SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: MARCH 31, 2003
COMMISSION FILE NUMBER: 000-30578
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MAGNA ENTERTAINMENT CORP.
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(Exact Name of Registrant as Specified in its Charter)
DELAWARE 98-0208374
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
337 MAGNA DRIVE, AURORA, ONTARIO L4G 7K1
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(Address of principal executive offices, including zip code)
(905) 726-2462
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934).
Yes [X] No [ ]
The Registrant had 48,679,796 shares of Class A Subordinate Voting Stock and
58,466,056 shares of Class B Stock outstanding as of April 30, 2003.
MAGNA ENTERTAINMENT CORP.
I N D E X
PAGES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations and Comprehensive Income (Loss)
for the three month periods ended March 31, 2003 and 2002 3
Condensed Consolidated Statements of Cash Flows for the three
month periods ended March 31, 2003 and 2002 4
Condensed Consolidated Balance Sheets at March 31, 2003 and
December 31, 2002 5
Notes to the Consolidated Financial Statements 6 - 11
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Position 12 - 17
Item 3. Quantitative and Qualitative Disclosures about Market Risk 17
Item 4. Controls and Procedures 17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities and Use of Proceeds 17
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 18
Certifications 19 - 20
Exhibit Index 21
Exhibits 22 - 31
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MAGNA ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
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[UNAUDITED]
[U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE FIGURES]
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THREE MONTHS ENDED
MARCH 31,
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2003 2002
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REVENUES
Racing
Gross wagering $238,674 $220,353
Non-wagering 27,804 23,675
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266,478 244,028
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Real estate
Sale of real estate - 637
Rental and other 3,637 4,134
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3,637 4,771
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270,115 248,799
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COSTS AND EXPENSES
Racing
Purses, awards and other 145,721 140,523
Operating costs 72,846 55,344
General and administrative 15,759 10,633
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234,326 206,500
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Real estate
Cost of real estate sold - 287
Operating costs 1,993 2,924
General and administrative 501 501
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2,494 3,712
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Predevelopment and other costs 2,199 1,541
Depreciation and amortization 7,437 5,326
Interest expense, net 2,284 67
Equity income (743) -
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247,997 217,146
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Income before income taxes 22,118 31,653
Income tax provision 9,468 13,038
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Net income 12,650 18,615
Other comprehensive income (loss)
Foreign currency translation adjustment 8,838 (659)
Change in fair value of interest rate swap (5) -
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Comprehensive income $21,483 $17,956
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Earnings per share for Class A Subordinate Voting Stock, Class B Stock or
Exchangeable Share:
Basic $ 0.12 $ 0.22
Diluted $ 0.12 $ 0.22
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Average number of shares of Class A Subordinate Voting Stock, Class B Stock and
Exchangeable Shares outstanding during the period [in thousands]:
Basic 107,135 84,089
Diluted 116,027 85,546
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MAGNA ENTERTAINMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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[UNAUDITED]
[U.S. DOLLARS IN THOUSANDS]
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THREE MONTHS ENDED
MARCH 31,
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2003 2002
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CASH PROVIDED FROM (USED FOR):
OPERATING ACTIVITIES
Net income $12,650 $18,615
Items not involving current cash flows 9,232 5,470
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21,882 24,085
Changes in non-cash working capital 4,967 (3,136)
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26,849 20,949
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INVESTMENT ACTIVITIES
Real estate property and fixed asset additions (12,997) (13,598)
Other asset disposals (additions) 820 (1,109)
Proceeds on disposal of real estate - 1,198
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(12,177) (13,509)
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FINANCING ACTIVITIES
Decrease in bank indebtedness (49,475) -
Issuance of long-term debt 16,110 -
Repayment of long-term debt (1,380) (981)
Issuance of share capital 29 251
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(34,716) (730)
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Effect of exchange rate changes on cash
and cash equivalents 1,967 (67)
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Net (decrease) increase in cash and cash equivalents
during the period (18,077) 6,643
Cash and cash equivalents, beginning of period 87,681 39,212
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Cash and cash equivalents, end of period $69,604 $45,855
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MAGNA ENTERTAINMENT CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
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[UNAUDITED]
[U.S. DOLLARS AND SHARE AMOUNTS IN THOUSANDS]
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MARCH 31, DECEMBER 31,
2003 2002
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ASSETS
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CURRENT ASSETS:
Cash and cash equivalents $ 69,604 $ 87,681
Restricted cash 25,256 18,692
Accounts receivable 58,364 46,138
Income taxes receivable - 2,262
Prepaid expenses and other 13,487 8,094
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166,711 162,867
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Real estate properties and fixed assets, net 765,779 752,130
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Other assets, net 328,367 329,705
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Future tax assets 12,129 12,103
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$ 1,272,986 $ 1,256,805
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LIABILITIES AND SHAREHOLDERS' EQUITY
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CURRENT LIABILITIES:
Bank indebtedness $ - $ 49,475
Accounts payable and other liabilities 133,049 112,749
Income taxes payable 5,582 -
Long-term debt due within one year 15,256 15,049
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153,887 177,273
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Long-term debt 132,783 117,801
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Convertible subordinated notes 72,333 72,233
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Other long-term liabilities 9,610 8,405
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Future tax liabilities 161,815 160,191
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SHAREHOLDERS' EQUITY:
Capital stock issued and outstanding -
Class A Subordinate Voting Stock
(issued: 2003 - 48,680; 2002 - 48,648) 317,028 316,855
Class B Stock (issued: 2003 and 2002 - 58,466) 394,094 394,094
Contributed surplus 17,282 17,282
Retained earnings (deficit) 9,729 (2,921)
Accumulated comprehensive income (loss) 4,425 (4,408)
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742,558 720,902
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$ 1,272,986 $ 1,256,805
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MAGNA ENTERTAINMENT CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. 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.S.
GAAP") for interim financial information and with instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by U.S. GAAP for complete financial
statements. The preparation of the consolidated financial statements in
conformity with U.S. GAAP requires management to make estimates and assumptions
that affect the amounts reported in the consolidated financial statements and
accompanying notes. Actual results could differ from estimates. In the opinion
of management, all adjustments, which consist of normal and recurring
adjustments, necessary for fair presentation have been included. Operating
results for the three month period ended March 31, 2003 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2003. 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, 2002.
The Company's racing business is seasonal in nature. 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. A disproportionate share of
annual revenues and net income is earned in the first quarter of each year.
2. ACQUISITIONS AND PRO-FORMA IMPACT
[a] Acquisitions
On October 23, 2002, the Company completed the acquisition of
substantially all the operations and related assets of Lone Star Park
at Grand Prairie. On November 27, 2002, the Company completed the
acquisition of a controlling interest in the Pimlico Race Course and
Laurel Park, which are operated under the trade name "The Maryland
Jockey Club". Both of these acquisitions are fully disclosed in the
Company's consolidated financial statements for the year ended December
31, 2002. As a result of the timing of these acquisitions, the results
of the operations of these acquisitions are not included in the
Company's results for the three months ended March 31, 2002.
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. ("ORI"). ORI was a former subsidiary of the Company that,
at March 31, 2003, was owned by an employee of the Company. The results
of operations of ORI, which owns Flamboro Downs, have been accounted
for under the equity method for the three months ended March 31, 2003,
pending receipt of all necessary regulatory approvals which were
received by April 16, 2003 (see note 8). This acquisition is fully
disclosed in the Company's consolidated financial statements for the
year ended December 31, 2002. As a result of this transaction being
completed subsequent to March 31, 2002, the results of operations of
Flamboro Downs are not included in the Company's results for the three
months ended March 31, 2002.
[b] Impact of Acquisitions
The pro-forma impact of our 2002 acquisitions if they had occurred on
January 1, 2002, is as follows (in thousands, except per share
figures):
THREE MONTHS ENDED
MARCH 31,
REVENUES 2003 2002
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Revenues as reported $270,115 $248,799
Restatement for acquisitions - 39,112
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Pro-forma revenues $270,115 $287,911
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THREE MONTHS ENDED
MARCH 31,
NET INCOME 2003 2002
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Net income as reported $12,650 $18,615
Restatement for acquisitions - (2,793)
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Pro-forma net income $12,650 $15,822
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THREE MONTHS ENDED
BASIC AND DILUTED MARCH 31,
EARNINGS PER SHARE 2003 2002
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Earnings per share as reported
Basic and Diluted $0.12 $0.22
Restatement for acquisitions
Basic - (0.03)
Diluted - (0.04)
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Pro-forma earnings per share
Basic $0.12 $0.19
Diluted $0.12 $0.18
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3. LONG-TERM DEBT
During the three months ended March 31, 2003, the Company received proceeds
of $16.1 million (Euros 15 million) from a loan obtained by a subsidiary.
The loan bears interest at 4% per annum, with a maturity date of February
2007, and is secured by a pledge of land and a guarantee by the Company.
4. CAPITAL STOCK AND LONG-TERM INCENTIVE PLAN
[a] Capital Stock
Changes in Class A Subordinate Voting Stock and Class B Stock for the
three months ended March 31, 2003 are shown in the following table
(number of shares and stated value in the following table have been
rounded to the nearest thousand):
Class A Subordinate
Voting Stock Class B Stock Total
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Number of Stated Number of Stated Number of Stated
Shares Value Shares Value Shares Value
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Issued and outstanding at
December 31, 2002 48,648 $316,855 58,466 $394,094 107,114 $710,949
Issued under the Long-term
Incentive Plan 26 144 - - 26 144
Issued on exercise of stock
options 6 29 - - 6 29
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Issued and outstanding at
March 31, 2003 48,680 $317,028 58,466 $394,094 107,146 $711,122
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[b] Long-term Incentive Plan
The Company has a Long-term Incentive Plan (the "Plan") (adopted in
2000) which allows for the grant of nonqualified stock options,
incentive stock options, stock appreciation rights, restricted stock,
bonus stock and performance shares to directors, officers, employees,
consultants, independent contractors and agents. A maximum of 7.8
million shares are available to be issued under the Plan, of which 6.5
million are available for issuance pursuant to stock options and tandem
stock appreciation rights and 1.4 million are available for issuance
pursuant to any other type of award under the Plan. During the three
months ended March 31, 2003, 31,965 shares were issued under the Plan,
including 6,000 shares issued on the exercise of stock options.
The Company grants stock options to certain directors, officers, key
employees and consultants to purchase shares of the Company's Class A
Subordinate Voting Stock. 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. Generally, stock options under the 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 in the events specified in the
stock option agreements entered into by the Company with each recipient
of options.
During the three months ended March 31, 2003, no stock options were
granted, 6,000 stock options were exercised and no stock options were
cancelled. At March 31, 2003, there were 5,355,833 options outstanding
with the exercise price of the options ranging from $3.91 to $9.43 per
share and a weighted average exercise price of $6.18 per share.
There were 4,107,528 options exercisable at March 31, 2003 with a
weighted average exercise price of $6.13 per share.
Financial Accounting Standards Board Statement No. 123 ("SFAS 123"),
"Accounting and Disclosure of Stock-Based Compensation" provides
companies an alternative to accounting for stock-based compensation as
prescribed under APB Opinion No. 25 ("APB 25"). SFAS 123 encourages,
but does not require companies to recognize an expense for stock-based
awards at their fair value on the date of grant. SFAS 123 allows
companies to continue to follow existing accounting rules (intrinsic
value method under APB 25 which does not give rise to an expense)
provided that pro-forma disclosures are made of what net income and
earnings per share would have been had the fair value method been used.
The Company accounts for stock-based compensation under APB 25 and
provides pro-forma disclosure required by SFAS 123.
There were no stock options granted during the three months ended March
31, 2003. For the three months ended March 31, 2002, 137,500 stock
options were granted with an average fair value of $4.08 per option.
The fair value of stock option grants is estimated at the date of grant
using the Black-Scholes option valuation model with the following
assumptions:
THREE MONTHS ENDED
MARCH 31,
2003 2002
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Risk free interest rate N/A 3.0%
Dividend yield N/A 0.77%
Volatility factor of expected market price of Class A
Subordinate Voting Stock N/A 0.549
Weighted average expected life (years) N/A 4.07
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The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that require input of
highly subjective assumptions including the expected stock price
volatility. 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
its stock options.
The Company's SFAS 123 pro-forma net income and the related per share
amounts are as follows:
THREE MONTHS ENDED
MARCH 31,
2003 2002
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Net income, as reported $12,650 $18,615
Pro-forma stock compensation expense determined
under the fair value method, net of tax (867) (696)
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Pro-forma net income $11,783 $17,919
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Earnings per share
Basic - as reported $ 0.12 $ 0.22
Basic - pro-forma $ 0.11 $ 0.21
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Diluted - as reported $ 0.12 $ 0.22
Diluted - pro-forma $ 0.11 $ 0.21
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5. EARNINGS PER SHARE
The following is a reconciliation of the numerator and denominator of the
basic and diluted earnings per share computations (in thousands, except per
share amounts):
THREE MONTHS ENDED
MARCH 31,
2003 2002
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Basic Diluted Basic Diluted
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Net income $ 12,650 $ 12,650 $ 18,615 $18,615
Interest, net of related tax on
7.25% convertible subordinated notes - 823 - -
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$ 12,650 $ 13,473 $ 18,615 $18,615
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Weighted Average Shares Outstanding:
Class A Subordinate Voting Stock 48,669 57,561 23,478 24,935
Class B Stock 58,466 58,466 58,466 58,466
Exchangeable Shares - - 2,145 2,145
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107,135 116,027 84,089 85,546
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Earnings Per Share $ 0.12 $ 0.12 $ 0.22 $ 0.22
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6. COMMITMENTS AND CONTINGENCIES
[a] In connection with its acquisition of a controlling interest in The
Maryland Jockey Club, Maryland Racing, Inc. ("MRI"), a wholly-owned
subsidiary of the Company, has agreed with the Maryland Racing
Commission to spend a minimum of $5.0 million by August 31, 2003, an
additional $5.0 million by December 31, 2003, and an additional $5.0
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.
[b] In connection with its acquisition of a controlling interest in The
Maryland Jockey Club, the Company has an obligation to pay $18.3
million on exercise of either the put or call options for the remaining
interest in The Maryland Jockey Club. At March 31, 2003, this
obligation has been reflected on the condensed consolidated balance
sheet as long-term debt due after one year.
[c] At March 31, 2003, the secured notes of $32.8 million, assumed by ORI
on its acquisition of Flamboro Downs, have been guaranteed by the
Company. In addition, the purchase and sale agreement stipulates that
the purchase price may be increased by a maximum of $3.7 million (Cdn.
$5.5 million), plus accrued interest, in the event that Flamboro Downs'
agreement with the Ontario Lottery and Gaming Corporation, with respect
to the slot facility, is extended.
[d] Although the Company is considering a major redevelopment of its
Gulfstream Park racetrack in Florida (the "Gulfstream Park
Redevelopment"), it has deferred a decision on the project at the
present time. Should it proceed as currently contemplated, the
Gulfstream Park Redevelopment would include a simulcast pavilion, a
sports and entertainment arena and a new turf club and grandstand. In
addition, there would be significant modifications and enhancements to
the racetracks and stable areas. If completed, the Gulfstream Park
Redevelopment would require the demolition of a substantial portion of
the current buildings and related structures, which include the
grandstand and turf club. The aggregate carrying value at March 31,
2003 of the assets that would be demolished if the Gulfstream Park
Redevelopment is completed is approximately $21.9 million. If the
Company decides to proceed with the Gulfstream Park Redevelopment and
obtains the 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.
7. SEGMENT INFORMATION
The Company's reportable segments reflect how the Company is organized and
managed by senior management. The Company has two operating segments: racing
operations and real estate and other operations. The racing segment includes
the operation or management of eleven thoroughbred racetracks, two
standardbred racetracks, one racetrack that runs both thoroughbred and
standardbred meets, one greyhound track and three thoroughbred training
centers. In addition, the racing segment includes off-track betting ("OTB")
facilities, a national account wagering business and HorseRacing TV(TM). The
real estate and other operations segment includes the operation of two golf
courses and related facilities, residential housing developments adjacent to
the golf courses and other real estate holdings.
The accounting policies of each segment are the same as those described in
the "Significant Accounting Policies" section in the Company's annual report
on Form 10-K for the year ended December 31, 2002.
The following summary presents key information by operating segment (in
thousands):
THREE MONTHS ENDED MARCH 31, 2003
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REAL ESTATE
RACING AND OTHER
OPERATIONS OPERATIONS TOTAL
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Revenues $ 266,478 $ 3,637 $ 270,115
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Income before income taxes $ 21,466 $ 652 $ 22,118
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Real estate property and fixed asset additions $ 12,785 $ 212 $ 12,997
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THREE MONTHS ENDED MARCH 31, 2002
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REAL ESTATE
RACING AND OTHER
OPERATIONS OPERATIONS TOTAL
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Revenues $ 244,028 $ 4,771 $ 248,799
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Income before income taxes $ 30,223 $ 1,430 $ 31,653
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Real estate property and fixed asset additions $ 10,350 $ 3,248 $ 13,598
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8. SUBSEQUENT EVENTS
[a] On April 16, 2003, having received all necessary regulatory approvals,
the Company completed the acquisition of Flamboro Downs Holdings
Limited, the owner and operator of Flamboro Downs. The shares of ORI,
the owner of Flamboro Downs Holdings Limited, were transferred back to
the Company.
[b] On April 30, 2003, the Company's senior, unsecured, revolving credit
facility was reduced from $100.0 million to $50.0 million in accordance
with the terms of the agreement dated December 2, 2002.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL POSITION
The following discussion of our results of operations and financial
position should be read in conjunction with the unaudited consolidated financial
statements included in this report.
OVERVIEW
Magna Entertainment Corp. ("MEC", "we" or the "Company") is North
America's number one owner and operator of horse racetracks and one of the
world's leading suppliers, via simulcasting, of live racing content to the
growing inter-track, off-track and account wagering markets. On April 16, 2003,
having received all necessary regulatory approvals, MEC completed the
acquisition of Flamboro Downs, a harness racetrack located in Hamilton, Ontario,
45 miles west of Toronto, Ontario. We currently operate or manage eleven
thoroughbred racetracks, two standardbred racetracks, one racetrack that runs
both thoroughbred and standardbred meets and one greyhound track, as well as the
simulcast wagering venues at these tracks. In addition, we operate off-track
betting ("OTB") facilities and a national account wagering business known as
XpressBet(TM), which permits customers to place wagers by telephone and over the
Internet on horse races run at up to 70 racetracks in North America. MEC also
owns and operates HorseRacing TV(TM), a television network focused exclusively
on horse racing that we initially launched on the Racetrack Television Network
("RTN") in 2002. HorseRacing TV(TM) is currently carried on cable systems in
eight states, with over one million subscribers to date. We are in ongoing
discussions with cable and satellite operators with the goal of achieving
broader distribution for HorseRacing TV(TM). RTN, in which we have a one-third
interest, was formed to telecast races from our racetracks and other racetracks,
via private direct to home satellite, to paying subscribers. To support certain
of our thoroughbred racetracks, we also own thoroughbred training centers
situated near San Diego, California, in Palm Beach County, Florida and in the
Baltimore, Maryland area. We have commenced development of a horse racetrack and
gaming facility near Vienna, Austria.
SEASONALITY
Our racetracks operate for prescribed periods each year. As a result,
our racing revenues and operating results for any quarter will not be indicative
of the revenues and operating results for the year. Because four of our largest
racetracks, Santa Anita Park, Gulfstream Park, Lone Star Park and Golden Gate
Fields, run live race meets principally during the first half of the year, our
racing operations have historically operated at a loss in the second half of the
year, with our third quarter generating the largest loss. This seasonality has
resulted in large quarterly fluctuations in revenue and operating results. We
expect the seasonality of our business to gradually diminish as our recent
acquisitions, OTB network and account wagering initiatives evolve. Some time ago
we set out to reduce our reliance on winter racing by acquiring properties that
operate at different times throughout the year. The acquisition of Lone Star
Park at Grand Prairie and The Maryland Jockey Club late in 2002 give us
significant new content in the second and fourth quarters. The costs of
operating these facilities, which have reduced our earnings in the first
quarter, should be more than offset by increased earnings in the periods when
these tracks run their live race meets. These tracks and Flamboro Downs earned
approximately $22.0 million in EBITDA for their owners in 2002, so we anticipate
significant profits from these acquisitions for the balance of 2003.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2003 COMPARED TO THREE MONTHS ENDED MARCH 31, 2002
RACING OPERATIONS
In the three months ended March 31, 2003, we operated our racetracks
for an additional 89 live race days as compared to the prior year period. The
overall increase in live race days is primarily attributable to 61 live race
days at Laurel Park, which was acquired in the fourth quarter of 2002, 22
additional live race days at Portland Meadows, as a result of the 2002 live
race meet concluding early in order to permit construction of a storm water
retention system, and eight additional live race days at Thistledown due to
the earlier start of the 2003 live race meet. At our largest tracks, Santa
Anita Park and Golden Gate Fields each had one extra live race day which were
offset by two fewer live race days at Gulfstream Park as a result of the
timing of their 2003 race meets.
Set forth below is a schedule of our actual live race days by racetrack
for the first quarter and awarded live race days for the remaining quarters in
2003 with comparatives for 2002.
LIVE RACE DAYS
AWARDED AWARDED AWARDED
Q1 Q2 Q2 Q3 Q3 Q4 Q4 TOTAL TOTAL
LARGEST RACETRACKS 2003 2002 2003 2002 2003 2002 2003 2002 2003(1) 2002
------------------ ---- ---- ---- ---- ---- ---- ---- ---- ------- ----
Santa Anita Park(2) 66 65 15 15 - - 5 4 86 84
Golden Gate Fields 66 65 - - - - 39 38 105 103
Bay Meadows - - 55 55 23 24 26 26 104 105
Gulfstream Park 72 74 17 16 - - - - 89 90
Lone Star Park(3) - N/A 60 N/A 10 N/A 33 15 103 15
Laurel Park(4) 61 N/A - N/A 21 N/A 65 18 147 18
Pimlico Race Course(4) - N/A 53 N/A 16 N/A 4 - 73 -
--- --- --- --- --- --- --- --- --- ---
265 204 200 86 70 24 172 101 707 415
--- --- --- --- --- --- --- --- --- ---
OTHER RACETRACKS(5)
Thistledown 10 2 63 65 61 61 53 59 187 187
Remington Park - 1 3 33 44 30 35 41 82 105
Great Lakes Downs - - 38 37 61 62 19 19 118 118
The Meadows 50 51 52 56 52 52 54 51 208 210
Flamboro Downs(6) N/A N/A 55 N/A 65 N/A 71 N/A 191 N/A
Portland Meadows 40 18 12 - - - 32 29 84 47
--- --- --- --- --- --- --- --- ----- -----
100 72 223 191 283 205 264 199 870 667
--- --- --- --- --- --- --- --- ----- -----
TOTAL 365 276 423 277 353 229 436 300 1,577 1,082
--- --- --- --- --- --- --- --- ----- -----
--- --- --- --- --- --- --- --- ----- -----
(1) Includes actual live race days for the first quarter of 2003 and awarded
live race days for the remainder of 2003.
(2) Excludes The Oak Tree Meet, which is hosted by the Oak Tree Racing
Association at Santa Anita Park.
(3) Excludes live race days prior to our acquisition of Lone Star Park at Grand
Prairie on October 23, 2002.
(4) Excludes live race days prior to our acquisition of a controlling interest
in the Pimlico Race Course and Laurel Park racetracks, which are operated
under the trade name "The Maryland Jockey Club ("MJC")" on November 27,
2002.
(5) Excludes Colonial Downs, a racetrack owned by a third party whose racing
operations are managed by MJC.
(6) Excludes live race days prior to our acquisition of Flamboro Downs on April
16, 2003.
Live race days are a significant factor in the operating and financial
performance of our racing business. Another significant factor is the level of
wagering per customer on our racing content on-track, at inter-track simulcast
locations, at OTB facilities and increasingly on our XpressBet(TM) account
wagering system. There are also many other factors that have a significant
impact on our racing revenues, which include, but are not limited to: attendance
at our racetracks, inter-track simulcast locations and OTB facilities; the
number of races and the average field size per race; our ability to attract the
industry's top horses and trainers; inclement weather; and changes in the
economy.
Revenues from our racing operations were $266.5 million for the three
months ended March 31, 2003, compared to $244.0 million in the 2002 comparable
period, an increase of $22.5 million or 9.2%. The increase is primarily
attributable to the acquisitions of The Maryland Jockey Club and Lone Star Park
at Grand Prairie, which generated revenues in the three months ended March 31,
2003 of $24.0 million and $11.3 million, respectively, partially offset by
reduced revenues due to lower average daily attendance and correspondingly
decreased on-track wagering activity at most of our facilities. Also
contributing to the decline was a generally weaker United States economy, the
war in Iraq and severe winter weather experienced in the quarter, particularly
in the northeast region of the United States where several of our facilities are
located, which resulted in five canceled live race days at Laurel Park and many
canceled simulcast signals.
In the three months ended March 31, 2003, gross wagering revenues for
our racing operations increased 8.3% to $238.7 million, compared to $220.4
million in the 2002 comparable period, primarily due to the acquisitions of The
Maryland Jockey Club and Lone Star Park at Grand Prairie, partially offset by a
change in the mix of handle and related revenues. Declines in average daily
attendance, caused partially by the war in Iraq, severe winter weather and a
generally weaker U.S. economy, resulted in lower volumes of on-track live and
import handle and related revenues. The severe winter weather, particularly in
the northeastern United States, resulted in significant numbers of cancelled
live race days and race cards. It is difficult to quantify with precision the
impact of these events, but we do know that they had a significantly negative
impact on our first quarter earnings. These declines were partially offset by
increases in
export handle and related revenues at Gulfstream Park and Golden Gate Fields.
Non-wagering revenues in the three months ended March 31, 2003 increased 17.4%
to $27.8 million, compared to $23.7 million in the three months ended March 31,
2002, for reasons consistent with those noted for the increase in gross wagering
revenues. As a percentage of gross wagering revenues, non-wagering revenues
increased from 10.7% in the three months ended March 31, 2002 to 11.6% in the
current year period as a result of sponsorship revenues earned on the Sunshine
Millions(TM). Non-wagering revenues consist primarily of food and beverage
sales, program sales, admissions income, parking revenues, sponsorship revenue
and income from the rental of our facilities to other racing operators.
Purses, awards and other increased to $145.7 million in the three
months ended March 31, 2003 from $140.5 million in the comparable period in
2002 primarily due to the increase in gross wagering revenues for the period.
As a percentage of gross wagering revenue, purses, awards and other decreased
from 63.8% in the three months ended March 31, 2002 to 61.1% in the three
months ended March 31, 2003 primarily due to the mix of wagers made, the
state the wagers were made in and the mix of on-track versus off-track
wagering. Operating costs increased $17.5 million to $72.8 million in the
three months ended March 31, 2003 from $55.3 million in the three months
ended March 31, 2002. The increased operating costs included $15.5 million
incurred by our acquisitions and new business units, including Lone Star Park
at Grand Prairie, The Maryland Jockey Club, Palm Meadows and HorseRacing
TV(TM) and additional rent expense incurred at our Bay Meadows facility of
$0.7 million. Another factor contributing to higher operating costs in the
quarter was the start-up costs of the inaugural Sunshine Millions(TM),
thoroughbred racing's newest major event. As a percentage of total racing
revenues, operating costs increased from 22.7% in the three months ended
March 31, 2002 to 27.3% in the three months ended March 31, 2003. The
increase in operating costs as a percentage of revenue was primarily the
result of costs incurred by our recent acquisitions and new business units,
which were not running live race meets or which were in start-up phase during
the current quarter and additional rent incurred at our Bay Meadows facility.
General and administrative expenses were $15.8 million in the three
months ended March 31, 2003, compared to $10.6 million in the three months ended
March 31, 2002. As a percentage of total racing revenues, general and
administrative expenses increased from 4.4% in the three months ended March 31,
2002 to 5.9% in the three months ended March 31, 2003. The increased costs
included $4.8 million of costs incurred by our recent acquisitions and new
business units not included in the comparable prior year period.
REAL ESTATE OPERATIONS
Revenues from real estate operations were $3.6 million in the three
months ended March 31, 2003, compared to $4.8 million in the three months ended
March 31, 2002. The decrease in revenues is primarily attributable to lower
housing sales in our European housing operations and no sales of Non-Core Real
Estate in the current quarter. In the three months ended March 31, 2002, there
was one Non-Core Real Estate property sold, which generated revenues of $0.6
million and income before income taxes of $0.4 million.
PREDEVELOPMENT AND OTHER COSTS
Predevelopment and other costs were $2.2 million in the three months
ended March 31, 2003 compared to $1.5 million in the comparable prior year
period. The increase in predevelopment and other costs in the current period is
primarily due to costs of approximately $1.0 million incurred with respect to
pursuing alternative gaming opportunities in states where we currently operate.
Predevelopment and other costs represent the costs incurred on developmental
initiatives undertaken to enhance our racing operations.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased $2.1 million from $5.3 million
in the three months ended March 31, 2002 to $7.4 million in the three months
ended March 31, 2003, as a result of our recent acquisitions recording
depreciation and amortization of $1.7 million and increased depreciation and
amortization on recent fixed asset additions.
INTEREST INCOME AND EXPENSE
Our net interest expense for the three months ended March 31, 2003
increased $2.2 million to $2.3 million from $0.1 million in the three months
ended March 31, 2002. The higher net interest expense is attributable to the
issuance of $75.0 million of convertible subordinated notes in December 2002 and
higher levels of debt related to our acquisitions of The Maryland Jockey Club
and Lone Star Park at Grand Prairie. In the three months ended March 31, 2003,
$0.8 million of interest was capitalized with respect to projects in
developmental stages, compared to $0.5 million in the comparable prior year
period.
INCOME TAX PROVISION
We recorded an income tax provision of $9.5 million on earnings before
income taxes of $22.1 million in the three months ended March 31, 2003, compared
to an income tax provision of $13.0 million on income before income taxes of
$31.7 million in the three months ended March 31, 2002. Our effective income tax
rate in the three months ended March 31, 2003 was 42.8%, compared to 41.2% in
the 2002 comparable period, primarily due to certain tax losses for which we
have not recorded the corresponding tax benefit.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES
Cash provided by operations before changes in non-cash working capital
decreased $2.2 million in the three months ended March 31, 2003 compared to the
three months ended March 31, 2002. The decrease is attributable to a decrease in
net income, partially offset by increases in depreciation and amortization,
future income taxes and equity earnings. In the three months ended March 31,
2003, cash provided from non-cash working capital balances was $5.0 million.
INVESTMENT ACTIVITIES
Cash used in investment activities in the three months ended March
31, 2003 was $12.2 million, including expenditures of $13.0 million on real
estate property and fixed asset additions, offset by $0.8 million of net
proceeds received on the disposal of other assets. Expenditures relating to
real estate property and fixed asset additions for the three months ended
March 31, 2003 were comprised of $4.5 million for the construction of our
Palm Meadows training center, $2.2 million for our Austrian racetrack under
development, maintenance capital improvements of $1.9 million, and $4.4
million of expenditures related to other racetrack property enhancements,
infrastructure and predevelopment costs on certain of our properties and
account wagering and television related activities. Cash used in investment
activities in the three months ended March 31, 2002 was $13.5 million
including investments of $13.6 million in real estate property and fixed
asset additions and $1.1 million of other asset additions, partially offset
by $1.2 million of proceeds received on the sale of non-core real estate.
FINANCING ACTIVITIES
Cash used in financing activities was $34.7 million in the three
months ended March 31, 2003. The Company's revolving credit facility of $49.5
million was repaid early in the quarter from proceeds on the sale of Non-Core
Real Estate received late in 2002. The Company also reduced long-term debt by
$1.4 million and received proceeds on new long-term debt incurred in Europe
of $16.1 million. Cash used in financing activities was $0.7 million for the
three months ended March 31, 2002 related to the repayment of long-term debt
of $1.0 million, partially offset by the issuance of share capital of $0.3
million.
WORKING CAPITAL, CASH AND OTHER RESOURCES
Our net working capital, excluding cash and cash equivalents and bank
indebtedness, was ($41.5) million at March 31, 2003, compared to ($37.6) million
at December 31, 2002. The decreased investment in net working capital, excluding
cash and cash equivalents and bank indebtedness, was primarily related to an
increase in accounts payable and other accruals of $20.3 million and income
taxes payable of $7.8 million, partially offset by an increase in restricted
cash of $6.6 million, accounts receivable of $12.2 million and prepaid expenses
and other of $5.4 million.
Our credit agreement with respect to our senior, unsecured, revolving
credit facility expires on October 10, 2003, but may be extended with the
consent of both parties. Under the terms of the agreement, the amount available
under the credit facility was reduced to $50.0 million on April 30, 2003. At
March 31, 2003, we had no borrowings under this facility, but had issued letters
of credit totaling $20.2 million which includes one letter of credit of $18.3
million required under the terms of The Maryland Jockey Club acquisition.
On November 27, 2002, contemporaneous with our acquisition of The
Maryland Jockey Club, the Company granted the remaining minority interest
shareholders of The Maryland Jockey Club the option to sell such interest to us,
at any time during the first five years after closing of the acquisition. A cash
payment of $18.3 million plus interest will be required on exercise of the
option. At March 31, 2003, this obligation has been reflected on our balance
sheet as long-term debt due after one year.
At March 31, 2003, we had cash and cash equivalents of $69.6 million
and total shareholders' equity of $742.6 million. At April 30, 2003, we also had
unused and available credit facilities of approximately $39.8 million.
We believe that our current cash resources, cash flow from our racing
and real estate operations, including proceeds from the anticipated sales of
Non-Core Real Estate, and borrowings under our credit facilities described above
will be sufficient to finance our operations and our maintenance capital
expenditure program during the next year. However, in order to complete our
strategic growth programs, we will be required to seek additional debt and/or
equity financing through public or private sources. If such additional financing
is not available to us as needed or on terms acceptable to us, we may not be
able to complete these programs.
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Our primary exposure to market risk related to financial instruments
(or the risk of loss arising from adverse changes in market rates and prices,
including interest rates, foreign currency exchange rates and commodity prices)
is with respect to our investments in companies with a functional currency other
than the U.S. dollar. Fluctuations in the U.S. dollar exchange rate relative to
the Canadian dollar and the Euro will result in fluctuations in shareholders'
equity and comprehensive income. We have generally not entered into derivative
financial arrangements for currency hedging purposes, and have not and will not
enter into such arrangements for speculative purposes.
Additionally, we are exposed to interest rate risk. Interest rates are
sensitive to many factors, including governmental monetary and tax policies,
domestic and international economic and political considerations and other
factors that are beyond our control.
Our future earnings, cash flows and fair values relating to financial
instruments are primarily dependent upon prevalent market rates of interest,
such as LIBOR and EURIBOR. Based on interest rates at March 31, 2003 and our
current credit facilities, a 1% per annum increase or decrease in interest rates
on our short-term credit facility and other variable rate borrowings would not
materially affect our annual future earnings and cash flows. Based on borrowing
rates currently available to us, the carrying amount of our debt approximates
its fair value.
In order to mitigate a portion of the interest rate risk associated
with our variable rate debt, we have entered into an interest rate swap
contract. Under the terms of this contract, the Company receives a LIBOR based
variable interest rate and pays a fixed rate of 6.0% on a notional amount of
$54.6 million as at March 31, 2003. The maturity date of this contract is
November 30, 2004.
ACCOUNTING DEVELOPMENTS
Under Staff Accounting Bulletin 74, we are required to disclose certain
information related to new accounting standards, which have not yet been adopted
due to delayed effective dates. In the three months ended March 31, 2003, there
were no new accounting standards with delayed effective dates that impact our
consolidated financial statements.
FORWARD-LOOKING STATEMENTS
This Report contains forward-looking statements as defined by the U.S.
Securities Act of 1933 and the U.S. Securities Exchange Act of 1934. 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; estimates of costs relating to environmental remediation and
restoration; proposed new racetracks or other developments, products and
services; expectations that claims, lawsuits, environmental costs, commitments,
contingent liabilities, labor negotiations or agreements, or other
matters will not have a material adverse effect on our consolidated financial
position, operating results, prospects or liquidity; 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.
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. 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. Important
factors that could cause such differences include, but are not limited to, the
factors discussed in the "Risk Factors" section of the Company's Annual Report
on Form 10-K for the year ended December 31, 2002 and our subsequent public
filings.
Forward-looking statements speak only as of the date the statement was
made. We assume no obligation to update forward-looking information to reflect
actual results, changes in assumptions or changes in other factors affecting
forward-looking information. 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this item is incorporated by reference to the
information contained in "Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Position - Qualitative and
Quantitative Disclosures About Market Risk" of this Quarterly Report.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. Within 90
days prior to the filing date of this Quarterly Report, the Registrant
carried out an evaluation, under the supervision and with the participation
of the Registrant's management, including the Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the Registrant's
disclosure controls and procedures as defined in Rules 13a-14(c) and
15d-14(c) under the U.S. Securities Exchange Act of 1934. Based upon
that evaluation, the Chief Executive Officer and Chief Financial Officer
have concluded that the Registrant's current disclosure controls and
procedures are adequate and effective.
(b) Changes in internal controls. There have been no significant
changes in the Registrant's internal controls or in other factors that could
significantly affect internal controls subsequent to the date of the
evaluation by the Chief Executive Officer and Chief Financial Officer.
The design of any system of controls and procedures is based in part
upon certain assumptions about the likelihood of future events. There can be
no assurance that any design will succeed in achieving its stated goals under
all potential future conditions, regardless of how remote.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, various routine claims incidental to our business
are made against us. None of these claims has had, and we believe that none of
the current claims, if successful, will have, a material adverse effect upon
our business.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
See exhibit index on page 21.
(B) REPORTS ON FORM 8-K
DATE ITEMS REPORTED AND FINANCIAL STATEMENTS FILED
November 27, 2002 The following financial statements were filed:
(amendment filed:
February 10, 2003) (a) Maryland Jockey Club Companies Audited Combined
Financial Statements for the year ended December
31, 2001 with Report of Independent Auditors;
(b) Maryland Jockey Club Companies Unaudited
Combined Financial Statements for the nine
months ended September 30, 2002 and
September 30, 2001;
(c) Pro Forma Consolidated Statement of
Operations and Comprehensive Income for
the year ended December 31, 2001;
(d) Pro Forma Consolidated Statement of
Operations and Comprehensive Income for
the nine months ended September 30, 2002;
(e) Pro Forma Consolidated Balance Sheet as at
September 30, 2002; and
(f) Notes to the Pro Forma Consolidated Financial Statements.
February 21, 2003 Financial results of the Registrant for the fourth quarter and year ended
(filed February 25, 2003) December 31, 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MAGNA ENTERTAINMENT CORP.
(Registrant)
by: /s/ GRAHAM J. ORR
-------------------------------------
Graham J. Orr, Executive Vice-
President and Chief Financial Officer
by: /s/ GARY M. COHN
-------------------------------------
Gary M. Cohn, Vice-President, Special
Projects and Secretary
Date: May 14, 2003
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
REGARDING MAGNA ENTERTAINMENT CORP.'S QUARTERLY REPORT ON FORM 10-Q
FOR THE FISCAL PERIOD ENDED MARCH 31, 2003
I, Jim McAlpine, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Magna
Entertainment Corp.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: May 14, 2003 /s/ Jim McAlpine
-------------------------------------
Jim McAlpine
President and Chief Executive Officer
CERTIFICATION OF CHIEF FINANCIAL OFFICER
REGARDING MAGNA ENTERTAINMENT CORP.'S QUARTERLY REPORT ON FORM 10-Q
FOR THE FISCAL PERIOD ENDED MARCH 31, 2003
I, Graham J. Orr, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Magna
Entertainment Corp.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: May 14, 2003 /s/ Graham J. Orr
----------------------------
Graham J. Orr
Executive Vice-President and
Chief Financial Officer
EXHIBIT INDEX
NUMBER DESCRIPTION PAGES
3.1 Restated Certificate of Incorporation of Magna Entertainment Corp.
(incorporated by reference to the corresponding exhibit number of the
Registrant's Report on Form 8-K filed on March 16, 2000)
3.2 By-laws of Magna Entertainment Corp. (incorporated by reference
to the corresponding exhibit number of the Registrant's Report on
Form 8-K filed on March 16, 2000)
4.1 Form of Stock Certificate for Class A Subordinate Voting Stock
(incorporated by reference to exhibit 4 of the Registrant's
Registration Statement on Form S-1 originally filed on
January 14, 2000 (File number 333-94791))
4.2 Indenture dated as of December 2, 2002, between Magna
Entertainment Corp. and The Bank of New York, as
trustee, including the form of 7 1/4% Convertible
Subordinated Notes due December 15, 2009
(incorporated by reference to exhibit 4.1 of the
Registrant's Registration Statement on Form S-3 filed
January 31, 2003 (File number 333-102889))
10.1 Loan Agreement dated January 24, 2003 between MEC *
Grundstucksentwicklungs GmbH and Osterreichische Lotterien
Gesellschaft m.b.H. (the Annexes to this Agreement have been
omitted but will be furnished supplementally to the Commission
upon request)
99.1 Certification by the Chief Executive Officer pursuant to 18 U.S.C. *
Section 1350, as added by Section 906 of the Sarbanes-Oxley
Act of 2002
99.2 Certification by the Chief Financial Officer pursuant to 18 U.S.C. *
Section 1350, as added by Section 906 of the Sarbanes-Oxley
Act of 2002