----

----

| x | QUARTERLY      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|---|---------------------------------------------------------------------------------------------------|

|   | OR |
|--------|----|

| o | TRANSITION      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|---|----------------------------------------------------------------------------------------------------|

| Delaware(State      or other jurisdictionof      incorporation or organization)                      |   | 95-2078752(I.R.S.      EmployerIdentification      Number) |
|------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------|
|                                                                                                 |   |                                                       |
| 1330      Post Oak Blvd., Suite 2000Houston,      Texas(Address      of Principal Executive Offices) |   | 77056(Zip      Code)                                       |

| Large      accelerated filer o | Accelerated      filer x | Non-accelerated      filer o | Smaller      reporting company o |
|--------------------------------|--------------------------|------------------------------|----------------------------------|

----

----

----

|                                              | TABLE OF CONTENTS                                                                                                                  |   |
|---------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                              |                                                                                                                               |   |
| PART      I. –      FINANCIAL INFORMATION   |                                                                                                                               |
|                                              |                                                                                                                               |   |
|                                              |                                                                                                                               |   |
| Item 1.                                           | Financial Statements      (unaudited):                                                                                             |   |
|                                              | Condensed Consolidated Balance      Sheets                                                                                         |   |
|                                              | Condensed Consolidated Statements of      Operations                                                                               |   |
|                                              | Condensed Consolidated Statements of Cash      Flows                                                                               |   |
|                                              | Notes to Unaudited Condensed      Consolidated Financial Statements                                                                |   |
|                                              |                                                                                                                               |   |
| Item 2.                                           | Management's Discussion and      Analysis of Financial Condition and      Results      of Operations |   |
|                                              |                                                                                                                               |   |
| Item 3.                                           | Quantitative and Qualitative      Disclosures About Market Risk                                                                    |   |
|                                              |                                                                                                                               |   |
| Item 4.                                           | Controls and    Procedures                                                                                                         |   |
|                                              |                                                                                                                               |   |
|                                              |                                                                                                                               |   |
| PART II. – OTHER      INFORMATION           |                                                                                                                               |
|                                              |                                                                                                                               |   |
|                                              |                                                                                                                               |   |
| Item 1.                                           | Legal Proceedings                                                                                                                  |   |
| Item 1A.                                          | Risk Factors                                                                                                                       |   |
| Item 2.                                           | Unregistered Sales of Equity Securities      and Use of Proceeds                                                                   |   |
| Item 3.                                           | Defaults Upon Senior      Securities                                                                                               |   |
| Item 6.                                           | Exhibits                                                                                                                           |   |
| Signatures                                        |                                                                                                                               |   |
|                                              |                                                                                                                               |   |
|                                              |                                                                                                                               |   |
| APPENDIX A – GLOSSARY OF      DEFINED TERMS |                                                                                                                               |

----

Table of Contents

| MAXXAM INC. AND SUBSIDIARIES                                                                                                                                                                                                                                                         |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |
| CONDENSED CONSOLIDATED BALANCE    SHEETS                                                                                                                                                                                                                                             |   |
| (In      millions of dollars, except share information)                                                                                                                                                                                                                              |   |
|                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                 |   | September      30,2008 |   |   | December      31,2007 |   |
|                                                                                                                                                                                                                                                                                 |   | (Unaudited) |   |
|                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |
| Assets                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |
| Current      assets:                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |
| Cash      and cash equivalents                                                                                                                                                                                                                                                       |   | $ | 52.4 |   |   | $ | 67.8 |   |
| Marketable      securities and other short-term investments                                                                                                                                                                                                                          |   |   | 2.7 |   |   |   | 25.0 |   |
| Receivables:                                                                                                                                                                                                                                                                         |   |   |   |   |   |   |   |   |
| Trade,      net of allowance for doubtful accounts of $0.4 and $0.5,      respectively                                                                                                                                                                                               |   |   | 2.3 |   |   |   | 3.0 |   |
| Other                                                                                                                                                                                                                                                                                |   |   | 2.1 |   |   |   | 1.6 |   |
| Real      estate inventory                                                                                                                                                                                                                                                           |   |   | 3.8 |   |   |   | 3.9 |   |
| Prepaid      expenses and other current assets                                                                                                                                                                                                                                       |   |   | 7.3 |   |   |   | 2.9 |   |
| Restricted      cash                                                                                                                                                                                                                                                                 |   |   | 2.3 |   |   |   | 2.3 |   |
| Total      current assets                                                                                                                                                                                                                                                            |   |   | 72.9 |   |   |   | 106.5 |   |
| Property,      plant and equipment, net of accumulated depreciation of$106.4   and      $99.1, respectively                                                                                                                                                           |   |   | 212.0 |   |   |   | 219.8 |   |
| Real      estate inventory                                                                                                                                                                                                                                                           |   |   | 55.6 |   |   |   | 52.7 |   |
| Deferred      income taxes                                                                                                                                                                                                                                                           |   |   | 45.0 |   |   |   | 94.7 |   |
| Deferred      financing costs                                                                                                                                                                                                                                                        |   |   | 4.4 |   |   |   | 4.9 |   |
| Long-term      receivables and other assets                                                                                                                                                                                                                                          |   |   | 5.7 |   |   |   | 6.7 |   |
| Long-term      investments and restricted cash of $3.6                                                                                                                                                                                                                               |   |   | 14.7 |   |   |   | 33.6 |   |
|                                                                                                                                                                                                                                                                                 |   | $ | 410.3 |   |   | $ | 518.9 |   |
| Liabilities      and Stockholders’      Deficit                                                                                                                                                                                                                                |   |   |   |   |   |   |   |   |
| Current      liabilities:                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |
| Accounts      payable                                                                                                                                                                                                                                                                |   | $ | 6.2 |   |   | $ | 6.5 |   |
| Short-term      borrowings and current maturities of long-term debt                                                                                                                                                                                                                  |   |   | 6.0 |   |   |   | 5.3 |   |
| Accrued      interest                                                                                                                                                                                                                                                                |   |   | 0.9 |   |   |   | 0.9 |   |
| Accrued      compensation and related benefits                                                                                                                                                                                                                                       |   |   | 2.8 |   |   |   | 2.3 |   |
| Refundable      deposits                                                                                                                                                                                                                                                             |   |   | 2.3 |   |   |   | 2.3 |   |
| Accrued      defense costs                                                                                                                                                                                                                                                           |   |   | 7.4 |   |   |   | 4.0 |   |
| Accrued      taxes                                                                                                                                                                                                                                                                   |   |   | 12.4 |   |   |   | 3.9 |   |
| Deferred      income                                                                                                                                                                                                                                                                 |   |   | 3.1 |   |   |   | 0.7 |   |
| Other      accrued liabilities                                                                                                                                                                                                                                                       |   |   | 6.8 |   |   |   | 6.7 |   |
| Total      current liabilities                                                                                                                                                                                                                                                       |   |   | 47.9 |   |   |   | 32.6 |   |
| Long-term      debt, less current maturities                                                                                                                                                                                                                                         |   |   | 206.7 |   |   |   | 211.2 |   |
| Accrued      pension and other postretirement benefits                                                                                                                                                                                                                               |   |   | 7.1 |   |   |   | 7.0 |   |
| Other      noncurrent liabilities                                                                                                                                                                                                                                                    |   |   | 37.3 |   |   |   | 45.1 |   |
| Losses      in excess of investment in Debtors                                                                                                                                                                                                                                       |   |   | 484.2 |   |   |   | 484.2 |   |
| Total      liabilities                                                                                                                                                                                                                                                               |   |   | 783.2 |   |   |   | 780.1 |   |
| Commitments      and contingencies                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |
| Stockholders’      deficit:                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |
| Preferred      stock, $0.50 par value; $0.75 liquidation preference; 2,500,000      shares   authorized;      Class A $0.05 Non-Cumulative Participating Convertible      Preferred   Stock;      668,964 shares issued and 668,119 shares outstanding |   |   | 0.3 |   |   |   | 0.3 |   |
|                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |
| Common      stock, $0.50 par value; 13,000,000 shares authorized; 10,063,359      shares   issued;      4,561,237 and  5,248,717 shares outstanding,      respectively                                                                                      |   |   | 5.0 |   |   |   | 5.0 |   |
| Additional      capital                                                                                                                                                                                                                                                              |   |   | 225.3 |   |   |   | 225.3 |   |
| Accumulated      deficit                                                                                                                                                                                                                                                             |   |   | (434.9 | ) |   |   | (342.9 | ) |
| Accumulated      other comprehensive income (loss)                                                                                                                                                                                                                                   |   |   | (0.8 | ) |   |   | (1.2 | ) |
| Treasury      stock, at cost (shares held; preferred – 845; common – 5,502,122      and   4,814,642,      respectively)                                                                                                                                   |   |   | (167.8 | ) |   |   | (147.7 | ) |
| Total      stockholders’      deficit                                                                                                                                                                                                                                          |   |   | (372.9 | ) |   |   | (261.2 | ) |
|                                                                                                                                                                                                                                                                                 |   | $ | 410.3 |   |   | $ | 518.9 |   |

----

Table of Contents

| MAXXAM      INC. AND SUBSIDIARIES                                        |   |
|--------------------------------------------------------------------------|--------|
|                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |
| CONDENSED CONSOLIDATED STATEMENTS OF      OPERATIONS                     |   |
| (In      millions of dollars, except share and per share    information) |   |
|                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                     |   | Three      Months EndedSeptember      30, |   |   | Nine      Months EndedSeptember      30, |   |
|                                                                     |   | 2008 |   |   | 2007 |   |   | 2008 |   |   | 2007 |   |
|                                                                     |   | (Unaudited) |   |
|                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |
| Sales:                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Real      estate                                                         |   | $ | 8.3 |   |   | $ | 9.7 |   |   | $ | 26.9 |   |   | $ | 34.1 |   |
| Racing                                                                   |   |   | 13.0 |   |   |   | 13.3 |   |   |   | 36.5 |   |   |   | 36.5 |   |
| Forest      products, including MGI                                      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 4.4 |   |
| Corporate                                                                |   |   | 2.4 |   |   |   | - |   |   |   | 5.3 |   |   |   | - |   |
|                                                                     |   |   | 23.7 |   |   |   | 23.0 |   |   |   | 68.7 |   |   |   | 75.0 |   |
| Costs      and expenses:                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost      of sales and operations:                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Real      estate                                                         |   |   | 3.7 |   |   |   | 4.3 |   |   |   | 12.9 |   |   |   | 15.3 |   |
| Racing                                                                   |   |   | 12.7 |   |   |   | 11.8 |   |   |   | 34.4 |   |   |   | 32.2 |   |
| Forest      products, including MGI                                      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 4.3 |   |
| Corporate                                                                |   |   | 1.0 |   |   |   | - |   |   |   | 5.1 |   |   |   | - |   |
| Selling,      general and administrative expenses                        |   |   | 10.4 |   |   |   | 11.0 |   |   |   | 26.7 |   |   |   | 29.8 |   |
| Gains      on sales of other assets                                      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (0.1 | ) |
| Depreciation,      depletion and amortization                            |   |   | 4.1 |   |   |   | 3.5 |   |   |   | 10.0 |   |   |   | 11.5 |   |
|                                                                     |   |   | 31.9 |   |   |   | 30.6 |   |   |   | 89.1 |   |   |   | 93.0 |   |
| Operating      income (loss):                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Real      estate                                                         |   |   | (0.4 | ) |   |   | (0.9 | ) |   |   | (3.3 | ) |   |   | (1.5 | ) |
| Racing                                                                   |   |   | (3.9 | ) |   |   | (3.0 | ) |   |   | (7.4 | ) |   |   | (5.4 | ) |
| Forest      products, including MGI                                      |   |   | (0.4 | ) |   |   | (0.3 | ) |   |   | (1.4 | ) |   |   | (3.8 | ) |
| Corporate                                                                |   |   | (3.5 | ) |   |   | (3.4 | ) |   |   | (8.3 | ) |   |   | (7.3 | ) |
|                                                                     |   |   | (8.2 | ) |   |   | (7.6 | ) |   |   | (20.4 | ) |   |   | (18.0 | ) |
| Other      income (expense):                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investment,      interest and other income (expense)                     |   |   | (0.6 | ) |   |   | 1.4 |   |   |   | (6.4 | ) |   |   | 4.4 |   |
| Interest      expense                                                    |   |   | (4.0 | ) |   |   | (4.2 | ) |   |   | (12.1 | ) |   |   | (15.3 | ) |
| Amortization      of deferred financing costs                            |   |   | (0.2 | ) |   |   | (0.1 | ) |   |   | (0.5 | ) |   |   | (0.6 | ) |
| Loss      before income taxes                                            |   |   | (13.0 | ) |   |   | (10.5 | ) |   |   | (39.4 | ) |   |   | (29.5 | ) |
| Provision      for income taxes                                          |   |   | (52.4 | ) |   |   | - |   |   |   | (52.6 | ) |   |   | - |   |
| Net      loss                                                            |   | $ | (65.4 | ) |   | $ | (10.5 | ) |   | $ | (92.0 | ) |   | $ | (29.5 | ) |
|                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic      loss per common and common equivalent share                   |   | $ | (14.34 | ) |   | $ | (2.00 | ) |   | $ | (19.39 | ) |   | $ | (5.62 | ) |
|                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted      loss per common and common equivalent share                 |   | $ | (14.34 | ) |   | $ | (2.00 | ) |   | $ | (19.39 | ) |   | $ | (5.62 | ) |
|                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average shares outstanding - Basic and Diluted             |   |   | 4,561,237 |   |   |   | 5,250,230 |   |   |   | 4,744,398 |   |   |   | 5,252,244 |   |

----

Table of Contents

| MAXXAM      INC. AND SUBSIDIARIES                                                           |   |
|---------------------------------------------------------------------------------------------|--------|
|                                                                                        |   |   |   |   |   |   |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH      FLOWS                                        |   |
| (In      millions of dollars)                                                               |   |
|                                                                                        |   |   |   |   |   |   |
|                                                                                        |   | Nine      Months EndedSeptember      30, |   |
|                                                                                        |   | 2008 |   |   | 2007 |   |
|                                                                                        |   | (Unaudited) |   |
|                                                                                        |   |   |   |   |   |   |
| Cash      flows from operating activities:                                                  |   |   |   |   |   |   |
| Net      loss                                                                               |   | $ | (92.0 | ) |   | $ | (29.5 | ) |
| Adjustments      to reconcile net loss to net cash used for operating      activities: |   |   |   |   |   |   |   |   |
| Depreciation,      depletion and amortization                                               |   |   | 10.0 |   |   |   | 11.5 |   |
| Non-cash      stock-based compensation expense                                              |   |   | (6.0 | ) |   |   | (0.4 | ) |
| Gains      on sales of other assets                                                         |   |   | - |   |   |   | (0.1 | ) |
| Net      losses (gains) from marketable securities                                          |   |   | 7.8 |   |   |   | (1.1 | ) |
| Amortization      of deferred financing costs                                               |   |   | 0.5 |   |   |   | 0.6 |   |
| Equity      income of unconsolidated affiliates, net of dividends                           |   |   | 0.3 |   |   |   | (0.7 | ) |
| Increase      (decrease) in cash resulting from changes in:                                 |   |   |   |   |   |   |   |   |
| Receivables                                                                                 |   |   | - |   |   |   | 8.3 |   |
| Inventories                                                                                 |   |   | 0.1 |   |   |   | 0.8 |   |
| Prepaid      expenses and other assets                                                      |   |   | (0.3 | ) |   |   | 2.8 |   |
| Accounts      payable                                                                       |   |   | (0.3 | ) |   |   | 2.2 |   |
| Accrued      and deferred taxes                                                             |   |   | 52.0 |   |   |   | (0.1 | ) |
| Other      accrued liabilities                                                              |   |   | 6.0 |   |   |   | (2.2 | ) |
| Accrued      interest                                                                       |   |   | - |   |   |   | 2.7 |   |
| Long-term      assets and long-term liabilities                                             |   |   | (2.0 | ) |   |   | (4.9 | ) |
| Other                                                                                       |   |   | - |   |   |   | (0.3 | ) |
| Net      cash used for operating activities                                                 |   |   | (23.9 | ) |   |   | (10.4 | ) |
|                                                                                        |   |   |   |   |   |   |   |   |
| Cash      flows from investing activities:                                                  |   |   |   |   |   |   |   |   |
| Net      proceeds from the disposition of property and investments                          |   |   | - |   |   |   | 0.1 |   |
| Maturities      of marketable securities and other investments                              |   |   | 11.6 |   |   |   | 130.5 |   |
| Sales      of marketable securities and other investments                                   |   |   | 31.9 |   |   |   | 82.1 |   |
| Purchases      of marketable securities and other investments                               |   |   | (9.1 | ) |   |   | (172.1 | ) |
| Net      proceeds from restricted cash                                                      |   |   | - |   |   |   | (1.2 | ) |
| Capital      expenditures                                                                   |   |   | (2.4 | ) |   |   | (3.0 | ) |
| Decrease      in cash due to deconsolidation of Debtors                                     |   |   | - |   |   |   | (1.1 | ) |
| Contribution      to joint venture                                                          |   |   | - |   |   |   | (0.6 | ) |
| Net      cash provided by investing activities                                              |   |   | 32.0 |   |   |   | 34.7 |   |
|                                                                                        |   |   |   |   |   |   |   |   |
| Cash      flows from financing activities:                                                  |   |   |   |   |   |   |   |   |
| Principal      payments on long-term debt                                                   |   |   | (3.8 | ) |   |   | (3.4 | ) |
| Borrowings      under revolving and short-term credit facilities                            |   |   | - |   |   |   | 2.2 |   |
| Treasury      stock purchases                                                               |   |   | (20.1 | ) |   |   | (0.3 | ) |
| Net      proceeds from refundable deposits                                                  |   |   | 0.4 |   |   |   | 0.9 |   |
| Net      cash used for financing activities                                                 |   |   | (23.5 | ) |   |   | (0.6 | ) |
|                                                                                        |   |   |   |   |   |   |   |   |
| Net      increase (decrease) in cash and cash equivalents                                   |   |   | (15.4 | ) |   |   | 23.7 |   |
| Cash      and cash equivalents at beginning of the period                                   |   |   | 67.8 |   |   |   | 34.8 |   |
| Cash      and cash equivalents at end of the period                                         |   | $ | 52.4 |   |   | $ | 58.5 |   |
|                                                                                        |   |   |   |   |   |   |   |   |
| Supplemental      disclosure of cash flow information:                                      |   |   |   |   |   |   |   |   |
| Interest      paid                                                                          |   | $ | 12.1 |   |   | $ | 12.4 |   |

----

Table of Contents

NOTES TO UNAUDITED CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

----

Table of Contents

----

Table of Contents

----

Table of Contents

|   | Potential      Impact on the Company and Certain Related  Entities |
|--------|--------------------------------------------------------------------|

----

Table of Contents

|   | Level      2 - Observable inputs other than Level 1 prices such as quoted prices for      similar assets or liabilities; quoted prices in markets that are not      active; or other inputs that are observable or can be corroborated by      observable market data for substantially the full term of the assets or      liabilities. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Level      3 - Unobservable inputs that are supported by little or no market activity      and that are significant to the fair value of the assets or      liabilities. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                         |   | Fair      Value Measurements as ofSeptember      30, 2008 |   |
|------------------------------|--------|-----------------------------------------------------------|--------|
|                         |   | Total                                                     |   |   | Level      1 |   |   | Level      2 |   |   | Level      3 |   |
|                         |   |                                                      |   |   |   |   |   |   |   |   |   |   |
| Description:                 |   |                                                      |   |   |   |   |   |   |   |   |   |   |
|                         |   |                                                      |   |   |   |   |   |   |   |   |   |   |
| Short-term      investments  |   | $                                                         | 2.7    |   |   | $ | 2.7 |   |   | $ | - |   |   | $ | - |   |
|                         |   |                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Auction      rate securities |   |                                                      | 5.1    |   |   |   | - |   |   |   | - |   |   |   | 5.1 |   |
|                         |   |                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                        |   | $                                                         | 7.8    |   |   | $ | 2.7 |   |   | $ | - |   |   | $ | 5.1 |   |

|                                                                                              |   | Auction      Rate Securities |   |
|---------------------------------------------------------------------------------------------------|--------|------------------------------|--------|
|                                                                                              |   |                         |   |
| Carrying      value as of January 1, 2008                                                         |   | $                            | 11.5   |   |
| Settlements                                                                                       |   |                         | (2.6   | ) |
| Impairment      charge included in the   Consolidated      Statement of Operations |   |                         | (3.8   | ) |
| Carrying      value as of September 30, 2008                                                      |   | $                            | 5.1    |   |

----

Table of Contents

----

Table of Contents

|                                                                                | ReportableSegments            |                                                                  |   |   |                                  |   |      |                                                                      |                  |   | ReportableSegments                                                        |   |   |                                          |   |
|-------------------------------------------------------------------------------------|-------------------------------|-----------------------------------------------------------------------|--------|--------|---------------------------------------|--------|-----------|---------------------------------------------------------------------------|-----------------------|--------|---------------------------------------------------------------------------|--------|--------|-----------------------------------------------|--------|
|                                                                                | Real      Estate              |                                                                  | Racing |   | MGI                                   |   | Corporate |                                                                      | TotalExcludingDebtors |   | Debtors                                                                   |   |   | ConsolidatedTotal                             |
|                                                                                | (In      millions of dollars) |
| Investment,      interest andother income for      thethree months    ended:        |                          |                                                                  |   |   |                                  |   |      |                                                                      |                  |   |                                                                      |   |   |                                          |   |   |   |   |   |   |   |
| September 30,    2008                                                               | $                             |          (0.3)           |   | $      |   (0.3)                     |   | $         |             - |                  | $      |             - | (1)    | $      |       (0.6)     |   | $ | (2) |   | $ |              (0.6) |
| September 30,    2007                                                               |                          |            0.8 |   |   |       - |   |      |             - |                  |   |          0.6                 |   |   |        1.4 |   |   |   | (2) |   |   |                1.4 |
|                                                                                |                          |                                                                  |   |   |                                  |   |      |                                                                      |                  |   |                                                                      |   |   |                                          |   |   |   |   |   |   |   |
| Investment,      interest andother income for      thenine months    ended:         |                          |                                                                  |   |   |                                  |   |      |                                                                      |                  |   |                                                                      |   |   |                                          |   |   |   |   |   |   |   |
| September 30,    2008                                                               | $                             |          (1.3)           |   | $      |   (0.3)                     |   | $         |             - |                  | $      |        (4.8)                           | (1)    | $      |       (6.4)     |   | $ | (2) |   | $ |              (6.4) |
| September 30,    2007                                                               |                          |            2.0 |   |   |    0.1                 |   |      |             - |                  |   |          2.1                 |   |   |        4.2 |   |   |           0.2 | (3) |   |   |                4.4 |
|                                                                                |                          |                                                                  |   |   |                                  |   |      |                                                                      |                  |   |                                                                      |   |   |                                          |   |   |   |   |   |   |   |
| Selling,      general andadministrative      expensefor the three      monthsended: |                          |                                                                  |   |   |                                  |   |      |                                                                      |                  |   |                                                                      |   |   |                                          |   |   |   |   |   |   |   |
| September 30,    2008                                                               | $                             |            2.7 |   | $      |    2.4                 |   | $         |          0.4                 |                  | $      |          4.9                 | (4)    | $      |      10.4            |   | $ | (2) |   | $ |              10.4 |
| September 30,    2007                                                               |                          |            3.2 |   |   |    4.1                 |   |      |          0.3                 |                  |   |          3.4                 | (4)    |   |      11.0            |   |   |   | (2) |   |   |              11.0 |
|                                                                                |                          |                                                                  |   |   |                                  |   |      |                                                                      |                  |   |                                                                      |   |   |                                          |   |   |   |   |   |   |   |
| Selling,      general andadministrative      expensefor the nine months      ended: |                          |                                                                  |   |   |                                  |   |      |                                                                      |                  |   |                                                                      |   |   |                                          |   |   |   |   |   |   |   |
| September 30,    2008                                                               | $                             |          10.1            |   | $      |    6.8                 |   | $         |          1.4                 |                  | $      |          8.4                 | (4)    | $      |      26.7            |   | $ | (2) |   | $ |              26.7 |
| September 30,    2007                                                               |                          |          11.1            |   |   |    8.5                 |   |      |          1.5                 |                  |   |          7.2                 | (4)    |   |      28.3            |   |   |           1.5 | (3) |   |   |              29.8 |
|                                                                                |                          |                                                                  |   |   |                                  |   |      |                                                                      |                  |   |                                                                      |   |   |                                          |   |   |   |   |   |   |   |
| Operating      loss forthe three months      ended:                                 |                          |                                                                  |   |   |                                  |   |      |                                                                      |                  |   |                                                                      |   |   |                                          |   |   |   |   |   |   |   |
| September 30,    2008                                                               | $                             |          (0.4)           |   | $      |   (3.9)                     |   | $         |        (0.4)                           |                  | $      |        (3.5)                           |   | $      |       (8.2)     |   | $ | (2) |   | $ |              (8.2) |
| September 30,    2007                                                               |                          |          (0.9)           |   |   |   (3.0)                     |   |      |        (0.3)                           |                  |   |        (3.4)                           |   |   |       (7.6)     |   |   |   | (2) |   |   |              (7.6) |
|                                                                                |                          |                                                                  |   |   |                                  |   |      |                                                                      |                  |   |                                                                      |   |   |                                          |   |   |   |   |   |   |   |
| Operating      loss for thenine months    ended:                                    |                          |                                                                  |   |   |                                  |   |      |                                                                      |                  |   |                                                                      |   |   |                                          |   |   |   |   |   |   |   |
| September 30,    2008                                                               | $                             |          (3.3)           |   | $      |   (7.4)                     |   | $         |        (1.4)                           |                  | $      |        (8.3)                           |   | $      |     (20.4)                |   | $ | (2) |   | $ |            (20.4) |
| September 30,    2007                                                               |                          |          (1.5)           |   |   |   (5.4)                     |   |      |        (1.5)                           |                  |   |        (7.3)                           |   |   |     (15.7)                |   |   |          (2.3) | (3) |   |   |            (18.0) |
|                                                                                |                          |                                                                  |   |   |                                  |   |      |                                                                      |                  |   |                                                                      |   |   |                                          |   |   |   |   |   |   |   |
| Interest      expense for thethree months ended (5):                                |                          |                                                                  |   |   |                                  |   |      |                                                                      |                  |   |                                                                      |   |   |                                          |   |   |   |   |   |   |   |
| September 30,    2008                                                               | $                             |            4.1 |   | $      |       - |   | $         |             - |                  | $      |          0.1                 |   | $      |        4.2 |   | $ | (2) |   | $ |                4.2 |
| September 30,    2007                                                               |                          |            4.2 |   |   |       - |   |      |             - |                  |   |          0.1                 |   |   |        4.3 |   |   |   | (2) |   |   |                4.3 |
|                                                                                |                          |                                                                  |   |   |                                  |   |      |                                                                      |                  |   |                                                                      |   |   |                                          |   |   |   |   |   |   |   |
| Interest      expense for thenine months ended (5):                                 |                          |                                                                  |   |   |                                  |   |      |                                                                      |                  |   |                                                                      |   |   |                                          |   |   |   |   |   |   |   |
| September 30,    2008                                                               | $                             |          12.5            |   | $      |       - |   | $         |             - |                  | $      |          0.1                 |   | $      |      12.6            |   | $ | (2) |   | $ |              12.6 |
| September 30,    2007                                                               |                          |          12.7            |   |   |       - |   |      |             - |                  |   |          0.1                 |   |   |      12.8            |   |   |           3.1 | (3) |   |   |              15.9 |

----

Table of Contents

|                                                                      | ReportableSegments            |                                    |   |   |                        |   |      |                                        |                  |   | ReportableSegments                                                  |   |   |                                          |   |
|---------------------------------------------------------------------------|-------------------------------|-----------------------------------------|--------|--------|-----------------------------|--------|-----------|---------------------------------------------|-----------------------|--------|---------------------------------------------------------------------|--------|--------|-----------------------------------------------|--------|
|                                                                      | RealEstate                    |                                    | Racing |   | MGI                         |   | Corporate |                                        | TotalExcludingDebtors |   | Debtors                                                             |   |   | ConsolidatedTotal                             |
|                                                                      | (In      millions of dollars) |
|                                                                      |                          |                                    |   |   |                        |   |      |                                        |                  |   |                                                                |   |   |                                          |   |   |   |   |   |   |   |
| Depreciation,      depletion andamortization forthethree months    ended: |                          |                                    |   |   |                        |   |      |                                        |                  |   |                                                                |   |   |                                          |   |   |   |   |   |   |   |
| September 30,    2008                                                     | $                             |    2.3                   |   | $      |     1.8 | (7)    | $         |        - |                  | $      |            - |   | $      |        4.1 |   | $ | (2) |   | $ |               4.1 |
| September 30,    2007                                                     |                          |       3.1 |   |   |     0.4 |   |      |        - |                  |   |            - |   |   |        3.5 |   |   |   | (2) |   |   |               3.5 |
|                                                                      |                          |                                    |   |   |                        |   |      |                                        |                  |   |                                                                |   |   |                                          |   |   |   |   |   |   |   |
| Depreciation,      depletion andamortization forthenine months    ended:  |                          |                                    |   |   |                        |   |      |                                        |                  |   |                                                                |   |   |                                          |   |   |   |   |   |   |   |
| September 30,    2008                                                     | $                             |       7.2 |   | $      |     2.7 | (7)    | $         |        - |                  | $      |          0.1           |   | $      |      10.0            |   | $ | (2) |   | $ |             10.0 |
| September 30,    2007                                                     |                          |       9.3 |   |   |     1.2 |   |      |        - |                  |   |          0.1           |   |   |      10.6            |   |   |           0.9 | (3) |   |   |             11.5 |
|                                                                      |                          |                                    |   |   |                        |   |      |                                        |                  |   |                                                                |   |   |                                          |   |   |   |   |   |   |   |
| Loss      before incometaxes for the threemonths ended:                   |                          |                                    |   |   |                        |   |      |                                        |                  |   |                                                                |   |   |                                          |   |   |   |   |   |   |   |
| September 30,    2008                                                     | $                             |     (4.8)           | (6)    | $      |   (4.2)           | (7)    | $         |   (0.4)                           |                  | $      |        (3.6)                     | (8)    | $      |     (13.0)                |   | $ | (2) |   | $ |           (13.0) |
| September 30,    2007                                                     |                          |     (4.3)           |   |   |   (3.0)           |   |      |   (0.3)                           |                  |   |        (2.9)                     |   |   |     (10.5)                |   |   |   | (2) |   |   |           (10.5) |
|                                                                      |                          |                                    |   |   |                        |   |      |                                        |                  |   |                                                                |   |   |                                          |   |   |   |   |   |   |   |
| Loss      before income taxes forthe nine months      ended:              |                          |                                    |   |   |                        |   |      |                                        |                  |   |                                                                |   |   |                                          |   |   |   |   |   |   |   |
| September 30,    2008                                                     | $                             |   (17.1)                      |   | $      |   (7.7)           | (7)    | $         |   (1.4)                           |                  | $      |      (13.2)                                | (8)    | $      |     (39.4)                |   | $ | (2) |   | $ |           (39.4) |
| September 30,    2007                                                     |                          |   (12.2)                      |   |   |   (5.3)           |   |      |   (1.5)                           |                  |   |        (5.3)                     |   |   |     (24.3)                |   |   |          (5.2) | (3) |   |   |           (29.5) |
|                                                                      |                          |                                    |   |   |                        |   |      |                                        |                  |   |                                                                |   |   |                                          |   |   |   |   |   |   |   |
| Capital      expendituresfor the threemonthsended:                        |                          |                                    |   |   |                        |   |      |                                        |                  |   |                                                                |   |   |                                          |   |   |   |   |   |   |   |
| September      30, 2008                                                   | $                             |       0.2 |   | $      |     0.1 |   | $         |        - |                  | $      |            - |   | $      |        0.3 |   | $ | (2) |   | $ |               0.3 |
| September      30, 2007                                                   |                          |       0.4 |   |   |     0.7 |   |      |        - |                  |   |            - |   |   |        1.1 |   |   |   | (2) |   |   |               1.1 |
|                                                                      |                          |                                    |   |   |                        |   |      |                                        |                  |   |                                                                |   |   |                                          |   |   |   |   |   |   |   |
| Capital      expendituresfor the nine monthsended:                        |                          |                                    |   |   |                        |   |      |                                        |                  |   |                                                                |   |   |                                          |   |   |   |   |   |   |   |
| September 30,    2008                                                     | $                             |       0.7 |   | $      |     1.7 |   | $         |        - |                  | $      |            - |   | $      |        2.4 |   | $ | (2) |   | $ |               2.4 |
| September 30,    2007                                                     |                          |       0.8 |   |   |     2.1 |   |      |        - |                  |   |          0.1           |   |   |        3.0 |   |   |              - | (3) |   |   |               3.0 |
|                                                                      |                          |                                    |   |   |                        |   |      |                                        |                  |   |                                                                |   |   |                                          |   |   |   |   |   |   |   |
| Total      assets as of:                                                  |                          |                                    |   |   |                        |   |      |                                        |                  |   |                                                                |   |   |                                          |   |   |   |   |   |   |   |
| September 30,    2008                                                     | $                             |   269.5                       |   | $      |   34.8            |   | $         |        - |                  | $      |      106.0                                 |   | $      |    410.3                       |   | $ | (2) |   | $ |           410.3 |
| December 31,    2007                                                      |                          |   281.5                       |   |   |   36.0            |   |      |        - |                  |   |      201.4                                 |   |   |    518.9                       |   |   |   | (2) |   |   |           518.9 |

| (1) | Includes      a $0.1 million impairment charge for the three months ended September 30,      2008 and a $5.6 million impairment charge for the nine months ended      September 30, 2008 related to the Company’s investment      portfolio. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | As      a result of the deconsolidation of the Debtors, their data is not included      in the consolidated results of operations for the three months and nine      months ended September 30, 2008 and the three months ended September 30,      2007 or in consolidated total assets as of September 30, 2008 or December      31, 2007. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | These      amounts are for the period from January 1, 2007 through January 18,      2007. |
|-----|-------------------------------------------------------------------------------------------|

| (4) | Includes a benefit related to      stock-based compensation in the amount of $4.4 million and $0 for the      three months ended September 30, 2008 and 2007, respectively and $6.0      million and $0.4 million for the nine months ended September 30, 2008 and      2007, respectively. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Interest      expense includes amortization of deferred financing  costs. |
|-----|---------------------------------------------------------------------------|

| (6) | Includes      a $0.4 million write-off of deferred development  costs. |
|-----|------------------------------------------------------------------------|

| (7) | Includes      a write-off of $1.3 million representing the estimated net book value of      the property damaged or destroyed by Hurricane Ike.  See Note 12      for additional information. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (8) | Includes      income of $1.2 million related to the recognition of contingent      consideration on the sale of lumber toMRC. |
|-----|-------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

|                                                                                             |   | September      30,2008 |   |   | December      31,2007 |   |
|--------------------------------------------------------------------------------------------------|--------|------------------------|--------|--------|-----------------------|--------|
|                                                                                             |   |                   |   |   |                  |   |
| Current:                                                                                         |   |                   |   |   |                  |   |
| Cash      and cash equivalents                                                                   |   | $                      | 52.4   |   |                  | $      | 67.8 |   |
| Marketable      securities - auction rate securities                                             |   |                   | -      |   |                  |   | 5.5 |   |
| Marketable      securities - other                                                               |   |                   | 2.7    |   |                  |   | 19.5 |   |
| Restricted      cash                                                                             |   |                   | 2.3    |   |                  |   | 2.3 |   |
| Total      current                                                                               |   |                   | 57.4   |   |                  |   | 95.1 |   |
|                                                                                             |   |                   |   |   |                  |   |   |   |
| Non-Current:                                                                                     |   |                   |   |   |                  |   |   |   |
| Marketable      securities - auction rate securities                                             |   |                   | 5.1    |   |                  |   | 6.0 |   |
| Investments      in limited partnerships                                                         |   |                   | 6.0    |   |                  |   | 24.0 |   |
| Restricted      cash                                                                             |   |                   | 3.6    |   |                  |   | 3.6 |   |
| Total      non-current                                                                           |   |                   | 14.7   |   |                  |   | 33.6 |   |
|                                                                                             |   |                   | 72.1   |   |                  |   | 128.7 |   |
| Less:  restricted      amounts                                                         |   |                   | (5.9   | )      |                  |   | (5.9 | ) |
| Total      unrestricted cash, cash equivalents, marketable securities and other      investments |   | $                      | 66.2   |   |                  | $      | 122.8 |   |

----

Table of Contents

|                                         |   | September      30, 2008 |   |
|----------------------------------------------|--------|-------------------------|--------|
|                                         |   | CarryingValue           |   |   | AggregateFair      Value |   |   | Net      Gainsin      AOCL |   |   | Net      Lossesin      AOCL |   |
|                                         |   |                    |   |   |   |   |   |   |   |   |   |   |
| Auction      rate securities                 |   | $                       | 5.1    |   |   |   | 5.1 |   |   | $ | - |   |   | $ | - |   |
| Equity      securities and other investments |   |                    | 2.7    |   |   |   | 2.7 |   |   |   | - |   |   |   | (0.8 | ) |
| Total                                        |   | $                       | 7.8    |   |   | $ | 7.8 |   |   | $ | - |   |   | $ | (0.8 | ) |
|                                         |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                                       |   | December      31, 2007 |   |
|------------------------------------------------------------|--------|------------------------|--------|
|                                                       |   | CarryingValue          |   |   | AggregateFair      Value |   |   | Net      Gainsin      AOCL |   |   | Net      Lossesin      AOCL |   |
|                                                       |   |                   |   |   |   |   |   |   |   |   |   |   |
| Debt      securities with maturities of less than one year |   | $                      | 6.3    |   |   | $ | 6.3 |   |   | $ | - |   |   | $ | - |   |
| Auction      rate securities                               |   |                   | 11.5   |   |   |   | 11.5 |   |   |   | - |   |   |   | - |   |
| Equity      securities and other investments               |   |                   | 13.2   |   |   |   | 13.2 |   |   |   | 0.4 |   |   |   | (1.7 | ) |
| Total                                                      |   | $                      | 31.0   |   |   | $ | 31.0 |   |   | $ | 0.4 |   |   | $ | (1.7 | ) |

----

Table of Contents

|                                                                                                                              |   | September      30,2008 |   |   | December      31,2007 |   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|--------|--------|-----------------------|--------|
|                                                                                                                              |   |                   |   |   |                  |   |
| 7.56%      Lakepointe Notes due June 8, 2021                                                                                      |   | $                      | 110.5  |   |                  | $      | 111.8 |   |
| 7.03%      Motel Notes due May 1, 2018                                                                                            |   |                   | 41.9   |   |                  |   | 43.3 |   |
| 6.08%      Beltway Notes due November 9, 2024                                                                                     |   |                   | 27.4   |   |                  |   | 27.9 |   |
| 7.12%      Palmas Notes due December 20, 2030                                                                                     |   |                   | 28.0   |   |                  |   | 28.2 |   |
| Other      notes and contracts, primarily secured by receivables, buildings, real      estate   and      equipment |   |                   | 4.9    |   |                  |   | 5.3 |   |
| Total      principal outstanding                                                                                                  |   |                   | 212.7  |   |                  |   | 216.5 |   |
|                                                                                                                              |   |                   |   |   |                  |   |   |   |
| Less:  Short-term      borrowings and current maturities                                                                |   |                   | (6.0   | )      |                  |   | (5.3 | ) |
|                                                                                                                              |   | $                      | 206.7  |   |                  | $      | 211.2 |   |
|                                                                                                                              |   |                   |   |   |                  |   |   |   |

----

Table of Contents

|                                          |   | Pension      Benefits                 |   |   | Medical/Life                         |   |   | Pension      Benefits |   |   | Medical/Life |   |
|-----------------------------------------------|--------|---------------------------------------|--------|--------|--------------------------------------|--------|--------|-----------------------|--------|--------|--------------|--------|
|                                          |   | Three      Months Ended September 30, |   |   | Nine      Months Ended September 30, |   |
|                                          |   | 2008                                  |   |   | 2007                                 |   |   | 2008                  |   |   | 2007         |   |   | 2008 |   |   | 2007 |   |   | 2008 |   |   | 2007 |   |
|                                          |   |                                  |   |   |                                 |   |   |                  |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Components      of net periodicbenefit costs: |   |                                  |   |   |                                 |   |   |                  |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service cost                                  |   | $                                     | -      |   |                                 | $      | -      |                  |   | $      | 0.1          |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 0.1 |   |   | $ | - |   |
| Interest cost                                 |   |                                  | 0.5    |   |                                 |   | 0.5    |                  |   |   | -            |   |   |   | - |   |   |   | 1.4 |   |   |   | 1.5 |   |   |   | 0.1 |   |   |   | - |   |
| Expected return on      assets                |   |                                  | (0.6   | )      |                                 |   | (0.5   | )                     |   |   | -            |   |   |   | - |   |   |   | (1.7 | ) |   |   | (1.5 | ) |   |   | - |   |   |   | - |   |
| Recognized net actuarial      loss            |   |                                  | -      |   |                                 |   | -      |                  |   |   | -            |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Amortization of      priorservice costs       |   |                                  | -      |   |                                 |   | -      |                  |   |   | (0.1         | )      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (0.1 | ) |   |   | - |   |
| Net periodic benefit      costs               |   |                                  | (0.1   | )      |                                 |   | -      |                  |   |   | -            |   |   |   | - |   |   |   | (0.3 | ) |   |   | - |   |   |   | 0.1 |   |   |   | - |   |
| Curtailments, settlements      andother       |   |                                  | -      |   |                                 |   | -      |                  |   |   | -            |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Adjusted net periodic      benefitcosts       |   | $                                     | (0.1   | )      |                                 | $      | -      |                  |   | $      | -            |   |   | $ | - |   |   | $ | (0.3 | ) |   | $ | - |   |   | $ | 0.1 |   |   | $ | - |   |

----

Table of Contents

----

Table of Contents

|                          |   | Nine      Months EndedSeptember      30, |   |
|-------------------------------|--------|------------------------------------------|--------|
|                          |   | 2008                                     |   |   | 2007 |   |
|                          |   |                                     |   |   |   |   |
| Expected      volatility      |   |                                     | 33     | % |   |   | 29 | % |
| Expected      dividends       |   |                                     | -      |   |   |   | - |   |
| Expected      term (in years) |   |                                     | 7.14   |   |   |   | 7.33 |   |
| Risk-free      rate           |   |                                     | 3.0    | % |   |   | 4.2 | % |

|                                   |   | Options                                                                                                           |   | WeightedAverageExercise      Price |                                                                                                  | Weighted      AverageRemainingContractual      Term(in      years) |                                                                                                                                                             | AggregateIntrinsic      Value(in      millions) |
|----------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|-------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------|
|                                   |   |                                                                                                              |   |                               |                                                                                                  |                                                               |                                                                                                                                                             |                                            |   |   |
| Balance      at January 1, 2008        |   |            1,019,086                                       |   | $                                  |                 24.11 |                                                               |                                                                                                                                                             |                                            |   |   |
| Granted                                |   |                   2,400 |   |                               |                 28.50 |                                                               |                                                                                                                                                             |                                            |   |   |
| Exercised                              |   |                 (2,600)           |   |                               |                 13.70 |                                                               |                                                                                                                                                             |                                            |   |   |
| Forfeited      or expired              |   |               (92,804)                      |   |                               |                 40.52 |                                                               |                                                                                                                                                             |                                            |   |   |
| Balance      at September 30, 2008     |   |               926,082                       |   | $                                  |                 22.52 |                                                               |                           4.78 |                                            |  $ |                    0.7 |
| Exercisable      at September 30, 2008 |   |               708,996                       |   | $                                  |                 20.78 |                                                               |                           3.88 |                                            |  $ |                    0.7 |

----

Table of Contents

|                                                                |   | Three      Months EndedSeptember      30, |      |   | Nine      Months EndedSeptember      30, |   |
|---------------------------------------------------------------------|--------|-------------------------------------------|-----------|--------|------------------------------------------|--------|
|                                                                |   | 2008                                      |      |   | 2007                                     |   |   | 2008      (1) |   |   | 2007 |   |
|                                                                |   |                                      |      |   |                                     |   |   |   |   |   |   |   |
| Weighted      average number of common shares outstanding-basic(2): |   |                                      | 4,561,237 |   |                                     |   | 5,250,230 |   |   |   | 4,744,398 |   |   |   | 5,252,244 |   |
|                                                                |   |                                      |      |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Effect      of dilution(3):                                         |   |                                      |      |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Conversion      of Class A Preferred Stock                          |   |                                      | -         |   |                                     |   | - |   |   |   | - |   |   |   | - |   |
| Exercise      of stock options                                      |   |                                      | -         |   |                                     |   | - |   |   |   | - |   |   |   | - |   |
|                                                                |   |                                      |      |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average number of common shares outstanding-diluted   |   |                                      | 4,561,237 |   |                                     |   | 5,250,230 |   |   |   | 4,744,398 |   |   |   | 5,252,244 |   |
|                                                                |   |                                      |      |   |                                     |   |   |   |   |   |   |   |   |   |   |   |

| (1) | In      the second quarter of 2008, a mathematical error was discovered in the      calculation of the weighted average shares outstanding for the first      quarter of 2008.  As a result, earnings per share for the three      months ended March 31, 2008 was reported as a loss of $2.58 per share,      rather than a loss of $2.72 pershare. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | In      March 2008, MAXXAM Parent purchased 687,480 shares of its Common Stock      from two affiliated institutional holders in a privately negotiated      transaction for an aggregate cost of $20.1  million. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | The      Company had a loss for the three and nine months ended September 30, 2008      and 2007.  The Class A Preferred Stock and options were      therefore not included in the computation of earnings per share for the      period as the effect would be anti-dilutive.  If the Company was      required to include dilutive shares in its per share calculations, the      number of dilutive shares of Class A Preferred Stock for the three and      nine months ended September 30, 2008 and 2007 would be 668,119 and      668,119, respectively, and the number of dilutive options for the three      months ended September 30, 2008 and 2007 would be 104,265  and      265,238, respectively, and the number of dilutive options for the nine      months ended September 30, 2008 and 2007 would be 34,755 and 88,413,      respectively. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                          |   | Three      Months EndedSeptember      30, |   |   | Nine      Months EndedSeptember      30, |   |
|---------------------------------------------------------------|--------|-------------------------------------------|--------|--------|------------------------------------------|--------|
|                                                          |   | 2008                                      |   |   | 2007                                     |   |   | 2008 |   |   | 2007 |   |
|                                                          |   |                                      |   |   |                                     |   |   |   |   |   |   |   |
| Net      loss                                                 |   | $                                         | (65.4  | )      |                                     | $      | (10.5 | ) |   | $ | (92.0 | ) |   | $ | (29.5 | ) |
| Other      comprehensive loss:                                |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized      gain (loss) on available-for-sale investments |   |                                      | (1.2   | )      |                                     |   | (0.2 | ) |   |   | 0.5 |   |   |   | - |   |
| Total      comprehensive loss                                 |   | $                                         | (66.6  | )      |                                     | $      | (10.7 | ) |   | $ | (91.5 | ) |   | $ | (29.5 | ) |

----

Table of Contents

| ITEM      2. | MANAGEMENT’S DISCUSSION AND ANALYSIS      OF FINANCIAL CONDITION AND RESULTS OF  OPERATIONS |
|--------------|---------------------------------------------------------------------------------------------------|

----

Table of Contents

|                                                                                            |   | Three      Months EndedSeptember      30, |   |   | Nine      Months EndedSeptember      30, |   |
|-------------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------|--------|------------------------------------------|--------|
|                                                                                            |   | 2008                                      |   |   | 2007                                     |   |   | 2008 |   |   | 2007(1) |   |
|                                                                                            |   | (In      millions of dollars)             |   |
|                                                                                            |   |                                      |   |   |                                     |   |   |   |   |   |   |   |
| Sales                                                                                           |   | $                                         | 23.7   |   |                                     | $      | 23.0 |   |   | $ | 68.7 |   |   | $ | 70.6 |   |
| Costs      and expenses                                                                         |   |                                      | (31.9  | )      |                                     |   | (30.6 | ) |   |   | (89.1 | ) |   |   | (86.3 | ) |
| Operating      loss                                                                             |   |                                      | (8.2   | )      |                                     |   | (7.6 | ) |   |   | (20.4 | ) |   |   | (15.7 | ) |
| Other      income (expense)                                                                     |   |                                      | (0.6   | )      |                                     |   | 1.4 |   |   |   | (6.4 | ) |   |   | 4.3 |   |
| Interest      expense, including amortization of deferred   financing      costs |   |                                      | (4.2   | )      |                                     |   | (4.3 | ) |   |   | (12.6 | ) |   |   | (12.8 | ) |
| Loss      before income taxes                                                                   |   |                                      | (13.0  | )      |                                     |   | (10.5 | ) |   |   | (39.4 | ) |   |   | (24.2 | ) |
| Provision      for income taxes                                                                 |   |                                      | (52.4  | )      |                                     |   | - |   |   |   | (52.6 | ) |   |   | - |   |
| Net      loss                                                                                   |   | $                                         | (65.4  | )      |                                     | $      | (10.5 | ) |   | $ | (92.0 | ) |   | $ | (24.2 | ) |
|                                                                                            |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Revenues      by segment as a percentage of total:                                              |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Real      estate                                                                                |   |                                      | 35.0   | %      |                                     |   | 42.2 | % |   |   | 39.2 | % |   |   | 48.3 | % |
| Racing                                                                                          |   |                                      | 54.9   | %      |                                     |   | 57.8 | % |   |   | 53.1 | % |   |   | 51.7 | % |
| Corporate                                                                                       |   |                                      | 10.1   | %      |                                     |   | - |   |   |   | 7.7 | % |   |   | - |   |
|                                                                                            |   |                                      | 100.0  | %      |                                     |   | 100.0 | % |   |   | 100.0 | % |   |   | 100.0 | % |

| (1) | Excludes      sales of $4.4 million, operating losses of $2.3 million and net losses of      $5.2 million related to the Debtors for the period from January 1, 2007      through January 18, 2007. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

----

Table of Contents

|                                                                                                 |   | Three      Months EndedSeptember      30, |   |   | Nine      Months EndedSeptember      30, |   |
|------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------|--------|------------------------------------------|--------|
|                                                                                                 |   | 2008                                      |   |   | 2007                                     |   |   | 2008 |   |   | 2007 |   |
|                                                                                                 |   | (In      millions of dollars)             |   |
|                                                                                                 |   |                                      |   |   |                                     |   |   |   |   |   |   |   |
| Sales:                                                                                               |   |                                      |   |   |                                     |   |   |   |   |   |   |   |
| Real      estate:                                                                                    |   |                                      |   |   |                                     |   |   |   |   |   |   |   |
| Fountain      Hills                                                                                  |   | $                                         | 0.5    |   |                                     | $      | 1.4 |   |   | $ | 1.9 |   |   | $ | 6.3 |   |
| Mirada                                                                                               |   |                                      | -      |   |                                     |   | 0.4 |   |   |   | 0.5 |   |   |   | 1.8 |   |
| Palmas                                                                                               |   |                                      | 0.4    |   |                                     |   | 0.1 |   |   |   | 0.6 |   |   |   | 0.3 |   |
| Total                                                                                                |   |                                      | 0.9    |   |                                     |   | 1.9 |   |   |   | 3.0 |   |   |   | 8.4 |   |
|                                                                                                 |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Resort,      commercial and other:                                                                   |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Fountain      Hills                                                                                  |   |                                      | 0.4    |   |                                     |   | 0.5 |   |   |   | 2.2 |   |   |   | 2.6 |   |
| Palmas                                                                                               |   |                                      | 2.4    |   |                                     |   | 2.6 |   |   |   | 7.8 |   |   |   | 9.1 |   |
| Commercial      lease properties                                                                     |   |                                      | 4.6    |   |                                     |   | 4.6 |   |   |   | 13.8 |   |   |   | 13.8 |   |
| Other                                                                                                |   |                                      | -      |   |                                     |   | 0.1 |   |   |   | 0.1 |   |   |   | 0.2 |   |
| Total                                                                                                |   |                                      | 7.4    |   |                                     |   | 7.8 |   |   |   | 23.9 |   |   |   | 25.7 |   |
|                                                                                                 |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Total      sales                                                                                     |   | $                                         | 8.3    |   |                                     | $      | 9.7 |   |   | $ | 26.9 |   |   | $ | 34.1 |   |
|                                                                                                 |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Operating      income (loss):                                                                        |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Fountain      Hills                                                                                  |   | $                                         | (0.4   | )      |                                     | $      | (0.2 | ) |   | $ | (1.6 | ) |   | $ | 0.5 |   |
| Mirada                                                                                               |   |                                      | -      |   |                                     |   | 0.4 |   |   |   | (0.2 | ) |   |   | 1.0 |   |
| Palmas                                                                                               |   |                                      | (2.9   | )      |                                     |   | (3.5 | ) |   |   | (9.7 | ) |   |   | (9.6 | ) |
| Commercial      lease properties                                                                     |   |                                      | 3.2    |   |                                     |   | 2.6 |   |   |   | 9.7 |   |   |   | 7.8 |   |
| Other                                                                                                |   |                                      | (0.3   | )      |                                     |   | (0.2 | ) |   |   | (1.5 | ) |   |   | (1.2 | ) |
| Total      operating income (loss)                                                                   |   | $                                         | (0.4   | )      |                                     | $      | (0.9 | ) |   | $ | (3.3 | ) |   | $ | (1.5 | ) |
|                                                                                                 |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Investment,      interest and other income:                                                          |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Equity      in earnings from real estate joint ventures                                              |   | $                                         | (0.4   | )      |                                     | $      | 0.3 |   |   | $ | (0.3 | ) |   | $ | 0.7 |   |
| Other                                                                                                |   |                                      | 0.1    |   |                                     |   | 0.5 |   |   |   | (1.0 | ) |   |   | 1.3 |   |
|                                                                                                 |   | $                                         | (0.3   | )      |                                     | $      | 0.8 |   |   | $ | (1.3 | ) |   | $ | 2.0 |   |
|                                                                                                 |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Interest      expense and amortization of     deferred      financing costs |   | $                                         | (4.1   | )      |                                     | $      | (4.2 | ) |   | $ | (12.5 | ) |   | $ | (12.7 | ) |
|                                                                                                 |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Loss      before income taxes                                                                        |   | $                                         | (4.8   | )      |                                     | $      | (4.3 | ) |   | $ | (17.1 | ) |   | $ | (12.2 | ) |

----

Table of Contents

|                               |   | Three      Months EndedSeptember      30, |   |   | Nine      Months EndedSeptember      30, |   |
|------------------------------------|--------|-------------------------------------------|--------|--------|------------------------------------------|--------|
|                               |   | 2008                                      |   |   | 2007                                     |   |   | 2008 |   |   | 2007 |   |
|                               |   | (In      millions of dollars)             |   |
|                               |   |                                      |   |   |                                     |   |   |   |   |   |   |   |
| Number      of live racing days:   |   |                                      |   |   |                                     |   |   |   |   |   |   |   |
| Sam      Houston Race Park         |   |                                      | 30     |   |                                     |   | 35 |   |   |   | 77 |   |   |   | 81 |   |
| Valley      Race Park              |   |                                      | -      |   |                                     |   | - |   |   |   | 71 |   |   |   | 70 |   |
|                               |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Handle:                            |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Sam      Houston Race Park:        |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| On-track      handle               |   | $                                         | 27.9   |   |                                     | $      | 33.4 |   |   | $ | 90.9 |   |   | $ | 97.0 |   |
| Off-track      handle              |   |                                      | 6.4    |   |                                     |   | 9.1 |   |   |   | 79.1 |   |   |   | 92.9 |   |
| Total                              |   | $                                         | 34.3   |   |                                     | $      | 42.5 |   |   | $ | 170.0 |   |   | $ | 189.9 |   |
|                               |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Valley      Race Park:             |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| On-track      handle               |   | $                                         | 3.4    |   |                                     | $      | 3.7 |   |   | $ | 13.2 |   |   | $ | 13.5 |   |
| Off-track      handle              |   |                                      | -      |   |                                     |   | - |   |   |   | 3.0 |   |   |   | 2.9 |   |
| Total                              |   | $                                         | 3.4    |   |                                     | $      | 3.7 |   |   | $ | 16.2 |   |   | $ | 16.4 |   |
|                               |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Sales:                             |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Sam      Houston Race Park:        |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Gross      pari-mutuel commissions |   | $                                         | 6.3    |   |                                     | $      | 7.6 |   |   | $ | 22.2 |   |   | $ | 24.1 |   |
| Concert      revenues              |   |                                      | 3.3    |   |                                     |   | 1.4 |   |   |   | 4.1 |   |   |   | 1.7 |   |
| Other      revenues                |   |                                      | 2.6    |   |                                     |   | 3.4 |   |   |   | 6.4 |   |   |   | 6.8 |   |
| Total                              |   |                                      | 12.2   |   |                                     |   | 12.4 |   |   |   | 32.7 |   |   |   | 32.6 |   |
| Valley      Race Park:             |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Gross      pari-mutuel commissions |   |                                      | 0.7    |   |                                     |   | 0.8 |   |   |   | 3.1 |   |   |   | 3.2 |   |
| Other      revenues                |   |                                      | 0.1    |   |                                     |   | 0.1 |   |   |   | 0.7 |   |   |   | 0.7 |   |
| Total                              |   |                                      | 0.8    |   |                                     |   | 0.9 |   |   |   | 3.8 |   |   |   | 3.9 |   |
| Total      sales                   |   | $                                         | 13.0   |   |                                     | $      | 13.3 |   |   | $ | 36.5 |   |   | $ | 36.5 |   |
|                               |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Operating      loss:               |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Sam      Houston Race Park         |   | $                                         | (3.5   | )      |                                     | $      | (2.7 | ) |   | $ | (6.6 | ) |   | $ | (4.2 | ) |
| Valley      Race Park              |   |                                      | (0.2   | )      |                                     |   | (0.2 | ) |   |   | (0.5 | ) |   |   | (0.7 | ) |
| Other                              |   |                                      | (0.2   | )      |                                     |   | (0.1 | ) |   |   | (0.3 | ) |   |   | (0.5 | ) |
| Total      operating loss          |   | $                                         | (3.9   | )      |                                     | $      | (3.0 | ) |   | $ | (7.4 | ) |   | $ | (5.4 | ) |
|                               |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Loss      before income taxes      |   | $                                         | (4.2   | )      |                                     | $      | (3.0 | ) |   | $ | (7.7 | ) |   | $ | (5.3 | ) |
|                               |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |

----

Table of Contents

----

Table of Contents

|                                                 |   | Three      Months EndedSeptember      30, |   |   | Nine      Months EndedSeptember      30, |   |
|------------------------------------------------------|--------|-------------------------------------------|--------|--------|------------------------------------------|--------|
|                                                 |   | 2008                                      |   |   | 2007                                     |   |   | 2008 |   |   | 2007 |   |
|                                                 |   | (In      millions of dollars)             |   |
|                                                 |   |                                      |   |   |                                     |   |   |   |   |   |   |   |
|                                                 |   |                                      |   |   |                                     |   |   |   |   |   |   |   |
| Revenue                                              |   | $                                         | 2.4    |   |                                     | $      | - |   |   | $ | 5.3 |   |   | $ | - |   |
| Cost      of goods sold                              |   |                                      | (1.0   | )      |                                     |   | - |   |   |   | (5.1 | ) |   |   | - |   |
| Gain      on lumber sale                             |   |                                      | 1.4    |   |                                     |   | - |   |   |   | 0.2 |   |   |   | - |   |
| Corporate      expenses                              |   |                                      | (9.3   | )      |                                     |   | (3.4 | ) |   |   | (14.5 | ) |   |   | (7.7 | ) |
| Stock-based      compensation                        |   |                                      | 4.4    |   |                                     |   | - |   |   |   | 6.0 |   |   |   | 0.4 |   |
| Operating      loss                                  |   |                                      | (3.5   | )      |                                     |   | (3.4 | ) |   |   | (8.3 | ) |   |   | (7.3 | ) |
| Investment,      interest and other income (expense) |   |                                      | (0.1   | )      |                                     |   | 0.5 |   |   |   | (4.9 | ) |   |   | 2.0 |   |
| Loss      before income taxes                        |   | $                                         | (3.6   | )      |                                     | $      | (2.9 | ) |   | $ | (13.2 | ) |   | $ | (5.3 | ) |

----

Table of Contents

|                          | Three      Months EndedSeptember      30, |   | Nine      Months EndedSeptember      30, |   |
|-------------------------------|-------------------------------------------|--------|------------------------------------------|--------|
|                          | 2008                                      |   | 2007                                     |   | 2008 |   | 2007 |   |
|                          | (In      millions of dollars)             |   |
|                          |                                      |   |                                     |   |   |   |   |   |   |   |   |   |
| Operating      loss           |                                      | $      | (0.4                                     | )      |   | $ | (0.3 | ) |   | $ | (1.4 | ) |   | $ | (1.5 | ) |
| Loss      before income taxes |                                      |   | (0.4                                     | )      |   |   | (0.3 | ) |   |   | (1.4 | ) |   |   | (1.5 | ) |

----

Table of Contents

|                                                                                                                                                                 |   | Real      Estate              |   |   | Racing |   |   | MGI    |   |   | Corporate |   |   | Total  |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|-----------|--------|--------|--------|--------|
|                                                                                                                                                                 |   | (In      millions of dollars) |   |
|                                                                                                                                                                 |   |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |
| Debt      and credit facilities   (excluding      intercompany   notes)                                                                |   |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |
| Short-term      borrowings and   current      maturities of   long-term      debt:                                                     |   |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |
| September      30, 2008                                                                                                                                              |   | $                             | 5.8    |   |   | $      | 0.2    |   |   | $      | -         |   |   | $      | -      |   |   | $ | 6.0 |   |
| December      31, 2007                                                                                                                                               |   |                          | 5.2    |   |   |   | 0.1    |   |   |   | -         |   |   |   | -      |   |   |   | 5.3 |   |
|                                                                                                                                                                 |   |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |   |   |
| Long-term      debt, excluding   current      maturities and   discounts:                                                              |   |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |   |   |
| September      30, 2008                                                                                                                                              |   | $                             | 206.0  |   |   | $      | 0.7    |   |   | $      | -         |   |   | $      | -      |   |   | $ | 206.7 |   |
| December      31, 2007                                                                                                                                               |   |                          | 210.4  |   |   |   | 0.8    |   |   |   | -         |   |   |   | -      |   |   |   | 211.2 |   |
|                                                                                                                                                                 |   |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |   |   |
| Cash,      cash equivalents,   marketable      securities   and other      investments                                                 |   |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |   |   |
| September      30, 2008                                                                                                                                              |   |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |   |   |
| Current      restricted amounts                                                                                                                                      |   | $                             | 0.1    |   |   | $      | 2.2    |   |   | $      | -         |   |   | $      | -      |   |   | $ | 2.3 |   |
| Other      current amounts                                                                                                                                           |   |                          | 4.1    |   |   |   | 2.5    |   |   |   | -         |   |   |   | 48.5   |   |   |   | 55.1 |   |
|                                                                                                                                                                 |   |                          | 4.2    |   |   |   | 4.7    |   |   |   | -         |   |   |   | 48.5   |   |   |   | 57.4 |   |
|                                                                                                                                                                 |   |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |   |   |
| Long-term      unrestricted investments                                                                                                                              |   |                          | 1.6    |   |   |   | -      |   |   |   | -         |   |   |   | 9.5    |   |   |   | 11.1 |   |
| Long-term      restricted   amounts                                                                                                                   |   |                          | 3.6    |   |   |   | -      |   |   |   | -         |   |   |   | -      |   |   |   | 3.6 |   |
|                                                                                                                                                                 |   | $                             | 9.4    |   |   | $      | 4.7    |   |   | $      | -         |   |   | $      | 58.0   |   |   | $ | 72.1 |   |
|                                                                                                                                                                 |   |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |   |   |
| Changes in cash and cash   equivalents                                                                                                                |   |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                 |   |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |   |   |
| Capital      expenditures for the nine months ended:                                                                                                                 |   |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |   |   |
| September      30, 2008                                                                                                                                              |   | $                             | 0.7    |   |   | $      | 1.7    |   |   | $      | -         |   |   | $      | -      |   |   | $ | 2.4 |   |
| September      30, 2007                                                                                                                                              |   |                          | 0.8    |   |   |   | 2.1    |   |   |   | -         |   |   |   | 0.1    |   |   |   | 3.0 |   |
|                                                                                                                                                                 |   |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |   |   |
| Net      proceeds from dispositions of property   and      investments for the nine months ended:                                                     |   |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |   |   |
| September      30, 2008                                                                                                                                              |   | $                             | -      |   |   | $      | -      |   |   | $      | -         |   |   | $      | -      |   |   | $ | - |   |
| September      30, 2007                                                                                                                                              |   |                          | 0.1    |   |   |   | -      |   |   |   | -         |   |   |   | -      |   |   |   | 0.1 |   |
|                                                                                                                                                                 |   |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |   |   |
| Borrowings      (repayments) of debt and credit facilities,   net      of financing costs for the nine months ended:                                  |   |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |   |   |
| September      30, 2008                                                                                                                                              |   | $                             | (3.7   | )      |   | $      | (0.1   | )      |   | $      | -         |   |   | $      | -      |   |   | $ | (3.8 | ) |
| September      30, 2007                                                                                                                                              |   |                          | (3.3   | )      |   |   | (0.1   | )      |   |   | -         |   |   |   | -      |   |   |   | (3.4 | ) |
| Dividends      and advances, including interest paid   and      tax sharing payments received (paid)   for      the nine months ended: |   |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |   |   |
| September      30, 2008                                                                                                                                              |   | $                             | 8.6    |   |   | $      | 6.0    |   |   | $      | -         |   |   | $      | (14.6  | ) |   | $ | - |   |
| September      30, 2007                                                                                                                                              |   |                          | 1.5    |   |   |   | 2.5    |   |   |   | -         |   |   |   | (4.0   | ) |   |   | - |   |

----

Table of Contents

----

Table of Contents

----

Table of Contents

|   | Level      2 - Observable inputs other than Level 1 prices such as quoted prices for      similar assets or liabilities; quoted prices in markets that are not      active; or other inputs that are observable or can be corroborated by      observable market data for substantially the full term of the assets or      liabilities. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Level      3 - Unobservable inputs that are supported by little or no market activity      and that are significant to the fair value of the assets or      liabilities. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                         |   | Fair      Value Measurements as ofSeptember      30, 2008 |   |
|------------------------------|--------|-----------------------------------------------------------|--------|
|                         |   | Total                                                     |   |   | Level      1 |   |   | Level      2 |   |   | Level      3 |   |
|                         |   |                                                      |   |   |   |   |   |   |   |   |   |   |
| Description:                 |   |                                                      |   |   |   |   |   |   |   |   |   |   |
|                         |   |                                                      |   |   |   |   |   |   |   |   |   |   |
| Short-term      investments  |   | $                                                         | 2.7    |   |   | $ | 2.7 |   |   | $ | - |   |   | $ | - |   |
|                         |   |                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Auction      rate securities |   |                                                      | 5.1    |   |   |   | - |   |   |   | - |   |   |   | 5.1 |   |
|                         |   |                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                        |   | $                                                         | 7.8    |   |   | $ | 2.7 |   |   | $ | - |   |   | $ | 5.1 |   |

----

Table of Contents

|                                                                                              |   | Auction      Rate Securities |   |
|---------------------------------------------------------------------------------------------------|--------|------------------------------|--------|
|                                                                                              |   |                         |   |
| Carrying      value as of January 1, 2008                                                         |   | $                            | 11.5   |   |
| Settlements                                                                                       |   |                         | (2.6   | ) |
| Impairment      charge included in the   Consolidated      Statement of Operations |   |                         | (3.8   | ) |
| Carrying      value as of September 30, 2008                                                      |   | $                            | 5.1    |   |

 QUANTITATIVE AND QUALITATIVE DISCLOSURESABOUT MARKET RISK

 CONTROLS AND PROCEDURES

----

Table of Contents

PART II.  OTHERINFORMATION

LEGAL PROCEEDINGS

 RISK FACTORS

|   | The      bankruptcy cases of the Debtors could result in claims against or have      other adverse impacts on the Company and its  affiliates. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------|

  UNREGISTERED SALES OF EQUITYSECURITIES AND USE OF PROCEEDS

DEFAULTS UPON SENIOR SECURITIES

----

Table of Contents

EXHIBITS

|   |                   10.1 | Agreement,      dated July 10, 2008, between The Pension Benefit Guaranty Corporation and      the Company (incorporated herein by reference to Exhibit 10.1 to the      Company’s Current Report on Form 8-K, filed on July 16,    2008) |
|--------|------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |                   10.2 | Separation,      Release and Confidentiality Agreement, dated July 31, 2008, between the      Company and J. Kent Friedman (incorporated herein by reference to Exhibit      10.1 to the Company’s Current Report on Form 8-K/A Amendment No. 1, filed      on August 7, 2008) [Note:  a portion of      this exhibit has been redacted and the redacted portion separately filed      with the Securities and Exchange Commission pursuant to a request for      confidential treatment] |
|--------|------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |                * 31.1 | Section      302 Certification of Chief ExecutiveOfficer |
|--------|--------------------------------------------------------------------|----------------------------------------------------------|

|   |                * 31.2 | Section      302 Certification of Chief FinancialOfficer |
|--------|--------------------------------------------------------------------|----------------------------------------------------------|

|   |                * 32.1 | Section      906 Certification of Chief Executive Officer and Chief Financial      Officer |
|--------|--------------------------------------------------------------------|--------------------------------------------------------------------------------------------|

----

Table of Contents

SIGNATURES

|                                                                                          |   | MAXXAM      INC.                                                                                                     |
|-----------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------|
| Date:           November      14, 2008 | By:    | /S/      M.      EMILY MADISON                                                                   |
|                                                                                          |   | M.      Emily MadisonVice      President, Finance(Principal      Accounting Officer andPrincipal      Financial Officer)  |

----

Table of Contents

APPENDIX A

----

Table of Contents

----

Table of Contents

----