08/02/2006 11:00PM

Magna reports $26.3M second-quarter loss


Magna Entertainment Corp., the racetrack owner and operator, lost $26.3 million in the second quarter of 2006, a slight improvement over the company's $26.9 million loss in the third quarter of 2005, according to financial statements released by the company late Wednesday.

The 2006 results were dragged down by significantly higher interest payments on the company's ballooning debt. In the quarter, interest payments were $16.1 million, compared to $7.7 million in the third quarter of 2005. A sizeable portion of Magna's debt is held by its parent company, MI Developments.

Revenues in the quarter were up 9.7 percent to $184.6 million, compared to $168.3 million in the second quarter last year. Expenses jumped 14.4 percent from $182. 7 million to $209 million.

Magna had negative cash flow in the quarter of $19.2 million, according to the statements. The company's long-term liabilities, including debt due its parent, other long-term debt, and $220 million in notes, has reached $650 million.

Because of the company's debt, cash-flow problems, and continuing losses ? Magna has now lost close to $350 million over the past three years ? the company's auditors repeated language in the financial statements that Magna's ability to operate as a "going concern" is in doubt. The language, which first appeared in Magna's statements in the previous quarter, is frequently included by auditors in the financial statements of companies that have ongoing losses.

Magna is hoping to close a deal to sell its Meadows harness track in Pennsylvania later this year, provided the facility is licensed for slot machines. The company plans to use $200 million in proceeds from the sale to draw down portions of its debt.