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) May 15, 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.)
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)
ITEM 5. OTHER EVENTS
On May 15, 2000, the Registrant issued a press release in which the Registrant
announced its unaudited financial results for three month period ended March 31,
2000. The full text of the press release issued by the Registrant is filed as
Exhibit 1 and is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit 1 Copy of Registrant's press release dated May 15, 2000 is
attached as Exhibit 1.
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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: May 15, 2000 by: /s/ J. Brian Colburn
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J. Brian Colburn, Secretary
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INDEX TO EXHIBITS
EXHIBIT DESCRIPTION OF EXHIBIT
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1 Registrant's press release dated May 15, 2000
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EXHIBIT 1
MAGNA ENTERTAINMENT CORP.
285 West Huntington Drive
Arcadia, CA 91007
Tel: (626) 574-7223
Fax: (626) 446-9565
PRESS RELEASE
MAGNA ENTERTAINMENT CORP.
ANNOUNCES RESULTS FOR FIRST QUARTER
May 15, 2000, Arcadia, California......Magna Entertainment Corp. (TSE: MIE.A,
MEH: NASDAQ: MIEC) today reported its financial results for the first quarter
ended March 31, 2000.
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First Quarter Ended (1)
March 31,
2000 1999
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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
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(1) All amounts are reported in millions of U.S. dollars, except per share
figures.
Revenue, which is 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 racetrack as it was purchased in late 1998.
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.
5
"During the quarter, the Company completed an exciting ninety (90) days of live
racing, and the registration and spin-off of the Company as a public entity",
said Jerry D. Campbell, the Company's President and Chief Executive Officer.
"Santa Anita Park, despite unusually high rainfall in February, recently
completed its Winter race meet increasing handle, or total wagering, by four
percent (4%) over 1999 for a new pari-mutuel track record of $1.04 billion.
"The Company offers approximately 330 days of live racing, although
disproportionate revenues occur in the first two quarters of the year at premier
racetracks in California and Florida. The Company's Florida operations are
positioned to achieve improved profitability in the future as a result of the
agreement with the owner of Hialeah Park to conduct its Spring meet at
Gulfstream Park and the reduction of state tax on wagers for Florida
racetracks."
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.
"For the remainder of the year, management will focus its attention on continued
best practices and synergies at the racetracks. The implementation during the
quarter of a disposition plan for its real estate holdings in North America and
Europe and improved operations will position the Company as one of the leaders
in the future expansion of the pari-mutuel industry through new multi-media and
Internet initiatives," stated Mr. Campbell.
The Company has entered into property sales agreements providing anticipated
proceeds of approximately $14 million in the second and third quarter. 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.
In addition, all regulatory approvals were obtained from the U.S. and Canadian
securities commissions which permitted Magna International Inc. ("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 either the Company's Class A Subordinate Voting Stock
or Exchangeable Shares of MEC Holding (Canada) Inc., which are exchangeable into
Class A Subordinate Voting Stock, to Magna's shareholders. The dividend record
date was February 25, 2000.
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 23% of the amounts wagered on pari-mutuel racing in the United
States in 1999. As a complement to its horse racing 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.
The Company will hold a conference call to discuss the first quarter results on
Tuesday, May 16, 2000 at 11:00 a.m. Toronto time (E.D.T.) The number to use for
this call is 1-800-348-6433. Please call 10 minutes prior to the conference
call. The overseas number to call is 1-212-271-4737. The conference call will be
chaired by Jerry D. Campbell, President and Chief Executive Officer, and David
A. Mitchell, Executive Vice President and Chief Financial Officer. For further
information, please contact David A. Mitchell at (626) 574-6313.
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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
March 31, March 31,
2000 1999
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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
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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
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Income before income taxes 21,158 16,240
Income tax provision 9,178 6,915
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Net income 11,980 9,325
Other comprehensive loss:
Foreign currency translation adjustment 4,850 5,045
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Comprehensive income 7,130 4,280
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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
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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
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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
March 31, March 31,
2000 1999
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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
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Net cash provided by Operating Activities 7,591 14,428
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INVESTMENT ACTIVITIES
Acquisition of business (1,770) -
Real estate property and fixed asset additions (2,386) (1,810)
Disposal of other assets 700 -
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Net cash used for Investing Activities (3,456) (1,810)
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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)
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Net cash used for Financing Activities (5,618) (1,012)
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Effect of exchange rate changes on cash
and cash equivalents (69) (6)
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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
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Cash and cash equivalents, end of period 56,860 29,103
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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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March 31, December 31,
2000 1999
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ASSETS
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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
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Real estate properties and fixed assets, net 567,595 564,789
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Other assets, net 100,229 100,967
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Deferred income taxes 6,367 6,367
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772,770 760,353
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LIABILITIES AND SHAREHOLDERS' EQUITY
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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
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Long-term debt 24,349 19,506
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Other long-term liabilities 476 494
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Deferred income taxes 92,624 93,183
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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
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772,770 760,353
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