International Speedway Management Discusses Q2 2012 Results - Earnings Call Transcript

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International Speedway (NASDAQ:ISCA) Q2 2012 Earnings Call July 5, 2012 9:00 AM ET


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

John R. Saunders - President

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


Alvin C. Concepcion - Citigroup Inc, Research Division

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

Stephen Altebrando - Sidoti & Company, LLC

Barry L. Lucas - Gabelli & Company, Inc.


Good morning, and welcome to the International Speedway Corporation Second Quarter 2012 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded on Thursday, July 5, 2012.

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 second quarter ended May 31, 2012. With us on this earnings call are John Saunders, President; and Dan Houser, Senior Vice President and Chief Financial Officer. After our formal remarks, a Q&A period will follow. The operator will instruct you on procedures at that time.

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 documents filed by International Speedway 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 John Saunders. John?

John R. Saunders

Thank you, Charles, and good morning, everyone. Our fiscal second quarter financial results were positively impacted by scheduling changes, primarily due to hosting 2 additional NASCAR Sprint Cup Series events than in the comparable quarter. Other quarter-over-quarter comparisons are outlined in the earnings news release. Despite the favorable financial results quarter-over-quarter, attendance-related revenues at our events generated mixed results. Corporate sales for the quarter were slightly behind target, but we remain encouraged by the level of market activity supported by strong media sales.

For the year, we expect to be within a couple of percentage points of our corporate revenue target with the exception of 2 Sprint Cup events, which remain open or not yet announced. We have sold all remaining NASCAR Sprint Cup and nationwide entitlements, and we're confident that we will secure entitlement partners for both Watkins Glen and Phoenix's Sprint Cup events.

Turning to the consumer, we are seeing certain positive signs such as some growth in -- for caps for food, beverage and merchandise concessions. In addition, retention rates have experienced a slight uptick for comparable events. Positive signs indeed but attendance-related revenues continued to be challenged by the slower-than-expected economic recovery.

Deferred revenue, after adjusting for event schedule changes, is down year-over-year by approximately $11 million. Advanced ticket sales for our Sprint Cup events remain approximately 8% and 9% off from last year in units and revenue, respectively. Parts of these declines are associated with the timing of renewals and related programs. However, fans' purchasing decisions are still coming later in the sales cycle, closer to the race weekend. NASCAR core fan demographic, which is the working class, still has a lack of consumer confidence, seeing a lack of job growth and less income growth. Until these indicators improve, we expect our current consumer trends to remain under pressure.

Now, we are not waiting for the trends to reverse course to make strategic decisions to grow our business. We are moving forward with numerous initiatives to drive consumer sales. We can't stress enough the importance of getting guests to the live event. Aside from the positive impact to consumer-related revenues, it supports both corporate sales and influences the long-term health of TV media rights fees.

We are actively targeting the next generation of fans through integrated promotions, which include education on the sport with introductory fan experiences. Also, we are aggressively outbound prospecting on group sales. All of this is being supported by increased levels of consumer research, leveraging technologies such as mobile websites and event apps and highly segmented promotional campaigns, just to cite a few examples.

We believe improving the overall guest experience at our motorsports events will drive interest and conversion. More comfortable seating, upgraded and expanded restrooms, additional points of sale, leveraging audio and visual experiences with greater social connectivity, all are focus areas to enhance the fan experience to build retention.

Targeted improvements at our motorsports facilities to enhance the guest experience will further support growth. We are in the process of reviewing highly impactful projects that would necessitate an increase in CapEx.

Just this past week at Daytona, we filed with the city a Planned Master Development application, which is the first step in the pursuit of potential redevelopment projects at the World Center of Racing. While many aspects of the projects are yet to be determined, such projects could include a complete overhaul of the entire frontstretch grandstands, creating a world-class motorsports entertainment facility including features such as new seats, suites and guest amenities, as well as new entry points, improved fan conveyance and a redesigned midway for elevated fan engagement. Our filing is only the first step in a long process, and there are still many unanswered questions that could impact or even derail this initiative. Multiple internal and external factors will influence the economics and project feasibility. Construction design and cost must still be scoped. All of these and much more must be addressed before final approval.

It should be noted that any substantial increase in spending will depend on several factors, such as a stable economic environment, operating environment, credit availability and preferably the sale of the Staten Island property. We compete with a variety of entertainment options such as concerts and other professional and collegiate stick and ball sporting events for the consumers' discretionary dollar. We must meet the needs of today's consumer to secure and grow market share.

Our current pricing strategies and related consumer initiatives, coupled with focused capital spending are on target, designed to stimulate interest that we can convert to stronger renewals and retention rates, getting the company back on the path to increasing consumer-related revenues.

I would like to touch on TV ratings before I turn the call over to Dan. Currently, TNT is broadcasting the Sprint Cup events and has seen an increase in ratings with its first 3 events. FOX, however, saw a 4% decline in ratings for its 13th Sprint Cup telecast. Part of the decline in ratings can be attributed to weather as well as competition from other sports. However, FOX's senior vice president of programming and research, when asked about the dip in the 18 to 34 demographic, indicated that this year was, and I quote, "Mostly driven by competitive scenarios, and he didn't feel it was reflective of a long-term problem with NASCAR." There are a number of other factors that keep us optimistic on the level of the next media rights contract.

We know that broadcasters want live programming on their networks because it creates destination viewing. Viewers watch these events in real-time and do not DVR them. DVR penetration, as being reported by Nielsen, has advertisers scrambling. Today, DVR penetration has increased to about 42% of American TV households. That's a dramatic increase from 2006 when only 3% of households had a DVR. We attribute the jump in sports advertising up 33% over the past 3 years to almost $11 billion annually due to this fact.

Another positive is increased competition. The re-branded NBC Sports network, while just a fraction of the viewers of ESPN, will grow in prominence with this year's Summer Olympics. It is conceivable that with increased visibility that they may secure more sports media rights. And prior to 2007, NBC was broadcasting NASCAR events. More bidders usually mean higher fees for sports rights.

Also, NASCAR fan avidity remains strong. In addition to the fact that NASCAR has essentially year-round programming, a recent survey conducted by the research firm, Rubicon, found that NASCAR viewers had the highest sponsor recall on television. This is certainly appealing to advertisers.

Again, these many factors, on top of the substantive broadcast results as well as other dynamics, breed optimism regarding the prospect of NASCAR's next broadcast rights agreement.

I will now turn the call over to Dan Houser to discuss the financial performance for the quarter. Dan?

Daniel W. Houser

Thanks, John, and good morning, everyone. Our second quarter results were impacted by the ongoing economic trends, which continue to stifle attendance-related and to a lesser extent, corporate partner revenues. Comparability was also affected by other factors, primarily by changes in the Kansas and Phoenix race calendars. Specifically, the spring NASCAR Sprint Cup and Camping World Truck events at Kansas in the second quarter of fiscal 2012 were held in the third quarter of fiscal 2011. The spring NASCAR Sprint Cup and Nationwide Series events at Phoenix were held in the second quarter of fiscal 2012. The corresponding events were held in the first quarter of fiscal 2011. A NASCAR Camping World Truck Series event held at Darlington in the second quarter of fiscal 2011 will not be held in fiscal 2012.

And as mentioned on our last conference call, we expect lower ancillary revenues going forward 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 bidding on the distribution rights for original programming. 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 second quarter 2012 results include carrying costs related to Staten Island, a settlement of litigation involving certain ancillary facility operations, non-cash impairments of assets primarily attributable to the removal of assets not fully depreciated in connection with certain capital improvements, the loss on the early redemption of our senior notes due 2014, the equity investment in Hollywood Casino at Kansas Speedway, which opened in our first quarter of fiscal 2012, and the net gain on sale of certain assets. All of these are outlined in the earnings release and are included in our GAAP to non-GAAP reconciliation where appropriate.

Taking a look at the income statement, admissions revenue for the second quarter increased to $37.3 million, largely attributable to the previously mentioned timing of spring events at Kansas and Phoenix. Partially offsetting the increase was attendance at certain other events as well as previously discussed NASCAR Camping World Truck Series event held at Darlington in 2011 that will not be held in fiscal 2012.

For the 6 months ended May, the weighted average ticket price for our comparable Sprint Cup events decreased approximately 1.2%. The increase in motorsports-related revenues to $125.8 million was largely attributable to the previously mentioned timing of the spring events at Kansas and Phoenix and to increases in television broadcast revenue. Offsetting the increase were reduced ancillary rights and to a lesser extent, decreases in sponsorship suite and hospitality revenue for the comparable events.

For the quarter, ISC's domestic television broadcast and ancillary rights were $89.6 million with $89.1 million associated with the domestic broadcast contracts and approximately $500,000 of ancillary rights.

The increase in food, beverage and merchandise revenue to $12.7 million was largely attributable to the timing of events at Kansas and Phoenix. Partially offsetting the increases were concession sales related to non-motorsports events that were held in the second quarter of fiscal 2011 not held in fiscal 2012.

Prize & Point Fund Monies and NASCAR sanction fees increased to $48.9 million, largely attributable to events at Kansas and Phoenix and increases in television broadcast rights fees for NASCAR Sprint Cup, Nationwide and Camping World Truck Series events, a portion of which were paid to competitors as part of Prize & Point Fund Monies.

Motorsports-related expense increased to $34.8 million. The increase was primarily attributable to the previously mentioned timing of the events at Kansas and Phoenix. To a lesser extent, other non-event expenses contributed to the increase. Motorsports-related expenses as a percentage of combined admissions and motorsports-related revenue decreased to approximately 21.3% compared to 22.1% for the same period in the prior year. Food, beverage and merchandise expense increased to $10.1 million. The increase was primarily attributable to the events at Kansas and Phoenix. Partially offsetting the increase were expenses related to concession sales for non-motorsports events that were held in the second quarter of fiscal 2011 that were not held in fiscal 2012.

Food, beverage and merchandise expense, as a percentage of food, beverage and merchandise revenue, decreased to approximately 79.6% as compared to 82.5% for the same period in the prior year. This increased margin is attributable to the increase in catering merchandising concession revenues combined with cost containment of certain non-variable costs.

General and administrative expense increased to $27.9 million for the quarter. The increase was primarily attributable to carrying costs of our Staten Island property, legal expenses and settlement and certain administrative costs. G&A expenses, as a percentage of total revenues, decreased to approximately 15.5% as compared to 17.3% for the same period in the prior year. The increased margin is primarily due to the increase in revenue.

Depreciation and amortization expense for the quarter increased to $19.2 million. The increase was attributable to capital expenditures for our ongoing facility enhancements and related initiatives. The $5.7 million non-cash impairment of long-lived assets is primarily attributable to the removal of certain assets not fully depreciated in connection with the repaving of the track at Kansas.

Interest income was comparable to the same period in the prior year. Interest expense for the quarter decreased to $2.9 million. The decrease is primarily due to the redemption of the remaining $87 million principal 5.4% senior notes in March 2012 and increased capitalized interest. Partially offsetting the decrease was higher borrowings on our 2010 credit facility. The $9.1 million loss on early redemption of debt is related to the redemption of the remaining 2014 senior notes.

$1.4 million of income from equity investments represents our 50% equity investment in Hollywood Casino at Kansas Speedway. Our effective income tax rate was approximately 39.3% as compared to 39.2% for the same period in the prior year.

Net income for the 3 months ended May 31, 2012 was $13.7 million or $0.30 per diluted share on approximately 46.3 million shares. Excluding the carrying costs related to the Staten Island, settlement of litigation involving certain ancillary facility operation, non-cash impairment of track assets and loss on the early redemption of debt and the net gain on sale of certain assets, we posted earnings of $0.52 per diluted share for the 2012 second quarter. As described in the release, this is compared to non-GAAP net income for the 2011 second quarter of $0.26 per diluted share.

As for the balance sheet and future liquidity, at May 31, our combined cash and cash equivalents totaled approximately $104.1 million. Current deferred income was $86.2 million, and shareholders' equity was approximately $1.2 billion. At the end of the quarter, total debt was approximately $298.8 million, which includes $65 million in senior notes, $62 million in TIF bonds associated with Kansas, $1 million in revenue bonds, $50 million for our term loan on our headquarters office building and $120 million in borrowings on our line of credit.

During the second quarter, as we mentioned on the last conference call, we completed the redemption of all of our outstanding 5.4% senior notes. We used additional capacity on our line of credit to retire all of the notes for an aggregate principal equal to the $87 million outstanding, plus a redemption premium of approximately $9 million and accrued interest up to but excluding the redemption date.

We're monitoring the current interest rate environment, to potentially refinance the borrowings of the redeemed notes with lower cost alternatives and extend a significant portion of our near-term debt maturities.

Our Hollywood Casino at Kansas Speedway joint venture opened on time and under budget. As of the end of our second quarter, we funded approximately $134.3 million of the approximately $145 million revised budget we estimate to be our share of the capitalized development cost for the project, which is included on our balance sheet as equity investments.

In addition, we funded certain working capital needs of the project prior to opening which are capitalized. Other startup and related costs through opening were expensed through equity and net loss from equity investments. Cash flow from the casino's operations is currently being used to fund the remaining development costs and will subsequently be distributed to the joint venture partners in accordance with the partnership agreement.

We expect the casino will begin to provide positive cash flow in fiscal 2012 and expect for the full year -- for the full 2012 fiscal year to result in slightly positive equity income in our consolidated statement of operations.

During the quarter, we increased our annual dividend by 2% to $0.20 per share, marking the 39th consecutive year that the company has paid a dividend to its shareholders. We did not purchase shares of our Class A during the second quarter.

For the 6 months ended May 31, 2012, 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 May 2012 to approximately 7.1 million shares. At the end of the quarter, we had approximately $62 million in remaining capacity on our $330 million authorization.

Returning capital through repurchasing shares and an annual dividend payment continues to be an important component of our long-term capital allocation strategy. We're currently only buying shares opportunistically based on levels of our stock price. We will spend a minimum of $20 million in returning capital to our shareholders this year. We have additional capacity to purchase shares. Without foresight on the stock price, I can't provide the incremental purchases for the remainder of the year.

As it relates to capital spending, for the 6 months ended May 31, 2012, we spent $26.1 million on capital expenditures for projects at our existing facilities. At second quarter-end, we have approximately $47.9 million in capital projects currently approved. These projects include the track reconfiguration and road course construction at Kansas, grandstand seating enhancements at Talladega and Watkins Glen, facility signage and road improvements at Chicagoland, grandstand concourse and facility signage improvements at Richmond and RV improvements and paving at Michigan.

As a result of these currently approved projects and anticipated additional approvals in fiscal 2012, we expect our total 2012 capital expenditures at our existing facilities will be approximately $80 million to $90 million depending on the timing of certain projects. We review the capital expenditure program periodically and modify it as required to meet current business needs.

In terms of our 2012 financial outlook, we are reiterating our full year guidance of total revenues of between $610 million and $630 million, non-GAAP earnings to range between $1.50 and $1.60 per diluted share, EBITDA margin to range between 32.5% and 34% and operating margin to range between 20% and 21%. Based on John's comments regarding consumer-related revenues, we're more comfortable at the low end of the ranges.

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're 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.

Due to careful financial oversight, we are well-positioned for success and to balance the ongoing capital needs of our business as well as our other strategic opportunities while returning capital to our shareholders. We benefit from a solid position that we have maintained over the years, which affords us the ability to execute our disciplined capital allocation strategy and maintain our leadership position in the industry. And we believe as the consumer experiences improvement in their economic situation, we will benefit from their renewed confidence.

We look forward to speaking with you on our next call in October, and I'll turn it back over to the operator for Q&A.

Question-and-Answer Session


[Operator Instructions] Your first question comes from the line of Greg Badishkanian.

Alvin C. Concepcion - Citigroup Inc, Research Division

This is Alvin Concepcion in for Greg. You mentioned sluggishness in your core fan demographic, did you see that trend worsening over the last few months? Or is it more of a continuation of what you have been seeing over the past several quarters?

Daniel W. Houser

Yes, I guess it's more of a continuing sluggishness. I mean, I think we're largely seeing stabilization. We're just not seeing improvement as we would hope. And we have certain markets that are still seem to be strong. Michigan -- of course, of course that wasn't in the past quarter, but the Talladega market is that band through Mississippi and Alabama is particularly high in unemployment. That's one of the tracks where we continue to see some pressure. We had -- I think, with the calendar moving around in Kansas with that new event, that was a little difficult for some of the fans too. But otherwise, it's -- I think we're largely seeing stabilization. It's just that we're -- try as we might with all types of programs and promotions, we're having difficulty getting the needle to move.

Alvin C. Concepcion - Citigroup Inc, Research Division

Okay. Great. And along that note, are you seeing changes in sentiment from your corporate customers? You mentioned a slight downtick there.

Daniel W. Houser

No. I think that's -- like we said, our target for the year was pretty much flat with 2011. We believe we'll be within a couple of percentage points of hitting that target for the year. So some of it has to do with changes in the mix where you got some events down, some events up. But that's really been a much more predictable area of the business than the consumer side. It continues to be fairly volatile.

Alvin C. Concepcion - Citigroup Inc, Research Division

Great. Just one more question. Could you provide an update on the NASCAR? Did you write some negotiations if you have one?

John R. Saunders

Yes. I mean -- this is John. We -- as we said before, we constantly are in discussions with NASCAR about the broadcast relationships. And what I said in my remarks, while TNT is currently up through their first 3 broadcasts on Cup, FOX finished their part of the season down 4%. However, FOX doesn't -- they have come out and said that they don't think there's anything fundamentally wrong with the programming with the NASCAR content. We did have some weather issues. We did have some other sports programming competition in the marketplace. Tiger is winning again. You had some storied franchises in the NBA finals. So -- in addition to that, we've -- NBC has re-branded their cable channel and will be covering the Summer Olympics this month. And they could be a potential bidder going forward. We think that there's some good competition in the marketplace for the NASCAR content. Broadcasters are looking for live sports programming. So we continue to be optimistic about the next broadcast agreement, but we don't have anything definitive, obviously, at this point. But I would add one other thing, Nationwide Series is up, it's up 3% year-to-date and it's also up in the demographic, which is interesting to us. Again, we don't believe anything is fundamentally flawed with the NASCAR content, just a variety of other kinds of factors in the marketplace.


Your next question comes from the line of Michael Walsh.

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

Filling in for Tim Conder here. Just kind of tagging on to Alvin's question. Digital media rights, I mean, is that something that you think can be tacked on to the upcoming contract? I mean how significant could that be? You're losing the ancillary rights fee agreement, I just kind of want to get your thoughts on that.

John R. Saunders

Well, with regard to the first part of your question, the -- we anticipate -- I mean, the broadcasters have been asking for digital rights. And so we anticipate some sort of relationship there to grow, and we believe that it will be beneficial for the industry. We can't quantify what that looks like right now. NASCAR has -- as they've announced, from an interactive standpoint, they are taking back their rights. They've acquired them back from Turner and are going to ramp those up or currently are ramping those -- that infrastructure up internally. And again, we don't have any quantification of -- but we believe there will be a better economic business opportunity going forward. So we think all of that is positive, and it's -- to your question, specifically, yes, we do believe the broadcasters will have some sort of digital opportunity in this next agreement.

Daniel W. Houser

Michael, just on that, I think that, while NASCAR took those digital rights back, we don't think that they were being optimized in what was the historical business model there surrounding those. So by packaging those in, we believe that, that's going to help to drive the value of the overall broadcast rights. The decrease in -- that we've experienced, again, in the ancillary rights area is not really associated with this. It has a little bit to do with the ramp-up of the cost in 2012 to be ready to really launch those, the NASCAR website and other things in 2013. But that's really largely driven by this anomaly around the satellite radio that we discussed.

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

Got you. Just kind of looking back at some of the recent history. I was a little surprised that you guys didn't do any share repo this quarter. You guys got down close to $23 in the stock price, and I just kind of wanted to see what your thoughts around that if there's any particular reasons why?

Daniel W. Houser

Well, I -- again, we had set certain thresholds that are kind of solidly in place under a 10b5 plan. We certainly see the value -- we think this -- it isn't that we don't think we reached a point where the stock has a value by any means whatsoever, but we're also balancing that with what we see as maintaining the flexibility in our balance sheet, the dry powder. We think we still got opportunities to invest in the business, and we want to make sure that we have got dry powder there. We're also positioning ourselves for what we see is a needed investment back into the business, into the core business, to keep pace with other entertainment options. At this point, I would still -- while we're in active negotiations on the Staten Island property, we don't have a deal there yet. And that's a major cash event for us. So all things considered, that's where we are for the time being. We certainly -- with our -- with the dividend and what we've purchased this year, it kind of puts us at an equivalent yield of about 1.7% on this current stock price. That's not huge, but I think that where we stand, I think in the future that we can see yield well above that, maybe up into the 3% range, and still be holding to these other aspects that we think we need to balance. But again, it will take action on the board's part to readjust where we've got the floor set for purchases.

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

Sure. And I was just kind of curious there. And, Dan, you had mentioned on Staten Island is -- would you say it's progressed a little bit since we -- since the last couple of quarters or kind of what

in the same place?

Daniel W. Houser

Well, I would say that it is constantly moving and constantly evolving. We've got competing parties who are very anxious to get going with viable port development projects on this property bay. We've got good political will. It creates jobs. It's -- we've got the environmental issues managed. The problem continues to be in this -- in the world that we're in today that traditional project financing is elusive to these parties. So then it's looking for private equity, et cetera, et cetera. So it's all centered around these folks being able to come up with the funding that we kind of stay in a circling pattern. And we have a couple of options and those are -- things are in the works, and we feel good about it, but it's kind of like we've got these -- we've got suitors professing undying love but no one's showed up with the ring at the altar yet.

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

And really quickly here, last question, guys. So Daytona enhancements maybe for '13, what's the timing of that? And you don't have formal guidance around CapEx for 2013, but I think you've mentioned CapEx maybe pushing over $100 million in '13 and '14, [indiscernible] to those contemplate the Daytona enhancements?

John R. Saunders

Well, right now, we -- this is John. As I've said earlier, we're in the very, very preliminary stages. I would characterize this as conceptual. We don't have -- we're just -- we're thinking about the future of our crown jewel. And Daytona stands above all, and especially the Daytona 500. And the reason why we're even addressing it right now is that in the city of -- addressing it publicly, in the city of Daytona Beach, there's a fairly lengthy zoning and permitting process. And so we're talking to the city through these filings and -- but it is -- it's not contemplated in anything that we've talked about for 2013 at this point. And as I said, it's very early on, very early on. But we will -- as soon as we have more to report, we'll certainly keep you informed.


Your next question comes from the line of Steve Altebrando.

Stephen Altebrando - Sidoti & Company, LLC

I apologize if I missed this, but did you give a comparable event admissions revenue for the quarter?

Daniel W. Houser

We really don't give that, but what we did say was that we were down a little bit. Our weighted average ticket price on comparable events was pretty flat, I think down 1.2%. We had some reduction in comparable events on the admissions level, but it's low-single digits.

Stephen Altebrando - Sidoti & Company, LLC

Okay. And then in the past you had mentioned that, I think, you felt somewhat close to being able to push prices. Obviously, the economy is not helping out here. How close do you think you are to that? Is that more of a 2013 event?

Daniel W. Houser

Well, I mean, our ticket pricing for the year 2012 is pretty much set. So we're not going to reduce pricing within -- after the ticket prices are set. What we do sometimes is if -- we will flex pricing upward if we see demand for a certain section of the grandstands for a certain event. We'll take some opportunity there and do some flex pricing upward. But our policy is we don't reduce prices in the selling cycle and penalize basically the people who buy early. That's why we want to incent people to buy early.

Stephen Altebrando - Sidoti & Company, LLC

Right. Okay. And then last one, on corporate sponsorships, I know these deals are not cookie-cutter. But I had assumed some of the multi-year deals that were, I guess, inked in '09 and '10 probably would not very favorable pricing. Is there an opportunity to benefit as these contracts -- some of these contracts renew in '13 and '14?

Daniel W. Houser

Yes, absolutely. I mean we're seeing ups and downs in that area now. And what will happen -- particularly as you get into the event season like we are right now, if you have inventory that -- we've got a couple of Cup events that are in the works, but there's less time for a partner to activate. So what we will target doing then is we get a multi-year arrangement, it may have a reduced entry-level price for the first year in 2012, but you'll get a healthy market price in the years going out. And so that's the phenomenon that you'll see. But we've had some good names, some good partners come into the sport. Now it's impacted by not only NASCAR, but the -- I mean, it's the wallet of the partner and how things are impacting that industry. So one other thing, I just, for example, with the Dodd-Frank kind of things and some of the things that came out of that with banking and where the banks were making a lot of money off of transaction fees and bank account fees and things like that for a number of years, well they really wanted to target these consumer retail type people come into the track. When their revenue profile then was changed because of regulatory changes, their focus may alter. And it isn't as targeted of a buy for that industry. So you've got things like that, for example, that will -- that can contribute to changes in names from time to time. I mean, home improvement is still very under -- very much under pressure with the stagnant housing market and things like that. So -- but we've had great names in consumer brands, [indiscernible] things like that come into the sport to take the place.


Your next question comes from the line of Barry Lucas.

Barry L. Lucas - Gabelli & Company, Inc.

I have several. John, could we come back to the Daytona project. I know you said it was really just in conceptual phase. But I'm just trying to get a feel in terms of how might it differ from the previous plans, Daytona Live and the mixed-use facility?

John R. Saunders

Well, first of all, regarding what we formally call Daytona Live, now we refer to it as the potential of a development north of the Speedway across the street. There's a retail, dining and entertainment complex. That development, as we have said previously, is really going to be driven by market conditions. It's not a speculative-type project. We think it has a really long-term value, shareholder value and certainly would complement the events at the Speedway and would be designed in a way to complement the events, but drive returns year-round. But that -- in a way, that is viewed separately than what we've talked about this morning, which is the -- moving Daytona to a next-generation, world-class motorsports facility. And that -- I don't want to necessarily try to quantify, but it would be a game-changer for the industry. And we think the industry needs that. And we think that, that should happen at the industry's top-flight brand. And so when you think about Turn 1 to turn -- I'm sorry, Turn 4 to Turn 1, that's a mile-long of grandstands. We are not optimized in things like points of sale, which are opportunities to drive revenue. Fan engagement is more important than ever. And we're dealing with a structure that, while we're very proud of it, we think it has greater opportunity to drive long-term growth in the future. And you look at things like, from a corporate standpoint, hospitality. For 25 to 30 years, we've been driving corporate hospitality. There has been essentially a tent with a white picket fence around it and some nicely decorated and so forth. But it's become separate from the event. If you think about new stick and ball stadiums and you look at the suite corporate opportunities, they're very much connected to the event itself. And in our case, we have to host these hospitality zones away from the racetrack where you can't view the racetrack. So those are just some examples of how we view this would be a game-changer, but it's very -- it's very early on. And as I said, there are a number of things that could alter or even derail the project. We've got to have a little bit more clarity on the operating environment from a macro standpoint. What do the credit markets looks like. There's just a number of things that -- the next generation of media contracts. So it's early on, and the reason why we're talking about it is that if we have a long runway with the city of Daytona Beach in terms of the appropriate permitting and zoning requirements that we would have to obtain. So -- but as I said earlier, we'll have -- as we are able to talk in more clarity and from a quantitative standpoint, we certainly will keep everybody informed.

Barry L. Lucas - Gabelli & Company, Inc.

Great, thanks. And if we could maybe get Dan involved here. On the balance sheet, you redeemed the 5.4% notes using the revolver primarily. And what moves you directionally to fund that to put more permanent financing in place? Rates are low here, it's -- I'm sure you're in discussions, but would part of that will also be dependent upon the direction that this project may take?

Daniel W. Houser

Well, I think that the capital structure provides the flexibility to management to make decisions. I think from the balance sheet perspective, it's -- rates are historically at a very low point. It's not in a volatile world that we're in. Very unclear what they might be by the time we got to mid-2014. So it, for us, were -- really the strategy was to take those down. And I think that we're certainly taking a look at taking advantage of some long-term financing at some very attractive historically low rates. So I think it's a prudent thing to do [indiscernible] the business side of the sides.

Barry L. Lucas - Gabelli & Company, Inc.

Okay. Last area would be on the guidance and the comfort level at the low-end of $1.50 to $1.60. I think, on a Eximius basis, you handily beat Street Consensus and were ahead of my estimates. So I'm just wondering, are you seeing stuff in the pipeline, whether it's advanced ticket sales that's making you even more cautious than you were?

John R. Saunders

No. I think it's largely, Barry, that the -- that it's really -- we've kind of urged everyone to think about the timing of events, how they switched around from quarter-to-quarter. So what you had in the first quarter -- last year you had the Phoenix event that was in the first quarter last year and moved to the second quarter that weekend, and as well the Kansas weekend that was in the third quarter moving into the second quarter. So you had 2 more Cup weekends in that second quarter as compared to last year. So that's going to have an impact on your third quarter and on your first quarter. And so our hope would be that folks out there kind of think about that a bit, and think about what we said about guidance and take a look at their numbers for Q3 and Q4.

Barry L. Lucas - Gabelli & Company, Inc.

Okay. And how are you feeling about this weekend's race at Daytona?

John R. Saunders

Feeling good. The weather looks -- the weather outlook is improving. Here in Florida, you get the afternoon -- it's kind of the standard weathermen's forecast is afternoon showers. But things are looking good. It's actually -- I think, while it's warm here, it's cooler than other parts of the country. So I think we got great competition coming up, great chance for the weekend. And we've been feeling pretty good about the way Daytona has been performing. So we're anxious to get the cars and crews in here.


At this time, there are no further questions. I'll now turn the call back over to management for closing remarks.

John R. Saunders

Well, I just want to thank everybody for joining us today in the second quarter call, and we look forward to talking to you on the third quarter call. Have a great day. Thank you.

Daniel W. Houser

Thanks, everyone.


Ladies and gentlemen, this today's conference call. You may now disconnect.

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