Magna stock rises despite bad quarter

Magna Entertainment lost $9.7 million in the third quarter of 2002, the company announced Friday, or 9 cents a share, after costs associated with its account-wagering business and start-up television network dragged on flat revenues, officials said.

Revenues were $65.4 million in the quarter, compared with $65.8 million last year. Expenses increased to $81.9 million in the quarter, compared with $76.3 million in the third quarter last year.

Last year in the third quarter, Magna lost $6.2 million, or 7 cents a share. The company owns Santa Anita Park, Gulfstream Park, Lone Star Park, and eight other tracks. It also has a pending deal to purchase a majority share in both Laurel Park and Pimlico Race Course.

During a conference call with analysts on Friday, Magna officials said that the third quarter is the weakest quarter of the year for the company. Magna's tracks ran only 24 live racing days during the quarter.

The results for the quarter were well out of line of the estimate of analysts, who predicted that Magna would lose 5 cents a share. Magna's stock rose on Friday, closing at $6.40, up 46 cents.

Through the first nine months of the year, Magna has had net income of $9.9 million, or 10 cents a share, according to financial statements released late Thursday. Last year through the first nine months, the company had net income of $18.5 million, or 22 cents a share.

Graham Orr, Magna's chief financial officer, said during a conference call that insurance costs have increased significantly in 2002 because of the Sept. 11 attacks. Utility costs have also gone up significantly, Orr said.

Orr also said that Magna has lost "several millions of dollars" on its account-wagering service, XpressBet, which was launched earlier this year, and its subscriber-based satellite television network, the Racetrack Television Network. Magna owns a one-third share in RTN, which has 1,600 subscribers, officials said.

Jim McAlpine, Magna's chief executive officer, said during the conference call that the company also "invested heavily in additional lobbying actions and research" during the quarter. Magna is hoping to get slots machines legalized at its tracks in several states, including Maryland, Michigan, Oklahoma, and Pennsylvania, officials said.

Magna has spent nearly a half-billion dollars since 1998 acquiring racetracks. The company's chairman, Frank Stronach, who controls Magna's stock through a publicly traded auto company he also controls, has bought nearly 1.8 million shares in the company since it announced disappointing second quarter earnings in late summer, sending the stock to a 52-week low.

McAlpine said that Magna "has most of what we need" in responding to questions about whether the company intended to purchase more tracks in the future.

McAlpine said the company hopes to improve racing results at Gulfstream in 2003 by increasing the field size of the track's races. Handle on Gulfstream's races dipped 17 percent last year as gamblers criticized the track for failing to present attractive wagering cards.