98) $ (0. By way of example, we have reduced general and administrative
expenditures and have
not renewed the lease on one of our historically
unprofitable operations, Multnomah Greyhound Park
, effective January 1, 2005.
The financial impact of these two actions will improve EBITDA by more
than $8
million before one-time charges."
Our racetracks operate for prescribed periods each
year.6 million in 2004, compared to $708.7 million, which
included real estate property and fixed
asset additions of $139. New York Time. The Company's
racing revenues and operating results
for any quarter will not be
indicative of the racing revenues and operating results for the
year. Based on this analysis,
non-cash impairment charges were required of Gulfstream
Park's
racing license of $49.0% per annum (4. The note is
secured by
two first mortgages and a
debenture against Flamboro Downs
racetrack
and related real estate. 23,869 -
Term loan facility of 15 million
Euros,
bearing interest at 4. A European subsidiary has provided
two
first mortgages on real estate
properties as security for this facility.18 $6
. Because the Company's stock options have
characteristics significantly different from
those of traded
options and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's
opinion,
the existing models do not necessarily provide a
reliable single measure of the fair
value of the Company's stock
options.96) $ (0. The
deposits have
been reflected as other assets on the Company's
consolidated balance sheets. The Company
incurred loan origination expenses of $3.
(c) On November 1, 2004, a
wholly-owned subsidiary of the Company
entered into an access agreement with Magna and
one of its
subsidiaries for their use of the golf course and the clubhouse
meeting, dining and other facilities at Fontana Sports in
Oberwaltersdorf, Austria
. operations 20,443 19,386 91,008 90,588
Northern U. Subsequent Event
On February 18, 2005, one of the Company's Canadian subsidiaries
entered into
a financing agreement, which is collateralized by an
assignment of the future amounts receivable
under the Magna Golf Club
access agreement.
("ORI"), a wholly-owned subsidiary
of MEC that owned and operated
Flamboro Downs, a standardbred racetrack and site holder for
slot
machines operated by the Ontario Lottery Gaming Corporation, located
in Hamilton
, Ontario Canada.
(b) On November 9, 2005, MEC announced that it had entered into a share
purchase agreement with PA Meadows, LLC, a company jointly owned by
William Paulos
and William Wortman, controlling shareholders of
Millennium Gaming, Inc. The sale is scheduled
to close following receipt of
approval from the Pennsylvania Harness Racing Commission, receipt
by
The Meadows of a Conditional Category 1 slot license pursuant to the
Pennsylvania
Race Horse Development and Gaming Act, and the
satisfaction of certain other customary closing
conditions. At December 31, 2005, MEC
had borrowings under the facility of $27.S.1 million
(Cdn.00
Exercised (30,000) 31. Generally, stock options under
the MEC Plan vest over a period
of two to six years from the date of grant at rates of 1
/7th to 1/3rd
per year and expire on or before the tenth anniversary of the date of
grant, subject to earlier cancellation upon the occurrence of certain
events specified
in the stock option agreements entered into by MEC
with each recipient of options.61 per
share. In addition to racetracks, MEC's real estate portfolio
includes two golf courses and related
recreational facilities in Austria
and Canada, two residential developments in various stages
of development
in Austria and Canada and one residential development held for sale in
the United States. Proceeds realized from
asset sales, excluding the sale of Flamboro Downs
, will be applied to
reduce debt (including amounts owed under the bridge loan discussed
below).2 million (plus costs
and capitalized interest) for capital expenditures related
to the
casino facility being built at Remington Park racetrack in Oklahoma
(the
"Remington Park project financing"), and (ii) accelerating the
time when principal and interest
payments on amounts advanced under
the project financings will begin to January 1, 2007
(rather than
January 1, 2008 under the prior arrangements). These amendments did
not change the amount of the Gulfstream Park project financing. ("BE+K"), parent of Suitt
Construction Co.5% per annum
(with interest paid monthly) or (ii) a fixed rate equal
to LIBOR
plus 6. The security package also includes
second ranking security
over the lands owned by Gulfstream Park
and second ranking security over the Palm Meadows
training
facility and the shares of the owner of the Palm Meadows
training
center (in each case, behind security granted for the
amended Gulfstream Park project
financing, as discussed below). Management believes that
adequate provisions have been recorded
in the accounts where
required.0 million.
("Cloverleaf"), the current owner of
Rosecroft Raceway ("Rosecroft"),
a standardbred track located in Prince George's County in
Maryland. From April 19, 2004 until June 9, 2004,
they operated under a state law which precluded
MJC from operating
after 6:15 p.
Since coming into effect on June 9, 2004
, the Maryland Operating
Agreement has enabled Pimlico, Laurel Park and Rosecroft to conduct
simulcast wagering on thoroughbred and harness race signals during
the day and
evening hours without restriction.8 million for the year ended
December 31, 2005 (2004 -
$2.
simulcast aqueduct
dollars in thousands,
except per share figures.98)
--------
-----------------------------------------------------------------
---------------------------
----------------------------------------------
Average number of shares
of Class A Subordinate
Voting Stock and Class B
Stock outstanding
during the period
(in thousands
):
Basic and Diluted 107,345 107,146 107,323 107,143
----------
---------------------------------------------------------------
-----------------------------
--------------------------------------------
MAGNA ENTERTAINMENT CORP.3 million in the year
ended December 31, 2004 related to
Gulfstream Park's long-lived assets in connection
with the
redevelopment.
The Company has also commenced the redevelopment
of the racing
surfaces at Laurel Park. If the Company fails to comply with these
financial covenants and the bank is unwilling to waive such a
covenants
breach or amend the agreement and related financial
covenants, it will result in the
occurrence of an event of
default under the facility, and the lender could therefore
demand repayment.4% at
December 31, 2004) with a maturity date
of October 7, 2007, subject to a
further extension at the Company's
option to October 7, 2009.0% at December 31, 2004)
with a maturity date
of December 15, 2006,
secured by a first and second mortgage on
land
in Austria owned by a European
subsidiary.5%) maturing April 1, 2027, secured
by buildings and improvements at Lone
Star Park at Grand Prairie.41
6.78
----------------------------------------------------------------
Balance, End
of Year 4,500,500 4,841,500 $6. The fair value
of stock option grants in 2004 was
estimated at the date of grant using the following
assumptions:
Years ended December 31
,
----------------------------------------------------------------
2004 2003
---------------------
-------------------------------------------
Risk free interest rates
3.96) $ (0. The
Company is exploring alternative venues, including vacant land
that has been purchased in Dixon, California for future
development
of a thoroughbred racetrack with an associated
retail shopping and entertainment complex
.6 million. Under
certain conditions, these deposits may be refundable to Forest
City. operations segment includes a non-cash write-down
of $4.0 million Cdn
. MEC has announced that the proposed sale is expected to close
by March 30, 2006. The purchase
price is
payable in cash at closing, subject to a holdback amount of
$39.0 million
unused and available.3% (December 31, 2004 - 6.0 million from the available
proceeds of such
sales to repay a portion of the MEC Credit Facility. During the
three months ended December
31, 2005, no shares were issued under the
MEC Plan and during the year ended December 31
, 2005, 14,175 shares
were issued under the MEC Plan. The first distribution date is on or
about
March 31, 2006 and the second distribution date is on or about
March 31
, 2007.19 4,672,500 6.18
--------------------------------------------------------
-------------
---------------------------------------------------------------------
Stock options
exercisable,
December 31 4,127,715 6
. The segregation of operations between wholly-owned and publicly
traded operations recognizes
the fact that, in the case of the Real
Estate Business, the Company's management has direct responsibility
for
the key operating, financing and resource allocation decisions, whereas,
in the case
of MEC, such responsibility resides with MEC's separate Board
of Directors and executive management
.
MEC
MEC operates or manages eleven thoroughbred racetracks, one standardbred
racetrack, and one racetrack that runs both thoroughbred and standardbred
meets, as well
as the simulcast wagering venues at these tracks. Since the Company and Magna
are under the common
control of the Stronach Trust, they are considered
to be related parties for accounting purposes
.0 million (plus
costs and capitalized interest) for the reconstruction and
development
of The Meadows racetrack and slot facility in
Pennsylvania (the "Meadows project financing
").
In October 2005, the MID Lender agreed to further amend certain of
the
loan agreements between it and MEC and certain of MEC's
subsidiaries., the general contractor
for the Gulfstream
Park construction project, for debt financing of up to $13.7 million
(including accrued interest) which is reflected as
restricted cash and due to MEC on the balance
sheet of the Real
Estate Business.1 million,
respectively, was advanced to
MEC under the bridge loan.9% and 10. Prior to January 1,
2007, payment of interest will
be deferred.7 million (2004 - $0. MEC paid the Company a total of approximately
$7 thousand
for these extensions. At December 31, 2005, MEC had
incurred approximately $2. To December
31, 2005, MEC has not made any such payments.
Also in February 2006, the MID Lender agreed
to make the third tranche of
the bridge loan available to MEC and to waive compliance with the
financial covenant contained in the bridge loan in relation to Golden
Gate Fields for
the period ended December 31, 2005. If the sale of the
real estate in Palm Beach County (see
note 4) does not take place on or
prior to April 30, 2006, a mortgage in favour of the MID Lender
will also
be registered against such real estate.racecourse curragh
As a result, our
racing revenues and operating
results for any quarter will not be indicative
of our racing revenues and operating results for the
year. Results of Flamboro Downs were equity accounted during
the period prior to our acquisition
, which was completed on April 16, 2003.17%. The dial-in number for overseas
callers is 416-641-6683
.S.
The promissory note, which bears interest at 5% per annum, is
repayable
by Richmond Racing in monthly principal and interest
payments of $26 thousand until maturity
. Bank Indebtedness
(a) The Company has a senior secured revolving credit facility in
the amount of $50.0 million. The weighted average interest rate on the loans
outstanding under the credit facility as at December 31, 2004
was 6.
Accordingly, at December 31, 2004, the amount is included in
long-term debt
. The interest
rate is not to be less than 6.0%
per annum until June
7, 2007, with a
maturity date of June 7, 2017. The loan is
secured
by a deed of trust on land,
buildings and improvements and security
interests in all other assets of certain
affiliates of The Maryland Jockey Club.
Information with respect to shares under option is as follows:
Weighted Average
Shares
Subject to Option Exercise Price
-------------------------------------------
---------------------
2004 2003 2004 2003
----------------------------------------------------------------
Balance
, Beginning
of Year 4,841,500 5,361,833 $6.93
Exercised
(175,000) (6,000) 4. The operating lease
requires the Company to
pay rent equal to one percent of the
wagers made at the track (including wagers on both
live and
import races), and also an additional percentage of revenues for
other activities as follows: (a) one percent of revenues for
horse-related activities
, including simulcasting of horse races
during the non-live season, (b) five percent
of revenues not
related to horse racing up to $800 thousand, and (c) three
percent of revenues not related to horse racing in excess of
$800 thousand. If
the Company
proceeds, the Company's goal would be to minimize any
interference
with The Meadows' operations, however, with a
project of this magnitude, there will
likely be a temporary
disruption of The Meadows' operations and there is risk that the
redevelopment will not be completed according to schedule.
The option
expires on June 30, 2005. Prior to completion of the
conditional sale, the property
is being leased by the Company
from Magna for a nominal amount.8 million related to
long-lived and intangible assets and the
Northern U.
MEC's racing business is
seasonal in nature.
The Company has reclassified certain prior period amounts to conform
to
the current period's presentation. Prior periods have also been adjusted
to reflect
the restatement for discontinued operations (note 3) and
assets held for sale (note 4). AcG-15
provides guidance on the application of
consolidation principles to certain entities that are
subject to control
on a basis other than ownership of voting interests.6 million
and
Cdn. The term line
of credit is due on July 31, 2006.1%. To date, the Company has not purchased
any Class A
Subordinate Voting Shares under the normal course issuer bid. Such options have
generally been granted with 1/5th of the options vesting on the date
of grant and
the remaining options vesting over a period of four
years at a rate of 1/5th on each anniversary
of the date of grant.
(b) MEC has a Long-term Incentive Plan (the "MEC Plan"), adopted in
2000,
which allows for the grant of non-qualified stock options, incentive
stock
options, stock appreciation rights, restricted stock, bonus
stock and performance shares
to MEC's directors, officers, employees,
consultants, independent contractors and agents
.14
---------------------------------------------------------------------
----
-----------------------------------------------------------------
During the three months
ended December 31, 2005, there were 75,000
MEC stock options granted with a weighted average
fair value of $3.94 (2004 - $2.1 million), respectively.
The Company's reporting segments
are as follows:
Real Estate Business
The Real Estate Business owns real estate
assets in Canada, Austria, the
United States, Germany, Mexico, the United Kingdom, Poland, the
Czech
Republic, Belgium and Spain.S. The
Stronach Trust also controls Magna through the
right to direct the votes
attaching to 66% of Magna's Class B Shares.
(ii) MEC
Project Financing
The Gulfstream Park project financing and the Remington Park
project financing are made available by the MID Lender to
wholly-owned subsidiaries
of MEC that own and/or operate
Gulfstream Park and Remington Park. Certain cash from
the operations of the Remington Park borrower must be used to
pay deferred
interest on the Remington Park project financing
plus a portion of the principal under
the facility equal to the
deferred interest on the Gulfstream Park project financing
.
(i) MEC's racetrack and associated land under capital lease at Lone Star
Park
are included in the Grand Prairie Metropolitan Utility and
Reclamation District ("GPMURD
")., a wholly-owned
subsidiary of MEC, entered into an agreement with GPMURD whereby it
is required to make certain payments to GPMURD in lieu of property
taxes. MEC expensed
$1.
racedays racecourses
The implementation of these actions will
result in certain one-time implementation costs being
incurred in both 2004
and 2005.
EBITDA was adversely impacted by non-cash write-downs of long
-lived assets of
$26.5 million Euros commencing
January 1, 2006 until the ninth installment has
been made in 2014. Forward-looking statements are
based on information available at the time and
/or management's good faith
belief with respect to future events, and are subject to risks and
uncertainties
that could cause actual performance or results to differ
materially from those expressed in the statements
. Actual results could differ from
estimates.
If the acquisition of Flamboro
Downs had occurred on January 1, 2003,
the Company's unaudited pro-forma total revenues would
have been
$146.0 million.5 million, Remington Park's fixed assets of
$3. dollar
loans and letters of credit for general
corporate purposes. Prime rate or LIBOR plus
2.0% per annum
(6.98)
Diluted
- pro-forma $ (0.96) $ (0.
(h) The Maryland Jockey Club is a party to an agreement
(the
"Maryland Operating Agreement") with Cloverleaf Enterprises,
Inc
. Transactions With Related Parties
(a) In December 2004, certain of the Company's subsidiaries
entered
into a project financing arrangement with our parent company,
MI Developments Inc.
("Magna") and one of its subsidiaries for their use of the golf
course and the clubhouse meeting, dining and other facilities at
the
Magna Golf Club in Aurora, Ontario.
The Company has granted Magna a right of first
refusal to
purchase the Company's two golf courses.S. MEC's racing revenues and
operating results for any quarter will not be indicative of the racing
revenues and operating
results for the year." have not been eliminated in the
presentation of each segment's financial
data and related measurements. EARNINGS (LOSS) PER SHARE
Diluted earnings (loss) per share
for the three-month period and year
ended December 31, 2005 and 2004 are computed as follows:
Three months ended Year ended
December 31, December 31,
------------------
------- -------------------------
2005 2004 2005
2004
-------------------------------------------------------------------------
Net income (loss)
from continuing
operations $ (5,107) $ (14,124)
$ 7,836 $ (10,383)
Net income (loss)
from discontinued
operations
(1,032) 356 (1,277) 1,883
------------------------------------
-------------------------------------
Net income (loss) $ (6,139) $ (13,768) $ 6
,559 $ (8,500)
-------------------------------------------------------------------------
Weighted average
number of Class A
Subordinate Voting
and Class B Shares
outstanding during
the period (thousands) 48,290 48,168 48,260
48,157
Stock options
(thousands) - - 59
-
-------------------------------------------------------------------------
48,290 48,168 48,319 48,157
-----------------------
--------------------------------------------------
Diluted earnings (loss)
per Class A
Subordinate
Voting or Class B Share
- from continuing
operations
$ (0.18)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The computation
of diluted earnings per share for the three-month period
ended December 31, 2005 excludes the
effect of the potential exercise of
390,000 (2004 - 364,000) options to acquire Class A Subordinate
Voting
Shares of the Company because the effect would be anti-dilutive. dollar loans and letters
of credit for
general corporate purposes.3 million (2004 -
$27.
8.
9.16
---------------------------------------------------------------------
---------------------------------------------------------------------
Stock options
exercisable,
December 31 196,000 33.40 150,000 6. MEC also
owns and operates production facilities in
Austria and in North Carolina for StreuFex(TM), a
straw-based horse
bedding product. The bridge loan is cross-defaulted to all other
obligations of MEC and its subsidiaries to MID and its
subsidiaries.4 million
) due under the Gulfstream Park project
financing, including $3.3 million of accrued
interest. At a
consolidated level, such costs are charged to general and
administrative
expenses in the periods in which they are incurred.
(b) MEC's Sales to Mr.0 million
during the racing season and one percent of gaming revenue in excess
of $60. The Maryland
Operating
Agreement has been in effect since June 9, 2004, and expired on
April
30, 2005, however, both parties continue to informally operate
under its terms until a new
arrangement can be finalized. Under the Maryland
Operating Agreement, Cloverleaf agrees to
pay the thoroughbred
industry a 12% premium on pari-mutuel wagering (net of refunds)
conducted at Rosecroft on all thoroughbred race signals, and MJC
agrees to pay Cloverleaf
a 12% premium on pari-mutuel wagering (net
of refunds) conducted at Pimlico and Laurel Park
on all standardbred
race signals.
(j) In October 2003, MEC signed a Letter of
Intent to explore the
possibility of a joint venture between Forest City Enterprises, Inc
. This deposit has been included in MEC's accounts payable and
accrued liabilities on the
Company's consolidated balance sheets.
(k) In April 2004, MEC signed a Letter of Intent to
explore the
possibility of joint ventures between Caruso Affiliates Holdings
("Caruso") and certain affiliates of MEC to develop certain
undeveloped lands surrounding
Santa Anita Park and Golden Gate Fields
racetracks.curragh racecourses
A) today reported its financial results
for
the fourth quarter and year ended December 31, 2004.89) $ (0.7 million in 2004 and write-downs
and impairment charges of long-lived and
intangible assets of $134.1 million in 2003 to a net loss
of $95.08%.magnaentertainment.S.7 million.5 million (December 31, 2003 - no borrowings) and had
issued letters of credit totaling $21.,
had a $10. At December 31, 2003
, borrowings under the
facility were $6. 4,501 4,712
Unsecured
promissory note bearing interest
at 6.6 million shares of
Class A Subordinate
Voting Stock are available to be issued
under the Plan, of which 6.30 6.6 million
to guarantee various
construction projects related to activity of the Company. If the
Company decides to proceed with The Meadows
Redevelopment and obtains approval of its
Board of Directors, a
reduction in the expected life of the existing assets would
occur and a write-down would be necessary. The Agreement also contemplates
a conceptual development and business plan for the project.55% per annum above MID's notional cost
of borrowing
under its floating rate credit facility, compounded monthly
(5.
(b) On November 1, 2004, a wholly-owned subsidiary of the Company
entered into an access agreement with Magna International Inc. The agreement, which
expires on December 31, 2014, stipulates an annual fee of
$4.1 million
was recognized in real estate and other revenue related to an
access agreement
that expired on March 1, 2004. The Company received proceeds of $11. commencing January 1, 2006 until
the third
installment has been made in 2008. The interest rate implicit in the
arrangement is 5.
Notes to Interim Consolidated Financial Statements
(All amounts
in U.
However, the effects of transactions between these two segments, which
are further
described in note 14, are eliminated in the consolidated
results of operations and financial
position of the Company. REAL ESTATE PROPERTIES
Real estate properties consist of:
(restated -
notes 3 + 4)
As at December 31,
2005 2004
-------------------------------------------------------
------------------
Real Estate Business
Income-producing properties under
operating
leases
Land $ 192,873 $ 198,940
Buildings
, parking lots and roadways - cost 1,198,488 1,186,112
Buildings, parking lots and roadways
-
accumulated depreciation (220,895) (195,654)
---------
----------------------------------------------------------------
1,170,466 1,189,398
------------------------------------------------
-------------------------
Development properties
Land and improvements
100,457 105,408
Properties under development 13,863
31,477
-------------------------------------------------------------------------
114,320 136,885
------------------
-------------------------------------------------------
Properties held for sale
23,872 31,417
---------------------------------------------------------
----------------
1,308,658 1,357,700
-------------------------------------------------------------------------
MEC
Revenue
-producing racetrack properties
Land and improvements 206,873
208,841
Buildings - cost 495,018 395,338
Buildings - accumulated depreciation (91,005) (68,280)
Construction in progress
119,247 104,583
----------------------------------------------
---------------------------
730,133 640
,482
-------------------------------------------------------------------------
Under-utilized
racetrack properties 96,303 98,332
----------------------------------
---------------------------------------
Development properties
Land and improvements
40,611 39,494
Properties under development
3,155 1,222
---------------------------------------------------------------
----------
43,766 40,716
--
-----------------------------------------------------------------------
Revenue-producing non
-racetrack properties
Land and improvements 37,130 37,543
Buildings - cost 51,299 56,957
Buildings
- accumulated depreciation (11,090) (11,025)
-------------------------------
------------------------------------------
77,339 83,475
----------------------------------------------------------------------
---
Properties held for sale 2,500 2,512
---------
----------------------------------------------------------------
950,041 865,717
------------------------------------------------
-------------------------
Eliminations (note 14) (4,143)
(101)
-------------------------------------------------------------------------
Consolidated
$ 2,254,556 $ 2,223,316
--------------------------------
-----------------------------------------
---------------------------------------------------
----------------------
7.
The loans under the MEC Credit Facility bear interest
at either the
U. $5. $)
-----------------------------------------------------
----------------
Stock options outstanding,
January 1 490,000
33.38 per option and 2,000 stock options were
cancelled.8% - 30.70
- -
Forfeited (88,000) 7.13
-----------
----------------------------------------------------------
Stock options
outstanding
,
September 30 4,762,500 6. The Stronach Trust controls the Company through
the right to
direct the votes attaching to 66% of the Company's Class B Shares.5%, respectively
.
All interest and fees charged by the Real Estate Business relating to
the
Financing Agreements and amendments thereto, including any
capitalization and subsequent
amortization thereof by MEC, and any
adjustments to MEC's related deferred financing costs
, are eliminated
from the Company's consolidated results of operation and financial
position.
Magna has committed to fund the cost of land improvements and
manufactured
homes for the development of this community through the
not-for-profit organization.P.
("Forest City") and various affiliates of MEC, anticipating the
ownership and development
of a portion of the Gulfstream Park
racetrack property. Forest City has paid $2. The Limited
Liability Company Agreement further contemplates additional
agreements including
a ground lease, a reciprocal easement agreement,
a development agreement, a leasing agreement
and a management
agreement to be executed in due course and upon satisfaction of
certain conditions.simulcast racedays
S. Cash provided
from financing activities in 2004 was $117. The conference
call will be chaired by Jim McAlpine,
President and Chief Executive Officer of MEC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
----------------------------------------------------------------
---------
(Unaudited)
(U. GAAP") for interim financial information
and with
instructions to Form 10-Q and Article 10 of Regulation S-X. On
April 16, 2003, the Company
received all necessary regulatory
approvals for the acquisition of Flamboro Downs, and accordingly
, the
shares of ORI were transferred to the Company. As the terms of the
arrangements
between the Company and ORI provided the Company with
significant influence over ORI and
the entitlements to the
undistributed earnings of ORI, the results of operations of ORI were
accounted for under the equity method for the period from October 18,
2002 to
April 16, 2003.1 million and $716.
MI Racing Inc. It also
includes the estimated
future cash flows associated with the racing
licenses and long-lived assets directly associated
with, and expected
to arise as a direct result of, the use and disposition of those
assets. 10,000 -
Bank term line of credit denominated in
Euros, bearing interest at EURIBOR plus
0.8% at December 31,
2004).5% per annum.50).
As of December 31, 2004, these indemnities amounted
to
$9.
(k) In October 2003, the Company signed a Letter of Intent to
explore the possibility of a joint venture between Forest City
Enterprises
, Inc.4 million was
outstanding under the Gulfstream Park loan.0 million, which have
been recorded as a reduction of the outstanding loan balance. However, these measures
should not be considered
as an alternative to, or more meaningful than, net income (loss
) as a
measure of the Company's operating results or cash flows, or as a
measure
of liquidity.
December 31,
-
------------------------------------------------------------------------
2004 2003
----------------------------------------
---------------------------------
Total Assets
California operations
$ 310,026 $ 311,988
Florida operations 205,149
178,040
Maryland operations 168,073 143,486
Southern U. ACCOUNTING CHANGES
Consolidation of Variable Interest Entities
In September 2004, The Canadian Institute of Chartered Accountants
approved Accounting Guideline
15, "Consolidation of Variable Interest
Entities" ("AcG-15"). Under the
terms of the
share purchase agreement, Millennium-Oaktree will pay
MEC $225. Loans under the MEC Credit
Facility are
collateralized by a first charge on the assets of Golden Gate Fields
and a second charge on the assets of Santa Anita Park, and are
guaranteed by certain
subsidiaries of MEC.0%.85
--------------------------------------------------------------
-------
Stock options outstanding,
December 31 390,000 33.26
or Cdn.0 million (2004 - $1. MEC also owns and operates HorseRacing TV(TM), a network
focused
on horseracing, and owns a 30% equity investment in AmTote, a
provider of totalisator services
to the pari-mutuel industry.
(i) MEC Bridge Loan
The bridge loan
bears interest, at MEC's option, at either (i) a
floating rate equal to the U. The guarantees
are secured by first ranking
security over the lands owned by The Meadows (ahead of
the
Gulfstream Park project financing), second ranking security over
the lands owned by Golden Gate Fields (behind an existing third
party lender) and third
ranking security over the lands owned by
Santa Anita Park (behind existing third party
lenders). During the three-month period and year
ended December 31, 2005, $26. Prior
to the relevant
completion date, amounts outstanding under each facility bore
interest at a floating rate equal to 2.7 million;
MEC - $20. MEC Lone Star, L.
("AmTote") for a total cash purchase
price, including transaction costs, of $4. Concurrently
, a
similar waiver was provided to MEC by the bank under the MEC Credit
Facility (see note
7).racecards simulcast
Our financial results for the fourth quarter of 2004 reflect the full
quarter's operations
for all of MEC's racetracks and related pari-mutuel
wagering operations.
Revenues were $731
.5 million of revenue generated on the sale of excess land at
Golden Gate Fields. The decline in the
current year
EBITDA, excluding these non-cash write-downs is primarily attributable to
additional
pre-development costs incurred in the pursuit of alternative gaming
opportunities and regulatory
reform, the opening of Magna Racino(TM), pre-
operating and start-up costs related to RaceONTV
(TM) and other
international business developments, additional distribution costs at
HorseRacing
TV(TM) as a result of the carriage agreement with the operator of
the Dish Network(TM) and increased
costs at Santa Anita Park with the opening
of an entertainment facility including a new restaurant
and sports bar.5 million to a use of cash of $45.2 million in 2003, primarily due to decreased earnings
in 2004 adjusted for the write-downs of long-lived and intangible assets.
MEC, North America
's number one owner and operator of horse racetracks,
based on revenue, acquires, develops and operates
horse racetracks and related
pari-mutuel wagering operations, including off-track betting facilities
.m. We
assume no obligation to update forward-looking statements to reflect actual
results, changes
in assumptions or changes in other factors. For further information, refer to
the consolidated
financial statements and footnotes thereto included
in the Company's annual report on Form
10-K for the year ended
December 31, 2003. There was no impact on unaudited
pro
-forma net loss or pro-forma basic and diluted loss per share for
the three months and year
ended December 31, 2003 as the results of
ORI were accounted for under the equity method
during the period
October 18, 2002 to April 16, 2003. The lease requires MI Racing Inc. term
loan facility, unless waived by the lender,
and the lender could therefore demand repayment
.
6.14 $6.89) $ (0.38) $ (0.00)
-------------------------
---------------------------------------
--------------------------------------------
--------------------
(c) Maximum Shares
The following table
(number of shares have been rounded to the
nearest thousand) presents the maximum number
of shares of
Class A Subordinate Voting Stock and Class B Stock that would be
outstanding if all of the outstanding options and convertible
subordinated
notes issued and outstanding as at December 31,
2004 were exercised or converted:
Number of Shares
---
-------------------------------------------------------------
Class A Subordinate Voting
Stock outstanding
at December 31, 2004 48,879
Class B Stock outstanding at December 31, 2004 58,466
Options
to purchase Class A Subordinate
Voting Stock
4,501
8.0 million by December 31, 2003, and an
additional $5. Prior
to the completion date, amounts
outstanding under the loan will bear interest at a floating
rate
equal to 2. At December 31, 2004, $26.
The loan balance will be
accreted to its face value over the
term to maturity. As a result of the spin-off
transaction, which was effected on September 2, 2003, MID has
acquired Magna
's controlling interest in the Company. The
conditional sale agreement is subject to
the successful
severance of the affected properties. As a result of a reorganization
in prior years,
the Company acquired the shares of such subsidiary.2 million) of rent
for facilities and central shared services
to Magna and one of its subsidiaries.4 million
.1 million
related to racing licenses, the Maryland operations segment includes
a non-cash write-down of $47./FIRST AND FINAL ADD - TO114 - MI DEVELOPMENTS INC. EARNINGS/
The Company holds an investment in Magna Entertainment Corp. The
Company owns approximately
59% of MEC's total equity, representing
approximately 96% of the total voting power of its outstanding
stock., a Pennsylvania real estate
development company, for $51.0 million, which will be
released over time in accordance with
the terms of the share purchase agreement. $5.4%.16
216,000 32.0%
Weighted average expected
life (years)
- 4. All of such stock options give the grantee
the right to purchase Class A
Subordinate Voting Stock of MEC at a
price no less than the fair market value of such stock
at the date of
grant.33
Exercised - - (175
,000) 4. The MID Lender
received arrangement fees of $1.0 million at closing and
$0.2 million
(2004 - $3. As at December 31, 2005,
these indemnities
amounted to $4. This net wagering revenue was then
distributed 80% to MJC and 20% to Rosecroft
.galopp simulcasts
The Continuous Improvement Team that was
created in 2003 constantly monitors their recommendations
to ensure they have
been implemented and that anticipated cost savings have been achieved.7 million
of after tax non-cash write- downs of long-
lived assets in 2004. These
forward-looking statements
may include, among others, statements regarding:
expectations as to operational improvements; expectations
as to cost savings,
revenue growth and earnings; the time by which certain objectives will be
achieved;
proposed new racetracks or other developments, products and
services; projections, predictions, expectations
, estimates or forecasts as to
our financial and operating results and future economic performance;
and other
matters that are not historical facts.38) $ (0. dollars in thousands)
------
-------------------------------------------------------------------
Three months ended Year ended
December 31,
December 31,
------------------------------------------------------------------------
-
2004 2003 2004 2003
-----------
--------------------------------------------------------------
Cash provided from (used for):
Operating activities
Net loss $ (40,953) $(103,161) $ (95,636
) $(105,097)
Items not involving current
cash flows 10,551 83
,043 50,337 105,287
----------------------------------------------------------------
---------
(30,402) (20,118) (45,299) 190
Changes
in non-cash working
capital 8,698 24,691 8,780 13,614
-------------------------------------------------------------------------
(21,704) 4,573 (36,519) 13,804
-------------------------------
------------------------------------------
Investment activities
Real estate property
and
fixed additions (37,889) (51,624) (139,940) (105,958)
Other asset
(additions)
disposals 500 36 (582) (16,549)
Proceeds on disposal of
real estate properties and
fixed assets 2,746
11,687 19,841 13,248
--------------------------------------------------------
-----------------
(34,643) (39,901) (120,681) (109,259)
-------------------------------------------------------------------------
Financing activities
Increase (decrease) in bank
indebtedness 2,500 2,000 29,500
(42,779)
Issuance of long-term debt 123,355 - 142,616 16,110
Repayment of long-term debt (49,618) (1,712) (55,651) (17,513)
Issuance of share capital
- - 852 29
Issuance of convertible
subordinated notes
- - - 145,000
---------------------------------------
----------------------------------
76,237 288 117,317
100,847
-------------------------------------------------------------------------
Effect of exchange rate
changes on cash and cash
equivalents
688 1,048 717 6,734
----------------------------------------------------
---------------------
Net increase (decrease) in
cash and cash equivalents
during
the period 20,578 (33,992) (39,166) 12,126
Cash and cash equivalents,
beginning of period 40,063 133,799 99,807 87,681
----------------
---------------------------------------------------------
Cash and cash equivalents,
end
of period $ 60,641 $ 99,807 $ 60,641 $ 99,807
------------------------
-------------------------------------------------
-------------------------------------------
------------------------------
MAGNA ENTERTAINMENT CORP. ("ORI").4 million in the year ended
December 31, 2004 related to Laurel Park's long-lived assets in
connection
with the redevelopment.0 million senior
revolving credit facility, as currently stated
, at the quarterly
reporting dates during the remaining term of the facility, which
expires on October 10, 2005, unless extended with the consent of
both parties
. ("SAC") and a pledge of all of
the outstanding capital stock of LATC
and SAC.5% per annum, with a maturity
date of June 30, 2007.
38,796 38,135
Term loan facility of 17.5 million Euros
commencing
January 1, 2006 until the ninth
installment has been made in 2014. The term line of
credit is repayable
in annual installments of $3.6%.98)
---------------
------------------------------------------------------
----------------------------------
-----------------------------------
As a result of the net loss for the three months and
year ended
December 31, 2004, options to purchase 4,500,500 shares and notes
convertible
into 30,100,124 shares have been excluded from the
computation of diluted loss per share
since the effect is
anti-dilutive.
(b) In the ordinary course of business
activities, the Company may
be contingently liable for litigation and claims with, among
others, customers, suppliers and former employees. From April 19, 2004 until June 9
, 2004, they operated
under a state law which precluded The Maryland Jockey Club from
operating after 6:15 p.
Since coming into effect on June 9, 2004
, the Maryland Operating
Agreement has enabled Pimlico, Laurel Park and Rosecroft to
conduct simulcast wagering on thoroughbred and harness race
signals
during the day and evening hours without restriction. The loan is guaranteed by The Meadows and is
collateralized principally by first-ranking security over the
lands forming
part of the race track operations at Gulfstream
Park and The Meadows and certain lands
adjacent to the
racetrack operations at Gulfstream Park and over all other
assets of Gulfstream Park and The Meadows, excluding licenses
and permits. The
Meadows project financing is contingent on a
number of events, including the issuance
of a license to The
Meadows to operate slot machines and additional financing from
other sources.7 million (for the year ended December 31, 2003 -
$1. $13
.S. dollars following the accounting policies as set out in
the annual consolidated financial
statements for the year ended
December 31, 2004, except as disclosed in note 2.
The
unaudited interim consolidated financial statements include the
accounts of MI Developments Inc
.
In the opinion of management, the unaudited interim consolidated
financial statements
reflect all adjustments, which consist only of
normal and recurring adjustments, necessary to
present fairly the
financial position at December 31, 2005 and 2004 and the results of
operations and cash flows for the three-month and nine-month periods
ended December 31, 2005
and 2004. Regulatory approval for this sale
transaction was obtained on October 17, 2005
, and MEC completed the
transaction on October 19, 2005.
(b) On August 18, 2005
, three subsidiaries of MEC entered into a share
purchase agreement with Colonial Downs, L
. However, both the bank
and the MID Lender agreed in October 2005 to waive this repayment
requirement. The MID
Lender provided a similar waiver under the terms of the bridge
loan
(see note 16).
(b) On July 27, 2005, one of MEC's European subsidiaries entered
into a
bank term line of credit agreement of 2. A European subsidiary of MEC has
provided two first mortgages on real estate as security for this
facility.9 million (Cdn
.5 million)
that are repayable in six annual repayments of Cdn.38 645,000 33.38
---------------------------------------------------------------------
Stock options
outstanding,
September 30 390,000 33.85
Cancelled
- - (2,000) 31.9 million), respectively.64
Forfeited
(150,000) 8.3 million (2004 -
$0. racetracks that have agreed
to
participate in MEC's international distribution network to locations
outside North America.
The Company's interim consolidated statements of income (loss),
consolidated statements
of cash flows, and consolidated balance sheets
have been arranged so as to provide detailed,
discrete financial
information on the Real Estate Business and MEC reporting segments.0 million
(plus costs and capitalized interest) for the
reconstruction of facilities at Gulfstream
Park racetrack in Florida
(the "Gulfstream Park project financing") and $77. The expected
sale of under-utilized real estate in Palm
Beach County, Florida to Toll Bros, Inc. The MEC
Recapitalization Plan also contemplates a possible
partnership to pursue alternative gaming
opportunities at MEC
racetracks and the possible raising of equity in 2006.0 million and
$74. and certain of its
affiliates filed an oppression application in the Ontario Superior
Court of Justice against the Company and certain of its current and
former directors
and officers.
(c) MEC generates a substantial amount of its revenues from wagering
activities and is subject to the risks inherent in the ownership and
operation of a
racetrack.5 million) of letters of credit
issued with various financial institutions at December
31, 2005 to
guarantee various of its construction projects.This category contains links related
to horse racing tracks or racecourses from around the world.
simulcast simulcasts
Magna Entertainment Corp. announces results
for the fourth quarter and year ended December 31 2004
9 million in 2003,
an increase of $22
.9 million from the issuance of share capital
on the exercise of stock options, partially offset by
repayments of long-term
debt of $55. The interest rate implicit in the
arrangement is 5.96)
$ (0. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance
with United States generally accepted
accounting principles ("U. GAAP for complete financial
statements.7 million was required based
on uncertainty regarding future renewals of
the lease of the
Bay Meadows facility, which was renewed on a year-to-year basis
in each of 2002 and 2003, but expired on December 31, 2004.S.0 million revolving credit
facility that was scheduled
to mature on September 7, 2004, but was extended until
October 28, 2004, at which date the facility was converted to a
term loan
facility, which matures on December 15, 2019. The facility
is guaranteed by the Los
Angeles Turf
Club, Incorporated ("LATC") and is
secured by a first
deed of trust on
Santa Anita Park and the surrounding
real property
, an assignment of the
lease between LATC and the racetrack
operator
, and The Santa Anita Companies,
Inc. The
promissory note is repayable
in annual
installments of $2.6 million Euros,
bearing interest at
an implicit rate of
5.9 million
(Euros 2.0%
per annum
and cannot exceed 7.
(b) Long-term Incentive Plan
The Company has
a Long-term Incentive Plan (the "Plan") (adopted
in 2000), which allows for the grant
of non-qualified stock
options, incentive stock options, stock appreciation rights,
restricted stock, bonus stock and performance shares to
directors, officers
, employees, consultants, independent
contractors and agents.87 4. No options
that were forfeited for the
years ended December 31, 2004 and 2003 were subsequently
reissued.14 $6.84% 0.38) $ (0.55% Convertible Subordinated Notes
,
convertible at $7.05 per share 21,276
7. Management
believes that adequate provisions have been recorded in the
accounts
where required. The Maryland Operating Agreement replaced a
previous agreement (the
"Maryland Revenue Sharing Agreement"),
which was effective as of January 1, 2000 and
expired on
April 18, 2004. Prior to January 1,
2008, payment of interest
will be deferred.0 million) retroactive to January 1, 2004. On closing, GCGC paid $23.
MEC
's results of operations and cash flows related to discontinued
operations for the three-month
period and year ended December 31, 2005
and 2004, and MEC's assets and liabilities related to
discontinued
operations as at December 31, 2004, are shown in the following tables:
Three months ended Year ended
December 31, December 31,
------------------------- -
------------------------
2005 2004 2005 2004
-------------------------------------------------------------------------
Revenues
$ 1,227 $ 7,388 $ 22,483 $ 29,104
Costs and expenses 1,459
5,281 17,342 20,471
-----------------------------------------------------
--------------------
(232) 2,107 5,141 8,633
Depreciation and
amortization 45 245 783
894
Interest (income)
expense, net (302) 628 1,566
2,416
Write-down of racing
license 2,671 - 14
,961 -
-------------------------------------------------------------------------
Income (loss) before
undernoted (2,646) 1,234 (12,169) 5
,323
Gain on disposition - - 9,837 -
--------
-----------------------------------------------------------------
Income (loss) before
income taxes and
minority interest (2,646) 1,234 (2,332) 5,323
Income tax (recovery)
expense (881) 627 (149) 2
,108
Minority interest (733) 251 (906) 1,332
--------
-----------------------------------------------------------------
Net income (loss)
from
discontinued
operations $ (1,032) $ 356 $ (1,277) $ 1,883
-------------------------------------------------------------------------
------------------
-------------------------------------------------------
Three
months ended Year ended
December 31, December
31,
------------------------- -------------------------
2005 2004 2005 2004
------------------------------
-------------------------------------------
Cash provided by
(used in) operating
activities $ (1,649) $ 2,117 $ 994 $ 4,342
Cash provided by
(used in) investing
activities 29,045 (389) 35,972
(784)
Cash used in financing
activities (4,670) - (6,989
) (1,845)
Effect of exchange
rate changes on cash
and cash equivalents
(3,411) (1,702) (1,451) (2,484)
------------------------------------------
-------------------------------
Net increase (decrease
in cash and cash
equivalents
during
the period from
discontinued
operations 19,315
26 28,526 (771)
Payments from (to) MEC's
continuing operations (20
,294) 26 (29,162) (2,798)
------------------------------------------------
-------------------------
Net increase (decrease)
in cash and cash
equivalents
during
the period from
discontinued operations (979) 52 (636)
(3,569)
Cash and cash
equivalents, beginning
of period
979 584 636 4,205
------------------------------------------------
-------------------------
Cash and cash
equivalents, end of
period
$ - $ 636 $ - $ 636
--------------------------------------
-----------------------------------
---------------------------------------------------------
----------------
As at December 31, 2004
-------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 636
Restricted cash 2,055
Accounts receivable
2,315
Income taxes receivable
258
Prepaid expenses and other
134
-------------------------------------------------------------------------
5,398
--------------------
-----------------------------------------------------
Real estate properties, net
19,896
Fixed assets, net
1,325
Racing license 72,759
Future tax assets 276
-------------------
------------------------------------------------------
94,256
----------------------------------------------------------
---------------
$ 99,654
-------------------------------------------------------------------------
----------------
---------------------------------------------------------
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities $ 3,528
Long-term debt
due within one year 4,362
Deferred revenue
977
--------------------------------------------------------
-----------------
8,867
-------------------------------------------------------------------------
Long-term debt
39,003
Future tax liabilities
18,271
-------------------------------------------------------
------------------
57,274
-------------------------------------------------------------------------
$ 66,141
-----------------------------------
--------------------------------------
------------------------------------------------------
-------------------
4.0 million.0% or LIBOR plus 4.2% at December 31, 2005). LONG-TERM DEBT
On February 18, 2005, one of MEC's Canadian subsidiaries entered into a
financing
arrangement that is secured by an assignment of the future
amounts receivable under the Magna
Golf Club access agreement for the
years 2006 through 2008.16 575,000 31.85
---------------------------------------------------------------------
Stock options outstanding
,
March 31 and June 30 420,000 33. At December 31, 2005, there were 199,471 performance
share awards vested.0 million. ("GPRA"), MEC's
subsidiary that owns and operates
Gulfstream Park, enter into a
definitive agreement with BE+K, Inc.
Pursuant
to the terms of the bridge loan agreement between the MID
Lender and MEC, as well as the
terms of the MEC Credit Facility (see
note 7), MEC was required to use the net proceeds from
the sale of
Flamboro Downs (see note 3) to pay down the principal amount owing
under the two facilities in equal portions.5% per annum, compounded semi-annually. The total sales
price for these properties
was $1.
Under the Maryland Operating Agreement
, the parties have agreed to
make a good faith effort to reach a long-term agreement on
cross-breed simulcasting and off-track betting facilities in the
State of Maryland
. In
2005, a Limited Liability Company Agreement was entered into with
Forest City
concerning the planned development of "The Village at
Gulfstream Park(TM)".0 million of the
initial capital contribution. In the event the development does not
proceed, MEC may have
an obligation to fund a portion of those
pre-development costs incurred to that point in
time.4 million was paid in
the year ended December 31, 2005.mutuel aqueduct
6 million or 3. If you have any
teleconferencing questions, please call Karen Richardson at 905-726-7465. In the opinion of management
, all adjustments, which
consist of normal and recurring adjustments, necessary for fair
presentation have been included.
A disproportionate share of annual revenues and net
income is earned
in the first quarter of each year. Based on this analysis, non-cash impairment
charges were required of Multnomah Greyhound Park's racing
license of
$5.9 million,
Portland Meadows' racing license of $0.7 million. The credit facility
expires on October 10, 2005, and may be extended with the
consent of
both parties. 20,304 -
Obligation to pay
$18.S. Prime rate or LIBOR
plus 2.6%. A maximum of 7.3 million are available for issuance
pursuant to any other
type of award under the Plan. All of such stock
options give the grantee the right to purchase Class A
Subordinate Voting Stock of
the Company at a price no less than
the fair market value of such stock at the date
of grant.14 $6. The average fair values of the stock option
grants in 2004 were
$2.98)
Basic
- pro-forma $ (0.96) $ (0.0 million by August
31,
2003, an additional $5. Under the agreement, wagering revenue from
these sources was pooled and certain expenses and obligations
were pooled and paid
from those revenues to generate net
wagering revenue. Under the terms of the
Letter of Intent, the Company may be responsible for additional
equity contributions
, however to December 31, 2004 the Company
has not made any such contributions. After
the completion date, amounts
outstanding under the loan will bear interest at a fixed
rate of
10.
(e) On August 19, 2003, the shareholders of the Company
's former
parent company, Magna, approved the spin-off to its shareholders
of its wholly-owned subsidiary, MID. The
Company and MID operate as separate public
companies each having
its own board of directors and management team.
(f) Development real estate includes $9.8 million) of rent for totalisator equipment and fees for
totalisator services to AmTote, a company in which the Company
has a
30% equity interest.
(i) During the year ended December 31, 2004, the Company incurred
$2. The Corporate and other segment includes costs
related to the Company
's corporate head office, cash and other
corporate office assets and investments in racing
related real estate
held for development. Management believes that the use of
these measures enables management and investors to evaluate and
compare, from period to period
, operating and financial performance
of companies within the horse racing industry in a meaningful
and
consistent manner as EBITDA eliminates the effects of financing and
capital
structures, which vary between companies.7 million related to racing licenses,
the Southern
U.S.
dollars and all tabular amounts in thousands unless
otherwise noted)
(All
amounts as at December 31, 2005 and 2004 and for the three-month
period and year ended December
31, 2005 and 2004 are unaudited)
1. MEC's racing operations have
historically operated
at a loss in the second half of the year, with the
third quarter typically generating the largest
operating loss. DISCONTINUED OPERATIONS
(a) On August 16, 2005, MEC and Great Canadian Gaming
Corporation
("GCGC") entered into a share purchase agreement under which GCGC
acquired all of the outstanding shares of Ontario Racing Inc. ("Colonial LP") pursuant
to
which Colonial LP purchased all of the outstanding shares of
Maryland-Virginia Racing Circuit
, Inc.01 (0.04
-----------------------------------------------------------------------
--
$ (0. The MEC Credit Facility is
available by way of U
. Pursuant to the terms of the amended
MEC Credit Facility, as well as the terms of the bridge
loan
agreement between a subsidiary of MID (the "MID Lender") and MEC (see
note
14(a)), MEC was required to use the net proceeds from the sale
of Flamboro Downs (see note
3) to pay down the principal amount owing
under the two facilities in equal portions.75%
per annum (3.0 million
commencing January 1, 2009 until the last instalment has been made in
2014.
Options expire on the tenth anniversary of the date of grant, subject
to earlier cancellation in the events specified in the stock option
agreement entered
into by MID with each recipient of options.85
Granted -
- 100,000 39.
During 2005, MEC introduced an incentive compensation program
(the
"MEC Program") for certain officers and key employees, which will
award performance
shares of MEC's Class A Subordinate Voting Stock as
contemplated under the MEC Plan in 2005
.16
Granted - - 50,000 6.80
-----
----------------------------------------------------------------
Stock options
outstanding,
December 31 4,827,500 6. In
addition, MEC operates
off-track betting facilities, a United States
national Internet and telephone account wagering
business known as
XpressBet(R) and a European account wagering service known as
MagnaBet
(TM). To support certain of MEC's thoroughbred
racetracks, MEC owns and operates three thoroughbred
training centers in
the United States.
(a) MEC Recapitalization Plan and Financings
On December 9, 2004, the MID Lender entered into a loan agreement to
provide
project financing facilities to subsidiaries of MEC of
$115.0 million of the Flamboro Downs
sale
proceeds and such additional amounts as are necessary to ensure that
future
Gulfstream Park construction costs can be funded, which
escrowed amount will be applied against
such future construction
costs, (iv) MEC use commercially reasonable efforts to sell The
Meadows (see note 4) and use the proceeds of such sale to pay down
the bridge
loan, and (v) in the event that MEC did not enter into a
definitive agreement prior to December
1, 2005 to sell The Meadows
subject only to the approval of the State Harness Racing Commission
of Pennsylvania or had not completed such sale and repaid the bridge
loan by January
15, 2006, the MID Lender would be granted mortgages
on certain additional properties owned
by MEC (see note 16).0 million was made available upon
closing of the Financing Agreements
for drawdown by MEC,
$25.
Commencing January 1, 2007, the MID Lender
will receive monthly
blended payments of principal and interest based on a 25-year
amortization period under each of the project financing
facilities.1 million
) of
accrued interest.
If MID and MEC do not renew or further extend the
option agreement,
MEC may incur a write-down of certain costs that have been incurred
with respect to this specific property.
(d) MEC occupies land for the Remington Park
racing facility under an
operating lease that extends through 2013.0 million). Under the
Limited Liability Company
Agreement, Forest City is required to contribute up to a maximum
of
$15. SUBSEQUENT EVENTS
In February 2006, as a result of the fact that MEC had
not, prior to
December 1, 2005, entered into an agreement to sell The Meadows subject
only to the approval of the State Harness Racing Commission of
Pennsylvania (the agreement of
sale that MEC entered into was subject to
an additional condition requiring receipt by The Meadows
of a Conditional
Category 1 slot license pursuant to the Pennsylvania Race Horse
Development
and Gaming Act), the bridge loan agreement was amended by the
MID Lender and MEC in order to
add certain MEC subsidiaries as additional
guarantors and to have such subsidiaries grant the
MID Lender additional
security, including mortgages on properties owned by such subsidiaries
in
California, New York and Ohio.racecourse horseracing
22 - Magna Entertainment Corp.4%, which is primarily attributable
to the acquisition of
Flamboro Downs, the opening of Magna Racino(TM) on April 4, 2004, increased
decoder revenues at our California racetracks as a result of revenue being
recognized during the
second quarter of 2004 for amounts previously in
dispute, increased attendance and wagering at Pimlico
on the Preakness
Stakes(R), increased revenues earned at Lone Star Park at Grand Prairie as a
result
of hosting the 2004 Breeders' Cup(TM) and increased stall rent at Palm
Meadows(R), our thoroughbred
training center in Palm Beach County, Florida,
partially offset by fewer live race days at our largest
tracks and reduced on-
track and inter-track wagering revenues at several of our facilities due
to
lower average daily attendance.7 million
compared to a loss of $117.9 million in the year ended
December 31, 2003. The net loss in 2003 includes $81.6 million, partially offset by proceeds on the
sale of non-core real estate and fixed assets of $19.
On December 29, 2004, one of our European
subsidiaries entered into a
financing arrangement that is collateralized by an assignment of the
future
amounts receivable under the Fontana Sports access agreement previously
announced on November
1, 2004. We will also be webcasting the
conference call at http://www. Forward-looking statements
should not
be read as guarantees of future performance or results, and will not
necessarily be
accurate indications of whether or the times at or by which
such performance or results will be achieved
. The
preparation of the consolidated financial statements in conformity
with U
. The consideration included cash of
$0.17% per annum, collateralized by an
assignment of future amounts receivable
under the Fontana Sports access agreement
,
repayable in nine annual principal and
interest payments of 2. 18
,312 18,312
Term loan facilities, bearing interest
at either
the U.
The term loan is repayable in quarterly
principal and interest
payments.625% per annum (2. 7,870 7,328
Obligation to pay $5.1% per annum
, with a maturity date of
September 14, 2005.
1,180 571
------------------------------------------------------------
----
259,261 180,074
Less due within one year 17,763 58,048
-------------------
---------------------------------------------
$ 241,498 $ 122,026
----------------------------------------------------------
------
----------------------------------------------------------------
7
.00 4. This project is still
in the early stages of planning and is subject to
regulatory and
other approvals. ("Cloverleaf"), the current owner of Rosecroft Raceway
("Rosecroft"), a standardbred track located in Prince George's
County
in Maryland.
(j) The Company is considering a redevelopment of the
clubhouse
/grandstand at The Meadows ("The Meadows
Redevelopment").8% at December 31, 2004).5%
per annum, compounded semi-annually.0 million (for the year ended December 31, 2003 -
$2. operations includes a non-cash write-down of
$13. operations 105,024
105,357
Northern U.", which correspond to the Company's reporting
segments
as described in note 13 to the unaudited interim consolidated
financial statements. $50. MEC
received proceeds of $11.0 - 4.0
---------------------------------------
------------------------------
----------------------------------------------------------
-----------
During the three-month period and year ended December 31, 2005, the
Real Estate Business recognized stock-based compensation expense of
$0.08 (100,000
) 6.4%
Weighted average expected
life (years) 4. In 2004
,
MEC launched RaceONTV(TM) in Europe to provide North American racing
content from MEC
's racetracks and other U. Under the Financing Agreements, the MID
Lender provided MEC with
a 13-month bridge loan of up to
$100.0 million expiring August 31, 2006.
As at December 31, 2005, there was a balance of $97. At December 31, 2005, the
Company
has accrued a liability for the estimated value of the land
to be donated with the related
expense of $0. Although it is not possible to accurately estimate the
extent of potential
costs and losses, if any, management believes,
but can provide no assurance, that the ultimate
resolution of such
contingencies would not have a material adverse effect on the
financial position of the Company.9 million; MEC - $4. Commencing April 19,
2004, MJC
and Rosecroft are no longer pooling their wagering revenue
and distributing net wagering
revenue as they did under the Maryland
Revenue Sharing Agreement. Without an arrangement
similar in effect to the
Maryland Revenue Sharing Agreement or the Maryland Operating
Agreement, there would be a material decline in the revenues,
earnings and purses
of MJC.
(l) On August 22, 2003, MEC completed the acquisition of a 30% interest
in AmTote International, Inc.galopp birdsville
EBITDA for the year ended December 31, 2004 was a loss of $35
.
This press release may contain "forward-looking statements" within the
meaning of applicable
securities legislation, including the Securities Act of
1933, as amended and the Securities Exchange
Act of 1934, as amended., a wholly owned subsidiary of the
Company, sold the real property
and associated racetrack license of
Great Lakes Downs to Richmond Racing Co., LLC ("Richmond
Racing") for
approximately $4. GAAP.
Write-downs and impairment charges relating
to long-lived and
intangible assets recognized are as follows:
Years ended December 31,
---------------------------------
------------------------------------
2004(a)
2003(b)
---------------------------------------------------------------------
Gulfstream Park $ 26,252 $ 49,078
The Maryland Jockey
Club 433 47,712
Bay Meadows
- 20,294
Multnomah Greyhound Park - 5,538
Remington Park - 4,780
Portland Meadows
- 3,754
Thistledown
- 3,700
------------------------------------------------------------
---------
$ 26,685 $ 134,856
-
--------------------------------------------------------------------
--------------------
-------------------------------------------------
(a) The Company commenced a major redevelopment
of its Gulfstream
Park racetrack and demolished certain long-lived assets. At
December 31, 2004, the Company had borrowings under the facility
of $27.
The loans under the facility bear interest at either the U.7%.0% per
annum and cannot exceed 7.3 million on exercise
of either the put or call option
for the
remaining minority interest in The Maryland
Jockey Club, bearing
interest at the
6 month LIBOR (2.6% at December 31, 2004). 15,520
15,521
Term loan facility, bearing interest at
either the U
.0% at December 31, 2004),
with a maturity date of December 15, 2019.10
Weighted average
remaining
contractual
life
(years) 5. Although it is not possible to
accurately estimate the extent of
potential costs and losses, if
any, management believes, but can provide no assurance
, that the
ultimate resolution of such contingencies would not have a
material adverse effect on the financial position of the
Company.0 million with expiration
dates through 2005. At this time,
the Company is uncertain as to the likelihood of a
renewal of
this agreement on comparable terms. Under the terms of the Letter of Intent
and also the
Pre-Development Management Agreement, the Company may be
responsible for additional equity contributions, however to
December 31, 2004, the
Company has not made any such
contributions. ("MID") for the reconstruction of
facilities at Gulfstream Park of $115 million. The anticipated completion
date for the Gulfstream Park reconstruction project is the first
quarter of 2006.
The accounting policies of each segment are the same as those
described in the
"Significant Accounting Policies" section of the
Company's annual report on Form 10-K for
the year ended December 31,
2003.S.S.S.0 million and MEC will continue to manage the racing
operations at The Meadows on behalf of Millennium-Oaktree pursuant to
a minimum
five-year racing services agreement.
MEC's assets classified as held for sale and corresponding
liabilities
related to these transactions at December 31, 2005, with comparative
restatement
as at December 31, 2004, are shown in the table below. The
computation of diluted earnings per
share for the year ended December 31,
2004 excludes the effect of the potential exercise of 553
,060 options to
acquire Class A Subordinate Voting Shares of the Company because the
effect
would be anti-dilutive. At December 31, 2005, the bank term line of credit is fully
drawn
.7 million) that are repayable in three annual instalments of
Cdn.4 million) and $1.6 million
shares of MEC's Class A Subordinate Voting Stock are
available to be issued under the MEC
Plan, of which 6.3 million are available for issuance
pursuant to any other type of award
under the MEC Plan.94
------------------------------------------------------------------
---
Stock options
outstanding, March 31 4,845,500 6.28
per
option.0 million due under the Remington Park project financing,
including $0.4 million
.
(b) On August 2, 2005, Greenlight Capital, Inc.
(h) The Maryland Jockey Club
("MJC") is a party to an agreement (the
"Maryland Operating Agreement") with Cloverleaf Enterprises
, Inc.retama simulcasting
AURORA, ON, Feb.
("MEC") (NASDAQ: MECA; TSX: MEC. If we update one
or more forward-looking
statements, no inference should be drawn that we will
make additional updates with respect thereto
or with respect to other forward-
looking statements.
MAGNA ENTERTAINMENT CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED
)
1.
The Company's racing business is seasonal in nature. Sale and Lease Arrangement
of Great Lakes Down
On August 24, 2004, MI Racing Inc. The fair value of the racetracks
was determined using the
discounted cash flow method, including a probability-weighted
approach in considering the likelihood of possible outcomes.
(b) During the year
ended December 31, 2003, Gulfstream Park and The
Maryland Jockey Club ("MJC") experienced
lower average daily
attendance and decreased on-track wagering activity compared to
the prior year.6 million and goodwill of $0. Based on this impairment indicator, the
Company tested
these racetrack's respective long-lived and intangible assets
for recoverability.9 million (December 31,
2003 - $21. Long-term Debt
The Company's long-term debt consists of the following:
December 31,
--------------------------
2004 2003
----------------------------------------------------------------
Term
loan facility, bearing interest
at LIBOR plus 2. $2.5 million) with the remaining
amount due upon maturity.0% at December 31,
2004) until December 1, 2008
, with a
maturity date of December 1, 2013. 17,786 18,744
Capital lease (imputed interest rate
of 8.96) $ (0. Multnomah Greyhound
Park had a loss before income
taxes for the year ended December 31, 2004 of $2.
In June 2003, the Company purchased an approximately 22%
interest in
the real property upon which Portland Meadows is
located, and also purchased the long
-term rights to operate the
facility pursuant to an operating lease. Commencing
April 19, 2004, The Maryland Jockey Club and Rosecroft are no
longer pooling
their wagering revenue and distributing net
wagering revenue as they did under the Maryland
Revenue Sharing
Agreement.
Under the Maryland Operating Agreement
, the parties have agreed
to make a good faith effort to reach a long-term agreement
on
cross-breed simulcasting and off-track betting facilities in the
State of Maryland. In April 2004, the Company
signed a Pre-Development Management Agreement
which governs the
activities of the parties and obligates the parties to work
together to plan, design, entitle, pre-lease, contract to
construct and finance
a project.4 million (Euros 2.5 million, which may serve as the
site of the Company's
proposed racetrack in Romulus, Michigan.3 million
and the Maryland operations segment includes
a non-cash write-down
of long-lived assets of $0.
As required under GAAP
, MEC's long-lived assets and racing licenses
are tested for impairment on an annual basis
or whenever events or
circumstances indicate that the carrying value may not be
recoverable. On
February 27, 2006, the due diligence period was extended to March 15,
2006.0%).
Effective July 27, 2005, the MEC Credit Facility was amended in order
to extend the term to July 31, 2006, replace the existing financial
covenants
with an earnings before interest, taxes, deprecation and
amortization ("EBITDA") maintenance
test relating to Santa Anita Park
and Golden Gate Fields, add mandatory repayment provisions
and modify
the interest rate provisions.
The fair value of MID stock options
granted was estimated at the date
of grant using the Black-Scholes option pricing model with
the
following weighted average assumptions:
Three
months ended Year ended
December 31, December
31,
------------------ ------------------
2005 2004 2005 2004
-----------------------
----------------------------------------------
Risk-free interest rate - 3
. The Company's operations are segmented
in the Company's internal financial reports between wholly
-owned
operations (the Real Estate Business) and publicly traded operations
(MEC). The
Gulfstream Park project financing was amended to
recognize that MEC increased the capital
budget for the redevelopment
of Gulfstream Park by $26.5 million, to permit certain changes
to the contractor
arrangements for the Gulfstream construction project, and to
establish the Gulfstream Escrow described below.
In addition, MEC pays an annual commitment
fee equal to 1.
The project financing facilities have a term of 10 years from
the relevant completion dates for the construction projects at
Gulfstream
Park and Remington Park which occurred in February
2006 and November 2005, respectively
. Stronach two housing lots and an
apartment located in MEC's residential development in
Oberwaltersdorf, Austria.simulcasts racetracks
Despite our enthusiasm for the future and
the belief that our long
-term goals are appropriate, we recognize that we
cannot continue to strain our limited current resources
with costs related to
initiatives providing no significant current revenue.7 million.
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
-----------------------------------
--------------------------------------
(Unaudited)
(U.
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
-------------------------------------------------------------------------
(Unaudited)
(U.S. Acquisition and Pro-Forma Impact
On October 18, 2002, the
shares of Flamboro Downs Holdings Limited,
the owner and operator of Flamboro Downs, a harness
racetrack located
in Hamilton, Ontario, 45 miles west of Toronto, were acquired by
Ontario Racing Inc. The lease is for an initial term of five years with
an option to
renew the lease for up to three additional periods of
five years each.
Base
rate or LIBOR plus a margin based on the Company's ratio of
debt to earnings before
interest, income taxes, depreciation and
amortization.0% per annum
(6.0% at December 31, 2004).
9. The Company's operating results will be
materially
adversely affected at least until such time as an
alternative venue can be opened or
additional revenue source
arrangements secured. There can be no assurance that operating
at an alternative venue in the future will be as profitable as
the Bay
Meadows operation has been. The
Company has contributed an additional $200,000 in 2004
.16 $ (0.29) $ 0.5 million euros
($3. CONTRIBUTED SURPLUS
Changes in
the Company's contributed surplus are shown in the following
table:
Three months
ended Year ended
December 31, December
31,
2005 2005
--------
-----------------------------------------------------------------
Contributed surplus, beginning
of period $ 2,025 $ 2,387
Stock-based compensation
87 351
Transfer to share capital on exercise of
stock options
- (626)
-----------------------------------------
--------------------------------
Contributed surplus, end of period $ 2,112
$ 2,112
-------------------------------------------------------------------------
-------------------------------------------------------------------------
11.87
Forfeited (145,000) 6.18 4,672,500 6. TRANSACTIONS WITH RELATED PARTIES
Mr. Stronach, the Company's Chairman and the Chairman of Magna and
MEC, and two other
members of his family are trustees of the Stronach
Trust.5 million
(the "BE+K Loan
"), which is collateralized by the Ocala Land, to be
used to pay for construction costs for
the Gulfstream Park
construction project, (iii) MEC place into escrow (the "Gulfstream
Escrow") with the MID Lender $13.
The Remington Park project financing and
the Gulfstream Park
project financing contain cross-guarantee, cross-default and
cross-collateralization provisions. The lease also contains
options to renew
for five 10-year periods after the initial term.5 million plus one-half of one percent of the
pari-mutuel wagers made at the racetrack in excess of $187. without Rosecroft's consent, and the
federal
Interstate Horseracing Act, which provides that, without the consent
of
MJC, Rosecroft cannot accept simulcast wagering on horseracing
during the times that Pimlico
or Laurel Park are running live races. The $2.0 million as and when needed.curragh racetracks
--------
-----------------------------------------------------------------
Year Ended Three Months Ended
December 31,
December 31,
2004 2003 2004 2003
---- ---- ---- ----
Revenues
$ 731,577 $ 708,935 $ 138,988 $ 146,078
Loss before interest,
taxes, depreciation and
amortization ("EBITDA") $ (35,704) $(117,936) $ (24,651) $
(148,153)
Net loss $ (95,636) $(105,097) $ (40,953) $(103,161)
Diluted loss per share $ (0. With guidance from
the Committee, management has taken actions
that will result in immediate cost
savings benefiting 2005 and beyond.8 million. commencing January
1, 2006 until the third
installment has been made in 2008.89) $ (0. GAAP requires management to
make estimates and assumptions
that affect the amounts reported in the consolidated financial
statements and accompanying notes. Based on these impairment indicators, the
Company tested Gulfstream Park's and MJC's long-lived and
intangible assets for
recoverability. The term loans are repayable
in quarterly principal and interest
payments.6% per annum (5.
The term loan is callable on December 31,
2006 or December 31, 2011.89) $ (0.00)
----------------------------
------------------------------------
-----------------------------------------------
-----------------
Diluted
- as reported $ (0.1 million. Any
interference with the racing operations would result in a
reduction
in the revenues and earnings at The Meadows. Upon
execution of this Agreement, Forest
City paid $1 million to the
Company in consideration for their right to work exclusively
with the Company on this project and to secure the performance
of their
obligations under the Agreement. The project
financing is made by way of progress draw
advances to fund
reconstruction. The loan has a ten-year term from the completion
date of the reconstruction project. The loans contain cross-
guarantee,
cross-default and cross-collateralization
provisions. The agreement, which expires on
December 31, 2014 stipulates an annual fee amounting to
$3. During the
year ended December 31, 2003, $3. and its subsidiaries (collectively "MID"
or the "Company")
. This change had no impact on the results of
operations for the three months and year ended December
31, 2005. The purchase price for the transaction described above
established a fair value
for certain assets of Flamboro Downs and
accordingly MEC performed impairment testing of
these assets at
June 30, 2005.P. and a fund managed by Oaktree Capital
Management
, LLC ("Oaktree" and together with PA Meadows, LLC,
"Millennium-Oaktree"), providing for the
acquisition by Millennium-
Oaktree of all of the outstanding shares of Washington Trotting
Association, Inc.
In February 2006, the bank agreed to waive compliance with
the EBITDA
financial covenant contained in the MEC Credit Facility in relation
to Golden Gate Fields for the period ended December 31, 2005.0 million) bearing interest at the European
Interbank Offered
Rate plus 0.85 (30,000) 31. During the three months ended
December 31, 2004, no shares were issued under the MEC Plan and
during the year ended
December 31, 2004, 199,000 shares were issued
under the MEC Plan, including 175,000 shares
issued on the exercise
of stock options. The number of shares of
Class A Subordinate
Voting Stock underlying the performance share
awards is based either on a percentage of a
guaranteed bonus or a
percentage of total 2005 compensation divided by the market value of
the stock on the date the MEC Program was approved by the
Compensation Committee
of MEC's Board of Directors. During the year ended December 31, 2005, 201,863
performance
share awards were granted under the MEC Program with a
weighted average grant-date market
value of either $6.
$7.3% - 4.84%
Expected volatility of MEC's
Class A Subordinate
Voting Stock 52.2 million) and $1. F.S.
base rate plus 5.5% per annum (with interest paid at the relevant LIBOR
contract maturity
), in each case subject to a minimum rate of
9. In 2006, the Company intends
to donate up to 50 acres of this land to a not-for-profit
organization established to
assist the victims of Hurricane Katrina
with charitable funding from Magna and other Canadian
sources.m.mutuel racecourse
SV. The
interest rate implicit in this arrangement is 5.
We will hold a conference
call to discuss our 2004 fourth quarter and
year end results on Wednesday, February 23, 2005 at 9:00
a.
The number to use for this call is 1-800-291-5032. dollars and share amounts in thousands)
-------------------------------------------------------------------------
December 31, December 31,
2004 2003
------------------------------------------------------
-------------------
ASSETS
----------------------------
---------------------------------------------
Current assets:
Cash and cash equivalents
$ 60,641 $ 99,807
Restricted cash 25,478
24,738
Accounts receivable 47,655 34
,215
Income taxes receivable 1,798 1,809
Prepaid
expenses and other 13,069 12,939
-----------------------------
--------------------------------------------
148,641
173,508
--------------------------------------------------------------------
-----
Real estate properties, net 912,243 838,870
-------
------------------------------------------------------------------
Fixed assets, net
51,538 31,355
----------------------------------------------
---------------------------
Racing licenses 240,893 236
,098
-------------------------------------------------------------------------
Other assets
, net 14,793 13,079
--------------------------------
-----------------------------------------
Future tax assets 35,245
30,030
-----------------------------------------------------------------------
--
$ 1,403,353 $ 1,322,940
----------
---------------------------------------------------------------
-----------------------------
--------------------------------------------
LIABILITIES AND SHAREHOLDERS
' EQUITY
-------------------------------------------------------------------------
Current
liabilities:
Bank indebtedness $ 27,500 $ 6,696
Accounts payable and other
liabilities 150,410
118,997
Long-term debt due within one year 17,763 58,048
---
----------------------------------------------------------------------
195,673 183,741
------------------------------------------
-------------------------------
Long-term debt 241,498
122,026
-------------------------------------------------------------------------
Long
-term debt due to parent 23,408 -
------------------------
-------------------------------------------------
Convertible subordinated notes 219
,257 218,167
----------------------------------------------------------------
---------
Other long-term liabilities 11,919 11,725
---
----------------------------------------------------------------------
Future tax liabilities
132,918 130,227
------------------------------------------
-------------------------------
Shareholders' equity:
Capital stock issued and outstanding
-
Class A Subordinate Voting Stock
(issued: 2004 - 48,879,
2003 - 48,680
) 318,003 317,028
Class B Stock (issued: 2004 and
2003 - 58,466) 394,094 394,094
Contributed surplus
17,282 17,282
Deficit
(203,654) (108,018)
Accumulated comprehensive income 52,955
36,668
-------------------------------------------------------------------------
578,680 657,054
-----------------
--------------------------------------------------------
$ 1,403,353 $ 1,322,940
--------------------------------------------------------
-----------------
-------------------------------------------------------------------------
MAGNA ENTERTAINMENT CORP. Flamboro Downs houses a gaming facility
with 750 slot machines operated by the Ontario Lottery and Gaming
Corporation. The
Company used an
expected present value approach of estimated future cash flows,
including a probability weighted approach in considering the
likelihood
of possible outcomes, to determine the fair value of
the long-lived and intangible assets
.
5.6 million was unused and available. At December 31, 2004, the term
loan
is fully drawn and is repayable
in monthly principal amounts of
$417
thousand until maturity.6% per annum (5. 2,500 2,500
Other loans to various subsidiaries from
various banks, and city governments,
including equipment loans and a term loan,
with interest rates ranging
from 4.0% to
9. For the
year ended December 31, 2003, options
forfeited were
primarily as a result of employment contracts being
terminated for certain employees due to down sizing of the
corporate office
.
123 ("SFAS 123") and has been determined as if the Company
had accounted
for its stock options under the fair value method
under SFAS 123.534
Weighted average expected life (years) 4.90) $ (1.0 million,
which resulted
in a loss of $0. Bay Meadows earnings before
income taxes for the year ended December
31, 2004 were
$3.1 million.0 million by June 30, 2004 on capital expenditures
and renovations at Pimlico Race Course, Laurel Park, Bowie
Training Center
and their related facilities and operations. As
at December 31, 2004, this commitment
was fulfilled.
(l) In April 2004, the Company signed a Letter of Intent to explore
the possibility of joint ventures between Caruso Affiliates
Holdings and
various affiliates of the Company to develop
certain undeveloped lands surrounding our
Santa Anita Park and
Golden Gate Fields racetracks.
10. $5. The real
estate and other operations
segment has also been further segmented to reflect the sale of
Non-Core Real Estate and golf and other operations which include the
operation
of two golf courses and related facilities and other real
estate holdings including residential
housing developments adjacent
to the Company's golf courses. GAAP to provide the information
in this note
concerning EBITDA.
The unaudited interim consolidated financial statements
do not conform in
all respects to the requirements of generally accepted accounting
principles
for annual financial statements.13) $ (0.
6.S. In connection with the bank's waiver of
the repayment
requirement, MEC agreed that upon the closing of certain future asset
sales, MEC will use approximately $12. The interest rate implicit in the arrangement is
5.
10. STOCK-BASED COMPENSATION
(a) On August 29, 2003, MID's Board of Directors
approved the Incentive
Stock Option Plan (the "MID Plan"), which allows for the grant of
stock options or stock appreciation rights to directors, officers,
employees and
consultants. $) Number (Cdn.26
Exercised (70,000) 31.44
---------------------------------------------------------------------
------------
---------------------------------------------------------
During the three months ended
March 31, 2004, 100,000 MID stock
options were granted with a weighted average fair value
of $7.57 per
option. These 100,000 MID stock options and an additional 193,000
stock options were subsequently cancelled during the three months
ended September 30, 2004
.3%
Expected dividend yield - 1. During the three months and year ended
December 31, 2005, 2,392 performance shares were issued under this
program for consideration
of approximately $17 thousand.12 4,622,500 6.38) per option.0% 3.
In connection
with the MEC Recapitalization Plan, the MID Lender
entered into two loan agreements with
MEC and certain of its
subsidiaries and amended the existing loan agreement (collectively
,
the "Financing Agreements").
The October 2005 amendments to the bridge loan
required that (i) the
MID Lender waive its negative pledge over certain land located in
Ocala, Florida (the "Ocala Land") owned by certain subsidiaries of
MEC, (ii) Gulfstream
Park Racing Association, Inc.4 million and all of the MID Lender's
costs in connection with
these arrangements. At the MEC segment level, these
costs are recognized as deferred financing
costs and are being
amortized into interest expense (of which a portion has been
capitalized in the case of the Gulfstream Park and Remington Park
project financings)
, over the respective lives of the bridge loan and
Gulfstream Park and Remington Park project
financings.9 million was recognized during the three months ended
June 30, 2005.
(g) At December 31, 2005, the Company's contractual commitments related
to construction
and development projects outstanding amounted to
approximately $27.simulcasting 1613
-------------
------------------------------------------------------------
In announcing these results,
Jim McAlpine, President and Chief Executive
Officer of MEC, remarked: "2004 has been a challenging
year for MEC. MEC is a classic example of a young company with
ambitious goals for future growth
. It should be noted that 2003 revenues
included $8.9 million and
other asset additions of $0. We
received proceeds of 17. Please call 10 minutes
prior to the start of the conference call. dollars
in thousands, except per share figures)
----------------------------------------------------
---------------------
Three months ended Year ended
December 31, December 31,
-------------------
------------------------------------------------------
2004
2003 2004 2003
----------------------------------------------------------
---------------
Revenues
Racing
Gross wagering $ 98,090 $ 101
,860 $ 559,300 $ 561,927
Non-wagering 30,321 38,007 132,260
125,238
-------------------------------------------------------------------------
128,411 139,867 691,560 687,165
-----------------------
--------------------------------------------------
Real estate and other
Sale of real
estate - 2,649 16,387 2,649
Golf and other 10,577
3,562 23,630 19,121
--------------------------------------------------------
-----------------
10,577 6,211 40,017 21,770
-------------------------------------------------------------------------
138,988 146,078 731,577 708,935
-----------------------------------
--------------------------------------
Costs and expenses
Racing
Purses, awards
and other 60,005 59,543 339,991 336,770
Operating costs 70,123
68,089 287,350 259,400
General and administrative 19,543 19,715 66
,962 66,651
-------------------------------------------------------------------------
149,671 147,347 694,303 662,821
----------------
---------------------------------------------------------
Real estate and other
Cost
of real estate sold - 2,618 6,762 2,618
Operating costs
5,499 5,838 17,511 16,600
General and administrative 400 800
2,147 2,362
--------------------------------------------------------------------
-----
5,899 9,256 26,420 21,580
-------
------------------------------------------------------------------
Predevelopment and other
costs 8,365 2,921 20,508 8,767
Depreciation and
amortization 9,558 8,740 37,510 31,897
Interest expense, net 6,354
4,401 24,091 13,620
Write-down of long-lived and
intangible assets
- 134,856 26,685 134,856
Equity income (296)
(149) (635) (1,153)
-----------------------------------------------------------
--------------
179,551 307,372 828,882 872,388
-------------------------------------------------------------------------
Loss before income
taxes (40,563) (161,294) (97,305) (163,453)
Income tax provision
(benefit
) 390 (58,133) (1,669) (58,356)
----------------------------
---------------------------------------------
Net loss (40,953) (103,161
) (95,636) (105,097)
Other comprehensive income
(loss)
Foreign currency
translation adjustment 15,713 16,634 15,627 40,493
Change in fair
value of
interest rate swap 38 245 660 583
---
----------------------------------------------------------------------
Comprehensive loss
$ (25,202) $ (86,282) $ (79,349) $ (64,021)
-----------------------------------------
--------------------------------
------------------------------------------------------------
-------------
Loss per share for Class A
Subordinate Voting Stock
or Class B Stock:
Basic and Diluted $ (0.S.
2. ORI was owned by an employee of the Company
.S.2 million and other
intangible assets of $3.6 million and Thistledown's racing
license of $3.S. However, the
Company's ability to continue to meet these
financial covenants
may be adversely affected by a deterioration in business
conditions or results of operations, adverse regulatory
developments and other
events beyond the Company's control.3 6.90) $ (1.
As a result of the net loss
for the three months and year ended
December 31, 2003, options to purchase 4,841,500 shares
and notes
convertible into 30,100,124 and 20,790,421 shares, respectively, were
excluded from the computation of diluted loss per share since the
effect was anti-dilutive
.
The Maryland Revenue Sharing Agreement enabled wagering to be
conducted
, both day and evening, on live and simulcast
thoroughbred and harness races at Pimlico
, Laurel Park and
Rosecroft and the three Maryland off-track betting facilities
operated by them.
Under the Maryland Operating Agreement, Cloverleaf agrees
to pay
the thoroughbred industry a 12% premium on pari-mutuel wagering
(net of refunds) conducted at Rosecroft on all thoroughbred race
signals, and The
Maryland Jockey Club agrees to pay Cloverleaf a
12% premium on pari-mutuel wagering
(net of refunds) conducted
at Pimlico and Laurel Park on all standardbred race signals
. The Company is continuing to
explore these developmental opportunities but to December
31,
2004 has not entered into definitive Operating Agreements on
either
of these potential developments.
In December 2004, certain of the Company's subsidiaries
also
entered into a binding term sheet with MID for project financing
to fund part of the proposed redevelopment at The Meadows for
$77 million.2 million
was recognized in real estate and other revenues related to an
access
agreement that expired on December 31, 2003.
(d) In September 2004, a subsidiary of
the Company entered into an
option agreement with MID and one of its subsidiaries to
acquire
100% of the shares of the MID subsidiary that owns land in
Romulus
, Michigan, for $33. An Austrian subsidiary of Magna has agreed to indemnify
such subsidiary
for any damages or expenses associated with this
case.S.08%.S. Transactions and balances
between the "Real Estate
Business" and "Magna Entertainment Corp. AcG-15 applies to
annual
and interim periods beginning on or after November 1, 2004.
3. The proposed sale was subject
to the completion of due diligence by February 28, 2006., each MEC wholly-owned subsidiaries
through which MEC
currently owns and operates The Meadows, a standardbred racetrack in
Pennsylvania.
In accordance with the terms of MEC's senior secured revolving credit
facility (see note 7) and the bridge loan agreement with a subsidiary of
the Company
(see note 14), MEC is required to use the net proceeds from
the sale of under-utilized real estate
in Palm Beach County, Florida and
The Meadows, as previously described in sections (a) and (b
), to fully
pay down principal amounts outstanding under the bridge loan and to
permanently
pay down a portion of the principal amounts outstanding under
the senior secured revolving credit
facility up to $12.02) 0. The loan bears interest at a rate of 6. The price that MID will pay
for shares
purchased pursuant to the bid will be the market price at the time of
acquisition
.
Activity in MID's option plan was as follows:
2005 2004
----------------------
---------------------
Weighted Weighted
Average Average
Exercise Exercise
Price Price
Number (Cdn.85
- -
Cancelled - - (293,000) 34.3 million
are
available for issuance pursuant to stock options and tandem stock
appreciation
rights and 1.32 - -
-------------------------------------------------
--------------------
Stock options
outstanding, June 30 4,912,500 6. Substantially
all these real estate assets
are leased to, or are under development for subsequent lease to
, Magna's
automotive operating units.
14. MEC's sales of the
Flamboro Downs
racetrack and the management contract for the Colonial
Downs racetrack (see note 3) are the
first of such asset
dispositions.
In consideration of the amendments and waivers
described above, MEC
paid the MID Lender a fee of $0.
As initially structured
(and prior to the addition of additional
security in February 2006 - see note 16), the
bridge loan is
secured by certain assets of MEC and guaranteed by certain
subsidiaries of MEC.
The Maryland Operating Agreement replaced a previous agreement
(the
"Maryland Revenue Sharing Agreement"), which was effective as of
January
1, 2000 and expired on April 18, 2004. MEC is obligated to
contribute 50% of any and all
equity amounts in excess of
$15. To December 31, 200