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International Speedway Corporation (NASDAQ:ISCA)

Q1 2008 Earnings Call

April 9, 2008 9:00 am ET

Executives

Wes Harris - Senior Director of Corporate and Investor Communications

John Saunders - Executive Vice President and Chief Operating Officer

Dan Houser - Vice President and Chief Financial Officer

Analysts

John Fox –Fenimore Asset Management

Tim Conder – Wachovia

Bob Simonson – William Blair

Alvin Concepcion – Citi

Operator

Good morning and welcome to the International Speedway Corporation 2008 First Quarter Conference Call. [Operator Instructions] I would now like to turn the conference over to Wes Harris, Senior Director of Corporate and Investor Communications for International Speedway.

Wes Harris

Good morning everyone and welcome to the International Speedway Corporation Conference Call. We are here to discuss the company’s results for the first quarter ended February 29, 2008. With us on this morning’s call are John Saunders, Executive Vice President and Chief Operating Officer and Dan Houser, Vice President and Chief Financial Officer. After John and Dan have provided the formal remarks a question and answer period will follow. The operator will instruct you on procedure at that time.

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 beliefs and expectations and which are not historical facts or applied perspective 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 10-K and subsequent 10-Q. Copies of these filings are available from the company and the SEC. The company undertakes no obligation to release publicly any revisions to these forward looking statements that may be needed to reflect events or circumstances at the date hereof or to reflect current or unanticipated events.

Inclusion of any statement in this call does not constitute an admission by ISC or any other person that events or circumstances described that such statements are material. With those formalities out of the way I’d like to turn the call over to John Saunders.

John Saunders

Good morning everyone. Despite a challenging economic backdrop we are pleased to report near record revenue for the first quarter of fiscal 2008. Top line growth was driven by higher merchandise, sponsorship, television and ancillary media revenues. Also significantly contributing to the year over year increase was higher hospitality sales and admissions to Dayton’s Sprint Fan Zone as well as higher concessions, catering and certain other motor sports related revenues.

Looking at the specific events of the first quarter, the 2008 race season began with a very successful DirecTV Speed Week at Daytona and was kicked off by the 46th running of the Grand-Am Rolex 24 at Daytona. The premier weekend in sports car racing was an overall success including outstanding on track competition that resulted in a record 15 different leaders and 695 laps completed.

We hosted a very successful 30th Annual Budweiser Shoot Out highlighted by Dale Earnhardt, Jr. debut in the 88 car and his first victory at Hendrick Motorsports. The event also posted a 7% increase in average household television viewership. Later that week we were pleased to record more than a 5% increase in attendance for the Daytona 500 Qualifying Gatorade Dual at Daytona. Fans were treated to exciting racing and watched as Dale Jr. won the first race and Denny Hamlin won the second.

We posted more than a 5% increase in combined attendance for the nationwide series Camping World 300 and the Craftsman Truck Series Chevy Silverado 250. We were also pleased with higher television viewership results for both races. The Camping World 300 was the fourth most viewed nationwide event on cable in the history of the series. The Chevy Silverado 250 was the second most viewed truck event in the history of the Speed Network.

This historic 50th running of the Daytona 500 was a huge success for the company highlighted by its earliest grand stand sell out in modern history and increased television viewership. The days festivities included a Sprint pre-race show featuring performances by Chubby Checker, Michael McDonald, Cool and the Gang, Books n’ Dunn, and Trisha Yearwood. Seven time Daytona 500 champion Richard Petty served as honorary starter for the great American race which saw 42 lead changes among 16 different drivers with Ryan Newman capturing the checkered flag in a last lap shoot out.

As we have discussed on previous calls a big part of our success with this years Daytona 500 was the execution of a comprehensive marketing program that resulted in companies representing more than 40 brands spending a combined $100 million in activation for the event. The most significant relationship with our partnership was with Kroger who launched in mid 2007 the largest in store retail promotion in the history of motorsports at nearly 2,500 outlets within Kroger’s corporate family of stores.

These efforts generated more awareness for the historic race and other speed week’s events which translated into increased revenues across the board. Turning your attention to our NASCAR Race Weekend in California, despite challenging weather conditions that pushed the nationwide Stater Brothers 300 and Sprint Cup Auto Club 500 races to Monday we were pleased to host an exciting weekend of racing, the country’s second largest media market.

Of course the most significant highlight was the announcement that we had entered into a comprehensive facility naming rights agreement with Auto Club. I’ll discuss that relationship in more detail in a few minutes. Looking to our second quarter events, in early March we hosted a successful weekend of motorcycle racing that included the Daytona Supercross and the 67th running of the Daytona 200. At the end of the month Martinsville Speedway played host to both the NASCAR Craftsman Truck and Sprint Cup Series.

Despite exciting on track competition that is the hallmark of the historic facility we recorded attendance related revenues that were less than expected. While challenging economic conditions had an impact on the results of the weekend we were also impacted by inclement weather which negatively affected race week sales. Homestead Miami Speedway hosted a Grand-Am and IRL weekend in late March anchored by the first unified Indy car series race in over a decade.

The exciting race featured eight cars from teams that formerly competed in a champ car world series. We look forward to the long term opportunities available from both the consumer and corporate sales perspective as the results of combining these two open wheel series. For the remainder of the second quarter we will host four Sprint Cup and Nationwide series weekends at Phoenix, Talladega, Richmond, and Arlington.

In addition Kansas will host an IRL Craftsman Truck and ARCA weekend. Auto Club Speedway will run an AMA Motorcycle weekend. As we look out to the remaining events in the second quarter and beyond we are keeping a very close eye on consumer spending trends. Our overall advance ticket sales are currently trending behind in the high single digits from where we were at this time last year. While part of this decline is associated with the timing of our renewals and related programs we believe many fans are making their purchase decision closer to race day.

This trend is consistent with what we have experienced in previous economic down turns including the most recent period in which we posted approximate 1% decrease in admissions in revenue from 2002 to 2003. To address the current economic challenges and remain sensitive to the realities that face our race fans we are keeping ticket prices comparable with last year and offering more payment plans for ticket purchases. We offer access to free parking at all of our facilities and are expanding camping areas to allow our fans to save on the high costs of renting hotel rooms.

For our fans who aren’t as sensitive to economic issues, those with higher discretionary income we continue to expand our offering a segmented experiences that drive incremental revenue for the company. These experiences typically include premium tickets combined with up scale hospitality options including lounge facilities that offer full service and world class cuisine.

Turning our attention to sponsorship, as I previously mentioned during the first quarter we announced a 10 year multi million dollar sponsorship with Auto Club of Southern California, the nation’s largest member of the AAA federation, to rename California Speedway as Auto Club Speedway of Southern California. This partnership is a landmark achievement for both ISC and the motorsports industry and will place a premium on enhancing the fan experience at the speedway with special initiatives aimed at Auto Club members and a series of capital improvements that will make the racetrack more comfortable, acceptable and enjoyable.

From a race entitlement perspective we announced a number of agreements since our call in January. Auto Club Speedway announced a three year partnership with Pepsi for the facilities Labor Day weekend Sprint Cup Race. In addition, LifeLock has entered into three year agreements for cup events at Michigan and Chicagoland. Martinsville Speedway has secured an entitlement sponsor for its October Sprint Cup Series Race. We currently have one Sprint Cup and two nation wide title sponsorships that are either open or not announced.

By way of comparison at this time last year we had three Cup and two Busch Entitlements open or not announced for the 2007 season. Again, we sold all of our Cup and Busch Entitlements for 2007 and look forward to similar success in fiscal 2008. Looking at all of our marketing partnerships we have agreements in place for 88% of our 2008 target. This compared to last year at this time when we had deals in place for a little more than 80% of our 2007 target.

While this is a significant positive trend we continue to see solid corporate interest it should not overshadow the challenges we face in the current economic environment. We have been successful because we work very closely with our partners to develop innovative marketing programs tailor made to drive their business. Beyond our significant marketing expertise our ability to consistently attract and retain corporate partners is because we offer a portfolio that is unmatched in the business.

We have a national footprint hosting events 11 months out of the year and access to the sports super bowl the Daytona 500. This is very compelling to perspective partners that want to reach NASCAR fans who are three times more likely to buy that sponsors brand and for those fans that attend events five times as likely.

Turning to capital spending, for 2008 we continue to anticipate spending between $90 million and $100 million. Included in this estimate are a number of significant projects including track lighting in Chicagoland which will enable the running of the facility’s July Cup event under the lights on Saturday night, the addition of a second story viewing deck in the Sprint Fan Zone at Daytona, Grand Stand seating enhancements at Michigan International Speedway, new media centers at Homestead in Miami and Watkins Glen International, and completion of renovations at Darlington in time for the facilities May Cup weekend. These improvements include a new tunnel and repaving of the racing surface. Land and related improvements at certain facilities for expansion of parking, camping capacity and other uses and fan enhancements that enable us to effectively compete with other sports venues for consumer and corporate spending.

Excluded from our CapEx guidance for 2008 is between $5 million and $10 million in estimated spending for Daytona Live a mixed use entertainment destination development we are pursuing in a 50/50 joint venture with the Coors Company. Assuming everything progresses as planned we look forward to beginning construction later this year with the first phase, our new corporate headquarters opening in 2009.

We are also partner with Coors on an exciting opportunity in Kansas for the development of a Hard Rock Casino and Hotel on property adjacent to our Kansas Speedway. As we discussed on our call in January our proposal and three others are being evaluated by the Kansas Lottery Commission who will then 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 timeline for this selection process should take between 150 and 270 days with an outside selection date of October.

We are also making important progress at Motorsports Authentics our sports related merchandise 50/50 joint venture with Speedway Motorsports. The management of MA continues to anticipate 2008 will be an important turn around year and expect the business to do financially break even. MA is off to a good start as their operations contributed $1.8 million in equity income to our first quarter results. The management team has executed perfectly and delivered the desired product in correct quantities on time for the events to date this year. While it is early in the year and MA is susceptible to future economic challenges we are very pleased by the progress we are seeing in that business.

With that I’d like to turn the call over to Dan Houser for the financial review.

Dan Houser

Good morning everyone, thanks for joining us on today’s call. As John mentioned we are pleased to report near record revenue for the first quarter as well as increased earnings. Looking to the income statement our admissions revenue increased to $56.1 million primarily due to increased overall attendance for Daytona Speed Weeks event. Partially offsetting this increase was lower attendance for the Auto Club Speedway, Nationwide and Craftsman Truck Series events that were impacted by inclement weather.

The increase in Motorsports related income to $112.8 million was primarily associated with increased sponsorship, television and ancillary media rights for the NASCAR events at Daytona and Auto Club Speedway. Higher Sprint fans, hospitality and other race related revenues at Daytona also contributed to the increase. For our first quarter ISC’s domestic television broadcast and ancillary rights were $63 million, $60.3 million for domestic broadcast and $2.7 million for ancillary rights.

Food, beverage and merchandise revenue increased to $22.7 million and was primarily attributable to the success of Speed Weeks and the increased merchandise sales around the 50th running of the Daytona 500. The increase in NASCAR direct expenses to $33.1 million was primarily attributable to higher television broadcast rights fees, a percentage of which are paid as part of prize money. Motorsports related expense increased to $35.3 million with the majority of the increase associated with the promotional and advertising spending for the 50th Daytona 500.

To a lesser extent advertising and additional race related expenses driven by inclement weather during the Auto Club Race weekend also contributed to the increase. Food, beverage and merchandise expenses increased to $12.8 million for the quarter primarily due to variable costs associated with higher sales. General and administrative expenses increased to $27.7 million. The increase was primarily related to a full quarter of expenses for Chicagoland Speedway and Route 66 Raceway as compared to only one month during the first quarter of 2007.

Property taxes and costs related to our ongoing business also contributed to the increase. Partially offsetting the increase were lower costs for the Kentucky litigation as compared to the first quarter of ’07. Depreciation and amortization during the quarter decreased to $17.3 million. The decrease was largely driven by lower accelerated depreciation associated with our Daytona Live project as compared to the first quarter of 2007. Partially offsetting the decrease was a full quarter of depreciation for Chicagoland Speedway and Route 66 Raceway.

The $731,000 impairment of long live assets is primarily attributable to an increase in the estimated costs of fill removal related to our Staten Island property. To a lesser extent impairment of certain other long live assets also contributed to the charge.

The net loss of $3.1 million and interest income was primarily due to the company recording a non-cash charge totaling approximately $3.8 million or $0.07 per diluted share to correct the carrying value of certain life insurance agreements for certain officers. The cumulative adjustment for tax exempt interest income recognized covers the six and a half year period through the end of fiscal 2007. Interest expense for the quarter decreased to approximately $3.6 million due to higher capitalized interest and lower average borrowings on our revolving credit facility in the current period.

Our 2008 first quarter equity and net income from equity investments of $1.8 million is related to our 50% interest in Motorsports Authentics. Our effective tax rate for this quarter increased to 41.6%. The increase is a primarily result of the tax exempt nature of the previously discussed non-cash adjustment to interest income. As we discussed on the December guidance call for 2008 we anticipate our full year effective tax rate will be approximately 39%.

As an update to the IRS exam as we discussed in previous calls last June the IRS commenced the administrative appeals process. We expect that the process could take up to 12 months to complete. Turning back to the income statement, income from continuing operations for the three months ended February 29, 2008, was $36.2 million or $0.71 per diluted share on approximately 51 million shares outstanding.

However, when you exclude the non-cash charge to correct the carrying value of certain life insurance agreements the additional depreciation associated with the Daytona Live development project and the impairment of long live assets associated with fill removal process on Staten Island and the net book value of certain assets retired from service we posted earnings of $0.80 per diluted share for the 2008 first quarter. As described in the release this is compared to non-GAAP net income for the 2007 first quarter of $0.70 per diluted share.

Now to the balance sheet, at February 29, our combined cash and short term investments totaled $74 million. Current deferred income was $172 million and shareholders equity was $1.1 billion. Total debt at quarter end was approximately $396 million including $300 million in senior notes, $20 million in borrowings on our credit facility which were subsequently repaid in March, $67 million in tip bonds associated with Kansas and $9 million in debt associated with Chicagoland and Route 66.

Also during the first quarter we purchased 1.2 million shares of our class A stock for $50 million bringing the total number of shares purchased from December 2006 through February 2008 to approximately 2.8 million shares. This leaves approximately $119 million in remaining capacity on our $250 million authorized as of quarter end. We expect to continue to execute on our stock repurchase plan while maintaining strong financial flexibility positioned to take advantage of opportunities in our business.

In terms of our financial outlook, while we continue to keep a close eye on economic trends we reiterate our 2008 full year total revenue guidance of between $805 million and $825 million. The top half of this range anticipates growth in all of our major revenue categories in fiscal 2008. We also maintain our ratings guidance for 2008 of $3.05 to $3.15 per diluted share. While we posted solid first quarter results based on difficult macro economic conditions and that we are still early in the fiscal year. We continue to remain more comfortable at the lower end of this earnings range.

In conclusion, we remain well positioned for future success in 2008 and beyond. While we are in no way immune to a broad economic down turn we benefit from a business model in which a substantial portion of our revenues are contracted on a multi year basis with staggering maturities. This results in significant earnings and cash flow visibility. As we discussed in our call in January approximately 75% of our 2008 earnings per share guidance is contracted under NASCAR’s domestic television broadcast and ancillary media rights agreement.

This percentage is substantially higher when you layer in advance sales for tickets, sponsorship, advertising and hospitality and other revenues. We are very excited about the future of NASCAR and we are particularly pleased with the results so far in 2008. The competition on track is competitive as ever from both driver and car manufacturer perspective. Toyota, new to the sport is off to a terrific start and the new car and Sprint Cup is producing more side by side racing and green flag passes. These factors as well as many others are driving up viewership and interest in our sport.

ISC is uniquely positioned to benefit from the popularity of NASCAR. We continue to experience healthy demand from national corporations and regional businesses attracted by ISC’s premier events, nationwide presence, compelling intellectual property assets and professional expertise. We remain committed to enhancing our facilities to provide guests with truly thrilling and innovative entertainment that they will want to experience year after year.

Furthermore, we are exploring avenues for external development from both a track expansion perspective as well as opportunities to help our existing facilities become year round entertainment destinations. As a result we are very positive on the outlook of our business and remain focused on building long term value for our shareholders. With that I would like to open up the floor for questions.

Question-and-Answer Session

Operator

Our first question is coming from John Fox with Fenimore Asset Management.

John Fox –Fenimore Asset Management

I have a couple questions. Motorsports expense line was a little bit higher than I thought and I guess that is related to Daytona. Could you talk about what you think that will be for the year as a percentage of revenues?

Dan Houser

We did have some aberrations there in the first quarter. We had increased spending around the Daytona 500 the 50th running. This is a once in our lifetime event so we went all out to promote that event and that spending to support that event it returns that met our expectations there. Keep in mind that during the quarter that we had the events postponed at California. That resulted in both the Cup event and the nationwide event being run on Monday so that boosted that up.

Wes Harris

For the full year we had given guidance in December that we thought we were going to be at 22% to 23% when you look at that line items as a percentage of admissions and Motorsports related revenue. I think we are going to be closer to the high end of that as compared to the low end.

Dan Houser

The other thing, we are in a tough economic environment. It’s no secret that our consumer is getting hit pretty hard with gas prices and food prices that we may look, as we go through the year at our promotional and advertising spends and where that makes sense to strategically position ourselves there.

John Fox –Fenimore Asset Management

You are saying pull those back if it made sense.

Dan Houser

No, I would say otherwise to focus those on programs where we really feel we can have an impact.

John Fox –Fenimore Asset Management

To get people to show up.

Dan Houser

Exactly.

Wes Harris

Clearly we are not going to spend $200,000 to get $100,000 on the top line but I think what we’ve experienced in previous economic down turns is that where we have the exposure in our business is that we have a few 100 or 1,000 people not show up for the event. If people are purchasing their tickets closer to race day its hard for us to change our cost structure that far out. As Dan said, we want to continue to have a premium experience.

Typically what we’ve seen in the past we are trying to do as good a job as managing on it. You’ll lose some of the top line and you won’t be able to maintain the same margins that you would in better economic times.

John Fox –Fenimore Asset Management

You mentioned legal expense, was there legal expense in the quarter?

Dan Houser

Yes, there was. It was much less significant than it was year over year but we still got costs going out on the Kentucky appeal. It’s still unclear at this time what that’s going to mean as we go out on the timeline. There are some milestones in the appeal process coming up and it will depend on the response from the other parties.

Wes Harris

We spent about $1 million in Q1 on the Kentucky litigation.

John Fox –Fenimore Asset Management

What’s the timeline on the New York City land sale at this point?

John Saunders

We are completing the removal of the bad fill from the site. More so to your question we are in discussions with, I’m not at liberty to disclose who, but with two prospective buyers. Progress is being made. There is no purchase/sale agreement in place at this point but as I said, progress is being made. We remain cautiously optimistic that a transaction could be completed and get this thing off our balance sheet by the end of the year.

John Fox –Fenimore Asset Management

What is your intention on the buyback at this point?

John Saunders

We intend to be spending in the neighborhood of our free cash flow after our CapEx spending. It’s probably between $130 million to $150 million on the year in total.

Wes Harris

We did a bunch of purchases in the last several months. Right now we are probably going to pull back a little bit on that. We are still going to do $10 million plus but its going to be closer to that in doing $20 million a month.

John Fox –Fenimore Asset Management

John said $130 plus for the year is that fair?

John Saunders

I would say so. Like all businesses we are watching what happens with the economy. That’s assuming things stay on a course of what the current expectations are or if there is some catastrophic change our there we may revisit that.

Dan Houser

Ten million a months is the $90 plus the $50 is $140 so that how we got it.

Wes Harris

I think we’ll probably be a little closer to the higher end of the $130 to $150 range.

Operator

Our next question is coming from Tim Conder of Wachovia.

Tim Conder – Wachovia

A couple things here, clarification and I apologize if I missed it. The TV ratings can you give us an update and then also your guidance for the year does that include or exclude the items that you discussed, the depreciation and so forth?

Wes Harris

On the television ratings, to date we are up; it looks like around 6% on average household ratings for the Cup series. We’ve actually seen increases across the board pretty much all of the events except for the challenges because of weather out in California. That’s very positive, in no way are we trying to say that means that’s what it’s going to be for the full year but that’s definitely a great way to start the year. I think the broadcasters are doing a great job. There are a lot of compelling stories out there and a lot of good on track racing. Our guidance for the year does exclude those additional depreciation charges so you would look at that non-GAAP table that we have for Q1 and that would be factored into our full year guidance.

Tim Conder – Wachovia

Just to clarify on the TV ratings is that adjusted for the rain issues that you had at a couple events and that’s also NASCAR as a whole. You mentioned households are we talking households or are you talking rating points.

Wes Harris

We are talking about households, average households. That does adjust; the rain is out of there. There’s another part of your question that I didn’t answer?

Tim Conder – Wachovia

Are you talking NASCAR as a whole rating?

Wes Harris

Yes, that is season to date.

Tim Conder – Wachovia

Two others, a follow up to the previous line of questions regarding legal expenses. I think you gave us somewhat of an idea at the end of the year call that you had. Is this an update for the full year? Any additional color that you can offer on the AAA agreement in California. In discussions that we’ve had you said that not all of that was incremental part of it was renewing some existing things with AAA at multiple tracks. Any additional color you can give on that agreement.

Wes Harris

The AAA agreement is discrete to that facility. That is just at that facility.

Tim Conder – Wachovia

Was it linked in, in any way with AAA Nationwide?

Wes Harris

It’s not directly linked in that way but they are the largest club within that federation. Clearly they are going to be tapping the entire base of membership which is 50 million folks to try to promote that position. We think they are the perfect partner and this is a great model that we can use to take out and talk to other folks. It definitely is incremental, we talked about that it is multi million dollars a year. We haven’t talked about the numbers but I can tell you it is very, very significant. We look forward to trying to do other types of arrangements for other facilities.

Tim Conder – Wachovia

Is that a level loaded contract or have you got more of an escalator built into it.

Wes Harris

It’s got an escalator I believe between 4% and 5%.

Tim Conder – Wachovia

Any additional comments on the potential legal expenses for the year?

Wes Harris

Let me go back to the Auto Club deal, that’s a kager so I don’t know if its every year the same way but I know there is some escalator, I don’t know what the range is but that’s the kager over 10 years.

Tim Conder – Wachovia

Some of the media reports of $50 to $70 million for the total contract are those unreasonable or somewhat near reality?

Wes Harris

We can’t comment on that. The Kentucky is still unclear at this point. I’m talking about the amount of spending, we all feel very, very strongly that this thing is frivolous and it’s going to go away. We spent $1 million, we are probably going to spend, we won’t get up to the full $5 million we spent last year but it will probably be somewhere between $1 million and that number I just don’t know at this point until we get further into the process. They haven’t even filed their briefs so we don’t know exactly what they are going to say.

Operator

Our next question is coming from Bob Simonson of William Blair.

Bob Simonson – William Blair

A cash flow question, the Daytona Live, I think you said it might have been $5 to $10 million spending this year but it’s excluded from your CapEx number. Is half of that go through your cash flow or how much of that actually goes through the cash flow?

Wes Harris

That will be our spend, our portion of the spend so that full $5 to $10 million will go into that. That’s the portion of the equity contribution that we are making in addition to the land.

Bob Simonson – William Blair

That will go though the CapEx line?

Wes Harris

The reason why we excluded that from our existing facility guidance is we are trying to keep those segregated. We have the $80 to $100 million that’s sort of what we have been doing over the past several years. We wanted to try to be consistent so people can understand how to compare the year over year spending trend.

Bob Simonson – William Blair

If Kansas regulatory people don’t approve your bid do you go forward with any other project there or does that end any spending in Kansas City?

John Saunders

We don’t have any plans. If we were not to receive approval for the casino application we don’t have at this time any ancillary development plans for Kansas Speedway. As you may know there is substantial retail dining entertainment development around the facility to the west that exists today. It doesn’t mean we wouldn’t look at that in the future but there is no plan in the event that the project didn’t get awarded to us.

Bob Simonson – William Blair

Will you say if you did get awarded what this project might go for, the amount that it might cost?

Wes Harris

In our disclosures we’ve got something of $670 million. As you move through this process they’ll come back and they will ask questions and that will further define exactly what that project costs. It’s going to be in excess of $600 million.

Bob Simonson – William Blair

To clarify on Tim’s question, what’s included in the estimates? Last year you made $2.85 on a non-GAAP basis the first quarter was $0.70 that means its $2.15 in the remaining three quarters of last year and this year $3.05 to $3.15 if I take out the $0.80 non-GAAP its $2.25 to $2.35. That’s a projected gain in a range of 5% to 9%. Have I done that right?

Dan Houser

Yes, I think so. I didn’t add and subtract as fast as you did.

Bob Simonson – William Blair

That’s the correct process to go through?

Dan Houser

Yes.

Bob Simonson – William Blair

Lastly, you’ve talked quite a bit about sponsorships. On a going forward basis an awful lot of companies that either were in, like the Google that were assumed to be not terribly economically sensitive have turned out to be, despite the internet and sponsorships and advertising a little bit more sensitive than people thought. Are you finding it tougher on a going forward basis to interest sponsorship? You’ve had a lot of good success in the last couple of years, is it getting any tougher?

Dan Houser

We have great strong demand for our sport. I think that’s because of the nature of our fans, the fan affinity. We are continuing to feel success there. Where we have had softness in the past in that area will be around a lot of times not going back on the official status and things like that. You might see some of the associated spending on hospitality and those types of things, entertainment around those sponsors will draw back before actually stepping away from the sport. It will remain to be seen, this is really a consumer led down turn right now. It will depend on how it continues how it impacts the corporate side. We feel like we are well positioned to compete for the sports marketing dollar.

Bob Simonson – William Blair

From the standpoint of your marketing guys going out and trying to attract new fortune 500 or any corporate sponsor for that matter. Is there a push back that, we’d really like to do it but not now. Whereas maybe a year ago they might have said do it.

John Saunders

We are not seeing any significance of that. What we are doing though is we have a tremendously brand loyal fan base and we are energizing our marketing team led by Roger VanDerSnick and Daryl Wolfe through innovative ideas bringing new opportunities, bringing marketing solutions to these potential or renewing partners. Overall we are investing in our marketing efforts whether it’s on the human capital side or through the application of technology.

If you look back at this company after we went on the NASDAQ in the late 90’s and you look at the company today in terms of it has transformed dramatically from what I would call an order taking company to a high powered marketing and sales company. There’s a next generation of that to come which I think is going to give us, its not going to completely snuff out a macro economic turn down but it gives us a competitive edge by offering what marketing opportunities companies are going to deploy if we come in and offer solutions that go beyond the kind of things that we did in the past.

That’s the approach strategically we are taking to this. How do we make our marketing platforms, our marketing solutions more compelling, interesting and ultimately returning a better RLY than some other opportunity that a consumer product or B2B company may be pursuing.

Dan Houser

I think the 50th running of the Daytona 500 was probably the best example we could throw out.

Operator

Our next question is coming from Alvin Concepcion of Citi.

Alvin Concepcion – Citi

I wanted to see if you guys could quantify what you were seeing in advanced ticket sales now year over year?

John Saunders

In my scripted remarks our trends right now are down. It’s no secret what’s happened in the economy. Particularly this down turn is consumer driven; it’s something that hasn’t happened at this level in decades. We are seeing year over year trends on advanced sales to be down. As I mentioned some of this is timing of renewals and other related programs. Some of it may be people waiting to buy closer to the event. We anticipate, right now we are looking at something in the high single digits being down from year over year.

Wes Harris

That’s on our advanced sales trends. That’s not saying where we think we are going to end up for the year it’s just where we are at this point in time.

Alvin Concepcion – Citi

Looking past this consumer down turn where would you see attendance turning larger and more normalized growth rate you’d expect?

Wes Harris

I’m a little confused about your question.

Alvin Concepcion – Citi

It’s trending down high single digits; historically I think you guys have been--attendance has grown low to mid single digits. When things get back to normal, past the consumer down turn, is that the same trend you’d see for attendance growth?

Dan Houser

As we move out into better economic times that you could look at seeing something in that single digit type growth. You are not adding a bunch of events and you are not adding a bunch of capacity so I’m not going to say high single digits but I think we can definitely have improvements. This year is definitely going to be a challenge. Let’s be very clear it’s going to be a challenge but we believe that we have that factored in adequately in our guidance.

Operator

We have time for one more question. Your final question is coming from John Fox with Fenimore Asset Management.

John Fox –Fenimore Asset Management

I think this question was answered but I want to confirm the guidance is using $0.80 for the first quarter, excluding all the impairment, the depreciation, etcetera?

Dan Houser

That’s correct. Use the non-GAAP table in the release.

John Fox –Fenimore Asset Management

When Wes mentioned it earlier he mentioned the depreciation so I wanted to be sure we are using everything.

Operator

I would now like to turn the floor back to management for any closing remarks.

John Saunders

I’d like to thank all of you for joining us on the call this morning. To quickly summarize, we are very proud of the first quarter. We are watching these macro economic conditions and consumer trends very, very closely. We are continuing to invest in our fan experience and will continue to do so through this difficult time. As Dan pointed out we continue to reaffirm our guidance but more so towards the lower end of the range. We look forward to talking to you at the next earnings release call in three months. Thanks for joining us and we’ll talk to at the next quarter.

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Source: International Speedway Corporation F1Q08 (Qtr End 02/29/08) Earnings Call Transcript
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