Expansion Pushes Magna Revenues Up 54%

Expansion Pushes Magna Revenues Up 54%
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Magna Entertainment Corp.'s revenues during the second quarter ended June 30 were up 54.2% from a year ago while net income was down slightly, the company reported after the markets closed Thursday night.

Revenues, excluding proceeds from the sale of non-core real estate, for the second quarter were $188.3 million, up from $122.2 million in 2002. Through the first six months of the year, Magna's total revenues of $458.4 million is a 23.8% increase from the same period the previous year.

The increases resulted primarily from the acquisitions of Lone Star Park at Grand Prairie and The Maryland Jockey Club, the company said. However, Magna did suffer lower average daily attendance and decreased on- track wagering activity at most of its facilities during the quarter.

Earnings before interest, taxes, depreciation, and amortization, (EBITDA), excluding gains on the sale of non-core real estate, was $11 million for the second quarter ended June 30, compared to $5.8 million in the prior year period, and was $42.8 million in the first six months ended June 30, 2003, compared to $42.5 million in the prior year period. The increase in EBITDA in the second quarter of 2003 was attributed to the company's recent acquisitions, which contributed $14.6 million of EBITDA.

The numbers were partially offset by lower gross wagering and non-wagering revenues, costs incurred pursuing alternative gaming opportunities and regulatory reform, and costs associated with the start-up of HorseRacing TV and Palm Meadows.

Net income fell from $1.08 million during last year's third quarter, which included the sale of non-core real estate, to $811,000. Exluding last year's core real estate sales, net income was up. However, net income is down to $13.46 million for the first six months of the year as compared to $19.69 million for the same period in 2002.

Diluted earnings per share, excluding gains on the sale of non-core real estate, were one cent in the second quarter of 2003 compared to zero cents in the comparative prior year period. Through the first six months, diluted earnings are 13 cents per share, down from 21 cents a share last year.

Revenue on the sale of non-core real estate in the second quarter of 2002 was $6.1 million, resulting in EBITDA of $1.8 million. There were no sales of non-core real estate in the second quarter of 2003. Magna expects to sell its remaining non-core real estate over the next year.

During the three months ended June 30, cash provided from operations before changes in non-cash working capital was $7.4 million. Total cash used in investment activities during the quarter was $27.4 million, including real estate property and fixed asset additions of $15.5 million and other asset additions of $12.6 million, partially offset by proceeds on disposal of real estate of $700,000.

Cash provided from financing activities was $137 million, due to the issuance of 8.55% convertible subordinated notes due in 2010, which provided $145 million net of issue costs, partially offset by repayment of long-term debt of $8 million.

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