Magna Entertainment Reports Overall Improvements for Q3

3 November 2001

In announcing these results, Jim McAlpine, President and Chief Executive Officer of MEC, remarked that ``we are pleased with our improved operating and financial performance for the nine months ended September 30, 2001 and the third quarter. EBITDA before gains on the sale of real estate for the third quarter was $4.9 million better than last year. The third quarter is typically our weakest quarter because our four largest racetracks, collectively, have the fewest live race days during this quarter.

``The improvements in year to date EBITDA reflect the ongoing consolidation of strategic racetracks and sale of non-core real estate, offset somewhat by the impact of fewer live racing days at some of our California tracks, the temporary closure of our racetracks and OTBs in response to the tragic events of September 11, 2001, and a weaker U. S. economy. For the balance of 2001, we expect to see further improvements in our operating and financial performance as we achieve greater synergies and economies of scale, realize improved seasonal performance resulting from live racing at Bay Meadows and the operations of MEC Pennsylvania in the fourth quarter and benefit from the sale of non-core real estate. At the same time, we will continue to pursue strategic acquisitions. We plan to expand our account wagering operations utilizing our ''Call-A-Bet`` telephone system and the Internet following the recent favorable legislative amendments in California''.

Our racetracks operate for prescribed periods each year. As a result, our racetrack revenues and operating results for any quarter will not be indicative of our revenues and operating results for the year. In the third quarter of 2001, three of our largest racetracks, Santa Anita Park, Gulfstream Park and Golden Gate Fields had no live race days. We expect that seasonal fluctuations will be reduced over time as the full impact of our acquisition and account wagering initiatives is realized.

Our financial results for the third quarter of 2001 reflect the full quarter's operations for all of the Company's racetracks and related operations. The comparative results for the third quarter of 2000 do not reflect the operations of Bay Meadows, MEC Pennsylvania or Portland Meadows, which were acquired in November 2000, April 2001 and commenced activity in July 2001, respectively.

Revenue for the first nine months and third quarter of 2001 increased 24.9% to $423.6 million and 31.1% to $65.8 million, respectively. The higher revenues in the third quarter of 2001 reflect primarily the acquisition of MEC Pennsylvania and Bay Meadows, partially offset by a lower level of sales of non-core real estate.

EBITDA, excluding gains on the sale of non-core real estate, for the nine months ended September 30, 2001 was $35.7 million compared to $25.5 million in the first nine months of fiscal 2000 and for the three months ended September 30, 2001 was a loss of $2.9 million compared to a loss of $7.8 million in the third quarter of 2000.

Revenues on the sale of non-core real estate in the third quarter of 2001 were $1.1 million, resulting in EBITDA of $40,000, compared to revenues in the third quarter of 2000 of $16.8 million and EBITDA of $3.7 million. We have completed further sales of our non-core real estate in the fourth quarter of 2001 and expect additional sales to be completed in 2002.

Net income increased 92% to $18.5 million for the first nine months of 2001 compared to 2000, despite a loss of $6.2 million in the third quarter of 2001 compared to a loss of $5.1 million in the comparative quarter of 2000.

Diluted earnings per share increased 83% to $0.22 for the first nine months of 2001 and diluted loss per share was $0.07 for the third quarter of 2001 compared to a loss of $0.06 per share in the third quarter of 2000.

During the third quarter of 2001, cash generated from operations before changes in non-cash working capital was $0.6 million. Total cash used for investment activities during the quarter was $5.8 million, including $9.1 million for real estate property and fixed asset additions and $0.5 million of other assets, partially offset by $3.8 million of net cash proceeds from the sale of non-core real estate.

We recently announced the acquisition of Multnomah Greyhound Park in Portland, Oregon and the commencement of operations at Portland Meadows. These two operations will enable us to act as the wagering hub for the State of Oregon throughout the year, and thereby determine and manage all simulcast signals imported into Oregon racetracks and off-track betting facilities (``OTBs''). This will permit broader simulcast distribution of, and increase wagering on, other MEC tracks.

As previously discussed, we are continuing to pursue strategic acquisitions and make strategic investments in our racetracks and related operations, including entertainment operations, to grow and enhance our racing business. As announced last week, we have filed an amended registration statement and a preliminary short form prospectus with securities regulators in the United States and Canada offering 20 million shares of Class A Subordinate Voting Stock (plus an over-allotment option of 3 million shares).

During the fourth quarter of 2001, we will continue to focus on earnings growth through the implementation, throughout our operations, of best practices and common systems, utilization of our corporate purchasing power to reduce costs, improved production and distribution of our simulcast program, and the sale of non-core real estate holdings.

MEC, one of the largest operators of premier horse racetracks in the United States, acquires, develops and operates horse racetracks and related pari-mutuel wagering operations, including OTBs, and owns and operates a national telephone account wagering system called ``Call-A-Bet.''