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International Speedway Corporation (NASDAQ:ISCA)

Q2 2008 Earnings Call

July 9, 2008 9:00 am ET

Executives

Wes Harris – Sr. Director IR

John Saunders – Executive VP & COO

Dan Houser – VP & CFO

Analysts

Paul Swinand – Stephens Inc.

Alvin Concepcion - Citigroup Global Markets

Timothy Conder – Wachovia Capital Markets

Edward Williams – BMO Capital Markets

Joe Hovorka – Raymond James

Unspecified Analyst – Citadel

Rob Nye – Equity Advisors

Eugene Thomas – Prudential

Operator

Good morning and welcome to the International Speedway Corporation 2008 second quarter conference call. [Operator Instructions] I would like now to turn the conference over to 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 are here to discuss the company’s results for the second quarter ended May 31, 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 their 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’s beliefs and expectations and which are not historical facts or applied [perspectively] are considered forward-looking statements. It’s important to note that our 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-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 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 that such statements are material. So, with these formalities out of the way I’ll turn it over to John Saunders.

John Saunders

Thanks Wes and good morning everyone. During the second quarter we held several successful race weekends and hosted capacity crowds for our May Sprint Cup Race at Richmond, its 17th in a row and at Darlington. In fact we hosted nearly one million paid attendees at our events during the quarter which demonstrates that consumers continue to view motorsports, particularly NASCAR, as an important part of their lifestyle despite the current economic environment.

Moreover, television ratings this year for the three national NASCAR Series are up over last year which is another example of continued fan interest. For our second quarter lower attendance contributed to total revenue results that were below expectations. As one would expect, the continued headwind in the macroeconomic environment is impacting consumer trend.

On a positive note we did a very good job of controlling expenses without sacrificing the quality of the race experience for our race fans. In addition we continued to see important success at Motorsports Authentics as they turn around that business. Significantly contributing to our growth in earnings per share in 2008 second quarter was a lower share count as a result of our aggressive return of capital program through share repurchases.

Looking at the specific events of the second quarter, Daytona hosted Bike Week in early March highlighted by the AMA Supercross and the 67th running of the Daytona 200, both presented by Honda. Inclement weather impacted walk-up sales for both events.

Homestead-Miami Speedway ran the 2008 IRL season opener GAINSCO Auto Insurance Indy 300; the historic first race of the IndyCar Series and Champ Car reunification. In addition the track held the Grand-Am Rolex Series, Grand Prix of Miami Sports Car event.

Martinsville Speedway hosted a weekend of NASCAR Craftsman Truck and Sprint Cup racing, highlighted by the Goody's Cool Orange 500. Unseasonably cold weather for the Cup event impacted attendance-related revenues.

Phoenix International Raceway hosted a NASCAR Sprint Cup and Nationwide weekend, highlighted by Jimmie Johnson winning the Subway Fresh Fit 500; his second consecutive Cup victory at that track.

Talladega Superspeedway held a Sprint Cup and Nationwide race weekend, which featured Joe Gibbs Racing sweeping the two-race Aaron's Dream Weekend. Also of note was an increase in television viewership for the Cup race of 8% over 2007.

Kansas Speedway ran a successful ARCA RE/MAX, Craftsman Truck and IndyCar weekend. In the Roadrunner Turbo Indy 300, Dan Wheldon held off Tony Canon and Scott Dixon in the final laps to become the first driver to win two IndyCar races at the facility since opening in 2001.

As I mentioned earlier, Richmond International Raceway recorded its 17th consecutive sellout for its Sprint Cup event. The weekend was also highlighted by the successful running of the NASCAR Nationwide Lipton Tea 250.

Darlington Raceway hosted a great weekend of Sprint Cup and Nationwide racing, highlighted by the fourth consecutive sellout of the Dodge Challenger 500. We were also pleased to record a 16% increase in television viewership for the event.

Now looking to our third quarter events, Watkins Glen International hosted an exciting weekend of sports car racing in June, highlighted by the fourth Grand Am Daytona Prototype victory of the season for Scott Pruett and Memo Rojas in the 27th running of the Sahlen's Six Hours of The Glen.

Route 66 Raceway held the 11th annual Torco Racing Fuels NHRA Nationals. Fans were treated to four days of thrilling racing and watched Funny Car driver Tony Pedregon win the 38th time in his career.

Michigan International Speedway hosted the NASCAR Sprint Cup, Craftsman Truck and ARCA RE/MAX series in mid-June. Fans were treated to an exciting weekend of racing that culminated with Dale Earnhardt Jr. winning the LifeLock 400.

At Richmond’s IRL IndyCar weekend in late June, a record crowd was on hand to see Tony Canon win the SunTrust Indy Challenge.

This past weekend, Daytona hosted Cup, Nationwide and Grand-Am racing, highlighted by a terrific Coke Zero 400 Powered by Coca-Cola. The race featured 21 lead changes and 49 green flag passes and another nail-biting finish that ended with Kyle Busch winning his first Sprint Cup victory at the historic facility.

Watkins Glen hosted an exciting weekend of IndyCar racing, highlighted by increased attendance for the Camping World Grand Prix at The Glen and Ryan Hunter-Reay's first IndyCar series victory.

For the remainder of the quarter, we will host weekends anchored by Sprint Cup races at Chicagoland Speedway, Watkins Glen, Michigan and Auto Club Speedway. I would note that in 2007 Auto Club’s NASCAR race weekend was held in the fiscal fourth quarter.

Also in the third quarter through our limited partnership with GMI, the second annual NASCAR Nationwide and Grand-Am racing weekend will be held in Montreal, Canada.

Turning our attention to corporate marketing, corporate sponsors continue to view motorsports, particularly NASCAR, as an important component to their overall marketing programs. And while the economic conditions are making the process of securing deals more time consuming, spending by our partners remains healthy. As a result we continue to expect year-over-year growth in both sponsorship and hospitality revenue.

Looking specifically at race entitlements, we in discussions with multiple companies for Kansas Speedway Sprint Cup race scheduled for late September. At this same time last year we had two opened or unannounced Cup event entitlements. With a portfolio of well over 50 major events having only one race title position under negotiations is notable given the current economic landscape.

Now turning to capital spending, for 2008 we anticipate spending at our existing facilities to approximate $100 million. Included in this estimate are a number of significant projects such as installing track lighting at Chicagoland, which will enable the running of the facility’s Cup race this Saturday under the lights; addition to Dayton Sprint Fan Zone and improvements to the track’s infield road course; grandstand seating enhancements at Michigan; addition of escalators at Auto Club Speedway and Richmond to improve traffic flow; new media centers at Homestead-Miami and Watkins Glen; a new tunnel and racing surface at Darlington; land and related improvements at certain facilities for 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 $5 million and $10 million in estimated spending for Daytona Live!, the mixed-use entertainment destination development we are pursuing in a 50/50 joint venture with The Cordish Company. Construction is now underway on the office building that will serve as ISC’s, NASCAR’s and Grand Am’s new corporate headquarters. We currently anticipate completion of the office in late 2009. In addition, during the second quarter we announced Cobb Theatres will anchor Daytona Live! 265,000 square foot mixed-use retail, dining and entertainment area, with a 65,000 square-foot, 14-screen theater. Final design plans for retail, dining and an entertainment portion of the development are expected to be completed by the end of next month.

As we have discussed on previous calls we have also partnered in a joint venture with Cordish on an exciting opportunity for the development of a Hard Rock Hotel & Casino on the property adjacent to Kansas Speedway. The Kansas Lottery Commission has evaluated the proposals and forwarded them to the Lottery Gaming Facility Review Board, which has final approval in selecting the company to construct and manage the casino. The Review Board will be holding public meetings for the final decision anticipated this September.

Another bright spot for the company is the progress of the turnaround at Motorsports Authentics, our motorsports-related merchandise 50/50 joint venture with Speedway Motorsports. During the first half of fiscal 2008 MA earned a profit of $9.5 million which resulted in the contribution of $4.8 million in equity income to ISC’s pre-tax results. To put MA’s improvement in perspective, MA lost $7.3 million in the first half of fiscal [2000], $3.7 million of which was ISC’s portion. This equates to almost a $17 million swing in profitability for MA when comparing the two six month periods.

While we are clearly pleased with the continued progress of MA we are keeping a close eye on the impact of the broader economy on the business. As a result we are reiterating our earnings guidance of breakeven for MA’s 2008 full year.

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

Dan Houser

Thanks John and good morning everyone. As John discussed despite a challenging economic environment we are pleased to report solid second quarter results. Let’s take a look at the income statement for the quarter.

Admissions revenue for the second quarter decreased to $53.4 million primarily due to lower attendance at certain events reflecting the economic conditions and in some instances inclement weather. Motorsports related income for the quarter of $101.2 million is essentially flat compared to fiscal 2007. Increases in television broadcast ancillary rights for our NASCAR events as well as increased sponsorship revenues at certain events conducted at Richmond, Talladega and Martinsville, were offset by decreases in sponsorship and advertising revenues primarily at the Kansas and Homestead IRL weekend.

The decrease in food, beverage and merchandise revenue to $17.7 million in the quarter is primarily attributable to previously noted lower attendance. The increase in NASCAR direct expenses to $34.7 million is primarily due to higher television broadcast rights fees, a percentage of which are paid as part of prize money as well as increases in point fund money.

Through execution of prudent cost containment strategies, motorsports related expense rose only 1% to $38.7 million. The slight increase is primarily associated with higher promotional and advertising expenses. Food, beverage and merchandise expense decreased to $11.7 million for the quarter primarily due to variable costs associated with previously discussed attendance decreases.

General and administrative expenses decreased to $28.3 million for the quarter. Even when excluding the substantial reduction in legal fees for the Kentucky litigation, and certain operating costs related to the pursuit of development projects year-over-year, costs are down as a direct result of our company-wide cost containment initiative.

Depreciation and amortization for the second quarter decreased to $17.4 million. The decrease is primarily due to lower accelerated depreciation associated with our Daytona Live! project. Partially offsetting the decrease was increased depreciation expense attributable to capital spending for facility enhancements and related initiatives.

The $1.1 million impairment of long-life assets is largely due to an increase in the estimated costs of fill removal related to our Staten Island property. These fill removal activities were completed in the second quarter of 2008.

The decrease in interest income to $384,000 is primarily due to lower cash and short-term investment balances driven by use of cash for our share repurchase program. Interest expense for the quarter decreased to approximately $3.3 million due to higher capitalized interest and lower average borrowings on our revolving credit facility. The $3 million in net income from equity investments is related to our 50% interest in Motorsports Authentics.

Our effective tax rate for the second quarter is 39.5%. The higher rate in the 2007 second quarter was due to the tax treatment associated with losses incurred by Motorsports Authentics and certain state tax implications relating to impairment. As outlined in our press release we anticipate our full year effective tax rate on a non-GAAP basis will range between 38% and 39%.

Income from continuing operations for the three months ended May 31st, 2008 is $26 million, or $0.52 per diluted share on approximately 50 million shares outstanding. However, when you exclude the additional depreciation associated with the Daytona Live! development project and the impairment charges associated with the fill removal process on Staten Island, as well as the net book value of certain assets retired from service, we posted earnings of $0.54 per diluted share for the second quarter.

As described in our release, this is compared to non-GAAP net income for the [2000] second quarter are $0.51 per diluted share. Now let’s review the balance sheet.

At May 31, our combined cash and short-term investments total $81 million. Current deferred income is $200 million and shareholders equity is $1.1 [billion]. Total debt at quarter-end is approximately $376 million including $300 million in senior notes; $67 million in TIFF Bonds associated with Kansas; and $9 million in debt associated with Chicagoland and Route 66.

It is important to note that $150 million of the senior notes are due in April, 2009. Last month in anticipation of refinancing the senior notes we entered into a swap agreement to affectively lock-in a substantial portion of the interest rate on a $150 million notional amount. Also of note is that we are currently reviewing certain accounting implications related to our Daytona Live! joint venture that could result in consolidation of the office building currently construction in our third quarter which would include approximately $51 million in non-recourse finances.

During the second quarter we purchased 967,000 shares of our Class A stock for $40 million bringing the total number of shares purchased from December, 2006 through May, 2008 to approximately 3.8 million shares, leaving 79 million in remaining capacity on our $250 million authorization as of quarter-end.

We expect to continue executing on our stock repurchase plan while maintaining our strong financial flexibility positioned to take advantage of strategic opportunities. In terms of our financial outlook, we expect consumer spending trends will continue to be impacted by challenging economic conditions and that this will result in a reduction of our attendance-related revenues in the low to mid single-digits on a percent basis year-over-year.

On the other hand, we anticipate year-over-year growth in sponsorship, hospitality, television and certain other motorsports related revenues. As a result we have refined our 2008 full-year total revenue guidance to a range of between $805 million and $815 million. We currently expect our full-year non-GAAP EBITDA margin to range between 40% and 41% and our 2008 non-GAAP operating margin to range between 31% and 32% of total revenues. We are narrowing our 2008 full-year non-GAAP earnings guidance to a range of $3.05 to $3.10 per diluted share and given the current economic outlook, we are much more comfortable at the low end of this earnings range.

In conclusions motorsports, and particularly NASCAR, remains a stable and growth industry. Despite challenging economic conditions not experienced in many decades, we continue to host huge crowds week in and week out. This demonstrates the strength and the avidity of a core fan base that craves the visceral experience that can only be felt by attending a live event.

These fans are also fiercely brand-loyal which attracts corporate partners focused on maximizing the return on their promotional and advertising investment. Specifically for ISC, our significant earnings and cash flow visibility places us in an optimal position to weather the downturn. In addition, supported by a solid financial profile, we possess the flexibility to capitalize on business opportunities that may present themselves as a result of the current environment.

With that, we are ready for your questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Paul Swinand – Stephens, Inc.

Paul Swinand – Stephens, Inc.

First question, admissions were down 6.6% and in your comments you said that the guidance assumes low to mid single admissions down for the year, is there anything else that you’re planning down in the guidance?

Wes Harris

What we talked about on the attendance-related revenues being down, low to mid single-digits for the full year, that’s going to include admissions as well as its going to include your food, beverage and merchandise.

Paul Swinand – Stephens, Inc.

So when you say attendance-related, you’re including the food and beverage?

Wes Harris

Yes sir.

Paul Swinand – Stephens, Inc.

But again that’s slightly better then you tracked in the second quarter which was down—at least from the admissions line.

Dan Houser

Well remember, we had a strong first quarter with Speed Weeks, so that will impact the overall results for the year.

Paul Swinand – Stephens, Inc.

So it’s averaging out.

Wes Harris

And when you look at motorsports-related income, TV will continue to grow through Q3 and Q4 and that’s contracted so that is what it is—that little north of 2% for the year. And then when you look at sponsorship and hospitality, we still anticipate for the full year that we are going to be up on those. We will be down on the remaining portion, the last 15% of that line item, that is a combination of advertising and camping and track rentals and things like that. Those types of things have been impacted in the business.

Paul Swinand – Stephens, Inc.

Just to be clear obviously you’ve made gains on Motorsports Authentics in the first two quarters, to breakeven you’d have to have a loss, that’s what you’re planning?

Dan Houser

That is the way we anticipate that business cycling. What happens is while you’re continuing on with events, a lot of the buying in some of your other channels is heavily weighted to the first two quarters of the year and then they will begin the cycle of buying for the following year. We hope to see great performance out of that entity but that’s pretty much in line with what we had anticipated.

Wes Harris

That being down in Q3 and Q4 was in line with the guidance that we gave in December as well. So we’ve been consistent with that.

Paul Swinand – Stephens, Inc.

On the admissions, did admissions track worse as time progressed through the quarter, is there any color on the gas price sensitivity and did the environment actually change between this conference call and the last or has it been tracking the way you assumed all year?

Wes Harris

Our advanced sales right now at this point—we’re still down about in the high single-digit but when you compare it to this same point last year, on a percentage basis. So that’s consistent with where we were at several months ago. Clearly the gas prices increasing doesn’t help and it definitely will impact events that are more regional in nature but I think the big take-away from all of this is we’re still hosting hundreds of thousands of people at—the 100,000 people at Daytona, 100,000 people at Michigan, well over that at Talladega as well, these fans, they’re getting pinched and they are cutting back on some of their spending when they come to the track, but they still want to come do this. It’s a release for them, its an escapism, the longer and longer that this downturn is protracted the more challenging its going to be not just on the consumer side but even on the corporate side but we’ve been, given this environment, very pleased with our results.

Operator

Your next question comes from the line of Alvin Concepcion - Citigroup Global Markets

Alvin Concepcion - Citigroup Global Markets

I just wanted to know, I think in your last call you mentioned that you wanted to keep pricing flat, what is sort of the thinking on that now and are you pretty comfortable with pricing given the tough environment?

Dan Houser

Well we certainly are not anticipating any price changes in 2008. Once we issue pricing that we—we maintain our pricing structure and we believe that it’s important not to reward the ticket buyers who would buy late in the process. Having said that, as we look out into 2009 I think that we’re going to be very modest on any price increases or any pricing decreases, what we generally do is rather then reacting to short-term economic trends is we look at each facility and evaluate are there sections of the grandstands that look like we’ve got pricing pressure? Or where we’ve got some opportunity and kind of address pricing in that manner. So I think that we anticipate at this point going into 2009 that it’ll be fairly flat or very low single-digits. I don’t anticipate anything like, at this point, of double-digit pricing decreases or anything like that.

Alvin Concepcion - Citigroup Global Markets

If you could please give us an update on your efforts to open a facility in Colorado and also Pacific Northwest and Metro New York.

John Saunders

Right now in Metro New York, we continue to have obviously interest; we’ve stated that on several previous calls have interest in that market but at the moment we’re very focused on selling the property on Staten Island. Discussions are moving along with regard to that sale. Right now there is nothing going on, no boots on the ground, there’s nothing going on in the Pacific Northwest and we still remain interested in the Denver market. But right at the moment, given the current economic environment we’re really focused on our core operations.

Operator

Your next question comes from the line of Timothy Conder – Wachovia Capital Markets

Timothy Conder – Wachovia Capital Markets

The TV and ancillary right number for here in the second quarter, could you repeat that?

Wes Harris

It was a total of television and ancillary was $59.5 million for the quarter and the breakout was $3.6 million in ancillary and $55.9 million in broadcast.

Timothy Conder – Wachovia Capital Markets

From a conceptual standpoint given the demographics of the fan base attending the races, and what you’ve talked about with the squeeze going on given the economic situation, should we be seeing a little bit of a benefit on some of the TV side as fans say, hey I’m going to cut back a little on going to the events and maybe a little bit from that standpoint, and granted it won’t move the numbers a lot, but should there be a little bit of that substitution effect going on?

John Saunders

We think so and that’s the good news is that while this pinch is on and it won’t last forever, what the good news is, is that our fans are not leaving our sport. And so the broadcast partners are happy. We’re happy about that and we hope to see that trend continue throughout the year and at some point as these headwinds diminish perhaps we’ll start to see a return to the live events. But we’re pleased with what’s going on in the television arena.

Wes Harris

You’re exactly right when you talked about the increase, the amount of attendance that the people that—the minimal amount of people that aren’t coming wouldn’t substantiate the amount of the increase in the television so there’s definitely people—more people are watching television. The biggest driver of that growth is because of what’s going on track, the competition is stronger then ever, I think the broadcasters are doing a great job of focusing on what’s going on track and I think there’s—Dale Earnhardt doing well helps. There’s a lot of good story lines. Its very compelling entertainment so I think that’s what’s driving the increase.

Timothy Conder – Wachovia Capital Markets

Yes, the numbers of the attendance down as you mentioned Wes do not substantiate the TV increase alone. Kentucky, could you give us what you did spend in the second quarter there and maybe the status timetable, a little update as far as potentially getting that all resolved and what your expectations are for expenses for the balance of the year?

John Saunders

From a status point, we expect to have our case, as you know we’re in appeals, and have our case fully briefed by the end of the year. Due to some changes in court procedures, we now expect some sort of ruling in early to mid 2009.

Wes Harris

We spent a couple of hundred thousand dollars, about $215,000 in the quarter. For the year we’ll spend between $1 million and $2 million, that’s what we’re anticipating.

Timothy Conder – Wachovia Capital Markets

You talked about Staten Island, and I think you had mentioned before that you really want to get that consummated here this year, you’ve got several interested parties, does that seem reasonable this year that you’ll get that done? In conjunction with that, you’ve talked in the past also about deposits that you have with the IRS and that potentially some of those normal ongoing audits could be completed this year. Maybe just give an update on that status. And then if you get a substantial amount of cash out of the combination of those two, could we see a material acceleration in the share repurchase?

John Saunders

With respect to Staten Island, we said before that we were cautiously optimistic about something happening by the end of the year, as this economy drags on we still hope for a closing by the end of the year. But it’s possible something could get thrown into 2009 so that’s where we’re at on that.

Dan Houser

Where we stand on the IRS deposits, we are in the appeals process with the service. It’s been just about a year now. We have done everything that we can do on our side of the table to move the process along and we’re just subject to the movement of service on this issue. I continue to be cautiously hopeful that there may be some resolution that would result in the return of some cash to us, but quite honestly have not had any indication one way or the other from the agent that’s working on this of his thoughts on our offers to reach a settlement.

Wes Harris

There is no statutory timeline or anything like that that they’re required to respond by a certain amount of time. This is not—this happened—this is not atypical for this to take this long, this happens to other companies, because we looked into it, because quite frankly it’s a little frustrating to us as well.

Dan Houser

To finish on Wes’ comment, what I continue to hear from the agent is apologies in that they are extremely overloaded, understaffed and please excuse their untimely response. As far as the use of cash, we continue to be focused on the robust return of capital program. It’s possible depending on the amount of cash we would receive from the IRS and/or Staten Island that we might look at something beyond just open market purchases. We continue to watch our level of free cash flow and in a challenging environment not only earnings are impacted, but the real deal is the cash. But we—right now we don’t plan our business around either one of those things coming to fruition at any particular time and so in just our core business operations we have built into that continuing meaningful return of capital through open market purchases.

Timothy Conder – Wachovia Capital Markets

On Motorsports Authentics, again even despite the environment here things like—you have kind of got that ship righted here, or the joint venture has, looking into 2009 are you at the point yet where you can go to some of the mass merchants, the Wal-Marts and others of the world and say, hey we’ve got our ship righted, now we feel we’re comfortable, ready to expand. Is that a viable potential for 2009?

John Saunders

In fact that’s underway now. They have been working on opening up channels of distribution. Its part of what’s driven their success. Obviously they’ve built a strong management team, they’re managing the costs extremely well, a watchful eye on inventories. They’re underway planning 2009 and we’re optimistic although as I said in my remarks, that we’re going to keep a close eye on it along with our friends at Speedway Motorsports, given the current economic environment. But opening up channels of distribution is clearly a strategy.

Operator

Your next question comes from the line of Edward Williams – BMO Capital Markets

Edward Williams – BMO Capital Markets

To follow-up on Tim’s questions with regards to Motorsports Authentics, can you give us an idea as to how you get to the breakeven? Are we looking at kind of equal losses in the third and the fourth quarters or is one larger then the other?

Dan Houser

I believe it’s weighted a little more towards the fourth quarter.

Wes Harris

Yes, that’s exactly right Dan. It’s not materially different. It’s not like one is way down and the other one is flat or something like that.

Edward Williams – BMO Capital Markets

But the fourth quarter should be a larger loss then the third quarter?

Wes Harris

Yes.

Edward Williams – BMO Capital Markets

Looking at Kansas City, what is the timing at this point, what should we expect to hear and when with regards to your proposal?

John Saunders

We expect, I think the formal presentations and public hearings are in early August and we expect a decision sometime in the September, October timeframe. So we’ll know by the end of the year whether we’re in or not.

Edward Williams – BMO Capital Markets

Can you just give us some color as to how you’re tracks have been performing regionally; just give us some added color as to how California is and Michigan and the economic sensitivity that we’re seeing in some of those markets?

John Saunders

With respect to California which has now been, with the new naming rights deal, has an outstanding partner with The Auto Club of Southern California and the name of the facility being changed to Auto Club Speedway. I think that’s going to bring great momentum in the marketplace. The demographics match up very nicely. Clearly like any other market in the country there’s some challengers but this is going to give them—this is a game-changer for them and so we’re optimistic in spite of the economy that things will start to improve out there.

With regards to Michigan, clearly they’ve been not just this year, but in the last several years, heavily impacted by the domestic auto industry in that part of the country, although as Wes touched on, these are still very large events and a lot of people, 100,000 plus, they’re big events. They had a great weekend this past June with Junior getting his first win in a long time. So the team has been quite innovative in spite of the challenges that they’re having both on a regional and a macro basis. The team’s done a great job up there of getting folks to come to the races and so. And typically the August event because school is out, is the bigger event of the two Cup events and its trending in that direction. So I think they’re doing a pretty good job in face of what they’re up against.

Edward Williams – BMO Capital Markets

Looking to the buyback for a moment, there’s about $80 million roughly left in the buyback program I think, should we assume that you’re going to continue to invest in it the way that you did in the last quarter or is there anything implicit in the guidance that we should be aware of?

Dan Houser

Well I think that we had discussed earlier in the year that we anticipated that we would spend at the level of free cash flow post—after our CapEx spending. That ranges 150, 140, probably more on the 140 side with weaker financial results. So that’s really the range that we’re looking at under the plan is to come in around in that area for the year. The stock is again down around $40 or a little under which makes it more interesting to us but again we probably will stay within that free cash flow range.

Edward Williams – BMO Capital Markets

Just if you can remind me, what is the first half, how much have you spent in the first half of the year?

Dan Houser

We spent $90 million year-to-date.

Operator

Your next question comes from the line of Joe Hovorka – Raymond James

Joe Hovorka – Raymond James

What’s the share count at the end of the quarter as opposed to the average? Do you know what you ended it at? So we’ll be entering the quarter with whatever the number is?

Dan Houser

At the end of the quarter it’s basically about 49.5.

Joe Hovorka – Raymond James

And then the motorsports-related income ex TV and the ancillary rights looks like it’s down, what is that, what’s driving that down? If I back out the TV and ancillary rights you gave out of the motorsports-related income, the remaining income is down.

Wes Harris

We were down in sponsorship and in hospitality. Sponsorship was primarily driven by I think Dan had some discussion in his prepared remarks I believe, about the sponsorship entitlements at our IRL event in Homestead and Kansas. We actually did—which was partially offset by better results for our sponsorship, results for our NASCAR events. Hospitality, part of what you find in hospitality is that we’re not—corporations are, they’re still spending their sponsorship dollars, they’re doing their—fulfilling their commitments and things like that, but they may not be bringing as many people to the races. So that’s where we’re impacted there. But for the full year, we still anticipate that we will be up on sponsorship as well as hospitality.

Operator

Your next question comes from the line of Unspecified Analyst – Citadel

Unspecified Analyst – Citadel

Does the Board have to meet to increase the authorization about 250 for the share repurchase because its obvious to everyone that at an average price of $40 a share, if you spent say $340 million, you would in effect be buying back a 165-seat track, and I would think that with the financial balance sheet in the position that its in, that this would be very doable in the next year or so. I was just curious how that worked, if The Board has to meet or if they’re going to increase that authorization some time during this year.

Dan Houser

First of all we have a sub-committee of The Board that looks at share repurchases and we usually circle up and at least talk every quarter about what the outlook is, if we want to change parameters or whether we want to have any increases and then we also have Board meetings four times a year. We have plenty of opportunity within our current authorization to reload the program.

Wes Harris

The full Board has to approve an increase in authorization but to delegate the authority about how to administer the program down to the share repurchase committee that includes a number of independent Directors.

Operator

Your next question is a follow-up from the line of Paul Swinand – Stephens, Inc.

Paul Swinand – Stephens, Inc.

If you had to net all your TV increases, you talked anecdotally about a few of the increases, can you give us a quarter-to-date, or a year-to-date what TV is up net across all the events, if you averaged them all together? I’m talking about the TV ratings and the--

Wes Harris

Television ratings for the Sprint Cup Series and then I’m talking about average households here because of a rating on cable delivers a different amount of viewership then a rating on broadcast, Cup is up 5% on households, the Nationwide Series is up 8% which is great because there’s even been two less events on network this year, so that’s outstanding, and then the truck series, The Craftsman Truck Series is up 18%. So that’s good stuff.

Paul Swinand – Stephens, Inc.

On the admission side, if you had to breakout any one class of events, like are the Craftsman or the IRL suffering more? You mentioned in your prepared remarks that some of the IRLs actually had record increases, is it sort of across the board and really geography-related or are some classes of events down more then others?

Wes Harris

What we seeing is very—what we anticipated and what we’ve seen in other economic downturns. Clearly this is a little bit more—at a different level then we’ve seen in—you’d have to go probably back to the early 90s to see such a consumer-led pull-back, but what we’re seeing is that the people are waiting to purchase their tickets longer. And that’s why you’re seeing that in the advanced sales. They’re still coming to the Cup events, to the anchor events, although we’re down in the low single-digits attendance year-to-date which we anticipated.

What they’re doing though is, is they’re not coming to as many support events. So they still want to go to the weekend but they may not be going to all of the events and so that’s what we anticipated and that’s what we’re seeing.

Paul Swinand – Stephens, Inc.

But when it’s a separate event like the IRL, even though it’s a much smaller event, it’s still the anchor.

Wes Harris

Yes it is but the Cup is the 800-lb. gorilla. The IRL is a great product, they have great racing but the Cup drives it.

Paul Swinand – Stephens, Inc.

You’re saying the Cup isn’t off as much as the rest.

Wes Harris

That’s right.

Paul Swinand – Stephens, Inc.

How are 2009 sponsorships tracking, theoretically two-thirds to three-quarters should be just rolling over, correct?

Wes Harris

Yes, that’s right.

Paul Swinand – Stephens, Inc.

And are they, I know that in your prepared remarks you said that you’re actually still ahead of last year even with Kansas City being unsold, is 2009 shaping up both pricing-wise and negotiation-wise, do you feel like you’re holding your own for 2009 as well?

Wes Harris

Yes, well I think they’re really spending all of their efforts right now focused on 2009. You have to—once you get about half way through the year, you’ve have to turn the corner and you have to move on. These discussions—and it depends on who we’re talking to, their taking longer to do the prospecting stage. We still have a lot of interest, people want to participate, we’re not having a problem where people aren’t fulfilling their obligations or anything like that. Just looking at title sponsorships, we talked about on the Cup Series, we have the [inaudible] entitlement open and we’re hopeful we’ll get something done this year. We’re not going to fire-sale it or anything like that.

But beyond that we have five title sponsorships that expire in 2008. So it’s not like we have half of our title sponsorship inventory that’s coming due. And the important thing to remember too is we talk a lot about title sponsorship because they have the most visibility, but it’s only about 30% of our gross sponsorship revenue. When you look at our gross sponsorship revenue we’re selling in excess of $130 million of stuff to hundreds of marketing partners. I can’t sit here today and say what we’re going to be up or if we’re going to be flat or whatever, but we have a lot of interest and our guys are pushing hard.

Operator

Your next question is a follow-up from the line of Timothy Conder – Wachovia Capital Markets

Timothy Conder – Wachovia Capital Markets

I guess continuing along that sponsorship question line, is The Auto Club agreement in California, is that a significant part of driving the year-over-year increase here in sponsorship and if so, can you give any type of details on that?

Wes Harris

It definitely contributed but it didn’t contribute as much as you probably think because Auto Club already had a title sponsorship position there for the Spring Cup Event. So it definitely was incremental and it has some growth built into it. I think it’s around 4% or 5% a year which is good.

Dan Houser

And which is typical of most of the agreements that we enter into so that’s—when you put all of that together, that’s really driving a lot of the increase.

Wes Harris

Yes and our guys have prospected and got a lot of significant deals done for this year. The new Coke deal helped; it’s across the board.

Timothy Conder – Wachovia Capital Markets

And again you said that 4% to 5% is pretty typical to the contracts you’re signing now as far as annual escalators?

Wes Harris

Yes sir.

Operator

Your next question comes from the line of Rob Nye – Equity Advisors

Rob Nye – Equity Advisors

The news report I guess out of the [strong observer] about the Chevy not renewing track sponsorship with NASCAR how does that affect you and is there any validity to that on your end?

John Saunders

We’ve seen the similar reports as well. Clearly it’s not secret that the auto, the domestic auto industry is struggling. But we have a long-term relationship with GM company-wide and it’s been a great mutually beneficial partnership. As it relates specifically to GM, we’re confident that they’re going to honor their contractual obligations and we continue to have conversations about the future but beyond that I really can’t talk in any other specifics at this point.

Rob Nye – Equity Advisors

Could you give us an idea of what kind of contribution in revenue comes from GM?

Wes Harris

Its not—we do business with over 400 marketing partners. They are a big partner, but at the end of the day we’ve got such a diverse group of sponsors its not—I wouldn’t say that it is material to any one year.

Operator

Your final question comes from the line of Eugene Thomas – Prudential

Eugene Thomas – Prudential

Your CapEx guidance of $100 million, just looking at my notes, is this a reduction from your prior guidance? Where is this coming from?

Wes Harris

No we had actually guided, and this is estimated capital spending for our existing facilities, when we had started at the beginning of the year we had estimated $90 million to $100 million and now that we’ve moved through the year and we’ve actually the Board has approved projects, we think we’re going to be at the higher end of that range. Some of that is a carry-over from spending that we thought we were going to do in 2007 when we spent $75 million.

Operator

There are not further questions at this time; I would like to turn the call over to Mr. Saunders for closing remarks.

John Saunders

I want to again thank you all for joining on the call today. Certainly we’re challenged by the macroeconomic conditions but we’re pretty pleased with the results given those conditions. Our team has performed well. Fans are not immune to this slower economy, but we continue to want to offer them the best value while managing our expenses. Their passion for the sport has not diminished so we’re pleased. TV ratings are up so given that and the overall context of things, we think we had a pretty good quarter. Again I want to thank everybody and we’ll see you again on the third quarter call. Thank you.

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Source: International Speedway Corporation F2Q08 (Qtr End 05/31/08) Earnings Call Transcript
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