Canterbury Park Holding Corp 10-Q for FY2020 Q1
Canterbury Park Holding Corp (CPHC)
About this 10-Q
Canterbury Park Holding Corp filed this 10-Q on May 13, 2020, covering the quarter ended March 31, 2020 (FY2020 Q1).
Headline figures
Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $10.95M
- down 5.5% from $11.59M a year earlier
- Net income
- $255.22K
- up 351.1% from net income of $56.57K a year earlier
- Diluted EPS
- $0.05
- up 400.0% from $0.01 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2020.
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO _____.
Commission File Number: 001‑37858
CANTERBURY PARK HOLDING CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
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Minnesota |
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47‑5349765 |
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(State or Other Jurisdiction of Incorporation or |
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(I.R.S. Employer |
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1100 Canterbury Road |
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Shakopee, MN 55379 |
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(Address of principal executive offices and zip code)
Securities registered pursuant Section 12(b) of the Act:
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Title of Each Class |
Trading Symbol |
Name of each exchange on which registered |
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Common Stock Common stock, $.01 par value |
CPHC |
Nasdaq |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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YES |
☒ |
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NO |
☐ |
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Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
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YES |
☒ |
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NO |
☐ |
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Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b‑2 of the Exchange Act.
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Large accelerated filer |
☐ |
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Accelerated filer |
☐ |
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Non-accelerated filer |
☒ |
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Smaller reporting company |
☒ |
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Emerging growth company |
☐ |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b‑2).
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YES |
☐ |
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NO |
☒ |
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The Company had 4,694,138 shares of common stock, $.01 par value, outstanding as of May 1, 2020.
Canterbury Park Holding Corporation
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Item 1. |
Financial Statements (unaudited) |
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Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019 |
2 |
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Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2020 and 2019 |
3 |
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4 |
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Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019 |
5 |
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6 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17 |
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1
PART 1 – FINANCIAL INFORMATION
CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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(Unaudited) |
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March 31, |
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December 31, |
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2020 |
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2019 |
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ASSETS |
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CURRENT ASSETS |
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Cash and cash equivalents |
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$ |
— |
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$ |
355,399 |
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Restricted cash |
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3,081,073 |
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2,308,955 |
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Short-term investments |
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— |
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103,886 |
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Accounts receivable, net of allowance of $19,250 for both periods |
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364,353 |
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302,037 |
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Inventory |
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288,878 |
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390,118 |
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Prepaid expenses |
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528,000 |
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501,493 |
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Income taxes receivable |
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88,075 |
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— |
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Total current assets |
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4,350,379 |
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3,961,888 |
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LONG-TERM ASSETS |
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Deposits |
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49,500 |
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49,500 |
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Restricted cash - long-term portion |
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— |
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1,262,744 |
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TIF receivable |
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9,857,413 |
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9,708,856 |
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Related party receivable |
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3,533,829 |
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3,528,927 |
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Operating lease right-of-use assets |
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72,911 |
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74,832 |
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Equity investment |
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2,992,633 |
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2,992,633 |
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Land, buildings and equipment, net |
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44,241,167 |
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43,833,702 |
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TOTAL ASSETS |
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$ |
65,097,832 |
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$ |
65,413,082 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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CURRENT LIABILITIES |
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Accounts payable |
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4,754,400 |
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3,495,238 |
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Card Casino accruals |
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1,655,005 |
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2,167,056 |
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Accrued wages and payroll taxes |
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890,059 |
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2,254,379 |
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Cash dividend payable |
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— |
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324,439 |
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Accrued property taxes |
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1,274,571 |
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1,019,658 |
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Deferred revenue |
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1,354,821 |
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1,482,130 |
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Payable to horsepersons |
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448,175 |
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557,696 |
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Current portion of finance lease obligations |
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24,807 |
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24,500 |
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Current portion of operating lease obligations |
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27,855 |
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29,776 |
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Income taxes payable |
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— |
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120,960 |
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Total current liabilities |
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10,429,693 |
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11,475,832 |
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LONG-TERM LIABILITIES |
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Deferred income taxes |
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4,663,500 |
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4,404,300 |
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Finance lease obligations, net of current portion |
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65,466 |
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71,784 |
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Operating lease obligations, net of current portion |
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45,056 |
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45,056 |
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Total long-term liabilities |
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4,774,022 |
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4,521,140 |
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TOTAL LIABILITIES |
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15,203,715 |
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15,996,972 |
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STOCKHOLDERS’ EQUITY |
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Common stock, $.01 par value, 10,000,000 shares authorized, 4,694,138 and 4,644,522 respectively, shares issued and outstanding |
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46,941 |
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46,445 |
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Additional paid-in capital |
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23,035,735 |
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22,733,933 |
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Retained earnings |
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26,811,441 |
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26,635,732 |
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Total stockholders’ equity |
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49,894,117 |
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49,416,110 |
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
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$ |
65,097,832 |
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$ |
65,413,082 |
See notes to condensed consolidated financial statements.
2
CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended March 31, |
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2020 |
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2019 |
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OPERATING REVENUES: |
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Pari-mutuel |
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$ |
1,296,026 |
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$ |
1,490,809 |
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Card Casino |
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7,561,172 |
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7,899,964 |
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Food and beverage |
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1,118,995 |
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1,352,801 |
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Other |
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972,766 |
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847,224 |
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Total Net Revenues |
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10,948,959 |
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11,590,798 |
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OPERATING EXPENSES: |
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Purse expense |
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1,103,394 |
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1,395,538 |
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Minnesota Breeders’ Fund |
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189,744 |
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217,695 |
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Other pari-mutuel expenses |
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220,849 |
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268,366 |
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Salaries and benefits |
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5,577,893 |
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5,745,287 |
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Cost of food and beverage and other sales |
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564,151 |
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625,757 |
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Depreciation and amortization |
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716,853 |
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625,520 |
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Utilities |
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290,611 |
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322,115 |
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Advertising and marketing |
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183,988 |
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190,329 |
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Professional and Contracted Services |
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972,324 |
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966,386 |
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Loss on disposal of assets |
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— |
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113,437 |
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Other operating expenses |
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987,457 |
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1,143,129 |
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Total Operating Expenses |
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10,807,264 |
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11,613,559 |
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INCOME (LOSS) FROM OPERATIONS |
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141,695 |
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(22,761) |
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OTHER INCOME |
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Interest income, net |
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163,690 |
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63,240 |
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Net Other Income |
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163,690 |
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63,240 |
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INCOME BEFORE INCOME TAXES |
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305,385 |
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40,479 |
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INCOME TAX BENEFIT (EXPENSE) |
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(50,164) |
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16,093 |
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NET INCOME |
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$ |
255,221 |
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$ |
56,572 |
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Basic earnings per share |
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$ |
0.05 |
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$ |
0.01 |
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Diluted earnings per share |
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$ |
0.05 |
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$ |
0.01 |
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Weighted Average Basic Shares Outstanding |
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4,659,579 |
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4,559,477 |
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Weighted Average Diluted Shares |
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4,662,675 |
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4,613,245 |
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Cash dividends declared per share |
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$ |
0.00 |
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$ |
0.07 |
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See notes to condensed consolidated financial statements.
3
CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
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For the three months ended March 31, 2020 |
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Number of |
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Common |
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Additional |
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Retained |
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Shares |
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Stock |
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Paid-in Capital |
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Earnings |
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Total |
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Balance at December 31, 2019 |
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4,644,522 |
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$ |
46,445 |
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$ |
22,733,933 |
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$ |
26,635,732 |
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$ |
49,416,110 |
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Exercise of stock options |
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24,250 |
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242 |
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200,548 |
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— |
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200,790 |
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Other share retirements |
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(9,920) |
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(99) |
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(44,587) |
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(79,512) |
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(124,198) |
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Stock-based compensation |
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— |
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— |
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57,606 |
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— |
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57,606 |
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401(K) stock match |
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17,179 |
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172 |
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160,795 |
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— |
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160,967 |
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Issuance of deferred stock awards |
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18,107 |
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181 |
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(72,560) |
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— |
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(72,379) |
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Net Income |
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— |
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— |
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— |
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255,221 |
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255,221 |
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Balance at March 31, 2020 |
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4,694,138 |
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$ |
46,941 |
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$ |
23,035,735 |
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$ |
26,811,441 |
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$ |
49,894,117 |
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For the three months ended March 31, 2019 |
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Number of |
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Common |
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Additional |
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Retained |
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Shares |
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Stock |
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Paid-in Capital |
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Earnings |
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Total |
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Balance at December 31, 2018 |
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4,527,685 |
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$ |
45,277 |
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$ |
21,420,886 |
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$ |
25,268,187 |
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$ |
46,734,350 |
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Exercise of stock options |
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28,060 |
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281 |
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172,111 |
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— |
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172,392 |
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Other share retirements |
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(5,863) |
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(59) |
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(27,915) |
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(62,023) |
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(89,997) |
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Stock-based compensation |
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— |
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— |
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90,058 |
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— |
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90,058 |
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Dividend distribution |
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— |
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— |
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— |
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(320,226) |
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(320,226) |
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401(K) stock match |
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8,111 |
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81 |
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116,312 |
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— |
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|
116,393 |
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Issuance of deferred stock awards |
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10,968 |
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110 |
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(55,044) |
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— |
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(54,934) |
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Shares issued under Employee Stock Purchase Plan |
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5,697 |
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57 |
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67,282 |
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— |
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67,339 |
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Net income |
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— |
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— |
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— |
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56,572 |
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56,572 |
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Balance at March 31, 2019 |
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4,574,658 |
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$ |
45,747 |
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$ |
21,783,690 |
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$ |
24,942,510 |
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$ |
46,771,947 |
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See notes to condensed consolidated financial statements.
4
CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Three Months Ended March 31, |
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2020 |
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2019 |
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Operating Activities: |
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Net income |
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$ |
255,221 |
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$ |
56,572 |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation |
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716,853 |
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625,520 |
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Stock-based compensation expense |
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57,606 |
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90,058 |
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Stock-based employee match contribution |
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160,967 |
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|
116,312 |
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Deferred income taxes |
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|
259,200 |
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|
94,800 |
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Loss from equity investment |
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— |
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2,377 |
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Loss on disposal of assets |
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— |
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|
113,437 |
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Changes in operating assets and liabilities: |
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Increase in accounts receivable |
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(67,218) |
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(69,385) |
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Decrease (increase) in other current assets |
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|
74,733 |
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(40,457) |
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Increase (decrease) in income taxes receivable/payable |
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(645,771) |
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|
357,158 |
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Decrease in operating lease right-of-use assets |
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|
1,921 |
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|
1,939 |
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Decrease in operating lease liabilities |
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(1,921) |
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(1,939) |
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Increase in accounts payable |
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|
960,781 |
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|
302,777 |
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Decrease in deferred revenue |
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(127,309) |
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(61,754) |
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(Decrease) increase in Card Casino accruals |
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(512,051) |
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|
417,322 |
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Decrease in accrued wages and payroll taxes |
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(1,364,320) |
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(888,915) |
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Increase in accrued property taxes |
|
|
254,913 |
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|
222,443 |
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Increase in payable to horsepersons |
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|
327,215 |
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|
122,454 |
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Net cash provided by operating activities |
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|
350,820 |
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|
1,460,719 |
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|
|
|
|
|
|
Investing Activities: |
|
|
|
|
|
|
|
Additions to land, buildings, and equipment |
|
|
(825,937) |
|
|
(3,101,381) |
|
Additions for TIF eligible improvements |
|
|
(148,557) |
|
|
(1,700,038) |
|
Proceeds from sale of investments |
|
|
103,886 |
|
|
— |
|
Net cash used in investing activities |
|
|
(870,608) |
|
|
(4,801,419) |
|
|
|
|
|
|
|
|
|
Financing Activities: |
|
|
|
|
|
|
|
Proceeds from issuance of common stock |
|
|
76,592 |
|
|
149,815 |
|
Payments against line of credit |
|
|
(1,450,000) |
|
|
— |
|
Borrowings on line of credit |
|
|
1,450,000 |
|
|
— |
|
Cash dividend paid to shareholders |
|
|
(324,439) |
|
|
(316,938) |
|
Payments for taxes related to net share settlement of equity awards |
|
|
(72,379) |
|
|
(54,934) |
|
Principal payments on finance lease |
|
|
(6,011) |
|
|
(5,738) |
|
Net cash used in financing activities |
|
|
(326,237) |
|
|
(227,795) |
|
|
|
|
|
|
|
|
|
Net decrease in cash, cash equivalents, and restricted cash |
|
|
(846,025) |
|
|
(3,568,495) |
|
|
|
|
|
|
|
|
|
Cash, cash equivalents, and restricted cash at beginning of period |
|
|
3,927,098 |
|
|
11,203,998 |
|
|
|
|
|
|
|
|
|
Cash, cash equivalents, and restricted cash at end of period |
|
$ |
3,081,073 |
|
$ |
7,635,503 |
|
|
|
|
|
|
|
|
|
Schedule of non-cash investing and financing activities |
|
|
|
|
|
|
|
Additions to buildings and equipment funded through accounts payable |
|
$ |
298,000 |
|
$ |
227,000 |
|
Transfer of future TIF reimbursed costs from PP&E |
|
|
149,000 |
|
|
1,700,000 |
|
ROU assets obtained in exchange for operating lease obligations |
|
|
— |
|
|
15,000 |
|
Dividend declared |
|
|
— |
|
|
320,000 |
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
Income taxes paid |
|
$ |
— |
|
$ |
— |
|
Interest paid |
|
|
11,000 |
|
|
2,000 |
See notes to condensed consolidated financial statements.
5
CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. OVERVIEW AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business – The Company’s Racetrack operations are conducted at facilities located in Shakopee, Minnesota, approximately 25 miles southwest of downtown Minneapolis. In May 1994, the Company commenced year-round horse racing simulcast operations and hosted the first annual live race meet during the summer of 1995. The Company’s live racing operations are a seasonal business as it typically hosts live race meets each year from May until September. The Company earns additional pari-mutuel revenue by televising its live racing to out-of-state racetracks around the country. Canterbury Park’s Card Casino typically operates 24 hours a day, seven days a week and is limited by Minnesota State law to conducting card play on a maximum of 80 tables. The Card Casino currently offers a variety of poker and table games. The Company’s three largest sources of revenues include: Card Casino operations, pari-mutuel operations and food and beverage sales. The Company also derives revenues from related services and activities, such as admissions, advertising signage, publication sales, and from other entertainment events and activities held at the Racetrack. Additionally, the Company is developing approximately 140 acres of underutilized land surrounding the Racetrack in a project known as Canterbury Commons. The Company is pursuing several mixed-use development opportunities for this land, directly and through joint ventures.
In January 2020, an outbreak of a respiratory illness caused by a new strain of coronavirus was identified. The disease has since spread rapidly across the world, causing the World Health Organization to declare the outbreak a pandemic (the “COVID-19 Pandemic”) on March 12, 2020. Since that time, measures have been taken to limit the impact of COVID-19, including shelter-in-place orders, social distancing measures, travel bans and restrictions, and business and government shutdowns.
On March 16, 2020, the Company announced that, based on the advice of Minnesota state and regulatory bodies, it was temporarily suspending all card casino, simulcast, and special events operations at Canterbury Park in response to concerns about the COVID-19 Pandemic. Canterbury Park determined this voluntary suspension of activities was in the best interest of the health and safety of its guests and team members and would provide the Company an opportunity to review and update operational best practices and strategies based on what was currently known about this public health situation and future developments.
Despite a strong start to the year, the disruptions arising from the COVID-19 Pandemic had a significant impact on the Company's financial condition and operations during the three months ended March 31, 2020. The duration and intensity of this global health emergency and related disruptions is uncertain. Given the dynamic nature of these circumstances, the impact on the Company’s consolidated results of operations, cash flows and financial condition in 2020 will be material, but cannot be reasonably estimated at this time as it is unknown when the COVID-19 Pandemic will end, when or how quickly the current travel restrictions will be modified or cease to be necessary and the resulting impact on the Company’s business and the willingness of customers to spend on entertainment.
The Company has a consolidated balance sheet with no long-term debt and an $8 million credit line that is anticipated to provide the Company with the necessary liquidity and financial flexibility to manage through this challenging operating environment. We have taken significant actions to mitigate the effects of the COVID-19 Pandemic on our operations, including initiating workforce reductions and furloughs, suspending the Company’s quarterly cash dividend, reducing working capital, postponing non-essential capital expenditures, reducing operating costs, and substantially reducing discretionary spending. We expect these countermeasures to partially mitigate the impacts of COVID-19 on our full year 2020 financial results. As the impact of the COVID-19 Pandemic on the economy and our operations evolves, we will continue to assess the impact on the Company and respond accordingly.
6
Basis of Presentation and Preparation – The accompanying condensed consolidated financial statements include the accounts of the Company (Canterbury Park Holding Corporation and its subsidiaries Canterbury Park Entertainment, LLC; Canterbury Park Concession, Inc.; and Canterbury Development, LLC). Intercompany accounts and transactions have been eliminated. The preparation of these condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in these condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.
These condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and the notes thereto for the fiscal year ended December 31, 2019, included in its Annual Report on Form 10‑K (the “2019 Form 10‑K”).
The condensed consolidated balance sheets and the related condensed consolidated statements of operations, stockholders’ equity, and the cash flows for the periods ended March 31, 2020 and 2019 have been prepared by Company management. In the opinion of management, all adjustments (which include only normal recurring adjustments, except where noted) necessary to present fairly the financial position, results of operations, statement of stockholders’ equity, and cash flows at March 31, 2020 and 2019 and for the periods then ended have been made.
Summary of Significant Accounting Policies – A detailed description of our significant accounting policies can be found in our most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2019. There were no material changes in significant accounting policies during the quarter ended March 31, 2020.
Restricted Cash – Restricted cash represents refundable deposits and amounts due to horsemen for purses, stakes and awards, and amounts accumulated in card game progressive jackpot pools, the player pool and poker promotional fund to be used to repay card players in the form of promotions, giveaways, prizes, or by other means. Restricted cash also includes a deposit related to its development operations. The Company deposited $1.2 million with a bank in December 2018 to assist Doran Canterbury I to complete financing for a construction loan. On May 1, 2020, the bank released the deposit back to the Company. Therefore, the Company classified this as short term restricted cash on its Condensed Consolidated Balance Sheet.
Deferred Revenue – Deferred revenue includes advance sales related to racing, events and corporate partnerships. Revenue from these advance billings is recognized when the related event occurs or services have been performed. Deferred revenue also includes advanced Cooperative Marketing Agreement (“CMA”) promotional funds, for which revenue is recognized when expenses are incurred.
Payable to Horsepersons - The Minnesota Pari-mutuel Horse Racing Act requires the Company to segregate a portion of funds (recorded as purse expense in the statements of operations) received from Card Casino operations and wagering on simulcast and live horse races, for future payment as purses for live horse races or other uses of the horsepersons’ association. Pursuant to an agreement with the Minnesota Horsemen’s Benevolent and Protective Association (“MHBPA”), the Company transferred into a trust account or paid directly to the MHBPA, $1,185,000 and $1,260,000 for the three months ended March 31, 2020 and 2019, respectively, related to thoroughbred races. Minnesota Statutes provide that amounts transferred into the trust account are the property of the trust and not of the Company, and therefore these amounts are not recorded on the Company’s Condensed Consolidated Balance Sheet.
Checks Written in Excess of Cash Balance – For the three months ended March 31, 2020, the Company included $945,000 of checks written in excess of cash balance within accounts payable on the Condensed Consolidated Balance Sheet. There were no checks written in excess of cash balance as of December 31, 2019.
7
Revenue Recognition – The Company’s primary revenues with customers consist of Card Casino operations, pari-mutuel wagering on simulcast and live horse races, and food and beverage transactions. We determine revenue recognition through the following steps:
Identification of the contract, or contracts, with a customer
Identification of the performance obligations in the contract
Determination of the transaction price
Allocation of the transaction price to the performance obligation in the contract
Recognition of revenue when, or as, we satisfy a performance obligation
The transaction price for a Card Casino contract is a set percentage of wagers and is recognized at the time that the wagering process is complete. The transaction price for pari-mutuel wagering is the commission received on a wager, exclusive of any track fees and is recognized upon occurrence of the live race that is presented for wagering and after that live race is made official by the respective state’s racing regulatory body. The transaction price for food and beverage contracts is the net amount collected from the customer for these goods. Food and beverage services have been determined to be separate, stand-alone performance obligations and the transaction price is recorded as revenue as the good is transferred to the customer when delivery is made.
Contracts for Card Casino operations and pari-mutuel wagering involve two performance obligations for those customers earning points under the Company’s loyalty program and a single performance obligation for customers who do not participate in the program. The Company applies a practical expedient by accounting for its gaming contracts on a portfolio basis as these wagers have similar characteristics and the Company reasonably expects the effects on the financial statements of applying the revenue recognition guidance to the portfolio would not differ materially from what would result if the guidance were applied on an individual wagering contract. For purposes of allocating the transaction price in a wagering contract between the wagering performance obligation and the obligation associated with the loyalty points earned, the Company allocates an amount to the loyalty point contract liability based on the stand-alone redemption value of the points earned, which is determined by the value of a point that can be redeemed for a cash voucher, food and beverage voucher, racing admission, valet parking, or racing forms. Based on past experience, the majority of customers redeem their points for cash vouchers. Therefore, there are no further performance obligations by the Company.
We have two general types of liabilities related to contracts with customers: (1) our MVP Loyalty Program and (2) outstanding chip liability. These are included in the line item Card Casino accruals on the consolidated balance sheet. We defer the full retail value of these complimentary reward items until the future revenue transaction occurs.
The Company offers certain promotional allowances at no charge to patrons who participate in its player rewards program.
We evaluate our on-track revenue, export revenue, and import revenue contracts to determine whether we are acting as the principal or as the agent when providing services, which we consider in determining if revenue should be reported gross or net. An entity is a principal if it controls the specified service before that service is transferred to a customer.
The revenue we recognize for on-track revenue and import revenue is the commission we are entitled to retain for providing a wagering service to our customers. For these arrangements, we are the principal as we control the wagering service; therefore, any charges, including simulcast fees, we incur for delivering the wagering service are presented as operating expenses.
For export revenue, our customer is the third party wagering site such as a racetrack, OTB, or advance deposit wagering provider. Therefore, the revenue we recognize for export revenue is the simulcast host fee we earn for exporting our racing signal to the third party wagering site.
8
2. STOCK-BASED COMPENSATION
Long Term Incentive Plan and Award of Deferred Stock
The Long Term Incentive Plan (the “LTI Plan”) authorizes the grant of Long Term Incentive Awards that provide an opportunity to Named Executive Officers (“NEOs”) and other Senior Executives to receive a payment in cash or shares of the Company’s common stock to the extent of achievement at the end of a period greater than one year (the “Performance Period”) as compared to Performance Goals established at the beginning of the Performance Period. Currently, there are two awards outstanding that are for three-year periods ending December 31, 2020 and 2021. As a result of the COVID-19 Pandemic, the Company has temporarily suspended its LTI Plan until there is more certainty about the Company’s reopening and future operations.
Board of Directors Stock Option, Deferred Stock Awards, and Restricted Stock Grants
The Company’s Stock Plan currently authorizes annual grants of restricted stock, deferred stock, stock options, or any combination of the three, to non-employee members of the Board of Directors at the time of the Company’s annual shareholders’ meeting as determined by the Board prior to each such meeting. Options granted under the Plan generally expire 10 years after the grant date. Restricted stock and deferred stock grants generally vest 100% one year after the date of the annual meeting at which they were granted, are subject to restrictions on resale for an additional year, and are subject to forfeiture if a board member terminates his or her board service prior to the shares vesting. The Board of Directors’ unvested deferred stock awards as of March 31, 2020 consisted of 12,604 shares with a weighted average fair value per share of $12.69. There were no unvested restricted stock or stock options outstanding at March 31, 2020.
Stock-based compensation expense related to the LTI Plan, deferred stock awards and restricted stock awards is included on the Condensed Consolidated Statements of Operations and totaled $58,000 and $90,000 for the three months ended March 31, 2020 and 2019, respectively.
Employee Stock Option Grants
The Company has granted incentive stock options to employees pursuant to the Company’s Stock Plan with an exercise price equal to the market price on the date of grant. The options vest over a 42‑month period and expire in 10 years.
A summary of stock option activity as of March 31, 2020 and changes during the three months then ended is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
Weighted |
|
Average |
|
|
|
||
|
|
|
|
|
Average |
|
Remaining |
|
Aggregate |
|||
|
|
|
Number of |
|
Exercise |
|
Contractual |
|
Grant Date |
|||
|
Stock Options |
|
Options |
|
Price |
|
Term |
|
Fair Value |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at January 1, 2020 |
|
33,250 |
|
$ |
9.64 |
|
|
|
|
|
|
|
Granted |
|
- |
|
|
- |
|
|
|
|
|
|
|
Exercised |
|
(24,250) |
|
|
8.28 |
|
|
|
|
|
|
|
Expired/Forfeited |
|
- |
|
|
- |
|
|
|
|
|
|
|
Outstanding at March 31, 2020 |
|
9,000 |
|
$ |
13.30 |
|
|
0.8 Years |
|
$ |
119,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at March 31, 2020 |
|
9,000 |
|
$ |
13.30 |
|
|
0.8 Years |
|
$ |
119,700 |
9
3. NET INCOME PER SHARE COMPUTATIONS
The following is a reconciliation of the numerator and denominator of the earnings per common share computations for the three months ended March 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
||||
|
|
|
2020 |
|
2019 |
|
||
|
Net income (numerator) amounts used for basic and diluted per share computations: |
|
$ |
255,221 |
|
$ |
56,572 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares (denominator) of common stock outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
4,659,579 |
|
|
4,559,477 |
|
|
Plus dilutive effect of stock options |
|
|
3,096 |
|
|
53,768 |
|
|
Diluted |
|
|
4,662,675 |
|
|
4,613,245 |
|
|
|
|
|
|
|
|
|
|
|
Net income per common share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.05 |
|
$ |
0.01 |
|
|
Diluted |
|
|
0.05 |
|
|
0.01 |
|
Options to purchase 9,000 shares of common stock at an average price of $13.30 per share were outstanding but not included in the computation of diluted net income per share for the three months ended March 31, 2020 because the exercise price of the options exceeded the market price of the Company’s common stock at March 31, 2020.
There were no out-of-the money options at March 31, 2019; thus, all outstanding options to purchase shares of common stock were included in the computation of diluted net income per share.
4. GENERAL CREDIT AGREEMENT
The Company has a general credit and security agreement with a financial institution, which provides a revolving credit line up to $8,000,000 and allows for letters of credit in the aggregate amount of up to $2,000,000 to be issued under the credit agreement. The line of credit is collateralized by all receivables, inventory, equipment, and general intangibles of the Company. This agreement was amended as of September 30, 2019 to extend the maturity date to September 30, 2020. As of March 31, 2020, the outstanding balance on the line of credit was $0.
5. OPERATING SEGMENTS
The Company has four reportable operating segments: horse racing, Card Casino, food and beverage, and development. The horse racing segment primarily represents simulcast and live horse racing operations. The Card Casino segment represents operations of Canterbury Park’s Card Casino, the food and beverage segment represents food and beverage operations provided during simulcast and live racing, in the Card Casino, and during special events. The development segment represents our real estate development operations. The Company’s reportable operating segments are strategic business units that offer different products and services. They are managed separately because the segments differ in the nature of the products and services provided as well as process to produce those products and services. The Minnesota Racing Commission regulates the horse racing and Card Casino segments.
Depreciation, interest and income taxes are allocated to the segments, but no allocation is made to the food and beverage segment for shared facilities. However, the food and beverage segment pays approximately 25% of gross revenues earned on live racing and special event days to the horse racing segment for use of the facilities.
10
The following tables represent a disaggregation of revenues from contracts with customers along with the Company’s operating segments (in 000’s):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020 |
|||||||||||||
|
|
|
Horse Racing |
|
Card Casino |
|
Food and Beverage |
|
Development |
|
Total |
|||||
|
Net revenues from external customers |
|
$ |
2,197 |
|
$ |
7,561 |
|
$ |
1,182 |
|
$ |
9 |
|
$ |
10,949 |
|
Intersegment revenues |
|
|
70 |
|
|
— |
|
|
262 |
|
|
— |
|
|
332 |
|
Net interest (expense) income |
|
|
(9) |
|
|
— |
|
|
— |
|
|
173 |
|
|
164 |
|
Depreciation |
|
|
398 |
|
|
261 |
|
|
58 |
|
|
— |
|
|
717 |
|
Segment (loss) income before income taxes |
|
|
(896) |
|
|
965 |
|
|
(160) |
|
|
74 |
|
|
(17) |
|
Segment tax expense (benefit) |
|
|
(94) |
|
|
158 |
|
|
(26) |
|
|
12 |
|
|
50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020 |
|||||||||||||
|
Segment Assets |
|
$ |
31,020 |
|
$ |
3,252 |
|
$ |
25,239 |
|
$ |
29,302 |
|
$ |
88,813 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2019 |
|||||||||||||
|
|
|
Horse Racing |
|
Card Casino |
|
Food and Beverage |
|
Development |
|
Total |
|||||
|
Net revenues from external customers |
|
$ |
2,292 |
|
$ |
7,900 |
|
$ |
1,399 |
|
$ |
- |
|
$ |
11,591 |
|
Intersegment revenues |
|
|
116 |
|
|
- |
|
|
303 |
|
|
- |
|
|
419 |
|
Net interest income |
|
|
8 |
|
|
- |
|
|
- |
|
|
55 |
|
|
63 |
|
Depreciation |
|
|
578 |
|
|
4 |
|
|
44 |
|
|
- |
|
|
626 |
|
Segment (loss) income before income taxes |
|
|
(1,176) |
|
|
1,110 |
|
|
(88) |
|
|
(22) |
|
|
(176) |
|
Segment tax expense (benefit) |
|
|
(414) |
|
|
441 |
|
|
(35) |
|
|
(8) |
|
|
(16) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019 |
|||||||||||||
|
Segment Assets |
|
$ |
31,618 |
|
$ |
3,327 |
|
$ |
25,430 |
|
$ |
29,074 |
|
$ |
89,449 |
The following are reconciliations of reportable segment revenues, income before income taxes, and assets, to the Company’s consolidated totals (in 000’s):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020 |
||||
|
|
|
2020 |
|
2019 |
||
|
Revenues |
|
|
|
|
|
|
|
Total net revenue for reportable segments |
|
$ |
11,281 |
|
$ |
12,010 |
|
Elimination of intersegment revenues |
|
|
(332) |
|
|
(419) |
|
Total consolidated net revenues |
|
$ |
10,949 |
|
$ |
11,591 |
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
|
|
|
|
|
Total segment income before income taxes |
|
$ |
(17) |
|
$ |
(176) |
|
Elimination of intersegment income before income taxes |
|
|
322 |
|
|
216 |
|
Total consolidated income before income taxes |
|
$ |
305 |
|
$ |
40 |
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
||
|
|
|
2020 |
|
2019 |
||
|
Assets |
|
|
|
|
|
|
|
Total assets for reportable segments |
|
$ |
88,813 |
|
$ |
89,449 |
|
Elimination of intercompany balances |
|
|
(23,715) |
|
|
(24,036) |
|
Total consolidated assets |
|
$ |
65,098 |
|
$ |
65,413 |
11
6. COMMITMENTS AND CONTINGENCIES
In accordance with an Earn Out Promissory Note given to the prior owner of the Racetrack as part of the consideration paid by the Company to acquire the Racetrack in 1994, if (i) off-track betting becomes legally permissible in the State of Minnesota and (ii) the Company begins to conduct off-track betting with respect to or in connection with its operations, the Company will be required to pay to the IMR Fund, L.P. the greater of (a) $700,000 per Operating Year, as defined, or (b) 20% of the Net Pretax Profit, as defined for each of five operating years. At this time, management believes that the likelihood that these two conditions will be met and that the Company would be required to pay these amounts is remote. At the date (if any) that these two conditions are met, the five minimum payments would be discounted back to their present value and the sum of those discounted payments would be capitalized as part of the purchase price in accordance with GAAP. The purchase price will be further increased if payments become due under the “20% of Net Pretax Profit” calculation. The first payment would be due 90 days after the end of the third Operating Year in which off-track betting is conducted by the Company. Remaining payments would be made within 90 days of the end of each of the next four Operating Years.
The Company entered into a Cooperative Marketing Agreement (the “CMA”) with the Shakopee Mdewakanton Sioux Community (“SMSC”), which became effective March 4, 2012, was amended in the first quarter of each of 2015, 2016, 2017, and 2018, and will expire on December 31, 2022. The CMA contains certain covenants which, if breached, would trigger an obligation to repay a specified amount related to such covenant. At this time, management believes it unlikely that any breach of a covenant will occur, and that therefore the possibility that the Company will be required to pay the specified amount related to any covenant breach is remote.
The Company is periodically involved in various claims and legal actions arising in the normal course of business. Management believes that the resolution of any pending claims and legal actions at March 31, 2020 and as of the date of this report, will not have a material impact on the Company’s consolidated financial positions or results of operations.
In August 2018, the Company entered into a Contract for Private Redevelopment with the City of Shakopee in connection with a Tax Increment Financing District (“TIF District”). The Company is obligated to construct certain infrastructure improvements within the TIF District, and will be reimbursed by the City of Shakopee by future tax increment revenue generated from the developed property. The total amount of funding that Canterbury will be paid as reimbursement under the TIF program for these improvements is not guaranteed and will depend on future tax revenues generated from the developed property.
7. COOPERATIVE MARKETING AGREEMENT
As discussed above in Note 6, on March 4, 2012, the Company entered into the CMA with the SMSC. The primary purpose of the CMA is to increase purses paid during live horse racing at Canterbury Park’s Racetrack in order to strengthen Minnesota’s thoroughbred and quarter horse industry. Under the CMA, as amended, this is achieved through “Purse Enhancement Payments to Horsemen” paid directly to the MHBPA. These payments have no direct impact on the Company’s consolidated financial statements or operations.
Under the terms of the CMA, as amended, the SMSC made a payment of $7.4 million during the first three months of 2019, primarily for purse enhancements for the live race meet. As of the date of this filing, the SMSC has not made a payment for the 2020 live race meet.
Under the CMA, as amended, SMSC also agreed to make “Marketing Payments” to the Company relating to joint marketing efforts for the mutual benefit of the Company and SMSC, including signage, joint promotions, player benefits, and events.
In the respective first quarters of 2015, 2016, 2017, and 2018, the CMA was amended to adjust the payment amounts between the “Purse Enhancement Payments to Horsemen” and “Marketing Payments to Canterbury Park.”
12
SMSC is currently obligated to make the following purse enhancement and marketing payments for 2021 through 2022:
|
|
|
|
|
|
|
|
|
|
|
Purse Enhancement Payments to |
|
Marketing Payments to |
||
|
Year |
|
Horsemen (1) |
|
Canterbury Park |
||
|
2021 |
|
|
7,380,000 |
|
|
1,620,000 |
|
2022 |
|
|
7,380,000 |
|
|
1,620,000 |
|
|
|
|
|
|
|
|
1 Includes $100,000 each year payable to various horsemen associations
The amounts earned from the marketing payments are recorded as a component of other revenue and the related expenses are recorded as a component of advertising and marketing expense and depreciation in the Company’s condensed consolidated statements of operations. For the three months ended March 31, 2020, the Company recorded $68,000 in other revenue, incurred $30,000 in advertising and marketing expense, and incurred $38,000 in depreciation related to the SMSC marketing funds. For the three months ended March 31, 2019, the Company recorded $75,000 in other revenue and incurred $18,000 in advertising and marketing expense and $57,000 in depreciation related to the SMSC marketing funds.
Under the CMA, the Company agreed for the term of the CMA, which is currently scheduled to terminate on December 31, 2022, that it would not promote or lobby the Minnesota legislature for expanded gambling authority and will support the SMSC’s lobbying efforts against expanding gambling authority.
8. REAL ESTATE DEVELOPMENT
Equity Investment
On April 2, 2018, the Company’s subsidiary Canterbury Development LLC, entered into an Operating Agreement (“Operating Agreement”) with an affiliate of Doran Companies (“Doran”), a national commercial and residential real estate developer, as the two members of a Minnesota limited liability company named Doran Canterbury I, LLC (Doran Canterbury I). Doran Canterbury I was formed as part of a joint venture between Doran and Canterbury Development LLC to construct an upscale apartment complex on land adjacent to the Company’s Racetrack (the “Project”). Doran Canterbury I is developing Phase I of the Project, which will include approximately 300 units, a heated parking ramp, and a clubhouse.
On September 27, 2018, Canterbury Development LLC contributed approximately 13 acres of land as its equity contribution in the Doran Canterbury I joint venture and became a 27.4% equity member. On December 20, 2018, financing for Doran Canterbury I was secured. As the Company is able to assert significant influence, but not control, over Doran Canterbury I’s operational and financial policies, the Company accounts for the joint venture as an equity method investment.
In connection with the execution of the Amended Doran Canterbury I Agreement, on August 18, 2018, Canterbury Development LLC entered into an Operating Agreement with Doran Shakopee, LLC as the two members of a Minnesota limited liability company entitled Doran Canterbury II, LLC (“Doran Canterbury II”). Under the Doran Canterbury II Operating Agreement, Doran Canterbury II will pursue development of Phase II of the Project, which is expected to begin upon rental stabilization of Phase I. Phase II will include an additional 300 apartment units. Canterbury Development’s equity contribution to Doran Canterbury II for Phase II will be approximately 10 acres of land. In connection with its contribution, Canterbury Development became a 27.4% equity member in Doran Canterbury II with Doran owning the remaining 72.6%.
13
Tax Increment Financing
On August 8, 2018, the City Council of the City of Shakopee, Minnesota approved a Contract for Private Redevelopment (“Redevelopment Agreement”) between the City of Shakopee Economic Development Authority (“Shakopee EDA”) and Canterbury Park Holding Corporation and its subsidiary Canterbury Development LLC in connection with a Tax Increment Financing District (“TIF District”) that the City had approved in April 2018. The City of Shakopee, the Shakopee EDA and the Company entered into the Redevelopment Agreement on August 10, 2018.
Under the Redevelopment Agreement, the Company has agreed to undertake a number of specific infrastructure improvements within the TIF District, including the development of public streets, utilities, sidewalks, and other public infrastructure. More specifically, the Company is obligated to construct improvements on Shenandoah Drive and Barenscheer Boulevard with these improvements required to be substantially complete on or before December 31, 2019 and December 31, 2020, respectively. As of December 31, 2019, improvements to Shenandoah Drive were substantially complete.
Under the Redevelopment Agreement, the City of Shakopee has agreed that a portion of the tax increment revenue generated from the developed property will be paid to the Company to reimburse it for its expense in constructing infrastructure improvements. The total estimated cost of TIF eligible improvements to be borne by the Company is $23,336,500. A detailed Schedule of the Public Improvements under the Redevelopment Agreement, the timeline for their construction and the source and amount of funding is set forth on Exhibit C of the Redevelopment Agreement, which was filed as Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended March 31, 2018. The total amount of funding that Canterbury will be paid as reimbursement under the TIF program for these improvements is not guaranteed, however, and will depend on future tax revenues generated from the developed property. As of March 31, 2020, the Company recorded a TIF receivable of $9,857,000, which represents $9,580,000 of principal and $277,000 of interest.
The Company expects to finance its improvements under the Redevelopment Agreement with funds from its current operating resources and existing credit facility and, potentially, third-party financing sources.
Purchase and Sale Agreement
On March 13, 2020, the Company entered into an agreement to sell approximately 12 acres of land on the East side of the Racetrack to a third party for total consideration of approximately $2.5 million. Closing is subject to the satisfaction of certain customary conditions. The Company expects the transaction to close in 2020.
9. LEASES
The Company determines if an arrangement is a lease or contains a lease at inception. The Company leases certain office equipment under finance leases. We also lease equipment related to our horse racing operations under operating leases. For lease accounting purposes, we do not separate lease and nonlease components, nor do we record operating or finance lease assets and liabilities for short term leases.
As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date to determine the present value of lease payments. We recognize expense for operating leases on a straight-line basis over the lease term. The Company’s lease agreements do not contain any variable lease payments, material residual value guarantees or any restrictive covenants.
Lease costs related to operating leases were $2,031 and $2,127 for the three months ended March 31, 2020 and 2019, respectively. The total lease expenses for leases with a term of twelve months or less for which the Company elected
14
not to recognize a lease asset or liability was $80,680 and $116,691 for the three months ended March 31, 2020 and 2019, respectively.
Lease costs included in depreciation and amortization related to our finance leases were $5,949 for the three months ended March 31, 2020 and 2019. Interest expense related to our finance leases was immaterial.
The following table shows the classification of the right of use assets on our consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
||||
|
|
|
Balance Sheet Location |
|
2020 |
|
2019 |
||
|
Assets |
|
|
|
|
|
|
|
|
|
Finance |
|
Land, buildings and equipment, net (1) |
|
$ |
90,273 |
|
$ |
$ 115,254 |
|
Operating |
|
Operating lease right-of-use assets |
|
|
72,911 |
|
|
13,074 |
|
Total Leased Assets |
|
|
|
$ |
163,184 |
|
$ |
$ 128,328 |
1 – Finance lease assets are net of accumulated amortization of $29,744 and $5,949 as of March 31, 2020 and 2019, respectively.
The following table shows the lease terms and discount rates related to our leases:
|
|
|
|
|
|
|
Three Months Ended March 31, |
||
|
|
2020 |
|
2019 |
|
Weighted average remaining lease term (in years): |
|
|
|
|
Finance |
3.4 |
|
4.5 |
|
Operating |
1.2 |
|
1.8 |
|
Weighted average discount rate (%): |
|
|
|
|
Finance |
5.0% |
|
5.0% |
|
Operating |
5.5% |
|
5.0% |
The maturity of operating leases and finance leases as of March 31, 2020 are as follows:
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020 |
|
Operating leases |
|
Finance leases |
||
|
2020 remaining |
|
$ |
29,315 |
|
$ |
21,557 |
|
2021 |
|
|
23,100 |
|
|
28,743 |
|
2022 |
|
|
23,100 |
|
|
28,743 |
|
2023 |
|
|
— |
|
|
19,332 |
|
Total minimum lease obligations |
|
|
75,515 |
|
|
98,375 |
|
Less: amounts representing interest |
|
|
(2,604) |
|
|
(8,102) |
|
Present value of minimum lease payments |
|
|
72,911 |
|
|
90,273 |
|
Less: current portion |
|
|
(27,855) |
|
|
(24,807) |
|
Lease obligations, net of current portion |
|
$ |
45,056 |
|
$ |
65,466 |
10. RELATED PARTY RECEIVABLES
On December 20, 2018, the Company entered into a loan agreement with Doran Family Holdings, which is the controlling partner in the Doran Canterbury I joint venture. The Company loaned Doran Family Holdings $2,910,000 net of loan origination fees, and received a promissory note totaling $2,940,000 bearing interest at 5%. The note will mature at the earliest of (i) the date of closing by Doran Canterbury II, LLC on Phase II Project Financing; (ii) the closing on any purchase of the Phase II Land by Doran Shakopee, LLC pursuant to its option under Section 3.9(a) of the Doran Canterbury II Operating Agreement; (iii) the date of final determination that the Phase II Project will not
15
be developed by Doran Canterbury II, LLC; or (iv) three (3) years following the date of the note. Management believes no allowance for doubtful accounts is necessary.
In 2018, the Company incurred $268,000 of costs for preliminary grading work on parcels of land the Company has designated for Doran Canterbury II. The Company will be fully reimbursed for these costs upon the commencement of the Doran Canterbury II project and thus, recorded the amount as a receivable. Although there is a possibility Doran Canterbury II will not materialize, the Company currently believes this likelihood is remote.
In 2019, the Company loaned money to the Doran Canterbury I joint venture in two separate loans in the amounts of $178,100 and $137,000, respectively. These member loans bear interest at the rate equal to the Prime Rate plus two percent per annum. The Company expects to be fully reimbursed for these member loans when the joint venture achieves positive cash flow.
11. SUBSEQUENT EVENTS
As part of its development efforts, the Company has recently entered into two real estate purchase and sale agreements.
On April 7, 2020, the Company entered into an agreement to sell approximately 11.3 acres of land on the West side of the Racetrack to a third party for total consideration of approximately $2,400,000. Closing is subject to the satisfaction of certain customary conditions. The Company expects the transaction to close in 2020.
On April 15, 2020, the Company entered into an agreement to sell approximately 2.4 acres of land on the West side of the Racetrack to a third party for total consideration of approximately $1,100,000. Closing is subject to the satisfaction of certain customary conditions. The Company expects the transaction to close in 2020.
16
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand Canterbury Park Holding Corporation, our operations, our financial results and financial condition and our present business environment. This MD&A is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and the accompanying notes to the financial statements (the “Notes”).
Overview:
Canterbury Park Holding Corporation (the “Company,” “we,” “our,” or “us”) conducts pari-mutuel wagering operations and hosts “unbanked” card games at its Canterbury Park Racetrack and Card Casino facility (the “Racetrack”) in Shakopee, Minnesota, which is approximately 25 miles southwest of downtown Minneapolis. The Racetrack is the only facility in the State of Minnesota that offers live pari-mutuel thoroughbred and quarter horse racing.
The Company’s pari-mutuel wagering operations include both wagering on thoroughbred and quarter horse races during live meets at the Racetrack each year from May through March, and year-round wagering on races held at out-of-state racetracks that are televised simultaneously at the Racetrack (“simulcasting”). Unbanked card games, in which patrons compete against each other, are hosted in the Card Casino at the Racetrack. The Card Casino typically operates 24 hours a day, seven days a week. The Card Casino offers both poker and table games at up to 80 tables. The Company also derives revenues from related services and activities, such as concessions, parking, advertising signage, publication sales, and from other entertainment events and activities held at the Racetrack.
COVID-19 Pandemic:
In January 2020, an outbreak of a respiratory illness caused by a new strain of coronavirus was identified. The disease has since spread rapidly across the world, causing the World Health Organization to declare the outbreak a pandemic (the “COVID-19 Pandemic”) on March 12, 2020. Since that time, measures have been taken to limit the impact of COVID-19, including shelter-in-place orders, social distancing measures, travel bans and restrictions, and business and government shutdowns.
On March 16, 2020, the Company announced that, based on the advice of Minnesota state and regulatory bodies, it was temporarily suspending all card casino, simulcast, and special events operations at Canterbury Park in response to concerns about the COVID-19 Pandemic. Canterbury Park determined this voluntary suspension of activities was in the best interest of the health and safety of its guests and team members and would provide the Company an opportunity to review and update operational best practices and strategies based on what was currently known about this public health situation and future developments.
Despite a strong start to the year, the disruptions arising from the COVID-19 Pandemic had a significant impact on the Company's financial condition and operations during the three months ended March 31, 2020. The duration and intensity of this global health emergency and related disruptions is uncertain. Given the dynamic nature of these circumstances, the impact on the Company’s consolidated results of operations, cash flows and financial condition in 2020 will be material, but cannot be reasonably estimated at this time as it is unknown when the COVID-19 Pandemic will end, when or how quickly the current travel restrictions will be modified or cease to be necessary and the resulting impact on the Company’s business and the willingness of customers to spend on entertainment.
We are mitigating negative impacts to our operating results by taking signification actions, as discussed below.
On April 1, 2020, as a result of the temporary closures and suspended operations described above, the Company announced that all Canterbury Park employees, except for a limited number of key personnel required for basic ongoing maintenance, security and management needs, were being placed on an unpaid furlough. The Company has continued to pay the employer share of health, dental, vison and life insurance for these furloughed employees. The Company also implemented a salary reduction for all remaining non-furloughed employees based on a combination of the employee’s
17
salary and the employee’s responsibilities during the temporary shutdown. The Company expects these salary reductions to remain in effect until the Company’s business operations begin to return to normal.
On March 16, 2020, the Company announced that the Company’s Board of Directors suspended its quarterly cash dividend until the Company’s business operations return to normal.
Other additional measures taken by the Company include postponing non-essential capital expenditures, reducing operating costs, and substantially reducing discretionary spending.
These countermeasures are expected to partially mitigate the impacts of the COVID-19 Pandemic on our full year 2020 financial results. The Company has a strong consolidated balance sheet with no long-term debt and an $8 million credit line that is anticipated to provide the Company with the necessary liquidity and financial flexibility to manage through this challenging operating environment. Additionally, as mentioned in notes 8 and 11 of the Notes to Financial Statements, the Company expects to close on three land sales in 2020, which would generate a substantial cash inflow for the Company.
As the impact of the COVID-19 Pandemic on the economy and our operations evolves, we will continue to assess the impact on the Company and respond accordingly.
Operations Review for the Three Months Ended March 31, 2020:
EBITDA
EBITDA represents earnings before interest, income tax expense, and depreciation and amortization. EBITDA is not a measure of performance or liquidity calculated in accordance with generally accepted accounting principles in the United States of America (“GAAP”), and should not be considered an alternative to, or more meaningful than, net income as an indicator of our operating performance or cash flows from operating activities as a measure of liquidity. EBITDA is presented as a supplemental disclosure because it is a widely used measure of performance and a basis for valuation of companies in our industry. Moreover, other companies that provide EBITDA information may calculate EBITDA differently than we do. Adjusted EBITDA reflects additional adjustments to net income to eliminate unusual items. For the three months ended March 31, 2020 and 2019, adjusted EBITDA excluded the loss on disposal of assets.
The following table sets forth a reconciliation of net income, a GAAP financial measure, to EBITDA and to adjusted EBITDA (defined above) which are non-GAAP financial measures, for the three months ended March 31, 2020 and 2019:
Summary of EBITDA Data
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
||||
|
|
|
2020 |
|
2019 |
|
||
|
NET INCOME |
|
$ |
255,221 |
|
$ |
56,572 |
|
|
Interest income, net |
|
|
(163,690) |
|
|
(63,240) |
|
|
Income tax (benefit) expense |
|
|
50,164 |
|
|
(16,093) |
|
|
Depreciation |
|
|
716,853 |
|
|
625,520 |
|
|
EBITDA |
|
|
858,548 |
|
|
602,759 |
|
|
Loss on disposal of assets |
|
|
— |
|
|
113,437 |
|
|
ADJUSTED EBITDA |
|
$ |
858,548 |
|
$ |
716,196 |
|
Adjusted EBITDA increased $142,000, or 19.9%, and increased as a percentage of net revenues to 7.8% from 6.2% for the three months ended March 31, 2020 as compared to the same period in 2019. The increase is primarily due to a reduction in operating expenses compared to the same period in 2019.
18
Revenues:
Total net revenues for the three months ended March 31, 2020 were $10,949,000, a decrease of $642,000, or 5.5%, compared to total net revenues of $11,591,000 for the three months ended March 31, 2019. This decrease consists of decreases in pari-mutuel, card casino, and food and beverages revenue of 13.1%, 4.3%, and 17.3%, respectively, slightly offset by an increase in other revenue of 14.8%. The decreases were driven by the COVID-19 Pandemic, which resulted in a temporary shutdown of operations effective March 16, 2020. See below for a further discussion of our sources of revenues.
Pari-Mutuel Data Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
||||
|
|
|
2020 |
|
2019 |
|
||
|
Simulcast |
|
$ |
1,015,000 |
|
$ |
1,217,000 |
|
|
Other revenue |
|
|
281,000 |
|
|
274,000 |
|
|
Total Pari-Mutuel Revenue |
|
$ |
1,296,000 |
|
$ |
1,491,000 |
|
|
|
|
|
|
|
|
|
|
Total pari-mutuel revenue decreased $195,000, or 13.1%, for the three months ended March 31, 2020 compared to the same period in 2019. The decrease is primarily due to the COVID-19 Pandemic described above, as pari-mutuel revenue was relatively flat for the first two months of 2020 compared to the same period in 2019.
Card Casino Revenue:
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
||||
|
|
2020 |
|
2019 |
|
||
|
Poker Games |
$ |
1,657,000 |
|
$ |
1,930,000 |
|
|
Table Games |
|
5,076,000 |
|
|
5,197,000 |
|
|
Total Collection Revenue |
|
6,733,000 |
|
|
7,127,000 |
|
|
Other Poker Revenue |
|
483,841 |
|
|
427,235 |
|
|
Other Table Games Revenue |
|
344,159 |
|
|
345,765 |
|
|
Total Card Casino Revenue |
$ |
7,561,000 |
|
$ |
7,900,000 |
|
The primary source of Card Casino revenue is a percentage of the wagers received from players as compensation for providing the Card Casino facility and services, which is referred to as “collection revenue.” Other Revenue presented above includes fees collected for the administration of tournaments, amounts earned as reimbursement of the administrative costs of maintaining jackpot funds, and amounts related to the outstanding chip liability that we expect will not be redeemed in the future.
As indicated by the table above, total Card Casino revenue decreased $339,000, or 4.3%, for the three months ended March 31, 2020, compared to the same period in 2019. The Company had increased growth in table games and poker revenue in the first two months of the 2020 first quarter compared to the same period in 2019, however, these increases were offset by a substantial revenue decrease in March 2020 due to the COVID-19 Pandemic described above.
Food and Beverage Revenue:
Food and beverage revenue decreased $234,000, or 17.3%, for the three months ended March 31, 2020 compared to the same period in 2019. The Company had increased growth in food and beverage revenues in the first two months of the 2020 first quarter compared to the same period in 2019; however, this increase was offset by a substantial revenue decrease in March 2020 due to the COVID-19 Pandemic described above.
19
Other Revenue:
Other revenue increased $126,000, or 14.8%, for the three months ended March 31, 2020 compared to the same period in 2019. The increase is primarily due to an increase in space rental revenue and other operating revenues.
Operating Expenses:
Total operating expenses decreased $806,000, or 6.9%, for the three months ended March 31, 2020 compared to the same period in 2019. The following paragraphs provide further detail regarding certain operating expenses.
Purse expense decreased $292,000, or 20.9% for the three months ended March 31, 2020 compared to the same period in 2019. The decrease is due to lower pari-mutuel and Card Casino revenues, as well as a change in the purse payment structure related to changes in our horsemen contract for 2019.
Salaries and benefits decreased $167,000, or 2.9%, for the three months ended March 31, 2020, compared to the same period in 2019. The decrease is partially due to a decrease in expenses related to our bonus plans, as these have been temporarily suspended as a result of the COVID-19 Pandemic. Additionally, labor costs were unusually high in the 2019 first quarter as a result of inefficiencies caused by the Card Casino construction in January and February and re-opening in March 2019.
Other operating expenses decreased $156,000, or 13.6%, for the three months ended March 31, 2020, compared to the same period in 2019. The decrease is primarily due to timing as well the Company delaying certain expenditures as a result of the COVID-19 Pandemic.
During the three months ended March 31, 2019, the Company recorded a loss on disposal of assets totaling $113,000. This primarily related to a write-off of assets disposed of in remodeling our Card Casino in 2019.
Net income for the three months ended March 31, 2020 and 2019 was $255,000 and $57,000, respectively.
Contingencies:
The Company entered into a Cooperative Marketing Agreement (the “CMA”) with the Shakopee Mdewakanton Sioux Community, which became effective on March 4, 2012, and was amended in the respective first quarters of 2015, 2016, 2017, and 2018, and will expire December 31, 2022. The CMA contains specific covenants that, if breached, would trigger an obligation to repay a specified amount related to these covenants. At this time, management believes that the likelihood that the breach of a covenant would occur and that the Company would be required to pay the specified amount related to a covenant is remote.
The Company continues to analyze the feasibility of various options related to the development of our underutilized land. The Company may incur substantial costs during the feasibility and predevelopment process, but the Company believes available funds are sufficient to cover the near-term costs. See Liquidity and Capital Resources for more information on liquidity and capital resource requirements.
Liquidity and Capital Resources:
The Company has a general credit and security agreement with a financial institution, which provides a revolving credit line up to $8,000,000 and allows for letters of credit in the aggregate amount of up to $2,000,000 to be issued under the credit agreement. The line of credit is collateralized by all receivables, inventory, equipment, and general intangibles of the Company. This agreement was amended as of September 30, 2019 to extend the maturity date to September 30, 2020. As of March 31, 2020, the outstanding balance on the line of credit was $0.
20
The Company’s cash, cash equivalents, and restricted cash balance at March 31, 2020 was $3,081,000 compared to $3,927,000 as of December 31, 2019. The Company believes that unrestricted funds available in its cash accounts, amounts available under its revolving line of credit, along with funds generated from operations and future land sales, will be sufficient to satisfy its liquidity and capital resource requirements for regular operations, as well as its planned development expenses during 2020. However, if the Company engages in any additional significant real estate development, additional financing would more than likely be required.
Given its number of employees and the nature of its primary operations, the Company does not currently qualify for any of the federal lending assistance offered by the CARES Act that was passed in late March and April 2020, including the Paycheck Protection Program or other CARES Acts small business lending programs.
Operating Activities
Net cash provided by operating activities for the three months ended March 31, 2020 was $351,000 primarily as a result of the following: The Company reported net income of $255,000, depreciation of $717,000, and stock-based compensation and 401(k) match totaling $219,000. The Company also experienced an increase in accounts payable of $961,000. This was partially offset by a decrease in accrued wages and payroll taxes of $1,400,000 and card casino accruals of $512,000.
Net cash provided by operating activities for the three months ended March 31, 2019 was $1,461,000 primarily as a result of the following: The Company reported net income of $57,000, which included a loss on disposal of assets of $113,000. Cash from operating activities was increased by noncash charges from depreciation of $626,000 and stock-based compensation and 401(k) match totaling $206,000. The Company also experienced an increase in accounts payable of $303,000, card casino accruals of $417,000, and a decrease in income taxes receivable of $357,000. This was partially offset by a decrease in accrued wages and payroll taxes of $889,000.
Investing Activities
Net cash used in investing activities for the first three months of 2020 and 2019 was $871,000 and $4,801,000, respectively, primarily for additions to land, buildings, and equipment and additions for TIF eligible improvements.
Financing Activities
Net cash used in financing activities during the first three months of 2020 and 2019 was $326,000 and $228,000, primarily due to cash dividends paid to shareholders, partially offset by proceeds from the issuance of common stock.
Critical Accounting Policies and Estimates:
The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We base our assumptions, estimates, and judgments on historical experience, current trends, and other factors that management believes to be relevant at the time the consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates, and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.
Our significant accounting policies are included in Note 2 to our consolidated financial statements in our 2019 Annual Report on Form 10‑K. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.
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Property and Equipment - We have significant capital invested in our property and equipment, which represents 68.0% of our total assets at March 31, 2020. We use our judgment in various ways including: determining whether an expenditure is considered a maintenance expense or a capital asset; determining the estimated useful lives of assets; and determining if or when an asset has been impaired or has been disposed. Management periodically reviews the carrying value of property and equipment for potential impairment by comparing the carrying value of these assets with their related expected undiscounted future net cash flows. If the sum of the related expected future net cash flows is less than the carrying value, management would determine how much of an impairment loss would be measured by the amount by which the carrying value of the asset exceeds the fair value of the asset. We have determined that no impairment of these assets exists at March 31, 2020.
Stock-Based Compensation – Accounting guidance requires measurement of services provided in exchange for a share-based payment based on the grant date fair market value. We use our judgment in determining the assumptions used to determine the fair value of equity instruments granted using a Black-Scholes model. The Company also grants Long Term Incentive Awards under the Long Term Incentive Plan (the “LTI Plan”) under which Company executive officers and other senior executives have the opportunity to receive a payout of shares of the Company’s common stock at the end of a three-year period. Management must make a number of assumptions to estimate future results to determine the compensation expense of the LTI Plan. As a result of the COVID-19 Pandemic, the Company has temporarily suspended its LTI Plan until there is more certainty about the Company’s reopening and future operations.
Commitments and Contractual Obligations:
The Company entered into the CMA with the SMSC on June 4, 2012, that was amended in January 2015, 2016, 2017, and March 2018 and expires December 31, 2022. See “Cooperative Marketing Agreement” below.
Legislation:
Minimum Wage Legislation
In 2014, Minnesota legislation enacted into law an increase in the minimum wage that must be paid to most Company employees. Beginning January 1, 2018, the minimum wage was set to increase at the beginning of each year by the rate of inflation with a maximum increase of up to 2.5% per year. The minimum wage for 2020 is $10.00 per hour. Prior to August 1, 2014, the Company employed a large number of individuals who received an hourly wage equal to or slightly above $7.25 per hour. As a result, this legislation had an adverse financial impact on the Company in 2014 through 2019, and will continue to have an adverse impact on the Company. We have implemented measures to partially mitigate the impact of this increase by raising our prices and reducing our employee count. These measures could themselves have an adverse effect because higher prices and diminished service levels may discourage customers from visiting the Racetrack.
Cooperative Marketing Agreement:
On June 4, 2012, the Company entered into the CMA with the SMSC. The primary purpose of the CMA is to increase purses paid during live horse racing at Canterbury Park’s Racetrack in order to strengthen Minnesota’s thoroughbred and quarter horse industry. Under the CMA, as amended, this is achieved through “Purse Enhancement Payments to Horsemen” paid directly to the MHBPA. These payments have no direct impact on the Company’s consolidated financial statements or operations.
Under the terms of the CMA, as amended, the SMSC made a payment of $7.4 million during the first three months of 2019, primarily for purse enhancements for the live race meet. As of the date of this filing, the SMSC has not made a payment for the 2020 live race meet.
Under the CMA, as amended, SMSC also agreed to make “Marketing Payments” to the Company relating to joint marketing efforts for the mutual benefit of the Company and SMSC, including signage, joint promotions, player benefits and events.
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In each of the respective first quarters of 2015, 2016, 2017, and 2018, the CMA was amended to adjust the payment amounts between the “Purse Enhancement Payments to Horsemen” and “Marketing Payments to Canterbury Park.” SMSC is currently obligated to make the following purse enhancement and marketing payments for 2020 through 2022:
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Purse Enhancement Payments to |
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Marketing Payments to |
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Canterbury Park |
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2021 |
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7,380,000 |
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1,620,000 |
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7,380,000 |
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1,620,000 |
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1 Includes $100,000 each year payable to various horsemen associations
The amounts earned from the marketing payments are recorded as a component of other revenue and the related expenses are recorded as a component of advertising and marketing expense and depreciation in the Company’s condensed consolidated statements of operations. For the three months ended March 31, 2020, the Company recorded $68,000 in other revenue, incurred $30,000 in advertising and marketing expense, and incurred $38,000 in depreciation related to the SMSC marketing funds. For the three months ended March 31, 2019, the Company recorded $75,000 in other revenue and incurred $18,000 in advertising and marketing expense and $57,000 in depreciation related to the SMSC marketing funds.
Under the CMA, the Company has agreed for the 10‑year term of the CMA expiring December 31, 2022 that it will not promote or lobby the Minnesota legislature for expanded gambling authority and will support the SMSC’s lobbying efforts against expanding gambling authority.
Redevelopment Agreement:
As mentioned above in note 8 of Notes to Financial Statements, on August 10, 2018, the City of Shakopee, the City of Shakopee Economic Development Authority, and the Company entered into a Redevelopment Agreement in connection with a Tax Increment Financing District (“TIF District”) that the City had approved in April 2018. Under the Redevelopment Agreement, the Company has agreed to undertake a number of specific infrastructure improvements within the TIF District, including the development of public streets, utilities, sidewalks, and other public infrastructure and the City of Shakopee agreed that a portion of the tax revenue generated from the developed property will be paid to the Company to reimburse it for its expense in constructing these improvements. The Company expects to finance its improvements under the Redevelopment Agreement with funds from its current operating resources and existing credit facility and, potentially, third-party financing sources.
Forward-Looking Statements:
From time-to-time, in reports filed with the Securities and Exchange Commission, in press releases, and in other communications to shareholders or the investing public, we may make forward-looking statements concerning possible or anticipated future financial performance, prospective business activities or plans that are typically preceded by words such as “believes,” “expects,” “anticipates,” “intends” or similar expressions. For these forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in federal securities laws. Shareholders and the investing public should understand that these forward-looking statements are subject to risks and uncertainties that could affect our actual results and cause actual results to differ materially from those indicated in the forward-looking statements. These risks and uncertainties include, but are not limited to:
material fluctuations in attendance at the Racetrack;
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any short-term or long-term effect that the COVID-19 Pandemic may have on the economy generally, or us as an entertainment venue, including reluctance from customers to visit our Racetrack or Card Casino or social distancing measures that we may voluntarily take that would limit attendance at our facilities; |
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the fact that we are currently unsure when we can reopen or commence live racing; |
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decline in interest in wagering on horse races at the Racetrack, at other tracks, or on unbanked card games offered at the Card Casino;
competition from other venues offering unbanked card games or other forms of wagering;
greater-than-anticipated expenses or a lower-than-anticipated return on the development of our underutilized land, including our joint venture to develop a luxury apartment complex;
competition from other sports and entertainment options;
increases in compensation and employee benefit costs;
increases in the percentage of revenues allocated for purse fund payments;
higher-than-expected expenses related to new marketing initiatives;
the impact of wagering products and technologies introduced by competitors;
legislative and regulatory decisions and changes, including decision or actions related to sports betting that would adversely affect our betting environment;
any legal, judicial, legislative or regulatory action or event that would adversely affect our ten-year Cooperative Marketing Agreement with the Shakopee Mdewakanton Sioux Community, which enhances the purses for daily racing at Canterbury Park and supports cooperative marketing programs for the two organizations, benefiting the stability and quality of live horse racing;
the fact that under the Redevelopment Agreement with the City of Shakopee, the Company has agreed to undertake a number of specific infrastructure improvements within the TIF District, and the amounts that Canterbury Park will be paid as reimbursement under the TIF program for these improvements is not guaranteed, but will depend in part on future tax revenues generated from the developed property;
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the success of the Company’s Canterbury Commons real estate development, including our reliance upon our joint venture partner Doran Companies to construct and profitably operate the upscale apartment complex; |
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the fact that 2019 first quarter construction activity in our Card Casino resulted in a decline in Card Casino revenues and any future construction activity may result in similar decline; |
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the fact the infrastructure improvements that we are making pursuant to the Redevelopment Agreement with the City of Shakopee together with improvements we are making to our parking facilities may disrupt traffic flow in a manner that discourages our customers from visiting our facilities, thereby affecting our revenue and profitability; |
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our ability to develop and maintain high-quality food and beverage offerings that we can market and sell to our Racetrack and Card Casino patrons, as well as future residents of the new Triple Crown Apartments at Canterbury that are being developed by the Doran–Canterbury joint ventures; |
the general health of the gaming sector; and
other factors that are beyond our ability to control or predict.
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ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Note applicable.
ITEM 4: CONTROLS AND PROCEDURES
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(a) |
Evaluation of Disclosure Controls and Procedures: |
The Company’s President and Chief Executive Officer, Randall D. Sampson and Chief Financial Officer, Randy J. Dehmer, have reviewed the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based upon this review, these officers have concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that the Company files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that the disclosure controls are also effective to ensure that information required to be disclosed in the Company’s Exchange Act reports is accumulated and communicated to management, including the chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.
(b) Changes in Internal Control over Financial Reporting:
There have been no significant changes in our internal control over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) that occurred during our fiscal quarter ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II
Not Applicable.
There have been no changes to the Risk Factors listed in the Form 10-K for the year ended December 31, 2019.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a)Not Applicable.
(b)Not Applicable.
(c)On December 17, 2007, the Company’s Board of Directors adopted a plan that authorized the repurchase of up to 250,000 shares of the Company’s common stock pursuant to Exchange Act Rule 10b‑18 in open market transactions, block purchases of privately negotiated transactions (the “2008 Stock Repurchase Plan”). From its adoption until August 13, 2012, the Company repurchased 216,543 shares under the 2008 Stock Repurchase Plan and, on that date, authorized the repurchase of an additional 100,000 shares of the Company’s common stock. The Company did not repurchase any shares during the first quarter of 2020. The maximum number of shares that may yet be purchased under the above authorizations is 128,781 as of March 31, 2020.
Item 3. Defaults upon Senior Securities
Not Applicable.
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3.1 |
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Bylaws of Canterbury Park Holding Corporation, as amended April 17, 2020. |
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31.1 |
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Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). |
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99.1 |
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Press Release dated May 12, 2020 announcing 2020 First Quarter Results. |
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101 |
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The following financial information from Canterbury Park Holding Corporation’s Quarterly Report on Form 10‑Q for the quarterly period ended March 31, 2020, formatted in eXtensible Business Reporting Language XBRL: (i) Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019, (ii) Condensed Consolidated Statements of Operations for the Three Months ended March 31, 2020 and March 31, 2019, (iii) Condensed Consolidated Statements of Stockholders’ Equity for the Three Months ended March 31, 2020 and March 31, 2019, (iv) Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 2020 and March 31, 2019, and (v) Notes to Financial Statements. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Canterbury Park Holding Corporation |
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Dated: May 13, 2020 |
/s/ Randall D. Sampson |
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Randall D. Sampson, |
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Executive Chairman, President, and Chief Executive Officer |
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Dated: May 13, 2020 |
/s/ Randy J. Dehmer |
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Randy J. Dehmer, Chief Financial Officer |
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Exhibit 3.1
BYLAWS
OF
CANTERBURY PARK HOLDING CORPORATION
(As amended, April 17, 2020)
ARTICLE I
OFFICES AND CORPORATE SEAL
Section 1.01. Registered and Other Offices. The registered office of the corporation in Minnesota shall be that set forth in the Articles of Incorporation or statement of the Board of Directors filed with the Secretary of State of Minnesota changing the registered office in the manner prescribed by law. The corporation may have such other offices, within or without the state of Minnesota, as the Board of Directors shall, from time to time, determine.
Section 1.02. Corporate Seal. If so directed by the Board of Directors, the corporation may use a corporate seal. The failure to use such seal, however, shall not affect the validity of any documents executed on behalf of the corporation. The seal need only include the word "seal," but it may also include, at the discretion of the Board, such additional wording as is permitted by law.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 2.01. Time and Place of Meetings. An annual meeting of shareholders may be held in the year of the corporation's formation and shall be held following the conclusion of each fiscal year of the corporation at such time and place, within or without the state of Minnesota, as may be designated by the Board of Directors and, in the absence of such designation, shall be held at the registered office of the corporation in the state of Minnesota.
Section 2.02. Annual Meetings. At any annual meeting of the shareholders there shall be an election of qualified successors for directors whose terms have expired at such annual meeting. Subject to Section 2.09 below, any business appropriate for action by the shareholders may be transacted at an annual meeting. No meeting shall be considered an annual meeting unless specifically designated as such in the notice of meeting.
Section 2.03. Special Meetings. A special meeting of the shareholders may be called at any time by the Chairman of the Board, the President, the Treasurer or the Board of Directors of this corporation, and shall be called by the Secretary upon the request in writing by two or more members of the Board of Directors, or upon the request in writing of a shareholder or shareholders holding ten percent or more of the voting power of all shares entitled to vote, except that a special meeting for the purpose of considering any action to directly or indirectly facilitate or effect a business combination, including any action to change or otherwise affect the composition of the board of directors for that purpose, must be called by 25 percent or more of the voting power of all shares entitled to vote. Such meeting shall be called in accordance with the provisions of Minnesota Statutes, Section 302A.433 by mailing a notice thereof pursuant to the provisions of Minnesota Statutes, Section 302A.435. Such notice shall state the time, place, and purpose of the meeting and the business transacted at all special meetings shall be confined
to the purpose stated in the call, unless all of the shareholders are present in person or by proxy and none of them objects to consideration of a particular item of business.
Section 2.04. Remote or Virtual Shareholder Meetings. The Board of Directors may determine that shareholders not physically present in person or by proxy at a regular or special shareholder meeting called pursuant to Section 2.02 or 2.03 of these Bylaws may, by means of remote communication, participate in a regular or special shareholder meeting held at a designated place. The Board of Directors also may determine that any regular or special meeting of the shareholders will not be held at a physical place, but instead solely by means of remote communication, so long as the corporation implements reasonable measures to provide that each shareholder participating by remote means communication has a reasonable opportunity to participate in the meeting in accordance with the provisions of Section 302A.436, subdivision 5, of the Minnesota Business Corporation Act (the “MBCA”) as amended from time to time, or any successor statute. Participation by remote communication constitutes presence at the meeting.
Section 2.05. Quorum; Adjourned Meetings. The holders of a majority of the voting power of the shares entitled to vote at a meeting constitute a quorum for the transaction of business; said holders may be present at the meeting either in person or by proxy. If a quorum is present when a duly called or held meeting is convened, the shareholders present may continue to transact business until adjournment, even though withdrawal of shareholders originally present leaves less than the proportion or number otherwise required for a quorum. In case a quorum shall not be present in person or by proxy at a meeting, those present in person or by proxy may adjourn to such day as they shall, by majority vote, agree upon, and a notice of such adjournment shall be mailed to each shareholder entitled to vote at least five (5) days before such adjourned meeting. If a quorum is present in person or by proxy, a meeting may be adjourned from time to time without notice, other than announcement at the meeting. At adjourned meetings at which a quorum is present in person or by proxy, any business may be transacted at the meeting as originally noticed.
Section 2.06. Voting. At each meeting of the shareholders, every shareholder having the right to vote shall be entitled to vote either in person or by proxy. Unless otherwise provided by the Articles of Incorporation or in a resolution of the Board of Directors filed with the Secretary of State, each shareholder shall have one vote for each share held. Upon demand of any shareholder the vote upon any question before the meeting shall be by ballot.
Section 2.07. Closing of Books. The Board of Directors may fix a time, not exceeding sixty (60) days preceding the date of any meeting of shareholders, as a record date for the determination of the shareholders entitled to notice of, and to vote at, such meeting, notwithstanding any transfer of shares on the books of the corporation after any record date so fixed. The Board of Directors may close the books of the corporation against the transfer of shares during the whole or any part of such period. If the Board of Directors fails to fix a record date for determination of the shareholders entitled to notice of, and to vote at, any meeting of shareholders, the record date shall be the twentieth (20th) day preceding the date of such meeting.
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Section 2.08. Notice of Meetings.
(a) Notice of Meetings. Subject to Section 2.08(b), notice of all meetings of shareholders shall be given to every holder of voting shares, except where the meeting is an adjourned meeting and the date, time and place of the meeting was announced at the time of adjournment. Except as provided in Section 2.03 hereof, the notice shall be given at least ten (10) days, but not more than sixty (60) days, before the date of the meeting, except that written notice of a meeting at which an agreement of merger or exchange is to be considered shall be given to all shareholders, whether entitled to vote or not, at least fourteen (14) days prior thereto.
(b) Electronic Notice. Notwithstanding the written notice requirement in Subsection 2.08(a) above, notice of any regular or special meeting may be given to a shareholder by means of electronic communication if the requirements of MBCA Section 302A.436, subdivision 5, as amended from time to time, are met. Notice to a shareholder is also effectively given if the notice is given to the shareholder in a manner permitted by the rules and regulations under the Securities Exchange Act of 1934, as amended, so long as the corporation has first received any written or implied consent required by those rules and regulations.
Section 2.09. Waiver of Notice. A shareholder may waive notice of any meeting of shareholders. A waiver of notice by a shareholder entitled to notice is effective whether given before, at or after the meeting and whether give orally or by attendance.
Section 2.10. Business to be Conducted at Annual Meetings. At the annual meeting, the shareholders shall elect directors of the corporation and shall transact such other business as may properly come before them. To be properly brought before the meeting, business must be of a nature that is appropriate for consideration at an annual meeting and must be (i) specified in the notice of meeting (or any supplement thereto) at the direction of the Board of Directors, (ii) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (iii) otherwise properly brought before the meeting by a shareholder (as defined in the Minnesota Business Corporation Act). In addition to any other applicable requirements, for matters to be properly brought before the annual meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the Secretary of the corporation. To be timely, each such notice must be given, either by personal delivery or delivery by United States mail, postage prepaid, addressed to the Secretary of the corporation at the registered office of the corporation, not less than 45 days nor more than 75 days prior to a meeting date corresponding to the previous year's annual meeting. Each such notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address of record of the shareholders proposing such business, (iii) the class or series (if any) and number of shares of the corporation which are owned by the shareholder, and (iv) any material interest of the shareholder in such business. Notwithstanding anything in these Bylaws to the contrary, no business shall be transacted at the annual meeting except in accordance with the procedures set forth in this Article; provided, however, that nothing in this Article shall be deemed to preclude discussion by any shareholder of any business properly brought before the annual meeting, in accordance with these Bylaws.
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ARTICLE III
DIRECTORS
Section 3.01. General Powers. The Board of Directors shall have the general management and control of all business and affairs of the corporation and shall exercise all the powers that may be exercised or performed by the corporation under Minnesota law and the Corporation's Articles of Incorporation and these Bylaws.
Section 3.02. Number and Classes of Directors. The Board of Directors of this corporation shall consist of one or more directors. The number of directors may be increased or, subject to Minnesota Statutes, Section 302A.223, decreased at any time by action of the Board of Directors. Each director shall serve until his or her successor shall have been duly elected and qualified, unless he or she shall retire, resign, die or be removed.
Section 3.03. Vacancies. Any vacancies occurring in the Board of Directors for any reason, and any newly created directorships resulting from an increase in the number of directors, may be filled by a majority of the directors then in office. Any directors so chosen shall hold office until the next election of directors and until their successors shall be elected and qualified, subject, however, to prior retirement, resignation, death or removal from office.
Section 3.04. Quorum. A majority of the directors then in office shall constitute a quorum for the transaction of business, and if at any meeting of the Board of Directors there shall be less than said quorum, a majority of those present may adjourn the meeting from time to time.
Section 3.05. Removal of Directors. Any director may be removed from office, with or without cause, only by the affirmative vote of the holders of at least two-thirds (2/3) of the voting power of the then outstanding shares of capital stock entitled to vote generally in the election of directors.
Section 3.06. Director Nominations. Subject to the rights of holders of any class or series of stock having a preference over the common shares as to dividends or upon liquidation, nominations for the election of directors may be made by the Board of Directors or a committee appointed by the Board of Directors or by any shareholder entitled to vote generally in the election of directors. However, any shareholder (as defined in the Minnesota Business Corporation Act) entitled to vote generally in the election of directors may nominate one or more persons for election as directors at the annual meeting only if written notice of such shareholder's intent to make such nomination or nominations has been given, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the corporation not less than 45 days nor more than 75 days prior to a meeting date corresponding to the previous year's annual meeting. Nominations by shareholders for election of one or more persons as directors at a special meeting shall be made by written notice in accordance with, but only to the extent permitted by Minnesota Statutes, Section 302A. Each such notice to the Secretary shall set forth: (i) the name and address of record of the shareholder who intends to make the nomination; (ii) a representation that the shareholder is a holder of record of shares of the corporation entitled to vote at such meeting and the person or persons specified in the notice; (iii) the name, age, business and residence addresses, and principal occupation or employment of each nominee; (iv) a description of all arrangements or understandings between the shareholder and each nominee
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and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; (v) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission; and (vi) the consent of each nominee to serve as a director of the corporation if so elected. The corporation may require any proposed nominee to furnish such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as a director of the corporation. Copies of any preliminary proxy materials or other filings with the Securities and Exchange Commission made by the nominating shareholder must be provided to the Secretary of the corporation concurrent with such filing. The presiding officer of the meeting may, if the facts warrant, determine that a nomination was not made in accordance with the foregoing procedure, and if he or she should so determine, it shall be so declared at the meeting and the defective nomination shall be disregarded.
Section 3.07. Regular Meetings. Regular meetings of the Board of Directors shall be held, without notice, at such time and place as shall from time to time be determined by the Board.
Section 3.08. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board or the President at any time and shall be called by him or her whenever requested to do so in writing by two or more members of the Board.
Section 3.09. Notice of Meetings. If the meeting is a regular meeting of the Board, or if the date and time of a Board meeting has been announced at a previous meeting, no notice is required. Otherwise, notice of a meeting of the Board of Directors shall be given by the Secretary who shall give at least twenty-four (24) hours' notice thereof to each director by mail, telephone, telegraph or in person. The notice need not state the purpose of the meeting.
Section 3.10. Waiver of Notice. Notice of any meeting of the Board of Directors may be waived by a director either before, at, or after such meeting in a writing signed by such director; provided, however, that a director, by his attendance and participation in any action taken at the meeting of the Board of Directors, shall be deemed to waive notice of such meeting.
Section 3.11. Committees of the Board. Except as otherwise provided in Article IV of these Bylaws, the Board of Directors may, in its discretion, by the affirmative vote of a majority of the Directors, appoint committees which shall have and may exercise such powers as shall be conferred or authorized by the resolutions appointing them. A majority of any such committee, if the committee be composed of more than two members, may determine its action and fix the time and place of its meetings, unless the Board of Directors shall otherwise provide. The Board of Directors shall have power at any time to fill vacancies in, to change the membership of, or to discharge any such committee.
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Section 3.12. Compensation of Directors. Directors who are not salaried officers of this corporation may receive any combination of a fixed sum per meeting attended, a fixed annual sum and/or such other compensation as may be determined, from time to time, by resolution of the Board of Directors. All directors may receive reimbursement of expenses, if any, for attendance at meetings of the Board of Directors or any committee thereof. Nothing herein contained shall be construed to preclude any director from serving this corporation in any other capacity and receiving compensation for such other service.
Section 3.13. Absent Directors. A director may give advance written consent or opposition to a proposal to be acted on at a Board of Directors' meeting.
Section 3.14. Authorization Without a Meeting. Any action required or permitted to be taken at a meeting of the Board or any committee may be taken without a meeting as authorized by law.
ARTICLE IV
EXECUTIVE COMMITTEE
The Board of Directors may by unanimous affirmative action of the entire Board designate two or more of their number to constitute an Executive Committee which, to the extent determined by unanimous affirmative action of the Board, shall have and exercise the authority of the Board in the management of the business of the corporation, but shall not have the power to amend these Bylaws. Such Executive Committee shall act only in the interval between meetings of the Board and shall be subject at all times to the control and direction of the Board. The Executive Committee may meet at stated times or on notice to all committee members given by any of their own number. Vacancies in the membership of the Executive Committee may be filled by the Board of Directors at a regular meeting or at a special meeting called for that purpose.
ARTICLE V
OFFICERS
Section 5.01. Number and Offices. The officers of the corporation shall consist of a President, Treasurer and Secretary and may also consist of one or more Vice Presidents (any one of whom may be designated an Executive Vice President or Senior Vice President in the discretion of the Board), one or more Assistant Secretaries and one or more Assistant Treasurers. The Board may elect or appoint any other officers it deems necessary for the operation and management of the corporation, each of whom shall have the powers, rights, duties, responsibilities and terms of office determined by the Board from time to time. Any number of offices or functions of those offices may be held or exercised by the same person.
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Section 5.02. Chairman of the Board. The Board of Directors may also elect as an officer a Chairman of the Board, who, if so elected, shall preside at all meetings of the Board of Directors and of the shareholders, shall make such reports to the Board of Directors and the shareholders as may from time to time be required, and shall have such other powers and shall perform such other duties as may be from time to time assigned to him or her by the Board of Directors. If a Chairman of the Board is not appointed, the duties and responsibilities of the Chairman of the Board set forth in this Section 5.02 shall be performed by the President.
Section 5.03. Election; Term of Office; Qualifications. At least annually the Board of Directors the Board shall elect the officers of the corporation, except that between such annual elections, at any regular or special meeting of the Board, additional offices may be established and officers may be elected to fill the newly created positions. All officers of the corporation shall, if not removed pursuant to Section 5.04, below, hold office until the annual election of officers next following their election to office, or until the election and qualification of their respective successors.
Section 5.04. Removal and Vacancies. Any officer may be removed from his or her office at any time by a majority of the whole Board of Directors, with or without cause. Such removal, however, shall be without prejudice to the contract rights, if any, of the person so removed. If there be a vacancy among the officers of the corporation by reason of death, resignation or otherwise, such vacancy may be filled for the unexpired term by the Board of Directors.
Section 5.05. President. The President shall be responsible for the operations of the corporation, subject to the control of the Board of Directors, shall make such reports to the Board of Directors as may from time to time be required, and shall have such other powers and shall perform such other duties as may be from time to time assigned to him or her by the Board of Directors or as otherwise are customarily possessed or performed by a President. The President shall be responsible to perform the duties of the Chief Executive Officer specified in Minnesota Statutes, Section 302A.305 to the extent such duties are not assigned to other officers of the corporation. The President, a Vice President or the Secretary, unless some other person is specifically authorized by resolution of the Board of Directors, shall sign all certificates of stock, bonds, deeds, mortgages, agreements, modification of mortgage agreements, leases, and contracts of the corporation.
Section 5.06. Vice Presidents. If Vice Presidents have been elected, such Vice Presidents shall each have such powers and duties as generally pertain to their respective offices, as well as such powers and duties as from time to time may be conferred by the Board of Directors. In the case of the death, resignation or disability of the President, the Vice President designated as Executive Vice President, or if none, the Vice President designated as Senior Vice President, or if neither, the Vice President who has held that office for the longest continuous period of time, or if there are no Vice Presidents, the Treasurer, shall assume the duties and responsibilities of the President until further action by the Board of Directors.
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Section 5.07. Secretary. The Secretary shall keep a record of the meeting and proceedings of the Directors and shareholders, have custody of the corporate seal and of other corporate records not specifically entrusted to some other official by these Bylaws or by direction of the Board of Directors, and shall give notice of such meetings as are required by these Bylaws or by the Directors. In the Secretary's absence at any meeting, an Assistant Secretary or a Secretary Pro Tempore shall perform the Secretary's duties.
Section 5.08. Treasurer. The Treasurer, subject to the order of the Board of Directors, shall have the care and custody of the money, funds, valuable papers, and documents of the corporation (other than his own bond, if any, which shall be in the custody of the President), and shall have and exercise, under the supervision of the Board of Directors, all powers and duties commonly incident to his or her office, and shall give bond in such form and amount and with such sureties as shall be required by the Board of Directors. The Treasurer shall keep accurate accounts of all monies of the corporation received or disbursed. He or she shall deposit all monies, drafts and checks in the name of, and to the credit of, the corporation and such banks and depositories as a majority of the whole Board of Directors shall from time to time designate. He or she shall have power to endorse for deposit all notes, checks and drafts received by the corporation. He or she shall disperse the funds of the corporation in the manner prescribed by the Board of Directors, making proper vouchers therefor. He or she shall render to the President and the directors whenever required, an account of all of his or her transactions as Treasurer and of the financial condition of the corporation and shall perform such other duties as may be prescribed from time to time by the Board of Directors or by the President. The Treasurer shall be responsible to perform the duties of the Chief Financial Officer specified in Minnesota Statutes, Section 302A.305 to the extent such duties are not assigned to other officers of the corporation.
Section 5.09. Additional Officers and Agents. The Board of Directors, at its discretion, may appoint a General Manager, one or more Assistant Treasurers, one or more Assistant Secretaries, and such other officers or agents as it may deem advisable and may prescribe the duties of any such officer or agent.
Section 5.10. Compensation. The officers of the corporation shall receive such compensation for their services as may be determined from time to time by the Board of Directors.
ARTICLE VI
SHARES AND THEIR TRANSFER
Section 6.01. Certificated and Uncertificated Shares. Shares of the Corporation’s stock may be certificated or uncertificated, as provided under Minnesota law. All certificates of stock of the Corporation shall be in such form as prescribed by law and adopted by the Board of Directors, certifying the number of shares of the corporation owned by him. The certificates shall be numbered in the order in which they are issued and shall be signed by the President or a Vice President and by the Secretary or an Assistant Secretary (or by such other two (2) officers as the Board of Directors may designate) and may have typed or printed thereon any legend as may be required by law or contract or as may be appropriate in the opinion of counsel to the corporation. Such signatures may be by facsimile if authorized by the Board of Directors. Every
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certificate surrendered to the corporation for exchange or transfer shall be canceled, and no new certificate or certificates shall be issued in exchange for any existing certificate until such existing certificate or other evidence of ownership shall have been so canceled.
Section 6.02. Issuance of Shares. The Board of Directors is authorized to cause to be issued shares of the corporation up to the full amount authorized by the Articles of Incorporation in such amounts as may be determined by the Board of Directors and as may be permitted by applicable law. Shares shall be allotted only in exchange for consideration in such forms as may be permitted by applicable law. At the time of any such allotment of shares, the Board of Directors making such allotment shall state, by resolution, their determination of the fair value of the corporation in monetary terms of any consideration other than cash for which shares are allotted. The amount of consideration to be received in cash or otherwise shall not be less than the par value of the shares so allotted.
Section 6.03. Transfer of Shares. Transfer of shares on the books of the corporation may be authorized only by the record holder of such stock, or the shareholder's legal representative, or by attorney lawfully constituted in writing, and, in the case of stock represented by a certificate, upon surrender of the certificate or the certificates for such shares. The corporation may treat as the absolute owner of shares of the corporation the person or persons in whose name or names the shares are registered on the books of the corporation. In the event that a bank, trust company or other similarly qualified corporation is designated and agrees to act as the registrar and/or transfer agent for the corporation, then the signatures of the officers specified above and any seal of the corporation may be imprinted upon the stock certificates by facsimile and said certificates may be authenticated by signature of an authorized agent of said registrar and/or transfer agent. The officers of the corporation may delegate to such transfer agent and/or registrar such of the duties relating to the recording and maintenance of records relating to shares of stock and shareholders of the corporation as may be deemed expedient and convenient and as are assumed by said registrar and/or transfer agent.
Section 6.04. Lost Certificates. Any shareholder claiming that a certificate for shares has been lost, destroyed or stolen shall make an affidavit of the fact in such form as the Board of Directors shall require and shall, if the Board of Directors so requires, give the corporation a sufficient indemnity bond, in form, in an amount, and with one or more sureties satisfactory to the Board of Directors, to indemnify the corporation against any claims which may be made against it on account of the reissue of such certificate. Unless issued in uncertificated form, a new certificate shall then be issued to said shareholder for the same number of shares as the one alleged to have been destroyed, lost or stolen.
ARTICLE VII
DISTRIBUTIONS
Section 7.01. Distributions. Subject to the provisions of the Articles of Incorporation, the Board of Directors may cause the corporation to make distributions pursuant to the provisions of the Minnesota Statutes, Section 302A.551.
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Section 7.02. Record Date. Subject to any provisions of the Articles of Incorporation, the Board of Directors may fix a date preceding the date fixed for the payment of any distribution or allotment of other rights as the record date for the determination of the shareholders entitled to receive payment of such distribution or allotment of such rights; and in such case only shareholders of record on the date so fixed shall be entitled to receive such payment or allotment notwithstanding any transfer of shares on the books of the corporation after such record date. The Board of Directors may close the books of the corporation against the transfer of shares during the whole or any part of such period.
ARTICLE VIII
BOOKS AND RECORDS; FISCAL YEAR
Section 8.01. Books and Records. The Board of Directors of the corporation shall cause to be kept in such place as it may designate:
(a)A share register, giving the names and addresses of the shareholders, the number and classes of shares held by each, and the dates on which the certificates therefor were issued;
(b)Records of all proceedings of shareholders and directors;
(c)Such other records and books of account as shall be necessary and appropriate to the conduct of corporate business; and
(d)Bylaws of the corporation and all amendments thereto.
Section 8.02. Fiscal Year. The fiscal year of the corporation shall be determined by resolution of the Board of Directors.
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ARTICLE IX
INDEMNIFICATION
Section 9.01 Definitions.
(a)For purposes of this Article, the terms defined in this Section have the meanings given them.
(b)"Corporation" includes any domestic or foreign corporation that was the predecessor of this corporation in a merger or other transaction in which the predecessor's existence ceased upon consummation of the transaction.
(c)"Official capacity" means (1) with respect to a director, the position of director in the corporation, (2) with respect to a person other than a director, the elective or appointive office or position held by an officer, member of a committee of the Board, or the employment or agency relationship undertaken by an employee or agent of the corporation, (3) with respect to a director, officer, employee, or agent of the corporation who, while a director, officer, employee, or agent of the corporation, is or was serving at the request of the corporation or whose duties in that position involve or involved service as a director, officer, partner, trustee, or agent of another organization or employee benefit plan, the position of that person as a director, officer, partner, trustee, employee, or agent, as the case may be, of the other organization or employee benefit plan.
(d)"Proceeding" means a threatened, pending, or completed civil, criminal, administrative, arbitration, or investigative proceeding, including a proceeding by or in the right of the corporation.
(e)"Special legal counsel" means counsel who has not represented the corporation or a related corporation, or a director, officer, employee, or agent whose indemnification is in issue.
Section 9.02 Indemnification Mandatory; Standard.
(a) Subject to the provisions of Section 9.04, the corporation shall indemnify a person made or threatened to be made a party to a proceeding by reason of the former or present official capacity of the person against judgments, penalties, fines, including, without limitation, excise taxes assessed against the person with respect to an employee benefit plan, settlements, and reasonable expenses, including attorneys' fees and disbursements, incurred by the person in connection with the proceeding, if, with respect to the acts or omissions of the person complained of in the proceeding, the person:
(1) Has not been indemnified another organization or employee benefit plan for the same judgments, penalties, fines, including, without limitation, excise taxes assessed against the person with respect to an employee benefit plan, settlements, and reasonable expenses, including attorneys' fees and disbursements,
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incurred by the person in connection with the proceeding with respect to the same acts or omissions;
(2)Acted in good faith;
(3)Received no improper personal benefit and Minnesota Statutes, Section 302A.255, if applicable, has been satisfied;
(4)In the case of a criminal proceeding, had no reasonable cause to believe the conduct was unlawful; and
(5)In the case of acts or omissions occurring in the official capacity described in Section 9.01 paragraph (c), clause (1) or (2), reasonably believed that the conduct was in the best interests of the corporation, or in the case of acts or omissions occurring in the official capacity described in Section 9.01 paragraph (c), clause (3), reasonably believed that the conduct was not opposed to the best interests of the corporation. If the person's acts or omissions complained of in the proceeding relate to conduct as a director, officer, trustee, employee, or agent of an employee benefit plan, the conduct is not considered to be opposed to the best interests of the corporation if the person reasonably believed that the conduct was in the best interests of the participants or beneficiaries of the employee benefit plan.
(b) The termination of a proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent does not, of itself, establish that the person did not meet the criteria set forth in this Section 9.02.
Section 9.03. Advances. Subject to the provisions of Section 9.04, if a person is made or threatened to be made a party to a proceeding, the person is entitled, upon written request to the corporation, to payment or reimbursement by the corporation of reasonable expenses, including attorneys' fees and disbursements, incurred by the person in advance of the final disposition of the proceeding, (a) upon receipt by the corporation of a written affirmation by the person of a good faith belief that the criteria for indemnification set forth in Section 9.02 have been satisfied and a written undertaking by the person to repay all amounts so paid or reimbursed by the corporation, if it is ultimately determined that the criteria for indemnification have not been satisfied, and (b) after a determination that the facts then known to those making the determination would not preclude indemnification under this Article. The written undertaking required by clause (a) is an unlimited general obligation of the person making it, but need not be secured and shall be accepted without reference to financial ability to make the repayment.
Section 9.04. Reimbursement to Witness. The corporation shall reimburse expenses, including attorneys' fees and disbursements, incurred by a person in connection with an appearance as a witness in a proceeding at a time when the person has not been made or threatened to be made a party to a proceeding.
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Section 9.05. Determination of Eligibility. (a) All determinations whether indemnification of a person is required because the criteria set forth in Section 9.02 have been satisfied and whether a person is entitled to payment or reimbursement of expenses in advance of the final disposition of a proceeding as provided in Section 9.03 shall be made:
(1) By the Board by a majority of a quorum; Directors who are at the time parties to the proceeding shall not be counted for determining either a majority or the presence of a quorum;
(2)If a quorum under clause (1) cannot be obtained, by a majority of a committee of the Board, consisting solely of two or more directors not at the time parties to the proceeding, duly designated to act in the matter by a majority of the full Board including directors who are parties;
(3)If a determination is not made under clause (1) or (2), by special legal counsel, selected either by a majority of the Board or a committee by vote pursuant to clause (1) or (2) or, if the requisite quorum of the full Board cannot be obtained and the committee cannot be established, by a majority of the full Board including directors who are parties;
(4) if a determination is not made under clauses (1) to (3), by the shareholders, excluding the votes of shares held by parties to the proceeding; or
(5)If an adverse determination is made under clauses (1) to (4) or under paragraph (b), or if no determination is made under clauses (1) to (4) or under paragraph (b) within 60 days after the termination of a proceeding or after a request for an advance of expenses, as the case may be, by a court in this state, which may be the same court in which the proceeding involving the person's liability took place, upon application of the person and any notice the court requires.
(b) With respect to a person who is not, and was not at the time of the acts or omissions complained of in the proceedings, a director, officer, or person possessing, directly or indirectly, the power to direct or cause the direction of the management or policies of the corporation, the determination whether indemnification of this person is required because the criteria set forth in Section 9.02 have been satisfied and whether this person is entitled to payment or reimbursement of expenses in advance of the final disposition of a proceeding as provided in Section 9.03 may be made by an annually appointed committee of the Board, having at least one member who is a director. The committee shall report at least annually to the Board concerning its actions.
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Section 9.06. Insurance. The corporation may purchase and maintain insurance on behalf of a person in that person's official capacity against any liability asserted against and incurred by the person in or arising from that capacity, whether or not the corporation would have been required to indemnify the person against the liability under the provisions of this Article.
Section 9.07. Disclosure. The amount of any indemnification or advance paid pursuant to this Article and to whom and on whose behalf it was paid shall be reported as part of the annual financial statements furnished to shareholders pursuant to Minnesota Statutes, Section 302A.463 covering the period when the indemnification or advance was paid or accrued under the accounting method of the corporation reflected in the financial statements.
Section 9.08. Discretionary Indemnification. Nothing in this Article IX shall be construed to limit the ability of the Board of Directors to indemnify any person or entity not described in this Article IX pursuant to, and to the extent described in, an agreement authorized by a majority of the directors then in office.
ARTICLE X
AMENDMENTS
Section 10.01. General Amendment. Except as provided in Section 10.02 below, these Bylaws may be altered, amended or repealed or new Bylaws enacted by the affirmative vote of a majority of the entire Board of Directors (if notice of the proposed alteration or amendment is contained in the notice of the meeting at which such vote is taken or if all directors are present) or at any regular meeting of the shareholders (or at any special meeting thereof duly called for that purpose) by the affirmative vote of a majority of the shares represented and entitled to vote at such meeting (if notice of the proposed alteration or amendment is contained in the notice of such meeting).
Section 10.02. Certain Amendments. Notwithstanding anything contained in Section 10.01 of this Article X to the contrary, either (i) the affirmative vote of the holders of at least two-thirds (2/3) of the votes entitled to be cast by the holders of all shares of the corporation entitled to vote generally in the election of directors, voting together as a single class, or (ii) the affirmative vote of a majority of the entire Board of Directors with the concurring vote of a majority of the Continuing Directors, voting separately and as a subclass of directors, shall be required to alter, amend or repeal, or adopt any provision inconsistent with, Section 2.09 of Article II, Sections 3.02 through 3.07 of Article III, Article IX, and this Section 10.02 of Article X. For purposes of this Article X, the term "Continuing Director" shall mean any member of the Board of Directors who was a member of the Board of Directors on March 25, 1994 or who is elected to the Board of Directors after March 25, 1994 upon the recommendation of a majority of the Continuing Directors then serving as directors, voting separately and as a subclass of directors on such recommendation.
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Exhibit 31.1
CERTIFICATION
I, Randall D. Sampson certify that:
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1. |
I have reviewed this quarterly report on Form 10-Q of Canterbury Park Holding Corporation; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d- 15(f)) for the registrant and have: |
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a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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c. |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d. |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case on an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and; |
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5. |
I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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Dated: May 13, 2020 |
CANTERBURY PARK HOLDING CORPORATION |
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/s/ Randall D. Sampson |
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Randall D. Sampson |
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Executive Chairman, President, and Chief Executive Officer |
Exhibit 31.2
CERTIFICATION
I, Randy J. Dehmer certify that:
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1. |
I have reviewed this quarterly report on Form 10-Q of Canterbury Park Holding Corporation; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d- 15(f)) for the registrant and have: |
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a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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c. |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d. |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case on an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and; |
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5. |
I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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Dated: May 13, 2020 |
CANTERBURY PARK HOLDING CORPORATION |
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/s/ Randy J. Dehmer |
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Randy J. Dehmer |
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Chief Financial Officer |
Exhibit 32
CERTIFICATION
Pursuant to 18 U.S.C. 1350, the undersigned Chief Executive Officer and Chief Financial Officer of Canterbury Park Holding Corporation (the “Company”) herby certifies that:
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(1) |
The accompanying quarterly report on Form 10-Q for the period ended March 31, 2020 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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(2) |
The information contained in the accompanying Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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CANTERBURY PARK HOLDING CORPORATION |
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Dated: May 13, 2020 |
/s/ Randall D. Sampson |
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Randall D. Sampson, |
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Executive Chairman, President, and Chief Executive Officer |
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Dated: May 13, 2020 |
/s/ Randy J. Dehmer |
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Randy J. Dehmer |
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Chief Financial Officer |
Exhibit 99.1
CANTERBURY PARK HOLDING CORPORATION ANNOUNCES
FIRST QUARTER 2020 FINANCIAL RESULTS
Shakopee, MN – March 12, 2020 – Canterbury Park Holding Corporation (“Canterbury Park” or “the Company”) (NASDAQ: CPHC) today reported financial results for the first quarter ended March 31, 2020.
($ in thousands, except per share data and percentages)
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Two Months Ended |
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Month Ended March 31, |
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Three Months Ended March 31, |
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February 29, 2020 |
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February 29, 2019 |
Increase |
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2020 |
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2019 |
Decrease |
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2020 |
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2019 |
Increase (Decrease) |
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Net revenue |
$ |
8,812 |
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$ |
7,337 |
20.1 |
% |
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$ |
2,137 |
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$ |
4,254 |
(49.8) |
% |
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$ |
10,949 |
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$ |
11,591 |
(5.5) |
% |
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Adjusted EBITDA (1) |
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1,762 |
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451 | 290.9 |
% |
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(903) |
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265 |
(440.8) |
% |
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859 |
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716 |
20.0 |
% |
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Net income (loss) |
$ |
1,000 |
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$ |
(36) |
2887.3 |
% |
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$ |
(745) |
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$ |
93 |
(901.1) |
% |
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$ |
255 |
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$ |
57 |
351.0 |
% |
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Basic EPS |
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$ |
0.05 |
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$ |
0.01 |
400.0 |
% |
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Diluted EPS |
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$ |
0.05 |
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$ |
0.01 |
400.0 |
% |
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(1) |
Definitions, disclosures and reconciliations of non-GAAP financial information are included later in the release. |
Management Commentary
“The temporary suspension of our operations on March 16, 2020 as a result of the COVID-19 pandemic was critical to ensure the safety and well-being of our team members and guests despite the significant impact on our business,” said Randy Sampson, President and Chief Executive Officer of Canterbury Park. “The very strong operating results we generated for the first two months of the quarter demonstrate the momentum we are capable of achieving, with year-over-year revenue and Adjusted EBITDA growth in January and February 2020 exceeding internal projections. The strength of our operating results for the first two months of the year is notable because despite the suspension of operations in mid-March, which drove a full-quarter net revenue decline of 5.5%, our Adjusted EBITDA rose 20% and net income increased 351% year over year for the first quarter.
“Since we closed our operations in mid-March, we have acted quickly and prudently to preserve cash and reduce operating expenses by implementing temporary unpaid furloughs, suspending or delaying 2020 planned capital expenditures and suspending the quarterly cash dividend. We believe these actions, combined with our balance sheet that has no long-term debt and our $8 million line of credit, provide the Company with the necessary liquidity and financial flexibility to manage through this challenging operating environment, bring back our valued employees as the economy re-opens and support Canterbury Park’s long-term outlook.
“Our two recent agreements for the sale of land for the development of additional residential units at Canterbury Commons™ are expected to generate cash flow later this year that will strengthen our resources to navigate near-term challenges while marking further material progress on our long-term vision to bring additional exciting lifestyle experiences, energy and excitement to Canterbury Park through the development of vibrant residential, commercial, hospitality and retail elements. These agreements also mark further milestones in unlocking the value of our excess real estate and, when combined with the Triple Crown upscale rental apartment development which remains on track for initial occupancy in June 2020, will comprise the majority of the planned Canterbury Commons residential development.
“While the measures we have taken to respond to the COVID-19 pandemic, including a delay in the start of this year’s race meet and an anticipated shorter meet, will significantly impact our second quarter results, we will look to further build on our strategies to grow player visitation and engagement once we return to operations. One recent example of these efforts was the introduction of the first dealer-assist blackjack games in our Card Casino. While the games were operational for only a few days, early guest feedback was very favorable. These games offer a unique blackjack entertainment experience for our local market and provide us with a new way to engage with players, including potentially new players seeking a low-wager entry point to blackjack.
“The health and well-being of our employees and guests remains our primary concern. We are preparing a detailed plan of operations for the re-opening of Canterbury Park that will offer a safe environment with the highest standards and safety protocols that encompass appropriate social distancing and sanitary measures. When we are able to re-open and begin to return to normalized operations, we believe the range of growth initiatives we have for our Card Casino, pari-mutuel and hospitality operations as well as the near-term outlook for further monetization of our excess real estate will help us to regain the momentum we were generating in early 2020 and support our goal of enhancing shareholder value.”
Canterbury Commons Development Update
The Company recently announced two real estate sales agreements with developers that would add 160 additional residential units at Canterbury Commons™. Pursuant to the two purchase agreements which we expect to close in September 2020, Canterbury would sell approximately 14 acres of land for total consideration of approximately $3.5 million. The agreement with Pulte Homes of Minnesota would result in the development of 109 row homes and townhome buildings, with initial site work scheduled to begin later this year. The agreement with Lifestyle Communities, LLC would result in the development of a cooperative community featuring a 56-unit, four-story building with over 5,000 square feet of amenity spaces.
Construction on Phase One of the Triple Crown Apartments project continued in the first quarter of 2020 with the Company’s joint venture development partner, Doran Companies, continuing its pre-leasing activity for the 321-unit first building, with initial occupancy expected in June 2020. Initial groundwork for Phase Two of the project, which would add another 305 units, is expected to begin later this year.
Collectively, these three development projects would ultimately represent approximately $200 million of potential total development for more than 760 residential units as well as the majority of the residential component of the Canterbury Commons™ Master Development Plan. The Company continues to make progress with developer and partner selection for the balance of the approximately 140 acres that will comprise Canterbury Commons™, with a renewed focus on commercial development including office, retail, hotel and entertainment spaces. Canterbury expects to make additional announcements of new development partners for this phase of development in the near future.
The Company also expects road work will begin soon on the newly re-named Unbridled Avenue on the north side of Canterbury Park. We expect Unbridled Avenue to provide significantly improved access to Canterbury Park, with the construction scheduled to conclude by November 2020.
Summary of 2020 First Quarter Operating Results
The operating results for the three-month period ended March 31, 2020 presented below reflect the impact of the suspension of operations at Canterbury Park on March 16, 2020. The operating results for the three-month period ended March 31, 2019 reflect the impact of disruption and higher costs associated with the renovation of the Card Casino in that period.
For the first two months of the 2020 first quarter period, net revenue increased approximately 20% and Adjusted EBITDA rose 291% compared to the same period in 2019. While the Company anticipated favorable year-over-year comparisons for the first two months of 2020 due to the construction disruption in the Card Casino last year, actual increases in revenues and Adjusted EBITDA for the two-month period far exceeded its expectations.
Net revenues for the three months ended March 31, 2020 decreased 5.5% to $10.9 million compared to $11.6 million for the same period in 2019. Card Casino revenues decreased $339,000, or 4.3%, due to a decrease in poker and table games revenue. Pari-mutuel revenues decreased $195,000, or 13.1%, primarily due to a decrease in simulcast revenue. Food and beverage revenues decreased $234,000, or 17.3%, primarily due to a decrease in volume in the Card Room and concession stands. Other revenues increased $126,000, or 14.8%, due to an increase in space rental and other operating revenues.
Operating expenses for the three months ended March 31, 2020 were $10.8 million, a decrease of $806,000, or 6.9%, compared to operating expenses of $11.6 million for the same period in 2019. This year-over-year decrease in operating expenses reflects reductions in the majority of the Company’s operating expense line items, primarily as a result of the Company’s temporary suspension of operations on March 16, 2020. The Company also recorded a loss on disposal of assets of $113,000 in 2019, primarily due to a write-off of assets disposed of as a result of the renovation of the Card Casino.
Net income and diluted earnings per share for the three months ended March 31, 2020 were $255,000 and $0.05, respectively. Net income and diluted earnings per share for the three months ended March 31, 2019 were $57,000 and $0.01, respectively.
Adjusted EBITDA increased 20.0% to $859,000 in the 2020 first quarter compared to 2019 first quarter adjusted EBITDA of $716,000.
Given its number of employees and the nature of its primary operations, the Company does not currently qualify for any of the federal lending assistance offered by the CARES Act that was passed in late March and April 2020, including the Paycheck Protection Program or other CARES Acts small business lending programs.
Additional Financial Information
Further financial information for the first quarter ended March 31, 2020 is presented in the accompanying table. Additional information will be provided in the Company’s Form 10-Q Report that will be filed with the Securities and Exchange Commission on or about May 14, 2020.
Use of Non-GAAP Financial Measures
To supplement our financial statements, we also provide investors with information about our EBITDA and Adjusted EBITDA, each of which is a non-GAAP measure. We define EBITDA as earnings before interest, taxes, depreciation and amortization. EBITDA is not a measure of performance or liquidity calculated in accordance with generally accepted accounting principles ("GAAP"), and should not be considered an alternative to, or more meaningful than, net income as an indicator of our operating performance, or cash flows from operating activities as a measure of liquidity. We have presented EBITDA as a supplemental disclosure because it is a widely used measure of performance and basis for valuation of companies in our industry. Other companies that provide EBITDA information may calculate EBITDA differently than we do. We define Adjusted EBITDA as earnings before interest income, income tax expense, depreciation and amortization and loss from disposal of assets. We have presented Adjusted EBITDA as a supplemental disclosure because it enables investors to understand our results excluding the effect of these four items.
About Canterbury Park
Canterbury Park Holding Corporation owns and operates Canterbury Park Racetrack and Card Casino in Shakopee, Minnesota, the only thoroughbred and quarter horse racing facility in the State. The Company generally offers live racing from May to September. The Card Casino typically hosts card games 24 hours a day, seven days a week, dealing both poker and table games. The Company also conducts year-round wagering on simulcast horse racing and hosts a variety of other entertainment and special events at its Shakopee facility. The Company is redeveloping 140 acres of underutilized land surrounding the Racetrack in a project know as Canterbury Commons. The Company is pursuing several mixed-use development opportunities for this land, directly and through joint ventures. For more information about the Company, please visit www.canterburypark.com.
Cautionary Statement
From time to time, in reports filed with the Securities and Exchange Commission, in press releases, and in other communications to shareholders or the investing public, we may make forward-looking statements concerning possible or anticipated future financial performance, business activities or plans. These statements are typically preceded by the words “believes,” “expects,” “anticipates,” “intends” or similar expressions. For these forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in federal securities laws. Shareholders and the investing public should understand that these forward-looking statements are subject to risks and uncertainties which could affect our actual results and cause actual results to differ materially from those indicated in the forward-looking statements. We report these risks and uncertainties in our Form 10-K Report to the SEC. They include, but are not limited to: any effect that the COVID-19 coronavirus pandemic and resulting precautionary measures may have on us as an entertainment venue or on the economy generally, including the fact that we temporarily suspended all card casino, simulcast, and special events operations at Canterbury Park on March 16, 2020; material fluctuations in attendance at the Racetrack; material changes in the level of wagering by patrons; any decline in interest in the unbanked card games offered in the Card Casino; competition from other venues offering unbanked card games or other forms of wagering; competition from other sports and entertainment options; increases in compensation and employee benefit costs; increases in the percentage of revenues allocated for purse fund payments; higher than expected expense related to new marketing initiatives; the impact of wagering products and technologies introduced by competitors; the general health of the gaming sector; legislative and regulatory decisions and changes; our ability to successfully develop our real estate, including our reliance on our current and future development partners; temporary disruptions or changes in access to our facilities caused by ongoing infrastructure improvements; and other factors that are beyond our ability to control or predict.
# # #
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Investor Contact: |
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Randy Dehmer |
Richard Land, Jim Leahy |
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Vice President and Chief Financial Officer |
JCIR |
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Canterbury Park Holding Corporation |
212-835-8500 or cphc@jcir.com |
952-233-4828 or investorrelations@canterburypark.com
- Financial tables follow -
CANTERBURY PARK HOLDING CORPORATION’S
SUMMARY OF OPERATING RESULTS
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Three months ended |
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March 31, |
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2020 |
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2019 |
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Net Operating Revenues |
$ |
10,948,959 |
|
$ |
11,590,798 |
|
Operating Expenses |
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(10,807,264) |
|
|
(11,613,559) |
|
Income (Loss) from Operations |
|
141,695 |
|
|
(22,761) |
|
Non-Operating Revenues, net |
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163,690 |
|
|
63,240 |
|
Income Tax (Expense) Benefit |
|
(50,164) |
|
|
16,093 |
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Net Income |
$ |
255,221 |
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$ |
56,572 |
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Basic Net Income Per Common Share |
$ |
0.05 |
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$ |
0.01 |
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Diluted Net Income Per Common Share |
$ |
0.05 |
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$ |
0.01 |
RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA
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|
|
|
|
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|
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Three months ended |
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March 31, |
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2020 |
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2019 |
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NET INCOME |
$ |
219,877 |
|
$ |
56,572 |
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Interest income, net |
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(163,690) |
|
|
(63,240) |
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Income tax expense (benefit) |
|
85,508 |
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|
(16,093) |
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Depreciation |
|
716,853 |
|
|
625,520 |
|
EBITDA |
|
858,548 |
|
|
602,759 |
|
Loss on disposal of assets |
|
- |
|
|
113,437 |
|
ADJUSTED EBITDA |
$ |
858,548 |
|
$ |
716,196 |