$7.3 million lost by Laurel, Pimlico in '93

March 17, 1994|By Jon Morgan | Jon Morgan,Md. Racing Commission/SUN STAFF GRAPHICSun Staff Writer

Maryland's major thoroughbred racetracks lost a record $7.3 million last year, adding pressure to track operator Joseph A. De Francis to reverse a worsening trend that eventually could TTC threaten the state's extensive breeding and racing industry.

The financial results, released yesterday by the Maryland Racing Commission, showed losses nearly 10 times last year's, bringing to more than $10 million the total losses posted at the tracks since Mr. De Francis took over as chairman in 1989.

The report also shows that Mr. De Francis, who pledged last April to suspend his salary until the financial situation at the tracks improved, took $719,399 in salary and management fees in 1993. His compensation was virtually unchanged from the year before.

Mr. De Francis had said in April that he would take only a bonus at the end of 1993 if business picked up.

In his statement yesterday, Mr. De Francis said he decided to take last year's pay because the tracks' chief lender restricted executive compensation when it restructured the track debt last month. Accordingly, Mr. De Francis said he will receive no pay this year until the tracks turn around.

Mr. De Francis blamed about half of last year's losses on extraordinary events unlikely to reoccur, such as the legal costs of the battle for control of the tracks, his push to expand into Virginia and various accounting changes.

But even without those items, the 1993 losses still would exceed all the red ink incurred since the last time the tracks posted a combined profit, 1988.

"Although the performance of our businesses during 1993 was very disappointing, we are optimistic about the future," Mr. De Francis said in a written statement. He and other track officials were unavailable for comment on the financial report yesterday.

Racing commission chairman John P. McDaniel said he would study the figures and meet with track managers for an explanation.

"We are always concerned when we see a loss at any of the tracks. We're trying to be proactive by meeting with management of the track. . . . There is, in my opinion, no cause for alarm until we get a chance to look at it and study it," Mr. McDaniel said.

"What you have to look at here are trend lines," he said. "We will be responsible and do what needs to be done."

Mr. De Francis, who early this year assumed total control of the track from two estranged partners, has launched an aggressive campaign of technological innovation, taking bets on races televised from other tracks, selling local race signals to out-of-state tracks and opening a series of off-track betting parlors around the state.

At one point last year, Mr. De Francis predicted that 1993 represented a turnaround for the tracks. But there was little evidence of improvement in the numbers released yesterday.

Both tracks suffered steep declines in revenue from admissions and concessions and 50 percent increases in administrative costs. But there were also millions of dollars in new income from simulcast betting.

Pimlico posted an operating loss of $1.4 million, compared with an operating profit of $1.6 million the year before. Total bets placed at the track -- its biggest single source of revenue -- declined slightly.

More than $2 million in debt service and several hundred thousand dollars in one-time accounting changes brought total losses to $3.8 million, compared with a loss of $465,644 in 1992.

Total betting at Laurel was up nearly 13 percent during the year, but the operating loss of $1.9 million was 20 times the $97,273 operating loss reported the year before. Interest payments pushed the total red ink to $3.5 million, compared with a loss of $284,539 the year before, when the track enjoyed a one-time windfall of $1.4 million related to a change in concession operators.

Richard Hoffberger, president of the Maryland Thoroughbred Horsemen's Association, said Mr. De Francis had warned the group that the losses would be steep.

"I'm sure that everybody's concerned that it can't go on forever. The question is what do you do to fix it and what's the state of Maryland racing compared to places around here," Mr. Hoffberger said.

"In spite of the losses, the track has managed to hold the line on purses and kept holding the show. I'm not trying to take the blame off Joe, but I know there are other racetracks where they worry on Thursday if they will make payroll on Friday," Mr. Hoffberger said.

In fact, the nation's racing industry showed signs of stabilizing last year after several disastrous years. Some tracks, such as Churchill Downs in Louisville, Ky., home of the Kentucky Derby, reported record revenues and profits.

"Horse racing in this country is in trouble, but good tracks make money and bad tracks lose money," said gaming analyst Stephen D. Weinress, managing partner of L.H. Friend Weinress and Frankson, of Irvine, Calif.

Johan Fatemi, head of the pari-mutuel wagering consulting practice of Peat Marwick, said: "That is a more extensive decline than you see around the country. It's hard to explain in terms of industry trends."

Losing at the track

Profits or losses at Laurel and Pimlico starting in 1988:

Year ...... Pimlico ....... Laurel

1993....... -3,769,274..... -3,456,918

1992 ...... -$465,644 ..... -$284,539

1991 ...... -$500,597 ..... -$358,702

1990 ...... -$483,972 ..... -$365,086

1989 ....... +$35,949 ..... -$370,312

1988 .... +$1,600,000 ......-$67,744

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