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International Speedway Corporation (NASDAQ:ISCA)

Q4 2007 Earnings Call

January 24, 2008 9:00 am ET

Executives

Wes Harris - IR

John R. Saunders – COO

Dan W. Houser – CAO

Analysts

Tim Conder - Wachovia

Bob Simonson – William Blair & Company

Greg Badishkanian – Citigroup

John Fox - Fenimore Asset Management

Operator

Good morning everyone and welcome to the International Speedway Corporation 2007 fourth quarter conference call. (Operator Instructions) I would now like to turn the conference over to Mr. Wes Harris, Senior Director of Corporate and Investor Communications for International Speedway. Mr. Harris please go ahead.

Wes Harris

Good morning everyone and welcome to the International Speedway Corporation conference call. We’re here to discuss the company’s results for the fourth quarter ended November 30, 2007. With us on this morning’s call are John Saunders, Executive Vice President and Chief Operating Officer and Dan Houser, Vice President and Chief Accounting Officer. After John and Dan provide their formal remarks, a question and answer period will follow.

Before we get started I’d like to remind everyone that statements made in the course of this conference call that express the company’s or management’s beliefs and expectation and which are not historical facts or applied prospectively are considered forward-looking statements. It’s important to note that the company’s actual results may differ materially from those contained in or implied by such forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the company’s SEC filings including but not limited to the 10-K and subsequent 10-Qs. Copies of these filings are available from the company and the SEC. The company undertakes no obligation to release publically any revisions to these forward-looking statements that may be needed to reflect the events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Inclusion of any statement in this call does not constitute an admission by ISC or any other person that the events or circumstances described in such statements are material.

So with these formalities out of the way, I’d like to turn the call over to John Saunders, John?

John Saunders

Thanks Wes and good morning everyone. We are pleased to report record revenues for the fourth quarter and full year of fiscal 2007. Contributing to our record full year revenues was the successful acquisition of the remaining 62.5% interest in Raceway Associates, owner and operator of Chicagoland Speedway and Route 66 Raceway. We also benefited from higher overall spending for advertising, sponsorship and hospitality at our comparable events. Increased fees from parking, camping, track rentals and other motorsports related revenues also contributed to the full year increase.

Supporting out growth in sponsorship revenue were significant multi year official status relationships with well known brands such as Bank of America, DeWalt, Gatorade, Home Depot, Office Depot, Sprint, Texas Instruments and UPS to name a few. We also secured entitlement sponsors for all our NASCAR Cup and Busch events in 2007. Negatively impacting year over year revenue was lower television rights fees for our NASCAR events. While the average annual rights fee for the new combined television agreements are substantially higher than the former agreements the 2007 rights fees were approximately 12% less than the 2006 rights fees.

Now turning to our specific events in the fourth quarter, we hosted eight major event weekends during the quarter, seven of which were anchored by NASCAR NEXTEL Cup races. As we discussed on our third quarter earnings call in October, California Speedway hosted exciting Cup and Busch racing on Labor Day weekend. Unfortunately the weekend posted less than anticipated results primarily due to an intense heat wave of over 100 degrees in temperature in the region during the week leading up to the races.

Richmond International Raceway posted its 32nd consecutive NEXTEL Cup sellout and attendance for the Emerson Radio 250 Busch series race was up more than 8% over the prior year.

Chicagoland Speedway hosted a thrilling season finale weekend for the IndyCar Series. In addition Kansas Speedway recorded sold-out attendance for its Cup and Busch weekend.

Talladega Superspeedway lived up to its moniker of America’s most competitive track with an outstanding weekend of Cup, Craftsman Truck and ARCA racing. Jeff Gordon capped the weekend with a thrilling move on the final lap to pass teammate Jimmie Johnson to win the UAW-Ford 500. Despite the exciting on track competition, Talladega recorded lower weekend attendance as compared to 2006. As we discussed on our call in October, we expect this was due to a number of factors. By far the most significant was the uniqueness of the 2006 weekend which included the debut of the newly paved racing surface, the track’s inaugural truck race and significant national promotion surrounding the release of the hit movie “Talladega Nights.” It is important to note that the attendance for 2007 event weekend was up almost 15% as compared to 2005 and we retained a sizable percentage of new event attendees from 2006.

Martinsville Speedway held another successful weekend of NASCAR Cup and truck racing highlighted by Jimmie Johnson’s third consecutive victory at the famous one-half mile oval. Phoenix International Raceway hosted a NASCAR triple-header weekend in November that featured Kyle Bush’s final win as a team member of Hendrick Motor Sports in the Busch series race. In addition a sold-out crowd was on hand to witness another Jimmie Johnson victory in his quest for the 2007 Cup Championship.

The NASCAR racing season ended in grand style at Homestead-Miami Speedway. The Ford Championship weekend has become one of the most anticipated and premier weekends in all of sports and 2007 further solidified this position. Ron Hornaday tied Jack Spragg as the only three-time champion of the Craftsman Truck Series and Carl Edwards was officially presented the championship trophy for the final race in the Busch Series history. The biggest highlight of the weekend was Jimmie Johnson’s capture of his second consecutive cup series championship as Jeff Gordon was unable to close the gap of Johnson’s 86 point lead heading into the race.

Now turning our attention to the first quarter of 2008 we are excited to begin the racing season. NASCAR pre-season thunder was very successful as thousands of fans participated in forums held in the Sprint Fan Zone at Daytona International Speedway. Stars from NASCAR’s three top national series answered questions and discussed their outlooks for the coming season. This weekend DIRECTTV Speedweeks at Daytona kicks off with the 46th running of the Rolex 24. This prestigious sports car event continues to draw top level competitors from all forms of racing. Just a few examples for this year include defending cup series champion Jimmie Johnson, two-time Indy 5 winner and reigning Dancing With The Stars Champion Elio [Castrinevis] and former cup series champion Kurt Bush.

Of course the highlight of Speedweeks is the eagerly anticipated 50th running the Daytona 500, the great American race. Headlining the Sprint Pre Race Show activities will be Brooks & Dunn, the most awarded duo in country music history. In support of this milestone race, we are executing on a national promotional platform to build consumer and corporate awareness. Companies representing more than 40 brands are expected to spend a combined $100 million in activation for the 2008 Daytona 500. The most significant relationship is our partnership with Kroger, who launched in mid 2007 the largest in-store retail promotion in the history of motorsports at nearly 2500 outlets within Kroger’s corporate family of stores.

These efforts are generating more awareness for the race and the other Speed Weeks as advanced ticket sales are turning well ahead of the prior year. DIRECTTV Speedweeks at Daytona also marks the beginning of our new ten year multi track agreement with Coca-Cola. This is one of the most financially significant sponsorship agreements in the history of ISC and we are working closely to develop creative and successful programs to promote our brands in the marketplace. The 2008 race season will also usher in new entitlement sponsors for NASCAR’s top stock car racing series. The NEXTEL Cup has been rebranded as the Sprint Cup beginning in 2008. In addition Nationwide has replaced Busch as the title sponsor of the nation’s second most popular racing series.

Sprint is leveraging its title position for the Cup Series through an aggressive promotion of their brand in multiple channels of distribution. In addition Nationwide is further raising exposure for NASCAR’s number two series for continued long term success. From a race-entitlement perspective we currently have five Sprint Cup and two Nationwide title sponsorships there either open or not yet announced. By way of comparison, at this time last year we had four cups and four Busch entitlements open for the 2007 season. As I mentioned earlier, we sold all of our Cup and Busch entitlements for 2007 and look forward to similar success in fiscal 2008.

Now turning to capital spending. We spent approximately $75 million on capital improvements at our existing facilities in 2007. For 2008 we anticipate spending between $90 million and $100 million with approximately $5 million associated with the timing of spending for certain projects that resulted in a shift from 2007 to 2008. Our significant projects for 2008 include:

track lighting at Chicagoland, which will enable the running of the facility’s July Cup event under the lights on Saturday night,

the recently completed addition of a second-storey viewing deck in the Sprint Fan Zone at Daytona,

grandstand seating enhancement at Michigan International Speedway,

new media centers at Homestead-Miami and Watkins Glen International,

completion of renovations at Darlington in time for the facility’s May Cup weekend. These improvements include a new tunnel, suite enhancements and the repaving of the racing surface.

land and related improvement at certain facilities for the expansion of parking, camping capacity and other uses, and

fan enhancements and amenities that enable us to affectively compete with other sports venues for consumer and corporate spending.

Excluded from our CapEx guidance for 2008 is between $10 million and $15 million in estimated spending for Daytona Live, a mixed use entertainment destination development we are pursuing in a 50/50 joint venture with The Cordish Company. The project recently received zoning approval from the local government in the form of a plan master development and while there are permitting and local project analyses to complete, we are pleased with the support the project has received from government officials and the local community. Assuming everything progresses as planned we look forward to beginning construction later this year.

We are also partnered with Cordish on an exciting opportunity in Kansas. In April, 2007 the Kansas state legislature authorized four land based casino licenses including one for Wyandotte County. Kansas Speedway and Cordish submitted a joint venture proposal to the unified government of Kansas City and Wyandotte County for the development of a casino, hotel and retail and entertainment project on property adjacent to Kansas Speedway. The initial development is expected to be branded as the Hard Rock Hotel & Casino.

Last month our proposal and three others were endorsed and sent to the Kansas Lottery Commission for further consideration. The Lottery Commission is evaluating the proposals and will recommend one or more to the Kansas Gaming Commission. The Gaming Commission has final approval in selecting the company to manage the casino. By statute the time line for this selection process should take between 150 and 270 days with an outside selection date of October.

Turning our attention to Staten Island we are continuing with our clean up efforts on the property in accordance with the consent order signed with the New York Department of Environmental Conservation. In addition we are in discussion with interested buyers for the 676 acre parcel and look forward to securing agreement in the coming months. We are also making important progress at Motorsports Authentics’, our motorsports related merchandise 50/50 joint venture with Speedway Motorsports. As we discussed on our call last month, the management of MA anticipates an important turn around year in 2008 and continue to expect the business will financially break even for the full year.

Over the past month, MA completed its year end goodwill and intangible asset valuation which resulted in an impairment charge. ISC’s portion was approximately $34.8 million which is within our anticipated range of $25 million to $50 million. This charge is reflected in our 2007 fourth quarter results. As substantially all of the charge was not deductible to ISC for tax purposes it reduced our fourth quarter GAAP earnings by approximately $0.65 per diluted share. While we are clearly disappointed in MA’s results to date, we continue to believe the sale of licensed merchandise represents a significant opportunity in the sport and our confident that the MA’s current management has developed a solid plan for the future.

On a very positive note earlier this month the United States District Court in Kentucky dismissed in it’s entirety the civil anti-trust action brought by Kentucky Speedway against ISC and NASCAR. From the beginning we have said the case was without legal or factual merit. The ruling reaffirms the validity of a business model that has significantly benefited the sport and its fans and puts an end to any question about which locations and dates NASCAR can run its races. As we expected, Kentucky Speedway has appealed the Court’s ruling. While the appeals process could take more than a year to complete we are very confident in our ultimate success. Clearly, we are extremely pleased with the US District Court’s ruling. This allows us to focus all of our attention on the new race season and growing our business over the long term.

NASCAR’s 2008 race season is shaping up nicely. The on track product remains strong and the sport is continuing to attract both consumers and corporate sponsors. In addition there are a number of industry developments that are helping to further raise awareness, including the full launch of NASCAR’s Car of Tomorrow beginning with the Daytona 500. Several driver and team changes are also helping to further raise fan and media awareness of the sport, most notably this includes Dale Earnhardt Junior’s transition to Hendrick Motorsports and Joe Gibbs racings move from Chevy to Toyota.

Finally we look forward to significant awareness to be generated by the national marketing campaigns of Sprint and Nationwide and are encouraged by the long term opportunities of aligning our premier racing events with two of the country’s most recognizable consumer brands. Now with that I’d like to turn the call over to Dan Houser for the financial review. Dan?

Dan Houser

Thanks John and good morning everyone. The comparability of our year over year results for the fourth quarter of 2007 was impacted by several factors. First the 2006 fourth quarter included a pre tax, non cash charge of $87.1 million or $1.04 per diluted share after tax for the impairment of long lived assets. This impairment was almost entirely related to the decision to discontinue our speedway development project on Staten Island. The 2007 fourth quarter includes impairment charges of approximately $3.9 million or $0.05 per diluted share after tax for costs associated with the fill removal process on the Staten Island property and the net book value of certain assets retired from service.

Second as John discussed, while the average annual rights fees for the new combined television agreements are substantially higher than the former agreements, the 2007 rights fees were approximately 12% less than the 2006 rights fees resulting in lower motorsports related revenue for comparable events.

Third the closed on the acquisition of Raceway Associates, owner of Chicagoland Speedway and Route 66 Raceway on February 2, 2007. Since then their results have been included in our consolidated operations. Prior to closing we had accounted for their operations as an equity investment. Accordingly the IRL IndyCar Series weekend held at Chicagoland as well as a number of smaller events at Route 66 were included in our 2007 fourth quarter consolidated results.

Fourth we recognized a deferred income tax credit of $1.6 million or $0.03 per diluted share after tax attributable to a revision to the recently enacted income based tax system in the state of Michigan. In accordance with the enacted legislation this credit was equal to the deferred income tax liability we recognized in our 2007 third quarter results.

Next we recognized approximately $500,000 or $0.01 per diluted share after tax for accelerated depreciation on certain buildings to be raised as part of our Daytona Live development project.

And finally, as John also noted our 2007 fourth quarter equity earnings include a charge of $34.8 million or $0.65 per diluted share to reflect our portion of MA’s goodwill and intangible asset impairments as of November 30, 2007.

Now looking to the detailed income statement, admissions revenue increased to $78.2 million primarily due to the consolidation of Chicagoland and Route 66. Partially offsetting this increase was lower attendance for the California and Talladega Cup weekends. Motorsports related income decreased for the fourth quarter to $143.7 million. The consolidation of Raceway Associates was more than offset by the 12% decrease in NASCAR broadcast rights for the quarter. Food, beverage and merchandise revenue decreased slightly to $27.1 million due to lower concessions revenue for the rain delay cup event at Kansas and lower attendance for the cup weekends at Talladega and California. Partially offsetting the decrease were revenues generated for races at Chicagoland and Route 66 as well as other smaller non comparable events. The decrease in NASCAR direct expenses to $50 million was primarily attributable to the previously mentioned lower television broadcast rights fees, a percentage of which are paid as part of the prize money. Motorsports related expense increased in the fourth quarter to $45.8 million due mainly to the consolidation of Raceway Associates. Food, beverage and merchandise expense decreased to $15 million for the quarter primarily due to attendance related variable costs and to a lesser extent margin improvement in several areas of the business.

General and administrative expenses increased to $28.9 million for the quarter. The increase was primarily related to the consolidation of Raceway Associates and costs related to our ongoing business. Partially offsetting the increase were slightly lower costs for the Kentucky litigation as compared to the fourth quarter of 2006. As John discussed we are very pleased the case was dismissed and we look forward to a successful outcome in the appeals process. For the full year 2007 we spent approximately $5.2 million or $0.06 per diluted share after tax for our defense in the litigation. The 2008 guidance we communicated last month assumed costs of between $5 million and $6 million for the full year. Now that the case is in the Appeals process, we expect to spend less, however at this point it is unclear exactly by how much.

Depreciation and amortization for the fourth quarter increased to $17.2 million. The increase was largely driven by our acquisition of Raceway Associates. The additional depreciation associated with our Daytona Live project also contributed to the increase. As previously discussed the $3.9 million impairment charge in the fourth quarter is attributable to additional fill removal costs on our Staten Island property and the net book value of certain assets retired from service. The decrease in interest income to $1.3 million for the 2007 fourth quarter was primarily due to lower cash balances as a result of our share repurchase program in fiscal 2007.

Interest expense for the quarter increased to approximately $3.8 million due to lower capitalized interest as well as interest related to the debt assumed as part of the Raceway Associates acquisition. For the fourth quarter the $36.4 million net loss from equity investments primarily relates to our interest in Motorsports Authentics’. As discussed previously included is approximately $34.8 million to reflect our portion of MA’s impairment of its goodwill and intangible assets.

Our effective tax rate for this year’s fourth quarter increased to 58.2%. The increase is substantially due to the tax treatment associated with the losses of Motorsports Authentics’. As we discussed on last month’s guidance call for 2008 we anticipate our full year effective tax rate will be approximately 39%.

As an update on the IRS exam, in June the IRS commenced the administrative appeals process which could take up to 12 months to complete. As of November 30, we had deposited $117.9 million with the service for requested downward adjustments to our reported fiscal 1999 through 2005 Federal Tax Depreciation deductions. This amount also includes interest related to the federal adjustments. Including related interest we currently expect combined after tax cash flow impact of additional federal adjustments for fiscal 2006 and related state tax revisions for all periods to range between $30 million and $40 million. This assumes no compromise during the appeals process. It is important to remember that any deposits we make with the IRS are not considered a payment of tax. They prevent us from incurring additional interest that would be charged at significantly higher rates. We will receive interest on any funds ultimately returned to us.

Turning back to the income statement, income from continuing operations for the three months ended November 30 was $22.5 million or $0.43 per diluted share on approximately 52 million shares outstanding. However, when you exclude the impairment at MA, the deferred income tax credit at Michigan, the additional depreciation associated with our Daytona Live project, additional fill removal costs on the Staten Island property and the net book value of certain assets removed from service, we posted earnings of $1.11 per diluted share for the 2007 fourth quarter. As described in the release non-GAAP net income for the 2007 full year was $2.85 per diluted share as compared to $3.24 per share for 2006. Approximately $0.27 per share of the decrease was associated with lower NASCAR television broadcast rights fees for our comparable events. ISC’s portion of MA’s increased operating losses reduced full year over year net income by an additional $0.11 per share. This amount excludes the previously discussed fourth quarter impairment and the 2007 third quarter inventory related write-down. The incremental full year earnings per share from the 2007 acquisition of Raceway Associates was slightly more than offset by the combination of lower attendance related results for certain 2007 events as well as higher depreciation, net interest and certain other expenses as compared to the 2006 full year.

Now looking to the balance sheet, at November 30 our combined cash and short term investments total $97 million. Current deferred income was $129 million and shareholders equity was $1.2 billion. Total debt at quarter end was approximately $378 million including $300 million in senior notes, $67 million in TIFF bonds associated with Kansas and $11 million in debt associated with Chicagoland and Route 66.

During the fourth quarter we purchased 646,000 shares of our Class A common stock for $30 million, bringing the total number of shares purchased from December, 2006 through November, 2007 to approximately 1.6 million shares. Over the 12 month period we spent approximately $81 million leaving $69 million in remaining capacity on our $150 million authorized as of November 30. As we discussed on our last call during fiscal 2007 we spent up to $10 million per month on the program. We have been more aggressive since that time and expect that trend to continue in the coming months. We are also evaluating options to expand the share repurchase program beyond the current authorization which would require the approval of our Board of Directors.

In terms of our 2008 financial outlook while we continue to keep a close eye on economic trends we reiterate 2008 full year total revenue guidance of $805 million and $825 million. The top half of this range anticipates growth in all our major revenue categories in fiscal 2008. We are also maintaining our earnings guidance for 2008 of $3.05 to $3.15 per diluted share. As we are so early in the year we are currently more comfortable at the lower end of this earnings range.

In conclusion, despite a challenging economy we are well positioned for success in 2008 and beyond. Consumer interest in motorsports, particularly NASCAR racing is strong. In addition, corporate spending is strong and we continue to attract partners to the sport who are interested in leveraging our unique portfolio of premier events and key markets to drive their business. While we are in no way immune to a broad economic down turn we benefit from a business model in which substantial portion of our revenues are contracted on a multi year basis with staggered maturities. This results in significant earnings and cash flow visibility. Looking specifically at fiscal 2008 approximately 75% of our earnings per share guidance is associated with NASCAR’s domestic television broadcast and [ansulary] media rights. This percentage is substantially higher when you layer in advanced sales for tickets, sponsorship, advertising, hospitality and other revenues. For example, we have already contracted or agreed to terms for approximately 80% of our gross marketing partnership target for 2008. This can be compared to this same time last year when we were at approximately 75% of our fiscal 2007 target.

With this backdrop, we will continue to focus on our core business of motorsports entertainment including enhancing the fan experience and delivering incremental value for our guests. Combined with financially and prudent investment in external expansion and a more aggressive return of capital program we look forward to building shareholder value for many years to come. With that I’d like to open the floor for questions.

Question-and-Answer Session

Operator

Your first question comes from Tim Conder – Wachovia

Tim Conder - Wachovia

A couple of things here and in particular as it relates to your guidance, looking at your inter guidance here, the mid point in the revenue guidance would imply flat revenues, year over year, your Op margins flat to up 100 basis points, your EBITDA flat to down 100 basis points, and if we look at some of the things you guys have considered this year, California, the issues with the heat, Talladega and the new TV is going to be up this year, and some easy comps elsewhere, Motorsports Authentics’ break even, that would collectively seem conservative. Can you maybe help us out a little bit?

Dan Houser

Well thanks Tim, I think in relation to that, we certainly have…we are very optimistic on our opportunities for 2008 and the upper end of our guidance range includes growth in all of our major revenue categories. We all know that the macro economic scene is very challenging and concerning now. So we’ve had certain regional wise challenges over the past year, we could likely encounter those again this year. So we’re keeping an eye on that. We have I think very robust growth in our corporate sales areas, however as that base increases your percentage growth increases are to bring the digits up there are a challenge. I think that we’re being, I believe prudent in our guidance considering the macro economic factors and but again the opportunities that we have in the upcoming year.

Tim Conder - Wachovia

Okay, how are your admissions if you look past the speedweeks and Daytona 500, how are advanced ticket sales looking past that on a year over year basis?

Dan Houser

Well I believe as we look out over the year, of course we are very excited right now about the speedweeks and our first quarter we believe looks very strong. We’re down in the low single-digits on our overall advanced sales combined, but that is impacted by several factors. Its timings of renewals have changed in some cases, we’ve got some new types of payment plans in effect that we’re really trying to work with our consumer to make it in every way possible and appealing to them to buy tickets to our races. So we’re keeping an eye definitely on the trends there. At this point again we’re reiterating our guidance range and we believe we’re solidly in the game.

Wes Harris

Clearly we’re keeping a close eye on Michigan. We had challenges over the last couple of years because of the regional challenges they’ve got with the auto industry, clearly the macro issues aren’t going to help them there. It didn’t help that they had in August; they had an event that rained out and didn’t start until Tuesday so that definitely impacts you. We’re going to keep a close eye on California in the fall, although California in the spring looks good. So there’s definitely some places we’re keeping a close eye on and as Dan said we’re trying some different ways of payment plans and other things like that to try to make it as easy as we can for our fans but also giving us the visibility. We can’t push the renewal cycle too close to event time.

Tim Conder - Wachovia

Right, one last one here, in reference to your share repurchase comment, would the Board consider borrowing, I mean if we look at your cash flow and I think you alluded to in the commentary that you may set aside an additional $30 million to $40 million related to some of the tax issues, but if we look at your cash flow you should be able to relatively sustain what you’ve done, so to take that up, is your context in your commentary stating that you may take that repurchase activity up at a higher level and then in turn then would you look to potentially borrow a little bit to do that?

Dan Houser

Well Tim we’re certainly considering the optimal cash flow structure decisions that you’ve alluded to, we have obviously as you’ve mentioned, a strong free cash flow. We have always and continue to want to be poised to take advantage of any expansion opportunities that make prudent financial sense. Having said that our stock like many stocks on the market are attractive at this time for repurchase. I am new in this role and I’m looking at various ways that we can optimize. I think that what I can tell you is that we’re focused on this; we believe that we have been more aggressive than the $10 million a month and we’re definitely looking at that. We still have some decision making I think to do to say we’re going to go beyond our free cash flow. It may be that we have some seasonal dips in cash where we may borrow on a short term basis or something like that. But again keeping our eye on options, keeping our eye on if we are fortunate enough to have a sale of the Staten Island property this year and we have a significant amount of cash available, we’ll be considering what are the best investment opportunities whether it’s in our selves or in other opportunities.

Tim Conder - Wachovia

Okay, great thank you gentlemen.

Operator

Your next question comes from Bob Simonson - William Blair & Company

Bob Simonson - William Blair & Company

John, what’s the basis, the legal basis for the Kentucky appeal?

John Saunders

We have not seen, all we’ve seen from them thus far is a press release that states they intended to appeal, they have put notice of appeal but we haven’t seen their briefs. Once we do, we’ll have an opportunity to respond to those but we really don’t know at this point what they intend to argue.

Bob Simonson - William Blair & Company

Okay and Wes, what was the broadcast and [ansulary] rights fees in the fourth quarter and the full year?

Wes Harris

Sure, for the fourth quarter, broadcast was $73.8 million, for the fourth quarter of 2007 [ansulary] was $3.2 million.

Bob Simonson - William Blair & Company

And for the full year, just adding it up?

Wes Harris

For the broadcast $242.8 million and $11.4 million on the [ansulary].

Bob Simonson - William Blair & Company

Okay, you talked John about your capital programs, how many seats and/or suites does that add in ‘08?

John Saunders

In ’08 there are no seat and no suite additions planned.

Wes Harris

We are changing out some; I think we’re doing some changing of some seats at Michigan. We’ve been doing some seating enhancements there taking out some bad sightline not high quality seats and replacing it with some seating that we had at other facility locations to make it more of a premium experience.

Bob Simonson - William Blair & Company

Do you have a tentative cost estimate for the Kansas City project if you were to be approved?

Wes Harris

The casino?

Bob Simonson - William Blair & Company

Yes.

Wes Harris

I think that its been north of $600 million which the majority of that will be financed by, well it will be 100% financed by the JV and they’re go out and probably borrow 80% to 85% of that amount for the construction financing with those borrowings backed by the tenant leases.

Bob Simonson - William Blair & Company

Okay, update on Denver?

John Saunders

Bob, on Denver we have there, in spite of some media reports that floated out of the Denver Post I think it was last week, we continue to have interest in that market but at this point in time, we’re focused on the things that we highlighted in our script. We don’t have any official dialogue going on with anybody. We don’t have any sight selection process underway. But we do remain interested in the market but we are going to focus on some of the other things we talked about such as Daytona Live, the gaming opportunity in Kansas City and share repurchase and investing in our existing facilities. At this time.

Bob Simonson - William Blair & Company

Is the IRS money that you’ve deposited, you used to talk about its possible you could get it all back, could you update whether that is still a possibility?

Dan Houser

As we said in our scripted remarks we entered the appeals process back in June. I feel that it was a, I was encouraged by the process just that it seemed that we at least were getting a, we were getting an opportunity to state our case. I felt like it wasn’t a preconceived answer to the situation. What we’ve run into now which has been a little of a surprise to us is that while we have supplied some information and offered some solutions to the issue, the service in particular the officer and appeals office that we’re dealing with are extremely backed up. So we’re just not getting any indication from them on where they stand. I’m reluctant to get folks excited that we may get a large portion of this money back. It’s not impossible under some of the potential settlement scenarios but it’s really too soon to say. Should we be lucky enough for that to happen that would certainly be funds that we could look to either a use in prudent external investments or additional stock repurchases.

Bob Simonson - William Blair & Company

I think John you mentioned these take about 12 months, is there a date certain that the IRS has to respond?

Dan Houser

No there isn’t and we really feel that we have no advantage in trying to press this issue. The reason is I feel we’ve got an appeal agent that at least has an open mind and so if the guy is overworked I don’t know that there’s any advantage to us to harass him or try to press the timing of his dealing with this.

Bob Simonson - William Blair & Company

Okay thanks very much.

Operator

Your next question comes from Greg Badishkanian – Citigroup

Greg Badishkanian - Citigroup

You did mention that you were seeing some low single declines in advance ticket sales now. You mentioned some factors affecting that, but where do you see attendance trending longer term?

John Saunders

Dan I think answered that, it’s a little bit early because of some of these payment plans and the timing of renewals and as Wes mentioned we’ll keep a close eye on Michigan, not just the macro economic conditions in the country right now but also what they’re experiencing in the auto industry. But we’re cautiously optimistic. And where we miss on a sell out, it’s not a big number. I think it’s important to note that if a track doesn’t sell out for example, Martinsville didn’t sell out last year where it had the year before, we were only off 1,000, 1,500 tickets. It wasn’t a big gash in the facility. Although like I said, we’re watching this very closely. It’s a bit of a mixed bag out there. It tends to be that way every year at this time but we’re just going to have to pay attention to the economy and the buying habits of our consumers.

Dan Houser

And on the longer term we spent a good deal of time this past year and are currently involved in integrating a new strategic planning or more robust strategic planning process for the company here and if I could boil that whole strategic plan down to one thing, it is focused on bringing the fan to our event. That is the key focus for across this company so we recognize the challenges that are faced in competing for the leisure entertainment dollar and so in the long run we’re very focused on what do the fans want, understanding their needs and their desires and delivering the type of experience that is going to be keep bringing them back year after year.

Wes Harris

And just one other…we’ve got Sprint involved, we’ve got Nationwide coming on now, they’re going to make a great big push more than AB ever was able to do really because they were really primarily focused on the number eight car. There’s a lot of upside if you can sell more tickets in the Busch series…I’m sorry, in the Nationwide Series, excuse me; I’ll put $5 in the kitty, because we’re not selling out those events. So there’s a lot of opportunity there. Fan avidity remains very, very high. Fan loyalty is very, very high in this sport compared to other sports. So there’s a lot of good things going on here. It’s just a little bit more challenging in these economic times but we’re positioned I would say better than 95% of the companies our there in this type of environment.

Greg Badishkanian - Citigroup

Okay great, if we could just get an update on ticket pricing expectations for ’08?

Dan Houser

We’re pretty modest there in the low single-digits, 1%, 2%. That is probably most strong in the Sprint Cup series. So we’re being modest there again we’re very focused on the fan retention and servicing our fan in the tough economic environment. We know that the consumer out there is up against, looking forward to a tough year and we’re doing our best to make it an opportunity for them to get to our races.

Greg Badishkanian - Citigroup

Okay, thank you.

Operator

Your next question comes from John Fox - Fenimore Asset Management

John Fox - Fenimore Asset Management

Good morning everyone, I had a few questions, first was other incomes were higher than normal, do you have anything of interest in that line item?

Dan Houser

I think it was again on assets, some asset sales. It was a non recurring item.

John Fox - Fenimore Asset Management

Okay and did I understand correctly that you would have to put up $30 million to $40 million of deposits with the IRS in fiscal ’08?

Dan Houser

Well this is how that works; the majority of that number is related to the state tax component for all periods. So once we file our 2007, our next year’s returns then because we’re under audit the service will, they’ll issue and additional adjustment and that will be several million dollars and that will likely make a deposit there. We don’t make the payments on the state taxes until there has been either a resolution, settlement and appeals or if we can’t get any satisfaction, or any suitable compromise there we go to litigation. It has to come to a final decision point before you file the amended state tax return and have that liability. So the bulk of that money depends on whether or not we have a settlement this year and then it depends on how much the adjustment is. If we have some compromise in the middle then it’s going to decrease the liability. What we’re giving you there is the worst case scenario.

John Fox - Fenimore Asset Management

So if I’m doing a 2008 cash flow budget, I should maybe not necessarily include it?

Dan Houser

That’s true.

John Fox - Fenimore Asset Management

Okay. How fast do you want to finish the buy back?

Dan Houser

You mean our outstanding funds?

John Fox - Fenimore Asset Management

Correct.

Dan Houser

We’re in discussions on that currently and we’re in discussion with our Board Committee on what adjustments we make take there. That probably will be close to running us into the next announcement of earnings, into the next window. But we’re considering what we may do in that program to extend it further out.

John Fox - Fenimore Asset Management

I mean you said on this call you’re doing more than $10 million a month and you have sixty-something left, so it would seem that you’re going to finish that up pretty quick.

Dan Houser

That’s true, that would be finished certainly by our next call.

John Fox - Fenimore Asset Management

Okay, great. And do you, maybe Wes, do you have the total attendance for 2007?

Wes Harris

I don’t have it…wait a second, 3.9 million paid attendees.

John Fox - Fenimore Asset Management

Okay great, thank you.

Operator

There are no further questions at this time. I would like to turn the floor back to Mr. Harris for any closing comments.

John Saunders

I’d like to thank all of you for joining us on the fourth quarter call. As we said earlier the trends are very nice for the DIRECTTV Speedweeks coming up with the Rolex 24 opening up, kicking off this weekend and then culminating with the Daytona 500 and California’s looking very strong. We look forward to visiting with you on the next call to discuss the first quarter of ’08 and once again appreciate all of you signing in this morning. Thank you very much.

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Source: International Speedway Corporation Q4 2007 Earnings Call Transcript

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