11/02/2004 1:00AM

Magna losses persist as costs keep rising


LEXINGTON, Ky. - Magna Entertainment Corp., the racing conglomerate that operates Santa Anita Park, Gulfstream Park, and 10 other racetracks, lost $50.3 million in the third quarter of 2004 on revenue of $102.3 million, according to financial records released Tuesday.

The third-quarter loss was $35 million greater than Magna's loss in the third quarter last year. For the first nine months of 2004, Magna has lost $54.7 million, compared with a net loss of $1.9 million through the first nine months of 2003.

The loss comes at a time when Magna is spending millions of dollars in pursuit of slot machines at its racetracks in Maryland, Pennsylvania, Florida, California, and Michigan, and when one of its most prominent tracks, Gulfstream Park in Florida, is undergoing a major renovation. In addition to the loss, Magna had negative cash flow of $39.2 million during the quarter, decreasing its cash reserves to $40.1 million.

Magna officials have said over the past year that the company is attempting to identify areas to cut costs. Operating costs for its racing operations, however, increased 20 percent in the third quarter of 2004 compared with 2003, from $50.9 million to $60.8 million, according to the financial statements.

Magna's stock closed down 58 cents on Tuesday to $5.05, a 10.3 percent decline.

Magna officials did not return phone calls on Tuesday. Jim McAlpine, Magna's chief executive, was scheduled to hold a conference call with analysts to discuss the third-quarter results on Wednesday.

In a statement accompanying the financial results, McAlpine said that Magna continues "to incur significant costs ahead of revenues as we position ourselves to achieve our strategic objectives and by higher costs in our pursuit of alternative gaming opportunities and regulatory reform."

In the statement, the company said that it would need to raise additional cash to proceed with its redevelopment of Gulfstream and "future growth opportunities." The statement said that the company could sell or lease some of its properties but did not identify the properties or whether they included racetracks.

Gulfstream Park was torn down earlier this year. After the demolition, Magna took a $26.7 million "impairment charge" against the property. The company is planning to rebuild the grandstand with a mix of new retail shops and restaurants. The plan is for the new grandstand to be ready by 2006.

Magna, along with Churchill Downs Inc., spent millions of dollars this year in California to support a ballot initiative that would have awarded slots to California racetracks if Native American tribes did not give 25 percent of their revenues from tribal casinos to the state. The amendment has failed to find popular support.

In Florida, Magna supported an amendment on the Tuesday ballot that would allow counties in South Florida to hold votes on whether to allow slot machines at racetracks. In New York, Magna has hired a team of influential lobbyists, including the son of the state Senate majority leader, Joseph Bruno, to push for the company's goal of taking over racing at the state's three major racetracks, Aqueduct, Belmont and Saratoga, after the New York Racing Association's franchise expires at the end of 2007.

Legislators in Pennsylvania passed a law this year allowing for slots at racetracks, including The Meadows, a harness track owned by Magna outside of Pittsburgh.