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MEC Magna Entertainment Corp.
337 Magna Drive
Aurora, Ontario
Canada L4G 7K1
Tel (905) 726-2462
Fax (905) 726-7172
EXHIBIT 99
PRESS RELEASE
MAGNA ENTERTAINMENT CORP.
ANNOUNCES SIGNIFICANTLY IMPROVED RESULTS
FOR THE FIRST QUARTER 2001
May 2, 2001, Aurora, Ontario, Canada......Magna Entertainment Corp. (NASDAQ:
MIEC; TSE: MIE.A, MEH) today reported its financial results for the first
quarter ended March 31, 2001.
----------------------------------------- ------------------------------------------
Three Months Ended/(1)/
March 31,
2001 2000
---- ----
Revenue /(2)/ $ 244,526 $ 186,468
Earnings Before Interest, Taxes,
Depreciation and Amortization (EBITDA) $ 44,622 $ 26,434
Net Income $ 22,468 $ 11,980
Diluted earnings per share $ 0.28 $ 0.15
----------------------------------------- ---------------------- -------------------
(1) All amounts are reported in thousands of U.S. dollars,
except per share figures.
(2) Effective October 1, 2000, the Company changed its method of
accounting for revenue recognition. The change in accounting
presentation has been retroactively applied.
Jim McAlpine, President and Chief Executive Officer of the Company, said that
"the improvement in MEC's performance in the first quarter of 2001 is a solid
endorsement of our consolidation strategy. EBITDA from racetrack operations grew
by 24%. We expect to see continued improvement in operating and financial
performance in the remainder of 2001, compared to the prior year, as we achieve
greater economies of scale, realize the value of improved distribution of our
simulcast signals and benefit from the sale of non-core real estate".
The Company's horse racetrack business is seasonal in nature. Generally, the
Company's horse racetrack revenues are greater in the first quarter of the
calendar year because three of the Company's premier racetracks, Santa Anita
Park, Gulfstream Park and Golden Gate Fields run live meets principally during
the first quarter of the year. This seasonality can be expected to cause
significant quarterly fluctuations in revenue, earnings and diluted earnings per
share. This will change as the full impact of our acquisition strategy is
realized. Accordingly, the seasonal fluctuations are expected to decrease as our
operations mature.
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Revenue for the first quarter ended March 31, 2001 increased 31% to $244.5
million, EBITDA increased 69% to $44.6 million, net income increased 88% to
$22.5 million and diluted earnings per share were $0.28, representing an
increase of 87%.
The financial results for the first quarter of 2001 reflect the full quarter's
operations for all of the Company's racetracks and related operations other than
the businesses acquired from Ladbroke on April 5, 2001. Revenues from racetrack
operations increased 18% to $214.9 million and EBITDA increased 24% to $33.7
million. The comparative results include only one month of operations of Great
Lakes Downs, which was purchased in late February 2000 and do not reflect the
operations of Bay Meadows Racecourse as it was purchased in November 2000.
In line with previous expectations, the sale of non-core real estate holdings
continued in the first quarter of 2001. Sales aggregating $26.2 million resulted
in EBITDA of $12.1 million. There were no real estate sales in the first quarter
of 2000. The Company expects further sales of non-core real estate throughout
the remainder of 2001.
During the first quarter of 2001, cash generated from operations before changes
in non-cash working capital was $13.0 million. Total investment activities
generated net cash of $2.4 million principally from $6.8 million cash proceeds
on the sale of real estate less real estate property and fixed asset additions
of $4.2 million. Also, bank indebtedness of $7.6 million was repaid and
long-term debt increased by $9.9 million during the quarter.
During the balance of fiscal 2001, the Company will continue to focus on
earnings growth through the implementation, throughout its operations, of best
practices, common systems, utilization of its corporate purchasing power to
reduce costs, improved production and distribution of its simulcast program, the
additions of Bay Meadows and the strategic businesses acquired from Ladbroke,
and the sale of non-core real estate holdings. These activities have already
begun to take effect and will pick up momentum as we move through 2001.
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, Great Lakes Downs in
Michigan and The Meadows in Pennsylvania. 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 real estate projects on the land
surrounding certain of its racetracks.
The Company will hold a conference call to discuss the first quarter results on
Thursday, May 3, 2001 at 9:00 a.m. New York time. The number to use for this
call is 1-888-434-1242. Please call 10 minutes prior to the conference call. The
overseas number to call is 1-416-620-2415. The conference call will be chaired
by Jim McAlpine, President and Chief Executive 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
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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 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
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MAGNA ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
- --------------------------------------------------------------------------------
[Unaudited]
[U.S. dollars in thousands,
except per share figures]
- --------------------------------------------------------------------------------
Three months ended
March 31, March 31,
2001 2000
- --------------------------------------------------------------- -------------- --------------
(restated,
see note 2)
Revenue
Racetrack 192,326 164,810
Gross wagering 22,589 17,958
Non-wagering
Real estate
Sale of real estate 26,151 -
Rental and other 3,460 3,700
- --------------------------------------------------------------- -------------- --------------
244,526 186,468
- --------------------------------------------------------------- -------------- --------------
Costs and expenses
Racetrack
Purses, awards and other 122,232 105,726
Operating costs 50,976 46,509
General and administrative 7,962 3,318
Real estate
Cost of real estate sold 14,093 -
Operating costs 2,688 2,971
General and administrative 245 239
Predevelopment and other costs 1,708 1,271
Depreciation and amortization 5,354 5,267
Interest expense 2,197 738
Interest income (797) (729)
- --------------------------------------------------------------- -------------- --------------
206,658 165,310
- --------------------------------------------------------------- -------------- --------------
Income before income taxes 37,868 21,158
Income tax provision 15,400 9,178
- --------------------------------------------------------------- -------------- --------------
Net income 22,468 11,980
Other comprehensive loss:
Foreign currency translation adjustment 8,854 4,850
- --------------------------------------------------------------- -------------- --------------
Comprehensive income 13,614 7,130
=============================================================== ============== ==============
Earnings per share of Class A Subordinate Voting
Stock, Class B Stock or Exchangeable Share:
Basic $ 0.28 $ 0.15
Diluted $ 0.28 $ 0.15
=============================================================== ============== ==============
Average number of shares of Class A Subordinate Voting
Stock, Class B Stock and Exchangeable
Shares outstanding during the period [in thousands]:
Basic 80,472 80,289
Diluted 80,472 80,289
=============================================================== ============== ==============
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Notes:
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1. In the opinion of management, the unaudited interim consolidated financial
statements reflect all adjustments, which consist only of normal and
recurring adjustments, necessary to present fairly the financial position
at March 31, 2001 and the results of operations and cash flows for the
three month period ended March 31, 2001.
2. Effective October 1, 2000, the Company changed its method of accounting for
revenue recognition in accordance with Staff Accounting Bulletin (SAB) No.
101, Revenue Recognition in Financial Statements and guidance provided by
EITF 99-19 Recording Revenue Gross as a Principal versus Net as an Agent.
Previously the Company recorded its wagering revenue net of "purses, stakes
and awards" and "pari-mutuel wagering taxes". Under the new accounting
method adopted during the fourth quarter of 2000, 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. In accordance with
SAB 101 guidance, all prior period income statements have been
retroactively reclassified to comply with the new accounting method.
3. The following table presents the number of Class A Subordinate Voting
Stock, Class B Stock and Exchangeable Shares outstanding at March 31, 2001
(in thousands):
Class A Subordinate Voting Stock 14,272
Class B Stock 58,466
Exchangeable Shares 7,736
------
80,474
======
4. The Company's segmented results of operations are as follows (in
thousands):
Three months ended March 31, 2001
Racetrack Real Estate
Operations Operations Total
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Revenue $ 214,915 $ 29,611 $ 244,526
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Income before income taxes $ 25,875 $ 11,993 $ 37,868
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Real estate properties and fixed asset
net additions (disposals) $ 1,820 $ (11,709) $ (9,889)
- -------------------------------------------------------------------------------------------------
Three months ended March 31, 2000
Racetrack Real Estate
Operations Operations Total
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Revenue $ 182,768 $ 3,700 $ 186,468
- -------------------------------------------------------------------------------------------------
Income (loss) before income taxes $ 21,499 $ (341) $ 21,158
- -------------------------------------------------------------------------------------------------
Real estate properties and fixed asset
net additions $ 1,564 $ 822 $ 2,386
- -------------------------------------------------------------------------------------------------
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MAGNA ENTERTAINMENT CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
[Unaudited]
[U.S. dollars in thousands]
- ----------------------------------------------------------------------------------------------------------------------------
March 31, December 31,
2001 2000
- ----------------------------------------------------------------------------------------------------------------------------
ASSETS
- ----------------------------------------------------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents 57,529 31,976
Restricted cash 27,538 13,461
Accounts receivable 62,030 33,399
Prepaid expenses and other 9,124 7,984
- ----------------------------------------------------------------------------------------------------------------------------
156,221 86,820
- ----------------------------------------------------------------------------------------------------------------------------
Real estate properties and fixed assets, net 546,720 568,265
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Other assets, net 115,962 117,561
- ----------------------------------------------------------------------------------------------------------------------------
Future tax assets 8,600 8,393
- ----------------------------------------------------------------------------------------------------------------------------
827,503 781,039
============================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Bank indebtedness - 7,609
Accounts payable and other liabilities 83,418 64,847
Income taxes payable 16,434 1,111
Long-term debt due within one year 12,538 12,754
- ----------------------------------------------------------------------------------------------------------------------------
112,390 86,321
- ----------------------------------------------------------------------------------------------------------------------------
Long-term debt 72,795 63,343
- ----------------------------------------------------------------------------------------------------------------------------
Other long-term liabilities 257 234
- ----------------------------------------------------------------------------------------------------------------------------
Future tax liabilities 86,619 89,353
- ----------------------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Capital stock issued and outstanding -
Class A Subordinated Voting Stock 101,337 100,770
Exchangeable Shares 57,410 57,937
Class B Stock 394,094 394,094
Contributed surplus 1,352 1,352
Retained earnings (deficit) 20,478 (1,990)
Accumulated comprehensive loss (19,229) (10,375)
- ----------------------------------------------------------------------------------------------------------------------------
555,442 541,788
- ----------------------------------------------------------------------------------------------------------------------------
827,503 781,039
============================================================================================================================
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Notes:
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1. In the opinion of management, the unaudited interim consolidated financial
statements reflect all adjustments, which consist only of normal and
recurring adjustments, necessary to present fairly the financial position
at March 31, 2001 and the results of operations and cash flows for the
three month period ended March 31, 2001.
2. Effective October 1, 2000, the Company changed its method of accounting for
revenue recognition in accordance with Staff Accounting Bulletin (SAB) No.
101, Revenue Recognition in Financial Statements and guidance provided by
EITF 99-19 Recording Revenue Gross as a Principal versus Net as an Agent.
Previously the Company recorded its wagering revenue net of "purses, stakes
and awards" and "pari-mutuel wagering taxes". Under the new accounting
method adopted during the fourth quarter of 2000, 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. In accordance with
SAB 101 guidance, all prior period income statements have been
retroactively reclassified to comply with the new accounting method.
3. The following table presents the number of Class A Subordinate Voting
Stock, Class B Stock and Exchangeable Shares outstanding at March 31, 2001
(in thousands):
Class A Subordinate Voting Stock 14,272
Class B Stock 58,466
Exchangeable Shares 7,736
-------
80,474
=======
4. The Company's segmented results of operations are as follows (in thousands):
Three months ended March 31, 2001
Racetrack Real Estate
Operations Operations Total
- -------------------------------------------------------------------------------------------------
Revenue $ 214,915 $ 29,611 $ 244,526
- -------------------------------------------------------------------------------------------------
Income before income taxes $ 25,875 $ 11,993 $ 37,868
- -------------------------------------------------------------------------------------------------
Real estate properties and fixed asset
net additions (disposals) $ 1,820 $ (11,709) $ (9,889)
- -------------------------------------------------------------------------------------------------
Three months ended March 31, 2000
Racetrack Real Estate
Operations Operations Total
- -------------------------------------------------------------------------------------------------
Revenue $ 182,768 $ 3,700 $ 186,468
- -------------------------------------------------------------------------------------------------
Income (loss) before income taxes $ 21,499 $ (341) $ 21,158
- -------------------------------------------------------------------------------------------------
Real estate properties and fixed asset
net additions $ 1,564 $ 822 $ 2,386
- -------------------------------------------------------------------------------------------------
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5. On April 5, 2001 the Company completed the previously announced agreement
with Ladbroke Racing Corp. and one of its subsidiaries (collectively "LRC")
to acquire LRC's account wagering operations, The Meadows harness track,
four off-track betting facilities and an 18.3% interest in The Racing
Network. In accordance with the terms of the agreement, one-half of the $53
million purchase price was paid in cash, one-quarter was satisfied by the
issuance of 3,178,297 shares of Class A Subordinate Voting Stock of the
Company and one-quarter was satisfied through the issuance of a promissory
note which is payable in two equal installments on the first and second
anniversaries of closing, and bears interest at 6% per annum.