Edgar Filing: INTERNATIONAL SPEEDWAY CORP

ISC 2.28.2015 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________

FORM 10-Q

_________________________________

(Mark One)



ý	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended February 28, 2015



¨	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission file number: 000-02384

_________________________________

INTERNATIONAL SPEEDWAY CORPORATION

(Exact name of registrant as specified in its charter)

_________________________________



FLORIDA		59-0709342
(State or other jurisdiction of incorporation)		(I.R.S. Employer Identification No.)



ONE DAYTONA BOULEVARD, DAYTONA BEACH, FLORIDA		32114
(Address of principal executive offices)		(Zip code)

Registrant’s telephone number, including area code: (386) 254-2700

_________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ý NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES ý NO ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	ý		Accelerated filer	o
Non-accelerated filer	o	(Do not check if a smaller reporting company)	Smaller reporting company	o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date:



Class A Common Stock	26,616,977 shares	as of February 28, 2015
Class B Common Stock	19,966,496 shares	as of February 28, 2015

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INTERNATIONAL SPEEDWAY CORPORATION

FORM 10-Q

FOR THE QUARTER ENDED FEBRUARY 28, 2015



TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION		3
	ITEM 1. FINANCIAL STATEMENTS	3
	ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	16
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	33
	ITEM 4. CONTROLS AND PROCEDURES	33
PART II—OTHER INFORMATION		34
	ITEM 1. LEGAL PROCEEDINGS	34
	ITEM 1A. RISK FACTORS	34
	ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	34
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES	34
	ITEM 4. MINE SAFETY DISCLOSURES	35
	ITEM 5. OTHER INFORMATION	35
	ITEM 6. EXHIBITS	36
SIGNATURE		37

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PART I.	FINANCIAL INFORMATION



ITEM 1.	FINANCIAL STATEMENTS

INTERNATIONAL SPEEDWAY CORPORATION

Consolidated Balance Sheets



	November 30, 2014			February 28, 2015
	(Unaudited)
	(In Thousands, Except Share and Per Share Amounts)
ASSETS
Current Assets:
Cash and cash equivalents	$	158,847		$	161,864
Receivables, less allowance of $1,000 in 2014 and 2015, respectively	27,598			83,281
Inventories	4,030			2,629
Income taxes receivable	6,202			862
Deferred income taxes	2,789			2,789
Prepaid expenses and other current assets	8,099			12,999
Total Current Assets	207,565			264,424
Property and Equipment, net of accumulated depreciation of $818,084 and $841,406 respectively	1,381,190			1,395,699
Other Assets:
Equity investments	122,565			118,972
Intangible assets, net	178,629			178,627
Goodwill	118,791			118,791
Other	68,911			65,917
	488,896			482,307
Total Assets	$	2,077,651		$	2,142,430
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Current portion of long-term debt	$	3,435		$	3,366
Accounts payable	41,491			35,038
Deferred income	33,043			85,934
Other current liabilities	18,813			20,147
Total Current Liabilities	96,782			144,485
Long-Term Debt	268,311			268,118
Deferred Income Taxes	354,276			357,413
Long-Term Deferred Income	9,548			8,286
Other Long-Term Liabilities	2,302			1,873
Commitments and Contingencies	—			—
Shareholders’ Equity:
Class A Common Stock, $.01 par value, 80,000,000 shares authorized; 26,248,081 and 26,248,787 issued and outstanding in 2014 and 2015, respectively	262			262
Class B Common Stock, $.01 par value, 40,000,000 shares authorized; 19,967,202 and 19,966,496 issued and outstanding in 2014 and 2015, respectively	200			200
Additional paid-in capital	447,518			448,224
Retained earnings	902,433			917,386
Accumulated other comprehensive loss	(3,981		)	(3,817		)
Total Shareholders’ Equity	1,346,432			1,362,255
Total Liabilities and Shareholders’ Equity	$	2,077,651		$	2,142,430

See accompanying notes

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INTERNATIONAL SPEEDWAY CORPORATION

Consolidated Statements of Operations



	Three Months Ended
	February 28, 2014			February 28, 2015
	(Unaudited)
	(In Thousands, Except Share and Per Share Amounts)
REVENUES:
Admissions, net	$	30,055		$	30,544
Motorsports related	85,228			87,431
Food, beverage and merchandise	13,208			14,735
Other	3,298			3,842
	131,789			136,552
EXPENSES:
Direct:
Prize and point fund monies and NASCAR sanction fees	27,151			27,296
Motorsports related	22,824			23,498
Food, beverage and merchandise	10,102			12,443
General and administrative	24,380			26,136
Depreciation and amortization	22,773			24,009
Losses on asset retirements	2,220			1,579
	109,450			114,961
Operating income	22,339			21,591
Interest income	23			19
Interest expense	(3,133		)	(1,468		)
Equity in net income from equity investments	1,619			3,244
Other	5,458			26
Income before income taxes	26,306			23,412
Income taxes	6,411			8,459
Net income	$	19,895		$	14,953

Earnings per share:
Basic and diluted	$	0.43		$	0.32

Basic weighted average shares outstanding	46,515,208			46,583,832

Diluted weighted average shares outstanding	46,530,016			46,596,605

See accompanying notes

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INTERNATIONAL SPEEDWAY CORPORATION

Consolidated Statements of Comprehensive Income



	Three Months Ended
	February 28, 2014		February 28, 2015
	(Unaudited)
	(In Thousands)
Net income	$	19,895	$	14,953
Other comprehensive income:
Amortization of terminated interest rate swap, net of tax benefit of $106 and $106, respectively	164		164
Comprehensive income	$	20,059	$	15,117

See accompanying notes

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INTERNATIONAL SPEEDWAY CORPORATION

Consolidated Statement of Shareholders’ Equity



	Class A Common Stock $.01 Par Value		Class B Common Stock $.01 Par Value		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
	(Unaudited) (In Thousands)
Balance at November 30, 2014	$	262	$	200	$	447,518	$	902,433	$	(3,981	)	$	1,346,432
Activity 12/1/14 — 2/28/15:
Net income	—		—		—		14,953		—			14,953
Comprehensive income	—		—		—		—		164			164
Stock-based compensation	—		—		706		—		—			706
Balance at February 28, 2015	$	262	$	200	$	448,224	$	917,386	$	(3,817	)	$	1,362,255

See accompanying notes

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INTERNATIONAL SPEEDWAY CORPORATION

Consolidated Statements of Cash Flows



	Three Months Ended
	February 28, 2014			February 28, 2015
	(Unaudited)
	(In Thousands)
OPERATING ACTIVITIES
Net income	$	19,895		$	14,953
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on assumption of controlling interest in equity investee	(5,447		)	—
Depreciation and amortization	22,773			24,009
Stock-based compensation	429			706
Amortization of financing costs	444			445
Interest received on Staten Island note receivable	214			1,162
Deferred income taxes	6,206			3,032
Income from equity investments	(1,619		)	(3,244		)
Distribution from equity investee	1,906			3,520
Loss on asset retirements, non-cash	18			379
Other, net	(16		)	(6		)
Changes in operating assets and liabilities:
Receivables, net	(54,518		)	(55,683		)
Inventories, prepaid expenses and other assets	(11,743		)	(3,748		)
Accounts payable and other liabilities	2,364			2,237
Deferred income	40,621			51,629
Income taxes	16,051			5,339
Net cash provided by operating activities	37,578			44,730
INVESTING ACTIVITIES
Capital expenditures	(31,247		)	(43,418		)
Distribution from equity investee and affiliate	2,594			1,980
Proceeds from sale of Staten Island property	6,100			—
Cash included in assumption of ownership interest in equity investee	4,686			—
Other, net	235			3
Net cash used in investing activities	(17,632		)	(41,435		)
FINANCING ACTIVITIES
Payment of long-term debt	(175		)	(278		)
Net cash used in financing activities	(175		)	(278		)
Net increase in cash and cash equivalents	19,771			3,017
Cash and cash equivalents at beginning of period	172,827			158,847
Cash and cash equivalents at end of period	$	192,598		$	161,864

See accompanying notes

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International Speedway Corporation

Notes to Consolidated Financial Statements

February 28, 2015

(Unaudited)

1. Basis of Presentation

The accompanying consolidated financial statements have been prepared in compliance with Rule 10-01 of Regulation S-X and accounting principles generally accepted in the United States for interim financial information but do not include all of the information and disclosures required for complete financial statements. The balance sheet at November 30, 2014, has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The statements should be read in conjunction with the consolidated financial statements and notes thereto included in the latest annual report on Form 10-K for International Speedway Corporation and its wholly-owned subsidiaries (the “Company” or “ISC”). In management’s opinion, the statements include all adjustments which are necessary for a fair presentation of the results for the interim periods. All such adjustments are of a normal recurring nature.

Because of the seasonal concentration of racing events, the results of operations for the three months ended February 28, 2014 and 2015, respectively, are not indicative of the results to be expected for the year.

2. New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board, in conjunction with the International Accounting Standards Board, issued ASU No. 2014-09, "Revenue from Contracts with Customers". The objective of this Update is to significantly enhance comparability and clarify principles of revenue recognition practices across entities, industries, jurisdictions, and capital markets. For a public entity, the amendments in this Update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The standard can be adopted either retrospectively to each prior reporting period presented or as a cumulative effect adjustment as of the date of adoption. The Company is currently evaluating the impact of adopting this new guidance on its financial position and results of operations and will adopt the provisions of this statement in the first quarter of fiscal 2018.

3. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share for the three months ended February 28, 2014 and 2015 (in thousands, except share and per share amounts):



	Three Months Ended
	February 28, 2014		February 28, 2015
Numerator:
Net income	$	19,895	$	14,953
Denominator:
Weighted average shares outstanding	46,515,208		46,583,832
Effect of dilutive securities	14,808		12,773
Diluted weighted average shares outstanding	46,530,016		46,596,605

Basic and diluted earnings per share	$	0.43	$	0.32

Anti-dilutive shares excluded in the computation of diluted earnings per share	136,501		104,909

4. Equity and Other Investments

Hollywood Casino at Kansas Speedway

Kansas Entertainment, LLC, (“Kansas Entertainment”) a 50/50 joint venture of Penn Hollywood Kansas, Inc. (“Penn”), a subsidiary of Penn National Gaming, Inc. and Kansas Speedway Development Corporation (“KSDC”), a wholly owned indirect subsidiary of ISC, operates the Hollywood-themed casino and branded destination entertainment facility, overlooking

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turn two at Kansas Speedway. Penn, as the managing member of Kansas Entertainment, is responsible for the operations of the casino.

The Company has accounted for Kansas Entertainment as an equity investment in its financial statements as of February 28, 2014 and 2015. The Company's 50.0 percent portion of Kansas Entertainment’s net income is approximately $1.6 million and $3.2 million for the three months ended February 28, 2014 and 2015, respectively, and is included in income from equity investments in its consolidated statements of operations.

Per the Development Agreement with the Unified Government of Wyandotte County/Kansas City, Kansas (“Unified Government”), the casino is subject to a 1.0 percent of gross gaming revenue payment if it had not commenced construction on an adjacent hotel by the second anniversary of its opening, which was February 2014. In June 2014, the Unified Government approved an extension of the construction commencement date to give the Unified Government time to complete a feasibility analysis for a new convention center that could be integrated with the hotel. Recently, the Unified Government decided not to proceed with the integrated development, leaving Kansas Entertainment until April 10, 2015, to commence construction on the adjacent hotel prior to the enforcement of the aforementioned payment.

The final decision to move forward with the proposed hotel will be market-based and subject to approval by Kansas Entertainment’s board. Should Kansas Entertainment ultimately not build the hotel it will be subject to the payment from the second anniversary of its opening forward. Accordingly, beginning February 2014, Kansas Entertainment began recording expense equal to 1.0 percent of gross gaming revenue since it did not proceed with construction of a hotel by the original deadline. Included in the Company's income from equity investment amounts for the three months ended February 28, 2014 and 2015 is approximately $0.1 million and $0.2 million, expense, respectively, related to this payment. The Company's share of this payment liability accrued from February 2014 through February 28, 2015 totaled approximately $0.7 million. At this time it is unlikely hotel construction will commence prior to the April 10, 2015, deadline and that Kansas Entertainment will be compelled to pay the accrued payment from the second anniversary of opening forward until such time as it may commence construction on a proposed hotel adjacent to the gaming facility.

Distributions from Kansas Entertainment for the three months ended February 28, 2015 totaling $5.5 million, consist of approximately $3.5 million received as a distribution from its profits, and is included in net cash provided by operating activities on the Company's statement of cash flows, and the remaining approximately $2.0 million received, was recognized as a return of capital from investing activities on the Company's statement of cash flows. Distributions from Kansas Entertainment for the three months ended February 28, 2014 totaling $4.5 million, consist of approximately $1.9 million received as a distribution from its profits, and is included in net cash provided by operating activities on the Company's statement of cash flows, and the remaining approximate $2.6 million received, was recognized as a return of capital from investing activities on the Company's statement of cash flows.

Subsequent to February 28, 2015, the Company received an additional distribution of approximately $8.0 million.

Staten Island Property

On August 5, 2013, the Company announced that it sold its 676 acre parcel of property located in Staten Island, New York, to Staten Island Marine Development, LLC (“Marine Development”). Marine Development purchased 100 percent of the outstanding equity membership interests of 380 Development LLC (“380 Development”), a wholly owned indirect subsidiary of ISC and owner of the Staten Island property, for a total sales price of $80.0 million. In addition, the Company previously received approximately $4.2 million for an option provided to the purchaser that is nonrefundable and does not apply to the $80.0 million sales price.

The Company received $7.5 million, less closing and other administrative costs, of the sales price at closing. The remaining sales price was financed with the Company holding a secured mortgage interest in 380 Development as well as the underlying property. The mortgage balance bears interest at an annual rate of 7.0 percent. In accordance with the terms of the agreement, the Company has received a principal payment of approximately $6.1 million plus interest on the mortgage balance through February 28, 2015, and will receive the remaining purchase price of $66.4 million, due March 5, 2016. Interest on the remaining mortgage balance is due quarterly, in arrears, and Marine Development is current with all payments through April 2015. Based on the level of Marine Development's initial investment at closing and continuing investment, the Company has accounted for the transaction using the cost recovery method and has deferred the recognition of profit of approximately $1.9 million, and interest totaling approximately $6.7 million at February 28, 2015, until the carrying amount of the property is recovered, which will not be until the final payment is made.

The net proceeds from the sale, combined with the mortgage interest and related cash tax benefits, will provide the Company with approximately $118.0 million in incremental cash flow through the term of the mortgage.

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5. Goodwill and Intangible Assets

The gross carrying value, accumulated amortization and net carrying value of the major classes of intangible assets relating to the Motorsports Event segment are as follows (in thousands):



	November 30, 2014
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortized intangible assets:
Food, beverage and merchandise contracts	$	10	$	9	$	1
Other	109		87		22
Total amortized intangible assets	119		96		23
Non-amortized intangible assets:
NASCAR — sanction agreements	177,813		—		177,813
Other	793		—		793
Total non-amortized intangible assets	178,606		—		178,606
Total intangible assets	$	178,725	$	96	$	178,629

	February 28, 2015
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortized intangible assets:
Food, beverage and merchandise contracts	$	10	$	10	$	—
Other	109		88		21
Total amortized intangible assets	119		98		21
Non-amortized intangible assets:
NASCAR — sanction agreements	177,813		—		177,813
Other	793		—		793
Total non-amortized intangible assets	178,606		—		178,606
Total intangible assets	$	178,725	$	98	$	178,627

The following table presents current and expected amortization expense of the existing intangible assets as of February 28, 2015 for each of the following periods (in thousands):



Amortization expense for the three months ended February 28, 2015	$	2
Remaining estimated amortization expense for the year ending November 30:
2015	6
2016	3
2017	1
2018	1
2019	1

There were no changes in the carrying value of goodwill during the three months ended February 28, 2015.

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6. Long-Term Debt

Long-term debt consists of the following (in thousands):



	November 30, 2014		February 28, 2015
4.63 percent Senior Notes	$	65,000	$	65,000
3.95 percent Senior Notes	100,000		100,000
4.82 percent Revenue Bonds	339		256
6.25 percent Term Loan	49,524		49,329
TIF bond debt service funding commitment	56,883		56,899
Revolving Credit Facility	—		—
	271,746		271,484
Less: current portion	3,435		3,366
	$	268,311	$	268,118

The Company's $65.0 million principal amount of senior unsecured notes (“4.63 percent Senior Notes”) bear interest at 4.63 percent and are due January 2021, require semi-annual interest payments on January 18 and July 18 through their maturity. The 4.63 percent Senior Notes may be redeemed in whole or in part, at the Company’s option, at any time or from time to time at redemption prices as defined in the indenture. Certain of the Company’s wholly owned domestic subsidiaries are guarantors of the 4.63 percent Senior Notes. Certain restrictive covenants of the 4.63 percent Senior Notes require that the Company's ratio of its Consolidated Funded Indebtedness to its Consolidated EBITDA ("leverage ratio") does not exceed 3.50 to 1.0, and its Consolidated EBITDA to Consolidated Interest Expense ("interest coverage ratio") is not less than 2.0 to 1.0. In addition the Company may not permit the aggregate of certain Priority Debt to exceed 15.0 percent of its Consolidated Net Worth. The 4.63 percent Senior Notes contain various other affirmative and negative restrictive covenants including, among others, limitations on liens, sales of assets, mergers and consolidations and certain transactions with affiliates. As of February 28, 2015, the Company was in compliance with its various restrictive covenants. At February 28, 2015, outstanding principal on the 4.63 percent Senior Notes was approximately $65.0 million.

The Company's $100.0 million principal amount of senior unsecured notes (“3.95 percent Senior Notes”) bear interest at 3.95 percent and are due September 2024. The 3.95 percent Senior Notes require semi-annual interest payments on March 13 and September 13 through their maturity. The 3.95 percent Senior Notes may be redeemed in whole or in part, at the Company's option, at any time or from time to time at redemption prices as defined in the indenture. Certain of the Company's wholly owned domestic subsidiaries are guarantors of the 3.95 percent Senior Notes. Certain restrictive covenants of the 3.95 percent Senior Notes require that the Company's leverage ratio does not exceed 3.50 to 1.0, and its interest coverage ratio is not less than 2.0 to 1.0. In addition the Company may not permit the aggregate of certain Priority Debt to exceed 15.0 percent of its Consolidated Net Worth. The 3.95 percent Senior Notes contain various other affirmative and negative restrictive covenants including, among others, limitations on liens, sales of assets, mergers and consolidations and certain transactions with affiliates. As of February 28, 2015, the Company was in compliance with its various restrictive covenants. At February 28, 2015, outstanding principal on the 3.95 percent Senior Notes was approximately $100.0 million.

Debt associated with the Company's wholly owned subsidiary, Chicagoland Speedway, LLC, which owns and operates Chicagoland Speedway and Route 66 Raceway, has debt outstanding in the form of revenue bonds payable (“4.82 percent Revenue Bonds”), consisting of economic development revenue bonds issued by the City of Joliet, Illinois to finance certain land improvements. The 4.82 percent Revenue Bonds have an interest rate of 4.82 percent and a monthly payment of $29,000 principal and interest. At February 28, 2015, outstanding principal on the 4.82 percent Revenue Bonds was approximately $0.3 million.

The term loan (“6.25 percent Term Loan”), related to the Company’s International Motorsports Center, has a 25 year term due October 2034, an interest rate of 6.25 percent, and a current monthly payment of approximately $323,000. At February 28, 2015, the outstanding principal on the 6.25 percent Term Loan was approximately $49.3 million.

At February 28, 2015, outstanding taxable special obligation revenue (“TIF”) bonds, in connection with the financing of Kansas Speedway, totaled approximately $56.9 million, net of the unamortized discount, which is comprised of a $7.7 million principal amount, 6.15 percent term bond due December 1, 2017 and a $49.7 million principal amount, 6.75 percent term bond due December 1, 2027. The TIF bonds are repaid by the Unified Government with payments made in lieu of property taxes (“Funding Commitment”) by the Company’s wholly owned subsidiary, Kansas Speedway Corporation (“KSC”). Principal (mandatory redemption) payments per the Funding Commitment are payable by KSC on October 1 of each year. The semi-annual interest component of the Funding Commitment is payable on April 1 and October 1 of each year. KSC granted a mortgage and security interest in the Kansas project for its Funding Commitment obligation.

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The Company's $300.0 million revolving credit facility (“2012 Credit Facility”) contains a feature that allows the Company to increase the credit facility to a total of $500.0 million, subject to certain conditions, provides for separate sub-limits of $25.0 million for standby letters of credit and $10.0 million for swing line loans. The 2012 Credit Facility is scheduled to mature in November 2017. Interest accrues, at the Company's option, at either LIBOR plus 100.0 — 162.5 basis points or a base rate loan at the highest of i) Wells Fargo Bank's prime lending rate, ii) the Federal Funds rate, as in effect from time to time, plus 0.5 percent, and iii) one month LIBOR plus 1.0 percent. The 2012 Credit Facility also contains a commitment fee ranging from 0.125 percent to 0.225 percent of unused amounts available for borrowing. The interest rate margin on the LIBOR borrowings and commitment fee are variable depending on the better of the Company's debt rating as determined by specified rating agencies or its leverage ratio. Certain of the Company's wholly owned domestic subsidiaries are guarantors on the 2012 Credit Facility. The 2012 Credit Facility requires that the Company's leverage ratio does not exceed 3.50 to 1.0 (4.0 to 1.0 for the four quarters ending after any Permitted Acquisition), and its interest coverage ratio is not less than 2.5 to 1.0. The 2012 Credit Facility also contains various other affirmative and negative restrictive covenants including, among others, limitations on indebtedness, investments, sales of assets, certain transactions with affiliates, entering into certain restrictive agreements and making certain restricted payments as detailed in the agreement. As of February 28, 2015, the Company was in compliance with its various restrictive covenants. At February 28, 2015, the Company had no outstanding borrowings under the 2012 Credit Facility.

Total interest expense incurred by the Company for the three months ended February 28, 2014 and 2015, are as follows (in thousands):



	Three Months Ended
	February 28, 2014		February 28, 2015
Interest expense	$	4,114	$	4,073
Less: capitalized interest	981		2,605
Net interest expense	$	3,133	$	1,468

Financing costs of approximately $3.7 million and $3.6 million, net of accumulated amortization, have been deferred and are included in other assets at November 30, 2014 and February 28, 2015, respectively. These costs are being amortized on a straight-line method, which approximates the effective yield method, over the life of the related financing.

7. Financial Instruments

Various inputs are considered when determining the carrying values of cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities which approximate fair value due to the short-term maturities of these assets and liabilities. These inputs are summarized in the three broad levels listed below:


•	Level 1 — observable market inputs that are unadjusted quoted prices for identical assets or liabilities in active markets


•	Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, credit risk, etc.)


•	Level 3 — significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments)

At February 28, 2015, the Company had money market funds totaling approximately $62.6 million which are included in cash and cash equivalents in its consolidated balance sheets. All inputs used to determine fair value are considered level 1 inputs.

Fair values of long-term debt are based on quoted market prices at the date of measurement. The Company’s credit facilities approximate fair value as they bear interest rates that approximate market. These inputs used to determine fair value are considered level 2 inputs. The fair value of the remaining long-term debt, as determined by quotes from financial institutions, was approximately $291.2 million compared to the carrying amount of approximately $271.7 million and approximately $293.0 million compared to the carrying amount of approximately $271.5 million at November 30, 2014 and February 28, 2015, respectively.

The Company had no financial instruments that used level 3 inputs as of February 28, 2015.

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8. Comprehensive Income

Comprehensive income is the changes in equity of an enterprise except those resulting from shareholder transactions. Accumulated other comprehensive loss consists of the following (in thousands):



	November 30, 2014		February 28, 2015
Terminated interest rate swap, net of tax benefit of $2,600 and $2,494, respectively	$	3,981	$	3,817

9. Income Taxes

The principal causes of the decreased effective income tax rate, as compared to the statutory income tax rate, for the three months ended February 28, 2014 are the tax treatment related to the other income recognized as a result of Speedway Motorsports Inc.'s abandonment of their interest in SMISC, LLC on January 31, 2014, including the related tax benefits associated with various operating loss carryforwards of Motorsports Authentics, Inc. and certain tax filing positions of SMISC, LLC totaling approximately $1.8 million. Decreases in certain state tax rates are the principal causes of the decreased effective tax rate, as compared to the statutory income tax rate, for the three months ended February 28, 2015.

As a result of these items, the Company's effective income tax rate decreased from the statutory income tax rate to approximately 24.4 percent and 36.1 percent for the three months ended February 28, 2014 and 2015, respectively.

10. Related Party Disclosures and Transactions

All of the racing events that take place during the Company’s fiscal year are sanctioned by various racing organizations such as the American Historic Racing Motorcycle Association, the American Motorcyclist Association, the Automobile Racing Club of America, the American Sportbike Racing Association — Championship Cup Series, the Federation Internationale de L’Automobile, the Federation Internationale Motocycliste, International Motor Sports Association (“IMSA”), Historic Sportscar Racing, IndyCar Series, National Association for Stock Car Auto Racing (“NASCAR”), National Hot Rod Association, the Porsche Club of America, the Sports Car Club of America, the Sportscar Vintage Racing Association, the United States Auto Club and the World Karting Association. NASCAR, which sanctions many of the Company’s principal racing events, is a member of the France Family Group which controls approximately 72.0 percent of the combined voting power of the outstanding stock of the Company, as of November 30, 2014, and some members of which serve as directors and officers of the Company. Standard NASCAR sanction agreements require racetrack operators to pay sanction fees and prize and point fund monies for each sanctioned event conducted. The prize and point fund monies are distributed by NASCAR to participants in the events. Prize and point fund monies paid by the Company to NASCAR for disbursement to competitors, which are exclusive of NASCAR sanction fees, totaled approximately $23.7 million and $23.5 million for the three months ended February 28, 2014 and 2015, respectively.

Under current agreements, NASCAR contracts directly with certain network providers for television rights to the entire NASCAR Sprint Cup, Xfinity and Camping World Truck series schedules. Under the terms of this arrangement, NASCAR retains 10.0 percent of the gross broadcast rights fees allocated to each NASCAR Sprint Cup, Xfinity and Camping World Truck series event as a component of its sanction fees. The promoter records 90.0 percent of the gross broadcast rights fees as revenue and then records 25.0 percent of the gross broadcast rights fees as part of its awards to the competitors. Ultimately, the promoter retains 65.0 percent of the net cash proceeds from the gross broadcast rights fees allocated to the event. The Company’s television broadcast and ancillary rights fees received from NASCAR for the NASCAR Sprint Cup, Xfinity, and Camping World Truck series events conducted at its wholly owned facilities, and recorded as part of motorsports related revenue, were approximately $58.0 million and $58.6 million for the three months ended February 28, 2014 and 2015, respectively.

11. Commitments and Contingencies

In October 2002, the Unified Government issued subordinate sales tax special obligation revenue bonds (“2002 STAR Bonds”) totaling approximately $6.3 million to reimburse the Company for certain construction already completed on the second phase of the Kansas Speedway project and to fund certain additional construction. The 2002 STAR Bonds, which require annual debt service payments and are due December 1, 2022, will be retired with state and local taxes generated within the speedway’s boundaries and are not the Company’s obligation. KSC has agreed to guarantee the payment of principal and any required premium and interest on the 2002 STAR Bonds. At February 28, 2015, the Unified Government had approximately $1.2 million outstanding on 2002 STAR Bonds. Under a keepwell agreement, the Company has agreed to provide financial assistance to KSC, if necessary, to support KSC’s guarantee of the 2002 STAR Bonds.

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In connection with the Company’s automobile and workers’ compensation insurance coverages and certain construction contracts, the Company has standby letter of credit agreements in favor of third parties totaling approximately $4.0 million at February 28, 2015. At February 28, 2015, there were no amounts drawn on the standby letters of credit.

DAYTONA Rising: Reimagining an American Icon

The Company is currently redeveloping the frontstretch of Daytona International Speedway ("Daytona"), the Company's 56-year-old flagship motorsports facility, to enhance the event experience for its fans, marketing partners, broadcasters and the motorsports industry. The redevelopment of Daytona has been branded DAYTONA Rising.

The Company currently anticipates DAYTONA Rising to cost approximately $400.0 million, excluding capitalized interest. The Company expects to fund DAYTONA Rising from cash on hand, cash from its operations, and may use borrowings on its credit facility for a limited period of time. In June 2014, House Bill 7095 was signed in Florida creating the Florida Sports Development Program, establishing a process for distributing state tax revenue for the construction or improvement of professional sports facilities. The DAYTONA Rising project is among the eligible applicants to receive sales tax incentives based on the project’s capital investment and amount of sales tax generated by the facility. The Company has filed its application and recently received approval from the state's Department of Economic Opportunity. The new program could potentially provide additional capital for the project. The Company, along with other applicants, are awaiting final decision on allocation of available funds.

Total spending incurred for DAYTONA Rising was approximately $37.5 million during the three months ended February 28, 2015. Based on the Company's current expectations of DAYTONA Rising, it has identified existing assets that are expected to be impacted by the redevelopment and that those assets will require accelerated depreciation or losses on asset retirements, totaling approximately $50.0 million over the approximate 26-month project time span. During the three months ended February 28, 2014 and 2015, the Company recognized accelerated depreciation and losses on disposal of assets totaling approximately $4.2 million and $4.3 million, respectively

As part of DAYTONA Rising, the Company entered into a Design-Build Agreement with Barton Malow Company (“Barton Malow”), which obligates the Company to pay Barton Malow approximately $316.0 million for the completion of the work described in the Design-Build Agreement. The amount is a stipulated sum to be paid for the work, which may not change unless the Company requests a change in the scope of work. The Design-Build Agreement contains certain provisions and representations usual and customary for agreements of this type, including, among others, provisions regarding liquidated damages to be assessed for work that is not completed according to the agreed upon schedule, provisions regarding payment schedules, and provisions regarding bonding and liability insurance policies applicable to the work. In addition, the Design-Build Agreement contains customary provisions regarding termination, review and inspection of the work, warranties and the use of subcontractors.

Current Litigation

The Company is from time to time a party to routine litigation incidental to its business. Management does not believe that the resolution of any or all of such litigation will have a material adverse effect on the Company’s financial condition or results of operations.

12. Segment Reporting

The general nature of the Company’s business is a motorsports themed amusement enterprise, furnishing amusement to the public in the form of motorsports themed entertainment. The Company’s motorsports event operations consist principally of racing events at its major motorsports entertainment facilities. The reporting units within the motorsports segment portfolio are reviewed together as the nature of the products and services, the production processes used, the type or class of customer using our products and services, and the methods used to distribute our products or provide their services are consistent in objectives and principles, and predominately uniform and centralized throughout the Company. The Company’s remaining business units, which are comprised of the radio network production and syndication of numerous racing events and programs, certain souvenir merchandising operations not associated with the promotion of motorsports events at the Company’s facilities, construction management services, leasing operations, and financing and licensing operations are included in the “All Other” segment. The Company evaluates financial performance of the business units on operating profit after allocation of corporate general and administrative (“G&A”) expenses. Corporate G&A expenses are allocated to business units based on each business unit’s net revenues to total net revenues.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Intersegment sales are accounted for at prices comparable to unaffiliated customers. The following tables provide segment reporting of the Company for the three months ended February 28, 2014 and 2015 (in thousands):

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	Three Months Ended February 28, 2014
	Motorsports Event		All Other			Total
Revenues	$	126,526	$	5,602		$	132,128
Depreciation and amortization	21,304		1,469			22,773
Operating income (loss)	24,758		(2,419		)	22,339
Capital expenditures	30,361		886			31,247
Total assets	1,589,960		503,082			2,093,042
Equity investments	—		131,431			131,431
	Three Months Ended February 28, 2015
	Motorsports Event		All Other			Total
Revenues	$	124,749	$	12,139		$	136,888
Depreciation and amortization	22,688		1,321			24,009
Operating income (loss)	24,366		(2,775		)	21,591
Capital expenditures	40,857		2,561			43,418
Total assets	1,680,351		462,079			2,142,430
Equity investments	—		118,972			118,972

Intersegment revenues were approximately $0.3 million and $0.3 million for the three months ended February 28, 2014 and 2015, respectively.

During the three months ended February 28, 2015, the Company recognized approximately $0.3 million in marketing and consulting costs that is included in general and administrative expense related to DAYTONA Rising. These costs were included in the Motorsports Event segment. During the three months ended February 28, 2014, the Company recognized approximately $0.4 million of similar costs.

During the three months ended February 28, 2015, the Company recognized approximately $3.9 million of accelerated depreciation that was recorded due to the shortening the service lives of certain assets associated with DAYTONA Rising and other projects. During the three months ended February 28, 2014, the Company recognized approximately $3.0 million of accelerated depreciation that was recorded due to the shortening the service lives of certain assets associated with DAYTONA Rising and capacity management initiatives.

During the three months ended February 28, 2015, the Company recognized approximately $1.6 million of losses primarily attributable to demolition costs in connection with DAYTONA Rising and other capital improvements. During the three months ended February 28, 2014, the Company recognized approximately $2.2 million of losses associated with asset retirements primarily attributable to the removal of assets not fully depreciated in connection with capacity management initiatives, DAYTONA Rising and other capital improvements.

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PART I.	FINANCIAL INFORMATION



ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

General

The general nature of our business is a motorsports themed amusement enterprise, furnishing amusement to the public in the form of motorsports themed entertainment. We derive revenues primarily from (i) admissions to motorsports events and motorsports themed amusement activities held at our facilities, (ii) revenue generated in conjunction with or as a result of motorsports events and motorsports themed amusement activities conducted at our facilities, and (iii) catering, concession and merchandising services during or as a result of these events and amusement activities.

“Admissions, net” revenue includes ticket sales for all of our racing events and other motorsports activities and amusements, net of any applicable taxes.

“Motorsports related” revenue primarily includes television and ancillary media rights fees, promotion and sponsorship fees, hospitality rentals (including luxury suites, chalets and the hospitality portion of club seating), advertising revenues, royalties from licenses of our trademarks, parking and camping revenues, and track rental fees.

“Food, beverage and merchandise” revenue includes revenues from concession stands, direct sales of souvenirs, hospitality catering, programs and other merchandise and fees paid by third party vendors for the right to occupy space to sell souvenirs and concessions at our motorsports entertainment facilities.

Direct expenses include (i) prize and point fund monies and NASCAR sanction fees, (ii) motorsports related expenses, which include labor, advertising, costs of competition paid to sanctioning bodies other than NASCAR and other expenses associated with the promotion of all of our motorsports events and activities, and (iii) food, beverage and merchandise expenses, consisting primarily of labor and costs of goods sold.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. While our estimates and assumptions are based on conditions existing at and trends leading up to the time the estimates and assumptions are made, actual results could differ materially from those estimates and assumptions. We continually review our accounting policies, how they are applied and how they are reported and disclosed in the financial statements.

The following is a summary of our critical accounting policies and estimates and how they are applied in the preparation of the financial statements.

Basis of Presentation and Consolidation. We consolidate all entities we control by ownership of a majority voting interest and variable interest entities for which we have the power to direct activities and the obligation to absorb losses. Our judgment in determining if we consolidate a variable interest entity includes assessing which party, if any, has the power and benefits. Therefore, we evaluate which activities most significantly affect the variable interest entities economic performance and determine whether we, or another party, have the power to direct these activities.

We apply the equity method of accounting for our investments in joint ventures and other investees whenever we can exert significant influence on the investee but do not have effective control over the investee. Our consolidated net income includes our share of the net earnings or losses from these investees. Our judgment regarding the level of influence over each equity method investee includes considering factors such as our ownership interest, board representation and policy making decisions. We periodically evaluate these equity investments for potential impairment where a decline in value is determined to be other than temporary. We eliminate all significant intercompany transactions from financial results.

Revenue Recognition. Advance ticket sales and event-related revenues for future events are deferred until earned, which is generally once the events are conducted. The recognition of event-related expenses is matched with the recognition of event-related revenues.

NASCAR contracts directly with certain network providers for television rights to the entire NASCAR Sprint Cup, Xfinity and Camping World Truck series schedules. Event promoters share in the television rights fees in accordance with the provision of the sanction agreement for each NASCAR Sprint Cup, Xfinity and Camping World Truck series event. Under the terms of this arrangement, NASCAR retains 10.0 percent of the gross broadcast rights fees allocated to each NASCAR Sprint Cup, Xfinity

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and Camping World Truck series event as a component of its sanction fees. The promoter records 90.0 percent of the gross broadcast rights fees as revenue and then records 25.0 percent of the gross broadcast rights fees as part of its awards to the competitors. Ultimately, the promoter retains 65.0 percent of the net cash proceeds from the gross broadcast rights fees allocated to the event.

Our revenues from marketing partnerships are paid in accordance with negotiated contracts, with the identities of partners and the terms of sponsorship changing from time to time. Some of our marketing partnership agreements are for multiple facilities and/or events and include multiple specified elements, such as tickets, hospitality chalets, suites, display space and signage for each included event. The allocation of such marketing partnership revenues between the multiple elements, events and facilities is based on relative selling price. The sponsorship revenue allocated to an event is recognized when the event is conducted.

Revenues and related costs from the sale of merchandise to retail customers, internet sales and direct sales to dealers are recognized at the time of sale.

Business Combinations.

All business combinations are accounted for under the acquisition method. Whether net assets or common stock is acquired, fair values are determined and assigned to the purchased assets and assumed liabilities of the acquired entity. The excess of the cost of the acquisition over fair value of the net assets acquired (including recognized intangibles) is recorded as goodwill. Business combinations involving existing motorsports entertainment facilities commonly result in a significant portion of the purchase price being allocated to the fair value of the contract-based intangible asset associated with long-term relationships manifest in the sanction agreements with sanctioning bodies, such as NASCAR and the International Motor Sports Association ("IMSA") series. The continuity of sanction agreements with these bodies has historically enabled the facility operator to host motorsports events year after year. While individual sanction agreements may be of terms as short as one year, a significant portion of the purchase price in excess of the fair value of acquired tangible assets is commonly paid to acquire anticipated future cash flows from events promoted pursuant to these agreements which are expected to continue for the foreseeable future and therefore, in accordance with ASC 805-50, “Business Combinations,” are recorded as indefinite-lived intangible assets recognized apart from goodwill.

Capitalization and Depreciation Policies. Property and equipment are stated at cost. Maintenance and repairs that neither materially add to the value of the property nor appreciably prolong its life are charged to expense as incurred. Depreciation and amortization for financial statement purposes are provided on a straight-line basis over the estimated useful lives of the assets. When we construct assets, we capitalize costs of the project, including, but not limited to, certain pre-acquisition costs, permitting costs, fees paid to architects and contractors, certain costs of our design and construction subsidiary, property taxes and interest.

We must make estimates and assumptions when accounting for capital expenditures. Whether an expenditure is considered an operating expense or a capital asset is a matter of judgment. When constructing or purchasing assets, we must determine whether existing assets are being replaced or otherwise impaired, which also is a matter of judgment. Our depreciation expense for financial statement purposes is highly dependent on the assumptions we make about our assets’ estimated useful lives. We determine the estimated useful lives based upon our experience with similar assets, industry, legal and regulatory factors, and our expectations of the usage of the asset. Whenever events or circumstances occur which change the estimated useful life of an asset, we account for the change prospectively.

Interest costs associated with major development and construction projects are capitalized as part of the cost of the project. Interest is typically capitalized on amounts expended using the weighted-average cost of our outstanding borrowings, since we typically do not borrow funds directly related to a development or construction project. We capitalize interest on a project when development or construction activities begin, and cease when such activities are substantially complete or are suspended for more than a brief period.

Impairment of Long-lived Assets, Goodwill and Other Intangible Assets. Our consolidated balance sheets include significant amounts of long-lived assets, goodwill and other intangible assets which could be subject to impairment. During the three months ended February 28, 2014 and 2015, we recorded before-tax charges as losses on retirements of long-lived assets primarily attributable to costs to remove certain other long-lived assets located at our motorsports facilities totaling approximately $2.2 million and $1.6 million, respectively.

As of February 28, 2015, goodwill and other intangible assets and property and equipment accounts for approximately $1.7 billion, or 79.0 percent of our total assets. We account for our goodwill and other intangible assets in accordance with ASC 350, “Intangibles — Goodwill and Other,” and for our long-lived assets in accordance with ASC 360, “Property, Plant and Equipment.”

We follow applicable authoritative guidance on accounting for goodwill and other intangible assets which specifies, among other things, non-amortization of goodwill and other intangible assets with indefinite useful lives and requires testing for possible impairment, either upon the occurrence of an impairment indicator or at least annually. We complete our annual testing

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in our fiscal fourth quarter, based on assumptions regarding our future business outlook and expected future discounted cash flows attributable to such assets (using the fair value assessment provision of applicable authoritative guidance), supported by quoted market prices or comparable transactions where available or applicable.

While we continue to review and analyze many factors that can impact our business prospects in the future (as further described in “Risk Factors”), our analysis is subjective and is based on conditions existing at, and trends leading up to, the time the estimates and assumptions are made. Different conditions or assumptions, or changes in cash flows or profitability, if significant, could have a material adverse effect on the outcome of the impairment evaluation and our future condition or results of operations. The adverse economic trends of the most recent recession, which impacted credit availability, consumer confidence and unemployment levels, contributed to the decrease in attendance related, as well as corporate partner, revenues for certain of our motorsports events. Despite this, we believe there has been no significant change in the long-term fundamentals of our ongoing motorsports event business. We believe our present operational and cash flow outlook further support our conclusion.

In connection with our fiscal 2014 assessment of goodwill and intangible assets for possible impairment we used the methodology described above. We believe our methods used to determine fair value and evaluate possible impairment were appropriate, relevant, and represent methods customarily available and used for such purposes. Our latest annual assessment of goodwill and other intangible assets in the fourth quarter of fiscal 2014 indicated there had been no impairment and the fair value substantially exceeded the carrying value for the respective reporting units.

In addition, our growth strategy includes investing in certain joint venture opportunities. In these equity investments we exert significant influence on the investee but do not have effective control over the investee, which adds an additional element of risk that can adversely impact our financial position and results of operations. The carrying value of our equity investments was $119.0 million at February 28, 2015.

Income Taxes. The tax law requires that certain items be included in our tax return at different times than when these items are reflected in our consolidated financial statements. Some of these differences are permanent, such as expenses not deductible on our tax return. However, some differences reverse over time, such as depreciation expense, and these temporary differences create deferred tax assets and liabilities. Our estimates of deferred income taxes and the significant items giving rise to deferred tax assets and liabilities reflect our assessment of actual future taxes to be paid on items reflected in our financial statements, giving consideration to both timing and probability of realization. Actual income taxes could vary significantly from these estimates due to future changes in income tax law or changes or adjustments resulting from final review of our tax returns by taxing authorities, which could also adversely impact our cash flow.

In the ordinary course of business, there are many transactions and calculations where the ultimate tax outcome is uncertain. Accruals for uncertain tax positions are provided for in accordance with the requirements of ASC 740, “Income Taxes.” Under this guidance, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50.0 percent likelihood of being realized upon the ultimate settlement. This interpretation also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and income tax disclosures. Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns. Although we believe the estimates are reasonable, no assurance can be given that the final outcome of these matters will not be different than what is reflected in the historical income tax provisions and accruals. Such differences could have a material impact on the income tax provision and operating results in the period in which such determination is made.

Contingent Liabilities. Our determination of the treatment of contingent liabilities in the financial statements is based on our view of the expected outcome of the applicable contingency. In the ordinary course of business, we consult with legal counsel on matters related to litigation and other experts both within and outside our Company. We accrue a liability if the likelihood of an adverse outcome is probable and the amount of loss is reasonably estimable. We disclose the matter but do not accrue a liability if the likelihood of an adverse outcome is reasonably possible and an estimate of loss is not determinable. Legal and other costs incurred in conjunction with loss contingencies are expensed as incurred.

Equity and Other Investments

Hollywood Casino at Kansas Speedway

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We have accounted for Kansas Entertainment as an equity investment in our financial statements as of February 28, 2014 and 2015. Our 50.0 percent portion of Kansas Entertainment’s net income is approximately $1.6 million and $3.2 million for the three months ended February 28, 2014 and 2015, respectively, and is included in income from equity investments in our consolidated statements of operations.

Per the Development Agreement with the Unified Government of Wyandotte County/Kansas City, Kansas (“Unified Government”), the casino is subject to a 1.0 percent of gross gaming revenue payment if it had not commenced construction on an adjacent hotel by the second anniversary of its opening, which was February 2014. In June 2014, the Unified Government approved an extension of the construction commencement date to give the Unified Government time to complete a feasibility analysis for a new convention center that could be integrated with the hotel. Recently, the Unified Government decided not to proceed with the integrated development, leaving Kansas Entertainment 100 days after the Unified Government’s notification of its decision, that date being April 10, 2015, to commence construction prior to the enforcement of the aforementioned payment.

The final decision to move forward with the proposed hotel will be market-based and subject to approval by Kansas Entertainment’s board. Should Kansas Entertainment ultimately not build the hotel it will be subject to the payment from the second anniversary of its opening forward. Accordingly, beginning February 2014, Kansas Entertainment began recording expense equal to 1.0 percent of gross gaming revenue since it did not proceed with construction of a hotel by the original deadline. Included in our income from equity investment amounts for the three months ended February 28, 2014 and 2015 is approximately $0.1 million and $0.2 million expense, respectively, related to this payment. Our share of this payment liability accrued from February 2014 through February 28, 2015 totaled approximately $0.7 million. At this time it is unlikely hotel construction will commence prior to the April 10, 2015, deadline and that Kansas Entertainment will be compelled to pay the accrued payment from the second anniversary of opening forward until such time as it may commence construction on a proposed hotel adjacent to the gaming facility.

Distributions from Kansas Entertainment for the three months ended February 28, 2015 totaling $5.5 million, consist of approximately $3.5 million received as a distribution from its profits, and is included in net cash provided by operating activities on our statement of cash flows, with the remaining approximately $2.0 million received recognized as a return of capital from investing activities. Distributions from Kansas Entertainment for the three months ended February 28, 2014 totaling $4.5 million, consist of approximately $1.9 million received as a distribution from its profits, and is included in net cash provided by operating activities on our statement of cash flows, with the remaining approximate $2.6 million received recognized as a return of capital from investing activities.

Subsequent to February 28, 2015, we received an additional distribution of approximately $8.0 million.

Staten Island Property

On August 5, 2013, we announced that we sold our 676 acre parcel of property located in Staten Island, New York, to Staten Island Marine Development, LLC (“Marine Development”). Marine Development purchased 100 percent of the outstanding equity membership interests of 380 Development LLC (“380 Development”), a wholly owned indirect subsidiary of ISC and owner of the Staten Island property, for a total sales price of $80.0 million. In addition, we previously received approximately $4.2 million for an option provided to the purchaser that is nonrefundable and does not apply to the $80.0 million sales price.

We received $7.5 million, less closing and other administrative costs, of the sales price at closing. The remaining sales price was financed with us holding a secured mortgage interest in 380 Development as well as the underlying property. The mortgage balance bears interest at an annual rate of 7.0 percent. In accordance with the terms of the agreement, we have received a principal payment of approximately $6.1 million plus interest on the mortgage balance through February 28, 2015, and we will receive the remaining purchase price of $66.4 million, due March 5, 2016. Interest on the remaining mortgage balance is due quarterly, in arrears, and Marine Development is current with all payments through April 2015. Based on the level of Marine Development's initial investment at closing and continuing investment, we have accounted for the transaction using the cost recovery method and has deferred the recognition of profit of approximately $1.9 million, and interest totaling approximately $6.7 million at February 28, 2015, until the carrying amount of the property is recovered, which will not be until the final payment is made.

The net proceeds from the sale, combined with the mortgage interest and related cash tax benefits, will provide us with approximately $118.0 million in incremental cash flow through the term of the mortgage.

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Income Taxes

The principal causes of the decreased income tax rate, as compared to the statutory income tax rate, for the three months ended February 28, 2014 are the tax treatment related to the other income recognized as a result of Speedway Motorsports Inc.'s (“SMI”) abandonment of their interest in SMISC, LLC on January 31, 2014, including the related tax benefits associated with various operating loss carryforwards of Motorsports Authentics, Inc. and certain tax filing positions of SMISC, LLC totaling approximately $1.8 million. Decreases in certain state tax rates are the principal causes of the decreased effective income tax rate, as compared to the statutory income tax rate, for the three months ended February 28, 2015.

As a result of these items, our effective income tax rate decreased from the statutory income tax rate to approximately 24.4 percent and 36.1 percent for the three months ended February 28, 2014 and 2015, respectively.

Future Trends in Operating Results

International Speedway Corporation is the leading owner of major motorsports entertainment facilities and promoter of motorsports-themed entertainment activities in the United States. We compete for discretionary spending and leisure time with many other entertainment alternatives and are subject to factors that generally affect the recreation, leisure and sports industry, including general economic conditions. Our operations are also sensitive to factors that affect corporate budgets. Such factors include, but are not limited to, general economic conditions, employment levels, business conditions, interest and taxation rates, relative commodity prices, and changes in consumer tastes and spending habits.

The unprecedented adverse economic conditions that began in 2008, which significantly impacted consumer confidence and disproportionately affected different demographics of our target customers, continue to influence the frequency with which guests attend our major motorsports entertainment events. Recurring global and regional uncertainty, lack of a broad based middle class economic recovery, and/or further weakening in the domestic economy may continue to adversely impact attendance levels, guest spending levels, and our ability to secure corporate marketing partnerships in the future. Reductions in any of these categories can directly and negatively affect revenues and profitability. Beginning in 2009, we mitigated the decline of certain revenue categories with sustainable cost containment initiatives. Beginning in 2012, we re-instituted regular merit pay increases to more normalized levels. Certain non-controllable costs, such as NASCAR sanction fees, have increased this year and we may continue to experience incremental increases. While we are sustaining the significant cost reductions previously implemented, we do not expect further significant cost reductions.

Looking ahead, we expect to benefit from the continuing slow but uneven, recovery in the overall U.S. economy, which we anticipate will improve attendance-related and corporate partnership revenues. Our industry will further benefit from NASCAR securing its broadcast rights through the 2024 season with the largest broadcast rights deal in the sport's 66-year history. Consistent with major sports properties throughout the world, broadcast rights represent our company's largest revenue segment. Expanding and extending this contracted revenue will provide us unparalleled long-term cash flow visibility. We also believe the strategic initiatives we and the motorsports industry have undertaken to grow the sport will continue to strengthen the long-term health of our Company.

The industry and its stakeholders have demonstrated their commitment to growing the sport by aligning with and executing upon growth initiatives supporting NASCAR's Industry Action Plan (“IAP”). The IAP's objective is to build upon NASCAR's appeal by enhancing the connection with existing fans, as well as attracting and engaging new Gen Y, youth and multicultural consumers in motorsports. Additional areas of focus within the IAP include building greater product relevance, cultivating driver star power, growing social media activities and enhancing the event experience. In recent years NASCAR has introduced several successful on-track innovations such as the Gen 6 Car design, new qualifying formats and enhancements to the Chase for the Championship that are direct results of IAP initiatives.

In January 2014 NASCAR announced a new championship format that puts greater emphasis on winning races all season long, expands the current Chase for the NASCAR Sprint Cup field to 16 drivers, and implements a new round-by-round advancement format that ultimately rewards a battle-tested, worthy champion. The format makes every race matter even more, diminishes points racing, puts a premium on winning races and concludes with a best-of-the-best, first-to-the-finish line showdown race – all of which is exactly what fans want. The new Chase structure is expected to drive NASCAR Sprint Cup competition to a whole new level with a thrilling, easy to understand format. The completion of the 2014 NASCAR season at Homestead-Miami Speedway saw very encouraging results for both at-track consumer and corporate interest, as well as improving year-over-year digital and media (television viewership, on-line/social-media) consumption for the 2014 Chase events. While the new broadcaster lineup and year over year network vs. cable channel changes for 2015 compared to 2014 will likely impact week to week metrics, we are optimistic that the increased fan interest and consumption of the 2014 Chase will provide momentum into the 2015 NASCAR season. Favorable event performance to date (as of Martinsville Spring Cup Race weekend) seems to indicate this positive trend will continue.

We support NASCAR's IAP on a number of fronts. As referenced above, we are committed to improving our major motorsports facilities to create stronger fan engagement. In particular, one of the most important projects in our history is the redevelopment

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of the frontstretch of Daytona, the Company's 56-year-old flagship motorsports facility. The project will enhance the event experience for our fans, marketing partners, broadcasters and the motorsports industry (See "DAYTONA Rising: Reimagining an American Icon"). We are confident that elevating the experience at the most important motorsports facility in North America will grow the Daytona 500 brand, our 12 other major motorsports facilities' brands and NASCAR's brand. Ultimately, this strategic project will positively influence attendance trends, corporate involvement in the sport, and the long-term strength of future broadcast media rights revenues.

Admissions

Achieving event sellouts and creating excess demand are crucial to the optimal performance of our major motorsports facilities that host NASCAR Sprint Cup Series events. An important component of our operating strategy has been our long-standing practice of focusing on supply and demand when evaluating ticket pricing and adjusting capacity at our facilities. By effectively managing both ticket prices and seating capacity, we have historically shown the ability to stimulate ticket renewals and advance ticket sales.

Advance ticket sales result in earlier cash flow and reduce the potential negative impact of actual, as well as forecasted, inclement weather. With any ticketing initiative, we first examine our ticket pricing structure for each segmented area within our major motorsports entertainment facilities to ensure prices are on target with market demand. When determined necessary, we adjust ticket pricing. We believe our ticket pricing is consistent with current demand, providing attractive price points for all income levels.

It is important that we maintain the integrity of our ticket pricing model by ensuring our customers who purchase tickets during the renewal period get preferential pricing. We do not adjust pricing downward inside of the sales cycle to avoid rewarding last-minute ticket buyers by discounting tickets. Further, we closely monitor and manage the availability of promotional tickets. Encouraging late cycle buying and offering excess promotional tickets could have a detrimental effect on our ticket pricing model and long-term value of our business. We believe it is more important to encourage advance ticket sales and maintain price integrity to achieve long-term growth rather than to capture short-term incremental revenue through discounting at the expense of our customers who purchased tickets during the renewal period. We continue to explore and implement innovative ticket pricing strategies whereby prices increase over time as well as price increases week of/day of races to capture incremental revenues.

Adjusting seating capacity is another consumer-focused strategy to promote sellouts, create excess demand and in turn increase capacity utilization at our major motorsports facilities. Over the past few years, we have reduced capacity at our major motorsports facilities. A significant portion of the capacity reduction was a result of our goal to provide improved fan amenities such as wider seating, create social zones with greater fan interaction/engagement for our guests, and remove sections that do not provide adequate sight lines. Based on our experience and the continual evolution of modern sports facilities, ticket demand relies strongly on creating a more personal and unique experience for the fans. Enhancing the live-event experience to compete with the at-home television experience is a critical strategy for our future growth. Capacity management facilitates other ancillary benefits including greater event-pricing power; increasing the number of tickets sold in the renewal cycle; increasing customer retention; driving greater attendance to our lead-in events(such as NASCAR's Xfinity and Camping World Truck series events); driving stronger interest from corporate sponsors; and creating a more visually compelling event for the television audience.

Other key strategic initiatives that focus on building live-event fan engagement include enhanced at-track audio and visual experiences, additional concession and merchandise points-of-sale, more social zones and greater wireless connectivity. We closely monitor customer demand, and continuously evaluate next-generation live-sports entertainment fan amenities, all of which could further impact how we manage capacity and spend capital at our major motorsports facilities.

Corporate Partnerships

NASCAR is a powerful brand with a loyal fan base that is aware of, appreciates and supports corporate participation to a greater extent than fans of any other sports property. The combination of brand power and fan loyalty provides an attractive platform for robust corporate partnerships. The number of Fortune 500 companies invested in NASCAR remains higher than any other sport. Approximately one-in-four Fortune 500 companies use NASCAR as part of their marketing strategy and the trend is increasing. The number of Fortune 500 companies investing in NASCAR increased three percent in 2014 versus prior year; and is an eleven percent improvement versus 2008.

We believe that our presence in key metropolitan statistical areas, year-round event schedule, impressive portfolio of major motorsports events and attractive fan demographics are beneficial as we continue to pursue renewal and expansion of existing corporate marketing partnerships and establish new corporate relationships. Companies are demanding more quantifiable return on investment from their sports marketing strategies and our company is focused on delivering enhanced value through our strategic initiatives. This includes enhanced facilities, more frequent and diverse content at our facilities, and deeper understanding of and integration with our customers' business, among other things.

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In fiscal 2014, excluding soft media sales, the company grew its gross corporate partnership revenue for the first time since the beginning of the recession. In early fiscal 2015, we are encouraged by favorable corporate sales trends that have us better positioned than at the same time in recent prior years. As of late March 2015, we have sold all but one NASCAR Sprint Cup race entitlement, two Xfinity Series entitlements, and one Camping World Truck Series entitlement, and have secured 88.0 percent of our total 2015 corporate sales target compared to 87.0 percent at this point for 2014. We have secured two long-term founding partnerships for DAYTONA Rising in Toyota and Florida Hospital, both in excess of ten year partnerships. We continue to see strong interest from prospective corporate partners seeking to establish a long-term marketing platform with our DAYTONA Rising project. Several founding partner discussions are underway at the time of this writing.

Television Broadcast and Ancillary Media Rights

Domestic broadcast and ancillary media rights fees revenues are ISC's largest revenue segment, accounting for approximately 46.5 percent of 2014 total revenues.

In August 2013, NASCAR finalized multi-platform broadcast rights agreements with NBCUniversal (“NBC”) and FOX for 10 years, beginning in 2015 through the 2024 season, for the broadcast and related rights for NASCAR's three national touring series. Financial terms were not disclosed but leading industry sources value the combined agreements at approximately $8.2 billion over the 10 years. The agreements include Spanish-language rights and 'TV Everywhere rights', which will allow NASCAR content to stream over the broadcasters'-affiliated websites.

FOX has exclusive rights to the first 16 NASCAR Sprint Cup Series point races beginning each year with the prestigious Daytona 500. In addition, FOX retains the rights to the NASCAR Sprint All-Star Race, The Sprint Unlimited, Budweiser Duel, 14 NASCAR Xfinity Series events and the entire NASCAR Camping World Truck Series. NBC has exclusive rights to the final 20 NASCAR Sprint Cup Series points races, final 19 NASCAR Xfinity Series events, select NASCAR Regional & Touring Series events and other live content beginning in 2015. In total, NASCAR will have the same number of Sprint Cup races on network television, 16; 9 on FOX and 7 on NBC; as it did in the prior 2007 to 2014 television package.

NASCAR's solid ratings , the strong demand for live sports programming and the proliferation of on-demand content were significant factors for NASCAR signing the largest broadcast rights deal in the sport's 66-year history.

In August 2013, FOX debuted its 24-hour Fox Sports 1 network to compete with ESPN. Fox Sports 1 is available in approximately 90 million television households. In addition to NASCAR, Fox Sports 1 has new or renewed deals for Major League Baseball, college football and basketball, Ultimate Fighting Championship, Major League Soccer ("MLS"), United States Golf Association, as well as other sports. Fox Sports 1 represents the latest in the long migration of marquee sports from broadcast television to cable/satellite, who generally can support a higher investment due to subscriber fees that are not available to traditional networks. In 2015, Fox Sports 1 will broadcast 7 live NASCAR Sprint Cup events and 11 NASCAR Xfinity events.

NBC Sports Network is in approximately 82 million homes, and in addition to NASCAR serves sports fans by airing coverage of the Olympic Games and Trials as well as the National Hockey League ("NHL"), MLS, IndyCar Series, Tour de France, major college football and basketball, and horse racing surrounding the Triple Crown, among other events.

Through the first six weeks of the 2015 broadcast season, NASCAR Sprint Cup has been the number one or two sport of the weekend. While year over year comparisons will be complicated in 2015 due to changes in broadcaster line up and network versus cable distribution week to week, further clouded by impacts of inclement weather in the current and prior year, the sport is experiencing positive trends in broadcast and digital metrics to date. Through the Martinsville weekend, NASCAR Sprint Cup has averaged 8.1 million viewers per event and a total of 33.5 million unique viewers. Also, digital and social media metrics continue to exhibit significant increases.

Domestic broadcast rights fees provide significant cash flow visibility to us, race teams and NASCAR over the contract term. Television broadcast rights fees received from NASCAR for the NASCAR Sprint Cup, Xfinity and Camping World Truck series events conducted at our wholly owned facilities under these agreements, and recorded as part of motorsports related revenue, were approximately $57.9 million and $58.5 million for the three months ended February 28, 2014 and 2015, respectively. Operating income generated by these media rights were approximately $42.1 million and $42.5 million for the three months ended February 28, 2014 and 2015, respectively.

As media rights revenues fluctuate so do the variable costs tied to the percentage of broadcast rights fees required to be paid to competitors as part of NASCAR Sprint Cup, Xfinity and Camping World Truck series sanction agreements. NASCAR prize and point fund monies, as well as sanction fees (“NASCAR direct expenses”), are outlined in the sanction agreement for each event and are negotiated in advance of an event. As previously discussed, included in these NASCAR direct expenses are amounts equal to 25.0 percent of the gross domestic television broadcast rights fees allocated to our NASCAR Sprint Cup, Xfinity and Camping World Truck series events, as part of prize and point fund money (See “Critical Accounting Policies and

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Estimates - Revenue Recognition”). These annually negotiated contractual amounts paid to NASCAR contribute to the support and growth of the sport of NASCAR stock car racing through payments to the teams and sanction fees paid to NASCAR. As such, we do not expect these costs to materially decrease in the future as a percentage of admissions and motorsports related income.

NASCAR is focused on measuring and growing all of the potential ways that people can consume media, whether traditional television viewership, page views of on-line content, and/or quantity/quality of social-media mentions. A November 2014 study of broad based digital media consumption habits found that amount of time spent on mobile devices has increased twenty percent since 2010, digital video viewing time has doubled since 2012, and 52 percent of on-line retail traffic now originates from mobile devices. Both trends will likely continue. Traditional consumption channels like television and radio still make up a majority of the average time spent per adult day, but on-line consumption whether using a desktop or mobile device now equals almost 30.0 percent of average daily time consuming audio and video content, skewing higher for younger demographics.

Responding to shifts in the way sports fans consume content, in 2013 and 2014 NASCAR made enhancements to NASCAR.com and NASCAR Mobile Apps that have strengthened the Industry's digital presence. In addition, NASCAR also created the Fan and Media Engagement Center to better understand digital conversations and optimize engagement with the social community. In only the second full year of managing its digital rights in-house, NASCAR experienced significant growth, exceeding one billion aggregate page views across NASCAR.com, NASCAR mobile web and the NASCAR Mobile app in 2014. The billion page view milestone marks a 45 percent year-over-year increase in engagement on the platform, according to data from Adobe Omniture SiteCatalyst. In the early part of the 2015 NASCAR season, NASCAR.com averaged 1.7 million unique visitors on NASCAR Sprint Cup race days; and the NASCAR Mobile applications were downloaded 5.3 million times, achieving nearly 14 percent growth since the end of the 2014 NASCAR season. On the social media front, social media mentions are up 21 percent in early 2015 versus the same time measured in prior year with an average of 5.5 million social media mentions per each race-day. Social-media engagement, which is defined as taking action on NASCAR content (e.g. sharing, likes, comments, retweets, etc.), increased more than 60 percent for both Facebook and Twitter over 2014 year-to-date. We expect all these channels will continue to grow and the industry is well positioned to engage and monetize these digital channels as our fans (mirroring society-at-large) consume more content via these channels. Along with NASCAR, we closely monitor changes in the television and media broadcast environment. Recent announcements by Apple, Amazon, HBO and others regarding direct to consumer ('a la carte' or 'Over the Top') content offerings is a trend that will likely continue. We view potential shifts in media consumption as positive for both the consumer and NASCAR, providing more rich and diverse ways to consume the NASCAR product and interact with our fans.

Sanctioning Bodies

Our success has been, and is expected to remain, dependent on maintaining good working relationships with the organizations that sanction events at our facilities, particularly with NASCAR, whose sanctioned events at our wholly owned facilities accounted for approximately 86.3 percent of our revenues in fiscal 2014. NASCAR continues to entertain and discuss proposals from track operators regarding potential realignment of their portfolio of NASCAR Sprint Cup Series dates to more geographically diverse and potentially more desirable markets where there may be greater demand, resulting in an opportunity for increased revenues to the track operators. We believe that realignments have provided, and will continue to provide, incremental net positive revenue and earnings as well as further enhance the sport's exposure in highly desirable markets, which we believe benefits the sport's fans, teams, sponsors and television broadcast partners as well as promoters.

Merchandise Operations

In 2015, NASCAR and NASCAR Team Properties announced a 10-year agreement with Fanatics Retail Group Concessions, Inc. ("Fanatics"), to operate NASCAR’s entire at-track merchandise business and deliver fans an enhanced, experiential at-track shopping environment. As part of the agreement, Fanatics will be the exclusive retailer of NASCAR and driver merchandise at trackside for all 38 NASCAR Sprint Cup Series events. In addition, Fanatics also contracted with us for 10 years of exclusive retail merchandise rights for our track trademarks and certain other intellectual property at all of our tracks. The new trackside retail model operated by Fanatics will evolve from using solely haulers for each specific team or driver to displaying all merchandise in a climate-controlled superstore retail environment supported by, in instances, smaller satellite retail touch points around the track. The new model will provide a more personal and convenient shopping experience for race fans. We believe this improved trackside merchandise model, combined with an upgraded online and mobile experience, will better position us and the industry to maximize merchandise sales while delivering top quality experience to our fans. Consequently, our wholly owned subsidiaries, Americrown and MA, will no longer provide at track merchandise to fans at motorsports events and therefore will no longer recognize related revenues. Instead, we will receive a percentage of sales from Fanatics, recorded as part of Food, Beverage and Merchandise Revenue. For fiscal 2015, we are projecting a reduction in operating income of approximately $4.0 million to $5.0 million related to this new merchandise business model. Contributing significantly to t

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his reduction are one-time, non-recurring operating expenses totaling $3.5 million to $4.5 million related to partial year operations, for which there is no associated revenue, and restructuring costs to effectively transition merchandise operations. Further, accounting rules will require us to recognize revenue and expense related to the sale of merchandise inventory to Fanatics, estimated at approximately $4.9 million and $5.0 million, respectively, which has been contemplated in the aforementioned impact to fiscal 2015.

For fiscal 2015, financial results will reflect the elimination of consolidated trackside merchandise operations, partially offset by percentage sales received by Fanatics, resulting in lower food, beverage and merchandise revenue and expense of approximately $37.0 million to $38.0 million, and $33.0 to $34.0 million, respectively. As well, elimination of general and administrative expenses related to trackside merchandise operations of approximately $2.0 million to $3.0 million is expected for fiscal 2015.

Going forward, we expect that the new merchandising model will meet or exceed the historic contribution from this line of business, as well as, enhance the experience of our guests.

Capital Improvements

Enhancing the live event experience for our guests is a critical strategy for our future growth. We compete for the consumers' discretionary dollar with other entertainment options such as concerts and other major sporting events not just motorsports events. In addition, fans continue to demonstrate willingness to pay for more unique, inversive, and segmented experiences that cannot be duplicated at-home. Today's consumer wants improved traffic flow, comfortable and wider seating, clean and available facilities, more points of sale, enhanced audio and visual engagement, social zones and greater connectivity. Providing these enhancements often requires capital spending.

We remain confident that our focus on driving incremental earnings by improving the fan experience will, in time, lead to increased ticket sales with better pricing power, growth in sponsorship and hospitality sales, better prospects for continued growth in broadcast media rights fees agreements, and greater potential to capture market share. As such, ISC's Board of Directors endorsed a capital allocation plan for fiscal 2013 through fiscal 2017 to not exceed $600.0 million. The five-year capital expenditure plan encompasses capital expenditures for our 13 major sports facilities, including DAYTONA Rising (see "DAYTONA Rising: Reimagining an American Icon"), and ONE DAYTONA (see "ONE DAYTONA"). It is vital that we continue to elevate our Daytona brand to ensure that it remains the pinnacle of motorsports facilities, which will generate further profitability and cash flow to the Company. We also anticipate modest capital spending on other projects for maintenance, safety and regulatory requirements. We are confident that by delivering memorable guest experiences, along with attractive pricing and fantastic racing, we will generate increased revenues as well as bottom-line results.

While we focus on allocating our capital to generate returns in excess of our cost of capital, certain of our capital improvements may not provide immediate, directly traceable near term positive returns on invested capital but over the longer term will better enable us to effectively compete with other entertainment venues for consumer and corporate spending.

Growth Strategies

Our growth strategies also include exploring ways to grow our businesses through acquisitions and external developments that offer attractive financial returns. This has been demonstrated through our joint venture to develop and operate a Hollywood-themed casino and branded entertainment destination facility overlooking turn two at Kansas Speedway. Increased visibility on property taxes for the existing facility has led Kansas Entertainment to consider the next phase of development, a Hollywood Casino Hotel (see "Hollywood Casino at Kansas Speedway").

Hollywood Casino at Kansas Speedway provided positive cash flow to us and included positive equity income in our consolidated statement of operations for fiscal 2014. We expect, for our 2015 fiscal year, that our share of the cash flow from the casino's operations will be approximately $22.0 million to $24.0 million.

Also, we are pursuing a mixed-use entertainment development named ONE DAYTONA, located on property we own located directly across from our Daytona motorsports entertainment facility (see “Liquidity and Capital Resources - ONE DAYTONA”).

We remain interested in pursuing further ancillary developments at certain of our other motorsports facilities.

Postponement and/or Cancellation of Major Motorsports Events

We promote outdoor motorsports entertainment events. Weather conditions affect sales of, among other things, tickets, food, drinks and merchandise at these events. Poor weather conditions prior to an event, or even the forecast of poor weather conditions, could have a negative impact on us, particularly for walk-up ticket sales to events which are not sold out in advance, as well as renewals for the following year. If an event scheduled for one of our facilities is delayed or postponed because of weather or other reasons such as, for example, the general postponement of all major sporting events in the United States following the September 11, 2001 terrorism attacks, we could incur increased expenses associated with conducting the

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rescheduled event, as well as possible decreased revenues from tickets, food, drinks and merchandise at the rescheduled event. If such an event is canceled, we would incur the expenses associated with preparing to conduct the event as well as losing the revenues, including any live broadcast revenues, associated with the event.

Seasonality and Quarterly Results

We derive most of our income from a limited number of NASCAR-sanctioned races. As a result, our business has been, and is expected to remain, highly seasonal based on the timing of major racing events. Future schedule changes as determined by NASCAR or other sanctioning bodies, as well as the acquisition of additional, or divestiture of existing, motorsports entertainment facilities could impact the timing of our major events in comparison to prior or future periods. Because of the seasonal concentration of racing events, the results of operations for the three month periods ended February 28, 2014 and 2015, are not indicative of the results to be expected for the year.

GAAP to Non-GAAP Reconciliation

The following financial information is presented below using other than U.S. generally accepted accounting principles (“non-GAAP”), and is reconciled to comparable information presented using GAAP. Non-GAAP net income and diluted earnings per share below are derived by adjusting amounts determined in accordance with GAAP for certain items presented in the accompanying selected operating statement data, net of taxes.

We believe such non-GAAP information is useful and meaningful, and is used by investors to assess our core operations, which consist of the ongoing promotion of racing events at our major motorsports entertainment facilities. Such non-GAAP information identifies and separately displays and adjusts for items that are not considered to be reflective of our continuing core operations at our motorsports entertainment facilities. We believe that such non-GAAP information improves the comparability of the operating results and provides a better understanding of the performance of our core operations for the periods presented. We use this non-GAAP information to analyze the current performance and trends and make decisions regarding future ongoing operations. This non-GAAP financial information may not be comparable to similarly titled measures used by other entities and should not be considered as an alternative to operating income, net income or diluted earnings per share, which are determined in accordance with GAAP. The presentation of this non-GAAP financial information is not intended to be considered independent of or as a substitute for results prepared in accordance with GAAP. Management uses both GAAP and non-GAAP information in evaluating and operating the business and as such deemed it important to provide such information to investors.

The adjustments for 2014 relate to marketing and consulting costs incurred associated with DAYTONA Rising, accelerated depreciation, losses associated with the retirements of certain other long-lived assets, DAYTONA Rising project capitalized interest, MA fair value adjustment and income tax benefits, and net gain on sale of certain assets.

The adjustments for 2015 relate to marketing and consulting costs incurred associated with DAYTONA Rising, accelerated depreciation, losses associated with the retirements of certain other long-lived assets, DAYTONA Rising project capitalized interest, and net gain on sale of certain assets.

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	Three Months Ended
	February 28, 2014			February 28, 2015
	(Unaudited)
	(In Thousands, Except Per Share Amounts)
Net income	$	19,895		$	14,953
Adjustments, net of tax:
DAYTONA Rising project	235			184
Accelerated depreciation	1,821			2,372
Losses on asset retirements	1,350			963
DAYTONA Rising project capitalized interest	(576		)	(1,571		)
MA fair value adjustment and income tax benefits	(7,212		)	—
Net gain on sale of certain assets	(7		)	(16		)
Non-GAAP net income	$	15,506		$	16,885
Per share data:
Diluted earnings per share	$	0.43		$	0.32
Adjustments, net of tax:
DAYTONA Rising project	0.00			0.00
Accelerated depreciation	0.04			0.05
Losses on asset retirements	0.03			0.02
DAYTONA Rising project capitalized interest	(0.01		)	(0.03		)
MA fair value adjustment and income tax benefits	(0.16		)	—
Net gain on sale of certain assets	0.00			0.00
Non-GAAP diluted earnings per share	$	0.33		$	0.36

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Comparison of the Results for the Three Months Ended February 28, 2015 to the Results for the Three Months Ended February 28, 2014.

The following table sets forth, for each of the indicated periods, certain selected statement of operations data as a percentage of total revenues:



	Three Months Ended
	February 28, 2014		February 28, 2015
	(Unaudited)
REVENUES:
Admissions, net	22.8	%	22.4	%
Motorsports related	64.7		64.0
Food, beverage and merchandise	10.0		10.8
Other	2.5		2.8
Total revenues	100.0		100.0
EXPENSES:
Direct:
Prize and point fund monies and NASCAR sanction fees	20.6		20.0
Motorsports related	17.3		17.2
Food, beverage and merchandise	7.7		9.1
General and administrative	18.5		19.1
Depreciation and amortization	17.3		17.6
Losses on asset retirements	1.6		1.2
Total expenses	83.0		84.2
Operating income	17.0		15.8
Interest income	0.0		0.0
Interest expense	(2.3	)	(1.1	)
Equity in net income from equity investments	1.2		2.4
Other	4.1		—
Income before income taxes	20.0		17.1
Income taxes	4.9		6.2
Net income	15.1	%	10.9	%

Comparability of results for the three months ended February 28, 2015 to the same periods in fiscal 2014 was impacted by the following:

•

On January 31, 2014, SMI abandoned its interest and rights in our 50/50 partnership Motorsports Authentics, LLC ("MA"), consequently bringing our ownership of MA to 100.0 percent. MA's operations are included in our consolidated operations subsequent to the date of SMI's abandonment. Prior to January 31, 2014, MA was accounted for as an equity investment in our financial statements. As a result of SMI's abandonment of their interest in MA, we recorded other income of approximately $5.4 million representing the fair value of MA, over the carrying value, as of January 31, 2014. In addition we recognized tax benefits relating to MA of approximately $1.8 million for the three months ended February 28, 2014, (see “Income Taxes”). There was no comparable event in the same period of fiscal 2015;

•

In 2015, NASCAR and NASCAR Team Properties announced a 10-year agreement with Fanatics Retail Group Concessions ("Fanatics") to operate NASCAR’s entire at-track merchandise business and deliver fans an enhanced, experiential at-track shopping environment. As part of the agreement, Fanatics will be the exclusive retailer of NASCAR and driver merchandise at trackside for all 38 NASCAR Sprint Cup Series events. In addition, Fanatics also contracted with us for 10 years of exclusive retail merchandise rights for its track trademarks and certain other intellectual property at all ISC tracks. Consequently, our wholly owned subsidiaries, Americrown and MA, beginning in January 2015, will no longer provide at track merchandise to fans at motorsports events and therefore will no longer recognize related sales revenues and operating expenses. Instead, we will receive a percentage of sales from Fanatics, recorded as part of Food, Beverage and Merchandise Revenue. For the first quarter of fiscal 2015, we recognized

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revenue and expense related to merchandise operations of approximately $8.8 million and $8.5 million, respectively. Included in this amount are $0.9 million of commission from Fanatics and non-recurring transactions of approximately $4.9 million of inventory sold to Fanatics and $2.9 million of wholesale transactions by MA, which drive a total of $8.3 million in expense including product costs associated with these transactions, costs related to the transition of trackside merchandise operations to Fanatics, as well as partial period operating expenses incurred prior to the transition of Americrown and MA merchandise operations for which there was no related revenue. This compares to first quarter of fiscal 2014, where we recognized revenue and expense related to merchandise operations of approximately $7.3 million and $5.5 million, respectively, which included direct sales of merchandise at trackside and excluded the partial period pre-consolidation operation of Motorsports Authentics prior to SMI’s abandonment of its MA interest (see "Future Trends in Operating Results, Merchandise Operations");


•	During the three months ended February 28, 2015, we recognized approximately $0.3 million, or less than $0.01 per diluted share, in marketing and consulting costs that are included in general and administrative expense related to DAYTONA Rising. During the three months ended February 28, 2014, we recognized approximately $0.4 million, or less than $0.01 per diluted share, of similar costs;

•

During the three months ended February 28, 2015, we recognized approximately $3.9 million, or $0.05 per diluted share, of accelerated depreciation that was recorded due to shortening the service lives of certain assets associated with DAYTONA Rising and other projects. During the three months ended February 28, 2014, we recognized approximately $3.0 million, or $0.04 per diluted share, of similar costs related to DAYTONA Rising and capacity management initiatives;

•

During the three months ended February 28, 2015, we recognized approximately $1.6 million, or $0.02 per diluted share, of losses primarily attributable to demolition and/or asset relocation costs in connection with DAYTONA Rising and other capital improvements. During the three months ended February 28, 2014, we recognized approximately $2.2 million, or $0.03 per diluted share, of similar losses associated in connection with DAYTONA Rising and capacity management initiatives; and


•	During the three months ended February 28, 2015, we capitalized approximately $2.6 million, or $0.03 per diluted share, of interest related to DAYTONA Rising. During the three months ended February 28, 2014, we recognized approximately $0.9 million, or $0.01 per diluted share, of similar interest capitalization.

Admissions revenue increased by approximately $0.5 million, or 1.6 percent, during the three months ended February 28, 2015, as compared to the same period of the prior year. The increase in the three month period ending February 28, 2015, was largely due to attendance at the Daytona 500, which was partially offset by inclement weather which negatively impacted attendance for preceding Speedweeks events.

Motorsports related revenue increased approximately $2.2 million, or 2.6 percent, during the three months ended February 28, 2015, as compared to the same period of the prior year. The increase for the three month period is primarily attributable to increases in sponsorship and hospitality revenues of approximately $1.0 million and television broadcast revenue of approximately $0.6 million. Also contributing to the three month period increase were increases in other ancillary motorsports related revenues of approximately $0.6 million.

Food, beverage and merchandise revenue increased approximately $1.5 million, or 11.6 percent, during the three months ended February 28, 2015, as compared to the same period of the prior year. The increase is primarily due to the transition of merchandise operations discussed above, partially offset by lower concessions and catering revenue in 2015 as compared to higher sales driven by the six hour rain delay during the 2014 Daytona 500.

Prize and point fund monies and NASCAR sanction fees for the three months ended February 28, 2015, were comparable to the same period of the prior year.

Motorsports related expenses increased approximately $0.7 million, or 3.0 percent, during the three months ended February 28, 2015, as compared to the same period of the prior year. The increase for the three month periods is primarily attributable to the increased incremental costs related to the aforementioned increases in other ancillary motorsports related revenues. Motorsports related expenses as a percentage of combined admissions and motorsports related revenue remained fairly consistent at approximately 19.9 percent for the three months ended February 28, 2015, as compared to approximately 19.8 percent for the same period in the prior year.

Food, beverage and merchandise expense increased approximately $2.3 million, or 23.2 percent, to $12.4 million during the three months ended February 28, 2015, The increase in the three month period is predominately attributable to the aforementioned transition of merchandise operations, partially offset by lower concession and catering sales. Food, beverage and merchandise expense as a percentage of food, beverage and merchandise revenue increased to approximately 84.4 percent for the three months ended February 28, 2015 compared to approximately 76.5 percent for the same respective period in the prior year. The decrease in margin for the three month period is substantially a result of the aforementioned transactions related

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to change in merchandising operations; however, excluding this activity, food, beverage and merchandise expense as a percentage of food, beverage and merchandise sales decreased compared to the same periods in 2014.

General and administrative expenses increased approximately $1.8 million, or 7.2 percent, during the three months ended February 28, 2015, as compared to the same period of the prior year. The increase in the three month period is predominately due to a net decrease to our general liability insurance reserve in the prior year period of approximately $1.1 million, for which there is no comparable reduction in the current period. Also contributing to the increase is approximately $0.4 million of certain administrative costs and certain ancillary facility operations and $0.3 million of non-recurring costs related to the aforementioned transition in merchandising operations. General and administrative expenses as a percentage of total revenues increased to approximately 19.1 percent for the three months ended February 28, 2015, as compared to 18.5 percent for the same respective period in the prior year. The margin decrease for the three months ended February 28, 2015 is predominately due to the aforementioned costs incurred in fiscal 2015 associated with the transition of merchandising operations and adjustments in our general liability insurance reserves in the 2014 period.

Depreciation and amortization expense increased approximately $1.2 million, or 5.4 percent, during the three months ended February 28, 2015, as compared to the same respective period of the prior year. Approximately $0.9 million of the increase relates to new assets placed in service associated with DAYTONA Rising, while approximately $0.4 million is attributable to the continued shortening of the service lives of certain assets that will eventually be retired associated with DAYTONA Rising. Also contributing to the increase is approximately $0.4 million attributable to the shortening of service lives of certain assets associated with the repaving of Watkins Glen. Slightly offsetting these increases is approximately $0.5 million related to assets that have been fully depreciated, or removed from service, for the three months ending February 28, 2015, as compared to the same period in the prior year.

Losses on retirements of long-lived assets of approximately $1.6 million for the three months ended February 28, 2015, is primarily attributable to demolition costs in connection with DAYTONA Rising and other capital improvements. The losses on retirements of long-lived assets of approximately $2.2 million, for the three months ended February 28, 2014, is primarily attributable to demolition costs in connection with DAYTONA Rising and capacity management initiatives.

Interest income during the three months ended February 28, 2015 was comparable to the same period of the prior year.

Interest expense during the three months ended February 28, 2015, decreased approximately $1.7 million, or 53.1 percent, as compared to the same period of the prior year. The decrease was predominately due to higher capitalized interest associated with DAYTONA Rising.

Equity in net income from equity investments represents our 50.0 percent equity investment in Hollywood Casino at Kansas Speedway during the three months ended February 28, 2015 and 2014, respectively (see “Equity and Other Investments”).

Our effective income tax rate was approximately 36.1 percent for the three months ended February 28, 2015, respectively, as compared to 24.4 percent for the same respective period of the prior year (see “Income Taxes”).

As a result of the foregoing, net income for the three month period ending February 28, 2015, as compared to the same period in prior year, reflected a decrease of approximately $4.9 million, or $0.11 per diluted share.

Liquidity and Capital Resources

General

We have historically generated sufficient cash flow from operations to fund our working capital needs, capital expenditures at existing facilities, and return of capital through payments of an annual cash dividend and repurchase of our shares under our Stock Purchase Plan. In addition, we have used the proceeds from offerings of our Class A Common Stock, the net proceeds from the issuance of long-term debt, borrowings under our credit facilities and state and local mechanisms to fund acquisitions and development projects. The following table sets forth, for each of the indicated periods, certain selected financial information (in thousands):



	November 30, 2014		February 28, 2015
	(Unaudited)
Cash and cash equivalents	$	158,847	$	161,864
Working capital	110,783		119,939
Total debt	271,746		271,484

At February 28, 2015, our working capital was primarily supported by our cash and cash equivalents totaling approximately $161.9 million, a decrease of approximately $3.0 million from November 30, 2014. The decrease in working capital is primarily a result of an approximate $42.2 million increase in deferred income as a result of the seasonality of our operations,

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as well as an approximate $16.6 million increase in account payable predominately due to the increased activity in DAYTONA Rising. (see "Capital Expenditures"). Significant cash flow items during the three months ended February 28, 2014 and 2015, respectively, are as follows (in thousands):



	February 28, 2014			February 28, 2015
	(Unaudited)
Net cash provided by operating activities ⁽¹⁾	$	37,578		$	44,730
Capital expenditures ⁽²⁾	(31,247		)	(43,418		)
Distribution from equity investee and affiliate ⁽³⁾	4,500			5,500
Proceeds from sale of Staten Island property ⁽⁴⁾	6,100			—
Cash included in assumption of ownership interest in equity investee ⁽⁵⁾	4,686			—

(1) The increase in net cash provided by operating activities, during the three months ended February 28, 2015, as compared to the same period in the prior year, were primarily due to increases in deferred income received and changes in inventory balances primarily driven by the aforementioned changes in merchandise operations, partially offset by a tax refund received in the first quarter of fiscal 2014

(2) Increase in capital expenditures is predominately due to DAYTONA Rising (see "Capital Expenditures")

(3) Distributions from equity investee and affiliates, for the three months ended February 28, 2015, totaling $5.5 million, consists of approximately $3.5 million received as a distribution from its profits, and is included in net cash provided by operating activities on our statement of cash flows, and the remaining approximate $2.0 million received, was recognized as a return of capital from investing activities on our statement of cash flows

(4) See "Note 4. Equity and Other Investments - Staten Island Property"

(5) Represents MA's cash balance assumed as a result of SMI's abandonment of their interest in SMISC, LLC

Our liquidity is primarily generated from our ongoing motorsports operations, and we expect our strong operating cash flow to continue in the future. In addition, as of February 28, 2015, we have approximately $296.0 million available to draw upon under our 2012 Credit Facility, if needed. See “Future Liquidity” for additional disclosures relating certain risks that may affect our near term operating results and liquidity.

Allocation of capital is driven by our long-term strategic planning and initiatives that encompass our mission, vision and values. Our primary uses of capital are to maintain modest debt levels that are consistent with our current investment grade debt rating from Standard and Poor’s. We will invest in our facilities to improve the guest experience and we will make investments in strategic projects that complement our core business and provide value for our shareholders, all of which is balanced with returning capital to our shareholders through share repurchases and dividends.

Capital Expenditures

As discussed in “Future Trends in Operating Results,” an important strategy for our future growth will come from investing in our major motorsports facilities to enhance the live event experience to better enable us to effectively compete with other entertainment venues for consumer and corporate spending.

In June 2013, ISC's board of directors endorsed a capital allocation plan for fiscal 2013 through fiscal 2017 to not exceed $600.0 million in capital expenditures over that period. The five-year capital expenditure plan encompasses all the capital expenditures for ISC's 13 major motorsports facilities, including DAYTONA Rising and ONE DAYTONA. Of the endorsed five-year capital expenditure plan, DAYTONA Rising will account for approximately $400.0 million of the $600.0 million, excluding capitalized interest.

For the three months ended February 28, 2015, we spent approximately $43.4 million on capital expenditures for projects at our existing facilities, of which $37.5 million is related to DAYTONA Rising, with the remainder associated with a variety of other improvements and renovations. In comparison, we spent approximately $31.2 million for the three months ended February 28, 2014, on capital expenditures for projects at our existing facilities.

With the majority of the capital expenditures for DAYTONA Rising occurring in fiscal 2014 and 2015, we estimate capital expenditures, exclusive of capitalized interest, across all of ISC's existing facilities will be approximately $200.0 million for fiscal 2015, based on the timing of construction payments. With a target completion date for DAYTONA Rising in January 2016, capital expenditures will then decrease significantly with an expectation of capital expenditures for projects at all of ISC's existing facilities, exclusive of capitalized interest, to be between $60.0 to $70.0 million in fiscal 2016 and fiscal 2017.

We review the capital expenditure program periodically and modify it as required to meet current business needs.

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Future Liquidity

General

As discussed in “Future Trends in Operating Results,” we compete for discretionary spending and leisure time with many other entertainment alternatives and are subject to factors that generally affect the recreation, leisure and sports industry, including general economic conditions. Our operations are also sensitive to factors that affect corporate budgets. Such factors include, but are not limited to, general economic conditions, employment levels, business conditions, interest and taxation rates, relative commodity prices, and changes in consumer tastes and spending habits. These factors may negatively impact year-over-year comparability for our revenue categories for the full year, with the exception of domestic broadcast media rights fees. While we are sustaining the significant cost reductions implemented subsequent to the unprecedented adverse economic conditions that began in 2008, we do not expect further significant cost reductions.

Our cash flow from operations consists primarily of ticket, hospitality, merchandise, catering and concession sales and contracted revenues arising from television broadcast rights and marketing partnerships. We believe that cash flows from operations, along with existing cash, cash equivalents and available borrowings under our credit facility, will be sufficient to fund:


•	operations of our major motorsports facilities for the foreseeable future;


•	the previously discussed five-year capital expenditures plan at our existing facilities, which includes DAYTONA Rising, ONE DAYTONA, as well as any future fan and competitor safety, critical maintenance and regulatory compliance spending;


•	payments required in connection with the funding of the Unified Government's debt service requirements related to the TIF bonds;


•	payments related to our existing debt service commitments;


•	contributions in connection with any future expansion of the Hollywood Casino at Kansas Speedway; and


•	our annual dividend payment and share repurchases under our Stock Purchase Plan.

We remain interested in pursuing acquisition and/or development opportunities that would increase shareholder value, of which the timing, size, success and associated potential capital commitments, are unknown at this time. Accordingly, a material acceleration of our growth strategy could require us to obtain additional capital through debt and/or equity financings. Although there can be no assurance, we believe that adequate debt and equity financing will be available on satisfactory terms.

While we expect our strong operating cash flow to continue in the future, our financial results depend significantly on a number of factors. In addition to local, national, and global economic and financial market conditions, consumer and corporate spending could be adversely affected by security and other lifestyle conditions resulting in lower than expected future operating cash flows. General economic conditions were significantly and negatively impacted by the September 11, 2001 terrorist attacks and the wars in Iraq and Afghanistan and could be similarly affected by any future attacks or fear of such attacks, or by conditions resulting from other acts or prospects of war. Any future attacks or wars or related threats could also increase our expenses related to insurance, security or other related matters. Also, our financial results could be adversely impacted by a widespread outbreak of a severe epidemiological crisis. The items discussed above could have a singular or compounded material adverse effect on our financial success and future cash flow.

DAYTONA Rising: Reimagining an American Icon

DAYTONA Rising is the redevelopment of the frontstretch at Daytona, ISC's 56-year-old flagship motorsports facility, to enhance the event experience for our fans, marketing partners, broadcasters and the motorsports industry.

The vision for DAYTONA Rising places an emphasis on enhancing the complete fan experience, beginning with five expanded and redesigned fan entrances, or injectors. Each injector will lead directly to a series of escalators and elevators that will transport fans to any of three different concourse levels, each featuring spacious and strategically-placed social "neighborhoods" along the nearly mile-long frontstretch.

As part of DAYTONA Rising, we entered into a Design-Build Agreement with Barton Malow Company (“Barton Malow”), which obligates us to pay Barton Malow approximately $316.0 million for the completion of the work described in the Design-Build Agreement. The amount is a stipulated sum to be paid for the work, which may not change unless we request a change in the scope of work. The Design-Build Agreement contains certain provisions and representations usual and customary for agreements of this type, including, among others, provisions regarding liquidated damages to be assessed for work that is not completed according to the agreed upon schedule, provisions regarding payment schedules, and provisions regarding bonding and liability insurance policies applicable to the work. In addition, the Design-Build Agreement contains customary provisions regarding termination, review and inspection of the work, warranties and the use of subcontractors.

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A total of 11 neighborhoods, each measuring the size of a football field, will enable fans to meet and socialize during events without missing any on-track action, thanks to dozens of strategically-placed video screens in every neighborhood. The central neighborhood, dubbed the "World Center of Racing," features open sight-lines enabling fans to catch all the on-track action while celebrating the history of Daytona International Speedway and its many unforgettable moments throughout more than 50 years of racing.

Every seat in Daytona's frontstretch will be replaced with wider, more comfortable seating that will provide pristine sight-lines. There will also be twice as many restrooms and three times as many concessions throughout the facility. During Budweiser Speedweeks 2015, fans experienced some of DAYTONA Rising’s new amenities including first-ever vertical transportation, approximately 40,000 new grandstand seats on the frontstretch near Turn 1, and new concessions and restrooms.

In addition to improving the overall fan experience, the corporate entertainment platform at Daytona will be completely transformed. Corporate hospitality will be moved into permanent structures inside the new grandstand, providing premier facilities for corporate entertaining throughout our events. Over 60 new trackside corporate suites will provide our premium guests with breathtaking views and first-class amenities befitting the “World Center of Racing.”

In February 2014, Daytona International Speedway announced Toyota as its first Founding Partner for DAYTONA Rising. Through this partnership, Toyota will sponsor Injector 4 and one of the neighborhoods, as well as receive 20,000 square feet of innovative fan engagement space that will enhance the overall guest experience, and nearly 50,000 square feet of interior and exterior branding space. The partnership runs through 2025.

In November 2014, Florida Hospital was announced as the stadium’s second Founding Partner taking ownership of Injector 1. As with Toyota, the Florida Hospital brand will be represented on one of five fan injectors, including more than 20,000 square feet of engagement space. Within this injector, Florida Hospital will also have a presence in one of the “neighborhoods”.

In February 2015, we entered into a long-term extension of Official Sponsor of Daytona with NextEra Energy Resources that includes the NASCAR Camping World Truck race entitlement. The agreement extends our renewable energy credit purchases designed to off-set Daytona’s carbon footprint and, with the newly signed agreement with NextEra Energy and Florida Power & Light, adds three new on-site Solar arrays. These structures will serve as aesthetically-pleasing fan amenities, such as covered parking and shade structures, and make DAYTONA Rising a top-five sports property in the U.S. for clean energy generation. Also recently announced is a partnership that extends the iconic Rolex brand’s role as the title sponsor of the annual Rolex 24 At Daytona sports car race and Official Timepiece of Daytona International Speedway. The expanded partnership will also afford Rolex with naming rights for the new Daytona Rising frontstretch lounge and suite level as well as enhanced branding opportunities throughout the redeveloped Speedway.

We expect that by providing our fans with a better experience as well as an expansive platform for our marketing partners, including an elevated hospitality experience, DAYTONA Rising, upon completion in 2016, is expected to provide an immediate incremental lift in Daytona's revenues of approximately $20.0 million, and earnings before interest, taxes, depreciation and amortization ("EBITDA”) lift of approximately $15.0 million with a mid-single-digit growth rate. We also currently anticipate the project to be accretive to our net income per share within three years of completion. While these forward looking amounts are management’s projections and we believe they are reasonable, our actual results may vary from these estimates due to unanticipated changes in projected attendance, lower than expected ticket prices, or lower than forecasted corporate sponsorships. We do not know whether these expectations will ultimately prove correct and actual revenues and operating results may differ materially from these estimates.

We currently anticipate DAYTONA Rising to cost approximately $400.0 million, excluding capitalized interest, which we expect to fund from cash on hand, cash from our operations, and we may use borrowings on our credit facility for a limited period of time. In June 2014, House Bill 7095 was signed in Florida creating the Florida Sports Development Program, establishing a process for distributing state tax revenue for the construction or improvement of professional sports facilities. The DAYTONA Rising project is among the eligible applicants to receive sales tax incentives based on the project’s capital investment and amount of sales tax generated by the facility. We filed our application and received approval from the state's Department of Economic Opportunity. The new program could potentially provide additional capital for the project. We, along with other applicants, are awaiting final decision on allocation of available funds.

Despite not anticipating the need for additional long-term debt to fund this project, accounting rules dictate that we capitalize a portion of the interest on existing outstanding debt during the construction period. We estimate that we will record approximately $11.0 million to $13.0 million of capitalized interest from fiscal 2013 through fiscal 2016.

Total spending incurred for DAYTONA Rising was approximately $37.5 million, during the three months ended February 28, 2015. Based on our current expectations of DAYTONA Rising, we have identified existing assets that are expected to be impacted by the redevelopment and that those assets will require accelerated depreciation, or losses on asset retirements, totaling approximately $50.0 million over the approximate 26-month project time span. During the three months ended

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February 28, 2015, we recognized accelerated depreciation and losses on disposal of assets totaling approximately $4.3 million, with a total of approximately $32.4 million recognized since the inception of the project.

In addition, our depreciation expense related directly to DAYTONA Rising will increase incrementally by approximately $12.0 million to $14.0 million in fiscal 2015, and an additional $9.0 million to $10.0 million in fiscal 2016, respectively. The incremental increase in depreciation expense for fiscal 2015 is based on the opening of approximately forty percent of the new stadium for Budweiser Speedweeks 2015. As a result, our total depreciation expense for fiscal 2015 is estimated to be between approximately $93.0 million and $97.0 million, and approximately $100.0 million to $105.0 million annually, in fiscal 2016, and then decreasing, due to lower capital spending, to approximately $85.0 million to $90.0 million beginning in fiscal 2019.

ONE DAYTONA

In June 2013, we entered a 50/50 joint venture with Atlanta based Jacoby Development, Inc. ("JDI") to develop ONE DAYTONA, the proposed premier mixed use and entertainment destination across from Daytona International Speedway. In March 2015, we announced a change in our business relationship with JDI and that we assumed 100.0 percent interest in ONE DAYTONA. JDI remains involved in the project through a consultative arrangement.

Also in March 2015, we announced RED Legacy, a leading national development group, as development consultant for ONE DAYTONA. Intensely focused on innovative destination retail and mixed-use projects, RED Legacy will work closely with ISC’s development resources on the project. The RED Legacy team is a natural fit for the project, having served as the developer for Legends Outlets Kansas City, a mixed-used retail destination across from our Kansas Speedway.

Shaner Hotels and Prime Hospitality Group ("PHG") have been selected as hotel partners. Shaner Hotels and PHG are planning a 145-room full-service boutique property and are working with global hospitality leader Marriott International to bring an exclusive Marriott Autograph Collection hotel to Daytona Beach and ONE DAYTONA.

We continue to refine the conceptual design for the first phase of ONE DAYTONA. Bass Pro Shops®, America's most popular outdoor store, and Cobb Theatres, the highly respected Southeastern-based exhibitor, have executed leases to anchor ONE DAYTONA. We are in active discussions with other potential anchor tenants for ONE DAYTONA. We have approved land use entitlements for ONE DAYTONA to allow for up to 1.4 million square feet of retail/dining/entertainment, 2,500 seats in a movie theater, 660 hotel rooms, 1,350 units of residential, 567,000 square feet of additional office space and 500,000 square feet of commercial/industrial space.

A Community Development District ("CDD") has been established for the purpose of installing and maintaining public infrastructure at ONE DAYTONA. The CDD is a local, special purpose government framework authorized by Chapter 190 of the Florida Statutes for managing and financing infrastructure to support community development.

The CDD has negotiated agreements with the City of Daytona Beach and Volusia County for a total of $40.0 million in incentives to finance a portion of the estimated $53.0 million in infrastructure required to move forward with the ONE DAYTONA project. We are currently proceeding with the leasing phase of the project while simultaneously completing the various necessary requirements for the CDD to access the incentives to start infrastructure work.

Speedway Developments

In light of NASCAR's publicly announced position regarding additional potential realignment of the NASCAR Sprint Cup Series schedule, we believe there are still potential development opportunities for public/private partnerships in new, underserved markets across the country that would create value for our shareholders. However, we are not currently pursuing any new speedway development opportunities.

Inflation

We do not believe that inflation has had a material impact on our operating costs and earnings.



ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

For quantitative and qualitative disclosures about market risk, see Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," of our annual report on Form 10-K for the year ended November 30, 2014. During the three months ended February 28, 2015, there have been no material changes in our market risk exposures.



ITEM 4.	CONTROLS AND PROCEDURES

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Under the supervision of and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of February 28, 2015. Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of February 28, 2015.

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our first quarter of fiscal 2015, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION



ITEM 1.	LEGAL PROCEEDINGS

From time to time, we are a party to routine litigation incidental to our business. We do not believe that the resolution of any or all of such litigation will have a material adverse effect on our financial condition or results of operations.



ITEM 1A.	RISK FACTORS

This report and the documents incorporated by reference may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You can identify a forward-looking statement by our use of the words “anticipate,” “estimate,” “expect,” “may,” “believe,” “objective,” “projection,” “forecast,” “goal,” and similar expressions. These forward-looking statements include our statements regarding the timing of future events, our anticipated future operations and our anticipated future financial position and cash requirements. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we do not know whether our expectations will prove correct. We previously disclosed in response to Item 1A to Part I of our report on Form 10-K for the fiscal year ended November 30, 2014 the important factors that could cause our actual results to differ from our expectations. There have been no material changes to those risk factors.



ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS



Period	Total number of shares purchased	Average price paid per share	Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares (or approximate dollar value of shares) that may yet be purchased under the plans or programs (in thousands)
December 1, 2014— December 31, 2014
Repurchase program (1)	—	—	—	$	61,740
January 1, 2015 — January 31, 2015
Repurchase program (1)	—	—	—	$	61,740
February 1, 2015 — February 28, 2015
Repurchase program (1)	—	—	—	$	61,740
	—		—

(1)

We have a share repurchase program (“Stock Purchase Plan”) under which we are authorized to purchase up to $330.0 million of our outstanding Class A common shares. The timing and amount of any shares repurchased under the Stock Purchase Plan will depend on a variety of factors, including price, corporate and regulatory requirements, capital availability and other market conditions. The Stock Purchase Plan may be suspended or discontinued at any time without prior notice. No shares have been or will be knowingly purchased from Company insiders or their affiliates.

Since inception of the Plan through February 28, 2015, we have purchased 7,063,962 shares of our Class A common shares, for a total of approximately $268.3 million. We did not purchase any shares of our Class A common shares during the three month period ended February 28, 2015. Transactions occur in open market purchases and pursuant to a trading plan under Rule 10b5-1. At February 28, 2015, we had approximately $61.7 million remaining repurchase authority under the current Stock Purchase Plan.



ITEM 3.	DEFAULTS UPON SENIOR SECURITIES

None

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ITEM 4.	MINE SAFETY DISCLOSURES

None



ITEM 5.	OTHER INFORMATION

None

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ITEM 6.	EXHIBITS



Exhibit Number		Description of Exhibit
3.1		Articles of Amendment of the Restated and Amended Articles of Incorporation of the Company, as filed with the Florida Department of State on July 26, 1999 (incorporated by reference from exhibit 3.1 of the Company’s Report on Form 8-K dated July 26, 1999)
3.2		Conformed copy of Amended and Restated Articles of Incorporation of the Company, as amended as of July 26, 1999 (incorporated by reference from exhibit 3.2 of the Company’s Report on Form 8-K dated July 26, 1999)
3.3		Conformed copy of Amended and Restated By-Laws of the Company, as amended as of April 9, 2003. (incorporated by reference from exhibit 3.3 of the Company’s Report on Form 10-Q dated April 10, 2003)
31.1		Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer — filed herewith
31.2		Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer — filed herewith
32		Section 1350 Certification — filed herewith
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculation Linkbase
101.DEF		XBRL Taxonomy Extension Definition Linkbase
101.LAB		XBRL Taxonomy Extension Label Linkbase
101.PRE		XBRL Taxonomy Extension Presentation Linkbase

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		INTERNATIONAL SPEEDWAY CORPORATION (Registrant)

Date:	April 7, 2015	/s/ Daniel W. Houser
		Daniel W. Houser, Senior Vice President,
		Chief Financial Officer, Treasurer