With a first-quarter earnings report that shows net income of $2.2 million versus a net loss of $4.1 million for the same period a year earlier, Magna Entertainment Corp. is rebounding from what company officials called a very tough year in 2005, officials said.It was the first profitable quarter for the company since the first quarter of 2004."I'll state the obvious," MEC lead director Jerry Campbell said May 1 during the company's annual meeting, which was available via Web cast from Canada. "It has been a tough year. We've got too much debt, and it takes twice as long to get out of debt as it takes to get into debt. We believe we hit bottom in 2005."We're optimistic about the future of your company. We think you'll be happier with next year's results."MEC carries about $550 million in debt, but company chairman and chief executive officer Frank Stronach said he believes MEC could be debt-free, or have very little debt, sometime in 2007. The company plans to close on its sale of The Meadows, a Pennsylvania harness track, for $225 million later this year; plans to sell more non-core assets such as real estate; and hopes to attract partners in some of its major racetrack holdings."People may ask, 'Why the hell are we in this kind of business, losing so much money?' " Stronach said to shareholders. "It's a huge, huge business, and I'm optimistic that down the road, we could get 10% of all the gambling in the world. It would be a huge, huge number."We're well on our way. I think we have a great opportunity to be the foremost gambling and entertainment company in the world.Stronach said MEC has spent $400 million in the last few years but had to do so given the need for infrastructure improvements. "We knew the racetracks were run down and antiquated," he said. "If we had left them alone, we could have had a good return (on investment). But we felt the old way isn't good enough."Revenue for MEC totaled $281.5 million in the first quarter of 2006, up from $245.7 million for the same period in 2005. The company said the improvement was due to gaming operations at Remington Park in Oklahoma, more racing dates at Golden Gate Fields in Northern California and Laurel Park in Maryland, and business gains at Gulfstream Park, which last year operated with temporary facilities.A summary of significant accounting policies that accompanied the first-quarter financial statement said the numbers were prepared on a "going concern basis" that contemplates the realization of assets and sale of liabilities for the foreseeable future. MEC had a working capital deficiency of $112.1 million as of March 31."Accordingly, the company's ability to continue as a going concern is in substantial doubt and is dependent on the company generating cash flows that are adequate to sustain the operations of the business and maintain its obligations with respect to secured and unsecured creditors, neither of which is assured," the financial statement says.Should certain asset sales not materialize, the company is considering alternatives, which may include refinancing or extension of loans.In other business, Stronach and Campbell were re-elected to the MEC board of directors according to preliminary election results announced during the shareholders' meeting. Others elected are Louis Lataif, William Menear, Dennis Mills, and Gino Roncelli. Official results will be announced after June 30.