ISC 2nd-quarter profit shrinks
International Speedway Corp. reported Tuesday its latest quarterly profit shrank 40 percent, gouged by losses on failed efforts to build two new racetracks and Speedplex redevelopment expenses.
The company also disclosed last weekend's attendance at the Pepsi 400 race was only about 120,000, or roughly three-quarters of its grandstand capacity. It blamed rainstorms that delayed the preliminary Busch Series race and discouraged fans from attending the main event.
It also warned investors its new memorabilia joint venture, Motorsports Authentics in Charlotte, N.C., may suffer up to $20 million in losses this year, mainly because of a sharp decline in orders for Dale Earnhardt Jr. merchandise. Sales plunged shortly after Junior announced in May he was defecting from his family's racing team.
In a conference call with investment analysts, ISC executives said net income for the March-April period (the company's second quarter) totaled $18.4 million, or 35 cents per share, down from the $30.7 million, or 58 cents a share, recorded a year earlier.
Nothing was mentioned during the conference call about an airplane crash in which Bruce Kennedy, the husband of ISC President Lesa France Kennedy, died.
Revenue increased 5 percent to $181.5 million, reflecting an extra racing weekend at Kansas International Speedway that was added to this year's second-quarter schedule.
The biggest one-time expense that slashed profits was a $9.1 million "impairment charge" -- equal to 11 cents per share -- for money lost on a fruitless campaign to build a racetrack in Kitsap County, near Seattle.
The charge also covered some of the expenses stemming from a failed track construction project in Staten Island, N.Y. The company recently had to pay a $282,000 environmental settlement to New York authorities for allowing contaminated soil to be hauled to the proposed track site, and has paid $2.6 million to have it removed.
Another expense was a $4.6 million accounting charge for the depreciation of office buildings slated for demolition at the Speedplex Office Park across the street from Daytona International Speedway. So far, only one building has been torn down to make way for the proposed Daytona Live hotel, office and retail project. But ISC's accounting move signals the entire five-building complex, originally built by General Electric about 40 years ago, will be torn down over the next two years.
ISC had been predicting Motorsports Authentics, its retailing partnership with Speedway Motorsports Inc., would start turning a profit this year, but uncertainty about Earnhardt's future scuttled the forecast. Although Chief Operating Officer John Saunders insisted the apparel company eventually will become a "win-win" for both partners, the venture remains a "lose-lose," expected to cost each partner $7 million to $10 million this year.
Saunders said the partnership is negotiating with Earnhardt for future rights to his merchandise. If a deal is signed, he said, "we hope for some level of profit in 2008."