International Speedway's CEO Discusses Q4 2011 Results - Earnings Call Transcript

| About: International Speedway (ISCA)

International Speedway (NASDAQ:ISCA)

Q4 2011 Earnings Call

January 26, 2012 9:00 am ET


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

Lesa Kennedy - Vice Chairman and Chief Executive Officer

John R. Saunders - President

Charles N. Talbert - Director of Investor & Corporate Communications


Barry L. Lucas - Gabelli & Company, Inc.

Michael K. Walsh - Wells Fargo Securities, LLC, Research Division

Alvin C. Concepcion - Citigroup Inc, Research Division

Stephen Altebrando - Sidoti & Company, LLC


Good morning, and welcome to the International Speedway Corporation Fourth Quarter and Full Year Fiscal 2011 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded on Thursday, January 26, 2012. 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's conference call. We're here to discuss the company's results for the fourth quarter ended November 30, 2011.

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 remark, a question-and-answer period will follow. The operator will instruct you of 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 ISC 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. Lesa?

Lesa Kennedy

Good morning, everyone, and thank you for participating on today's call. 2011 was an incredible year for NASCAR. We opened the year with Trevor Bayne becoming the youngest driver ever to win the Daytona 500, and we also ended the season in historic fashion too. Tony Stewart captured his third championship at our Homestead-Miami Speedway in the closest finish ever in the history of the Chase for the Sprint Cup championship. We have some great momentum as we set our sights on the 2012 season, starting with the world's premier sports car endurance race and the 50th anniversary of the Rolex 24 Daytona this week, followed by Speedweeks, that all lead up to the 54th running of the Daytona 500. We're excited about these events at Daytona, and we expect yet another capacity crowd for the Great American race.

In addition to the start of the motorsports season, we're really thrilled with the opening of our Hollywood Casino at Kansas Speedway on February 3. This is our first venture to monetize our vast real estate holdings, and we expect it to be very successful. Our share of the expected cash flow from the 50-50 joint venture would be nearly equivalent to ISC opening another Kansas Speedway-type motorsports facility with a fresh NASCAR Sprint Cup dates -- series dates included. Since there are no new gates being awarded by NASCAR, this is another way that we are increasing the company's bottom line results and further differentiating ourselves from our peers. Kansas Speedway and the Hollywood Casino are key components of the adjacent entertainment zone, which features main prominent shopping and leisure activities. The synergies of our facility and the neighborhood developments benefit all of the venues. And the area now currently attracts over 11 million visitors annually, making it one of the biggest draws in the region. We're confident that this project will create significant value for our shareholders.

The start of the motorsport season is always an exciting time for ISC, NASCAR and most important, our fans and our sponsors.

With that, I would now like to thank all of you, again, and I'll turn it over to John Saunders.

John R. Saunders

Thank you, Lesa, and good morning, everyone. During our fiscal fourth quarter, we hosted 7 NASCAR Sprint Cup Series events, 5 Nationwide Series events and 4 Camping World Truck Series events. The quarter-over-quarter comparison was impacted by certain factors, which are outlined in the earnings release.

We are pleased to report solid financial results, highlighted by increased net income despite ongoing macroeconomic headwinds. Dan will provide a detailed review of our financial performance later in the call.

We're keeping a close eye on consumer and corporate spending trends. The economy, while showing signs of improvement, remains fragile. Consumer confidence has rebounded from August lows but remains tenuous given current market conditions, such as unemployment levels, income growth and recent world events. The consumer, in our view, believes the economy and their financial situation are improving but remains cautious with their discretionary spending. As discretionary spending goes, so goes attendance-related revenues for sports and entertainment venues like ISC. Our expectation is that our customers will continue making purchasing decisions late in the buying cycle. Based on recent trends, we believe our pricing strategies and related consumer initiatives, coupled with facility enhancements, have helped stimulate renewals and advanced sales.

For the 2011 season, we saw an increase in our utilization rate to the mid-80% range. Phoenix's fall race achieved a sell-out, our first sell-out since 2008. And we saw an increase in retention rates for our Sprint Cup event. While one year does not make a trend, we believe that we are on the right path to achieving a normalized advanced ticket sales trend. We are seeing solid demand for the Daytona 500, as well as Sprint Cup events at Phoenix and Auto Club. Subsequent events will be wrapping up promotional activities after the Daytona 500.

Currently, our advanced ticket sales for Sprint Cup events remain in the range of approximately 5% and 7% off from last year in units and revenue, respectively. This is an improvement from where we were last year at this time but down approximately 14% on units and 12% on revenue. These and other metrics mentioned provide further credence that the current consumer spending headwinds might be easing.

Going into 2012 season, we expect to maintain our current ticket pricing strategies with any adjustments only in targeted areas within our grandstands. We do not believe that further broad-based reductions in ticket prices would drive demand. Our view is that we have an opportunity to increase revenue by gradually increasing ticket prices after the renewal period and up to the event. To drive ticket sales, we are laser-focused on enhancing the live event experience for our guests. We are convinced that improving the fan experience will lead to increased ticket sales as well as pricing power over the longer term.

We compete for the consumers' discretionary dollar with other entertainment options, such as arenas and other major sporting events. Today's consumer has different preferences compared to, say, 20, 10 and even as recent as 5 years ago. Expectations evolve, and we are committed to meeting and exceeding their expectations through ongoing capital improvements at our facilities that better position ISC to grow and take market share. We must meet the needs of today's consumer or we risk falling behind in our ability to capture this increased market share.

As Dan mentioned on our last earnings conference call in October, we may increase our capital spending at our existing facilities above 2011 levels beginning in 2013 to undertake certain capital improvement opportunities at our facilities that further enhance the live experience for our customers. We are increasing CapEx to between $80 million and $90 million in fiscal year 2012 and are considering large projects that would be highly impactful to the guest experience. To be clear, a substantial increase in spending will depend on several factors, such as a stable economic operating environment, credit availability and preferably the sale of our Staten Island property.

We have the largest portfolio of sponsors of any motorsports promoter in the country, and our corporate support for our industry remains strong. Our partners continue to tell us that their investment in motorsports, particularly in NASCAR, has a positive ROI. The success Sprint has enjoyed over the last 8 years as NASCAR's entitlement sponsor is the reason they extended their involvement in the sport through the 2016 season. Sprint is the largest sponsor in the sport, and this extension is a big win for the industry.

While we have seen corporate partnership pricing stabilize, the contractor ratio has been shorter during the economic downturn. This is the primary reason why we have more inventory to sell going into this season than in previous years. For fiscal 2012, we have agreements in place for approximately 67% of our gross marketing partnership revenue target. At this time last year, we had 74% of our revenue target. I remain confident we will hit our 2012 target due to the current outlook and a number of partner discussions underway.

Last year, we sold all of our available Sprint Cup and Nationwide Series entitlements. For 2012, we have 5 available entitlements, either open or not announced, for our 21 Sprint Cup events and 3 entitlements for our 16 Nationwide events. We have a strong record of selling entitlements and are working aggressively to secure not only these open entitlements, but also the other inventory available.

There is a lot to be encouraged about with regard to the television ratings and recent sports rights fee agreements. NASCAR ended the 2011 season with an average of 4.4 million households and 6.5 million viewers tuned in to each Sprint Cup race, which was an increase of 8% and 10%, respectively, over 2010 results. The final race of the season that featured the historic win by Tony Stewart was the most viewed Sprint Cup event in ESPN history.

NASCAR delivers a sizable audience. Over 70 million unique viewers tuned in to a NASCAR Sprint Cup Series event in 2011. Viewership among males 18 to 34 years of age was up 17% year-over-year, and NASCAR continues to be the #2 sport among all key demographic groups, trailing only the NFL. These, as well as other factors, keep us optimistic regarding the prospects of NASCAR's next broadcast rights agreement.

We know the live events provide ratings. Broadcasters want live sports programming on their networks. Viewers tend to watch these events live and not DVR them. DVR penetration continues to increase with about 44% of American TV households having at least 1 DVR.

We are seeing a strong sports broadcast rights fee landscape over the past several months. Both the NFL and the PGA have entered into new media rights fee agreements that have seen a healthy increase in average rights fees based on published and understood financial terms. Interestingly, both the NFL and the PGA referenced the proliferation of tablets and handheld devices. Both of their agreements provide for a digital platform to showcase those respective sports. In order for NASCAR to achieve optimal exploitation of online content, it makes sense for them to buy out the remaining 2 years of the Turner Sports exclusive rights to all NASCAR-related online content. While this would have a modest adverse financial impact to us for 2012, we believe in the long run it is the right move for NASCAR to remain in a strong negotiating position that allows us to maximize the terms for the next broadcast rights fee agreement.

Now turning our attention to Staten Island. We continue to have constructive dialogue with interested buyers. We expect the Department of Environmental Conservation will allow the property to be filled and the remaining environmental remediation to be completed, both of which are necessary precursors for the commercial development of the property. However, we do not anticipate filling activities to commence until after we have sold our interest in the property.

Now with that, I'd like to turn the call over to Dan for the financial review.

Daniel W. Houser

Thanks, John, and good morning, everyone. Our fourth quarter events, coupled with the cost reduction commitments we delivered, have generated improved operating income, EBITDA and net income year-over-year. We were able to deliver improved results despite not posting IndyCar events, which was an approximate decrease in the revenues of $10 million for the full year 2011. All in all, we're pleased with these results.

Our fourth quarter results were impacted by the ongoing economic trends, which continue to suppress attendance-related, as well as certain corporate partner revenues. Also, comparability was affected by the IndyCar series event at Homestead-Miami Speedway in fiscal 2010 which was not held in fiscal 2011. The fall NASCAR Sprint Cup and Nationwide Series events held at Auto Club Speedway in the fiscal 2010 fourth quarter were realigned to Kansas and Chicagoland, respectfully -- respectively, in the fiscal 2011 third quarter. Also in Chicagoland, a NASCAR Sprint Cup, Nationwide and Camping World Truck Series weekend that was held in the fiscal third quarter of 2010 was held in the fiscal fourth quarter of 2011. And the NASCAR Camping World Truck Series event held at Phoenix International Raceway in the fourth quarter of fiscal 2010 was held in the first quarter of fiscal 2011.

Other factors contributing to comparability for our fourth quarter 2011 results include certain carrying costs associated with our Staten Island property in fiscal 2011, impairment of long-lived assets resulting from capital improvement projects, interest rate swap expense in fiscal 2010, and a loss on early redemption of debt also in fiscal 2010. All of these are outlined in the earnings news release and are included in our GAAP to non-GAAP reconciliation where appropriate.

Now taking a look at the income statement. Admissions revenue for the fourth quarter decreased to $42.1 million, driven by lower attendance and weighted average ticket prices for certain events, combined with the impact of the previously discussed IndyCar series schedule change and certain other noncomparable operations. Partially offsetting these decreases were the previously discussed schedule changes for NASCAR Sprint Cup and Nationwide events. For the quarter, the weighted average ticket price for our comparable Sprint Cup events decreased approximately 5%. For the year, the weighted average ticket price for our comparable Sprint Cup events decreased approximately 3% to $82.17.

The increase in motorsports-related revenues to $133.5 million is largely attributable to increased television broadcast and ancillary rights, as well as increased sponsorship, suite and hospitality revenue, driven in part by NASCAR event schedule changes. The increase was partially offset by the net impact of the previously discussed IndyCar schedule change, as well as certain noncomparable operation.

For the quarter, ISC's domestic television and broadcast ancillary rights were $87 million, with $85 million associated with domestic broadcast contracts and $2 million of ancillary rights. The decrease in food, beverage and merchandise revenue to $12.9 million was primarily attributable to lower attendance for certain events. The impact of the previously discussed IndyCar series schedule change and noncomparable operations for non-motorsports event sales of concessions and catering. Prize & Point Fund Monies and NASCAR's sanction fees were comparable to a prior year period, with the decrease due to event schedule changes offsetting increases from TV -- the TV rights portion of prize money paid to competitors. Motorsports-related expense decreased to $35.2 million. The decrease is primarily attributable to the impact of the IndyCar series event schedule and changes in business operations, including cost containment focused to enhance margin without negatively impacting our guest experience. Motorsports-related expenses as a percentage of combined admissions and motorsports-related revenue decreased to approximately 20.1% compared to 21.9% for the same period in the prior year.

The decrease in food, beverage and merchandise expense to $9.5 million was largely attributable to the previously discussed NASCAR Sprint Cup and Nationwide schedule changes, the IndyCar Series schedule change and noncomparable operations for concessions and catering. Food, beverage and merchandise expense as a percentage of food, beverage and merchandise revenue increased to approximately 74.1% as compared to 70.9% for the same period in the prior year. The decreased margin was attributable to a number of factors, including event schedule and business operation changes, increased food costs and the enhanced concession and catering presentations.

General and administrative expense increased to $26.9 million for the quarter. The increase is related to certain carrying costs of our Staten Island property and legal fees related to a lawsuit against Speedway Motorsports concerning a contract termination when SMI purchased New Hampshire Motor Speedway. While the jury awarded us approximately $1 million as a result of SMI's termination, Speedway Motorsports is appealing the ruling. Partially offsetting the increase is the net reduction in personnel-related and various other costs driven by our cost-containment initiatives.

Depreciation and amortization expense increased to $19.7 million. The overall increase was attributable to capital expenditures for our ongoing facility enhancements and related initiatives. The $1.6 million noncash impairment of long-lived assets is primarily attributable to the removal of certain assets not fully depreciated in connection with track repaving and grandstand enhancements at certain facilities.

Interest income and interest expense were comparable to the same period of the prior year. The equity net loss from equity investments represents certain startup costs for our 50% equity interest in the Hollywood Casino at Kansas Speedway.

Our effective income tax rate for this quarter was approximately 40.7%. The slight increase is related to changes in certain state income tax laws, as well as other state income tax issues. Excluding these items, our effective income tax rate would've been approximately 39.3%. We expect our ongoing annual effective rate for fiscal 2012 to continue in the 38% to 39% range.

Net income for the 3 months ended November 30, 2011, was $26.5 million or $0.56 per diluted share on approximately 47.1 million shares outstanding. However, when you exclude the equity and net loss from equity investments, carrying costs associated with our Staten Island property and noncash impairments, we posted earnings of $0.62 per diluted share for the 2011 fiscal fourth quarter. As described in the release, this is compared to non-GAAP net income for the 2010 fourth quarter of $0.59 per diluted share.

As for the balance sheet and future liquidity, at November 30, our combined cash and cash equivalents totaled $110.1 million. Current deferred income was approximately $46.1 million, and shareholders' equity was $1.2 billion. At the end of the quarter, total debt was approximately $316 million, which includes approximately $152 million in senior notes, $62 million in TIF bonds associated with Kansas Speedway, $51 million for a loan to construct our headquarters office building, $50 million in borrowings on our line of credit and $1 million in revenue bond.

As Lesa mentioned, our Hollywood Casino at Kansas Speedway joint venture is opening next week on February 3. As of the end of the fourth quarter, we've funded approximately $92.1 million of the approximately $155 million we estimate to be our share of the capitalized development cost for the project, which is included in our balance sheet as equity investment. We also expect to fund certain capital -- working capital needs of the project prior to our opening, and we will continue to incur certain other start-up and related costs through the casino opening, which will be expensed as equity and net loss from equity investment. While the casino is expected to produce significant cash flow in 2012, because of the pre-opening expenses, we estimate the casino for the full year will be minimally accretive to earnings. I'll provide additional color when I discuss the 2012 financial guidance.

During the fourth quarter, we purchased 694,843 shares of our Class A stock for approximately $16.2 million. For fiscal 2011, we purchased 1.4 million shares for $37.1 million, bringing the total number of shares purchased from December 2006 through November 2011 to approximately 6.7 million shares. At the end of our fiscal year, we had approximately $72 million in remaining capacity on our $330 million authorization, which included the approval of an incremental 80 million authorized in October.

As it relates to capital spending, for the fiscal year, we spent $76.8 million on capital expenditures, which includes $68 million for projects at our existing facilities. The remaining balance was associated with land purchases, as well as additional capitalized spending for the Staten Island property. In comparison, capital expenditures for fiscal 2010 totaled approximately $105.9 million, which included approximately $85.7 million of projects at our existing facilities and approximately $9.1 million in long-term restricted cash used for the International Motorsports Center construction. At fiscal year end, we had approximately $56.5 million in capital projects currently approved for our existing facilities. These projects include track repaving and reconfiguration and road course construction at Kansas, grandstand seating enhancements at Talladega and Watkins Glen, parking improvements at Daytona, trackside RV development at Michigan, improvements at various other facilities for expansion of parking, camping capacity and other uses, and a variety of additional improvements and renovations to our facilities that enable us to effectively compete with other sports venues for consumer and corporate spending. As a result of these currently approved projects and anticipated additional approvals, we expect our fiscal 2012 capital expenditures at our existing facilities will be approximately $80 million to $90 million depending on the timing of certain projects.

As John mentioned, we have exciting opportunities as we enhance the live experience for our customers. But incremental capital spending will depend upon a number of factors, such as the timing of the sale of our Staten Island property, a strong balance sheet with manageable debt maturities and a stable economic environment.

In conjunction with this release, we announced that we were redeeming all of our outstanding 5.4% senior notes due 2014 on or before March 15, 2012. We intend to use additional borrowings under our credit facility to redeem and retire the $87 million principal amount plus the payment of a redemption premium and accrued interest. The net redemption premium associated unamortized net deferred financing cost and unamortized original issuance discount at the redemption date, totaling approximately $11 million, will be recorded as a loss on early redemption of debt in the second quarter of fiscal 2012. We will monitor the current credit and interest rate environment to potentially refinance the borrowings on our credit facility with longer-term alternatives to extend a significant portion of our near-term debt maturities. This is a continuation of our ongoing efforts to further strengthen our financial position, so we can execute our strategic vision for ISC. We're -- we are confident that by delivering memorable guest experience, along with attractive pricing and fantastic racing, we will generate stronger attendance-related revenues, as well as bottom line results.

While we focus on generating returns in excess of our cost of capital, certain of these capital improvements may not provide immediate directly retraceable positive returns. However, in the long run, these improvements will better enable us to effectively compete with other entertainment venues for consumer and corporate spending.

In terms of our 2012 financial outlook, our 2012 events schedule will have some notable differences from 2011. The earnings news release details the major events by series and by quarter. For 2012, we anticipate total revenues to range between $610 million and $630 million. The combined revenue we will recognize from television broadcast and ancillary media rights for NASCAR's top 3 racing series, which is included in motorsports-related revenue, will only increase approximately 0.7% to approximately $281 million.

While the broadcast agreement increases approximately 3.5%, the ancillary fees will be significantly lower in 2012. This is due to a combination of factors, the biggest of which is related to SiriusXM Radio, which has historically been the most significant contributor to the industry's ancillary rights revenue. To give you a little background here, in 2007, Sirius Satellite Radio, the predecessor to SiriusXM, entered into a 5-year agreement to be NASCAR's exclusive satellite radio partner. Since entering into the contract, Sirius Satellite Radio and XM Satellite Radio merged to form SiriusXM. Prior to this merger, both were actively competing against each other for the distribution rights for original programming, thereby increasing the pricing of these rights. Subsequent to the merger completing in 2008, leaving only one satellite provider bidding, distribution rights agreements entered into by SiriusXM have generally been lower. This is the case with the agreement NASCAR recently executed for SiriusXM radio to continue as the exclusive satellite rights provider for NASCAR. The sport and our tens of millions of fans will benefit from the continuation of this developing distribution channel, but the future revenue will be less.

Another ancillary rights revenue source John mentioned is driven by online content. We believe NASCAR will and should negotiate a buyout of these rights. Again, this would be a positive for the industry, as it puts NASCAR in a better negotiating position for the next broadcast rights agreement. This action will, however, have near-term ramifications for net ancillary rights revenue primarily related to costs of ramping up operations to be ready to optimize these digital media rights once retained by NASCAR.

For 2011, the industry earned approximately $17 million of total ancillary rights fees, of which ISC will receive approximately $8 million of ancillary rights and related satellite radio broadcast fees or approximately $0.10 per diluted share. For 2012, we expect to earn an immaterial amount of ancillary revenue.

On the expense side of the business, as a result of the company-wide cost reductions that have already been put in place, we currently expect our full year EBITDA margin to range between 32.5% and 34% of total revenues and expect our full year operating margin for 2012 to be between 20% and 21% of total revenues. While our margin guidance is slightly below 2011, we have done a good job in keeping costs relatively flat year-over-year. Certain incremental costs are expected, such as reinstituting merit pay increases for our employees.

Going forward, as we've discussed on previous conference calls, we do not have significant incremental costs that can be taken out of the business without materially alterating how we operate. While it's encouraging to see our business stabilize, we realize that a stronger consumer outlook is necessary for any meaningful improvement to our attendance-related revenues.

Our Kansas Casino joint venture will provide positive cash flow to ISC beginning in our second fiscal quarter, and we expect for the full year it will provide approximately $3 million in equity income to ISC. While we do not have specific debt associated with the project, we have funded and will fund the remaining portion on our revolver due to its attractive rates. We'll be fairly aggressive in paying down debt we associate with the casino from its cash flow. We expect our effective tax rate in 2012 to be between approximately 38% and 39% for the full year.

Based on all the assumptions, we expect 2012 full year non-GAAP earnings of between $1.50 and $1.60 per diluted share. From an earnings perspective, the fourth quarter will be our most significant, followed by the second, first and third quarter. This is different than previous years, so review the event schedules closely in the release.

The non-GAAP earnings per share guidance exclude any future loss or gain on impairment or disposal of long-lived assets, gain or loss on the sale of our Staten Island property, unanticipated further impairment of the property and ongoing carrying cost and the loss on early redemption of the senior notes. ISC remains a profitable and financially sound company. We have a tremendous opportunity to see our company grow stronger as we successfully execute our strategic initiatives.

As the consumer begins to feel better about their financial situation, we anticipate seeing an increase in their spending on discretionary items. Through our ticket pricing initiatives and fan amenity improvements, we would expect to see gains to our top line revenues from their renewed spending. And finally, we are excited to introduce into results the operations of our Hollywood Casino at Kansas Speedway joint venture, which we believe will significantly contribute to earnings and shareholder value for years to come.

We look forward to speaking with you on our next earnings conference call in April. With that, I'll turn it back over to the operator, who will lead us through the Q&A portion of the call.

Question-and-Answer Session


[Operator Instructions] Your first question comes from the line of Greg Badishkanian with Citi.

Alvin C. Concepcion - Citigroup Inc, Research Division

This is Alvin Concepcion in for Greg. I was just -- I apologize if I missed this. What was the comparable attendance growth for the quarter? And what kind of attendance growth is baked into your 2012 guidance?

Daniel W. Houser

Well, there -- year-over-year, our -- there's a lot of noise in the fourth quarter, first of all, with events moving around between different facilities, but we were on our expectations there. A lot of what you see, the weighted-average ticket price is still decreasing a bit, but we haven't done a lot with changing pricing. Most of it is related to the selection that the customers are making. We're really staying pretty stable for -- on our outlook on attendance for next year. We are cautious about the momentum and the recovery. I think from our perspective, the -- going into the past 2 seasons, we -- things have felt very strong at the beginning of the year and then you seem to run out of gas just on a macro level as you get to May, June, beginning of the summertime. So we're staying pretty flat on that kind of thing. Having said that, we're encouraged with what we're seeing for the events come up in Daytona and also the first couple events, California and Phoenix. So it's a little early to be telling much more than that. We actually -- some of our tracks are not going out as early on renewals as they have in the past, and that to some extent is the main thing that's impacting the deferred revenue year-on-year.

Alvin C. Concepcion - Citigroup Inc, Research Division

Okay, great. And then I think you talked a little bit about some opportunities to increase ticket pricing. Can you give us a sense for ticket price growth for the year? Just some more color behind that, please.

John R. Saunders

Yes, what I mentioned in my formal remarks was that first of all, we don't anticipate. If you look over the last '09, '10 and a little bit in '11, there were -- there was a fairly widespread reduction in prices in certain areas of our grandstands across the company. We don't see that happening in 2012. We think we've got the right mix of price points going forward, and that's not to say that may be something targeted here and there, but on a broad-based basis, we don't see any more reductions there. Now on increasing, what we monitor very closely is the whole concept of dynamic pricing, where after your renewal periods, our tracks are being very -- they're paying very close attention to sections within their grandstands where demand is as high and potentially skyrocketing and then are able to move pricing in those grandstands up to the actual execution of the event, and we're seeing great success with that. Now again, I would point out that we don't do anything that would penalize our best customers, those who pay us in advance for their tickets during the renewal period. We certainly are -- want to give the best pricing to those race fans. But as I said, as you get closer to the event, there are areas in the grandstands that are spiking in popularity, and that's where we're seeing an opportunity to uptick pricing.

Alvin C. Concepcion - Citigroup Inc, Research Division

You see, that's helpful. And then just a last question, if that buyout of the online content rights were to occur, what kind of impact would that have to revenues?

Daniel W. Houser

Well, I think on that, Alvin, the strategy really there, and this is pretty consistent with what you've seen going on with a lot of the other sports, the NFL, the new -- latest deal with golf is these broadcast arrangements are more -- they're becoming broader, too, and needing to capture these online rights for streaming in various digital channels. So the -- where we expect we would see the revenue driven there is NASCAR retains those as able to: one, they -- I think they feel like a better, much better leverage, the site and some of the ability to -- from our perspective, to sell tickets on a much broader platform; but also to be able to package these rights into the broadcast agreements for a more robust program there. So that's really kind of the strategy on that.


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

Stephen Altebrando - Sidoti & Company, LLC

Just breaking into the guidance a little bit. Are you assuming any contribution from the JV?

Daniel W. Houser

Yes, as I said in my remarks, we think it's going to probably be about $3 million. And that would be -- then that -- if that comes, it's a partnership, so it flows then into -- it will be taxed at the ISC level. And then also it -- yes, I mean, if you're trying to really isolate it, we're borrowing on the revolver, so it's got -- we've got interest cost to some extent there. But we think it's probably going to be about $3 million in that equity line.

Stephen Altebrando - Sidoti & Company, LLC

Okay. And then in terms of you had given advanced bookings seem to be down a little bit, but my sense is your guidance implies admissions revenue being flattish. Do you think that's optimistic at this point?

Daniel W. Houser

Well, as I said to Alvin there -- you're talking about the deferred revenue balances?

Stephen Altebrando - Sidoti & Company, LLC

Yes, and some of the advanced bookings numbers.

Daniel W. Houser

Yes. A lot of that, Steve, is as a result of the timing of renewals and some of the tracks that in prior years have started their renewal process before the end of the year. As a fiscal year, they're starting it later. One of the reasons is just we've seen this whole shift in kind of the buying patterns of consumers being later. So they feel like they can better optimize their renewal periods by tightening it a little bit. So that is -- that's the biggest factor in the change in the deferred revenue. So we -- I think, like I said, right now we feel -- as far as we've got visibility out, we're feeling pretty good about Speedweeks and trends we're seeing for Phoenix and Auto Club. We still rely on pretty heavy sales in the last 2, 3 weeks. So it's -- there's a ways to go on those, but I mean, we're feeling pretty good about our targets.

Stephen Altebrando - Sidoti & Company, LLC

Okay. And then in the online segment of -- well, of the $8 million reduction in ancillary revenue, how much is coming from the online segment and I guess...

Daniel W. Houser

It's really minimal because the -- what the online piece really is, is that they're ramping up cost at NASCAR media group, so they can be ready to take over those rights and optimize them in 2013. So what it is, is you've kind of got -- you got cost coming in, but you don't have the associated revenue coming in than the manner that it will to NASCAR in the future. So -- but the most significant piece there is really related to the Sirius piece with that. And with that contract, you're seeing the same thing with golf, with major league baseball, with NFL. Everybody has been taking a haircut on the -- on those rights fees as they go into renegotiation, but we think for the long term, it's an important distribution, or NASCAR thinks it's an important distribution channel to have available to the fan base.

Stephen Altebrando - Sidoti & Company, LLC

Okay. So I'm a little confused on -- so you expect to -- the online distribution to be essentially internal through NASCAR? Or is it also potentially contemplated to repackage with the TV deal?

Daniel W. Houser

Right. What's going on now and, John, if I misstate any of this, jump in. But right now, Turner owns all of those rights. And I think just the feeling is, is there is a lot more that can be done to optimize those than what is being done today. Turner hosts or operates the site. Primarily, their interest is selling advertising on that site as the whole digital social media environment is just exploding. With -- NASCAR feels it's extremely important to get those rights back and keep pace with other sports and entertainment offerings.

Stephen Altebrando - Sidoti & Company, LLC

Okay. And I guess not somewhat related, but what about handhelds? I know the NFL had booked I think a $700 million-plus contract with Verizon. Is that included on -- in the online or is that separate? And is that something you guys are working on?

John R. Saunders

Yes. That's what it -- that's in essence what Dan was speaking to is that the category, whether it's online or a wireless delivery of some sort, these are categories that were essentially locked up in earlier contracts, Turner being one of them, years ago, when nobody knew what the opportunities were going to be. And clearly, the handheld devices, the tablets and so forth being available for fans to get additional content, even at the venues, to make that happen, rights have to be clawed back. The technology is all there, we just need to get -- NASCAR needs to call back those rights and some infrastructure improvements in facilities, but we're not too far off from the ability for fans to get realtime content as they're actually watching a motorsports event. As I said, at particularly, at the live event. So those are all sort of captured in what Dan was speaking about with the whole NASCAR Turner equation.

Stephen Altebrando - Sidoti & Company, LLC

Okay. And then just last one real quick. The -- you mentioned potential step up in CapEx in fiscal '13 but also kind of mentioning that you're not expecting a return. And I guess where I'm going is why ramp up this CapEx if that's the case?

Daniel W. Houser

Yes. Good question, Steve. What the statement was -- is that some of it is going to be amenity type of things. And going back to the -- you go back to the last -- late '90s or early part of this millennium, the expansion, there's a lot of capital going in that was -- we were building seats, we were building suites, the big infield project at Daytona, which led itself to a big up-sell for the fan zone in there. The kind of things that we need to do today are enhancing seating, widening seats and seats with chairs and cup holders. We need vertical integration to help move fans up and down the grandstands. We need the video and content technology, et cetera, et cetera. Those are the kind of things that aren't necessarily you're going to put them in next year and then you're going to be able to count X times Y to get -- here's a bunch of dollars coming in the door. It's going to -- some of that is really -- is to sustain the products for the long term. Some of it is going to -- we believe will drive increased attendance and also drive increase per cap, and there will be opportunities for up-sell. But the -- what I think the important thing is that it's -- we're at a point in time where we really need to look at some of the facilities and the guest experience and make some important infrastructure improvements and keep pace. We strongly believe for the long run that, that's going to be the best thing for the long-term viability of the company. Now that's -- I don't think that you -- we're not doubling CapEx. There may be 1 year or 2 where it would be in the $100 million and a little -- maybe a little bit plus on that, but it's -- and also it -- that depends on a number of factors. We've got significant cash and opportunity to reap some tax benefits off of the sale of the Staten Island property. That would be an opportunity to -- that would enable us to raise some -- allocate a little more to the capital expenditures, we're -- and try -- we're calling these 2014 notes not really as much to try to shave interest costs as to take advantage of very attractive credit markets right now for ISC. It's -- what's it going to be like in 2 more years, no one really knows. I think there's fairly good optimism about credit markets right now, but with all the kind of the hanging over us is what's going on with -- in Europe, what's going to happen when we get into debt ceiling discussions again, et cetera, et cetera, that we feel very strongly it's important to take advantage of conditions now to extend those maturities out a ways and give ourselves some breathing room and some ability to be a little more flexible on our capital allocation.


Your next question comes from the line of Michael Walsh with Wells Fargo.

Michael K. Walsh - Wells Fargo Securities, LLC, Research Division

Just filling in here for Tim Conder. Most of our questions were answered, but I just wanted to revisit a few things on the cash side. How much have you guys contributed so far then to the JVs? Upwards of $90 million, is that right?

Daniel W. Houser

Yes. It's -- at the end of the year, it was $92 million of -- it's -- we're -- the cash flow on the -- I think by the end of the year, we'll see all of the cash that's basically going to go into the venture. But there's going to be -- even though the facility's opening next week, it's going to be a while before construction contracts close out and contingencies and punch lists and all of that kind of thing. So I think that it will be through 2011 will -- I mean, through 2012 will by the time we're out later in the year. But it's not going to be all in [indiscernible].

Michael K. Walsh - Wells Fargo Securities, LLC, Research Division

Okay, okay. And do you guys have debt to EBITDA -- you've been running kind of around the I guess 1.5 mark. I mean, do you guys have any goals there? Next maturities if you roll that to 15 on your credit facility. You don't have any maturities coming due for a while, but it sounds like from previous discussions, that Staten Island goes well and you do get something there, that maybe you carry a higher cash balance and you use that more towards some of the CapEx projects that you had mentioned.

Daniel W. Houser

Yes, I would say that's a great question, Michael, and thanks. I would say that while we're talking about some more CapEx deployment, we certainly do not intend to do that at the expense of our credit rating. And that we also do not intend to do it at the expense of having dry powder available should there be acquisition or development opportunities that become attractive to us. That -- here, lately, it hasn't been the case. Right now, we think that any future development -- motorsports facilities anyway is going to require significant public, private partnership. And just with the kind of general state of conditions of state and local government, that's probably not something on the short window. And then also on the acquisition end, we're just -- we're not interested in acquisitions that don't serve our shareholder well. So -- but we want to remain positioned that we can take advantage should either one of those situation present themselves, or other opportunities. Well, we've had a fantastic opportunity here with this project in our Kansas Speedway. So those are really the parameters that we operate with that.

Michael K. Walsh - Wells Fargo Securities, LLC, Research Division

And so your definition of big projects, is that video seeding content technology vertical integration, which you had mentioned, or were there other things?

Daniel W. Houser

It's that kind of thing. We think that we -- it's a lot -- we want to impact the broad base of the fan. So this is rather than focusing wholly on a lot of segmented high-end things, we want to do some of that kind of thing, but we want to do things that broadly impact the fan. And in the course of that, you're kind of rightsizing your capacity for the future, and I think that it will be a tremendous lift for us and a statement about the sport that will -- we're really, I think, on a pendulum swing with ratings and demographics and things like that, that -- it's a little different game. We got to get into these facilities, the kind of things that this younger generation's interested in, which is content, it's data, so a lot of aimed in that way, and also in comfort and ease of getting in and out of facilities and things like that.

Michael K. Walsh - Wells Fargo Securities, LLC, Research Division

So looks like you guys are a little bit more aggressive share repo this quarter relative to some of the more recent quarters. What was the buyback price there, was it around 23?

Daniel W. Houser

Yes. That's about where the average price was.

Michael K. Walsh - Wells Fargo Securities, LLC, Research Division

And then just lastly, I just wanted to clarify, so the non-GAAP EPS guidance, that's going to exclude any JV losses and/or gains going forward?

Daniel W. Houser

Actually, it brings the JV in this year. So it's going to be -- it will be pretty minimal this year in 2012 because you're going to have -- there'll be some start-up costs related there and things like that, but we think it'll probably be about -- probably be about a $3 million contribution to the equity income line.


Your next question comes from the line of Barry Lucas with Gabelli & Company.

Barry L. Lucas - Gabelli & Company, Inc.

Let me start quickly with John. John, you talked about the sponsorship sales sort of being a little bit below in terms of marketing goal, percentage sold versus year ago, largely due to shortened timing, but what are you seeing in price either on renewals or new sponsorship deals? Where are they coming in?

John R. Saunders

They're coming -- they're essentially -- we see stabilization. Where -- what's really changed, and not necessarily dramatically, but what has changed is the term has shortened up here. Rather than these 3- to 5-year-plus deals, we're seeing more of that 2-year, potentially 3-year type, so you have more turnover of renewal conversations, that kind of thing, than we did previously. Clearly, this is a much more challenged environment for us on the sponsorship side than we've seen in the past, but there's some bright spots. I mean, we're seeing -- on a net positive base we're seeing more people continuing to enter the sport. But the -- this is a category revenue that for all sports from time to time is going to ebb and flow and for NASCAR and you're seeing it in the teams as well. And for the racetracks, we're seeing a little bit of that ebb and flowing. It's not a -- any kind of long-term concern for us. As we mentioned earlier, we continue to deliver strong ROIs to our sponsorship partners. But back to your question, it's really more on the term that's generating this.

Barry L. Lucas - Gabelli & Company, Inc.

Okay. And just final area for me anyway. Been some discussion about opportunities, whether it's M&A or project opportunities, so what are you -- just certainly your early days with Kansas not quite open and the casino not quite open, where do you see other opportunities potentially evolving either for gaming or entertainment or what have you, given it seems like every state legislature around the country is looking at gaming as a source of revenues?

John R. Saunders

Yes, and we're obviously following that very carefully and very closely. Again, we are not necessarily pursuing a gaming strategy. It was -- for ISC, it was more -- it's always been about unlocking the value of this real estate, these vast holdings that we have. But that said, it doesn't -- would necessarily wouldn't preclude the opportunity at one of our other facilities. I think that would be one of the keys for us is that any kind of participation in gaming would be -- would have to be on one of our properties. But we know -- we've talked before, this is not our core competency. We would want to be with best-in-class partners, such as Penn Gaming. And you're right, New York's talking about it, Florida's talking about it, and we're monitoring it very closely. We're not going to be speculative about it, but where there's a right fit, like what we have in Kansas, we'll explore it. We'll go deeper on it.


At this time, there are no further questions. I will now turn the call back over for any closing remarks.

John R. Saunders

I just want to thank everybody for joining us on the fourth quarter call, and we're very excited about the momentum we have going into the Rolex 24, and then following on with the rest of Speedweeks and the Daytona 500. The momentum started back towards the end of last year, and it's carrying through, and so we look forward to talking with you guys again on the first quarter call in April. Once again, thanks for joining in.


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

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