Magna income down sharply in first quarter of the year

NEW YORK - Magna Entertainment Corporation had net income of $12.6 million in the first quarter of 2003, or 12 cents a share, down sharply from its first-quarter results in 2002.

During a conference call with analysts on Thursday morning, Jim McAlpine, Magna's chief executive officer, blamed the war in Iraq, severe winter weather in the Northeast, and a weak U.S. economy for the results. This year's first-quarter net income was down $6 million from 2002's first-quarter income of $18.6 million.

Magna's first quarter has always been its most profitable, and the company has relied on its first-quarter income to offset regular losses in other quarters. Its high-profile tracks, which include Gulfstream Park and Santa Anita, dominate the winter racing schedule.

According to Magna's financial statements, revenue in the quarter was $270 million, up $21 million from $249 million in the first quarter of 2002. But expenses increased from $217 million to $248 million, a jump of $31 million, offsetting the revenue gains. Operating costs in the quarter increased from $55.3 million to $72.8 million, and general and administrative costs jumped from $10.6 million to $15.8 million.

McAlpine, who called the first-quarter results "less than stellar," said that attendance at Magna tracks was down 20 percent this quarter from the first quarter last year. Magna owns at least majority shares in 13 horse tracks, including Lone Star Park, Pimlico Race Course, and Laurel Park, three new acquisitions that race primarily in the spring, summer, and fall.

Graham Orr, Magna's chief financial officer, said that Magna incurred approximately $6.5 million in expenses during the quarter related to projects such as the company's new training center in Florida, a horse racing television channel, an account-wagering service, and the Sunshine Millions, a racing event held this year for the first time at Santa Anita and Gulfstream. That figure also included lobbying expenses during the quarter, Orr said.

Orr characterized the expenses as an investment in the company's projects. "We did incur some costs that are going to benefit future periods," Orr said.

Also, Magna announced on Thursday that it had hired a chief operating officer, Roman Doroniuk, who was a former president of Lion's Gate Films, a Canadian-based film production and distribution company.

Doroniuk, who will be third in charge at Magna, is currently listed as an executive vice president with Magna International, the auto-parts company that is Magna Entertainment's former parent company and still its majority stockholder.

All of Magna Entertainment's top officers are former Magna International officers. Both McAlpine and Orr held top jobs at Magna International before being hired by the racetrack company. McAlpine was paid $1.2 million in 2002, and Orr was paid $710,000, according to company records.

Doroniuk said during the conference call that he had expertise in corporate restructuring but did not mention that he worked at Magna International. Magna officials did not immediately respond to requests to clarify Doroniuk's work history.