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Canterbury Park Holding Corp - Quarter Report: 2020 March (Form 10-Q)

Table of Contents

 

 

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

 

Picture 1

CANTERBURY PARK HOLDING CORPORATION


(Exact Name of Registrant as Specified in Its Charter)

 

 

 

 

Minnesota

             

47‑5349765

(State or Other Jurisdiction of Incorporation or
Organization)

 

(I.R.S. Employer
Identification No.)

 

 

 

 

1100 Canterbury Road 

 

 

Shakopee, MN  55379

 

 

(Address of principal executive offices and zip code)

 

Securities registered pursuant Section 12(b) of the Act:

 

 

 

 

Title of Each Class

Trading Symbol

Name of each exchange on which registered

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.

 

 

 

 

 

 

 

 

 

YES

 

NO

 

 

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).

 

 

 

 

 

 

 

 

 

YES

 

NO

 

 

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.

 

 

 

 

 

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

 

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).

 

 

 

 

 

 

 

 

 

YES

 

NO

 

 

The Company had 4,694,138 shares of common stock, $.01 par value, outstanding as of May  1, 2020.

 

 

 

Table of Contents

Canterbury Park Holding Corporation

INDEX

 

 

 

 

Page

 

 

 

 

PART I. 

FINANCIAL INFORMATION 

 

 

 

 

 

 

Item 1.

Financial Statements (unaudited) 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019

2

 

 

 

 

 

 

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2020 and 2019

3

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2020 and 2019

4

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019

5

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

6

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

25

 

 

 

 

 

Item 4.

Controls and Procedures

25

 

 

 

 

PART II. 

OTHER INFORMATION

 

 

 

 

 

 

Item 1.

Legal Proceedings

25

 

 

 

 

 

Item 1A.

Risk Factors

25

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

25

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities

25

 

 

 

 

 

Item 4.

Mine Safety Disclosures

26

 

 

 

 

 

Item 5.

Other Information

26

 

 

 

 

 

Item 6.

Exhibits

27

 

 

 

 

 

Signatures

 

27

 

 

1

Table of Contents

PART 1 – FINANCIAL INFORMATION

CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

 

 

March 31, 

 

December 31, 

 

    

2020

    

2019

ASSETS

 

 

  

 

 

  

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

  

 

 

  

Cash and cash equivalents

 

$

 —

 

$

355,399

Restricted cash

 

 

3,081,073

 

 

2,308,955

Short-term investments

 

 

 —

 

 

103,886

Accounts receivable, net of allowance of $19,250 for both periods

 

 

364,353

 

 

302,037

Inventory

 

 

288,878

 

 

390,118

Prepaid expenses

 

 

528,000

 

 

501,493

Income taxes receivable

 

 

88,075

 

 

 —

Total current assets

 

 

4,350,379

 

 

3,961,888

 

 

 

 

 

 

 

LONG-TERM ASSETS

 

 

  

 

 

  

Deposits

 

 

49,500

 

 

49,500

Restricted cash - long-term portion

 

 

 —

 

 

1,262,744

TIF receivable

 

 

9,857,413

 

 

9,708,856

Related party receivable

 

 

3,533,829

 

 

3,528,927

Operating lease right-of-use assets

 

 

72,911

 

 

74,832

Equity investment

 

 

2,992,633

 

 

2,992,633

Land, buildings and equipment, net

 

 

44,241,167

 

 

43,833,702

TOTAL ASSETS

 

$

65,097,832

 

$

65,413,082

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

  

 

 

  

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

  

 

 

  

Accounts payable

 

 

4,754,400

 

 

3,495,238

Card Casino accruals

 

 

1,655,005

 

 

2,167,056

Accrued wages and payroll taxes

 

 

890,059

 

 

2,254,379

Cash dividend payable

 

 

 —

 

 

324,439

Accrued property taxes

 

 

1,274,571

 

 

1,019,658

Deferred revenue

 

 

1,354,821

 

 

1,482,130

Payable to horsepersons

 

 

448,175

 

 

557,696

Current portion of finance lease obligations

 

 

24,807

 

 

24,500

Current portion of operating lease obligations

 

 

27,855

 

 

29,776

Income taxes payable

 

 

 —

 

 

120,960

Total current liabilities

 

 

10,429,693

 

 

11,475,832

 

 

 

 

 

 

 

LONG-TERM LIABILITIES

 

 

  

 

 

  

Deferred income taxes

 

 

4,663,500

 

 

4,404,300

Finance lease obligations, net of current portion

 

 

65,466

 

 

71,784

Operating lease obligations, net of current portion

 

 

45,056

 

 

45,056

Total long-term liabilities

 

 

4,774,022

 

 

4,521,140

TOTAL LIABILITIES

 

 

15,203,715

 

 

15,996,972

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

  

Common stock, $.01 par value, 10,000,000 shares authorized, 4,694,138 and 4,644,522 respectively, shares issued and outstanding

 

 

46,941

 

 

46,445

Additional paid-in capital

 

 

23,035,735

 

 

22,733,933

Retained earnings

 

 

26,811,441

 

 

26,635,732

Total stockholders’ equity

 

 

49,894,117

 

 

49,416,110

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

65,097,832

 

$

65,413,082

See notes to condensed consolidated financial statements.

2

Table of Contents

 

CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

 

 

2020

    

2019

 

OPERATING REVENUES:

 

 

  

 

 

  

 

Pari-mutuel

 

$

1,296,026

 

$

1,490,809

 

Card Casino

 

 

7,561,172

 

 

7,899,964

 

Food and beverage

 

 

1,118,995

 

 

1,352,801

 

Other

 

 

972,766

 

 

847,224

 

Total Net Revenues

 

 

10,948,959

 

 

11,590,798

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

  

 

Purse expense

 

 

1,103,394

 

 

1,395,538

 

Minnesota Breeders’ Fund

 

 

189,744

 

 

217,695

 

Other pari-mutuel expenses

 

 

220,849

 

 

268,366

 

Salaries and benefits

 

 

5,577,893

 

 

5,745,287

 

Cost of food and beverage and other sales

 

 

564,151

 

 

625,757

 

Depreciation and amortization

 

 

716,853

 

 

625,520

 

Utilities

 

 

290,611

 

 

322,115

 

Advertising and marketing

 

 

183,988

 

 

190,329

 

Professional and Contracted Services

 

 

972,324

 

 

966,386

 

Loss on disposal of assets

 

 

 —

 

 

113,437

 

Other operating expenses

 

 

987,457

 

 

1,143,129

 

Total Operating Expenses

 

 

10,807,264

 

 

11,613,559

 

INCOME (LOSS) FROM OPERATIONS

 

 

141,695

 

 

(22,761)

 

OTHER INCOME

 

 

  

 

 

  

 

Interest income, net

 

 

163,690

 

 

63,240

 

Net Other Income

 

 

163,690

 

 

63,240

 

INCOME BEFORE INCOME TAXES

 

 

305,385

 

 

40,479

 

INCOME TAX BENEFIT (EXPENSE)

 

 

(50,164)

 

 

16,093

 

NET INCOME

 

$

255,221

 

$

56,572

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.05

 

$

0.01

 

Diluted earnings per share

 

$

0.05

 

$

0.01

 

Weighted Average Basic Shares Outstanding

 

 

4,659,579

 

 

4,559,477

 

Weighted Average Diluted Shares

 

 

4,662,675

 

 

4,613,245

 

Cash dividends declared per share

 

$

0.00

 

$

0.07

 

 

See notes to condensed consolidated financial statements.

 

 

 

 

 

3

Table of Contents

CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of

    

Common

    

Additional

    

Retained

    

 

 

 

 

Shares

 

Stock

 

Paid-in Capital

 

Earnings

 

Total

Balance at December 31, 2019

 

4,644,522

 

$

46,445

 

$

22,733,933

 

$

26,635,732

 

$

49,416,110

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

24,250

 

 

242

 

 

200,548

 

 

 —

 

 

200,790

Other share retirements

 

(9,920)

 

 

(99)

 

 

(44,587)

 

 

(79,512)

 

 

(124,198)

Stock-based compensation

 

 —

 

 

 —

 

 

57,606

 

 

 —

 

 

57,606

401(K) stock match

 

17,179

 

 

172

 

 

160,795

 

 

 —

 

 

160,967

Issuance of deferred stock awards

 

18,107

 

 

181

 

 

(72,560)

 

 

 —

 

 

(72,379)

Net Income

 

 —

 

 

 —

 

 

 —

 

 

255,221

 

 

255,221

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2020

 

4,694,138

 

$

46,941

 

$

23,035,735

 

$

26,811,441

 

$

49,894,117

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of

    

Common

    

Additional

    

Retained

    

 

 

 

 

Shares

 

Stock

 

Paid-in Capital

 

Earnings

 

Total

Balance at December 31, 2018

 

4,527,685

 

$

45,277

 

$

21,420,886

 

$

25,268,187

 

$

46,734,350

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

28,060

 

 

281

 

 

172,111

 

 

 —

 

 

172,392

Other share retirements

 

(5,863)

 

 

(59)

 

 

(27,915)

 

 

(62,023)

 

 

(89,997)

Stock-based compensation

 

 —

 

 

 —

 

 

90,058

 

 

 —

 

 

90,058

Dividend distribution

 

 —

 

 

 —

 

 

 —

 

 

(320,226)

 

 

(320,226)

401(K) stock match

 

8,111

 

 

81

 

 

116,312

 

 

 —

 

 

116,393

Issuance of deferred stock awards

 

10,968

 

 

110

 

 

(55,044)

 

 

 —

 

 

(54,934)

Shares issued under Employee Stock Purchase Plan

 

5,697

 

 

57

 

 

67,282

 

 

 —

 

 

67,339

Net income

 

 —

 

 

 —

 

 

 —

 

 

56,572

 

 

56,572

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2019

 

4,574,658

 

$

45,747

 

$

21,783,690

 

$

24,942,510

 

$

46,771,947

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to condensed consolidated financial statements.

4

Table of Contents

CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

 

 

 

 

    

Three Months Ended March 31, 

 

 

2020

    

2019

Operating Activities:

 

 

 

  

 

  

Net income

 

$

255,221

 

$

56,572

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

  

 

 

Depreciation

 

 

716,853

  

 

625,520

Stock-based compensation expense

 

 

57,606

  

 

90,058

Stock-based employee match contribution

 

 

160,967

  

 

116,312

Deferred income taxes

 

 

259,200

  

 

94,800

Loss from equity investment

 

 

 —

 

 

2,377

Loss on disposal of assets

 

 

 —

  

 

113,437

Changes in operating assets and liabilities:

 

 

 

 

 

 

Increase in accounts receivable

 

 

(67,218)

 

 

(69,385)

Decrease (increase) in other current assets

 

 

74,733

 

 

(40,457)

Increase (decrease) in income taxes receivable/payable

 

 

(645,771)

 

 

357,158

Decrease in operating lease right-of-use assets

 

 

1,921

 

 

1,939

Decrease in operating lease liabilities

 

 

(1,921)

 

 

(1,939)

Increase in accounts payable

 

 

960,781

 

 

302,777

Decrease in deferred revenue

 

 

(127,309)

 

 

(61,754)

(Decrease) increase in Card Casino accruals

 

 

(512,051)

 

 

417,322

Decrease in accrued wages and payroll taxes

 

 

(1,364,320)

 

 

(888,915)

Increase in accrued property taxes

 

 

254,913

 

 

222,443

Increase in payable to horsepersons

 

 

327,215

 

 

122,454

Net cash provided by operating activities

 

 

350,820

  

 

1,460,719

 

 

 

 

 

 

 

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

Table of Contents

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

Table of Contents

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.

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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. 

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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

 

 

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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.

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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

 

 

 

 

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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.”

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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%.

 

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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

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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

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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.

 

 

 

 

 

 

 

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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

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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.

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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.

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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.

 

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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:

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 


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;

·

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;

·

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;

·

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;

·

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;

·

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;

·

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

(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

OTHER INFORMATION

Item 1.      Legal Proceedings

Not Applicable.

 

Item 1A.   Risk Factors

 

              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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Item 4.     Mine Safety Disclosures

Not Applicable.

 

Item 5.     Other Information

 

  Not Applicable.

 

 

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Item 6.     Exhibits

 

3.1

 

Bylaws of Canterbury Park Holding Corporation, as amended April 17, 2020.

 

 

 

31.1

 

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (rules 13a‑14 and 15d‑14 of the Exchange Act). 

 

 

 

31.2

 

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (rules 13a‑14 and 15d‑14 of the Exchange Act). 

 

 

 

32

 

Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

 

 

 

99.1

 

Press Release dated May 12, 2020 announcing 2020 First Quarter Results.  

 

 

 

101

 

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.

 

 

 

SIGNATURES

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.

 

 

 

 

Canterbury Park Holding Corporation 

 

 

Dated:  May 13, 2020

  /s/ Randall D. Sampson

 

 

 

  Randall D. Sampson,  

 

Executive Chairman, President, and Chief Executive   Officer

 

 

Dated:  May 13, 2020

  /s/ Randy J. Dehmer

 

 

Randy J. Dehmer,

Chief Financial Officer

 

 

 

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