02/21/2003 1:00AM

Magna lost $14.4M in '02


Magna Entertainment Corp., the largest racetrack owner and operator in North America, lost $14.4 million in 2002, or 14 cents a share, after taking a writedown of $23.3 million related principally to two of its poorly performing racetracks.

The $14.4 million loss was a $27.9 million reversal from Magna's results in 2001, when net income was $13.5 million, or 16 cents a share. Revenue was $549.2 million in 2002, compared with $519.1 million in 2001, according to filings Magna released on Friday.

Year-to-year comparisons are difficult to make for Magna, which has grown by leaps and bounds since it bought its first track, Santa Anita, in 1998. Since then, Magna has bought at least a majority share in 13 other tracks, including Gulfstream Park in Florida and Golden Gate Fields in California. In 2002 alone, Magna closed deals to buy Lone Star Park in Texas and Flamboro Downs in Canada outright and majority shares in Pimlico Race Course and Laurel Park in Maryland.

During a late-afternoon conference call with analysts on Friday, Magna officials said that increased insurance costs, workers' compensation expenses, and the weak economy affected its 2002 results, as well as the writedown. Costs related to start-up expenses for Magna's account-wagering service, XpressBet, and a horse racing television channel also dragged on the results, the officials said.

The officials said that $17.5 million of the $23.3 million writedown was related to the performance of Remington Park in Oklahoma City and Great Lakes Downs in Michigan, two tracks that are believed to be losing millions of dollars a year. Without the writedown, net loss for 2002 was $602,000, or 1 cent a share.

Magna does not break out the results of its individual tracks, and the company did not provide detailed results for its tracks in its filings on Friday.

Magna purchased Remington Park as a package with Thistledown in Ohio in 1999 for $18.7 million. Great Lakes was purchased for $1.7 million in the same year.

Magna's chief executive officer, Jim McAlpine, said that the company had no plans to dispose of the unprofitable tracks. "We definitely have a plan to make every single one of our operations profitable," he said.

McAlpine also said that Magna was hoping to build a track in the Detroit area in Michigan in order to improve its performance in that state and mitigate losses at Great Lakes.

McAlpine said Magna was hoping to create a circuit between Remington Park and Lone Star Park in Texas that would improve Remington's performance. McAlpine also said that Oklahoma was "a good OTB state" that would benefit from recent legislation allowing more simulcasts.

Magna stock was up 30 cents on Friday, or 6.3 percent, to $5.05, on lower-than-average trading.

During the conference call, some analysts chided Magna's officials for scheduling the call on Friday afternoon, 30 minutes before the market closed, and also said that Magna had failed to deliver on its promises to increase margins at the company and show a profit.

Magna officials also estimated that the total costs related to the construction of Palm Meadows, a training center about 30 miles north of Gulfstream Park, would reach approximately $95 million by the end of 2003, making it by far the most expensive training center ever built. McAlpine said perhaps $15 million of the cost would be offset by residential development of approximately 100 acres surrounding the training center.

The training center has been credited with revitalizing racing this year at Gulfstream Park, which last year suffered from short fields. Last year, horses could not be stabled at nearby Hialeah Park because that track closed, cutting into the available horse population in the Miami area.

Magna officials also said that because the deal to purchase Lone Star Park did not close until late in the year, the company was not able to count any revenues from the track's live racing meet in 2002. The officials said that next year's results will not only include those numbers but also revenues from the spring and summer operations at Laurel and Pimlico.

In two of the states in which Magna owns tracks, Maryland and Pennsylvania, legislators are seriously considering legalizing slots at racetracks. The outcomes of those efforts could have a dramatic impact on the company's results this year.