International Speedway Corp. (ISCA) reported mixed fourth-quarter results. Adjusted earnings of 56 cents per share, missed the Zacks Consensus Estimate of 58 cents by 3.4%. However, adjusted earnings rose 1.8% year over year, mainly due to increased revenues. The company promotes motorsports themed entertainment activities in the U.S. and owns 13 motorsports entertainment locations.
Total revenue was approximately $199.8 million, up 5.9% year over year, mainly due to higher motorsports related revenues, increased food, beverage and merchandise revenues and higher other revenues. Further, revenues beat the Zacks Consensus Estimate of $194 million by 3%.
Behind the Headline Numbers
Net admissions revenue dropped 0.7% year over year to $37.7 million. However, motorsports related revenues increased 2.3% year over year to $138.1 million. Food, beverage and merchandise revenues jumped 58.4% year over year to $19.4 million. Other revenues also rose 32.7% from the prior year to $4.5 million.
Operating expenses grew 0.5% year over year to $159.9 million, primarily due to higher general and administrative (G&A) expenses. G&A expenses increased 13.3% from the year-ago quarter to $28.4 million. Operating income increased 34.9% year over year to $39.8 million, primarily due to higher revenues on a year-over-year basis.
Daytona Rising
Daytona Rising is the front stretch of Daytona International Speedway — International Speedway’s flagship motorsports facility — currently being renovated.
The company anticipates Daytona Rising to cost approximately $400 million, excluding capitalized interest, which it plans to fund through cash on hand and cash from its operations. It might also use borrowings on its credit facility for a limited period of time.
The company spent nearly $119.3 million for the project in fiscal 2014, totaling approximately $170.5 million since its commencement. The company has identified certain existing assets that are expected to be impacted by the renovation of Daytona International Speedway and will require accelerated depreciation or losses on asset retirements. This will total approximately $50 million over the approximate 26-month project time span.
2014 Results
Revenues for the full-year 2014 were $651.9 million, up 6.4% year over year. Earnings were $1.42 per share, down 1.4% year over year.
Fiscal 2015 Outlook
For 2015, the company anticipates total revenue to range between $615 million and $630 million. The company expects revenues related to admissions, corporate sales and food, beverage and merchandise to be stable year over year, while television rights for Nascar’s top three racing series are expected to increase 3.8% to roughly $315.0 million. The lower-end of the range reflects a decrease in consumer-related revenues, should economic conditions deteriorate.
Also, motorsports and G&A expenses are expected to rise 3.2%, primarily due to higher personnel related costs, strategic spend supporting consumer marketing initiatives, and the operating expenses associated with assets placed in service related to Daytona Rising and one-time transition costs associated with the change in merchandise strategy.
As a result, the company currently expects its fiscal 2015 EBITDA between $180.0 million and $195.0 million, and EBITDA margin to range between 29.5% and 31% of total revenue.
Based on all the above expectations, the company expects fiscal 2015 earnings between $1.10 and $1.30 per share, which includes a charge of approximately 15 to 18 cents per share related to additional depreciation for assets placed in service during fiscal 2015 for Daytona Rising and about 5 to 6 cents per share related to non-recurring charges associated with the aforementioned merchandising strategy.
Excluding these charges, earnings for fiscal 2015 would range within $1.30 to $1.50 per share. For fiscal 2015, International Speedway expects operating income to reduce $4.0 to $5.0 million, related to its new merchandise business model. The reduction will primarily be due to the non-recurring operating expenses of $3.5 to $4.5 million related to certain partial year operations, and restructuring costs to effectively transition merchandise operations.
Recently, Nascar and Nascar Team Properties announced a 10-year agreement with Fanatics Retail Group Concessions, Inc. to operate Nascar’s entire on-the-track merchandise business and improve fans’ shopping experience. Per the agreement, Fanatics will be the exclusive retailer of Nascar and driver merchandise on the trackside for all 38 Nascar Sprint Cup Series events. In addition, Fanatics entered into a 10-year exclusive retail merchandise rights deal with the company for its track trademarks and certain other intellectual property at all the company-owned tracks.
Elimination of consolidated trackside merchandise operations, partially offset by percentage sales received from Fanatics, will lower food, beverage and merchandise revenue and expense by approximately $37.0 to $38.0 million, and $33.0 to $34.0 million, respectively. Elimination of G&A expenses related to trackside merchandise operations would be around $2.0 to $3.0 million.
Stocks to Consider
International Speedway presently has a Zacks Rank #3 (Hold). Better-ranked stocks in the same industry include The Marcus Corp. (MCS), Vail Resorts Inc. (MTN) and Norwegian Cruise Line Holdings Ltd. (NCLH). All these stocks carry a Zacks Rank #2 (Buy).
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