MEC: Fourth-Quarter Loss Down, Year-End Loss Up

Magna Entertainment Corp. reported Feb. 27 a total net loss of $39.7 million for the three-month period ending Dec. 31, and year-end losses of more than $105 million.

Net losses for the full year widened to $105.3 million from $95.6 million in 2004, with annual revenue falling to $624.7 million from $702.5 million, according to the financial reprot. The loss was the largest ever for the racetrack and entertainment conglomerate, extending its third straight year of red ink to a total of $306,026,000.

"(The year) 2005 has been a financially challenging yet exciting year for MEC," said Thomas Hodgson, president and chief executive officer. "We have made significant progress in 2005 in the pursuit of alternative gaming, regulatory reform, and strategic initiatives which will deliver future returns, but achieving these milestones has not been without cost and financing challenges."

MEC's fourth-quarter output did compare favorably to the $41-million net loss in the same period in 2004, with fourth-quarter revenue falling slightly to $126.9 million from $131.6 million. The company credited strong early returns at the Santa Anita Park meet, 10 additional racing days at Golden Gate Fields, and the opening of a slot-machine casino at Remington Park in Oklahoma as a reason for the improvement.

Hodgson said revenue declines for the final quarter were due in part to the expiration of operational leases at Bay Meadows in Northern California and Multnomah Greyhound Park in Oregon, which were reported last year during the same period.

Hodgson noted the sale of Flamboro Downs in Ontario, Canada; investment in the Maryland-Virginia Racing Circuit; agreements to sell a tract of land at Palm Meadows Training Center in Florida; opening of the casino at Remington Park; passage of slots legislation in Florida; and the opening of a new clubhouse at Gulfstream Park as among the major developments of the last year that impacted MEC finances.

"We are encouraged by the fact that the third and fourth quarters of 2005--which are typically our least profitable quarters given the seasonality of our business--have delivered two consecutive quarters of EBITDA (loss before interest, taxes, depreciation, and amortization) and net-loss improvements," Hodgson said. "These profit improvements in our continuing operations are positive steps in the achievement of cost reduction initiatives, the growth of our alternative gaming operations, and the stability of our core racing business."

Hodgson said the company plans capital expenditures of $60 million-$65 million in slot-machine installation and grandstand seating improvements at Gulfstream for 2006, bringing total expenditures for that project to about $240 million.

The company posted a total net worth of more than $1.4 billion, the financial report said.