International Speedway Corporation (ISCA)
Q3 2010 Earnings Call Transcript
October 7, 2010 9:00 am ET
Charles Talbert – Director, Investor and Corporate Communications
Lesa France Kennedy – CEO
John Saunders – President
Dan Houser – SVP, CFO and Treasurer
Michael Walsh [ph]
Russell Lynde [ph]
Erik Keener – River Road Asset Management
Barry Lucas – Gabelli & Company
Previous Statements by ISCA
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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 third quarter ended August 31, 2010. With us this morning's call are Lesa France Kennedy, Chief Executive Officer; John Saunders, President; and Dan Houser, Senior Vice President and Chief Financial Officer.
After our formal remarks, a question-and-answer period will follow. The operator will instruct you on procedures at that time. But before we start, I would 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 will turn the call over to Lesa Kennedy. Lesa?
Lesa France Kennedy
Good morning and thank you for participating on today's call. Since our last conference call in July, we’ve move forward on various strategic initiatives to ensure ISC remains the leader in motorsports entertainment. Our sound financial policies maintain a strong financial position that provides a significant competitive advantage within our industry.
ISC is a profitable and financially sound organization, but to remain competitive, we must become an even more flexible and responsive organization, one that faces greater responsibility and accountability for the success of the company with its business leaders. To accomplish this, as we have previously announced, we are making strategic organizational and structural changes at ISC.
These are necessary organizational changes, not only in response to an ongoing tough operating environment, but more importantly, taking the necessary steps on the cost side of the business to position the company for its long-term success.
I want to emphasize that we are excited about ISC’s prospects for the future and we are committed to taking the necessary steps to maintain a sound financial structure and make capital allocation decisions that position ISC for long-term success. And with that, I will now turn the call over to John Saunders.
Thank you, Lesa. And I know you have another commitment this morning. So we appreciate your time. The organizational and structural changes that Lesa touched on are currently underway in earnest. We are streamlining our corporate structure, optimizing event and business models, and improving processes across the organization. These changes will have a positive impact on our bottom line, as they will resolve in a reduction of operating expenses from a variety of sources by at least $20 million in 2011.
We will have further reductions over the next couple of years as we continue to evaluate and execute on changes to various business models and corporate services. As with any implemented cost containment initiatives we undertake, it must not negatively impact the fan or corporate partner experience and it may not hinder competitor safety. Included in the changes already executed has been the reduction of corporate-based full-time employee headcount, which includes senior level management positions, by approximately 20%. Also, as has been widely reported was our decision not to host any car series events in 2011.
While this will cause a loss of revenue from four less events next year, the move will be a net positive to our bottom line. The fact is if we are hosting events and operating businesses that are not performing or doing something that is not aligned with our strategic plan, we need to address it, and we are. As the economic environment stabilizes and begins to recover, we have the potential to generate improved operating margins as a result of these sustainable cost containment initiatives.
During the third quarter, we hosted 21 major motorsports events and with a wide open field in the NASCAR Chase for the Sprint Cup, we are excited for the remaining events, which culminate in the Ford Championship Weekend at Homestead-Miami Speedway. Going into this week’s raise at our Auto Club Speedway, only 109 points separate the top nine drivers and fewer than 60 points separating the top five. While the competition on track is generating high levels of excitement, our event related revenues continue to be challenged.
From an admission standpoint, we remain committed to our longstanding ticket sales policy of not discounting once we are in the sales cycle. We expect our pricing initiatives undertaken over the last two seasons to take hold in the market and the macroeconomic picture improves, we will be able to experience an increase in tickets volume. This year, our pricing initiatives will lower our weighted average ticket price in the mid-to-high single digits. We believe our current pricing levels and initiatives going into 2011 season are on target with demand, providing attractive price points for all demographic income levels.