MI Developments announces third quarter 2004 results AURORA, ON,
Nov. 10 /PRNewswire-FirstCall/ -- MI Developments Inc. (TSX: MIM.A,
MIM.B; NYSE: MIM) ("MID" or the "Company") today announced its
results for the three and nine months ended September 30, 2004. All
figures are in U.S. dollars unless otherwise noted.
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(in thousands, except REAL ESTATE BUSINESS per share figures) THREE
MONTHS NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------------ ------------------------ 2004 2003 Pro
2004 2003 Pro Actual Forma (1) Actual Forma (1)
------------------------ ------------------------ Rental revenues $
31,398 $ 29,485 $ 94,776 $ 85,387 Net income(2) $ 11,513 $ 13,445 $
34,687 $ 39,503 Funds from operations ("FFO")(2)(3) $ 19,775 $
22,043 $ 65,487 $ 64,683 Diluted FFO per share (2)(3) $ 0.41 $ 0.46
$ 1.36 $ 1.34 MID CONSOLIDATED ACTUAL THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, ------------------------
------------------------ 2004 2003 2004 2003
------------------------ ------------------------ Revenues Real
Estate Business $ 31,398 $ 29,485 $ 94,776 $ 85,211 Magna
Entertainment Corp. ("MEC") 105,596 104,475 589,721 562,857
-------------------------------------------------- $ 136,994 $
133,960 $ 684,497 $ 648,068
--------------------------------------------------
-------------------------------------------------- Net income
(loss) Real Estate Business (2) $ 11,513 $ 10,930 $ 34,687 $ 19,641
MEC(4) (27,450) (9,556) (29,419) (1,579)
-------------------------------------------------- $ (15,937) $
1,374 $ 5,268 $ 18,062
--------------------------------------------------
-------------------------------------------------- Diluted earnings
per share(4)(5) $ (0.33) $ 0.02 $ 0.11 $ 0.02
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(1) On August 19, 2003, the shareholders of Magna International
Inc. ("Magna") approved spin-off transactions to list MID as a
separate, publicly-traded company. Pro forma results for the Real
Estate Business give effect to the spin-off transactions, including
business combinations, changes in legal, capital and lease
structures, and committed levels of executive compensation for new
officers of MID, as though all of these changes had occurred
effective January 1, 2002. No pro forma adjustments were required
to be made to the results for the three and nine months ended
September 30, 2004. (2) The Real Estate Business' results for the
nine months ended September 30, 2004 reflect (i) $6.9 million ($4.8
million net of income taxes) of costs incurred in the first and
third quarter of 2004 related to employee settlement expenses, (ii)
$2.7 million ($2.4 million net of income taxes) of costs in the
third quarter of 2004 related to the Company's decision that it
would not proceed with the Proposed MEC Privatization, and (iii) a
one-time future income tax charge of $2.0 million incurred in the
second quarter of 2004 in order to revalue downwards future tax
assets related to Austrian operations to reflect decreases in
corporate income tax rates. Excluding the impact of these items,
for the three months ended September 30, 2004, the Real Estate
Business' net income was $15.8 million, FFO was $24.2 million, and
diluted FFO per share was $0.50. For the nine months ended
September 30, 2004, excluding the impact of these items, the Real
Estate Business' net income was $43.9 million, FFO was $71.6
million, and diluted FFO per share was $1.48. (3) FFO and diluted
FFO per share are measures widely used by analysts and investors in
evaluating the operating performance of real estate companies.
However, FFO does not have a standardized meaning under Canadian
GAAP and therefore, is unlikely to be comparable to similar
measures presented by other companies. Please refer to
"Reconciliation of Non-GAAP to GAAP Financial Measures" below. (4)
Net income (loss) and diluted earnings per share for the nine
months ended September 30, 2004 include the impact of non-cash
write-downs of MEC's long-lived assets recorded during the three
months ended June 30, 2004 of $26.7 million. The impact of these
write-downs to MEC's segment net income for the nine months ended
September 30, 2004 was $16.0 million. The impact to diluted
earnings per share for the nine months ended September 30, 2004 was
a decrease of $0.19 per share. (5) Diluted earnings per share for
the three and nine months ended September 30, 2003, include net
income only for the period subsequent to August 29, 2003, the
effective date of the spin-off from Magna.
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REAL ESTATE BUSINESS -------------------- Results of Operations On
September 2, 2003, 100% of our shares were distributed by Magna to
its shareholders of record on August 29, 2003 and we became a
separate, publicly traded company. Pro forma results, which are
presented for the three and nine months ended September 30, 2003,
give effect to the "spin-off" transactions as though they occurred
on January 1, 2002. Pro forma results have been provided for the
prior year in order to allow a more meaningful basis for comparison
of our current and prior year's financial performance. Nine Months
Ended September 30, 2004 For the nine months ended September 30,
2004, rental revenue was $94.8 million, an increase of $9.4 million
or 11% over pro forma rental revenue for the nine months ended
September 30, 2003 of $85.4 million. The higher rental revenue
reflects an increase of $6.1 million due to the strengthening of
the Canadian dollar and the euro against the U.S. dollar, completed
development projects coming on-stream of $2.8 million, and
contractual rent increases including certain rent adjustments of
$3.1 million, partially offset by a decrease in the straight-line
rent adjustment of $1.9 million and the effect of vacancies net of
lease renewals, which lowered revenues by $0.7 million. For the
nine months ended September 30, 2004, net income of the Real Estate
Business was $34.7 million. Included in this amount are
non-recurring expenses of $9.2 million related to: (i) $4.8 million
for employee settlement expenses, (ii) $2.4 million of costs
related to the Company's decision to not proceed with the Proposed
MEC Privatization, and (iii) a $2.0 million future income tax
charge (see footnote (2) above for details of each of these items).
Absent these non-recurring charges, net income of the Real Estate
Business for the nine months ended September 30, 2004 was $43.9
million representing an increase of $4.4 million or 11% over the
pro forma net income for the nine months ended September 30, 2003.
The increase in net income, excluding the impact of these
non-recurring items, is attributable to increased rental revenues
of $9.4 million, additional interest income and other gains of $0.7
million and a reduction in income tax expense of $1.0 million,
partially offset by higher general and administrative expenses of
$4.8 million and depreciation expense of $1.9 million. The increase
in general and administrative expenses is due to nine months of
actual expenses for the nine months ended September 30, 2004 being
compared to one month of actual expenses and eight months of pro
forma expenses for the nine months ended September 30, 2003. Actual
general and administrative expenses are higher than the prior year
pro forma amounts due to the additional public company costs and
additional staffing costs (in addition to the incremental
"committed" executive compensation costs included in the pre
spin-off pro forma general and administrative expenses for the nine
months ended September 30, 2003) incurred by the Company following
the spin-off from Magna. FFO for the nine months ended September
30, 2004 was $65.5 million, or $1.36 per share. Excluding the
after-tax impact of non-recurring items amounting to $6.1 million,
including, employee settlement expenses of $3.7 million, and costs
related to the Proposed MEC Privatization of $2.4 million, FFO in
the first nine months of 2004 was $71.6 million or $1.48 per
diluted share, up 11% from pro forma FFO of $64.7 million or $1.34
per share for the corresponding period of 2003. Three Months Ended
September 30, 2004 For the three months ended September 30, 2004,
rental revenue was $31.4 million, an increase of $1.9 million or 6%
over pro forma rental revenue for the three months ended September
30, 2003 of $29.5 million. The higher rental revenue reflects an
increase of $1.3 million due to the foreign exchange impact of a
weaker U.S. dollar, completed development projects coming on-stream
of $0.8 million, and contractual rent increases including certain
rent adjustments of $1.1 million, partially offset by a decrease in
the straight-line rent adjustment of $0.4 million and the effect of
vacancies and other items, which lowered revenues by $0.9 million.
Net income for the 2004 third quarter was $11.5 million. Excluding
the after-tax impact of non-recurring items amounting to $4.3
million, including, $1.9 million for employee settlement expenses,
and $2.4 million of costs related to the Proposed MEC
Privatization, net income for the three months ended September 30,
2004 was $15.8 million, an increase of $2.4 million or 17% over the
prior year pro forma amount of $13.4 million. The increase in net
income, excluding the impact of these non-recurring items, was
primarily the result of higher rental revenues of $1.9 million,
additional interest income and other gains of $0.9 million and
lower income taxes of $0.6 million, partially offset by increases
in general and administrative expenses of $0.6 million and
depreciation expense of $0.4 million. The increase in general and
administrative expenses is due to three months of actual expenses
for the three months ended September 30, 2004 being compared to one
month of actual expenses and two months of pro forma expenses for
the three months ended September 30, 2003. As noted above, only
known and "committed" expenses are included in the prior year pro
forma general and administrative expenses. FFO in the three months
ended September 30, 2004 was $19.8 million, or $0.41 per share.
Excluding the after-tax impact of non-recurring items amounting to
$4.5 million, including, employee settlement expenses of $2.1
million and costs related to the Proposed MEC Privatization of $2.4
million, FFO in the three months ended September 30, 2004 was $24.2
million or $0.50 per share, up 10% from pro forma FFO of $22.0
million or $0.46 per share for the comparable period in 2003.
Operating and Development Highlights At September 30, 2004, the
Real Estate Business had 25.0 million square feet of leasable area
with annualized lease payments of $131.8 million representing a
return of 12.1% on the net book value of our income-producing
property portfolio. At September 30, 2004, MID's construction group
had five properties under development: two in Canada and one each
in Austria, the U.S. and the Czech Republic. These developments
include expansions to existing facilities and when completed will
add a total of 356,000 square feet to our income-producing
portfolio. The total anticipated project costs related to these
projects are $22.8 million, of which $12.8 million has been spent
as of September 30, 2004. Included in our Properties Under
Development at September 30, 2004 is one new project in Canada
received from the Magna group in the third quarter for a 253,000
square foot facility with a budgeted cost of approximately $14.0
million. In addition, subsequent to the quarter end, and subject to
entering into definitive documents, we have reached an agreement in
principle with the Magna group in respect of two additional
facilities: (i) the 900,000 square foot greenfield facility in
Bowling Green, Kentucky; and (ii) a 370,000 square foot existing
facility located in Saltillo, Mexico, which the Company intends to
purchase from and subsequently lease to the Magna group. The
budgeted costs for these two facilities are approximately $80.0
million ($68.0 million for Bowling Green and $12.0 million for
Saltillo). We anticipate finalizing definitive documents in respect
of these facilities in the 2004 fourth quarter. John Simonetti,
Chief Executive Officer of MID, stated: "We are committed to
growing the assets and cash flows of our Real Estate Business as
evidenced by the $94.0 million in new Magna developments announced
today. Our solid foundation comes from the recurring rental income
stemming from our portfolio of Magna automotive factories, research
and development centres and corporate offices, and we plan to
continue to direct our financial resources in this area as we have
done in the past. In addition, we are evaluating participating in
the development of MEC projects, including MEC's underutilized
lands surrounding its premier racetracks and certain of its racing
assets and slot/video lottery terminal opportunities. The
opportunities for growth within MEC are significant and, as holder
of a 59% equity interest in MEC, MID has a strong and vested
interest in seeing that MEC is successful in realizing these
opportunities." MAGNA ENTERTAINMENT (MEC) MEC's racetracks operate
for prescribed periods each year. As a result, racing revenues and
operating results for any quarter will not be indicative of MEC's
revenues and operating results for the year. MEC's financial
results for the third quarter of 2004 reflect the full quarter's
operations for all of MEC's racetracks and related pari-mutuel
wagering operations. The comparative results for the third quarter
of 2003 do not reflect the operations of Magna Racino(TM),
RaceONTV(TM) and MEC's European simulcasting and distribution
business, which commenced operations during 2004. Revenues for the
third quarter and nine months ending September 30, 2004 increased
1% to $105.6 million and 5% to $589.7 million from the prior year
comparable periods, respectively. The increase in revenue for the
nine months ended September 30, 2004 is primarily attributable to
the acquisition of Flamboro Downs on April 16, 2003, the opening of
MEC's newest racetrack, Magna Racino(TM) on April 4, 2004,
increased decoder revenues at MEC's 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 during the Preakness(R) and increased stall
rent at Palm Meadows, MEC's thoroughbred training centre in Palm
Beach County, Florida, partially offset by reduced on-track and
inter-track wagering revenues at several of MEC's facilities due to
lower average daily attendance and decreased access fee revenues
from the Magna Golf Club and Fontana Sports facilities as a result
of the expiry of the access agreements with Magna on December 31,
2003 and March 1, 2004, respectively. Earnings Before Interest,
Taxes, Depreciation and Amortization ("EBITDA") was a loss of $30.5
million for the third quarter ended September 30, 2004, compared to
a loss of $12.6 million in the prior year period, and was a loss of
$11.2 million in the first nine months ended September 30, 2004,
compared to earnings of $30.2 million in the prior year period.
EBITDA for the first nine months of 2004 was adversely impacted by
a non-cash write-down of long- lived assets of $26.7 million
related to the redevelopment of the Gulfstream Park racetrack and
the racing surfaces at Laurel Park. The decline in the third
quarter of 2004 was primarily attributable to pre-operating and
start-up costs incurred at Magna Racino(TM), RaceONTV(TM) and other
MEC European business developments, additional predevelopment and
other costs, additional distribution and production costs at
HRTV(TM), severance and union buyout costs at The Maryland Jockey
Club and other non-recurring costs incurred in connection with the
redevelopment of the racing surfaces at Laurel Park. Net loss
increased to $27.4 million in the third quarter of 2004 compared to
a loss of $9.6 million in the prior year period and for the first
nine months of 2004 decreased to a loss of $29.4 million compared
to a loss of $1.6 million in the prior year period. The net loss in
the first nine months of 2004 includes the impact of the non-cash
write-down of long-lived assets. The decline in the third quarter
of 2004 is due to the EBITDA decreases as noted above and increased
depreciation and amortization and interest expense in the three
month period ended September 30, 2004 compared to the comparable
2003 period. At September 30, 2004, the market value of MID's
shareholding in MEC was $342.4 million, based on the closing price
of $5.45 per share for MEC Class A Subordinate Voting Stock
(NASDAQ:MECA) on that date. Dividends We also announce that our
Board of Directors declared a dividend on our Class A Subordinate
Voting Shares and Class B Shares for the third quarter ended
September 30, 2004. A dividend of U.S. $0.09 per share is payable
on or after December 15, 2004 to shareholders of record at the
close of business on November 30, 2004. MID Stock Symbols MID also
announced a pending change in its stock symbols on the Toronto
Stock Exchange ("TSX"). Commencing November 22, 2004, the Class A
Subordinate Voting Shares of MID will be traded on the TSX under
the stock symbol "MIM.SV.A" and the Class B Shares will be traded
under the stock symbol "MIM.MV.B". These changes result from a new
symbol naming convention adopted by the TSX. The stock symbol for
the Class A Subordinate Voting Shares on the New York Stock
Exchange ("MIM") is not affected by this change. About MID MID is a
real estate operating company engaged in the ownership, management,
leasing, development and acquisition of industrial and commercial
real estate properties located in North America and Europe.
Virtually all of our income-producing properties are under lease to
Magna and its subsidiaries. MID also holds a controlling investment
in MEC, North America's number one owner and operator of horse
racetracks, based on revenues, 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. We will hold a
conference call for interested analysts and shareholders to discuss
our third quarter results on Wednesday, November 10, 2004 at 10:00
a.m. EST (Toronto time). The number to use for this call is
1-800-814-3911. The number for overseas callers is 416-850-1243.
Please call 10 minutes prior to the start of the conference call.
MID will also webcast the conference call at
http://www.midevelopments.com/. The conference call will be chaired
by John Simonetti, Chief Executive Officer. For anyone unable to
listen to the scheduled call, the rebroadcast numbers will be:
North America - 1-877-289-8525 and Overseas - 416-640-1917
(reservation number is 21098968 followed by the number sign) and
will be available until Wednesday, November 17, 2004. The contents
of this press release contain statements which constitute
"forward-looking statements" within the meaning of Section 21E of
the United States Securities Exchange Act of 1934. Forward-looking
statements may include, among others, statements regarding the
Company's future plans, costs, objectives or economic performance,
or the assumptions underlying any of the foregoing. 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 future performance will be
achieved. Forward-looking statements are subject to known and
unknown risks, uncertainties and other unpredictable factors, many
of which are beyond the Company's control. MID expressly disclaims
any intention and undertakes no obligation to update or revise any
forward-looking statements to reflect subsequent information,
events or circumstances or otherwise. RECONCILIATION OF NON-GAAP TO
GAAP FINANCIAL MEASURES REAL ESTATE BUSINESS RECONCILIATION OF NET
INCOME TO FUNDS FROM OPERATIONS (U.S. dollars in thousands)
(Unaudited) Three Months Ended Nine Months Ended September 30,
September 30, ------------------------ ------------------------
2004 2003 2004 2003 Actual Pro Forma Actual Pro Forma
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Net income $ 11,513 $ 13,445 $ 34,687 $ 39,503 Add back (deduct)
non-cash items: Depreciation and amortization 8,533 8,154 25,405
23,545 Future income taxes 147 926 4,157 3,905 Stock-based
compensation expense (206) - 1,558 - Straight-line rent adjustment
136 (637) (104) (2,404) Loss (gain) on disposal of real estate
(348) 155 (216) 134
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Funds from operations $ 19,775 $ 22,043 $ 65,487 $ 64,683
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Funds from operations per share Basic and diluted $ 0.41 $ 0.46 $
1.36 $ 1.34
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Average number of shares outstanding (thousands) Basic 48,160
48,130 48,153 48,130 Diluted 48,160 48,130 48,190 48,130
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Pro Forma Consolidated Statements of Income (Loss) (U.S. dollars in
thousands, except per share figures) (Unaudited)
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Consolidated Real Estate Business -------------------------
------------------------- Three months ended Three months ended
September 30, September 30, -------------------------
------------------------- 2004(1) 2003(2) 2004(1) 2003(2)
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Revenues Rental revenue $ 31,398 $ 29,485 $ 31,398 $ 29,485 Racing,
real estate and other 105,596 104,475 - -
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136,994 133,960 31,398 29,485
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Operating costs and expenses Purses, awards and other 44,525 44,778
- - Operating costs 73,708 56,342 - - General and administrative
27,129 18,679 9,220 2,723 Depreciation and amortization 18,907
16,077 8,533 8,154 Interest expense (income), net 6,598 4,943 (387)
- Write-down of MEC's long-lived assets - - - -
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Operating income (loss) (33,873) (6,859) 14,032 18,608 Gain (loss)
on disposal of real estate 348 (155) 348 (155) Dilution losses and
other gains 1,026 - - -
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Income (loss) before income taxes and minority interest (32,499)
(7,014) 14,380 18,453 Income tax expense (recovery) 1,864 (4,640)
2,867 5,008 Minority interest (18,426) (6,263) - -
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Net income (loss) $ (15,937) $ 3,889 $ 11,513 $ 13,445
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Basic and diluted earnings per Class A Subordinate Voting or Class
B Share $ (0.33) $ 0.08
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------------------------------------------------ Magna
Entertainment Corp. -------------------------- Three months ended
September 30, -------------------------- 2004(1) 2003(2)
------------------------------------------------ Revenues Rental
revenue $ - $ - Racing, real estate and other 105,596 104,475
------------------------------------------------ 105,596 104,475
------------------------------------------------ Operating costs
and expenses Purses, awards and other 44,525 44,778 Operating costs
73,708 56,342 General and administrative 17,909 15,956 Depreciation
and amortization 10,374 7,923 Interest expense (income), net 6,985
4,943 Write-down of MEC's long-lived assets - -
------------------------------------------------ Operating income
(loss) (47,905) (25,467) Gain (loss) on disposal of real estate - -
Dilution losses and other gains 1,026 -
------------------------------------------------ Income (loss)
before income taxes and minority interest (46,879) (25,467) Income
tax expense (recovery) (1,003) (9,648) Minority interest (18,426)
(6,263) ------------------------------------------------ Net income
(loss) $ (27,450) $ (9,556)
------------------------------------------------
------------------------------------------------ (1) No pro forma
adjustments have been made to results for the three months ended
September 30, 2004. (2) See note 2 to the pro forma consolidated
statements of income (loss) for details of pro forma adjustments
made to the statements of income (loss) for the three months ended
September 30, 2003. Pro Forma Consolidated Statements of Income
(Loss) (U.S. dollars in thousands, except per share figures)
(Unaudited)
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Consolidated Real Estate Business -------------------------
------------------------- Nine months ended Nine months ended
September 30, September 30, -------------------------
------------------------- 2004(1) 2003(2) 2004(1) 2003(2)
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Revenues Rental revenue $ 94,776 $ 85,387 $ 94,776 $ 85,387 Racing,
real estate and other 589,721 570,186 - -
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684,497 655,573 94,776 85,387
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Operating costs and expenses Purses, awards and other 281,877
279,954 - - Operating costs 252,070 209,030 - - General and
administrative 71,356 56,845 21,438 6,910 Depreciation and
amortization 53,357 46,826 25,405 23,545 Interest expense (income),
net 18,654 16,239 (642) - Write-down of MEC's long-lived assets
26,685 - - -
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Operating income (loss) (19,502) 46,679 48,575 54,932 Gain (loss)
on disposal of real estate 9,842 (134) 216 (134) Dilution losses
and other gains 883 - - -
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Income (loss) before income taxes and minority interest (8,777)
46,545 48,791 54,798 Income tax expense (recovery) 5,681 13,157
14,104 15,295 Minority interest (19,726) (2,529) - -
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Net income (loss) $ 5,268 $ 35,917 $ 34,687 $ 39,503
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Basic and diluted earnings per Class A Subordinate Voting or Class
B Share $ 0.11 $ 0.75
-----------------------------------------------
-----------------------------------------------
------------------------------------------------ Magna
Entertainment Corp. -------------------------- Nine months ended
September 30, -------------------------- 2004(1) 2003(2)
------------------------------------------------ Revenues Rental
revenue $ - $ - Racing, real estate and other 589,721 570,186
------------------------------------------------ 589,721 570,186
------------------------------------------------ Operating costs
and expenses Purses, awards and other 281,877 279,954 Operating
costs 252,070 209,030 General and administrative 49,918 49,935
Depreciation and amortization 27,952 23,281 Interest expense
(income), net 19,296 16,239 Write-down of MEC's long-lived assets
26,685 - ------------------------------------------------ Operating
income (loss) (68,077) (8,253) Gain (loss) on disposal of real
estate 9,626 - Dilution losses and other gains 883 -
------------------------------------------------ Income (loss)
before income taxes and minority interest (57,568) (8,253) Income
tax expense (recovery) (8,423) (2,138) Minority interest (19,726)
(2,529) ------------------------------------------------ Net income
(loss) $ (29,419) $ (3,586)
------------------------------------------------
------------------------------------------------ (1) No pro forma
adjustments have been made to results for the nine months ended
September 30, 2004. (2) See note 2 to the pro forma consolidated
statements of income (loss) for details of pro forma adjustments
made to the statements of income (loss) for the nine months ended
September 30, 2003. Notes to Pro forma Statements of Income (Loss)
(All amounts in U.S. dollars and all tabular amounts in thousands
unless otherwise noted) (Unaudited) 1. BASIS OF PRESENTATION The
unaudited pro forma consolidated statements of income (loss) of MI
Developments Inc. (the "Company") have been prepared from the
Company's consolidated statements of income (loss) for the three
and nine months ended September 30, 2003. The pro forma
consolidated statements of income (loss) have been prepared on the
basis of the assumptions and adjustments described in note 2 below
and should be read in conjunction with the interim consolidated
financial statements as at and for the three and nine months ended
September 30, 2004 and 2003 ("Consolidated Financial Statements")
of the Company, including the related notes thereto. The pro forma
consolidated statements of income (loss) have been prepared in
accordance with Canadian generally accepted accounting principles
("Canadian GAAP"). Neither a pro forma statement of income (loss)
for the three and nine months ended September 30, 2004, nor a pro
forma balance sheet as at September 30, 2004 were required, as none
of the pro forma adjustments had any impact on the actual
consolidated results for the three and nine months ended September
30, 2004. The pro forma consolidated statements of income (loss)
are not necessarily indicative of the results of operations that
would have resulted had the relevant transactions taken place at
the respective dates referred to below. 2. PRO FORMA ASSUMPTIONS
AND ADJUSTMENTS The following tables illustrate the pro forma
adjustments made to the statements of income (loss) for the three
and nine months ended September 30, 2003: Pro Forma Adjustments
--------------------- Magna Entertain- Pro Forma Three Months Ended
Consoli- Real Estate ment Consoli- September 30, 2003 dated
Business Corp. dated
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Note 2(a) Revenues Rental revenue $ 29,485 $ - $ - $ 29,485 Racing,
real estate and other 104,475 - - 104,475
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133,960 - - 133,960
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Operating costs and expenses Purses, awards and other 44,778 - -
44,778 Operating costs 56,342 - - 56,342 General and administrative
18,394 285(ii) - 18,679 Depreciation and amortization 16,077 - -
16,077 Interest expense (income), net 8,474 (3,531)(iii) - 4,943
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Operating income (loss) (10,105) 3,246 - (6,859) Loss on disposal
of real estate (155) - - (155)
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Income (loss) before income taxes and minority interest (10,260)
3,246 - (7,014) Income tax expense (recovery) (5,371) 731(iv) -
(4,640) Minority interest (6,263) - - (6,263)
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Net income $ 1,374 $ 2,515 $ - $ 3,889
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Pro Forma Adjustments --------------------- Magna Entertain- Pro
Forma Nine Months Ended Consoli- Real Estate ment Consoli-
September 30, 2003 dated Business Corp. dated
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Note 2(a) Note 2(b) Revenues Rental revenue $ 85,211 $ 176(i) $ - $
85,387 Racing, real estate and other 562,857 - 7,329(i) 570,186
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648,068 176 7,329 655,573
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Operating costs and expenses Purses, awards and other 277,728 -
2,226(i) 279,954 Operating costs 206,427 - 2,603(i) 209,030 General
and administrative 54,536 864(ii) 1,445(i), 56,845 (ii)
Depreciation and amortization 46,666 36(i) 124(i) 46,826 Interest
expense (income), net 35,295 (25,061)(iii) 6,005(i), 16,239 (ii)
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Operating income (loss) 27,416 24,337 (5,074) 46,679 Loss on
disposal of real estate (134) - - (134)
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Income (loss) before income taxes and minority interest 27,282
24,337 (5,074) 46,545 Income tax expense (recovery) 10,333
4,475(iv) (1,651)(i), 13,157 (ii) Minority interest (1,113) -
(1,416)(iii) (2,529)
-------------------------------------------------------------------------
Net income (loss) $ 18,062 $ 19,862 $ (2,007) $ 35,917
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The pro forma consolidated statements of income (loss) have been
presented assuming that Magna International Inc. ("Magna")
completed the spin-off of the Company as a separate public company
as of January 1, 2002, and give effect to the following items as of
these respective dates: (a) Real Estate Business (i) Tesma
facilities On January 31, 2003, the Company purchased three
properties from Tesma International Inc. ("Tesma"), a public
subsidiary of Magna, for cash consideration of $25.0 million and
leased them back to Tesma under operating leases. The pro forma
consolidated statement of income (loss) for the three months ended
September 30, 2003 is not impacted by this transaction, however,
the pro forma consolidated statement of income (loss) for the nine
months ended September 30, 2003 includes adjustments to revenues of
$176,000 and depreciation expense of $36,000 related to these
properties. (ii) General and administrative expenses General and
administrative expenses have been adjusted to reflect incremental
committed executive compensation costs. (iii) Elimination of
historical intercompany interest The adjustments to interest
expense in the pro forma consolidated statements of income (loss)
give pro forma effect to the elimination of interest expense on
historical advances from Magna since all intercompany advances were
eliminated in the initial capitalization of the Company. (iv) Tax
adjustments The pro forma consolidated statements of income (loss)
reflect the tax effect on the foregoing Real Estate Business
adjustments, where applicable, computed at assumed income tax rates
as follows: For the three and nine month periods ended September
30, 2003
------------------------------------------------------------------
Canada 36.6% United States 38.0% Mexico 34.0% Austria 34.0% Germany
40.1% Spain 35.0%
------------------------------------------------------------------
------------------------------------------------------------------
In addition, in conjunction with the spin-off transactions, the
legal structure of the Company was amended. The pro forma
consolidated statements of income (loss) reflect the tax impact
resulting from this reorganization as if it had been implemented on
January 1, 2002. (b) Magna Entertainment Corp. (i) Acquisitions The
pro forma consolidated statements of income (loss) reflect the
April 16, 2003 transfer of the shares of Ontario Racing Inc., which
acquired Flamboro Downs ("Flamboro") in Hamilton, Ontario in
October 2002, to Magna Entertainment Corp. ("MEC") as if it had
been completed effective January 1, 2002. The pro forma
consolidated statement of income (loss) for the three months ended
September 30, 2003 is not impacted by this transaction, however the
pro forma consolidated statement of income (loss) for the nine
months ended September 30, 2003 includes adjustments related to the
Flamboro acquisition as follows: Nine months ended September 30,
2003
------------------------------------------------------------------
Revenues $ 7,329 Purses, awards and other 2,226 Operating costs
2,603 General and administrative 1,129 Depreciation and
amortization 124 Interest expense, net 616
------------------------------------------------------------------
Operating income 631 Income tax expense 631
------------------------------------------------------------------
Net income $ -
------------------------------------------------------------------
------------------------------------------------------------------
(ii) Convertible subordinated notes On June 2, 2003, MEC issued
$150.0 million of 8.55% convertible subordinated notes. The pro
forma consolidated statements of income (loss) reflect the MEC
convertible subordinated notes as if they were issued effective
January 1, 2002, including the tax effect on the foregoing
adjustment at the assumed income tax rate of 40%. The pro forma
consolidated statement of income (loss) for the three months ended
September 30, 2003 is not impacted by this transaction, however,
the pro forma consolidated statement of income (loss) for the nine
months ended September 30, 2003 includes adjustments to general and
administrative expenses of $0.3 million, interest expense of $5.4
million and income tax recovery of $2.3 million related to these
convertible subordinated notes. (iii) Minority interest expense The
pro forma consolidated statements of income (loss) include a
minority interest charge related to the MEC pro forma adjustments.
Minority interest expense has been recorded at 41.4% for the three
and nine months ended September 30, 2003. (c) Other The pro forma
earnings per share for the three and nine months ended September
30, 2003 are based on the assumption that 47,582,083 Class A
Subordinate Voting Shares and 548,238 Class B Shares were issued
and outstanding during those periods. 3. REAL ESTATE BUSINESS - PRO
FORMA FUNDS FROM OPERATIONS The Company measures and presents funds
from operations for the Real Estate Business because it is a
measure that is widely used by analysts and investors in evaluating
the operating performance of real estate companies. However, funds
from operations does not have standardized meaning under Canadian
GAAP and therefore is unlikely to be comparable to similar measures
presented by other companies. The Real Estate Business' funds from
operations is based on pro forma information prepared in accordance
with Canadian GAAP as follows: Three months ended Nine months ended
September 30, September 30, ------------------------
------------------------- 2004 2003 2004 2003
-------------------------------------------------------------------------
Net income $ 11,513 $ 13,445 $ 34,687 $ 39,503 Add back (deduct)
non-cash items: Depreciation and amortization 8,533 8,154 25,405
23,545 Future income taxes 147 926 4,157 3,905 Stock-based
compensation expense (206) - 1,558 - Straight-line rent adjustment
136 (637) (104) (2,404) Loss (gain) on disposal of real estate
(348) 155 (216) 134
-------------------------------------------------------------------------
Pro forma funds from operations $ 19,775 $ 22,043 $ 65,487 $ 64,683
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated Statements of Income (Loss) (U.S. dollars in
thousands, except per share figures) (Unaudited)
-------------------------------------------------------------------------
Consolidated Real Estate Business -------------------------
------------------------- Three months ended Three months ended
September 30, September 30, -------------------------
------------------------- 2004 2003 2004 2003
-------------------------------------------------------------------------
Revenues Rental revenue (note 14) $ 31,398 $ 29,485 $ 31,398 $
29,485 Racing, real estate and other (note 14) 105,596 104,475 - -
-------------------------------------------------------------------------
136,994 133,960 31,398 29,485
-------------------------------------------------------------------------
Operating costs and expenses Purses, awards and other 44,525 44,778
- - Operating costs 73,708 56,342 - - General and administrative
27,129 18,394 9,220 2,438 Depreciation and amortization 18,907
16,077 8,533 8,154 Interest expense (income), net 6,598 8,474 (387)
3,531
-------------------------------------------------------------------------
Operating income (loss) (33,873) (10,105) 14,032 15,362 Gain (loss)
on disposal of real estate 348 (155) 348 (155) Dilution losses and
other gains 1,026 - - -
-------------------------------------------------------------------------
Income (loss) before income taxes and minority interest (32,499)
(10,260) 14,380 15,207 Income tax expense (recovery) 1,864 (5,371)
2,867 4,277 Minority interest (18,426) (6,263) - -
-------------------------------------------------------------------------
Net income (loss) $ (15,937) $ 1,374 $ 11,513 $ 10,930
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic and diluted earnings (loss) per Class A Subordinate Voting or
Class B Share (note 5) $ (0.33) $ 0.02
-----------------------------------------------
----------------------------------------------- Average number of
Class A Subordinate Voting and Class B Shares outstanding during
the period (in thousands) (note 5) Basic 48,160 48,130 Diluted
48,160 48,130 -----------------------------------------------
-----------------------------------------------
------------------------------------------------ Magna
Entertainment Corp. -------------------------- Three months ended
September 30, -------------------------- 2004 2003
------------------------------------------------ Revenues Rental
revenue (note 14) $ - $ - Racing, real estate and other (note 14)
105,596 104,475 ------------------------------------------------
105,596 104,475 ------------------------------------------------
Operating costs and expenses Purses, awards and other 44,525 44,778
Operating costs 73,708 56,342 General and administrative 17,909
15,956 Depreciation and amortization 10,374 7,923 Interest expense
(income), net 6,985 4,943
------------------------------------------------ Operating income
(loss) (47,905) (25,467) Gain (loss) on disposal of real estate - -
Dilution losses and other gains 1,026 -
------------------------------------------------ Income (loss)
before income taxes and minority interest (46,879) (25,467) Income
tax expense (recovery) (1,003) (9,648) Minority interest (18,426)
(6,263) ------------------------------------------------ Net income
(loss) $ (27,450) $ (9,556)
------------------------------------------------
------------------------------------------------ See accompanying
notes Consolidated Statements of Income (Loss) (U.S. dollars in
thousands, except per share figures) (Unaudited)
-------------------------------------------------------------------------
Consolidated Real Estate Business -------------------------
------------------------- Nine months ended Nine months ended
September 30, September 30, -------------------------
------------------------- 2004 2003 2004 2003
-------------------------------------------------------------------------
Revenues Rental revenue (note 14) $ 94,776 $ 85,211 $ 94,776 $
85,211 Racing, real estate and other (note 14) 589,721 562,857 - -
-------------------------------------------------------------------------
684,497 648,068 94,776 85,211
-------------------------------------------------------------------------
Operating costs and expenses Purses, awards and other 281,877
277,728 - - Operating costs 252,070 206,427 - - General and
administrative 71,356 54,536 21,438 6,046 Depreciation and
amortization 53,357 46,666 25,405 23,509 Interest expense (income),
net 18,654 35,295 (642) 25,061 Write-down of MEC's long-lived
assets (note 3) 26,685 - - -
-------------------------------------------------------------------------
Operating income (loss) (19,502) 27,416 48,575 30,595 Gain (loss)
on disposal of real estate 9,842 (134) 216 (134) Dilution losses
and other gains 883 - - -
-------------------------------------------------------------------------
Income (loss) before income taxes and minority interest (8,777)
27,282 48,791 30,461 Income tax expense (recovery) 5,681 10,333
14,104 10,820 Minority interest (19,726) (1,113) - -
-------------------------------------------------------------------------
Net income (loss) $ 5,268 $ 18,062 $ 34,687 $ 19,641
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic and diluted earnings per Class A Subordinate Voting or Class
B Share (note 5) $ 0.11 $ 0.02
-----------------------------------------------
----------------------------------------------- Average number of
Class A Subordinate Voting and Class B Shares outstanding during
the period (in thousands) (note 5) Basic 48,153 48,130 Diluted
48,190 48,130 -----------------------------------------------
-----------------------------------------------
------------------------------------------------ Magna
Entertainment Corp. -------------------------- Nine months ended
September 30, -------------------------- 2004 2003
------------------------------------------------ Revenues Rental
revenue (note 14) $ - $ - Racing, real estate and other (note 14)
589,721 562,857 ------------------------------------------------
589,721 562,857 ------------------------------------------------
Operating costs and expenses Purses, awards and other 281,877
277,728 Operating costs 252,070 206,427 General and administrative
49,918 48,490 Depreciation and amortization 27,952 23,157 Interest
expense (income), net 19,296 10,234 Write-down of MEC's long-lived
assets (note 3) 26,685 -
------------------------------------------------ Operating income
(loss) (68,077) (3,179) Gain (loss) on disposal of real estate
9,626 - Dilution losses and other gains 883 -
------------------------------------------------ Income (loss)
before income taxes and minority interest (57,568) (3,179) Income
tax expense (recovery) (8,423) (487) Minority interest (19,726)
(1,113) ------------------------------------------------ Net income
(loss) $ (29,419) $ (1,579)
------------------------------------------------
------------------------------------------------ See accompanying
notes Consolidated Statements of Changes in Retained Earnings
(Deficit) (U.S. dollars in thousands) (Unaudited) Three months
ended Nine months ended September 30, September 30,
------------------------ ------------------------- 2004 2003 2004
2003
-------------------------------------------------------------------------
Deficit, beginning of period, as previously reported (note 6) $
(41,085) $ - $ (49,488) $ - Adjustment for change in accounting
policy related to stock-based compensation (note 2) - - (4,134) -
-------------------------------------------------------------------------
Deficit, beginning of period, after change in accounting policy
(41,085) - (53,622) - Magna's net investment, beginning of period -
1,610,475 - 1,432,225 Net income (loss) (15,937) 1,374 5,268 18,062
Dividends (4,334) - (13,002) - Net distributions to Magna -
(1,580,363) - (1,440,640) Charge to net investment related to lease
amendments - - - (5,494) Change in currency translation adjustment
- (30,568) - (3,235)
-------------------------------------------------------------------------
Retained earnings (deficit), end of period $ (61,356) $ 918 $
(61,356) $ 918
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes Consolidated Statements of Cash Flows (U.S.
dollars in thousands) (Unaudited)
-------------------------------------------------------------------------
Consolidated Real Estate Business -------------------------
------------------------- Three months ended Three months ended
September 30, September 30, -------------------------
------------------------- 2004 2003 2004 2003
-------------------------------------------------------------------------
OPERATING ACTIVITIES Net income (loss) $ (15,937) $ 1,374 $ 11,513
$ 10,930 Items not involving current cash flows (note 7) (2,318)
8,643 8,262 8,547 Changes in non-cash balances (note 7) 24,095
6,977 4,105 15,469
-------------------------------------------------------------------------
Cash provided by (used in) operating activities 5,840 16,994 23,880
34,946
-------------------------------------------------------------------------
INVESTMENT ACTIVITIES Property and fixed assets additions (56,884)
(30,329) (11,498) (4,516) Other assets disposals (additions) (44)
(5,873) - - Proceeds on disposal of real estate properties 1,701
493 1,213 493
-------------------------------------------------------------------------
Cash used in investment activities (55,227) (35,709) (10,285)
(4,023)
-------------------------------------------------------------------------
FINANCING ACTIVITIES Increase (decrease) in bank indebtedness
25,000 3,429 - (1,267) Issuance of long-term debt (note 10) - - - -
Issuance of subordinated notes by MEC - - - - Repayment of
long-term debt (1,518) (6,566) (105) (158) Issuance of shares - - -
- Dividends paid (4,334) - (4,334) - Net contribution by (to) Magna
- (9,569) - (9,569)
-------------------------------------------------------------------------
Cash provided by (used in) financing activities 19,148 (12,706)
(4,439) (10,994)
-------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents 1,251
379 1,649 (1,905)
-------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents during the
period (28,988) (31,042) 10,805 18,024 Cash and cash equivalents,
beginning of period 142,940 192,440 60,018 9,569
-------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 113,952 $ 161,398 $
70,823 $ 27,593
-------------------------------------------------------------------------
-------------------------------------------------------------------------
------------------------------------------------ Magna
Entertainment Corp. -------------------------- Three months ended
September 30, -------------------------- 2004 2003
------------------------------------------------ OPERATING
ACTIVITIES Net income (loss) $ (27,450) $ (9,556) Items not
involving current cash flows (note 7) (10,580) 96 Changes in
non-cash balances (note 7) 19,990 (8,492)
------------------------------------------------ Cash provided by
(used in) operating activities (18,040) (17,952)
------------------------------------------------ INVESTMENT
ACTIVITIES Property and fixed assets additions (45,386) (25,813)
Other assets disposals (additions) (44) (5,873) Proceeds on
disposal of real estate properties 488 -
------------------------------------------------ Cash used in
investment activities (44,942) (31,686)
------------------------------------------------ FINANCING
ACTIVITIES Increase (decrease) in bank indebtedness 25,000 4,696
Issuance of long-term debt (note 10) - - Issuance of subordinated
notes by MEC - - Repayment of long-term debt (1,413) (6,408)
Issuance of shares - - Dividends paid - - Net contribution by (to)
Magna - - ------------------------------------------------ Cash
provided by (used in) financing activities 23,587 (1,712)
------------------------------------------------ Effect of exchange
rate changes on cash and cash equivalents (398) 2,284
------------------------------------------------ Net increase
(decrease) in cash and cash equivalents during the period (39,793)
(49,066) Cash and cash equivalents, beginning of period 82,922
182,871 ------------------------------------------------ Cash and
cash equivalents, end of period $ 43,129 $ 133,805
------------------------------------------------
------------------------------------------------ See accompanying
notes Consolidated Statements of Cash Flows (U.S. dollars in
thousands) (Unaudited)
-------------------------------------------------------------------------
Consolidated Real Estate Business -------------------------
------------------------- Nine months ended Nine months ended
September 30, September 30, -------------------------
------------------------- 2004 2003 2004 2003
-------------------------------------------------------------------------
OPERATING ACTIVITIES Net income (loss) $ 5,268 $ 18,062 $ 34,687 $
19,641 Items not involving current cash flows (note 7) 50,224
46,622 30,920 25,504 Changes in non-cash balances (note 7) 12,903
(19,059) 13,963 (8,663)
-------------------------------------------------------------------------
Cash provided by (used in) operating activities 68,395 45,625
79,570 36,482
-------------------------------------------------------------------------
INVESTMENT ACTIVITIES Property and fixed assets additions (133,024)
(127,065) (30,861) (72,731) Other assets disposals (additions)
(654) (16,585) (188) 1,119 Proceeds on disposal of real estate
properties 19,573 1,535 2,478 1,535
-------------------------------------------------------------------------
Cash used in investment activities (114,105) (142,115) (28,571)
(70,077)
-------------------------------------------------------------------------
FINANCING ACTIVITIES Increase (decrease) in bank indebtedness
27,000 (45,577) - (604) Issuance of long-term debt (note 10) 19,257
20,363 - 2,463 Issuance of subordinated notes by MEC - 145,000 - -
Repayment of long-term debt (6,291) (17,397) (258) (215) Issuance
of shares 1,573 173 721 - Dividends paid (13,002) - (13,002) - Net
contribution by (to) Magna - 55,363 - 55,363
-------------------------------------------------------------------------
Cash provided by (used in) financing activities 28,537 157,925
(12,539) 57,007
-------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents 1,231
5,073 2,276 (3,028)
-------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents during the
period (15,942) 66,508 40,736 20,384 Cash and cash equivalents,
beginning of period 129,894 94,890 30,087 7,209
-------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 113,952 $ 161,398 $
70,823 $ 27,593
-------------------------------------------------------------------------
-------------------------------------------------------------------------
------------------------------------------------ Magna
Entertainment Corp. -------------------------- Nine months ended
September 30, -------------------------- 2004 2003
------------------------------------------------ OPERATING
ACTIVITIES Net income (loss) $ (29,419) $ (1,579) Items not
involving current cash flows (note 7) 19,304 21,118 Changes in
non-cash balances (note 7) (1,060) (10,396)
------------------------------------------------ Cash provided by
(used in) operating activities (11,175) 9,143
------------------------------------------------ INVESTMENT
ACTIVITIES Property and fixed assets additions (102,163) (54,334)
Other assets disposals (additions) (466) (17,704) Proceeds on
disposal of real estate properties 17,095 -
------------------------------------------------ Cash used in
investment activities (85,534) (72,038)
------------------------------------------------ FINANCING
ACTIVITIES Increase (decrease) in bank indebtedness 27,000 (44,973)
Issuance of long-term debt (note 10) 19,257 17,900 Issuance of
subordinated notes by MEC - 145,000 Repayment of long-term debt
(6,033) (17,182) Issuance of shares 852 173 Dividends paid - - Net
contribution by (to) Magna - -
------------------------------------------------ Cash provided by
(used in) financing activities 41,076 100,918
------------------------------------------------ Effect of exchange
rate changes on cash and cash equivalents (1,045) 8,101
------------------------------------------------ Net increase
(decrease) in cash and cash equivalents during the period (56,678)
46,124 Cash and cash equivalents, beginning of period 99,807 87,681
------------------------------------------------ Cash and cash
equivalents, end of period $ 43,129 $ 133,805
------------------------------------------------
------------------------------------------------ See accompanying
notes Consolidated Balance Sheets (U.S. dollars in thousands)
(Unaudited)
-------------------------------------------------------------------------
Consolidated Real Estate Business -------------------------
------------------------- September December September December 30,
2004 31, 2003 30, 2004 31, 2003
-------------------------------------------------------------------------
ASSETS
-------------------------------------------------------------------------
Current assets: Cash and cash equivalents $ 113,952 $ 129,894 $
70,823 $ 30,087 Restricted cash 29,541 24,738 - - Accounts
receivable 50,644 51,223 8,813 17,008 Income taxes receivable -
1,809 - - Prepaid expenses and other 21,072 13,457 356 518
-------------------------------------------------------------------------
215,209 221,121 79,992 47,613
-------------------------------------------------------------------------
Real estate properties, net (note 8) 2,098,336 2,066,382 1,231,923
1,227,512 Fixed assets, net 48,456 31,562 508 208 Deferred rent
receivable 13,609 13,930 13,609 13,930 Racing licenses 237,497
236,098 - - Other assets, net 13,517 20,229 - 323 Future tax assets
50,762 42,820 11,077 12,790
-------------------------------------------------------------------------
$ 2,677,386 $ 2,632,142 $ 1,337,109 $ 1,302,376
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
-------------------------------------------------------------------------
Current liabilities: Bank indebtedness (note 9) $ 33,696 $ 6,696 $
- $ - Accounts payable and accrued liabilities 163,123 128,481
25,741 18,487 Income taxes payable 9,886 2,571 7,280 2,571
Long-term debt due within one year (note 10) 14,916 58,618 292 570
Deferred revenue 11,608 19,335 - -
-------------------------------------------------------------------------
233,229 215,701 33,313 21,628
-------------------------------------------------------------------------
Long-term debt (note 10) 185,544 128,387 6,275 6,361 Note
obligations 209,976 208,933 - - Future tax liabilities 160,381
164,275 32,128 30,790 Minority interest 267,039 282,752 - -
-------------------------------------------------------------------------
1,056,169 1,000,048 71,716 58,779
-------------------------------------------------------------------------
Shareholders' equity: Class A Subordinate Voting Shares (note 11)
1,553,811 1,552,901 Class B Shares (note 11) 17,893 17,893
Contributed surplus 2,300 - Deficit (note 6) (61,356) (49,488)
Currency translation adjustment 108,569 110,788
-------------------------------------------------------------------------
1,621,217 1,632,094 1,265,393 1,243,597
-------------------------------------------------------------------------
$ 2,677,386 $ 2,632,142 $ 1,337,109 $ 1,302,376
-------------------------------------------------------------------------
-------------------------------------------------------------------------
------------------------------------------------ Magna
Entertainment Corp. -------------------------- September December
30, 2004 31, 2003 ------------------------------------------------
ASSETS ------------------------------------------------ Current
assets: Cash and cash equivalents $ 43,129 $ 99,807 Restricted cash
29,541 24,738 Accounts receivable 41,831 34,215 Income taxes
receivable - 1,809 Prepaid expenses and other 20,716 12,939
------------------------------------------------ 135,217 173,508
------------------------------------------------ Real estate
properties, net (note 8) 866,413 838,870 Fixed assets, net 47,948
31,354 Deferred rent receivable - - Racing licenses 237,497 236,098
Other assets, net 13,517 19,906 Future tax assets 39,685 30,030
------------------------------------------------ $ 1,340,277 $
1,329,766 ------------------------------------------------
------------------------------------------------ LIABILITIES AND
SHAREHOLDERS' EQUITY
------------------------------------------------ Current
liabilities: Bank indebtedness (note 9) $ 33,696 $ 6,696 Accounts
payable and accrued liabilities 137,382 109,994 Income taxes
payable 2,606 - Long-term debt due within one year (note 10) 14,624
58,048 Deferred revenue 11,608 19,335
------------------------------------------------ 199,916 194,073
------------------------------------------------ Long-term debt
(note 10) 179,269 122,026 Note obligations 209,976 208,933 Future
tax liabilities 128,253 133,485 Minority interest 267,039 282,752
------------------------------------------------ 984,453 941,269
------------------------------------------------ Shareholders'
equity: Class A Subordinate Voting Shares (note 11) Class B Shares
(note 11) Contributed surplus Deficit (note 6) Currency translation
adjustment ------------------------------------------------ 355,824
388,497 ------------------------------------------------ $
1,340,277 $ 1,329,766
------------------------------------------------
------------------------------------------------ Commitments and
contingencies (note 15) See accompanying notes FIRST AND FINAL ADD
TO FOLLOW DATASOURCE: MI Developments Inc. CONTACT: For further
information about this media release, please contact Deborah Fox at
(905) 726-7626. For teleconferencing questions, please call Susan
Fitzgerald at (905) 726-7106.
Copyright