A major debt restructuring enabled Malibu Grand Prix, which was in default to its lenders earlier this year, on Monday to report third-quarter earnings of $6.8 million.
It was the Woodland Hills-based company's second profitable quarter since going public in April, 1984. Malibu Grand Prix posted its first profitable period in this year's second quarter, when it earned just $148,000.
The third-quarter profit, which amounted to 53 cents a share, came mostly from an extraordinary gain of $6.2 million from a complex restructuring of the company's large debt. A year earlier, the company lost $358,000, or 3 cents a share, and was way behind on its debt.
Third-quarter revenue fell 6.5%, to $9.0 million, mainly because several money-losing facilities were closed, said Gary Rudolph, vice president for operations. The company made $582,000 on operations, thanks to cost cutting and a strong summer, he said.
Malibu Grand Prix deferred $6 million in extraordinary gains from its debt restructuring. The gains will be recorded as income of about $1.2 million a year over each of the next five years, the company said.
The debt restructuring gave Malibu five years to repay a $16.8-million debt to Bracton Corp., a former unit of Crocker National Bank. As part of the deal, Malibu also retired a separate, interest-free, $24-million note for less than face value.
In exchange for its claim to 60% of that note, Bracton got 4.9 million preferred shares of Malibu Grand Prix stock and a seven-year warrant to buy 20% of the company for $2.5 million. The other creditors got a total of $3.2 million in cash.
The result was a huge increase in earnings for the amusement-center operator, which had been in default on the interest-bearing debt to Bracton.
For the nine months ended Sept. 28, earnings were $5.8 million, or 46 cents a share, against a loss of $3.9 million, or 31 cents a share, a year earlier. Revenue was off 7.5%, to $22.9 million.
Malibu still has a net worth deficit of $6.7 million, but that does not include the deferred gains, Rudolph said. He added that the company will be insulated from income taxes for some time because of its past losses.
"We are extremely pleased with the results," said Ira Young, the company's chairman, in a news release. "We believe that all the provisions of the newly structured debt can be met."
Ed Byrd, a stock trader with Sherwood Securities in Los Angeles, quoted Monday's bid price of Malibu Grand Prix's thinly traded stock at 62 1/2 cents, unchanged from Friday but up 12 1/2 cents from a week ago.
Malibu owns and operates 42 recreational centers. They variously feature miniature Grand Prix racing, miniature golf and electronic video games.