ISC reports admissions revenue down 16.5 percent for 2009

International Speedway Corp. has seen revenues drop 13.6 percent and has reported a loss for the first six months of its 2009 fiscal year – the loss mostly attributed to a write-down of $55.6 million for struggling merchandise arm Motorsports Authentics.

In releasing its financial statement for December 2008-May 2009, ISC said it has seen admissions revenue drop 16.5 percent, motorsports-related revenue drop 8.7 percent and food, beverage and merchandise revenue drop 33.7 percent. Admissions revenue for March-May (including NASCAR Sprint Cup weekends at Martinsville, Phoenix, Talladega, Richmond and Darlington) was down 18.2 percent.

ISC expects overall admissions revenue to drop 15 percent for the year, ISC President John Saunders said during a conference call with financial analysts Tuesday morning.

Advance ticket sales have been down about 25-30 percent, ISC Chief Financial Officer Dan Houser said, as people buy tickets later. For the month prior to this past weekend’s Coke Zero 400, ticket sales were 22 percent ahead of last year, Saunders said. More than half of those late-ticket buyers are new ticket buyers, ISC officials said.

The weighted average ticket price for 2009 Sprint Cup events decreased approximately 5 percent from March through May and overall is down 1 percent from 2008, Houser said.

ISC is looking at other ways to generate more admissions revenue, including fewer tickets sold as part of weekend- or season-ticket packages.

“I anticipate that for the next year at certain events, we will unbundle ticket packages as well as adjust prices in other sections of the facilities beyond just the entry-level tickets,” Saunders said. “This is a high priority of our management team to optimize attendance and revenue generation in what we expect will continue to be a challenging economic environment.”

One of the biggest areas of concerns is merchandise company Motorsports Authentics, which ISC owns 50-50 with Speedway Motorsports Inc.

Motorsports Authentics will focus on distribution of merchandise trackside and the design and distribution of diecasts, Saunders said, resulting in a “leaner, more profitable operation.” It will focus less on licensed apparel and memorabilia sold to mass retailers, which resulted in the write-down of inventory, goodwill and other intangible assets on the balance sheet.

Doubling the $1.7 million operating loss reported by ISC, its financial report indicates Motorsports Authentics lost $3.4 million from March-May. The total write-down, assuming SMI would write down the same amount as ISC as it has in the past, would be $111.2 million.

A write-down is a devaluation of what the company is worth. ISC and SMI spent approximately $247.5 million in 2005 to buy Team Caliber and Action Performance to form Motorsports Authentics. They combined to write down $69.499 million in 2007, which with the current write-downs would total nearly $180.7 million in the devaluation of the company since its formation.

Saunders said shutting down the company is not currently on the table.

“We’re serious about this business,” Saunders said. “We’ve had our hits. It’s important to remember why we got into this business to begin with. Action Performance was running out of cash, and it was highly likely in the preceding year, if we did not complete the acquisition, that we would not have driver trailers at our events, not just ISC events but the entire industry.

“SMI and ISC stepped in to shore that up. That is terrific content for the fan, adds to the overall fan experience. Beyond that, we were also very interested in exploring opportunities en masse in the retail environment, and those opportunities didn’t evolve.”

“From a core operations standpoint, considering the economic pressures on discretionary consumer and corporate spending, we are pleased with the results of the first six months of fiscal 2009, which are generally in line with our revised expectations,” ISC Chief Executive Officer Lesa France Kennedy said in a statement. “While the economic environment is challenging for us, our fans and business partners alike, we remain in a strong financial position to weather this protracted downturn.”

ISC promoted the same number of NASCAR races in the first half of 2009 as it did in 2008, but its Indy Racing League weekend at Homestead was in the first half of 2008 and is now in the second half of 2009.

ISC’s outlook for 2009 remains the same as it announced three months ago, where it expects its earnings (not including accounting procedures that take into account impairment charges, acceleration charges, etc.) to be $1.80-$2.00 per share. In 2008, those earnings were $2.80 per share.

In the first 90 minutes of trading after the release of the results, ISC stock was holding relatively even, up 0.6 percent.

ISC owns tracks that host 19 NASCAR Sprint Cup points races: Daytona, Auto Club Speedway in California, Talladega, Richmond, Phoenix, Michigan, Martinsville, Kansas, Chicagoland, Homestead-Miami, Watkins Glen and Darlington.

In other items from the ISC conference call and financial statement:

• Gross sponsorship revenue will be off as much as 16 percent and hospitality will be off as much as 20 percent for the year, Saunders said. Sponsorship commitments, though, have reached about 95 percent of the company’s expectations this year, Saunders said.

• ISC has had a net loss of $6.5 million for the first half of the year, compared to a profit of $62.25 million in the first half of last year. Excluding discontinued operations, $8.9 million in interest income from an IRS settlement, impairment charges (write-downs) and accelerated depreciation of $1 million, net income for the six months was $44.2 million, compared to $64.9 million for the first six months of 2008.

• France Kennedy noted in the news release that less than 10 percent of ISC’s gross marketing partner revenue comes from auto manufacturers, so any impact from the reorganizations of Chrysler and General Motors should be minimal. Saunders said he expects revenue from manufacturers to be less than it has been in the past but doesn’t expect the manufacturers to drop out of the sport.

• Saunders said he hoped to learn by the end of the year whether ISC will get approval to build a casino on the Kansas Speedway property. If ISC obtains that approval, it would ask for a second Sprint Cup date for the track, realigning a date from one of its existing tracks for the 2011 season.