Canterbury Park Holding Corporation — FY2020 Form 10-K
Reporting period: Year ended December 31, 2020. This is an annual filing, not a standalone fourth-quarter report; the filing text does not provide a clear set of Q4-only financial results.
Business context
The company operates a Minnesota racetrack and unbanked Card Casino, with related pari-mutuel wagering and food-and-beverage operations, and pursues real estate development through Canterbury Commons. COVID-19 closures and capacity restrictions materially disrupted its racetrack businesses; development activity continued.
Financial performance
| Metric | FY2020 | FY2019 | Change |
|---|---|---|---|
| Net revenue | $33.14 million | $59.23 million | Down 44.0% |
| Operating expenses | $34.88 million | $55.59 million | Down 37.3% |
| Income from operations | $0.63 million | $3.64 million | Includes $2.37 million land-transfer gain in 2020 |
| Net income | $1.06 million | $2.72 million | Down 60.9% |
| Diluted earnings per share | $0.23 | $0.59 | Down $0.36 |
| Cash from operating activities | $1.68 million | $6.74 million | Down $5.06 million |
| Adjusted EBITDA (non-GAAP) | $0.81 million | $6.36 million | Down 87.3% |
- Operating expenses exceeded revenue by $1.74 million before the 2020 land-transfer gain. Operating expenses were 105.3% of revenue, versus 93.9% in 2019. Net margin was approximately 3.2%, compared with 4.6%.
- Net income included a $1.25 million income-tax benefit despite a $0.19 million pretax loss. The filing attributes the tax benefit chiefly to the federal tax-rate difference on NOL carrybacks.
- Revenue mix in 2020 was Card Casino $19.89 million, pari-mutuel $7.98 million, food and beverage $2.37 million, and other $2.90 million. Versus 2019, these categories declined 42.2%, 18.9%, 73.3%, and 52.4%, respectively.
- Year-end cash, cash equivalents, and restricted cash totaled $4.47 million, versus $3.93 million a year earlier. The balance sheet classified all 2020 cash as restricted cash; unrestricted cash and cash equivalents were reported as zero. Restricted balances include amounts due to horsemen and card-game pools.
- The company had no long-term debt and no outstanding balance on its revolving credit line at year-end. The facility was $6.0 million at December 31, 2020, with a $1.25 million letter of credit issued; a February 2021 amendment extended maturity to January 31, 2024 and increased the line to up to $10.0 million.
- The board suspended quarterly dividends in March 2020. The company paid $0.33 million in dividends during 2020, compared with $1.28 million in 2019.
Material changes and unusual items
- Card Casino, simulcast, and food-and-beverage operations were suspended March 16 through June 2020; racing and simulcasting resumed June 10, with table games and poker reopening later that month and in July. Those operations closed again November 21, 2020 through January 10, 2021, then reopened subject to restrictions.
- The live meet had 53 racing days in 2020, versus 66 in 2019. Reduced operations and capacity limitations drove substantial revenue declines; lower staffing, marketing, and other costs partly offset lost revenue.
- A $2.37 million gain was recorded on land contributed to the Doran Canterbury II and Canterbury DBSV joint ventures. The company also recorded a $1.48 million loss from equity investments.
- Canterbury Commons activity included land contributions to development joint ventures and agreements to sell about 13.7 acres for approximately $3.5 million, subject to closing conditions. The company held a 27.4% interest in each Doran venture and a 61.87% interest in Canterbury DBSV, which it accounts for using the equity method.
Outlook, risks, and contingencies
- Management said COVID-19’s duration, customer demand, capacity restrictions, and the timing of any return toward normal operations could not be reliably predicted; it expected pandemic effects to remain material. No specific revenue or earnings guidance was provided.
- Management cited cash, operating cash generation, and credit availability as expected sources of liquidity, alongside furloughs and staffing reductions, suspended dividends, deferred nonessential capital spending, and cost controls.
- The Cooperative Marketing Agreement with the Shakopee Mdewakanton Sioux Community runs through 2022. It provides purse enhancements directly to horsemen, not the company; marketing payments to the company were $1.62 million annually for 2021 and 2022. The filing’s stated 2021–2022 annual purse-enhancement amount is inconsistent: some sections report $7.28 million and others $7.38 million.
- The company reported a TIF receivable of $11.89 million, including $0.70 million interest, tied to future tax increments from development. Reimbursement depends on future tax revenues. The auditor identified estimation of the related allowance as a critical audit matter; management recorded no allowance.
- Key risks include continued pandemic disruption, competition from tribal casinos and other gaming and entertainment, regulation and gaming taxes, attracting horses and trainers, nonrenewal or changed terms of the SMSC agreement after 2022, and execution, financing, approvals, leasing, and reimbursement risks in real estate development.
- Management considered the likelihood of payments under the off-track betting earn-out and repayment obligations for a breach of the SMSC agreement remote. The company reported no material pending legal proceedings.
Important facts for investors to verify
- Q4-only results, which are not clearly presented in this annual filing, and the subsequent quarterly operating trend.
- Unrestricted liquidity, including the availability and borrowing-base conditions of the amended credit facility, given that year-end cash was classified as restricted.
- The recoverability and timing of the $11.89 million TIF receivable, and the final documented allocation of infrastructure obligations with Shakopee.
- The correct annual purse-enhancement commitment under the SMSC agreement, given the $7.28 million/$7.38 million discrepancy, and the prospects for an agreement beyond 2022.
- Occupancy, cash generation, debt and funding needs at the real estate joint ventures, plus whether pending land sales close as expected.
- The extent to which pandemic restrictions, customer demand, and staffing costs affect the 2021 live meet and reopened casino and event operations.