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) June 6, 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)
0-28003 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 June 6, 2000, the Registrant distributed its First Quarter Report - 2000 for
the period ended March 31, 2000 to its registered shareholders. The information
contained in the Registrant's First Quarter Report was included in the Report on
Form 10-Q filed by the Registrant with the Securities and Exchange Commission on
May 15, 2000.
The printed copy of the First Quarter Report to shareholders is filed as Exhibit
1 and is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit 1 Copy of Registrant's First Quarter Report - 2000 for the period
ended March 31, 2000
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: June 6, 2000 by: /s/ J. Brian Colburn
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J. Brian Colburn, Secretary
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION OF EXHIBIT
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1 Registrant's First Quarter Report - 2000 for the
period ended March 31, 2000
EXHIBIT 1
To the Shareholders of Magna Entertainment Corp.
(Unaudited)
(United States Dollars in millions, except per share figures)
First Quarter Ended
March 31,
2000 1999
Revenue $80.7 $39.9
Income Before Income Taxes $21.2 $16.2
Net Income $12.0 $ 9.3
Fully diluted earnings per share $0.15 $0.12
Highlights
During 1999, Magna International Inc. ("Magna") reorganized its non-
automotive assets to create Magna Entertainment Corp., the largest pari-mutuel
gaming company in North America with approximately twenty-three percent (23%) of
total wagering. With an initial capitalization of approximately $550 million,
and approximately $40 million in scheduled, long-term debt, the Company has one
of the strongest financial positions in the industry.
During the quarter, all regulatory approvals were obtained from the U.S.
and Canadian securities commissions permitting Magna to proceed with its
previously announced plans to transform the Company into a public company traded
on the Toronto Stock Exchange and NASDAQ. On March 10, 2000 Magna distributed
approximately 20% of the Company's shares through a special stock dividend of
Class A Subordinate Voting Stock or Exchangeable Shares of MEC Holdings (Canada)
Inc., which are exchangeable into Class A Subordinate Voting, to Magna's
shareholders. The dividend record date was February 25, 2000.
The Company recruited a talented and experienced management team to
complement its highly qualified board of directors. Annually, the Company offers
virtual year round racing with approximately 330 days of live racing, although
disproportionate revenues occur in the first two quarters of the year from the
Company's dominant racetracks in California and Florida. The Company controls
premier markets and products owning and operating three of the top ten tracks in
wagering handle in the U.S.
The Company has completed an exciting ninety (90) days of live racing
through March. In April, Santa Anita Park, the leading track in total handle
generated in the United States, completed its Winter race meet. Despite
unusually high rainfall in February, Santa Anita increased handle, or total
wagering, by four percent (4%) over 1999 for a new pari-mutuel track record of
$1.04 billion.
The agreement with the owner of Hialeah Park to conduct its Spring meet at
Gulfstream Park, and the equalization of tax structures for racetracks by the
2000 Florida legislature, positions the Company's Florida operations to achieve
an improvement in profitability.
Company Results
Revenue, net of purses, for the first quarter ended March 31, 2000 was
$80.7 million, income before income taxes was $21.2 million, net income was
$12.0 million and fully diluted earnings per share were $0.15.
The financial results for first quarter 2000 reflect the full quarter's
operations for all of the Company's racetracks, other than Great Lakes Downs.
The Company acquired Great Lakes Downs in Muskegon, Michigan during the quarter.
The purchase price was satisfied by the issuance of 267,416 shares of Class A
Subordinate Voting Stock of the Company. Great Lakes Downs is the newest pari-
mutuel gaming venue in Michigan, having commenced its first year of operations
in 1999. The financial results for the first quarter 1999 reflect only the
operations of the Santa Anita Park racetrack as it was purchased in late 1998.
Due to the concentration of live race dates during the first quarter, the
Company's EBITDA is seasonal. Historically, 80% of the EBITDA generated by its
racetracks occurs during the first quarter. The Company anticipates that this
trend will continue for the near future.
During the first quarter of 2000, cash generated from operations was $7.6
million. Total investment activities used a net $3.4 million, including the
acquisition of Great Lakes Downs for $1.8 million and fixed asset additions of
$2.4 million. Also during the period, bank indebtedness and long-term debt
totaling $7.5 million was repaid.
The Company has entered into real estate property sales agreements
providing anticipated proceeds of approximately $14 million in the second and
third quarters. In addition, during the quarter, the Company completed the
renegotiation of its existing $10.0 million revolving operating line of credit
and a new $63 million term loan with Wells Fargo Bank. The credit facility is
secured by one of the Company's racetracks although the funds are available for
corporate use.
Outlook
The Company's operating focus for the balance of this year will be on
implementing best practices - cost consolidation and revenue synergies - for its
racing properties. The Company's financing focus will be on increasing its
existing high liquidity to fund future growth and improve earnings assets. This
will be accomplished through additional credit facilities, and the continued
disposition or other form of monetization of its real estate portfolio.
Strategically, the Company is committed to the development of a long-term plan
to participate in the technological and regulatory expansion of simulcast and
off-track wagering. This strategy will permit the Company to exploit its premier
racing content with new products and markets on a global basis.
Jerry D. Campbell Frank Stronach
President & Chief Executive Officer Chairman of the Board
MAGNA ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
[Unaudited]
[United States dollars in thousands,
except per share figures]
Three months ended
March 31, March 31,
2000 1999
Revenue
Racetrack
Wagering, net of purses 59,084 27,237
Non-wagering 17,958 9,228
Real estate 3,700 3,442
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80,742 39,907
Costs and expenses
Racetrack
Operating costs 46,509 17,653
General and administrative 3,318 954
Real estate
Operating costs 2,971 2,976
General and administrative 239 228
Predevelopment and other costs 1,271 -
Depreciation and amortization 5,267 1,527
Interest expense 210 329
Interest income (201) -
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59,584 23,667
Income before income taxes 21,158 16,240
Income tax provision 9,178 6,915
Net income 11,980 9,325
Other comprehensive loss:
Foreign currency translation adjustment 4,850 5,045
Comprehensive income 7,130 4,280
Earnings per share of Class A Subordinate Voting
Stock, Class B Stock or Exchangeable Share:
Basic $0.15 $0.12
Fully diluted $0.15 $0.12
Average number of shares of Class A Subordinate
Voting Stock, Class B Stock and Exchangeable
Shares[in thousands]:
Basic 80,289 78,535
Fully diluted 80,289 78,535
MAGNA ENTERTAINMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
[Unaudited]
[United States dollars in thousands]
Three months ended
March 31, March 31,
2000 1999
Cash provided from (used for):
OPERATING ACTIVITIES
Net income 11,980 9,325
Items not involving current cash flows 4,998 1,893
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16,978 11,218
Changes in non-cash items related to operations (9,387) 3,210
Net cash provided by Operating Activities 7,591 14,428
INVESTMENT ACTIVITIES
Acquisition of business (1,770) -
Real estate property and fixed asset additions (2,386) (1,810)
Disposal of other assets 700 -
Net cash used for Investing Activities (3,456) (1,810)
FINANCING ACTIVITIES
Increase (decrease) in bank indebtedness (3,554) 10,675
Repayment of long-term debt (3,910) (44)
Issue of Class A Subordinate Stock 1,846 -
Increase in note payable to Magna - 477
Net contribution by Magna - (12,120)
Net cash used for Financing Activities (5,618) (1,012)
Effect of exchange rate changes on cash
and cash equivalents (69) (6)
Net increase (decrease) in cash and cash
equivalents during the period (1,552) 11,600
Cash and cash equivalents, beginning of period 58,412 17,503
Cash and cash equivalents, end of period 56,860 29,103
MAGNA ENTERTAINMENT CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
[Unaudited]
[United States dollars in thousands]
March 31, December 31,
2000 1999
ASSETS
Current assets:
Cash and cash equivalents 56,860 58,412
Accounts receivable 36,214 25,887
Prepaid expenses and other 5,505 3,931
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98,579 88,230
Real estate properties and fixed assets, net 567,595 564,789
Other assets, net 100,229 100,967
Deferred income taxes 6,367 6,367
772,770 760,353
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank indebtedness 3,591 7,259
Accounts payable and other liabilities 68,239 66,151
Income taxes payable 11,490 7,554
Long-term debt due within one year 15,938 19,119
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99,258 100,083
Long-term debt 24,349 19,506
Other long-term liabilities 476 494
Deferred income taxes 92,624 93,183
Shareholders' equity:
Capital stock issued and outstanding -
Class A Subordinated Voting Stock 61,700 11,500
Exchangeable Shares 97,008 110,000
Class B Stock 394,093 429,455
Retained Earnings (Deficit) 9,549 (2,431)
Accumulated comprehensive loss (6,287) (1,437)
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556,063 547,087
772,770 760,353
Magna Entertainment Corp.
Board Of Directors
Frank Stronach
Chairman of the Board and Chairman of Magna International Inc
Jerry D. Campbell
President & Chief Executive Officer
The Honorable William G. Davis
Counsel, Torys
Peter M. George
Vice-Chairman & Chief Executive Officer of Hilton Group plc
Joseph W. Harper
President & General Manager of Del Mar Thoroughbred Club
J. Terrence Lanni
Chairman of the Board & Chairman of the Executive Committee of MGM Grand Inc.
The Honorable Edward C. Lumley
Vice-Chairman, BMO Nesbitt Burns Inc.
Earle I. Mack
Senior Partner & Chief Financial Officer of The Mack Company
James Nicol
Vice-Chairman and Vice-Chairman of Magna International Inc
Gino Roncelli
Chief Executive Officer of Roncelli Plastics Inc.
Andrew Stronach
Vice-President, Corporate Development
Ronald J. Volkman
Chairman of the Board and President of ATX, Inc.
John C. York II
Executive Vice-President and Senior Vice-President, Racing Operations of The
Edward J. DeBartolo Corporation
SHAREHOLDER INFORMATION
Office Locations for Magna Entertainment Corp. and its Operating Groups
Magna Entertainment Corp.
285 W. Huntington Drive
Arcadia, California, USA 91007
Fontana Sports
Magna-Strasse 1
A-2522 Oberwaltersdorf, Austria
Telephone: 011-43-2253-600-0
Golden Gate Fields
1100 Eastshore Highway
Albany, California, USA 94706
Telephone: 510-559-7300
Great Lakes Downs
4800 Harvey Street
Muskegon, Michigan, USA 49444
Telephone: 231-799-2400
Gulfstream Park
901 South Federal Highway
Hallandale, Florida, USA 33009
Telephone: 800-771-8873
Remington Park
One Remington Place
Oklahoma City, Oklahoma, USA 73111
Telephone: 405-424-1000
Santa Anita Park
285 W. Huntington Drive
Arcadia, California, USA 91007
Telephone: 626-574-7223
Thistledown
21501 Emery Road
North Randall, Ohio, USA 44128
Telephone: 216-662-8600
Stock Listings
Magna Entertainment Corp.
Class A -
Nasdaq National Market (MIEC)
The Toronto Stock Exchange (MIE.A)
Exchangeable Shares -
The Toronto Stock Exchange (MEH)
Transfer Agents and Registrars
Canada - Class A and Exchangeable Securities
Montreal Trust Company of Canada
Toronto, Ontario, Canada
United States - Class A
American Securities Transfer & Trust Inc.
Denver, Colorado, USA
Report to the Shareholders for the Year Ended December 31, 1999
Copies of the Financial Statements for the Year Ended December 31, 1999 are
available through the Internet on the Electronic Data Gathering Analysis and
Retrieval (EDGAR) system, which can be accessed at www.sec.gov/edgarhp.htm for
U.S. shareholders, and on the System for Electronic Document Analysis and
Retrieval (SEDAR), which can be accessed at www.sedar.com for Canadian
shareholders.