International Speedway Earnings Call Nuggets: Motorsports-Related Line, MLB Deal

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On Thursday, International Speedway Corporation Class A (NASDAQ:ISCA) reported its third quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Motorsports-Related Line

Michael Walsh – Wells Fargo Securities: Just wanted to address the Motorsports related line, if you look at it on a nine-month year-over-year basis and I know it’s not perfect and you make adjustments for ancillary revenue. We know what the TV contract is, what kind of sticks out is the corporate partnership revenue. How much is that down year-over-year, do you guys have anything?

Daniel W. Houser – SVP, CFO and Treasurer: I think the thing there, Michael is that you know, we had some big deals that expired at the end of 2011 that were long-term like in the five year range that were negotiated back before the economic turn down and there were significant partners like Bank of America and things like that, that highly impacted Daytona. So, I think you see a disproportionate kind of impact there on that Coke Zero event year-over-year. We really as we’ve said before that we are within a couple of percentage points of our overall target on corporate partnerships for the year that the results for the quarter were within our range of expectations, but I think that’s what you see there is really that impact of some of those big deals, Home Depot, Crown Royal, UPS, ConAgra both the DAYTONA 500 and the Coke Zero were impacted pretty heavily, but we’ve seen increases that kind of went into a lot of the other events through the year that have helped to mitigate a lot of that.

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Michael Walsh – Wells Fargo Securities: I know you guys are fairly diversified in terms of the quantity of this partnership, but just kind of an early read on ’13. I mean what are you guys seeing right now on pricing and just…

Daniel W. Houser – SVP, CFO and Treasurer: Well, I mean I think it continues to be a mix bag, but our outlook, we have more to say about that in January, but we’re feeling pretty good about 2013. Lot of interest, you know some things are in the works on the – particularly on the entitlement side where we feel that we’re going to go into next year with a lot of that stuff off the board again not ready to announce a lot of that, but lot in progress and then when you – that then when you have that perishable inventory taken care of, you know your marketing teams have a lot more opportunity to focus those resources and on other incremental business, so we’re feeling pretty good about ’13 overall.

Michael Walsh – Wells Fargo Securities: You had mentioned, I am switching over to the Casino, you had mentioned the 16% gross of gaming revenue in the KC market, is there anything you can say there or when you get to 2015, what does that number have to be to reasonably achieve $50 million in EBITDA by 2015?

Daniel W. Houser – SVP, CFO and Treasurer: I mean I think that this is the – what’s kind of happening there in that market right now. We’re actually number one you know as far as revenue from table games and poker, but we’re not where we were hoping to be on the slot revenue which is the high margin stuff and what’s happening in that market right now is you’ve got a lot of – what and I take a lot of this from our partners. You know this business much better than we do, but there is a lot of not unsustainable promotion and things like that that are going on to try to you continue to hold on the market share. We’ve made a decision not to try to match that, we are continuing to compete on the quality, the experience, the ambience and the strength of being close to Kansas City. So that and you know in particular you’ve got one casino there in that market that is up for sale and they are doing extremely aggressive, basically what’s termed in that industry buying revenue and it’s not really aimed at competing with us as much as it’s aimed at building the revenue line because that’s what that property will trade on. So, we’re experiencing that right now. We’ve made a decision to kind of stay with our game plan for the long run, we really believe that that will, will get us where we want to eventually be and feel that we’ll be able to meet the targets that, that we expected, the penetration that we need to get over the long run, but some of the stuff is going up definitely continuing to 2013.

Michael Walsh – Wells Fargo Securities: Just one quick one here, and I’ll get off, you alluded to it on the earlier, but if Staten Island just doesn’t happen I mean do you still go forward with some of the Daytona plants. I realize that’s your flagship property, but I just kind of want to get your thoughts there?

John Saunders – President: This is John. First of all on Staten Island, we are in exclusive negotiating agreement and given confidentiality, terms of that agreement we can’t disclose who that potential buyer is, but with regards to moving forward on Daytona or any other high impact CapEx programs, that’s a decision that, when we get to that point – when we take into account the economy, we take into account the core business, we take into account the cost of these projects that’s all in the mix, but we would prefer very much to have a transaction completed before launching something somewhere else in the business.

Daniel W. Houser – SVP, CFO and Treasurer: I think Michael though, you know the thing along with that is our commitment to the investment grade metrics on the balance sheet, that in many ways is going to drive the decision-making. We’re not going to violate our principles there. Of course some of the things that we’ve done this past year starting a couple of years ago to take that 2014 maturity and move it out long-term certainly gives us a much more favorable debt maturity outlook and some flexibility in the near-term.

MLB Deal

Stephan Altebrando – Sidoti & Company: I just wanted to talk a little bit about the MLB deal particularly the one with the FOX, TNT where I think the aggregate amount doubled. If you could – I know these deals are from far from cookie cutter type deals, but if you could highlight maybe some of the similarities, some of the differences you guys have in terms of your bargaining position, maybe things like viewership trends and the amount of content being offered in these deals?

John Saunders – President: Well, one of the things with that deal is that a lot of that content I guess is moving off of MLB network onto the larger networks then that impact of that. I think from – we have obviously had in that the necessarily the ratings that we would have hoped for, not terrible ratings, but some softness there. The comments from FOX at the end of their season was they didn’t see as bad as anything that was other than just some of the competitive things in the sports viewing market through the year and that they felt pretty good about the way the season went. Our ratings are softer. Ratings are mainly irrelevant because of the way they drive advertising rates and what we are seeing for NASCAR and it’s kind of consistent across the board, is that ad rates and ad spending for live sports are up because really in a lot of ways, I know we keep harping on this, but this all DVR thing and less likelihood that the live sports are going to be pre-recorded and fast-forwarded through. So, I mean the MLB had some fluctuation in rates. They do have a tremendous amount of content. I think that’s something as well with us, as we have got a lot of content. We have a very long season. So I think that bodes well for us. I am not well versed enough Steve to say how the relative value of the baseball rights in the previous contract, et cetera, to where they are today, but we feel cautiously optimistic about where the NASCAR rights deal will end up and that’s in talks at this point with NASCAR. We think it will be late in – mid-late 2013 will have something. We just hope that these broadcasters have got some money left by the time we (indiscernible). They spend pretty big, but we continue to feel good about it.

Michael Walsh – Wells Fargo Securities: Just wanted to address the Motorsports related line, if you look at it on a nine-month year-over-year basis and I know it’s not perfect and you make adjustments for ancillary revenue. We know what the TV contract is, what kind of sticks out is the corporate partnership revenue. How much is that down year-over-year, do you guys have anything?

Daniel W. Houser – SVP, CFO and Treasurer: I think the thing there, Michael is that you know, we had some big deals that expired at the end of 2011 that were long-term like in the five year range that were negotiated back before the economic turn down and there were significant partners like Bank of America and things like that, that highly impacted Daytona. So, I think you see a disproportionate kind of impact there on that Coke Zero event year-over-year. We really as we’ve said before that we are within a couple of percentage points of our overall target on corporate partnerships for the year that the results for the quarter were within our range of expectations, but I think that’s what you see there is really that impact of some of those big deals, Home Depot, Crown Royal, UPS, ConAgra both the DAYTONA 500 and the Coke Zero were impacted pretty heavily, but we’ve seen increases that kind of went into a lot of the other events through the year that have helped to mitigate a lot of that.

Michael Walsh – Wells Fargo Securities: I know you guys are fairly diversified in terms of the quantity of this partnership, but just kind of an early read on ’13. I mean what are you guys seeing right now on pricing and just…

Daniel W. Houser – SVP, CFO and Treasurer: Well, I mean I think it continues to be a mix bag, but our outlook, we have more to say about that in January, but we’re feeling pretty good about 2013. Lot of interest, you know some things are in the works on the – particularly on the entitlement side where we feel that we’re going to go into next year with a lot of that stuff off the board again not ready to announce a lot of that, but lot in progress and then when you – that then when you have that perishable inventory taken care of, you know your marketing teams have a lot more opportunity to focus those resources and on other incremental business, so we’re feeling pretty good about ’13 overall.

Michael Walsh – Wells Fargo Securities: You had mentioned, I am switching over to the Casino, you had mentioned the 16% gross of gaming revenue in the KC market, is there anything you can say there or when you get to 2015, what does that number have to be to reasonably achieve $50 million in EBITDA by 2015?

Daniel W. Houser – SVP, CFO and Treasurer: I mean I think that this is the – what’s kind of happening there in that market right now. We’re actually number one you know as far as revenue from table games and poker, but we’re not where we were hoping to be on the slot revenue which is the high margin stuff and what’s happening in that market right now is you’ve got a lot of – what and I take a lot of this from our partners. You know this business much better than we do, but there is a lot of not unsustainable promotion and things like that that are going on to try to you continue to hold on the market share. We’ve made a decision not to try to match that, we are continuing to compete on the quality, the experience, the ambience and the strength of being close to Kansas City. So that and you know in particular you’ve got one casino there in that market that is up for sale and they are doing extremely aggressive, basically what’s termed in that industry buying revenue and it’s not really aimed at competing with us as much as it’s aimed at building the revenue line because that’s what that property will trade on. So, we’re experiencing that right now. We’ve made a decision to kind of stay with our game plan for the long run, we really believe that that will, will get us where we want to eventually be and feel that we’ll be able to meet the targets that, that we expected, the penetration that we need to get over the long run, but some of the stuff is going up definitely continuing to 2013.

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