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Speedway Motorsports (TRK)
Q2 2019 Earnings Call
Jul 31, 2019, 10:00 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Good morning and welcome to the Speedway Motors 2019 second-quarter earnings conference call. [Operator instructions] As a reminder, this call is being recorded on Wednesday, July 31, 2019. With us on this morning's call is Marcus Smith, chief executive officer and president; and Bill Brooks, vice chairman and chief financial officer. After formal remarks, a question-and-answer period will be conducted.

Before we start, the company would like to address forward-looking statements that may be addressed on the call. This conference call contains forward-looking statements, particularly statements with regard to the company's future operations and financial results. There are many factors that affect future events and trends of the company's business, including, but not limited to, economic factors, weather, the success of NASCAR and other sanctioning bodies, capital projects and expansion, financing needs and a host of other factors, both within and outside of management's control. These factors and other factors, including those contained in the company's annual report on Form 10-K and subsequently filed quarterly reports on Form 10-Q, involve certain risks and uncertainties that could cause actual results or events to differ materially from management's views and expectations.

Inclusion of any information or statement in this conference call not necessarily imply that such information or statement is material. The company does not undertake any obligation to release publicly revised or updated forward-looking information, and such information included in this conference call is based on information currently available and may not be reliable after this date. So with these formalities out of the way, I will turn the call over to Marcus Smith. Mr.


Marcus Smith -- Chief Executive Officer and President

Thank you, and good morning, ladies and gentlemen. Thank you for joining us on today's call as we to announce our second-quarter and year-to-date results for 2019. In April, Bristol Motor Speedway hosted its Spring NASCAR weekend featuring the Alsco 300 Xfinity Series race and the Food City 500 Cup Series race. And then in Charlotte, for the month of May, our annual 10 days of NASCAR Thunder started with the North Carolina Education Lottery 200 NASCAR Gander Outdoors Truck race and the NASCAR Monster Energy All-Star race.

Charlotte Motor Speedway capped off the month with the Alsco 300 Xfinity Series race and the historic 60th running of the Coca-Cola 600 on Memorial Day weekend. We finished off the quarter in June on the West Coast for the Toyota/Save Mart 350 and the 50th anniversary celebration of Sonoma Raceway. Other race events this quarter included NHRA national events at Bristol, Charlotte and Las Vegas, as well as the SpeedyCash.com 400 NASCAR Gander Outdoors Truck race and the IndyCar DXC Technology 600 doubleheader at Texas Motor Speedway. All of our NASCAR Monster Energy cup, Xfinity and Gander Outdoors series event entitlements are sold for 2019 and many for several years to come.

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We are encouraged by the uptick in television ratings and viewership we've seen so far this season, and FOX Sports wrapped its half of the season up an average of 3% in the viewership, which is encouraging to see. NASCAR's improvements to competition and the on-track product continued to deliver improved numbers and more dramatic finishes. The average number of lead changes per race through the first 19 races of the season are the most since 2014 during the same time frame. And from last year to this year, green-flag passes for the lead are up 46%.

Five of this year's races have set records with more green-flag passes for the lead than ever before: Las Vegas, Bristol, Kansas, Chicago and Kentucky. Of course, three of the speedways our ours, and we look forward to seeing that action continue for the rest of this season. And now for a more in-depth financial review, I'll turn it over to Bill Brooks.

Bill Brooks -- Vice Chairman and Chief Financial Officer

Thank you, Marcus. Before I start my remarks, I wanted to remind people that as previously announced in July 23, 2019, the company, Speedway Motorsports, and Sonic Financial Corporation, a private company owned and controlled by O. Bruton Smith and his family, entered into a definitive merger agreement for Sonic Financial to acquire all of the outstanding shares of the Speedway common stock for cash consideration of $19.75 per share. Sonic Financial, O.

Bruton Smith and his family and related entities beneficially own directly or indirectly approximately 29 million shares of Speedway Motorsports in control over 71% of the voting power. Closing that transaction is expected in the third quarter of 2019. We won't have any additional comments on these matters today. It's hard to compare the second quarter because Texas Motor Speedway held one NASCAR Monster Energy Cup and Xfinity Series racing event in the first quarter of 2019 that were held in the second quarter of 2018.

So rather than repeat that each line item of revenue expense was down or up because of this date migration, I'll confine most of my comments to the six-month period ended June 30, 2019, during which the major event weekends were similar between 2019 and 2018. Suffice to say that the second-quarter results were about what were expected. For the six months ended June 30, 2019, compared to the six months ended June 30, 2018, total revenues increased by $6.9 million or 2.9%. Admissions for the 6 months ended June 30, 2019 decreased by $2.7 million or 7.4%.

The decrease reflects lower admissions revenues associated with some of the NASCAR racing events and poor weather surrounding certain NASCAR racing events held at Atlanta Motor Speedway, Las Vegas Motor Speedway, Texas Motor Speedway, major NHRA racing events at Charlotte, smaller non-NASCAR events at Charlotte and Texas in the current six-month period. The decrease is also due to lower admissions for the Las Vegas Motor Speedway's major NHRA racing event, reflecting that, in 2018, it was an inaugural race on its four-lane racing configuration. Event-related revenue for the six months increased by $3.7 million or 5.3% due primarily to higher event souvenir merchandise revenues associated with third-party venues, and to a lesser extent, higher food and beverage commission revenues and track rental revenues. That overall increase was partially offset by lower event-related revenues from reduced attendance and poor weather.

Our NASCAR broadcasting revenue for the six months ended June 30, 2019, increased $5.7 million or 4.6%, which reflects higher contractual broadcast rights fees for those NASCAR sanction racing events. Our other operating revenue for the six months increased $244,000 or 1.7%, mostly to higher Legend Car revenues, partially offset by lower nonevent souvenir sales. Direct expense of events for the six months ended June 30, 2019, increased by $238,000 or 0.5%, primarily from operating costs associated with higher souvenir sales from third-party venues. The overall increase was partially offset by lower advertising and other operating costs in some of the events with poor weather and lower sanction and purse fees associated with some non-NASCAR racing events.

As expected, the NASCAR event management fee for the six months increased $3.4 million or 5%, which reflects higher contractual race event management fees. The other direct operating expenses for the six months ended in June increased by $674,000 or 7.1% from higher operating costs associated with higher Legend Cars revenues, partially offset by some decreased cost with lower nonevent souvenir sales. General and administrative expense for the six months increased $755,000 or 1.5%. This increase reflects higher property taxes, franchise taxes and costs of some non-legal professional services, partially offset by lower wage and utility cost in the current quarter.

Our depreciation and amortization expense for the six months ended June 30, 2019, increased by $1.1 million or 4.4%, mostly from recording pre-tax accelerated depreciation of $912,000 on retired assets, and that was partially offset by lower depreciation and assets that are now fully depreciated. Our net interest expense for the six months ended in June was $5.5 million, compared to $5.9 million for the same period last year. This change is due primarily to lower total outstanding debt. Other expense for the six months ended in June was $23,000 compared to the prior year of other income of $2.2 million.

This change is due to higher gain on disposals of property last year. Our income tax rate for the six months ended June 30, 2019, was 25.9%. And for 2018, it was 21.4%. The 2018 tax rate reflected a nonrecurring tax benefit of $1.1 million because of certain state income tax law changes.

Our net income of for six months ended June 30, 2019, was $25.9 million, compared to $28.4 million for the prior period. At this point, Jillian, please open up the line for any questions that the participants may have.

Questions & Answers:


Certainly. [Operator instructions] We don't appear to have any questions.

Marcus Smith -- Chief Executive Officer and President

Okay. Thank you very much, ladies and gentlemen, for your time today. We look forward to talking with you again sometime soon. Bye-bye.


[Operator signoff]

Duration: 14 minutes

Call participants:

Marcus Smith -- Chief Executive Officer and President

Bill Brooks -- Vice Chairman and Chief Financial Officer

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