<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
XXX QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
- - --- SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED MARCH 31, 1996.
___ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM ________ TO__________.
Commission File Number 0-24554
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Canterbury Park Holding Corporation
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(Exact name of business issuer as specified in its charter)
Minnesota 41-1775532
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(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
1100 Canterbury Drive, Shakopee, Minnesota 55379
- - ------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
(612) 445-7223
-----------------------
(Issuer's Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such report), and (2) has been
subject to such filing requirements for the past 90 days. YES __X__ NO ___
The Company had 2,939,271 shares of common Stock, $.01 par value per share,
outstanding as of May 10, 1996.
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Canterbury Park Holding Corporation
INDEX
Page
----
PART 1. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of
March 31, 1996 and December 31, 1995................3
Consolidated Statement of Operations for the
periods ended March 31, 1996 and 1995...............4
Consolidated Statement of Cash Flows for the
periods ended March 31, 1996 and 1995...............5
Notes to Consolidated Financial Statements..........6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS................7
PART II. OTHER INFORMATION.......................................10
Signatures...................................................10
Exhibit 1 EARNINGS PER SHARE SCHEDULE........................11
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CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995 (UNAUDITED)
- - --------------------------------------------------------------------------
MARCH 31, DECEMBER 31,
1996 1995
ASSETS
CURRENT ASSETS
Cash $ 483.195 $ 388,571
Accounts receivable, net of allowance
for uncollectible accounts 129,767 237,928
Inventory 77,473 88,806
Deposits 20,250 20,250
Prepaid expenses 84,996 89,198
---------- ---------
Total current assets 795,681 824,753
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $1,377,502 and $1,186,073,
respectively 8,939,155 9,143,662
INTANGIBLE ASSETS, net of accumulated
amortization of $6,515 and $5,378,
respectively 16,185 17,322
--------- ---------
$ 9,751,021 $ 9,985,737
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 709,169 $ 672,800
Accrued wages and payroll taxes 114,093 144,052
Accrued interest 161,300 109,340
Advance from shareholder (Note 2) 1,599,302 2,427,309
Accrued property taxes 482,109 386,124
Payable to horsepersons 449,866 533,711
--------- ---------
Total current liabilities 3,515,839 4,273,336
COMMITMENTS AND CONTINGENCIES (Note 3)
SHAREHOLDERS' EQUITY
Common stock, $.01 par value, 10,000,000
shares authorized, 2,939,271 shares
issued and outstanding 29,393 29,393
Additional paid-in capital 7,837,004 7,837,004
Accumulated deficit ( 1,631,215 ) ( 2,153,996 )
----------- -----------
Total shareholders' equity 6,235,182 5,712,401
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$ 9,751,021 $ 9,985,737
=========== ===========
See notes to consolidated financial statements.
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CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
PERIODS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
- - ------------------------------------------------------------------------------
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 1996 MARCH 31,1995
OPERATING REVENUES:
Pari-mutuel $ 2,634,991 $ 2,511,439
Concessions 380,568 278,480
Admissions and parking 65,639 77,026
Programs and racing forms 138,105 147,398
Other operating revenue 71,430 92,610
--------- ---------
3,290,733 3,106,953
OPERATING EXPENSES:
Pari-mutuel expenses
Statutory purses 183,402 197,169
Host track fees 459,932 430,397
Pari-mutuel taxes 158,184 151,116
Minnesota breeders' fund 140,270 133,628
Salaries and benefits 594,847 663,530
Cost of concession sales 92,526 77,789
Cost of publication sales 165,200 159,762
Depreciation and amortization 196,366 166,996
Utilities 148,569 144,606
Repairs, maintenance and supplies 52,384 114,527
Property taxes 95,985 101,609
Advertising and marketing 87,484 83,283
Other operating expenses 331,470 485,898
--------- ---------
2,706,619 2,910,310
NONOPERATING (EXPENSES) REVENUES:
Interest expense (62,253) (33,675)
Other, net 920 8,776
--------- ---------
(61,333) (25,399)
--------- ---------
INCOME BEFORE INCOME TAX EXPENSE 522,781 171,244
INCOME TAX EXPENSE 23,896
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NET INCOME $ 522,781 $ 147,348
========= =========
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE $ .15 $ .05
========= =========
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 4,733,796 2,939,271
========= =========
See notes to consolidated financial statements.
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CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
PERIODS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
- - ------------------------------------------------------------------------------
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 1996 MARCH 31,1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 522,781 $ 147,348
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation and amortization 196,366 166,996
Decrease (increase) in accounts receivable 108,161 (16,047)
Decrease (increase) in other current assets 15,535 (100,556)
Increase in accounts payable and
accrued expenses 6,410 321,980
Increase (decrease) in accrued interest 51,960 (6,522)
Increase in accrued property taxes 95,985 101,608
Increase in accrued income taxes 23,896
Decrease in payable to horsepersons (83,845) (16,792)
--------- ---------
Net cash provided by operations 913,353 621,911
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (13,222) (193,743)
Proceeds from sale of property and
equipment, net 22,500
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Net cash provided by (used in)
investing activities 9,278 (193,743)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on advance from shareholder, net (828,007) (300,000)
--------- ---------
NET INCREASE IN CASH 94,624 128,168
CASH AT BEGINNING OF PERIOD 388,571 323,259
--------- ---------
CASH AT END OF PERIOD $ 483,195 $ 451,427
========= =========
See notes to consolidated financial statements.
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CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIODS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The summary of significant accounting policies is included in the notes to
consolidated financial statements in the 1995 Annual Report on form 10-KSB.
INCOME TAXES - Income tax expense is computed by applying the estimated
annual effective tax rate to the year-to-date income. In 1996, income tax
expense of approximately $224,000 is offset by a reduction in the valuation
allowance recorded on the deferred tax asset related to the Company's net
operating loss carryforward.
EARNINGS PER SHARE - Earnings per share for the three months ended March
31, 1996 is calculated using the modified treasury stock method.
UNAUDITED FINANCIAL STATEMENTS - The consolidated balance sheet as of March
31, 1996, the consolidated statement of operation for the three months
ended March 31, 1996 and 1995, the consolidated statement of cash flows for
the three months ended March 31, 1996 and 1995, and the related information
contained in these notes have been prepared by management without audit.
In the opinion of management, all accruals (consisting of normal recurring
accruals) which are necessary for a fair presentation of financial position
and results of operations for such periods have been made. Results for an
interim period should not be considered as indicative of results for a full
year.
2. RELATED-PARTY TRANSACTIONS
At March 31, 1996, the Company had a $3,000,000 line of credit arrangement
with the Company's majority shareholder, of which $1,599,302 was
outstanding. The interest rate for borrowings under the line of credit was
prime plus 2%. The line of credit may be canceled on 90 days notice.
Management believes that funds available under this line of credit, or any
other line of credit which replaces it, along with funds generated from
simulcast operations, will be sufficient to satisfy its liquidity and
capital resource requirements during 1996. If the line of credit is not
replaced, the Company's majority shareholder has agreed not to terminate
the line of credit prior to March 31, 1997.
3. CONTINGENCIES
In accordance with the Earn Out Note, 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 $700,000 per operating year, as defined, or 20% of the net
pretax profit, as defined, for each of five operating years. At the date
(if any) that these two conditions are met, the five minimum payments will
be discounted back to their present value and the sum of those discounted
payments will be recorded as an increase to the purchase price. The
purchase price will be further increased if payments become due under the
20% of Net Pre-Tax Profit calculation. The first payment is to be made 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.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
Canterbury Park Holding Corporation (the "Company") owns and operates
Canterbury Park (the "Racetrack"), the only pari-mutuel horse racing facility in
the State of Minnesota. The Company's revenues for the period from January 1,
1996 to March 31, 1996 were derived primarily from pari-mutuel take-out on races
simulcast to Canterbury Park from racetracks throughout the country during 77
days of simulcast racing. In 1996 the Company intends to conduct over 300
simulcast racing days and additional revenues will be derived from pari-mutuel
take-out on live thoroughbred and quarterhorse racing at Canterbury Park when
the Company conducts its 51-day live racing meet from May 25, 1996 to August 18,
1996. In addition to pari-mutuel revenues, the Company generates revenues from
admissions, advertising, parking, publication sales, concessions, special events
and other sources of revenue.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31,
1995:
During the first three months of 1996 the Company operated 77 simulcast
racing days compared to 79 racing days in 1995. Total wagering handle for the
quarters ended March 31, 1996 and 1995 was $13,290,549 and $12,680,502,
respectively. Total attendance for the periods ending March 31, 1996 and 1995
was 40,069 and 43,405, respectively, resulting in an average of 520 and 549
patrons per simulcast day, respectively, and per-patron wagering of $331 and
$292, respectively.
Pari-mutuel revenue (gross wagering after deducting statutorily mandated
amounts from the handle to be paid to winning bettors or "take-out") for the
periods ending March 31, 1996 and 1995 was $2,634,991 and $2,511,439,
respectively. Total pari-mutuel expenses including state pari-mutuel taxes,
contributions to the Minnesota Breeders' Fund, statutory purses and host fees
were $941,788 and $912,310 for the periods ending March 31, 1996 and 1995,
respectively.
One of the Company's largest single expense items is horsepersons purses,
which Minnesota law requires to be set aside from pari-mutuel revenues. The
minimum percentage required by law to be set aside for purses varies
substantially depending on the time of the year the simulcasting is conducted.
For a 25 week period beginning in early May, which is the statutorily-
established "Racing Season," 50% of the net retainage is allocated to a fund for
the payment of purses during the live meet. For the remaining 27 weeks of the
year, November through April, funds accumulate for purses at the rate of 25% of
retainage after deducting an 8% expense factor. During the first quarter of any
calendar year, the Company benefits from the lower "non-racing season" purse
rate.
On April 11, 1996, new legislation was enacted which exempts the first $12
million per year of pari-mutuel revenue from the pari-mutuel tax, beginning July
1, 1996 and ending July 1, 1999. The legislation also allows Canterbury Park to
retain uncashed winning tickets from the enactment date of this legislation
until December 31, 1999. The benefits of this legislation to the Company are
expected to be approximately $750,000 per year and an additional $250,000
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will increase purses paid to horsepersons. The benefit in 1996 will be
considerably less than these annual estimates as the legislation will be in
effect for only the final two quarters.
Concession revenues were 37% higher than the comparable period in 1995 due
primarily to the success of three profitable special events during the first
quarter of 1996. During the first three months of 1996, Canterbury Park hosted
two major competitive snowmobile races and a three-day arts and crafts fair,
drawing an average of more than 15,000 spectators per event. During the
comparable period in 1995, Canterbury Park hosted one snowmobile race and
included two of three days of an arts and crafts fair. The snowmobile race in
1995, although gaining Canterbury Park a reputation as one of the premier
snowmobile racing venues in the world, was not profitable. The Company hosted a
series of three snowmobiling events at the facility during the 1995-1996 winter
season. This allowed the Company to allocate the cost of preparing the racing
surface to three events compared to only the single event in February of 1995.
In addition, the Company did not directly promote the events in 1996, but rather
leased the facility to the promoters. This reduced the Company's risk and
operating expenses.
Admissions, parking, program and racing form and other operating revenues
were lower in the 1996 period than in 1995, due to lower per-day simulcast
attendance.
Salaries and benefits are lower for the 1996 period than in 1995 due to
efficiencies gained in the concessions and mutuels areas. In addition, after
the 1995 live meet, certain reductions and consolidations of full-time staff
were enacted to reduce wage expenses for the Company.
Depreciation and amortization have increased from the 1995 period due to
the acquisition of significant amounts of video equipment in the second quarter
of 1995.
Repairs, maintenance and supplies expenditures decreased 54% from the
comparable period last year. This is due primarily to the extensive repairs and
improvements necessary in 1995 to bring the facility up to par for the inaugural
1995 live race meet. In addition, in 1996, an unseasonably cold month of March
resulted in deferrals of routine track, grounds and barn preparation to the
second quarter.
Other operating expense levels were lower for the 1996 period due to
stabilization of operations and increased focus on expense control in 1996. In
addition, other operating expenses in 1995 included approximately $75,000 of net
expenses related to the inaugural snowmobile race in February of 1995. These
expenses are not reflected in the 1996 Financial Statements as these costs were
paid directly or reimbursed by the promoters in accordance with our facility
rental agreement.
Net interest expense has increased 85% from the three month period ending
March 31, 1995 due to increases in amounts payable to horsepersons and in
advances on a line of credit with Mr. Curtis Sampson, the Company's Chairman.
The average daily balance of advances on the line of credit was approximately
$1.7 million for the first quarter of 1996, compared to $1.1 million for the
first quarter of 1995. Amounts payable to Horsepersons was $395,575 at March
31, 1995 compared to $449,866 at March 31, 1996. In addition, the interest rate
paid on amounts due to Horsepersons has increased from 6.0% during the first
three months of 1995
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to an average of 8.33% for the same period in 1996. The average interest rate
on the line of credit was 10.83% for the 1995 period compared to 10.33% in 1996.
Net income was $522,781 for the three months ended March 31, 1996 compared
to $147,348 in 1995, which was net of estimated income taxes of $23,896. There
is no estimated income tax expense for the three months ended March 31, 1996.
Because management does not anticipate net income for the year ended December
31, 1996 to exceed the net operating loss carryforward available at December 31,
1995. As discussed above, an increased portion of the Company's take-out will
be allocated to purses during six of the next nine months and, due to the
additional expenses that will be incurred in connection with live racing, the
Company does not expect income during the first quarter of fiscal year 1996 to
continue through the second and third quarters of fiscal year 1996.
LIQUIDITY AND CAPITAL RESOURCES
During the period January 1, 1996 through March 31, 1996, cash provided by
operating activities was $913,353, which resulted principally from net income of
$522,781. Other items providing cash for operations included depreciation and
amortization of $196,366, decreases in accounts receivable and other current
assets of $123,696, an increase in accrued property taxes of $95,985, an
increase in accrued interest of $51,960, and an increase in accounts payable and
accrued expenses of $6,410. These items are partially offset by a decrease in
amounts payable to horsepersons of $83,845. During the period January 1, 1996
through March 31, 1996, cash used in financing activities was $828,007, which
was the result of payments reducing the Company's line of credit with Mr. Curtis
Sampson.
Under its agreement with the horsepersons' associations (the
"horsepersons") the Company is required to segregate purse funds received from
simulcasting for future payment as purses for live racing or for other uses of
the horsepersons. Pursuant to this agreement, during the quarter ended March
31, 1996, the Company has transferred into a trust account to paid directly to
the horsepersons approximately $250,000. At March 31, 1996, the Company had an
additional $449,866 liability to the horsepersons which will be paid with
interest in 1996 in accordance with the agreement.
Approximately $385,000 of the Company's accrued property tax balance of
$482,200 at March 31, 1996 represents estimated 1995 taxes due and payable in
1996. The estimated tax accrual for the quarter ended March 31, 1996 (due and
payable in 1997) has been based on the current valuation for the property of
$6,000,000.
The Company believes that the funds to be generated from operations
together with funds available under its $3,000,000 line of credit with Mr.
Sampson will be sufficient to satisfy its liquidity and capital resource
requirements for the next twelve months. The Company anticipates that it may
pay down a portion of the borrowings under the line of credit with funds
generated from operations and borrow additional amounts under the line of credit
as funds are needed for working capital purposes. The Company is also
attempting to obtain a credit facility from a traditional lender to replace the
line of credit with Mr. Sampson. Mr. Sampson has advised the Company that if it
is unable to obtain a credit facility from a traditional lender, then he will
keep his line of credit in place until March 31, 1997. As of May 10, 1996,
borrowings under the line of credit were $1,489,409.
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PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2. CHANGES IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 1 EARNINGS PER SHARE SCHEDULE
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly cause this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Canterbury Park Holding Corporation
Dated: May 14, 1996 /s/ Randall D. Sampson
------------------------------------------------------
Randall D. Sampson,
President, Chief Executive Officer and Treasurer
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EXHIBIT 1. EARNINGS PER SHARE SCHEDULE
Calculation of net income under the modified treasury stock method:
Primary
Net Income $522,781
Assumed interest expense reduction 62,253
Assumed interest income increase 101,785
----------
$686,819
==========
Calculation of weighted average number of common and
common equivalent shares outstanding under the
modified treasury stock method:
Weighted average shares outstanding 2,939,271
Common stock equivalents 1,794,525
----------
$ 4,733,796
==========
Net income per common and common equivalent
share $ 0.15
==========
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 483,195
<SECURITIES> 0
<RECEIVABLES> 133,067
<ALLOWANCES> (3,300)
<INVENTORY> 77,473
<CURRENT-ASSETS> 795,681
<PP&E> 10,316,657
<DEPRECIATION> (1,377,502)
<TOTAL-ASSETS> 9,751,021
<CURRENT-LIABILITIES> 3,515,839
<BONDS> 0
0
0
<COMMON> 29,393
<OTHER-SE> 6,205,789
<TOTAL-LIABILITY-AND-EQUITY> 9,751,021
<SALES> 518,673
<TOTAL-REVENUES> 3,290,733
<CGS> 257,726
<TOTAL-COSTS> 2,706,619
<OTHER-EXPENSES> (920)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62,253
<INCOME-PRETAX> 522,781
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 522,781
<EPS-PRIMARY> .15
<EPS-DILUTED> 0
</TABLE>
