July 13, 2012 / 2:28 PM / 7 years ago

TEXT-S&P assigns International Speedway 'BBB' corp credit rating

Overview
     -- We are assigning our 'BBB' corporate credit rating to Daytona Beach, 
Fla.-based International Speedway Corp. (ISC), a promoter of racing
events at motorsports entertainment facilities.
     -- Our stable rating outlook reflects our expectation that the company's 
financial risk profile can withstand some level of earnings volatility, which 
we believe is likely given the still weak economy and its effects on the ISC 
customer base.  
Rating Action
On July 13, 2012, Standard & Poor's Ratings Services assigned its 'BBB' 
corporate credit rating to Daytona Beach, Fla.-based International Speedway 
Corp. The rating outlook is stable.

Rationale
The 'BBB' corporate credit rating on ISC reflects our assessment of the 
company's business risk profile as "satisfactory" and our assessment of the 
company's financial risk profile as "intermediate" according to our criteria. 

Our assessment of ISC's business risk profile as satisfactory reflects the 
company's leading market position in the U.S. motorsports industry and good 
profitability. ISC's reliance on an event-based business model, the 
susceptibility of its revenue base to the economic cycle, and the existence of 
substitute entertainment events all partially offset those strengths. Still, 
ISC benefits from an established fan base supporting National Association for 
Stock Car Auto Racing (NASCAR)-sanctioned events and a recurring revenue 
stream derived from broadcasting contracts which runs through 2014. 

Our assessment of ISC's financial risk profile as intermediate reflects 
current strong credit measures, including operating lease-adjusted debt to 
EBITDA of 1.4x and EBITDA coverage of interest above 10x, as of May 2012. We 
operating lease-adjusted debt to EBITDA will remain below 2.5x. 

ISC is the larger of the two major companies (the other is Speedway 
Motorsports Inc.) hosting races sanctioned by NASCAR. About 90% of ISC's 
revenues and an even greater percentage of EBITDA come from 47 major 
NASCAR-sanctioned events held at ISC's 13 facilities, and ISC has more than a 
50% market share of the Spring Cup races. ISC's market share is likely to 
remain solid as NASCAR--which is controlled by the same principal shareholders 
as ISC--has consistently awarded ISC race dates. We believe the industry, with 
high capital costs for new racetracks, long construction lead times, and a 
limited supply of NASCAR racing dates, has significant barriers to entry. 

We expect profitability to remain strong and reasonably stable. Contracted 
NASCAR broadcasting revenue represents a significant portion of the company's 
motorsports-related (broadcast rights and sponsorship) revenue and provides a 
stable source of cash flow increasing on average by 3% per year through 2014, 
when the current contract ends. While we expect a new contract will be in 
place by the end of 2013, the new contract negotiation represents a key risk 
for the company. Weak attendance trends and low TV ratings in the period 
leading up to these negotiations could hurt revenues. While TV ratings and 
viewership for the 2011 NASCAR Sprint Cup telecasts improved over 2010, they 
are still below pre-recession levels. However, NASCAR remains the 
second-highest-rated regular season sport on TV, and we believe there is still 
time before renegotiation for economic improvements to translate into both 
increased attendance and viewership.

For the six months ended May 31, 2012, revenues were up 6.8% compared to the 
first half of fiscal 2011 (ended November) because of two additional races in 
the 2012 period. The recession meaningfully affected ISC's target demographic 
and the geographic regions where the company's tracks are located, and we 
expect admission revenues from NASCAR-sanctioned events to remain pressured 
over the near-to-intermediate term. Additionally, the company's cost structure 
is largely fixed given the operating costs associated with hosting an event, 
and, as such, the decline in revenue over the past four years has affected 
margins. For fiscal 2012, our rating incorporates our expectation that modest 
growth in broadcasting revenues will mitigate a continued decline in admission 
sales, resulting in low-single-digit declines in revenue and EBITDA. Our 
preliminary forecast for fiscal 2013 is for modest, low single digit 
percentage growth in both revenues and EBITDA, which should be the result of 
the continued gradual economic recovery.

Liquidity
Based on the company's likely sources and uses of cash over the next 12 to 18 
months and incorporating our performance expectations, ISC has a "strong" 
liquidity profile, according to our criteria. Relevant factors in our 
assessment of ISC's liquidity profile include the following:
     -- We expect sources of liquidity to exceed uses by at least 1.5x.
     -- We project net sources of liquidity to remain positive, even in the 
event of a 30% decline in EBITDA.
     -- Covenant cushions are likely to be large enough that ISC would not 
violate its total leverage or minimum interest coverage covenants, even with 
30% EBITDA declines.

ISC historically has generated good levels of cash from operations, used to 
fund operations and liquidity needs. Cash balances totaled approximately $104 
million at May 2012, and ISC had $176 million availability under its $300 
million revolving credit facility due 2015. Beyond operational expenditures, 
cash uses include modest share repurchases (ISC has $61.7 million remaining 
under its existing share repurchase authorization), dividend payments, and 
expenditures for capital improvements at existing tracks, which we estimate 
will total about $90 million in 2012. ISC's debt maturity profile is strong: 
The nearest maturity is the revolver in 2015. The balance on the revolver is 
high compared with normal usage, because of ISC's March 2012 repurchase of its 
senior notes. We expect it to refinance this balance in the intermediate term. 

Outlook
The stable rating outlook reflects our expectation that ISC's financial risk 
profile can withstand some level of earnings volatility, which we believe is 
likely given the still weak economy and its effects on the ISC customer base. 
Although credit measures are currently strong, we expect ISC to deploy more 
financial resources to expand the business over the intermediate term. 

An upgrade, which we view as a longer-term scenario, would hinge on sustained 
growth in attendance and ratings of NASCAR racing events, which we believe 
should translate into favorable terms under a new broadcasting contract and 
growth in EBITDA margins. We could lower the rating if the company's debt to 
EBITDA deteriorates to 2.5x. Scenarios that could lead to such a decline 
include worsening economic conditions, or if there were a secular shift away 
from interest in NASCAR events, both of which would result in a decrease in 
attendance and ancillary revenues. Such scenarios would also have a 
compounding effect if either were to occur in the period leading up to 
broadcast contract negotiations.

Related Criteria And Research
     -- Methodology And Assumptions: Liquidity Descriptors For Global 
Corporate Issuers, Sept. 28, 2011
     -- Business Risk/Financial Risk Matrix Expanded, May 27, 2009
     -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008

Ratings List
Rating Assigned
International Speedway Corp.
 Corporate Credit Rating                BBB/Stable/--

Complete ratings information is available to subscribers of RatingsDirect on 
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 
by this rating action can be found on Standard & Poor's public Web site at 
www.standardandpoors.com. Use the Ratings search box located in the left 
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