SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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): February 11, 2002
MAGNA ENTERTAINMENT CORP.
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(Exact Name of Registrant as Specified in its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
000-30578 98-0208374
- --------------------------------------- -----------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
337 Magna Drive, Aurora, Ontario, Canada L4G 7K1
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(Address of Principal Executive Offices) (Zip Code)
(905) 726-2462
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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 AND REGULATION FD DISCLOSURE
On February 11, 2002, the Registrant issued a press release in which it
announced its unaudited financial results for the fourth quarter and year ended
December 31, 2001.
The full text of the press release issued by the Registrant is attached as
Exhibit 99 to this Current Report on Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
Exhibit 99 Copy of Registrant's press release dated February 11, 2002.
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: February 14, 2002 by: /s/Gary M. Cohn
----------------------------
Gary M. Cohn, Secretary
3
MEC Magna Entertainment Corp.
- ---
337 Magna Drive
Aurora, Ontario
Canada L4G 7K1
Tel (905) 726-2462
Fax (905) 726-2585
EXHIBIT 99
PRESS RELEASE
MAGNA ENTERTAINMENT CORP.
ANNOUNCES RESULTS FOR THE FOURTH QUARTER
AND YEAR ENDED DECEMBER 31, 2001
February 11, 2002, Aurora, Ontario, Canada......Magna Entertainment Corp.
("MEC") (NASDAQ: MIEC; TSE: MIE.A, MEH) today reported its financial results for
the fourth quarter and year ended December 31, 2001.
- --------------------------------------------------------------------------------------------------
Year Ended Three Months Ended
December 31, December 31,
2001 2000 2001 2000
---- ---- ---- ----
Revenue $519,061 $413,563 $95,511 $ 74,538
Earnings (loss) before interest, taxes,
depreciation and amortization ("EBITDA") $ 51,689 $ 21,829 $(1,127) $ (9,674)
EBITDA before gains on the sale of real estate $ 31,260 $ 14,855 $(4,467) $(10,597)
Net income (loss) $ 13,464 $ 441 $(5,014) $ (9,181)
Diluted earnings (loss) per share $ 0.16 $ 0.01 $ (0.06) $ (0.11)
All amounts are reported in thousands of U.S. dollars, except per share figures.
- --------------------------------------------------------------------------------------------------
In announcing these results, Jim McAlpine, President and Chief Executive Officer
of MEC, remarked: "We are pleased with our improved operating and financial
performance. Net income for the quarter and the full year improved $4.2 million
and $13.0 million, respectively. During the fourth quarter, we continued to
expand our account wagering operations culminating in the re-branding of our
national account wagering service as XpressBet and the launch of our new
Internet account wagering platform (www.xpressbet.com) in January 2002. With an
XpressBet account, our customers can now wager by telephone and over the
Internet on horse racing in North America, where permitted by law. In January
2002, XpressBet was granted a license to conduct account wagering in the State
of California. In February, we entered into a joint venture that will telecast
horse races on a private satellite horse racing service called Racetrack
Television Network ("RTN"). Coupled with XpressBet, RTN will make it much easier
for our customers to enjoy the thrill of horseracing from home or on the road.
We expect that 2002 will see further improvements in the operating and financial
performance of the
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4
racetrack segment of our business through the ongoing integration of our
strategic acquisitions and growth in our account wagering operations. To a
lesser extent, we will also continue to benefit from the sale of our remaining
non-core real estate."
Our racetracks operate for prescribed periods each year. As a result, our
racetrack revenues and operating results for any quarter will not be indicative
of our revenues and operating results for the year. We expect that these
seasonal fluctuations will reduce over time as the full impact of our
acquisition and account wagering initiatives is realized.
Our financial results for the fourth quarter of 2001 reflect the full quarter's
operations for all of the Company's racetracks and related operations. The
comparative results for the fourth quarter of 2000 do not reflect the live race
meet of Bay Meadows, or the operations of MEC Pennsylvania or Portland Meadows,
which were acquired in November 2000, April 2001 and commenced activity in July
2001, respectively.
Revenue for the year and fourth quarter of 2001 increased 25.5% to $519.1
million and 28.1% to $95.5 million, respectively, over the prior year. The
higher revenues in the fourth quarter of 2001 and for the full year reflect
primarily the acquisitions of Bay Meadows and MEC Pennsylvania, partially offset
by a lower level of sales of non-core real estate in the fourth quarter.
EBITDA, excluding gains on the sale of non-core real estate in 2001, was $31.3
million compared to $14.9 million in 2000 and for the three months ended
December 31, 2001 was a loss of $4.5 million compared to a loss of $10.6 million
in the fourth quarter of 2000.
Revenue on the sale of non-core real estate in 2001 was $40.6 million, resulting
in EBITDA of $20.4 million compared to revenue in 2000 of $37.6 million and
EBITDA of $7.0 million. Revenue on the sale of non-core real estate in the
fourth quarter of 2001 was $3.4 million, resulting in EBITDA of $3.3 million
compared to revenue in the fourth quarter of 2000 of $12.6 million and EBITDA of
$0.9 million.
Net income increased to $13.5 million for 2001 compared to $0.4 million in 2000.
A net loss of $5.0 million in the fourth quarter of 2001 compared to a net loss
of $9.2 million in the comparative quarter of 2000, represents a $4.2 million
improvement in the quarter.
Diluted earnings per share increased from $0.01 to $0.16 in 2001 and diluted
loss per share was $0.06 for the fourth quarter of 2001 compared to a loss of
$0.11 per share in the fourth quarter of 2000.
During the fourth quarter of 2001, cash generated from operations before changes
in non-cash working capital was $12.3 million. Total cash generated from
investment activities during the quarter was $2.5 million, including $19.7
million of net cash proceeds from the sale of non-core real estate, of which
$12.4 million was from a sale to a related party, Magna International Inc.,
partially offset by $13.4 million for real estate property and fixed asset
additions and $3.9 million in cash as part of the consideration for the
Multnomah acquisition.
We have recently extended the maturity date of the term loan facility of one of
our principal subsidiaries from November 30, 2002 to November 30, 2004. The
outstanding balance of the term loan facility at December 31, 2001 was $59.9
million. On November 15, 2001, we filed an amendment to our registration
statement offering 20 million shares of Class A Subordinate Voting Stock for
sale.
We are continuing to pursue strategic acquisitions and make strategic
investments in our racetracks and related operations, including entertainment
operations, to grow and enhance our racing business.
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5
In 2002, we will continue to focus on earnings growth through the
implementation, throughout our operations, of best practices and common systems,
utilization of our corporate purchasing power to reduce costs, improved
production and distribution of our simulcast program, growth of our account
wagering business and the sale of non-core real estate holdings.
MEC, 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, including off-track betting facilities ("OTBs"), and owns
and operates a national account wagering system called XpressBet(TM).
The Company will hold a conference call to discuss its fourth quarter and 2001
results on February 12, 2002 at 11:00 a.m. New York time. The number to use for
this call is 1-888-774-1632. Please call 10 minutes prior to the start of the
conference call. The overseas number to call is 1-416-620-2400. The conference
call will be chaired by Graham Orr, Executive Vice-President and Chief Financial
Officer of MEC.
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 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.
A registration statement has been filed with the United States Securities and
Exchange Commission but has not yet become effective. These securities may not
be sold nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This press release shall not constitute an offer
to sell or the solicitation of an offer to buy nor shall there be any sale of
these securities in any jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities
law of any such jurisdiction.
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
Page 5 of 14
6
MAGNA ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
- --------------------------------------------------------------------------------
[Unaudited]
[U.S. dollars in thousands, except per share figures]
- ------------------------------------------------------------------------------------------------------------------
Three months ended Year ended
December 31, December 31, December 31, December 31,
2001 2000 2001 2000
- ------------------------------------------------------------------------------------------------------------------
Revenue
Racetrack
Gross wagering $ 72,407 $ 40,199 $393,981 $301,288
Non-wagering 14,580 14,909 65,430 53,961
Real estate
Sale of real estate 3,364 12,595 40,600 37,630
Rental and other 5,160 6,835 19,050 20,684
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95,511 74,538 519,061 413,563
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Costs and expenses
Racetrack
Purses, awards and other 45,172 25,178 243,389 190,043
Operating costs 34,614 31,591 152,561 128,612
General and administrative 9,690 7,098 31,092 18,117
Real estate
Cost of real estate sold 24 11,672 20,171 30,656
Operating costs 5,907 7,289 15,789 18,928
General and administrative 301 401 1,130 1,133
Predevelopment and other costs 930 983 3,240 4,245
Depreciation and amortization 6,834 5,317 26,194 20,061
Interest expense, net 322 421 2,682 215
- ------------------------------------------------------------------------------------------------------------------
103,794 89,950 496,248 412,010
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Income (loss) before income taxes (8,283) (15,412) 22,813 1,553
Income tax provision (benefit) (3,269) (6,231) 9,349 1,112
- ------------------------------------------------------------------------------------------------------------------
Net income (loss) (5,014) (9,181) 13,464 441
Other comprehensive income (loss)
Foreign currency translation adjustment (3,080) 4,804 (9,062) (8,938)
- ------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss) $ (8,094) $ (4,377) $ 4,402 $ (8,497)
- ------------------------------------------------------------------------------------------------------------------
Earnings (loss) per share of Class A
Subordinate Voting Stock, Class B Stock
or Exchangeable Share:
Basic $ (0.06) $ (0.11) $ 0.16 $ 0.01
Diluted $ (0.06) $ (0.11) $ 0.16 $ 0.01
==================================================================================================================
Average number of shares of Class A
Subordinate Voting Stock, Class B Stock
and Exchangeable Shares outstanding
during the period [in thousands]:
Basic 83,956 80,466 82,930 80,422
Diluted 84,022 80,466 83,242 80,424
==================================================================================================================
Page 6 of 14
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MAGNA ENTERTAINMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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[Unaudited]
[U.S. dollars in thousands]
- -----------------------------------------------------------------------------------------------------------------
Three months ended Year ended
December 31, December 31, December 31, December 31,
2001 2000 2001 2000
- -----------------------------------------------------------------------------------------------------------------
Cash provided from (used for):
OPERATING ACTIVITIES
Net income (loss) $ (5,014) $ (9,181) $ 13,464 $ 441
Items not involving current cash flows 17,323 643 12,847 7,285
- -----------------------------------------------------------------------------------------------------------------
12,309 (8,538) 26,311 7,726
Changes in non-cash items related to
operations (7,039) 5,096 (682) (23,835)
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5,270 (3,442) 25,629 (16,109)
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INVESTMENT ACTIVITIES
Acquisition of businesses, net of cash (2,916) (24,117) (23,951) (24,117)
Real estate property and
fixed asset additions (13,368) (39,722) (38,862) (54,028)
Other asset (disposals) additions (842) 6,392 (1,208) 9,493
Proceeds on disposal of real estate 7,246 2,215 44,039 27,250
Proceeds on real estate sold to Magna 12,436 397 12,436 6,147
- -----------------------------------------------------------------------------------------------------------------
2,556 (54,835) (7,546) (35,255)
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FINANCING ACTIVITIES
Increase (decrease) in bank indebtedness - 7,518 (7,609) 759
(Repayment of) increase in long-term debt (10,597) 38,789 (3,026) 32,147
Issuance of share capital - - 476 -
- -----------------------------------------------------------------------------------------------------------------
(10,597) 46,307 (10,159) 32,906
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Effect of exchange rate changes on cash
and cash equivalents (874) 356 (688) (226)
- -----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents during the period (3,645) (11,614) 7,236 (18,684)
Cash and cash equivalents, beginning of
period 42,857 43,590 31,976 50,660
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Cash and cash equivalents, end of period $ 39,212 $ 31,976 $ 39,212 $ 31,976
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Page 7 of 14
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MAGNA ENTERTAINMENT CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------------------------------------------------
[Unaudited]
[U.S. dollars in thousands]
- --------------------------------------------------------------------------------------------------------------------------
December 31, December 31,
2001 2000
- --------------------------------------------------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 39,212 $ 31,976
Restricted cash 18,782 13,461
Accounts receivable 33,101 33,399
Prepaid expenses and other 5,162 7,984
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96,257 86,820
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Real estate properties and fixed assets, net 574,677 568,265
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Other assets, net 179,665 117,561
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Future tax assets 3,657 8,393
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$ 854,256 $781,039
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LIABILITIES AND SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Bank indebtedness $ -- $ 7,609
Accounts payable and other liabilities 78,337 64,847
Income taxes payable 1,312 1,111
Long-term debt due within one year 18,133 12,754
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97,782 86,321
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Long-term debt 67,768 63,343
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Other long-term liabilities 2,576 234
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Future tax liabilities 118,276 89,353
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Shareholders' equity:
Capital stock issued and outstanding -
Class A Subordinate Voting Stock 157,633 100,770
Exchangeable Shares 16,800 57,937
Class B Stock 394,094 394,094
Contributed surplus 7,290 1,352
Retained earnings (deficit) 11,474 (1,990)
Accumulated comprehensive loss (19,437) (10,375)
- --------------------------------------------------------------------------------------------------------------------------
567,854 541,788
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$ 854,256 $781,039
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MAGNA ENTERTAINMENT CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Summary of significant accounting policies
Basis of presentation
- ---------------------
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The preparation of the consolidated financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results could
differ from estimates. In the opinion of management, all adjustments, which
consist of normal and recurring adjustments, necessary for fair presentation
have been included. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report on Form
10-K for the year ended December 31, 2000.
The Company's racetrack business is seasonal in nature. The Company's racetrack
revenues and operating results for any quarter will not be indicative of the
revenues and operating results for the year. A disproportionate share of annual
revenues and net earnings are earned in the first quarter of each year.
Certain comparative figures have been reclassified to conform to the current
year's method of presentation.
2. Business Acquisitions
MEC Pennsylvania
On April 5, 2001, the Company completed the acquisition of Ladbroke Racing
Pennsylvania Inc. and Sport Broadcasting, Inc. (collectively the "Ladbroke
Companies" or "MEC Pennsylvania") for a total purchase price, including
transaction costs, of $46.6 million, net of cash acquired of $7.0 million.
The total purchase price was satisfied by cash payments of $20.1 million,
the issuance of two promissory notes totaling $13.25 million which bear
interest at 6% with the first note in the amount of $6,625,000 maturing on
the first anniversary of the closing date and the second note in the amount
of $6,625,000 maturing on the second anniversary of the closing date and by
the issuance of 3,178,297 shares of Class A Subordinate Voting Stock. The
Ladbroke Companies include account wagering operations, The Meadows harness
racetrack and four off-track betting facilities located around the
Pittsburgh, Pennsylvania area.
Page 9 of 14
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Multnomah Greyhound Park
On October 26, 2001, the Company acquired all the outstanding capital stock
of MKC Acquisition Co., operating as Multnomah Greyhound Park ("Multnomah"),
for a total purchase price, including transaction costs, of $5.9 million,
net of cash acquired of $0.3 million. Of the total purchase price, $3.9
million was paid in cash and the balance of $2.0 million through the
issuance of 330,962 shares of Class A Subordinate Voting Stock. Multnomah
Greyhound Park is located in Portland, Oregon and operates a greyhound dog
racing and pari-mutuel horse wagering business.
The purchase price of these 2001 acquisitions, which may be adjusted
further, has been allocated to the assets and liabilities acquired as
follows (in thousands):
Multnomah
MEC Greyhound
Pennsylvania Park Total
------------- ---------- ---------
Non-cash working capital deficit $ (6,514) $ (292) $ (6,806)
Real estate properties and fixed assets 19,947 292 20,239
Other assets 60,587 9,602 70,189
Deferred income taxes (27,448) (3,723) (31,171)
-------- ------- --------
Net assets acquired and total purchase price,
net of cash acquired $ 46,572 $ 5,879 $ 52,451
======== ======= ========
The purchase consideration for these
acquisitions is as follows:
Cash $ 20,072 $ 3,879 $ 23,951
Issuance of shares of Class A
Subordinate Voting Stock 13,250 2,000 15,250
Issuance of two promissory notes 13,250 -- 13,250
-------- ------- --------
$ 46,572 $ 5,879 $ 52,451
======== ======== ========
Pro-forma Impact
If the acquisition of MEC Pennsylvania and Multnomah had occurred on January 1,
2000, the Company's unaudited pro-forma results would have been:
For the year For the year
ended December 31, 2001 ended December 31, 2000
----------------------- -----------------------
Revenues $548,036 $564,228
Expenses 524,491 551,078
-------- --------
Income before income taxes 23,545 13,150
======== ========
Net income 13,658 6,080
======== ========
Net earnings per share
(basic and diluted) $ 0.16 $ 0.07
======== ========
3. Capital Stock
Page 10 of 14
11
Changes in Class A Subordinate Voting Stock, Exchangeable Shares and Class B
Stock for the year ended December 31, 2001 are shown in the following table
(number of shares and stated value in the following table have been rounded to
the nearest thousand):
Class A Subordinate Exchangeable
Voting Stock Shares Class B Stock
------------------------ -------------------------- -------------------------
Number of Stated Number Stated Number of Stated
Shares Value of Shares Value Shares Value
- -------------------------------------------------------------------------------------------------------------------------------
Issued and outstanding at
December 31, 2000 14,192 $100,770 7,807 $ 57,937 58,466 $394,094
Issued on exercise of stock
options 9 40 - - - -
Conversion of Exchangeable
Shares to Class A
Subordinate Voting Stock 71 527 (71) (527) - -
- -------------------------------------------------------------------------------------------------------------------------------
Issued and outstanding at
March 31, 2001 14,272 101,337 7,736 57,410 58,466 394,094
Issued on acquisition of the
Ladbroke Companies 3,178 13,250 - - - -
Issued under the Plan 63 403 - - - -
Conversion of Exchangeable
Shares to Class A
Subordinate Voting Stock 626 4,645 (626) (4,645) - -
- -------------------------------------------------------------------------------------------------------------------------------
Issued and outstanding at
June 30, 2001 18,139 119,635 7,110 52,765 58,466 394,094
Issued on exercise of stock
options 7 33 - - - -
Conversion of Exchangeable
Shares to Class A
Subordinate Voting Stock 4,707 34,926 (4,707) (34,926) - -
- -------------------------------------------------------------------------------------------------------------------------------
Issued and outstanding at
September 30, 2001 22,853 154,594 2,403 17,839 58,466 394,094
Issued on acquisition of MKC
Acquisition Co. 331 2,000 - - - -
Conversion of Exchangeable
Shares to Class A
Subordinate Voting Stock 140 1,039 (140) (1,039) - -
- -------------------------------------------------------------------------------------------------------------------------------
Issued and outstanding at
December 31, 2001 23,324 $157,633 2,263 $ 16,800 58,466 $394,094
===============================================================================================================================
The Company has a Long-term Incentive Plan (the "Plan") (adopted in 2000) which
allows for the grant of nonqualified stock options, incentive stock options,
stock appreciation rights, restricted stock, bonus stock and performance shares
to directors, officers, employees, consultants, independent contractors and
agents. A maximum of 8.0 million shares can be issued under the Plan, of which
6.5 million are available for issuance pursuant to stock options and tandem
stock appreciation rights and 1.5 million are available for issuance pursuant to
any other type of award under the Plan. During the three months ended December
31, 2001, no shares were issued under the Plan. During the twelve months ended
December 31, 2001, 78,094 shares were issued under the Plan.
The Company grants stock options to certain directors, officers and key
employees to purchase shares of the Company's Class A Subordinate Voting Stock.
All of such stock options give the
Page 11 of 14
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grantee the right to purchase Class A Subordinate Voting Stock of the Company at
a price no less than the fair market value of such stock at the date of grant.
Generally, stock options under the Plan vest over a period of two to six years
from the date of grant at rates of 1/7th to 1/3rd per year and expire on or
before the tenth anniversary of the date of grant, subject to earlier
cancellation in the events specified in the stock option agreements entered into
by the Company with each recipient of options.
During the year ended December 31, 2001, 1,250,000 stock options were granted,
15,000 stock options were exercised and 603,333 stock options were forfeited. At
December 31, 2001, there were 4,453,333 options outstanding that were all
granted during 2000 and 2001. The exercise price of the stock options
outstanding at December 31, 2001 ranged from $3.91 to $7.00 with an average
exercise price of $5.99.
There were 2,475,571 options exercisable at December 31, 2001 with an average
exercise price of $6.20.
4. Earnings (Loss) Per Share
The following is a reconciliation of the numerator and denominator of the basic
and diluted per share computations (in thousands except per share amounts):
Three months ended Year ended
December 31, December 31,
2001 2000 2001 2000
- ----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $(5,014) $(9,181) $13,464 $ 441
- ----------------------------------------------------------------------------------------------------------------------------------
Basic Diluted Basic & Basic Diluted Basic Diluted
Diluted
Weighted Average
Shares Outstanding:
Class A Subordinate Voting
Stock 23,162 23,228 14,129 18,911 19,223 10,488 10,490
Class B Stock 58,466 58,466 58,466 58,466 58,466 59,469 59,469
Exchangeable Shares 2,328 2,328 7,871 5,553 5,553 10,465 10,465
- ----------------------------------------------------------------------------------------------------------------------------------
83,956 84,022 80,466 82,930 83,242 80,422 80,424
- ----------------------------------------------------------------------------------------------------------------------------------
Earnings (Loss) Per Share $ (0.06) $ (0.06) ($0.11) $ 0.16 $ 0.16 $ 0.01 $ 0.01
- ----------------------------------------------------------------------------------------------------------------------------------
5. Commitments and Contingencies
The Company is currently considering a major redevelopment of its Gulfstream
Park racetrack in Florida (the "Gulfstream Development"). Should it proceed as
currently contemplated, the Gulfstream Development would include a simulcast
pavilion, sports and entertainment arena and a new turf club and grandstand. In
addition, there would be significant modifications and enhancements to the
racetracks and stable areas. If completed, the Gulfstream Development would
require the demolition of a substantial portion of the current buildings and
related structures, which include the grandstand, turf club and annex. The
aggregate carrying value at December 31, 2001 of the assets that would be
demolished if the Gulfstream Development is completed is approximately $23.0
million. If the Company decides to proceed with the Gulfstream Development and
obtains the approval of its Board of Directors, a reduction in the
Page 12 of 14
13
expected life of the existing assets would occur and a write-down would be
necessary.
6. Segment Information
The Company's reportable segments reflect how the Company is organized and
managed by senior management. The Company has two reportable segments: racetrack
and real estate operations. The racetrack segment includes the operation of
eight thoroughbred racetracks, a standardbred racetrack, a greyhound track and a
horse boarding and training center. In addition, the racetrack segment includes
off-track betting ("OTB") facilities and a national account wagering business.
The real estate segment includes the operation of two golf courses and related
facilities, a residential housing development adjacent to our golf course
located in Austria and other real estate holdings.
The accounting policies of each segment are the same as those described in the
"Significant Accounting Policies" section in the Company's annual report on Form
10-K for the year ended December 31, 2000.
The following summary presents key information by operating segment (in
thousands):
Three months ended December 31, 2001
Racetrack Real Estate
Operations Operations Total
- ----------------------------------------------------------------------------------------------------------------
Revenue $ 86,987 $ 8,524 $ 95,511
- ----------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes $ (10,420) $ 2,137 $ (8,283)
- ----------------------------------------------------------------------------------------------------------------
Real estate properties and fixed asset additions, net $ 6,637 $ 6,731 $ 13,368
- ----------------------------------------------------------------------------------------------------------------
Three months ended December 31, 2000
Racetrack Real Estate
Operations Operations Total
- ----------------------------------------------------------------------------------------------------------------
Revenue $ 55,108 $ 19,430 $ 74,538
- ----------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes $ (15,489) $ 77 $ (15,412)
- ----------------------------------------------------------------------------------------------------------------
Real estate properties and fixed asset additions, net $ 36,352 $ 3,370 $ 39,722
- ----------------------------------------------------------------------------------------------------------------
Page 13 of 14
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Three months ended December 31, 2001
Racetrack Real Estate
Operations Operations Total
- ----------------------------------------------------------------------------------------------------------------
Revenue $ 459,411 $ 59,650 $ 519,061
- ----------------------------------------------------------------------------------------------------------------
Income before income taxes $ 1,308 $ 21,505 $ 22,813
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Real estate properties and fixed asset additions, net $ 24,343 $ 14,519 $ 38,862
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Three months ended December 31, 2000
Racetrack Real Estate
Operations Operations Total
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Revenue $ 355,249 $ 58,314 $ 413,563
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Income (loss) before income taxes $ (3,863) $ 5,416 $ 1,553
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Real estate properties and fixed asset additions, net $ 46,128 $ 7,900 $ 54,028
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7. Transaction With Related Party
On October 31, 2001, the Company sold two non-core real estate properties
located in Milton, Ontario to Magna International Inc. for total proceeds of
approximately $12.4 million. The gain on the sale of the properties of
approximately $6.0 million, net of tax, is reported as a contribution to equity.
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