Magna won't pursue new tracks

Magna Entertainment Corp. lost $23.7 million in the second quarter of 2007 and has decided to drop its plans to build new racetracks in Northern California and Michigan, the company announced late on Thursday.

The second-quarter results brought Magna's losses over the past three years to approximately $325 million. Magna's accounting firm has said for the last three quarters that the company's ability to operate remains in doubt without significant improvements to its results.

Magna owns more racetracks than any other company in the U.S., and those properties include Santa Anita Park in Southern California, Gulfstream Park in Florida, Lone Star Park in Texas, and Laurel and Pimlico in Maryland.

Frank Stronach, Magna's interim chairman and the founder of the company, said in a release accompanying the financial statements that the second-quarter results were "extremely" disappointing. The company has hired Greenbrook Capital Partners to conduct a "strategic review" of the company in an attempt to improve results, the release said. Greenbrook will issue its recommendations in September, Magna said.

For the past five years, Magna has been seeking to develop new racetrack properties in Michigan and Northern California, but those plans have run into opposition from local communities. In addition, Magna has been unsuccessful in lobbying for casino-type gambling in either state.

Magna will also close a racetrack and casino it opened only two years ago in Austria, the company said, citing its inability to generate revenues consistent with its business plan. Racing will be discontinued at the Austrian racetrack in November, and the company will "evaluate other uses for the real estate," a release said.

According to financial statements, Magna had revenues of $203.1 million in the quarter, up from $179.7 million in the second quarter last year. However, expenses increased at an almost identical rate, from $203 million to $222.6 million. Loss per share in the quarter was 22 cents.

Magna had negative cash flow of $21.6 million in the quarter. At the end of the quarter, the company's long-term debt and other long-term liabilities was $504 million. Interest expense on the debt in the quarter was $12.2 million.

Magna said that it intended to sell several large properties in the future, including the Michigan and Northern California properties and 450 acres of land in Ocala, Fla. In total, the real estate that Magna will list for sale has a book value of $71 million, and the company said that it expects the sale of the land to "exceed" that amount.

On Thursday night, Magna said that officials would discuss the plans and second-quarter results during a conference call on Friday morning.