next question on that business development area. In the past, I think you've usually been able to put through escalators on renewals kind of in line with inflation and maybe a little bit better, but one would expect there's a little bit more pressure on pricing in this current environment. In terms of renewals, what are you seeing in the pricing environment?

John Saunders

I would say in the pricing we're seeing in the low single digits to flat. It's still a tough environment in terms of what it was several years ago, and the deals are somewhat on shorter terms. But again the good news is we're starting to see increased activity in that sector of the business.

Barry Lucas – Gabelli & Company

If we could just switch gears to Kansas for a second, was there a cash contribution in the first quarter to fund the equity portion?

Dan Houser

Yes. We had, I think, about $14 million go in and it's all related to the process really of getting through the licensing process, certain start-up costs, design, those kind of things, that are preparing us to be able to go out and start our financing discussions. You have to get pretty detailed design specifications and financial models, etc. We're in the process of all of that which has necessitated some cash calls in that area.

Barry Lucas – Gabelli & Company

Last question for me and sticking with the Kansas theme, yesterday [Linn] Tevision placed about $200 million of 8-year notes, I think, at 8 3/8. The question is where are you in permanent financing. I know it's early in the process, but the window seems to be fairly open.

Dan Houser

Great point. Again, until we really can test the waters on the financing for the casino, we've got to get a little more developed information on the design and some of the modeling. Having said that, our desire is to find an attractive financing at the joint venture level with nonrecourse or any limited recourse.

Having said that, I think we've got to look at all avenues on financing that make business sense. Certainly private placement markets and bond markets are very attractive to both ISC and Penn right now. Is there something that makes sense where you bridge it over until you get phase one ready to go and it's got some cash flow, and then you can do some permanent financing there at much better rates than doing a Greenfield.

We are not far down that path. That's probably going to happen during the third quarter this year. But we're mindful. I think the good news is, I am kind of rambling here, but I think we have a lot of options. The good news is I think there's many ways for us to figure out how to get this facility done, unlike 18 months ago where you are really scratching your head how would you do it.

Operator

Your next question comes from Erik Keener – River Road Asset Management.

Erik Keener – River Road Asset Management

Good morning. First one is a balance sheet question. On the receivables balance, can you guys give us some more color about why that is so high this quarter? And then when you expect it to kind of revert to normal levels?

Dan Houser

It really is just about all related to the timing of TV payments. This year, going into 2010, NASCAR changed the way that the payments flow to the promoters where in the past some of it was front loaded before the event. Now it comes after the event. We didn't receive the TV money for speed weeks until the beginning of March.

Erik Keener – River Road Asset Management

So we should see that go down, back to the $50 million or $60 million level next quarter?

Dan Houser

Yes. I think what you will see is it will be on cycle. It's going to depend on the timing of events quarter to quarter, but we'll be able to speak to that. That's really the difference in receivables this year.

Erik Keener – River Road Asset Management

Second question, the pothole at Daytona. I was a little bit surprised, and I think some fans and other people in the news media were surprised, to just see a patch. Can you guys talk about the patch, whether it's a base patch or a surface patch? I know it was much larger than the actual pothole, but I am just a little concerned going forward if there are problems at the track next year there might be problems bringing fans back to Daytona. Can you guys talk about that a little bit and your confidence level with the repair?

John Saunders

First of all, all of our track operators are required to inspect their racetracks on a daily basis, even when we're not racing. These are visible inspections for any kind of evidence of deterioration or damage to the racing surface. That procedure was followed throughout Speedweeks. Be mindful that we had two weeks of racing plus the 24hour race prior to the Daytona 500.

The preliminary analysis of the cause was a combination of really three things. It was temperature. We have had a very unusual, cold winter in Florida. Moisture, where we experienced what the engineers called delamination, which occurs below the surface. It's not visible on the surface. And the third thing is that right prior to that area where the hole opened up, the cars were bottoming out. Eventually with that weight and that force, it began to cut the asphalt and, once that happens, it begins to accelerate.

The hole was about 9 inches by 15 inches. The patch is a highgrade concrete patch that is 6 feet tall and 18 feet wide and about 6 to 8 inches thick. We have every bit of confidence that the patch will work for the upcoming events. We also are awaiting the results of an analysis of the entire racetrack, not just that area of the racetrack, and to clearly understand the condition way below the surface.

The upper portion of that racetrack is roughly 32 years old. The bottom piece, the base, is as old as the racetrack is. It's over 52 years old. We're awaiting the engineering results to decide whether we need to accelerate planned repaving, which was targeted in the area of 2012. But we don't have the results of that. We will have them in a couple of weeks. We have every bit of confidence that this concrete patch will hold.

We have a test coming up here in May with the nationwide cars; and even if there's an issue there, we will have time to address it. We don't think it will have any impact on the racing coming into the Coke Zero 400.

Erik Keener – River Road Asset Management

So you are testing the rest of the track for delamination, and you will keep us apprised of any further patching or capital expenditures needed to fix the track?

John Saunders

Absolutely.

Operator

At this time, there are no further questions.

John Saunders

Thank you, operator; and thank all of you for joining us on the first quarter call. I hope you have gleaned that management is keenly focused on the core business. Expense controls are in place and working. We are well positioned for recovery coming out of this recession. We are well guarded with a very strong balance sheet. Once again, thanks for joining us; and we will see you on the second quarter call.

Operator

This concludes today's conference call. You may now disconnect.

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