Exhibit 99.1
MAGNA ENTERTAINMENT CORP. 337 Magna Drive
Aurora, Ontario
L4G 7K1
Tel: (905) 726-2462
Fax: (905) 726-7172
PRESS RELEASE
MAGNA ENTERTAINMENT CORP.
ANNOUNCES RESULTS FOR THE FOURTH QUARTER
AND FISCAL YEAR 2000
February 19, 2001, Aurora, Ontario, Canada......Magna Entertainment Corp.
(NASDAQ: MIEC; TSE: MIE.A, MEH) today reported its financial results for the
fourth quarter and fiscal year ended December 31, 2000.
- --------------------------------------------------------------------------------
Fiscal Years Ended Fourth Quarter Ended
December 31, December 31,
2000 1999 2000 1999
---- ---- ---- ----
Revenue $ 413,563 $ 186,860 $ 74,538 $ 43,864
Earnings (Loss)
Before Interest,
Taxes, Depreciation
and Amortization $ 21,829 $ 9,777 $ (9,674) $ (2,556)
Net Income (Loss) $ 441 $ (62) $ (9,181) $ (3,062)
Diluted earnings
(loss) per share $ 0.01 $ 0.00 $ (0.11) $ (0.04)
All amounts are reported in thousands of U.S. dollars, except per share
figures.
"The year 2000 was the Company's second year of operation and our first year as
a public company.
Magna's original decision to enter the racetrack business was based on the
belief that there is a great opportunity to improve the way in which racetracks
operate. There is also an opportunity to improve profitability by implementing
common systems and taking advantage of the economies of scale.
It was always recognized that it would take time to achieve critical mass and to
develop the systems needed to improve operations and profitability.
We believe we will start to see positive results from our acquisition and
consolidation activities as we progress through 2001. As we develop our racing
product in North America, we see tremendous global opportunities.
-2-
Basically, we believe that conducting wagering on horse racing is ideally suited
to become a global business. Horses are admired and loved by people all over the
world. The opportunity exists to take horse racing and wagering into every
living room around the world via satellite, the Internet, interactive
television, and telephone. MEC intends to be a leading participant in electronic
wagering through these media," said Frank Stronach, the Company's Chairman.
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 three of 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.
Effective December 31, 2000, the Company changed its method of accounting for
revenue recognition. Previously the Company recorded its wagering revenue net of
"purses, stakes and awards" and "pari-mutuel wagering taxes". The Company now
recognizes revenue gross of "purses, stakes and awards" and "pari-mutuel
wagering taxes". The costs relating to these amounts are shown as "Purses,
awards and other" in the accompanying income statement. The change in accounting
presentation has been retroactively applied to August 1, 1998.
Revenue for the year ended December 31, 2000 was $413.6 million, earnings before
interest, taxes, depreciation and amortization were $21.8 million, net income
was $0.4 million and diluted earnings per share were $0.01. Revenue for the
fourth quarter ended December 31, 2000 was $74.5 million, loss before interest,
taxes, depreciation and amortization was $9.7 million, net loss was $9.2 million
and diluted loss per share was $0.11.
The financial results for the year ended December 31, 2000 reflect the full
year's live racing and simulcast operations for all of the Company's racetracks
except for Great Lakes Downs and Bay Meadows, which were acquired on February 29
and November 17, 2000, respectively. For the year ended December 31, 1999 the
financial results reflect the full year's operations of Santa Anita, the
operations of Gulfstream from September 1, 1999, the date of acquisition, the
operations of Thistledown and Remington racetracks from November 12, 1999, their
date of acquisition, and the operations of Golden Gate from December 10, 1999,
the date of acquisition.
The financial results for the fourth quarter of 2000 reflect the full quarter's
live racing and simulcast operations for all of the Company's racetracks except
for Bay Meadows, which was acquired on November 17, 2000. The financial results
for the fourth quarter of 1999 reflect the full quarter's operations of Santa
Anita and Gulfstream racetracks, the operations of Thistledown and Remington
racetracks from November 12, 1999 and the operations of Golden Gate from
December 10, 1999.
During fiscal 2000, cash generated from operations was $7.7 million, before
changes in non-cash working capital. Total investment activities during the
year were $34.4 million, including $25.9 million on the acquisitions of Bay
Meadows and Great Lakes Downs, $54.0 million on real estate and fixed asset
additions, partially offset by $43.8 million of proceeds from the disposal of
real estate. In addition, approximately $32.1 million of net long-term bank debt
was incurred during the year.
The previously announced acquisition from Ladbroke Racing Corp. and one of its
subsidiaries of their account wagering operations, The Meadows harness track,
four off-track betting facilities ("OTB's") and an interest in The Racing
Network is expected to close in the early Spring, subject to regulatory
approval. This strategic acquisition will significantly advance the Company's
electronic media wagering strategy.
"The seasonality of MEC's businesses, combined with the fact that most of the
Company's growth results from acquisitions, makes comparison from year to year
and quarter to quarter difficult during this building phase.
-3-
During this period, we have found that in some instances, our operating costs
were higher than expected. For example, in 2000, we incurred significant costs
in restructuring our corporate office. The cost of this restructuring and other
one-time costs incurred during 2000 amounted to approximately $7.5 million.
We have and will continue to take steps to reduce costs and increase revenue at
each of our racing operations.
The performance improvement plans that we have initiated at our existing
facilities, together with the impact of a full year of operations at the
racetracks acquired during 2000 and the addition of the businesses to be
acquired from Ladbroke, will result in earnings growth in 2001 and beyond.
The Company also expects the sale of a number of non-core real estate holdings
to be completed during 2001. Based on recent market conditions, it is
anticipated that the proceeds from these sales will, in the aggregate, exceed
the book value of such properties", said Jim McAlpine, President and CEO.
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 include Santa Anita Park,
Golden Gate Fields and Bay Meadows Racecourse in California, Gulfstream Park in
Florida, Remington Park in Oklahoma, Thistledown in Ohio and Great Lakes Downs
in Michigan. As a complement to its existing business, the Company is exploring
further development of its electronic media wagering operations, including
interactive television, expanded telephone account and Internet-based wagering,
as well as certain leisure and retail-based real estate projects.
The Company also announced the appointment of Jim McAlpine to its Board of
Directors to fill the vacancy created by the resignation of Mark Feldman in
January 2001.
The Company will hold a conference call to discuss its fourth quarter and year
end results on Tuesday, February 20, 2001 at 11:00 a.m. New York time (E.S.T.).
The number to use for this call is 1-877-871-4054. Please call 10 minutes prior
to the conference call. The overseas number to call is 1-416-620-2404. The
conference call will be chaired by Graham Orr, Executive Vice-President and
Chief Financial Officer.
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
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
-4-
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.
For more information contact:
Graham Orr
Executive Vice President
& Chief Financial Officer
Magna Entertainment Corp.
337 Magna Drive
Aurora, ON L4G 7K1
Tel: 905-726-7099
-5-
MAGNA ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
- -------------------------------------------------------------------------------------------------------------
[Unaudited]
[United States dollars in thousands,
except per share figures]
- -------------------------------------------------------------------------------------------------------------
Fiscal years ended Three months ended
December 31, December 31, December 31, December 31,
2000 1999 2000 1999
- -------------------------------------------------------------------------------------------------------------
Revenue
Racetrack
Wagering, gross 301,288 133,924 40,199 21,893
Non-wagering 53,961 31,022 14,909 12,224
Real estate
Sale of real estate 37,630 2,544 12,595 2,544
Rental and other 20,684 19,370 6,835 7,203
- -------------------------------------------------------------------------------------------------------------
413,563 186,860 74,538 43,864
- -------------------------------------------------------------------------------------------------------------
Costs and expenses
Racetrack
Purses, awards and other 190,043 85,520 25,178 13,645
Operating costs 128,612 63,302 31,591 21,003
General and administrative 18,117 5,987 7,098 2,209
Real estate
Cost of real estate sold 30,656 1,916 11,672 1,916
Operating costs 18,928 18,071 7,278 6,874
General and administrative 1,133 1,833 412 534
Predevelopment and other costs 4,245 454 983 239
Depreciation and amortization 20,061 7,924 5,317 3,248
Interest expense 3,263 1,666 1,313 407
Interest income (3,048) (2,586) (892) (1,591)
- -------------------------------------------------------------------------------------------------------------
412,010 184,087 89,950 48,484
- -------------------------------------------------------------------------------------------------------------
(Loss) income before income taxes 1,553 2,773 (15,412) (4,620)
Income tax (benefit) provision 1,112 2,835 (6,231) (1,558)
- -------------------------------------------------------------------------------------------------------------
Net (loss) income 441 (62) (9,181) (3,062)
Other comprehensive income (loss):
Foreign currency translation (8,938) (7,493) 4,804 (3,585)
adjustment
- -------------------------------------------------------------------------------------------------------------
Comprehensive loss (8,497) (7,555) (4,377) (6,647)
=============================================================================================================
(Loss) earnings per share of Class A
Subordinate Voting Stock, Class B
Stock or Exchangeable Share:
Basic $0.01 $0.00 $(0.11) $(0.04)
Diluted $0.01 $0.00 $(0.11) $(0.04)
=============================================================================================================
Average number of shares of Class A
Subordinate Voting Stock, Class B
Stock and Exchangeable Shares [in
thousands]: 80,422 78,686 80,466 78,686
Basic 80,424 78,686 80,466 78,686
Diluted
=============================================================================================================
-6-
MAGNA ENTERTAINMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------------------------------------------
[Unaudited]
[United States dollars in thousands]
- --------------------------------------------------------------------------------------------------------------------
Twelve months ended Three months ended
December 31, December 31, December 31, December 31,
2000 1999 2000 1999
- --------------------------------------------------------------------------------------------------------------------
Cash provided from (used for):
OPERATING ACTIVITIES
Net income 441 (62) (9,181) (3,062)
Items not involving current cash flows 7,285 6,001 643 608
- --------------------------------------------------------------------------------------------------------------------
7,726 5,939 (8,538) (2,454)
Changes in non-cash working capital (27,911) 9,287 1,096 16,436
Net cash provided from (used for)
Operating Activities (20,185) 15,226 (7,442) 13,982
- --------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Acquisition of business (25,887) (160,812) (24,117) (73,233)
Real estate property and fixed asset (54,028) (56,447) (39,722) (21,847)
additions 37,630 2,544 12,595 2,544
Proceeds on sale of real estate 6,147 - - -
Proceeds on real estate sold to Magna 1,761 (683) 409 (683)
Other assets disposals (additions)
- --------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for)
Investing Activities (34,377) (215,398) (50,835) (93,219)
- --------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Increase (decrease) in bank indebtedness 759 (2,722) 7,518 (233)
Increase of (repayment of) long-term debt 32,147 (3,278) 38,789 (80)
Issue of Class A Subordinate Stock 1,846 - - -
Contributed capital, net of tax 1,352 - - -
Decrease in note payable due from Magna - - - 111,622
Net contribution by Magna - 244,458 - 164
- --------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for)
Financing Activities 36,104 238,458 46,307 111,473
- --------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash
and cash equivalents (226) (68) 356 (59)
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents during the period (18,684) 38,218 (11,614) 32,177
Cash and cash equivalents, beginning of
period 50,660 12,442 43,590 18,483
- --------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period 31,976 50,660 31,976 50,660
====================================================================================================================
-7-
MAGNA ENTERTAINMENT CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
- ----------------------------------------------------------------------------------------------------------------
[Unaudited]
[United States dollars in thousands]
- ----------------------------------------------------------------------------------------------------------------
December 31, December 31,
2000 1999
- ----------------------------------------------------------------------------------------------------------------
ASSETS
- ----------------------------------------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents 31,976 50,660
Restricted cash 17,247 7,752
Accounts receivable 33,856 25,887
Prepaid expenses and other 7,984 3,931
- ----------------------------------------------------------------------------------------------------------------
91,063 88,230
- ----------------------------------------------------------------------------------------------------------------
Real estate properties and fixed assets, net 568,265 564,789
- ----------------------------------------------------------------------------------------------------------------
Other assets, net 117,561 100,967
- ----------------------------------------------------------------------------------------------------------------
Deferred income taxes 6,175 6,367
- ----------------------------------------------------------------------------------------------------------------
783,064 760,353
================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------------------
Current liabilities:
Bank indebtedness 7,609 7,259
Accounts payable and other liabilities 69,090 66,151
Income taxes payable 1,468 7,554
Long-term debt due within one year 12,754 19,119
- ----------------------------------------------------------------------------------------------------------------
90,921 100,083
- ----------------------------------------------------------------------------------------------------------------
Long-term debt 63,343 19,506
- ----------------------------------------------------------------------------------------------------------------
Other long-term liabilities 234 494
- ----------------------------------------------------------------------------------------------------------------
Deferred income taxes 86,778 93,183
- ----------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Capital stock issued and outstanding -
Class A Subordinated Voting Stock 100,770 11,500
Exchangeable Shares 57,937 110,000
Class B Stock 394,094 429,455
Contributed surplus 1,352 -
Retained earnings (deficit) (1,990) (2,431)
Accumulated comprehensive loss (10,375) (1,437)
- ----------------------------------------------------------------------------------------------------------------
541,788 547,087
- ----------------------------------------------------------------------------------------------------------------
783,064 760,353
================================================================================================================