Despite financial results that show a net loss of $105.1 million in 2003, Magna Entertainment Corp. president Jim McAlpine said the company "made significant strides" in creating a global company built around horse racing.
MEC released financial statements for the fourth quarter of 2003 and all of 2003 on Feb. 24. Revenue last year came in at $708.9 million, up 29.1% from $549.2 million in 2002. The net loss includes $81.7 million of non-cash write-downs MEC had announced in previous financial statements.
Earnings before interest, taxes, depreciation, and amortization for 2003 were a loss of $117.9 million compared with earnings of $0.5 million for 2002. In a press release, the company said the "decline in the current year is primarily attributable to the higher level of non-cash write-downs and to declines at several of our racetracks as a result of lower wagering revenues and higher operating expenses."
Lower revenue, MEC said, also resulted from higher operating expenses, primarily in the areas of insurance and rent at Bay Meadows in Northern California. The revenue increase stemmed from the acquisition of Lone Star Park, the Maryland Jockey Club, and Flamboro Downs.
"As announced on Oct. 30, we have developed a multi-part action plan aimed at improving our future financial results," McAlpine said in a statement that accompanied the financial results. "We initiated this action plan during the fourth quarter (of 2003) and took specific steps to reduce expenses by $5 million on an annualized basis.
"While we will realize those savings in 2004, the severance and other costs necessary to achieve them burdened the results of our fourth quarter. Throughout 2003, we also incurred significant pre-development expenses, related primarily to the pursuit of alternative gaming opportunities in states where we currently operate racetracks, including Maryland, Michigan, Oklahoma, and Pennsylvania.
"In assessing our fourth-quarter results, one must consider the impact of the severance costs and pre-development expenses, which were incurred to benefit 2004 and future years, as well as the non-cash write-downs of long-lived and intangible assets which were announced earlier this month. Our Continuous Improvement Team has recently completed its review of operations at three of our racetracks. Their recommendations are currently being implemented, and the resulting financial benefits will be realized in 2004 and beyond."
Net loss for the three months that ended Dec. 31, 2003 was $103.2 million. Revenue for the fourth quarter was $146 million, up from $106.8 million in the fourth quarter of 2002.