08/04/2005 11:00PM

Magna loses $26.9 million in second quarter of 2005


Magna Entertainment Corp., the largest racetrack operator in the United States, lost $26.9 million in the second quarter of 2005, or 25 cents per share, continuing a string of quarterly losses going back more than a year.

Since posting a $4.1 million profit in the first quarter of 2004, traditionally its strongest quarter of the year, Magna has posted losses in each of the five succeeding quarters, including the first quarter of 2005, and has lost $245 million in the past 3 1/2 years. In the second quarter last year, Magna lost $25.5 million.

Earlier this year, Magna announced that it is embarking on a plan to sell real estate and racetracks while seeking partnerships for some of its development projects. The intent of the plan is to reduce the company's debt and improve its cash-flow position, which has deteriorated over the past three years because of declining revenues at its racetracks and write-downs, or reductions in value, on its properties.

Company officials have so far declined to identify which properties are on the block, but in a conference call with business analysts on Friday morning, Magna chief executive Thomas Hodgson said that the company's two prime properties, Santa Anita in Southern California and Gulfstream Park in Florida, are not for sale.

Hodgson also said that Magna's Golden Gate Fields is not on the market but that the company is seeking partners for the development of the track's surrounding real estate. Golden Gate is in Albany, Calif., just north of the Golden Gate Bridge.

Magna reached a deal in the second quarter to sell Flamboro Downs, a racetrack and casino in Canada, and has recently closed Multnomah Greyhound Park, a racetrack in Oregon.

In the second quarter, Magna had revenues of $176 million, compared with $198 million in the second quarter of 2004. Last year, the second-quarter results included figures from Bay Meadows Race Course in San Mateo, just south of San Francisco. The owner of Bay Meadows did not renew Magna's lease on the racetrack in 2005.

Magna had negative cash flow of $2.5 million in the quarter, a $20.7 million improvement from the second quarter of 2004, when cash flow was a negative $23.2 million. The company's cash position has eroded by $57.3 million since the end of the first quarter last year. According to the financial statements, Magna had $45.2 million in cash at the end of June.