Magna Entertainment Corp. (NASDAQ: MECA; TSX: MEC.A) today reported its financial results for the third quarter ended September 30, 2008.
All amounts are reported in U.S. dollars in thousands, except per share figures.
MEC also announced that it has engaged Miller Buckfire & Co., LLC as its financial advisor and investment banker to review and evaluate various strategic alternatives including additional asset sales, financing and balance sheet restructuring opportunities. Miller Buckfire will also assist MEC in identifying, managing and executing its asset sales program and possible joint venture transactions.
Frank Stronach, MEC's Chairman and Chief Executive Officer, commented: "Although MEC has a strong asset base, we remain burdened with far too much debt and interest expense. Our previously announced debt elimination plan has been negatively affected by the weak real estate and credit markets, which have impacted our ability to sell non-core assets. As a result, we are evaluating MEC's core operations with a view to possibly selling or joint venturing one or more of MEC's core racetracks in order to strengthen MEC's balance sheet and liquidity position. Working with Miller Buckfire, we intend to develop and execute a plan to sell or joint venture certain core assets and enhance MEC's capital structure. Despite very difficult economic conditions in the U.S., our EBITDA loss modestly improved in the third quarter of 2008 compared to the same period last year due to improved results at Gulfstream Park and XpressBet. Although the weak economy will continue to present challenges in the near-term, we are very conscious of the fact that we must significantly improve our operating results."
Our racetracks operate for prescribed periods each year. As a result, our racing revenues and operating results for any quarter will not be indicative of our racing revenues and operating results for the year.
Revenues from continuing operations were $81.6 million for the three months ended September 30, 2008, an increase of $0.1 million or 0.1% compared to $81.5 million for the three months ended September 30, 2007. Revenues from continuing operations were impacted by:
- Maryland operations revenues below the prior year period by $3.2 million primarily due to decreased average daily attendance and handle at both Laurel Park and Pimlico;
- Southern U.S. operations revenues below the prior year period by $1.2 million primarily due to decreased average daily attendance and handle at Lone Star Park;
- PariMax operations revenues below the prior year period by $0.6 million primarily due to reduced revenues at AmTote's Australian operations and reduced tote service revenues with the overall industry decline in wagering handle, partially offset by increased wagering at XpressBet with access to new racing content that was not previously available to XpressBet;
- Northern U.S. operations revenues below the prior year period by $0.5 million primarily due to decreased average daily attendance and handle at The Meadows;
- California operations revenues above the prior year period by $3.1 million due to 10 additional live race days at Golden Gate Fields with a change in the racing calendar and additional awarded live race days; and
- Florida operations revenues above the prior year period by $2.6 million primarily due to the offering of simulcasting at Gulfstream Park after the live race meet ended, which was not available in the prior year comparative period, and increased slot revenues at Gulfstream Park.
Revenues were $478.8 million in the nine months ended September 30, 2008, a decrease of $24.3 million or 4.8% compared to $503.1 million for the nine months ended September 30, 2007. The decreased revenues in the nine months ended September 30, 2008 compared to the prior year period are primarily due to the same factors impacting the three months ended September 30, 2008 as well as California operations revenues below the prior year period by $18.1 million due to the net loss of 8 live race days at Santa Anita Park due to excessive rain and track drainage issues with the new synthetic racing surface that was installed in the fall of 2007, Maryland operations revenues below the prior year period by $11.1 million due to 13 fewer live race days at Laurel Park and decreased handle and wagering on the 2008 Preakness and real estate and other operations revenues above the prior year period by $4.3 million due to the sale of real estate and increased housing unit sales at our European residential housing development.
EBITDA loss from continuing operations was $20.4 million for the three months ended September 30, 2008, an improvement of $3.0 million or 13.0% compared to an EBITDA loss of $23.4 million for the three months ended September 30, 2007. The improved EBITDA loss from continuing operations was primarily due to:
- Corporate office costs below the prior year period by $2.4 million primarily due to lower severance in the current year period compared to the prior year period;
- Florida operations above the prior year period by $1.5 million due to increased gaming and simulcasting revenues at Gulfstream Park as noted above, combined with reduced operating costs and improved food and beverage operations; and
- A write-down of $1.4 million recorded in the prior year period related to the Porter, New York real estate;
partially offset by:
- Increased predevelopment and other costs of $2.4 million incurred pursuing alternative gaming opportunities including the November 4, 2008 Maryland gaming referendum, evaluating financing alternatives and legal costs relating to the protection of our content distribution rights.
EBITDA of $0.7 million for the nine months ended September 30, 2008, decreased $4.4 million from $5.1 million in the nine months ended September 30, 2007 primarily due to the same factors impacting EBITDA for the three months ended September 30, 2008 as well as:
- Maryland operations below the prior year period by $5.9 million due to decreased revenues at Laurel Park and Pimlico as noted above, combined with increased severance costs in the current year period;
- A write-down of long-lived assets of $5.0 million relating to an impairment charge related to the Dixon, California real estate property in the nine months ended September 30, 2008, which represented the excess of the carrying value of the asset over the estimated fair value less selling costs;
- California operations below the prior year period by $4.0 million for the reasons noted above which decreased revenues at Santa Anita Park;
partially offset by:
- Residential development and other above the prior year period by $2.3 million due to the sale of real estate and increased housing unit sales at our European residential housing development;
- Recognition of $2.0 million of deferred gain on The Meadows transaction; and
- PariMax operations above the prior year period by $1.8 million for the reasons noted above which increased revenues at XpressBet. -- www.cnxmarketlink.com
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