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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) August 14, 2000
MAGNA ENTERTAINMENT CORP.
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(Exact Name of Registrant as Specified in its Charter)
Delaware, United States of America
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(State or Other Jurisdiction of Incorporation)
000-30578 98-0208374
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(Commission File Number (I.R.S. Employer Identification No.)
285 West Huntington Drive, Arcadia, California 91007
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(Address of Principal Executive Offices) (Zip Code)
(626) 574-7223
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(Registrant's Telephone Number, Including Area Code)
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(Former Name or Former Address, if changed Since Last Report)
ITEM 5. OTHER EVENTS
On August 14, 2000, the Registrant issued a press release in which it announced
its unaudited financial results for the three month period ended June 30, 2000.
The full text of the press release issued by the Registrant is filed as Exhibit
1 and is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit 1 Copy of Registrant's press release dated August 14, 2000 is attached
as Exhibit 1.
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SIGNATURES
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 hereunto duly authorized
MAGNA ENTERTAINMENT CORP.
(Registrant)
Date: August 14, 2000 by: /s/ J. Brian Colburn
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J. Brian Colburn, Secretary
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INDEX TO EXHIBITS
EXHIBIT DESCRIPTION OF EXHIBIT
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1 Registrant's press release dated August 14, 2000
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EXHIBIT 1
MAGNA ENTERTAINMENT CORP.
285 West Huntington Drive
Arcadia, CA 91007
Tel: (626) 574-7223
Fax: (626) 446-9565
PRESS RELEASE
MAGNA ENTERTAINMENT CORP.
ANNOUNCES RESULTS FOR THE SECOND QUARTER
August 14, 2000, Arcadia, California......Magna Entertainment Corp. ("MEC")
(TSE: MIE.A, MEH: NASDAQ: MIEC) today reported its financial results for the
second quarter and six months ended June 30, 2000.
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Second Quarter Ended (\1\) Six Months Ended (\1\)
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $ 53,828 $ 20,795 $ 134,570 $ 60,702
Earnings Before Interest, Taxes,
Depreciation and Amortization $ 9,132 $ 583 $ 35,566 $ 18,679
Net Income $ 2,752 $(1,235) $ 14,732 $ 8,090
Fully diluted earnings per share $ 0.03 $ (0.02) $ 0.18 $ 0.10
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(1) All amounts are reported in millions of U.S. dollars, except per share
figures.
Revenue, net of purses, for the second quarter ended June 30, 2000 was $53.8
million, earnings before interest, taxes, depreciation and amortization
("EBITDA") was $9.1 million, net income was $2.8 million and fully diluted
earnings per share were $0.03. For the six months ended June 30, 2000, revenue
net of purses was $134.6 million, EBITDA was $35.6 million, net income was $14.7
million and fully diluted earnings per share were $0.18.
The financial results for second quarter 2000 reflect the full quarter's
operations for all of the Company's racetracks. The financial results for the
second quarter 1999 and six months ended
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5
June 30, 1999 reflect only the operations of Santa Anita Park racetrack, as it
was the only track owned by the Company during such reporting periods.
During the second quarter of 2000, cash generated from operations was $2.4
million. Total investment activities provided a net $9.1 million that included
the proceeds on disposition of real estate of $8.3 million and the cost of real
estate sold to a related party of $6.1 million, offset by fixed asset additions
of $6.4 million. Also during the period, long-term debt totaling $2.9 million
was repaid.
The Company recently announced the expansion of its executive management group
with the recruitment of Mark B. Feldman as President and Chief Executive
Officer. Mr. Feldman joined the Company on August 7, 2000 after seven years
with E! Entertainment Television, Inc. ("E!"), which owns and operates domestic
and international satellite delivered television networks and Internet
programming ventures. Most recently, Mr. Feldman was the Executive Vice
President of E!, responsible for all of its core business operations including
international program sales and channel development, online operations, new
business development, finance, business and legal affairs and administrative
functions. Mr. Feldman replaced Jerry D. Campbell, who has been named Vice
Chairman of the Company and will continue as a member of the Board of Directors.
In addition, Richard Goldberg, formerly Vice President, New Ventures Content
Strategies, for DirectTV, the world's leading provider of direct-to-home
satellite delivered television programming services, has accepted a role as a
senior advisor to Mr. Feldman and the Board of Directors. At DirecTV Mr.
Goldberg was most recently responsible for equity investments in television,
Internet and other media ventures. Prior to that, as Vice President, Program
Acquisitions, Mr. Goldberg was responsible for all programming acquisition,
distribution and licensing with, among others, professional sports leagues,
motion picture studios and television networks. Mr. Goldberg will be providing
consulting services to the Company primarily in connection with its media,
broadcasting, marketing and legislative initiatives.
"During the quarter, the Company operated live racing at all six of its venues
in North America.
"Santa Anita Park continued to lead the nation's racetracks achieving a new
record for handle, or total wagering, with a four percent (4%) increase to over
$1.0 billion. The Hialeah at Gulfstream Park meet, new for 2000, generated
incremental EBITDA during the quarter in excess of $1.0 million.
"During the remainder of the fiscal year, management will continue to focus its
attention on best practices and synergies at the property level to lay the
foundation for long-term improvements in track operating results. In the short
term the company anticipates the impact of new tax legislation in Florida
equalizing the pari-mutuel tax structure for all racetracks will improve
operating performance.
"The Company's previously announced real estate disposition program continues on
target with $8.3 million in proceeds during the quarter. In addition, MEC
received proceeds of $8.0 million on real estate sold to a related party. For
financial statement purposes, the gain on the real estate sales to related
parties are reported as additional equity capital, net of income tax. In total,
the Company's real estate sales generated $4.3 million in excess of the
historical cost of the properties sold. Furthermore, the Company has entered
into property sales agreements providing anticipated
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proceeds of approximately $20.0 million in the third and fourth quarters."
Mr. Feldman also stated that "For the remainder of 2000, MEC's strategic focus
will be on the development of branding initiatives to increase awareness of MEC
as the source of the world's premier racing experience and the development of
our interactive television and Internet programming service, scheduled for
launch in the first quarter of 2001. Beginning with the Internet site, MEC
intends to become the leading destination for news and information related to
the sport of horse racing - including dissemination of wagering information -
and for Internet and television based gaming. The media initiative will utilize
proprietary interactive wagering technology including systems to interface
telephone account wagering with totalizator wagering pools, both developed
internally by MEC and licensed via strategic alliances with leading technology
providers in the fields of interactive gaming, streaming audio and video and
others. As the legislative and regulatory environment continues to recognize the
permissibility of interstate wagering on pari-mutuel racing, the Company intends
to exploit its product strength to develop new customers and markets."
The Company, one of the largest operators of premier horse racetracks in the
United States, acquires, develops and operates horse racetracks and related
pari-mutuel wagering operations. These racetracks, which include Santa Anita
Park and Golden Gate Fields in California, Gulfstream Park in Florida, Remington
Park in Oklahoma, Thistledown in Ohio and Great Lakes Downs in Michigan,
accounted for 23% of the amounts wagered on pari-mutuel racing in the United
States in 1999. As a complement to its horse racing business, the Company is
exploring the development of media sports wagering operations, including
telephone account, interactive television, and Internet-based wagering, as well
as certain leisure and retail-based real estate projects.
The Company will hold a conference call to discuss the second quarter results on
Tuesday, August 15, 2000 at 12:00 noon New York time (E.D.T.). The number to
use for this call is 1-800-348-6433. Please call 10 minutes prior to the
conference call. The overseas number to call is 1-212-271-4737. The conference
call will be chaired by Mark B. Feldman, President and Chief Executive Officer,
and David A. Mitchell, Executive Vice President and Chief Financial Officer.
For further information, please contact David A. Mitchell at (626) 574-6320.
This press release contains various "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). The
Act provides certain "safe harbor" provisions for forward-looking statements.
All forward-looking statements made in this press release are made pursuant to
the Act. The reader is cautioned that these statements represent our judgment
concerning the future and are subject to risks and uncertainties that could
cause our actual operating results and financial condition to differ materially.
Forward-looking statements are typically identified by the use of terms such as
"may," "will," "expect," "anticipate," "estimate," and similar words, although
some forward-looking statements are expressed differently. Although we believe
that the expectations reflected in such forward-looking statements are
reasonable we can give no assurance that such expectations will prove to be
correct. Important factors that could cause actual results to differ materially
from our expectations include, but are not limited to: the impact of competition
from operators of other racetracks and from other forms of gaming (including
from Internet and on-line wagering); a substantial change in law or regulations
affecting our gaming activities; a substantial change in allocation of live
racing days; our continued ability to effectively compete for the country's top
horses and trainers necessary to field high-quality horse racing; our continued
ability to complete expansion projects designed to generate new revenues and
attract
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new patrons; our ability to sell some of our real estate when we need to or at a
price we want; the impact of inclement weather; and our ability to integrate
recent racetrack acquisitions.
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MAGNA ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
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[Unaudited]
[United States dollars in thousands,
except per share figures]
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Three months ended Six months ended
<S> <C> <C> <C> <C>
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
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Revenue
Racetrack
Wagering, net of purses 27,886 11,029 86,970 38,266
Non-wagering 12,374 6,704 30,332 15,932
Real estate
Sale of real estate 8,269 - 8,269 -
Rental and other 5,299 3,062 8,999 6,504
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53,828 20,795 134,570 60,702
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Costs and expenses
Racetrack
Operating costs 29,435 15,935 75,944 33,588
General and administrative 3,759 969 7,077 1,923
Real estate
Cost of real estate sold 5,914 - 5,914 -
Operating costs 4,178 3,110 7,160 6,086
General and administrative 240 198 468 426
Predevelopment and other costs 1,170 - 2,441 -
Depreciation and amortization 4,685 1,507 9,952 3,034
Interest expense 209 380 419 709
Interest income (253) (60) (454) (60)
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49,337 22,039 108,921 45,706
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Income (loss) before income taxes 4,491 (1,244) 25,649 14,996
Income tax provision (benefit) 1,739 (9) 10,917 6,906
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Net income (loss) 2,752 (1,235) 14,732 8,090
Other comprehensive loss:
Foreign currency translation adjustment 1,479 2,277 6,329 7,322
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Comprehensive income (loss) 1,273 (3,512) 8,403 768
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Earnings (loss) per share of Class A
Subordinate
Voting Stock, Class B Stock or $0.03 $(0.02) $0.18 $0.10
Exchangeable Share: $0.03 $(0.02) $0.18 $0.10
Basic
Diluted
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Average number of shares of Class A
Subordinate
Voting Stock, Class B Stock and
Exchangeable 80,466 78,535 80,377 78,535
Shares[in thousands]: 80,466 78,535 80,377 78,535
Basic
Diluted
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MAGNA ENTERTAINMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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[Unaudited]
[United States dollars in thousands]
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Three months ended Six months ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Cash provided from (used for):
OPERATING ACTIVITIES
Net income 2,752 (1,235) 14,732 8,090
Items not involving current cash flows 2,304 1,831 7,302 3,724
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5,056 596 22,034 11,814
Changes in non-cash items related to operations (2,671) (13,652) (25,951) (10,442)
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Net cash provided from (used for) Operating 2,385 (13,056) (3,917) 1,372
Activities
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INVESTMENT ACTIVITIES
Acquisition of business - (6,375) (1,770) (6,375)
Real estate property and fixed asset additions (6,381) (5,348) (8,767) (7,158)
Proceeds on sale of real estate 8,269 - 8,269 -
Proceeds (cost) on real estate sold to Magna 6,147 - 6,147 -
Other assets disposals (additions) 1,049 - 1,749 -
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Net cash provided from (used for) Investing
Activities 9,084 (11,087) 5,628 (13,533)
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FINANCING ACTIVITIES
Increase (decrease) in bank indebtedness 1,498 (12,722) (2,056) (2,047)
Repayment of long-term debt (2,857) (60) (6,767) (104)
Issue of Class A Subordinate Stock - - 1,846 -
Contributed capital, net of tax 1,352 - 1,352 -
Increase in note payable to Magna - 23,869 - 24,346
Net contribution by Magna - - - (12,120)
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Net cash provided from (used for) Financing
Activities (7) 11,087 (5,625) (10,075)
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Effect of exchange rate changes on cash
and cash equivalents 14 (1) (55) (7)
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Net increase (decrease) in cash and cash
equivalents during the period 11,476 (13,693) (3,969) (2,093)
Cash and cash equivalents, beginning of period 35,215 29,103 50,660 17,503
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Cash and cash equivalents, end of period 46,691 15,410 46,691 15,410
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MAGNA ENTERTAINMENT CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
[Unaudited]
[United States dollars in thousands]
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June 30, December 31,
2000 1999
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ASSETS
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<S> <C> <C>
Current assets:
Cash and cash equivalents 46,691 50,660
Restricted cash 6,915 7,752
Accounts receivable 32,032 25,887
Prepaid expenses and other 4,337 3,931
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89,975 88,230
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Real estate properties and fixed assets, net 557,356 564,789
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Other assets, net 97,559 100,967
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Deferred income taxes 6,367 6,367
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751,257 760,353
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current liabilities:
Bank indebtedness 5,079 7,259
Accounts payable and other liabilities 44,909 66,151
Income taxes payable 12,131 7,554
Long-term debt due within one year 12,919 19,119
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75,038 100,083
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Long-term debt 24,478 19,506
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Other long-term liabilities 437 494
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Deferred income taxes 92,616 93,183
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Shareholders' equity:
Capital stock issued and outstanding -
Class A Subordinated Voting Stock 85,310 11,500
Exchangeable Shares 73,398 110,000
Class B Stock 394,093 429,455
Contributed surplus 1,352 -
Retained earnings (deficit) 12,301 (2,431)
Accumulated comprehensive loss (7,766) (1,437)
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558,688 547,087
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751,257 760,353
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