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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) November 10, 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.)
2001 Wilshire Boulevard, Suite 400, Santa Monica, California, USA 90403
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(Address of Principal Executive Offices) (Zip Code)
(310) 829-9907
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(Registrant's Telephone Number, Including Area Code)
NOT APPLICABLE
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(Former Name or Former Address, if changed Since Last Report)
ITEM 5. OTHER EVENTS
On November 10, 2000, the Corporation issued a press release in which the
Corporation announced its financial results for the nine month period ended
September 30, 2000 and the resignation of David Mitchell as Executive Vice-
President and Chief Financial Officer and the appointment of Graham J. Orr as
Executive Vice-President and Chief Financial Officer.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit 1 Copy of Registrant's press release dated November 10, 2000 is
attached as Exhibit 1.
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- 2 -
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: November 10, 2000 by: /s/ Graham J. Orr
-------------------------------------
Graham J. Orr
Executive Vice-President and
Chief Financial Officer
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3
EXHIBIT 1
MAGNA ENTERTAINMENT CORP.
2001 Wilshire Blvd. Suite 400
Santa Monica, CA 90403
Tel: (310) 829-9907
Fax: (310) 453-1885
PRESS RELEASE
MAGNA ENTERTAINMENT CORP.
ANNOUNCES RESULTS FOR THE THIRD QUARTER
November 10, 2000, Santa Monica, California......Magna Entertainment Corp.
("MEC") (NASDAQ: MIEC; TSE: MIE.A, MEH) today reported its financial results for
the third quarter and nine months ended September 30, 2000.
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Third Quarter Ended/(1)/ Nine Months Ended/(1)/
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $ 39,590 $ 10,419 $ 174,160 $ 71,121
Earnings (Loss) Before Interest, Taxes,
Depreciation and Amortization $ (4,063) $ (6,346) $ 31,503 $ 12,333
Net Income (Loss) $ (5,110) $ (5,090) $ 9,622 $ 3,000
Diluted earnings (loss) per share $ (0.06) $ (0.06) $ 0.12 $ 0.04
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(1) All amounts are reported in thousands of U.S. dollars, except per share
figures.
The Company's horse racetrack business is seasonal in nature. Generally, the
Company's horse racetrack revenues are greater in the first and second quarters
of the calendar year than in the third and fourth quarters because the Company's
premier racetracks, Santa Anita Park, Golden Gate Fields and Gulfstream Park run
live meets principally during the first half of the calendar year. This
seasonality can be expected to cause significant quarterly fluctuations in
revenue, earnings and diluted earnings per share.
Revenue, net of purses, for the nine months ended September 30, 2000 was $174.2
million, earnings before interest, taxes, depreciation and amortization were
$31.5 million, net income was $9.6 million and diluted earnings per share were
$0.12. Revenue, net of purses, for the third quarter
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4
ended September 30, 2000 was $39.6 million, the loss before interest, taxes,
depreciation and amortization was $4.1 million, net loss was $5.1 million and
diluted loss per share was $0.06.
The financial results for third quarter 2000 reflect the full quarter's live
racing and simulcast operations for all of the Company's racetracks. The
financial results for third quarter 1999 reflect only the operations of Santa
Anita Park racetrack for the full three months and Gulfstream Park racetrack for
the month of September 1999, as they were the only racetracks owned by the
Company during this comparative reporting period. For the nine months ended
September 30, 1999 the financial results reflect nine months' operations of
Santa Anita Park and one months' operations for Gulfstream Park, as they were
the only tracks owned by the Company during that reporting period.
During the third quarter of 2000, cash used for operations, before changes in
non-cash working capital, was $5.8 million. Total investment activities
provided net cash of $10.8 million, including $16.8 million of proceeds on the
disposition of real estate partially offset by fixed asset additions of $5.5
million. Also, during the third quarter, bank indebtedness of $4.7 million was
repaid.
The Company also announced the expansion of its executive management team.
Graham J. Orr was appointed as Executive Vice-President and Chief Financial
Officer at a meeting of the Company's Board of Directors today, following the
Board's acceptance of the resignation of Mr. David Mitchell from these
positions. Mr. Orr was formerly the Executive Vice-President, Corporate
Development of Magna International Inc., the Company's controlling shareholder,
where he directed the corporate development, treasury/insurance and investor
relations functions for the last eight years. Previous to that he held a number
of senior financial positions within Magna including Executive Vice-President
and Chief Financial Officer of Decoma International and was a partner for eight
years at KPMG, one of the world's leading providers of assurance, tax, legal,
consulting and financial advisory services.
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 $16.8 million in proceeds during the quarter and $25.0 million year
to date. In total, the Company's real estate sales generated gains of $3.7
million and $6.1 million in the third quarter and first nine months,
respectively. Furthermore, the Company has entered into property sales
agreements providing anticipated proceeds of approximately $11.0 million in the
fourth quarter.
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 approximately 23% of the amounts wagered on pari-mutuel racing in
the United States in 1999. In addition, the previously announced acquisition of
Bay Meadows, in California is expected to close in the fourth quarter. As a
complement to its horse racetrack 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.
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The Company will hold a conference call to discuss the third quarter results on
Monday, November 13, 2000 at 12:00 noon New York time (E.S.T.). The number to
use for this call is 1-800-416-4607. Please call 10 minutes prior to the
conference call. The overseas number to call is 1-415-908-4740. The conference
call will be chaired by Mark B. Feldman, President and Chief Executive Officer,
and Graham Orr, Executive Vice-President and Chief Financial Officer. For
further information, please contact Graham Orr at (310) 315-5125.
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 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 Nine months ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Revenue
Racetrack
Wagering, net of purses 9,882 1,890 96,852 40,156
Non-wagering 8,092 2,866 38,424 18,798
Real estate
Sale of real estate 16,766 - 25,035 -
Rental and other 4,850 5,663 13,849 12,167
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39,590 10,419 174,160 71,121
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Costs and expenses
Racetrack
Operating costs 21,077 8,711 97,021 42,299
General and administrative 3,942 1,855 11,019 3,778
Real estate
Cost of real estate sold 13,070 - 18,984 -
Operating costs 4,490 5,111 11,650 11,197
General and administrative 253 873 721 1,299
Predevelopment and other costs 821 215 3,262 215
Depreciation and amortization 4,792 1,642 14,744 4,676
Interest expense 584 550 1,950 1,259
Interest income (755) (935) (2,156) (995)
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48,274 18,022 157,195 63,728
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(Loss) income before income taxes (8,684) (7,603) 16,965 7,393
Income tax (benefit) provision (3,574) (2,513) 7,343 4,393
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Net (loss) income (5,110) (5,090) 9,622 3,000
Other comprehensive loss (income):
Foreign currency translation adjustment 7,413 (3,414) 13,742 3,908
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Comprehensive loss (12,523) (1,676) (4,120) (908)
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(Loss) earnings per share of Class A
Subordinate Voting Stock, Class B Stock
or Exchangeable Share:
Basic $ (0.06) $ (0.06) $ 0.12 $ 0.04
Diluted $ (0.06) $ (0.06) $ 0.12 $ 0.04
===============================================================================================================
Average number of shares of Class A
Subordinate Voting Stock, Class B Stock
and Exchangeable Shares [in thousands]:
Basic 80,466 78,535 80,407 78,535
Diluted 80,466 78,535 80,411 78,535
=================================================================================================================
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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 Nine months ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Cash provided from (used for):
OPERATING ACTIVITIES
Net income (5,110) (5,090) 9,622 3,000
Items not involving current cash flows (660) 1,669 6,642 5,393
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(5,770) (3,421) 16,264 8,393
Changes in non-cash working capital (3,056) 3,293 (29,007) (7,149)
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Net cash provided from (used for)
Operating Activities (8,826) (128) (12,743) 1,244
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INVESTMENT ACTIVITIES
Acquisition of business - (81,204) (1,770) (87,579)
Real estate property and fixed asset additions (5,539) (27,442) (14,306) (34,600)
Proceeds on sale of real estate 16,766 - 25,035 -
Proceeds (cost) on real estate sold to Magna - - 6,147 -
Other assets disposals (additions) (397) - 1,352 -
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Net cash provided from (used for)
Investing Activities 10,830 (108,646) 16,458 (122,179)
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FINANCING ACTIVITIES
Increase (decrease) in bank indebtedness (4,703) (442) (6,759) (2,489)
Increase of (repayment of) long-term debt 125 (3,094) (6,642) (3,198)
Issue of Class A Subordinate Stock - - 1,846 -
Contributed capital, net of tax - - 1,352 -
Decrease in note payable to Magna - (135,968) - (111,622)
Net contribution by Magna - 256,414 - 244,294
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Net cash provided from (used for)
Financing Activities (4,578) 116,910 (10,203) 126,985
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Effect of exchange rate changes on cash
and cash equivalents (527) (2) (582) (9)
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Net increase (decrease) in cash and cash
equivalents during the period (3,101) 8,134 (7,070) 6,041
Cash and cash equivalents, beginning of
period 46,691 15,410 50,660 17,503
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Cash and cash equivalents, end of period 43,590 23,544 43,590 23,544
==============================================================================================================================
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MAGNA ENTERTAINMENT CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
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[Unaudited]
[United States dollars in thousands]
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September 30, December 31,
2000 1999
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ASSETS
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<S> <C> <C>
Current assets:
Cash and cash equivalents 43,590 50,660
Restricted cash 6,600 7,752
Accounts receivable 26,118 25,887
Prepaid expenses and other 3,926 3,931
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80,234 88,230
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Real estate properties and fixed assets, net 538,171 564,789
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Other assets, net 96,529 100,967
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Deferred income taxes 6,176 6,367
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721,110 760,353
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current liabilities:
Bank indebtedness 93 7,259
Accounts payable and other liabilities 38,675 66,151
Income taxes payable 9,031 7,554
Long-term debt due within one year 12,833 19,119
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60,632 100,083
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Long-term debt 23,664 19,506
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Other long-term liabilities 412 494
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Deferred income taxes 90,237 93,183
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Shareholders' equity:
Capital stock issued and outstanding -
Class A Subordinated Voting Stock 100,299 11,500
Exchangeable Shares 58,408 110,000
Class B Stock 394,094 429,455
Contributed surplus 1,352 -
Retained earnings (deficit) 7,191 (2,431)
Accumulated comprehensive loss (15,179) (1,437)
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546,165 547,087
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721,110 760,353
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