05/05/2008 11:00PM

Magna loses $46.5 million in first quarter


Magna Entertainment Corp., the racetrack operator that owns Santa Anita and Gulfstream Park, lost $46.5 million in the first quarter of 2008, according to financial statements released on Tuesday, continuing a string of losses that is putting the company's financial solvency in serious jeopardy.

The first-quarter loss compared to a $2.5 million profit in last year's first quarter, which has historically been the only quarter in which the company has typically shown a profit. During the quarter, Santa Anita and Gulfstream are both open for live racing, but Magna's California operations - including Golden Gate Fields in Northern California - suffered from the cancellation of nine live racing days at the two tracks during the first three months of the year.

Revenues in the quarter were down 9.1 percent compared to the first quarter of last year, from $254.2 million to $231 million. Magna said that its California operations accounted for $17.2 million of the difference between the two quarters.

Magna has been operating under a "going-concern" warning from its auditors for a year, based on its inability to turn an annual profit and a debt load that exceeds $600 million. The company is also facing an Aug.o10 deadline to bring its stock price above $1 for 10 consecutive trading days. If the company fails to comply with the requirement, its stock will be delisted from Nasdaq.

Magna's stock closed at 41 cents on Tuesday, down 7 cents, or 14.5 percent.

Though some of Magna's problems this quarter were related to the decline in revenue, the company recorded a $37.3 million cash writedown on a property in Dixon, Calif.; a racetrack and casino in Austria; and Portland Meadows in Oregon. In addition, interest expense in the quarter increased from $11.4 million last year to $16 million this year.

During a conference call with analysts on Tuesday afternoon, Magna officials reiterated that they are seeking to pare the company's debt by pursuing the sale of Thistledown racetrack in Ohio, Remington Park in Oklahoma, and Portland Meadows. However, the officials blamed the depressed real-estate market for the company's failure, so far, to strike any deal for the tracks.

Magna also owns Laurel Park and Pimlico Race Course in Maryland, and operates Lone Star Park in Texas under a long-term lease of the property and assets. The company owns and operates the XpressBet account-wagering platform, the bet-processing company Amtote, and has a 50 percent share in the television network HorseRacing TV and the simulcast-marketing company TrackNet.

Approximately $200 million of the debt carried by Magna is due this year to its parent company, MI Developments. That company is currently considering a proposal that would transfer the debt to a limited-liability company jointly owned by Magna Entertainment and MI Developments. The proposal is scheduled to be voted on by MI Developments shareholders on May 31.