Magna Entertainment reported across-the-board declines in revenue, net income, and earnings per share for the third quarter ending Sept. 30. The Ontario-based racing conglomerate also announced the resignation of two more directors, John York II and James Nichol, from its board of directors.
The sluggish quarter was not surprising to president Jim McAlpine who said it has been traditionally been the company's weakest.
"We expect these seasonal fluctuations to reduce over time as the full impact of our acquisitions, off-track betting, and account wagering initiatives are realized," he said. In particular, McAlpine said he expects the pending deals to acquire Flamboro Downs harness track in Ontario and with the Maryland Jockey Club to acquire a major interest in Pimlico and Laurel Park should iron out much of the fluctuations in revenue. The deal with the Maryland Jockey Club is expected to close in December.
Excluding the sale of non-core real estate, McAlpine noted that revenue for the first nine months of the year are up 12.3% to $433.9 million and net income is up 4.9% to $8.7 million for the same period.
For the quarter, however, Magna a loss of $9.7 million, which was 55.5% greater than the $6.2 million loss reported for the same period a year ago. Revenue also fell 1.6% to $63.7 million and diluted earnings per share fell 28.6% to 9-cent loss, down from a loss of 7 cents for the same quarter of 2001.
Total earnings before interest, depreciation, depreciation, taxes, and amortization (EBITDA) for the previous nine months, excluding the sale of non-core real estate, slid 12.4% to $31.2 million.
Besides dealing with third quarter financial reports Thursday, the Magna board appointed two new members to replace York and Nicol. York and Nicol both sited time constraints as reasons for not continuing to serve the board.
The new directors are Louis Lataif, who is dean of school of management at Boston University and a former executive with Ford Motor Co., and William Menear, who owns his own business and financial services company and is former executive with Scotia Bank.
During a conference call with stock analysis, McAlpine was very optimistic about the prospects for growth in 2003. He said the company is aggressively pursuing satellite and digital cable distribution for its HorseRacing TV channel and is optimistic about landing some national sponsorship deals for its network of nine Thoroughbred tracks and one harness track.
The market apparently sees some good times ahead. Magna's stock rose nearly 8% to $6.40 by the close of trading Friday.