International Speedway Management Discusses Q4 2012 Results - Earnings Call Transcript

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International Speedway (NASDAQ:ISCA) Q4 2012 Earnings Call January 24, 2013 9:00 AM ET


Charles N. Talbert - Senior Director of Investor and Corporate Communications

Lesa France Kennedy - Vice Chairman and Chief Executive Officer

John R. Saunders - President

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


Russell Lynde

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

Barry L. Lucas - Gabelli & Company, Inc.


Good morning, and welcome to the International Speedway Corporation's Fourth Quarter and Fiscal Year End 2012 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded on Thursday, January 24, 2013. I would now like to turn the conference over to Charles Talbert. Mr. Talbert, please go ahead.

Charles N. Talbert

Thank you, operator. Good morning, everyone, and welcome to the International Speedway's conference call. We are here to discuss the company's results for the fourth quarter and year ended November 30, 2012. With us on this morning's call are Lesa France Kennedy, Chief Executive Officer; John Saunders, President; and Dan Houser, Senior Vice President and Chief Financial Officer. [Operator Instructions]

Before we start, I'd like to address forward-looking statements that may be addressed on the call. Forward-looking statements involve risks, uncertainties and assumptions. Actual future performance, outcomes and results may differ materially from those expressed in these forward-looking statements. Please refer to the documents filed by International Speedway Corporation with the SEC, specifically the most recent reports on Form 10-K and 10-Q, which identify important risk factors, which could cause actual results to differ from those contained in these forward-looking statements.

So with these formalities out of the way, I'll turn the call over to Lesa Kennedy. Lesa?

Lesa France Kennedy

Good morning, and thank you, everyone, for participating on today's call. We had another terrific motorsport season that ended in Homestead-Miami Speedway, and Brad Keselowski won his first Sprint Cup championship. Brad is only the third driver in nearly 3 decades to capture the title while still in his 20s. This age group is one of our main target markets, and we see social media as the channel to reach this group.

Brad brought to the forefront the impact that social media can have on our sport. During last year's Daytona 500, Brad tweeted from his car. During the race, the lane [ph] gained almost 200,000 new followers. Since then the industry has embraced social media and the results are encouraging. A key finding that has emerged from Taylor's fifth annual Consumer Engagement Survey is that the growth in social and mobile consumption has a strong tendency -- our fans have a strong tendency to share content with others.

The interest in the sport among our avid NASCAR fans is the highest that we've seen in 5 years. Also, social media continues to grow for enthusiastic NASCAR fans, with the highest usage among younger fans. About 4 out of 5 of those ages 18 to 34 use social media to connect with NASCAR. It is this growth in mobile usage that the broadcasters want to capture with their streaming rights. John is going to go into it in a little more detail later, but the favorable FOX agreement that NASCAR signed in early October includes TV Everywhere rights.

These rights will allow FOX to stream its races to FOX Sports affiliated websites. We expect to see more of this type of technology as our content is being consumed in a variety of ways today. The fact is that fans will continue to embrace social media and the sharing of content in ever increasing numbers. The sport must provide a compelling mobile and social experience in order to remain relevant with these fans of the future. Now you can understand why social media is an integral part of NASCAR's Industry Action Plan, and we look forward to reporting this progress to you as we move forward.

Another major initiative of the Industry Action Plan is the introduction of the next generation Sprint Cup car for 2013, which we're calling Gen-6. The Gen-6 program is the most comprehensive overhaul in the sport since the 2007 debut of the car tomorrow. Its goal is to re-establish a brand identity among the automotive manufacturers. It will also provide competitive upgrades in an effort to improve the competition in NASCAR's Sprint Cup Series.

We now have our sights set on 2013, starting with the Premiere Endurance motorsports race, the Rolex 24 at Daytona this week, followed by Budweiser's in a few weeks [ph] and culminating in the 55th running of the Daytona 500. This is always an exciting time of the year for ISC, NASCAR and most importantly, our fans and our sponsors. So with that, I'll turn it over to John Saunders. Thank you.

John R. Saunders

Thank you, Lesa, and good morning, everyone. For our 2012 fiscal year, adjusting for noncomparable events as well as the previously discussed loss of ancillary rights to the industry, total revenues were down only slightly, less than 1%. However, we continue to experience the modest headwinds with our consumer. While attendance-related revenues were down approximately 5% for the year, it was a major sign of stabilization compared to 2011 with its approximate 10% decline. This year's decline in attendance-related revenues was substantially related to a handful of events. We are working with NASCAR to address the fans' perception of Talladega's racing, between tandem racing, weather and certain drivers having been critical of the track in recent years, altogether, in addition to the region's economic climate, affected fans' interests in attending Talladega's 2 NASCAR Sprint Cup weekends.

Other events included the Kansas Spring Race. It was moved to earlier in the year due to track repaving, causing a shortened sales cycle. Also, the walk-up was impacted by rather chilly weather. With the recently repaved and reconfigured track at Kansas, we expect to see better trends going forward. In fact, we saw an increase in ticket sales for its fall event.

We are also encouraged that Phoenix hosted its second consecutive sellout of its fall Sprint Cup event. As certain other consumer metrics are mixed, we know we have further inroads to make with our fans. This is a critical focus area to grow our business back to historical levels.

Our weighted average ticket price for Sprint Cup events is down less than 1% to $82.33. Deferred revenue is roughly in line with last year. Our caps are trending up. Our retention rate has stabilized. Our capacity utilization for Sprint Cup events ended the year at 81.4%, slightly down from last year.

Adjusting seat capacity is a strategy to promote sellouts and create excess demand. Since 2008, we have reduced capacity by 15.6%. The majority of this capacity reduction is a result of providing improved fan amenities, such as wider seating and creating social sounds [ph]. Other reductions were designed to rightsize our facilities to, one, meet market demand, and second, to project favorable optics on television.

Based on our experience in view of the evolution of modern sports facilities, demand for our product depends in part on the fans' experience. I stress that enhancing the live event experience for fans is a critical strategy for our future growth. We will continue to monitor market demand and entertainment industry best-in-class amenities, which could impact future capacity. This strategy is aligned with NASCAR's 5-year Industry Action Plan aimed to connect with existing fans, as well as engage Gen Y, youth and multicultural consumers in motorsports.

Additional areas of focus within the action plan that all stakeholders are supporting to enhance the appeal of NASCAR racing include: building product relevance, cultivating driver star power, growing social media activities and enhancing the event experience.

We are supporting the action plan on a number of fronts, but in particular, we are committed to meeting and exceeding our fans' expectations through ongoing capital improvements at our facilities. We are currently -- we are providing fans enhanced audiovisual experiences, more comfortable and wider seating, more concession and merchandise points of sale, and as Lesa mentioned, greater social connectivity.

We must meet the needs of today's consumer to improve attendance trends, which ultimately will increase corporate sales and influence the long-term health of broadcast media rights, which continue to remain strong.

Last October, NASCAR and FOX finalized an 8-year extension of its broadcast rights through 2022 season. The extension, according to industry sources, is valued at more than $2.4 billion over 8 years, an approximate 36.4% increase over the current agreement that expires after the 2014 season.

This agreement keeps us optimistic for the remaining content with ESPN and Turner, for which NASCAR is expected to begin negotiations over the summer.

As broadcast rights fees are our largest revenue source, it's imperative that we focus on growing our premium brand, the iconic Daytona International Speedway and the Daytona 500. Its premier status within the sport and the fact that the Daytona 500 is among the most valuable sporting event brands in the world is a key reason we are in the process of reviewing potentially highly impactable projects at the Speedway.

This past Tuesday, Daytona President Joie Chitwood unveiled the first conceptual renderings of a proposed, multiyear redevelopment of ISC's crown jewel. While many aspects of the project are yet to be determined, such a project could include a complete overhaul of the entire front-stretch grandstand, creating a world class motorsports entertainment stadium, including features such as new seats, suites and guest amenities, as well as new entry points, improved fan conveyance, a modern exterior, first-class social zones and a redesigned midway for fans.

We are not yet in the position to publicly discuss all the details about the Speedway project. Multiple internal and external factors will influence the economics and project feasibility, and construction and design costs are still being determined.

A substantial increase in CapEx spend above some recent levels will depend upon several factors, such as a stable economic operating environment and preferably, the sale of our Staten Island property.

While we focus on allocating our capital to generate returns in excess of our cost of capital, not all of these capital improvement investments will provide immediate, directly traceable positive returns on invested capital. That said, we're confident these investments will put us in a much better position to compete with other entertainment venues for the consumer and corporate dollar.

The evolution of sports facilities is ongoing and is relevant for all sports, not just motorsports. As consumer and corporate behaviors and demands change, we must be willing to respond appropriately or risk losing market share to other entertainment competition.

With the largest portfolio of sponsors of any motorsports promoter in the country, it is in special [ph] that we have the facilities and marquee events that attract corporate partners. Corporate support for us in our industry remains strong despite the economic downturn, which has influenced corporate budgets, sales and contract duration. The number of current Fortune 500 companies invested in NASCAR remains higher than any other sport, and more Fortune 500 companies are involved in NASCAR than in 2008 when the downturn began.

For 2012, we experienced a mix of both increasing and decreasing pricing for open inventory, as we had more available than in previous years. However, we've been able to accurately target our gross corporate marketing partnership revenues. We have good visibility on this revenue source.

As we enter into the 2013 motorsports season, we have less open entitlement inventory compared to this time last year. We have sold all of our available NASCAR Sprint Cup Series entitlements for the year. The remaining open entitlements include 2 Nationwide Series and 2 Camping World Truck Series entitlements. Last year at this time, we had 5 Sprint Cup Series, 3 Nationwide Series and 2 Camping World Truck Series entitlements open.

Corporate sponsors continue to generate a solid return on their investment in leveraging entitlements to grow their respective businesses. Entitlements provide our corporate partners an opportunity to essentially own an entire week in the NASCAR season while receiving valuable exposure for months prior to the event. New entitlement partners in 2013 include Kellogg's, Sprint and Toyota.

With fewer open entitlements, our salesforce is focusing on our official sponsor categories in concept-base partnerships, which we expect will pay off for us this year and 2014.

Our Hollywood Casino at Kansas Speedway, which opened in last February, has met current expectations. The casino, after almost a year of operations, has captured approximately 16% of total adjusted gross gaming revenue in the Kansas City market that has a total of 5 operating casinos, 4 of which are on the Missouri side of Kansas City.

For our 2012 fiscal year, total cash distribution to ISC from the casino JV included cash from operations used to complete construction and to fund working capital, was approximately $15 million. For 2013, our current expectation of cash distributions from the casino to ISC will be in the mid- to high-teen million dollar range. The high-end will come from a favorable resolution to the property taxes that are under appeal. I will now turn the call over to Dan to discuss the financial performance for the quarter. Dan?

Daniel W. Houser

Thanks, John, and good morning, everyone. While our financial results for the fourth quarter and for the year were impacted by the ongoing adverse economic trends, we were able to meet the lower end of our original non-GAAP full year earnings per share guidance.

In October, we felt it necessary to adjust guidance, primarily due to the potential downside for certain major motorsports events yet to be conducted in the fourth quarter. Fortunately, our fourth quarter events, by and large, met or exceeded our expectations. This is an ongoing challenge we have with fans' purchasing decisions still coming late in the sales cycle, closer to the race weekend, making forecasting for consumer-related revenues more difficult.

Currently, our advanced ticket sales for our Sprint Cup events remain in the range of approximately 8% off from last year, which is slightly below this time a year ago. During our fiscal fourth quarter, we hosted 7 NASCAR Sprint Cup Series events, 5 Nationwide Series events, and 4 Camping World Truck World Series events. The quarter-over-quarter comparison was affected by the fall NASCAR Camping World Truck Series event in Phoenix held in the fourth quarter of fiscal 2012, which was held in the first quarter of fiscal 2011.

Chicagoland Speedway held a NASCAR Camping World Truck Series event in the third quarter of fiscal 2012. The corresponding event was held in the fourth fiscal quarter of 2011.

Auto Club Speedway held in an IndyCar Series event in fiscal 2012, for which there was no comparable event in 2011. And as we've mentioned on previous conference calls, we received lower ancillary revenues due to a combination of factors, the most significant related to SiriusXM Radio, which has historically been the major contributor to the industry's ancillary rights revenue. Since the merger of Sirius Satellite Radio and XM Satellite Radio, there is now only one satellite provider, SiriusXM, bidding on the distribution rights for original program. As a result, distribution rights agreements entered into by SiriusXM Radio for original programming subsequent to the merger have generally been lower.

Other factors contributing to comparability for our fourth quarter 2012 results include carrying cost related to Staten Island, including repairing damage from Hurricane Sandy, impairments and losses on disposals primarily attributable to the removal of assets not fully depreciated in connection with certain capital improvements, and our equity investment in Hollywood Casino at Kansas Speedway, which opened in our first quarter of fiscal 2012.

All of these are outlined in the earnings news release and are included in our GAAP to non-GAAP reconciliation where appropriate. Looking at the detailed income statement, admissions revenue for the fourth quarter decreased to $40.1 million, largely attributable to lower attendance and weighted average ticket prices. Partially offsetting the decrease was the net impact of the previously discussed schedule changes.

For the quarter, the weighted average ticket price for our comparable Sprint Cup events decreased 1.5%. For the year, the weighted average ticket price for our comparable Sprint Cup events decreased slightly at less than 1% to $82.33. The decrease in motorsports-related revenues to $132.2 million was primarily attributable to the previously discussed reduction in ancillary rights and decreases in sponsorship hospitality and suite revenue for certain events held during the period. Partially offsetting these decreases were increases in television broadcast revenue for events held during the quarter and the net impact of the schedule changes.

For the quarter, ISC's domestic television broadcast and ancillary revenues were $87.9 million. For the year, it was $281.2 million.

The increase in food, beverage and merchandise revenue to $13.3 million is primarily due to the IndyCar Series event held at Auto Club Speedway in the fourth quarter, for which there was no comparable event in the prior year. Prize & Point Fund Monies and NASCAR's sanction fees increased to $50.4 million. The slight increase is due to increased television broadcast rights fees for the NASCAR Sprint Cup, Nationwide and Camping World Truck Series events, as standard NASCAR sanctioning agreements require a specific percentage of television broadcast rights fees to be paid to competitors.

Motorsports related expense increased to $38.3 million. The increase is largely related to the previously discussed schedule changes, particularly the IndyCar Series event held at Auto Club Speedway. To a lesser extent, increases in expenses related to non-event operations and other events conducted during the period contributed to the increase. The increase in food, beverage and merchandise expense to $10.3 million was largely attributable to the IndyCar Series event held at Auto Club Speedway and to the reorganization of Americrown, our merchandise concessions and catering subsidiary.

Americrown has implemented organizational changes to better adapt to consumer and corporate demands. These onetime costs will benefit Americrown with stronger margins going forward. To a lesser extent, concessions and catering expense at certain events also contributed to the increase. General and administrative expense decreased to $25 million for the quarter, largely due to a reduction in property taxes for Auto Club Speedway. The minimal increase in depreciation and amortization expense to $19.9 million for the quarter was primarily attributable to ongoing capital spending for maintenance CapEx and other facility enhancements.

The $4.1 million impairment of long-lived assets is primarily attributable to the removal of certain assets in connection with ongoing capital projects. Interest income and interest expense were comparable to the same period of the prior year.

Equity net income from equity investments represents our 50% equity interest in the Hollywood Casino at Kansas Speedway. Net income for the 3 months ended November 30, 2012, was $24.7 million or $0.53 per diluted share on approximately 46.4 million shares outstanding. However, when you exclude certain carrying costs associated with our Staten Island property and asset impairments and losses on disposals, we posted earnings of $0.61 per diluted share for the 2012 fourth fiscal quarter. As described in the release, this is compared to non-GAAP net income for the 2011 fourth quarter of $0.62 per diluted share.

As for the balance sheet and future liquidity, at November 30, our combined cash and cash equivalents totaled $78.4 million, current deferred income was approximately $42.8 million and shareholders' equity was $1.3 billion. At the end of the quarter, total debt was approximately $276.9 million, which includes $165 million of senior notes, $60.6 million in TIF bonds associated with Kansas Speedway, $50.3 million for our term loan on our headquarters office building and $1 million in revenue bonds.

We had no borrowings on our line of credit at year end. With respect to that, in November, we amended and restated our $300 million revolving credit facility. The amendment provides better terms and extends the final maturity of the facility from November 2015 to November 2017. The improved terms on the facility included an amended pricing grid ranging from LIBOR plus 1% to LIBOR plus 1.625%, depending on the better of ISC's debt rating as determined by Standard & Poor's, which remains BBB, or the company's leverage ratio. Comparable pricing on ISC's previous credit facility range from LIBOR plus 1.5% to LIBOR plus 2.25%.

This amendment is an endorsement of the company's strength. Maintaining a solid financial position, we're able to take advantage of favorable market condition. The improved terms of the facility will provide ISC lower borrowing cost and increased financial flexibility. Our balance sheet continues to be a differentiator to our peers who do not have the ability to secure the terms that we have been able to get consistently.

During the fourth quarter, we did not purchase shares of our Class A common stock. For the 2012 fiscal year, we purchased 405,538 shares of our Class A stock for approximately $10.3 million, bringing the total number of shares purchased from December 2006 through November 2012 to approximately 7.1 million shares.

At the end of the fiscal year, we had approximately $62 million in remaining capacity on our $330 million authorization. From a capital allocation perspective, we have spent year-to-date approximately $20 million on return of capital through dividend and share buybacks. While we have limited our buyback program, we absolutely view the company as being undervalued. However, we have always prided ourselves on the core principal of maintaining a strong balance sheet with the metrics of an investment grade rated company. As a result, we have a solid liquidity position and our cost of borrowings remain relatively low as indicated from the amended credit facility. We have opportunities to invest in our business, both core and ancillary, and having the solid liquidity position is strategically beneficial.

We want to balance the needs of our business with returning capital to our shareholders. At some point in the future, we may look at increasing our dividend to a more meaningful yield, but we still see the benefits of having a scalable buyback program that takes into account flexibility to execute on strategic opportunities.

For 2013, we currently expect a 2% increase on our annual dividend, contingent upon approval from our Board of Directors. For our share repurchase program, we will continue to maintain opportunistic parameters based on levels of our stock price. On a quarterly basis, we will review and adjust, if necessary, the parameters of our stock purchase plan.

As it relates to capital spending, for our 2012 fiscal year, we spent $82.9 million on capital expenditures for projects at our existing facilities, and we have another approximately $28.7 million in facility capital projects approved. As a result of these currently approved projects and anticipated additional approvals in fiscal 2013, we expect total 2013 capital expenditures at our existing facilities will be approximately $80 million to $90 million depending on the timing of certain projects. We'll review the capital expenditure program periodically and modify it as required to meet [ph] the current business needs.

While our 2013 guidance on capital expenditures is in the same range as the last few years, moving forward with strategic CapEx initiatives, including a Daytona redevelopment, could increase our total annual capital expenditures to an average range of between $100 million to $120 million for several years. Depending upon the final scope of the project we undertake at Daytona, our financial statements may impact or be impacted by accelerated depreciation and losses on disposals of assets resulting from removal prior to the end of their actual useful life.

Also, we have and we continue to expect to incur predevelopment costs that have and will continue to impact our financial statements.

In terms of our 2013 financial outlook, our 2013 event schedule will be similar to 2012. The earnings news release provides details of major events by series and by quarter. For 2013, we anticipate total revenues to range between $610 million and $625 million. Our expectation for the year, aside from the 3.6% increase in television rights fees for NASCAR's top 3 racing series to approximately $291.4 million, is for admissions, corporate and food and beverage and merchandise to remain stable year-over-year. The low end of the range contemplates a similar decrease in consumer-related revenues that we experienced in 2012, as well as an unfavorable outcome or delayed resolution of the casino property tax appeal.

We will see some noncontrollable expenses increase for the year, primarily an approximate 3% increase in NASCAR's sanction fees and Prize & Point Fund Monies. We have done a good job in maintaining the reductions we implemented in previous years in both direct expenses and G&A. However, as we mentioned on previous calls, we did reinstitute pay and bonuses to certain eligible employees. The expectation for 2013 is an approximately 2% increase.

As I mentioned earlier, with Americrown's reorganization complete and the business better adapted to meet consumer and corporate demands, we expect to see margin improvement within that business.

As a result, we currently expect our full year EBITDA margin to range between 31.5% and 32.5% of total revenues. And with depreciation and amortization expense at approximately $80 million, we expect our full year operating margin for 2013 to be between 18.5% and 20% of total revenues. As we do not currently have approval for a redevelopment project at Daytona, our guidance does not reflect significant capitalized interest related to the project, and we expect interest expense to be higher in 2013 than 2012, as the casino in Kansas is now in service.

Our effective tax rate in 2013 will be approximately 38% to 39% for the full year.

As John mentioned, our current expectation of cash distributions from the casino to ISC will be in the mid- to high-teen million dollar range. Again, the high end would come from a favorable resolution to the property tax appeal in 2013. Equity income for the year would be approximately $4 million to $7 million.

Based on all of the above assumptions, we expect 2013 full year non-GAAP earnings of between $1.35 and $1.55 per diluted share. It should be noted that the high-end of our non-GAAP EPS range assumes we repurchased 25 million in shares on the open market.

From an earnings perspective, the fourth quarter will be our most significant, followed by the second, first and third quarters. Our fiscal 2013 non-GAAP earnings per share guidance excludes any accelerated depreciation and future impairments and losses on disposals of long-lived assets, which could be recorded as part of capital improvements due to the removal of assets prior to the end of their actual useful lives, any income statement impact attributable to the company's proposed redevelopment project at Daytona and certain carrying costs as well as any gain or loss on the sale of our Staten Island property and any unanticipated further impairment of the property.

In closing, our top priority at ISC is to provide superior, innovative and thrilling guest experiences. To remain true to this vision and compete for the consumers' discretionary dollar with other entertainment options, we must invest in capital enhancements that provide fan-friendly amenities consistent with consumer expectations. While these enhancements may provide limited short-term returns, we are confident that our focus on improving the event experience will lead to increased consumer and corporate sales in the long run and benefit our shareholders. Our sound financial policies ensure we maintain a strong financial position that provides a significant competitive advantage within our industry. We have a tremendous opportunity to see our company grow stronger as we successfully execute our strategic initiatives. We look forward to speaking with you on our next earnings conference call in April. With that, I'll turn it back over to the operator.

Question-and-Answer Session


[Operator Instructions] Your first question comes from the line of Russell Lynde with Park West Asset Management.

Russell Lynde

You guys have done a decent job returning cash to shareholders and I think your commentary on the call about increasing dividends over time is certainly encouraging. Have you looked at a REIT structure, given your significant real estate assets and the significant tax savings? It seems like, in a REIT structure, you could return more cash to shareholders and REIT valuations are significantly higher than sort of your current valuation today. Can you talk about whether you've looked at that and what conclusions you've come to?

Daniel W. Houser

Yes, we have. And certainly, particularly in light of our partner in the Casino Penn National's recent announcement of the direction they've gone. What we see as the impediment for us is really the significant holdings of the France family and their desire to remain active and invested in the business. And we feel that, that's really one of the strongest things that we can deliver to shareholders. And if you look at the -- you look down into the tax rules -- and we have actually done quite a bit of it, working with some of our outside financial consultants and CPAs, that it's just -- it would require such a dilution of their interest that it really is not feasible, unfortunately.


Your next question comes from Michael Walsh with Wells Fargo.

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

Just filling in for Tim Conder here. Just wanted to revisit Daytona. I know you guys are not in a position to give any formal type of guidance on what CapEx could spend -- could be related to those enhancements, but is there anything that you could throw out to give us some idea of what that could be like in the future?

John R. Saunders

Well, as Dan mentioned in his remarks, in 2013, we're looking sort of at similar trends on CapEx of $80 million to $90 million. And -- but potentially, with the enhancements to facilities like Daytona, you could see that spend get north of $100 million to $120 million a year for a period of time. That's the extent of -- not knowing what these costs are and still working through the design and engineering, so forth, we just can't -- don't have the ability yet to accurately pinpoint those construction costs.

Daniel W. Houser

Yes, Michael, we -- even with an approval sometime this year -- we believe that whatever we would spend toward that project this year would be covered in that $80 million to $90 million. We'll certainly update if that is -- becomes a different story. And as I said, kind of along those lines, as well don't have a big capitalized interest factor. So we think that the -- while our cash interest expense is similar or even a little down from last year, the recognized interest expense is probably going to be up a little bit.

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

And this question is a little offbeat, but I just wanted to revisit it. It doesn't really change your cash flow over the longer term. But with the Senate amendments and the HRA bill that was passed, they extended the 7-year recovery period for motorsports entertainment complexes through 2013. Do you see that being extended further out past 2013? Do you guys have any good insight on that?

John R. Saunders

Well, I mean, think that's -- that depends on the political climate and the elected officials at the time. I would say a couple of things: If there -- within the next 2-year period there's major tax reform, then it's likely that they'll deal with all of these extenders, of which we're one in a big group, they'll somehow or another try to deal with all that stuff in the tax reform and therefore, escape this recurring event. These are things that -- typically they -- this has gone on long before we got into the bucket, and kind of the cycle of these things. There's many, many, many in there. NASCAR -- ours happens to be one of the sexier ones, all but -- probably one of the most insignificant from a dollar perspective, but we certainly captured a lot of press this last time around and we had TV interviews, newspaper interviews, all kinds of stuff, with sort of leading with the whole NASCAR thing and the rum thing. So really, in a large sense, 2 years from now that most of that will be forgotten, it'll depend on, really, what the political climate's right at the time. These are something that never -- this is never a bill that gets passed. These extenders never go on their own. They have to attach to something that's, the term is germane to the issue. So there has to be some sort of a tax bill, a tax-related or a revenue-raising bill that is being passed, that these things can be an add-on to. So it was quite an interesting exercise that -- of publicity and all that it went through. We're certainly hopeful. We'll certainly be working to do it. If it -- we -- it only would benefit a major renovation at Daytona if that provision is intact and enforced when the assets go into service. That's kind of the trigger. So we'd need at least another renewal probably of that -- for that to help us.

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

Got you. And then just 2 quick ones here on the 2013 outlook. In terms of admissions, do you really see any changes to your approach on ticket sales? I mean, is it really more still just a question on volume on the ticket sale side for admissions?

John R. Saunders

Well, as Dan mentioned, our outlook is on admissions and food and beverage revenue is -- we're looking at some level of stabilization. I will add that we continue to see, as we have in the last several years, sort of a late-buying crowd, particularly in the fourth quarter. We were pleasantly surprised with activity at Kansas and as I mentioned, the sellout in Phoenix and the finale at Homestead-Miami Speedway. But unlike previous years, I'm pretty excited with the alignment that we have with NASCAR in the Industry Action Plan, particularly with initiatives targeting Gen Y and youth. Really strong programs coming online. Some of them will take more than a year to resonate and drive admissions at the gate, but we're optimistic. It's the first time in the long time that we really had an industry alignment that includes all the stakeholders. And I think those kinds of strategies are really going to -- and with some tailwinds from the economy, main street is still -- our demographic is still impacted by unemployment in the markets in which we operate. But having said that, like I said, we're still -- we're more optimistic about some of the strategies we have in place.

Daniel W. Houser

And I think, in addition, Michael, I think that in our corporate partnership sales is an area where we really feel like we've got some optimism and opportunity with -- hats off to our partnership sales teams here in Daytona and across the company where we're in a position where we are just about done with our entitlement inventories, which are perishable inventory and put a lot of pressure on your sales teams to get done at particular times during the year. When you've got that off the docket, it really kind of opens them wide up to being able to get out there and really pursue official status and upsells and things. And in addition to that, what's really exciting is not only have they got these inventory sold -- and we're at about 76% of either sold or in process on our target for 2013 where we were about 68% last year at this time, but they're really, really strong national brands that we're capturing as well. So we do feel some momentum there and pretty excited about that.


[Operator Instructions] Your next question comes from Barry Lucas with Gabelli & Company.

Barry L. Lucas - Gabelli & Company, Inc.

I have a couple and one just quick follow-up on the last comment. The corporate sponsorship that you just described, Dan, of sellouts, 76% versus 68%, does that include the entitlements that have been sold? Or is that sort of a separate item?

Daniel W. Houser

No, that's kind of like our total revenue across the company that comes from corporate partners. So that includes the suites, the hospitality, the display, what we call displays outside in the -- outside the track and inside the track, as well the sponsorship itself. So it's -- and also media, which includes MRN. So I think we're -- we've got a good momentum across-the-board, but very, very good, obviously, in the entitlement space.

John R. Saunders

Barry, this is John. I would add to that, that in addition to the buckets of revenue that Dan was just referencing, that these are strong, as he mentioned, very strong national brands like Kellogg's and Toyota, that these partners are stepping up with very sizable in-market activation spends, which obviously, is helpful to our admissions initiatives. And there was a level of pull back in that space over the last few years and we're starting to see that come back into the business.

Barry L. Lucas - Gabelli & Company, Inc.

Great. And how would you characterize both pricing in that space, John, and/or renewals?

John R. Saunders

We're seeing improvement in pricing. We saw a contract duration go to 1- to 2-year durations. Now we're seeing it come back to 3 to 3-plus years. Pricing was a little mixed in 2012, but we're seeing trending, from the low- to mid-single digits, on escalators. And so, as Dan mentioned, the corporate outlook is really gaining some momentum.

Barry L. Lucas - Gabelli & Company, Inc.

Okay. I have several others, but let me just ask this. If we're seeing 3% or so on TV rights fees and you've just described a fairly decent outlook for corporate sponsorship and other areas, I think you said per caps were up, why is it muted revenue guidance? I mean, you're essentially saying that admissions are still going to be flat to down?

Daniel W. Houser

Well, the revenue guidance really has some upside to it. We -- it's -- a lot of it is -- the concern is in the consumer space. And it's just -- it's been extremely volatile. And I'll go back to our -- last October, we felt like we needed to pull our guidance down on our -- on the EPS range. Things turned out a lot better than what we thought they were going to be, but it was very, very late in the cycle. I mean, we've got some things that we know we're going to be up against this year. One is, we had a rain out and rescheduled Daytona 500 for the first time in its hallowed [ph] history, and it's going to be a headwind. We're confident that we can get to where we need to get for the 500. We're optimistic that we can get to a sellout again. But it's going to be a late cycle phenomenon. And you're -- then you're victim to weather, you're victim to the mood of the company -- the country across-the-board on macroeconomic conditions, et cetera. So we've just -- we hope -- and some of the things we're doing, John and his teams are working on to try to manage capacity back to where we've got some of this scarcity, demand tension. We don't have that luxury that we had when you go back to pre-'08 times.

Barry L. Lucas - Gabelli & Company, Inc.

Great. A couple of quick ones for either of you. The storm that hit the area here, Sandy, was particularly hard on Staten Island. Is there any other additional remediation? As a result of the storm, does it slow the sales process? How do you -- how would you view that?

John R. Saunders

As Dan mentioned in his remarks, Barry, there was some damage at the property. There was a levy, in particular, broke and it flooded. The are several wells on the property that had to be repaired or replaced. All that work has been completed. No impact to our negotiations to sell the property. Certainly, what happened to our land there is nowhere near what happened to the rest of the island. I would consider it insignificant compared to people who live there and the businesses that operate there. But it didn't do anything to knock us off our game and as far as any regulatory, like the DEC of New York State, they were kept the apprised of all our repair operations, and no issues there.

Barry L. Lucas - Gabelli & Company, Inc.

Okay, great. Two more quick ones, if I may. In -- there's been talk in the state legislature here in New York, again, about gaming, and especially upstate. So I just wonder, in terms of the long-term project, how likely, assuming gaming came, non-racino kind of gaming, was introduced here in New York and sites were available upstate, how comfortable do you feel about Watkins Glen in its inaccessibility, and your partner. I mean, is that somewhere on the drawing board?

John R. Saunders

We've been following that very carefully. Particularly, it's been spearheaded by our track president at Watkins Glen, Michael Printup. And it's my understanding that, yes, there is -- the governor mentioned in his state of the state speech about upstate casinos. But it's my understanding that there is some agreement with the Seneca Indians that there's a -- some sort of geographic exclusion in the upstate area that would be for them to develop casinos. And it's somewhere in that Finger Lakes region to the, I believe to the West, towards Rochester, Buffalo. And our track president has been in discussions with those folks, but nothing of any substance at this point. And as you know, there hasn't been any move a foot in the legislature at this point. But we're following it pretty closely. And would Watkins Glen be a potential site? We'll see.

Barry L. Lucas - Gabelli & Company, Inc.

Last item. Talladega. You brought it up. Talladega 2 being one of the tougher races to get people to travel to. So what do you do about that? Does that mean you shift that race? Or you thinking about shifting the race? Does NASCAR to the extent that someone can comment on that? Is there any contemplation of shortening the calendar?

John R. Saunders

No. There's no discussion of that going on and there's no plans to move those races to anywhere else. We're very, very proud. Historically, Talladega has been a huge generator of operating income for the company. They have had 5 years of high unemployment through their trading area. It's when you have a cumulative effect of things like tornadoes and the talk of tornadoes in and around the events, and we've all seen the damage that can be done to our industry. You don't see it in other industries as much as you see it in our industry where driver quotes can be damaging to the fans' interest in certain races. And the tandem racing, 2 or 3 events of that kind of stuff, which was quite frankly, pathetic. The -- it's not what Talladega has been known for. So we are working hand-in-hand with NASCAR to address this. And not just the racing, but the entire weekend in terms of the qualifying formats. Track president Grant Lynch, is -- this is top priority for him. And in the past, we've -- negative storylines in our industry have been out there and they've had their impacts. And when we get into talking about the bright side, the good things of our sport, we see things turn around. And I think that, that's -- will be the ultimately, the outcome at Talladega. But it's going to take several partnerships with all of our stakeholders to get it done.

Daniel W. Houser

And the Gen-6 car can be a big part of that across the schedule this year, but with Talladega, it's a very traditional type of NASCAR fan. And we're excited about what that can bring to the racing and also what it brings back to the affinity with the manufacturer brands. We think is very important.


I would now like to turn the call back to John for closing remarks.

John R. Saunders

Thank you, operator, and thank you, all, for dialing in for our fourth quarter call, and we'll look forward to talking to you after our first quarter. Thank you.


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

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