International Speedway Corporation F4Q09 Guidance Call Transcript

| About: International Speedway (ISCA)
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International Speedway Corporation (NASDAQ:ISCA) Q4 2009 Guidance Call December 10, 2008 9:00 AM ET


Roger VanDerSnick – SVP, Marketing & Business Operations

Dan Houser – VP & CFO

Wes Harris – Sr. Director IR


John Fox – [McKinsey & Company]

Edward Williams – BMO Capital Markets


Good morning and welcome to the International Speedway Corporation 2009 financial guidance conference call. (Operator Instructions) I would now like to turn the conference to Wes Harris, Senior Director of Corporate and Investor Communications for International Speedway; please go ahead.

Wes Harris

Good morning everyone and welcome to our conference call. We’re here to discuss ISC’s financial guidance for the 2009 fiscal year. Joining me this morning is Dan Houser, Vice President, and Chief Financial Officer, and Roger VanDerSnick, Senior Vice President of Marketing and Business Operations.

After we have provided our 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 prospectively 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-Qs. Copies of these filings are available from ISC 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 in such statements are material. So Dan will provide some of the detailed financial guidance for 2009 but I wanted to start with Roger VanDerSnick.

Roger has been with us for a couple of years and I wanted to have Roger on the call today to talk about some consumer and corporate trends since clearly everyone is looking closely at that in light of what’s going on in the broader macroeconomic environment.

Roger maybe you can begin with a little background about yourself and then just jump right into it.

Roger VanDerSnick

That’s terrific Wes, thanks for that. As Wes said I have been with ISC now about three years and prior to that spent about six to seven years over at NASCAR and left there as the Vice President of Marketing and prior to joining NASCAR I did about 15 years at Procter & Gamble, a bulk of that running a various number of brands in Cincinnati.

One of the key focus areas both on the NASCAR side and clearly here now at ISC, has been really the integration and leveraging of traditional marketing discipline, CBG marketing disciplines into the sports marketing area, whether that’s sponsorship, licensing, and ticketing.

What we have found is some really good success at applying again those marketing disciplines and functions in those traditional areas. So before we get into the financial details as Wes said, I wanted to be able to talk a little bit about the consumer side of the business as well as on the corporate side of the business and talking about those trends because obviously those have some implications for the 2009 financial picture for us.

As everybody knows the economic environment really is unprecedented. Its certainly very, very challenging. We’ve got rising unemployment resulting lower consumer confidence and lower consumer spending. And all of that really in a tightening credit market environment and so it’s a pretty tough situation out there from a sports standpoint.

With that said, we really are fortunate to be involved in the NASCAR sport in this environment. The fan support and avidity is unsurpassed in all of sports. I think everybody knows NASCAR itself is the number two rated regular season sport on television, 75 million fans in the fan base with a high percentage of those fans being avid fans and those avid fans obviously having very strong behaviors in terms of race attendance, purchasing habits, as well as watching on television.

The sports, the live events themselves are still very impressive putting in over on average, over 100,000 live attendees at Sprint Cup events and in fact 17 of the top 20 live sporting events in the United States are NASCAR Sprint Cup events.

The fan base itself has very attractive demographics and I think more importantly also has some very attractive household purchasing behaviors and those behaviors are terrific for us to be able to market to our corporate sponsors because of those fans more likely to have children at home, more likely to over [per] purchase and consume a variety of different products and therefore are terrific targets for our corporate sponsors.

Corporate America wants to tap into these fans because of those attractive demographics and attractive habits and therefore there’s more Fortune 500 companies in the sport then any other sport and its out belief and we see it [played] out time and time again, that an investment in NASCAR and in racing can be the most efficient and the most effective of all of sports and its driven by the responsiveness of the brand loyal race fans.

So that said we do think that we’re uniquely positioned to capitalize on this popularity. We’ve got a national platform of premier facilities and events in key markets. Our events take place in US population areas that comprise two-thirds of the total US. We’re racing in six of the top 12 media markets. And our events span the entire race calendar all the way from the Daytona 500 in February to Ford Championship Weekend in November which crowns the champions in the top three national NASCAR racing series.

Let’s talk a little bit about the consumer trends, obviously all sports are being challenged, whether its stick and ball, or whether its racing on the consumer side. We’re seeing some fans being pressured, some fans pulling back. We’re seeing some modest drops in attendance but also some modest drop in spending behaviors and as a result we’re implementing a number of different aggressive ticketing consumer marketing programs to combat that for next year.

Right now our advanced admissions are currently trending behind about mid-teens versus last year. We do anticipate some pick-up as we get closer to events throughout 2009 and to deal with that we really are going after a couple of different strategies.

One is a continuation of our pursuit which is about creating a best in class guest experience at our events and that’s judicious facility planning, operational planning, and investment strategies to continue to make the live event attendance the best it can possibly be.

We’re implementing a number of different quantitative studies and things like that to really grade ourselves and hold ourselves accountable to delivering that kind of experience.

Then on the marketing side, we’ve got a number of different programs we’re putting in place whether its examining and making tough calls on pricing, whether its talking about different packaging adjustments to our ticket purchases. We’ve added General Admission Only grandstands and in many cases, kids admissions are free.

And we’re also providing a lot of value to our customers. We are cautious about discounting but what we do go after is a number of different things to provide added value to our fans into the ticket package so that it makes their experience even better then before.

We’re innovating like never before in the local market area in terms of promotions, both on our own with local media partners and with our sponsors. We’re continuing to provide a number of different enhanced and expanded installment payment programs.

And I think the final piece is we are doing the right things when it comes to technology allowing us to market to our fans in an efficient, effective way, improving our website quality and interaction to drive consumer marketing results, and using our contact center which is a terrific tool for us to be able to again, effectively talk to all of our fans and race guests.

The last piece is just highlighting again, we’re going to get through this entire year, but we’re going to stay true to our pricing principals. Our principals are to treat our best customers the best, those folks that renew with us early will continue to get the best deals possible. And we’re going to be very cautious about reacting late in sale cycles and providing discounted pricing to new fans where we don’t apply those to our current fans.

So we’re going to continue to stay true to our pricing principals in that regard.

Moving to the corporate area, again all sports are continuing to be challenged in this area and that said I do like our chances in this environment because of the fact that there’s a track record of positive rate of return in corporate sponsorship and NASCAR and as corporations continue to prioritize and scrutinize their marketing budgets, they’re going to put those marketing budgets into areas that generate the best return and again, like I said, I like our chances in that area.

The racetracks themselves are the culmination of the NASCAR and the race fans’ experience and passion for the sport and as a result that’s very attractive to corporate America. That’s where there’s tremendous amount of passion, a tremendous amount of avidity, and that’s where corporations can really make a difference and really come in and cause our fans to change their purchasing behaviors and to buy and support sponsors in the sport that the fans are watching.

A couple of things on sponsorship, one is sponsorship plays a little bit of a unique role in the sport. Our fans recognize that and they know that corporate sponsorship in this area brings the sports to the fans in a way that’s different then other sports.

The fans recognize that, have shown us, and tell us that they’re willing to change their purchasing decisions to support those sponsors that bring the sport to them. So again that kind of unique aspect of the sport really does continue to make this an attractive opportunity for corporate America.

A couple of things on our sponsorship efforts, one, entitlements are one of our most visible pieces of inventory. In the past in fact they made up well over half of our sponsorship revenue but today its well south of that because we’ve made such great inroads into what we call the official status category where we’re really monetizing a variety of other categories and marketing relationships with all of our tracks at the local and at the national level.

It provides us an almost endless supply of categories to go pursue as well as it gives us an opportunity to really innovate in those areas and provide marketing opportunities to a number of different sponsors. We’re prospecting in the hundreds of different sponsors’ areas and we’re prospecting in brand new categories that are significant to the sport and we hope to be able to bring some of those to bear in 2009.

On the entitlement side and back to that, right now we have four open Sprint Cup entitlements and three Nationwide, that’s a bit better then last year. Last year at this point in time we had six open Sprint Cup entitlements and four open Nationwide.

We’ve secured a number of large partnerships, one of which is Service Master which is a multi year deal, seven figures annually, that is really a unique opportunity to bring into the sport a new category and the details on that we’ll be able to announce a little bit later, but we’re very pleased with that.

We’ve also been able to renew a number of other larger agreements that I can’t yet announce today, but we’re continuing to step our way through the renewal process for 2009 and are encouraged about the outlook.

A couple of points on why do we think we’ve been successful in that area, I think I’ve spoken about this a little bit but one of them is really this idea of innovation. We have to be smarter about providing great marketing solutions and tools to our corporate sponsors and when we’ve been able to marry those up and a strategic fit with the brand and with the sport and a marketing program that really delivers results, we’ve been able to really do very well with that with corporate America.

We focus on measurement, we focus on market research, again reapplying some of those traditional marketing techniques and applications into the sports area and really developing and utilizing our comprehensive sales network, both with our corporate sales group as well as our sales force across our 12 different facilities across America.

Finally in wrapping up I probably should talk a little bit about the auto manufacturers. Certainly they’ve been a tremendous part of the sport for decades and our hope and we’re encouraged by the latest developments in Washington, and we’re encouraged by the opportunities to continue to work with them.

There is going to be and we have seen already some pullback by them. What’s important is that not all of our relationships with them is a cash opportunity. We also do a great deal of trade with them to help us run our events and we’re optimistic that we’re going to be able to get through 2009 and 2010 with those manufacturers and come out of this with a continued strong relationship with them.

And with that, that concludes my remarks on the marketing side, I’d like to turn it over to Dan now for the financial update.

Dan Houser

Thanks Roger and good morning everyone. Thanks for joining us today. Given the challenging macroeconomic environment we’re pleased with our solid finish to [physical] 2008. We remain comfortable with our previous full year guidance of total revenues ranging between $780 million and $785 million and non-GAAP earnings of between $2.80 and $2.85 per diluted share.

This guidance excludes accelerated depreciation for certain office and related buildings in Daytona Beach, the impairment of long life assets associated with the fill removal process on our Staten Island property, and the net book value of certain assets retired from service, the tax benefit associated with certain restructuring initiatives, a non-cash charge to correct the carrying value of certain other assets, and an allowance against advances associated with our joint venture project in Kansas for the development of a gaming and entertainment destination.

For 2009 while we provided a preliminary guidance on our last call in October, since then there has been further weakening of the macroeconomic environment that indicates to us that the start of a broad based recovery will not occur until well into next year.

Given this backdrop we are now anticipating slightly lower 2009 total revenues that will range between $745 million and $765 million. Our 2009 event schedule will be very similar to 2008. Our press release details the major events by series and quarter and I’d like to highlight significant changes that impact year-over-year comparability.

First as previously announced in May, Auto Club Speedway’s fall NASCAR events will move from the Labor Day weekend to mid-October beginning in 2009. The results for this year’s California Fall Sprint Cup weekend were recorded in our third quarter and the 2009 event weekend will be posted in the fourth fiscal quarter.

Second, Chicagoland Speedway will host its inaugural NASCAR Camping World Truck Series event on August 28 as part of the track’s IRL and ARCA Remax Series weekend. This event weekend will be held during the 2009 third quarter as compared to the fourth quarter in 2008.

Last, the IRL moved the Homestead, Miami weekend from their 2008 season opening event which is in our second fiscal quarter to their 2009 season ending race in October, our fourth fiscal quarter. This makes Homestead, Miami the season ending championship venue for the Nations Premier Stock Car, Truck, Open Wheel, and Sports Car Racing Series.

From an earnings perspective these schedule changes will result in the fourth quarter being our most significant in 2009, followed by the first, third, and second quarter. I would note that our guidance excludes approximately $500,000 or $0.01 per diluted share after-tax in the first and second fiscal quarters for accelerated depreciation related to our Daytona Live! project.

Now let’s move to the specific line items on the income statement for fiscal 2009, given the well documented challenging economic environment and its impact on consumer spending trends we currently anticipate a mid to high single-digit decrease in 2009 admissions revenue as compared to 2008.

The revenue we recognize from television and ancillary media rights for NASCAR’s top three racing series, which is included in motorsports related revenue will increase approximately 2.5% in 2009 to between $262 million and $264 million.

While the domestic broadcast rights feels are contracted to increase by almost 3% we anticipate ancillary and media rights to be comparable to 2008 which brings the total increase down slightly.

The remaining motorsports related revenue which is primarily comprised of sponsorship, hospitality, advertising, and other revenues is expected to be down in the mid single-digits on a percentage basis year-over-year.

In 2008 we benefited greatly from the 50th running of the Daytona 500. As it relates to sponsorship, we had a record number of corporate marketing partners activating at this event. We had solid success establishing and renewing marketing partnerships in 2008, most notably the multi year, multi million-dollar naming rights agreement with Auto Club of Southern California to rename the California Speedway, the Auto Club Speedway of Southern California.

As Roger discussed we secured title sponsors for all of our major events in 2008. We currently have agreements in place for more then 75% of our 2009 events. Four Sprint Cup and three Nationwide title sponsorships are currently open for 2009. This is compared to last year at this time when we had open entitlements for six Sprint Cup and four Nationwide races.

Looking at full year food, beverage, and merchandise revenue, similar to admissions revenue we expect a mid to high single-digit year-over-year percentage decrease. We expect NASCAR direct expenses which includes prize money, point fund, and sanction fees for our NASCAR events, will be approximately 23% of combined admissions income and motorsports related revenue for fiscal 2009.

This line items includes both television related prize and point fund money and non-television related prize money, point fund money, and sanction fees for our NASCAR races. As a reminder NASCAR sanction agreements require that track operators pay the competitors as part of prize and point fund money, an amount equal to 25% of the gross television broadcast rights fee revenue for each sanctioned event.

In response to a lower revenue outlook, we are actively managing controllable expenses with ongoing cost containment initiatives. Our plan is to keep our collective 2009 controllable event and administrative expenses flat with 2008.

While we are taking additional costs out of the business its critical that any cost cutting initiative is balanced against the risk that we may damage the quality of the fan experience. This would have a detrimental effect on ticket renewals and customer retention which will drive up future cost of customer acquisition.

We expect full year motorsports related expenses to range between 23% and 24% of combined admissions income and motorsports related revenue for fiscal 2009 which is consistent with our expected margins for 2008.

We currently anticipate 2009 full year food, beverage, and merchandise expenses to range between 64% and 65% of food, beverage, and merchandise revenue. We expect 2009 G&A expense to be approximately 14% of total revenue which is comparable to 2008. As we have discussed in previous calls, we’ve been aggressively reducing these costs and remain focused on spending only in areas that directly contribute to the successful execution of our long-term strategic plan.

We currently expect our full year EBITDA margin to range between 37% and 38% of total revenues. We anticipate depreciation and amortization expense in 2009 will range from $72 million to $74 million driven by capital expenditures at our existing facilities.

We currently expect to spend between $65 million and $70 million in 2009 on improvements most notably seating and facility enhancements at Daytona and Michigan.

Excluded from our CapEx guidance for 2009 is approximately $15 million in spending for Daytona Live!, our mixed-use entertainment destination development we are pursuing in a 50/50 joint venture with the [Cordish] Company.

We currently expect our full year operating margin for 2009 to be between 27% and 28% of total revenues. This range translates based on our projected 2009 total revenue guidance to operating income of approximately $2.60 to $2.75 per diluted share after tax.

This is above the impact we received from our domestic broadcast television ancillary media rights which is expected to be approximately $2.45 per diluted share after tax in 2009.

Looking below operating income there are a number of items impacting year-over-year comparability. Currently we expect interest income to range from $1 million to $2 million and interest expense between $24 million and $25 million for 2009.

In terms of full year 2009 interest expense there are a couple of significant factors that will result in higher interest expense as compared to 2008. First as of November 30, we completed all of the physical soil removal and related site work on our Staten Island property.

We submitted an interim grading plan per our agreement with the New York State Department of Environmental Conservation and are awaiting final approval. Therefore in [physical] 2009 we do not expect to capitalize interest associated with this project.

By way of comparison, in fiscal 2008 we capitalized approximately $4 million or $0.05 per diluted share after-tax of interest expense related to our efforts on Staten Island.

Second our guidance anticipates that we will be able to secure an interest rate on any borrowings to refinance our $150 million to the senior notes due in April, 2009 at a blended rate of 8.5%. This is compared to the 4.2% coupon we currently pay on the maturing borrowings.

This results in an increase in 2009 full year interest expense associated with the refinancing of approximately $4 million or $0.05 per diluted share after-tax as compared to fiscal 2008.

Finally our 2009 full year interest expense guidance includes approximately $400,000 in net interest expense associated with the financing for the construction of our Daytona Beach headquarters building.

Turning our attention to the equity investments line, contributing to strong results for 2008 was the successful turnaround of Motorsports Authentics, our motorsports related joint venture with Speedway Motorsports.

During 2008 MA benefited from strong sales surrounding the historic 50th running of the Daytona 500 as well as Dale Earnhardt Jr.’s move to a new team sponsoring car number. While we expect MA management will continue to institute financial responsibility and superior execution as part of the ongoing turnaround in the business, MA will face a difficult sales environment in 2009 given the current macroeconomic outlook.

As a result we expect MA to post break-even results for fiscal 2009 as it compared to a contribution to ISC of approximately $2 million to $2.5 million in equity income or $0.04 to $0.05 per diluted share after-tax, for fiscal 2008.

For Daytona Live! we anticipate the office building which is fully financed will open in the fourth quarter of 2009. The retail, dining, and entertainment portion of the project is expected to come online in 2010. Therefore we are not forecasting equity income from this joint venture until then.

The retail, dining, and entertainment component is being actively marketed by [Cordish]. [Cobb] Theaters will be an anchor tenant with a state of the art, 65,000 square foot theater that is currently being designed.

We are encouraged by the response of other potential tenants despite the current economic environment.

Turning attention to our 50/50 joint venture with [Cordish] to develop a Hard Rock Hotel and Casino adjacent to Kansas Speedway it was with much regret that the joint venture announced last Friday its decision to withdraw its application for a Lottery Gaming Facility Manager of the Northeast Kansas gaming zone.

The joint venture however fully intends to reapply upon the reopening of bidding. In the three months since the Kansas Lottery Gaming Facility Review Board awarded the joint venture the right to operate a casino in Wyandotte County, there’s been a well-documented unprecedented crisis and disruption in the global financial markets.

We were ready to move forward with the development of the full Hard Rock branded casino portion of the project that would have included a state of the art casino and multiple dining and entertainment venues. If approved to move forward now, the joint venture would have been on track to have the casino open in late 2009.

While the joint venture would have been able to finance the initial casino development, debt financing for the full project is not available today at reasonable rates due to the crisis in the credit markets. Therefore having the flexibility to phase in the development would have mitigated the risk of not having the financing immediately in place for the non-gaming portions of the project.

Unfortunately the existing agreement with the Kansas Lottery Commission did not contemplate a phased development and it could not be modified. As such, the joint venture was forced to withdraw its application.

We currently expect that the Kansas Lottery Commission will adopt essentially the same procedures as it did for the first contract award. However, at this point the company does not have any certainly as to when the Kansas Lottery Commission will begin accepting bids or when the winning proposal will be chosen.

Therefore at this point we do not anticipate any capitalized spending for the project in 2009. As mentioned earlier we fully intend to reapply as part of the new bidding process and expect to submit a project that is similar in size and scope as our original proposal.

In addition given the current financing environment we will include language in our proposal that will provide flexibility to phase the construction of the luxury hotel, convention facilities, and additional non-gaming entertainment components.

Our proposal will also include a commitment to [petition] NASCAR to realign a second date to Kansas from one of our existing facilities by the time the development opens. To attract Grand Am and Car Club events we will also commit to build a state of the art road course in the infield at Kansas Speedway.

It should be noted that both the second date and the road course are contingent on our proposal being selected the Lottery Gaming Facility Manager of the Northeast Kansas gaming zone.

We assume the joint venture will have approximately $2 million in expenses associated with resubmitting its proposal. ISC’s portion is expected to be approximately $1 million in 2009 which will flow through our equity investment line.

As a result in terms of quarterly expectations for our collective 2009 equity investments we currently anticipate approximately break-even results in the first quarter, income of approximately $1 million in the second quarter, a loss of approximately $500,000 in the third quarter, and a loss of approximately $1.5 million for the fourth quarter.

Continuing down the income statement we expect our effective tax rate in 2009 to be approximately 39% for the full year. Looking at our share count, our financial guidance for 2009 assumes we will purchase approximately 65 million to 70 million of our stock in the open market.

We currently have approximately $40 million remaining in our capacity on our $250 million authorization. I would note that we ceased repurchasing shares in September as a result of the deteriorating outlook on credit markets and our desire to conserve cash given that we have $150 million in senior notes due this April.

Once we are certain we will be able to refinance at acceptable rates, we will resume our repurchase program as we view it as a critical component in our long-term capital allocation strategy designed to build shareholder value.

Based on all of the above assumptions we expect 2009 full year non-GAAP earnings of between $2.35 and $2.45 per diluted share and are currently more comfortable at the low end of the range.

When developing the projections I just discussed we made a number of key assumptions that may change depending on the condition of credit markets and the related impact on the broader economy. The most important assumption is that we will refinance by private placement or public debt offering our $150 million in senior notes prior to maturity this April at a blended rate of 8.5% or less and at a term of 10 years.

Of note is that our projections do not include the possibility of receiving funds from the sale of Staten Island or through IRS settlement. As we discussed on our third quarter earnings call at the beginning of October as a safeguard we drew down our revolving credit facility, the $150 million necessary to fund our April maturity.

Accordingly in a scenario where we cannot achieve an acceptable refinancing in early 2009 we will use the revolver borrowing as a bridge to a more favorable credit market or in a worst case scenario use operating cash flow to pay down the balance on the revolver by June of 2010 which is one year prior to the revolver maturity.

As a result of conserving cash and paying down debt in this situation we would decrease capital spending at our existing facilities to approximately $50 million in 2009. We view this as the minimum amount of investment necessary for maintenance CapEx, safety and regulatory requirements, and preserving the guest experience.

In addition in this scenario in all likelihood we would not be buying back a significant number of shares through our repurchase program. Of course once we sell the Staten Island property and/or secure a settlement as part of the appeals process with the IRS, we will evaluate opportunities to further invest in our business including additional share repurchases.

We’re having productive conversations concerning a settlement with the IRS on the sale of our Staten Island property currently and as such we remain hopeful for a resolution on both fronts during 2009.

In conclusion we believe the future of motorsports entertainment is bright and we remain excited about opportunities in 2009 and beyond. The fundamentals of our business remain strong driven by solid consumer and corporate interest.

One major reason for our continued success has been our execution of a proven long-term business plan supported by a strong financial profile. While we continue to keep a close eye on national economic trends and their impact on consumer and corporate spending, we remain confident that we will get through these times as a stronger and better-operated company.

This concludes our formal remarks and with that we are ready for Q&A.

Question-and-Answer Session


(Operator Instructions) Your first question comes from the line of John Fox – [McKinsey & Company]

John Fox – [McKinsey & Company]

Do you have the breakdown on the TV and the ancillary dollar amounts for 2008 for the full year?

Wes Harris

For the full year on the broadcast side we’re looking at, we anticipate $247 million and right at about $10 million on the ancillary and again, that’s the net amount that’s booked through our revenue.

John Fox – [McKinsey & Company]

Do you have a summary of the TV ratings for the 2008 NASCAR season?

Wes Harris

We were up on Cup on average households 1%, on the Nationwide series 4%, and almost 25% on the Truck series.

John Fox – [McKinsey & Company]

Do you happen to have for International Speedway the attendance number, that actual number of people in the seats?

Wes Harris

I don’t have that final number because we haven’t finished up all of our full year, what we’ve talked about though is that we anticipate that our admissions revenue will be down somewhere in the sort of mid single-digits year-over-year. So when we have our call in January, our final year call, we’ll be able to talk about that but its definitely going to be down year-over-year.

John Fox – [McKinsey & Company]

Did you give the depreciation guidance for 2009?

Dan Houser

Yes, it was $72 to $74 million for the full year.

John Fox – [McKinsey & Company]

The $15 million for Daytona Live! CapEx, that’s in addition, I know you just did a construction loan—

Dan Houser

Right, which was for the, that is for the office building which is fully financed so we won’t have any further capital for that. The $15 million is associated with the additional entertainment and aspects of the construction which are basically where we are right now is working on getting the leases lined up so we can secure the financing.

John Fox – [McKinsey & Company]

Basically that $15 million going into the JV?

Dan Houser


John Fox – [McKinsey & Company]

Could you just talk more generally about the auto manufacturers’ sponsorship of the teams, not your sponsorship but the racing teams and I heard as recently as this morning there’s a number of teams that don’t have sponsors for next year and so could you just talk about that and how you think that might play out and what the impact might be.

Roger VanDerSnick

I think its important to recognize that as the manufactures participation in the sport over time has grown those teams have expanded if you will, particularly in the engineering and the R&D area and things of that nature.

What’s going to be important and we’re starting to see some of that but those teams are going to have to be able to do the reverse and they’re going to have continue and be able to contract as that sponsorship perhaps reduces. And we’re seeing that.

You’re seeing testing go away for the year. You’re seeing teams downsize in their areas and you’re also probably going to see teams spend less in very expensive technology development efforts. And so the hope would be that the teams are able to come through that in a way that maintains competitive balance.

Our interest is obviously putting on great exciting racing at our tracks that our fans love so that’s going to be the hope, is that they’re able to follow that spending and contract their business models.

John Fox – [McKinsey & Company]

Maybe you just talked about car count a little bit, 43 cars, even if there’s a few less cars then that, that’s not going to have any negative impact on what the consumer sees or the competition on the track?

Roger VanDerSnick

I don’t think so. It wasn’t that long ago where there were less then full fields as well in the sport and the racing has continued to be terrific so I’m not overly alarmed by a perhaps some shorter fields in some of the races for 2009.

John Fox – [McKinsey & Company]

So if we go from 43 cars to 38, that may not be different then it was a few years ago and obviously the major teams with the stars are going to be in that mix so.

Roger VanDerSnick

It is and again the hope will be and we’ve seen NASCAR continue to do this, is strive to maintain that competitive balance so you have a very large number of teams and drivers competing for the win week in and week out and as a result having a very competitive season.


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

Edward Williams – BMO Capital Markets

Can you talk a bit about what efforts to the extent that you know of is the NASCAR’s owners taking to help you and the other promoters navigate the difficult environment and what kind of additional promotional activity do you expect for the Nationwide and the Camping World Series to continue to grow those?

Roger VanDerSnick

I would say our interest with NASCAR is as much as they did with the teams by eliminating testing, our hope is there’s going to be continued programs and we’re in dialogue with them now to help us through the year whether that’s incremental driver presence in the marketplace and overlay marketing programs to help a variety of number of events throughout the season and so those plans aren’t completed yet, but we’re having the dialogue with them about that because its very clear that that is a much needed step for next year.

On the Nationwide programs, our hope is that after Nationwide is finding their way in the sport and really firming up all of their plans, we’re continue to see some more incremental promotion in that area. I don’t have those plans yet now but we also assume the same thing for Camping World.

We have a pretty deep relationship with Camping World at a variety of our speedways and they have been terrific partners for us particularly in that camping space where there is a high overlap in terms of the NASCAR fan and the race fans in our facilities and so we’re optimistic about the Camping World addition to the sport particularly on top of good attendance as well as a pretty significant jump of about 24% in terms of television ratings for that series.

Edward Williams – BMO Capital Markets

Given the environment that we’re seeing, when you think about expanding into new areas whether its Seattle or Denver or New York, how has your thinking changed given the environment that we’re all operating in right now?

Wes Harris

What we’ve talked about with folks, that we’re on hold on those types of opportunities. There’s going to be a public private partnership that’s going to be required in those instances to try to, these are very, very expensive facilities. NASCAR has been very clear that the cut schedule is full so it would require a date realignment from one of our existing facilities so you’ve got to look at the incremental economic benefit that you get from that and that will not subsidize building a $400 million plus facility.

So that requires a public private partnership and so that is tough to get done in this environment in any markets and it’s an expensive process to go through because there’s a referendum that you’d have to go through and legislation so we’re really on hold.

Long-term we still want to be in those markets, we think they’re great markets. We know there’s a lot of fans there and we know they’re very avid so we know they are great markets so longer-term that is definitely still on our plates.


There are no additional questions at this time; I would like to turn it back over to management for any additional or closing comments.

Roger VanDerSnick

I’ll just make a few comments to reiterate a couple of things that we’ve talked about today, that certainly the short-term environment is going to be challenging for us. The silver lining in that is that it is causing us to be leaner, more nimble and innovate like never before.

So we’re going to get through this in a way that actually builds capability both on our marketing experience side as well as running events and we’re going to do that all in an environment where we’re still going to continue to firmly control our cost structure throughout this process.

So we still remain very optimistic about the sport, where we’re headed. The bedrock of the sport in terms of the brand loyal fan base and the ability for corporate sponsors to really drive their business with association in the sport is going to continue and so that gives us reasons to feel very bullish about the long-term effects of the sport.

That’s kind of how we’re viewing these things. We will get through this year and we’re going to come out of it in far better shape.

Thank you very much and we’ll talk to you in January.

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