Magna Entertainment Corp. chief executive officer Jim McAlpine Nov. 3 acknowledged the company's substantial third-quarter loss and said it would re-examine its strategy and direction moving forward.
During a teleconference call, McAlpine reported MEC's board of directors had approved the third-quarter results submitted for the nine-month period that ended Sept. 24. In a statement released Nov. 2, McAlpine called the $50.3-million loss "disappointing."
Financial officials for the Ontario, Canada-based company reported a 2.1% revenue dip for the quarter to $102.3 million from $104.5 million. The overall loss represents a drop of 47 cents a share compared with a loss of $15.5 million, or 14 cents a share, for the same period in 2003.
"Throughout 2004, we have continued to pursue our core strategies of investing in facilities and distribution to build long-term value for our shareholders," McAlpine said. "We have known since we began this program almost six years ago that the majority of the country's horse racetrack facilities were outdated and did not meet the need of either horsemen or customers.
"The majority of our properties are in a similar state, but these acquisitions were justified as the facilities held hard-to-get pari-mutuel licenses, were located in highly populous markets, and came with valuable urban real estate."
As a result, McAlpine said, the third- and fourth-quarter outlook was burdened with "significantly higher one-time costs than one would normally expect as a result of these multiple initiatives."
McAlpine said the quarterly results were "negatively impacted by several major factors," including the reconstruction of the racing surfaces at Laurel Park in Maryland; the phased-in start-up of a new racetrack near Vienna, Austria; start-up costs incurred in the establishment of new technologies and an international simulcast network; and costs associated with legislative regulatory reform.
McAlpine said company had invested heavily to gain passage of alternative gaming legislation in California, Florida, Michigan, and Oklahoma. "Early results show that an initiative in Oklahoma appears to have passed, a similar one in Florida is too close to call, and the position of the pari-mutuel industry in both California and Michigan appears to have failed," he said.
McAlpine said that moving forward, the company would reassess its legislative position in California, Florida, and Michigan "to determine our future strategy to achieve parity with other gaming operators. In Oklahoma we will proceed to work diligently to obtain the necessary approvals to operate gaming machines at Remington Park."
McAlpine said that while MEC continues to be optimistic concerning the long-term prospects of the company, "we are conscious of the strain that our investment strategy and heavy losses have placed on our resources."
To that end, McAlpine said the company's board of directors has appointed an executive management committee to re-examine the direction the of each business unit and strategic initiative with a view to "dramatically curtailing losses and reducing costs."
McAlpine cited the ongoing development of Gulfstream Park, the passage of a gaming bill in Pennsylvania, and a deal between HorseRacing Television and the DISH Network as positive recent developments. He said the company intends to pursue an alternative gaming license for The Meadows in western Pennsylvania at the earliest possible date.