SHAKOPEE, Minn., Nov. 9, 2020 /PRNewswire/ -- Canterbury Park
Holding Corporation ("Canterbury"
or "the Company") (NASDAQ: CPHC), today reported financial results
for the third quarter ended September 30,
2020. The results reflect the ongoing impact of the COVID-19
pandemic, including the state mandated capacity limitations and
weakened visitor demand subsequent to the reopening of Canterbury
Park.
($ in thousands,
except per share data and percentages)
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Three Months Ended
September 30,
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Nine Months Ended
September 30,
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Increase
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Increase
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2020
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2019
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(Decrease)
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2020
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2019
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(Decrease)
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Net revenues
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$13,300
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$18,601
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(28.5%)
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$27,017
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$46,625
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(42.1%)
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Adjusted
EBITDA(1)
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1,211
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2,265
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(46.5%)
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295
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4,658
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(93.7%)
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Net
income(2)
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$1,849
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$1,150
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60.7%
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$923
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$2,165
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(57.4%)
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Basic EPS
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$0.39
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$0.25
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56.0%
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$0.20
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$0.47
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(57.4%)
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Diluted EPS
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$0.39
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$0.25
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56.0%
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$0.20
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$0.47
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(57.4%)
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(1) Adjusted
EBITDA, a non-GAAP measure, excludes certain items from net (loss)
income, a GAAP measure. Non-GAAP
financial measures are not
intended to be considered in isolation from, a substitute for, or
superior to GAAP results.
Definitions, disclosures and
reconciliations of non-GAAP financial information are included
later in the release.
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(2) Net income
for the three and nine month periods ended September 30, 2020
include the benefit of a $2.3 million gain
related to transfers of
land to the Doran Canterbury II and Canterbury DBSV joint
ventures.
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Management Commentary
"While our third quarter results reflect the continued impact of
the Covid-19 pandemic on all aspects of our operations at
Canterbury Park, the quick actions we took to reduce labor and
other operating expenses along with our disciplined approach to
conserving cash have helped ensure we have the liquidity and
flexibility to position the Company for long-term health and
growth," said Randy Sampson,
President and Chief Executive Officer of Canterbury Park.
"Notwithstanding the pandemic restrictions, since reopening in
June, our financial performance consistently improved throughout
the quarter. As a result, we were able to generate positive cash
flow in the third quarter of 2020.
"Our operations included month-over-month improvement in table
games revenue in our Card Casino throughout the third quarter of
2020 compared to the prior year. While July was down by double
digits compared to a year ago, it steadily improved and was down
single digits in August and up slightly in September. In our
racing and pari-mutuel operations, we completed a safe and modified
53-day race meet. Due to capacity being limited to approximately
10% of the average number of visitors we would normally
accommodate, and as a result of the loss of 12 racing days, we saw
a 65% decrease in on-track wagering on our live races. However, our
decision to shift our racing schedule to weekday afternoons allowed
us to increase our market penetration, resulting in a 116%
year-over-year increase in handle from out-of-state wagering
outlets. We continue to work closely with state and local officials
to increase capacity in our Card Casino and our simulcast wagering
location in a safe manner and to communicate our health and safety
efforts to our guests. We expect that when allowed to operate
without the current restrictions and as guest visitation begins to
return to pre-pandemic levels, the financial performance of these
operations will continue to improve.
"Notwithstanding the partial recovery in our Card Casino and
pari-mutuel businesses, pandemic-related restrictions on our
special events and group sales operations impacted the third
quarter operating performance and will continue to impact our
non-gaming business for at least the next several months. To
address this near-term challenge, we recently made the difficult
decision to align staffing levels with the current level of our
non-gaming business. These actions included leaving vacant
positions unfilled, furloughing team members, pay reductions for
senior leadership and some job eliminations. While the decision to
undertake these actions was very painful to make, they have allowed
us to reduce expenses to a level that we believe will help us
sustain our long-term viability. We greatly appreciate the patience
and support of our team members during this period of uncertainty
caused by the COVID-19 pandemic, and we look forward to a brighter
future as restrictions on our operations ease.
"Importantly, the pandemic has not had any notable impact on our
consistent progress in unlocking value for our shareholders by
monetizing the excess acreage around Canterbury Park through the
development of Canterbury Commons™. Development activity for this
unique and new residential, commercial and retail community remains
busy with six active projects on approximately 50 acres of land
currently underway in various stages of development,
pre-development or approvals. Committed development projects to
date include the Triple Crown Residences and the southwest
development ground development which include a number of commercial
pad-ready sites for future development. The residential population
at Canterbury Commons is beginning to be established as leasing
activity accelerates for the upscale apartments at the Triple Crown
Residences. In addition, the new corporate headquarters for
Greystone Construction, which represents the first commercial
development at Canterbury Commons, is progressing. It is very
encouraging to see the daily transformation taking place, and we
believe that bringing a new population center to the doorstep of
Canterbury Park will drive new energy and economic benefits for our
Card Casino, racing and hospitality operations. We are making
progress on additional agreements to further monetize the remaining
excess real estate. Overall, we expect the development of
Canterbury Commons will provide for a long-term stream of cash flow
and create value from our excess land which we believe is not
currently reflected in our share valuation."
Mr. Sampson concluded, "Prior to the pandemic, we were achieving
consistent operating improvement and expect we can regain that
momentum as normalized operations resume. In the interim, we remain
focused on providing an outstanding and safe entertainment
experience at Canterbury Park while maintaining the cost and cash
management discipline needed to ensure that we can execute on
growth opportunities in the future. We are confident Canterbury
Park has the balance sheet and financial flexibility to support our
current operations and to execute on future growth initiatives for
our Card Casino, pari-mutuel and hospitality operations at the
appropriate time while unlocking value through the development of
Canterbury Commons."
Canterbury Commons Development
Update
Development of Canterbury Commons began in 2018 with the
first of two joint venture agreements between Canterbury and Doran Companies ("Doran") for the development of the upscale
Triple Crown Residences at Canterbury Park. Construction of the
321-unit first phase, which is being developed pursuant to the
first joint venture agreement, began in late 2018 with initial
occupancy on June 1, 2020. As of the
end of October 2020, approximately
150 units were available for occupancy. Leasing activity for these
units has been strong and is anticipated to continue as the
remaining first phase units are expected to be released and
available for occupancy beginning December
2020 and into the first quarter of 2021. In August 2020, Doran exercised its option for Phase II of the
project, which will include an additional 300 residential units,
and the Company entered into a second joint venture agreement with
Doran. Pursuant to this second
agreement, in early August 2020, the
Company transferred roughly 10 acres of land to the second joint
venture with Doran. In addition to
receiving 27.4% ownership in the Doran Phase II joint venture, the
exchange resulted in the repayment of a $2.9
million note receivable which was on the Company's balance
sheet as a related party receivable as of June 30, 2020. Groundwork on the Doran Canterbury
II site began in October 2020, paving
the way for the ground-up construction of the second phase of
apartments, which is anticipated to begin in the spring of
2021.
Development work related to the Company's joint venture
with Greystone Construction ("Greystone") is also underway on the
southwest portion of the Canterbury Commons site. Pursuant to this
joint venture, Greystone is developing a 13-acre land parcel with
potential uses expected to include hospitality, dining,
residential, commercial and service-oriented retail. Greystone's
development work to date is primarily for a new 28,000 square foot
office building, with Greystone committed to occupy the second
floor as its new corporate headquarters. The project is expected to
be completed by July 2021.
In addition, development work by Pulte Homes of Minnesota on 109 new row homes and townhome
residences at Canterbury Commons is expected to start in the spring
of 2021 following approvals. Lifestyle Communities is working on
its approvals with the City of
Shakopee for a new cooperative community featuring a
56-unit, four-story building with over 5,000 square feet of amenity
spaces that is expected to begin construction in the fall of
2021.
The Company expects that road work on Unbridled Avenue on the
north side of Canterbury Park will be completed at the end of
November 2020, providing a new
entrance from Canterbury Road that will significantly improve
access to Canterbury Park and Canterbury Commons.
Finally, the Company is making further progress with developer
and partner selection for the balance of the approximately 140
acres that will comprise Canterbury Commons, with a focus on
additional commercial development of office, retail, hotel and
entertainment spaces. Canterbury
expects to make additional announcements of new development
partners in the future for this phase of development.
Summary of 2020 Third Quarter Operating Results
Net revenues for the three months ended September 30, 2020 decreased 28.5% to
$13.3 million compared to
$18.6 million for the same period in
2019. Pari-mutuel revenues increased $606,000, or 16.9%, over the prior-year period
due to an increase in out of state handle, partially offset by
decreases in simulcast wagering and in live racing revenue due to
state-mandated capacity limitations reducing visitors to
approximately 10% of the prior-year period and an 18.5% reduction
in the number of days in the racing season. For the three months
ended September 30, 2020, Card Casino
revenues decreased $1.4 million, or
16.0%, as compared to the same period in 2019, food and beverage
revenues decreased $3.0 million, or
77.6%, as compared to the same period in 2019, and other revenues
decreased $1.6 million, or 59.5%, as
compared to the same period in 2019. These decreases are the result
of business limitations due to the COVID-19 pandemic.
Operating expenses for the three months ended September 30, 2020 were $12.2 million, a decrease of $4.9 million, or 28.5%, compared to operating
expenses of $17.1 million for the
same period in 2019. This year-over-year decrease in operating
expenses reflects reductions in the majority of the Company's
operating expenses, primarily a result of its limited operations
and active efforts to reduce expenses to preserve cash.
During the 2020 third quarter, the Company recorded a
$2.3 million gain related to the
transfers of land to the Doran Canterbury II and Canterbury DBSV
joint ventures. This gain, along with reductions in operating
expenses proportionately greater than the reductions in revenue for
the third quarter 2020, were the contributors to an increase in
income from operations of $1.9
million in the third quarter 2020 as compared to the prior
year period.
The Company recorded net income of $1.8
million, or diluted earnings per share of $0.39, for the three months ended September 30, 2020. Net income and diluted
earnings per share for the three months ended September 30, 2019 were $1.2 million and $0.25, respectively. The increase in net income
in the third quarter 2020 as compared to the third quarter 2019 was
primarily due to the gain on the land transfers that occurred in
the third quarter 2020 and did not occur in the prior-year
period.
Adjusted EBITDA, a non-GAAP measure, for the three months ended
September 30, 2020 was $1.2 million compared to $2.3 million in the same period in 2019.
Summary of 2020 Year-to-Date Operating Results
Net revenues for the nine months ended September 30, 2020 decreased 42.1% to
$27.0 million, compared to
$46.6 million for the same period in
2019. The year-over-year decrease in net revenues reflects declines
across the Company's operations, primarily as a result of the
temporary suspension of operations from March 16, 2020 through June 9, 2020 and the limitations placed on its
operations since reopening.
Operating expenses for the nine months ended September 30, 2020 were $28.1 million, a decrease of $15.7 million, or 35.9%, compared to operating
expenses of $43.9 million for the
same period in 2019. The year-over-year decrease in operating
expenses reflects reductions in a majority of the Company's
operating areas, primarily as a result of the temporary suspension
of operations from March 16, 2020
through June 9, 2020 and the
limitations placed on operations since reopening. In the second
quarter of 2019, the Company recorded a gain on insurance
recoveries of $199,000, which was
accounted for as a reduction in operating expenses.
The Company recorded net income of $923,000, or diluted earnings per share of
$0.20, for the nine months ended
September 30, 2020. Net income and
diluted earnings per share for the nine months ended September 30, 2019 were $2.2 million and $0.47, respectively.
Adjusted EBITDA, a non-GAAP measure, for the nine months ended
September 30, 2020 was $295,000 compared to $4.7
million in the same period in 2019.
Additional Financial Information
Further financial information for the third quarter ended
September 30, 2020 is presented in
the accompanying tables at the end of this press release.
Additional information will be provided in the Company's Quarterly
Report on Form 10-Q that will be filed with the Securities and
Exchange Commission on or about November 10,
2020.
Use of Non-GAAP Financial Measures
To supplement our financial statements, we also provide
investors with information about our EBITDA and Adjusted EBITDA,
each of which is a non-GAAP measure, which excludes certain items
from net income a GAAP measure. We define EBITDA as earnings before
interest, taxes, depreciation and amortization. We define Adjusted
EBITDA as earnings before interest income, income tax expense
(benefit), depreciation and amortization, as well as
excluding gain on insurance recoveries, gain on transfer of
land, and loss from disposal of assets. Neither EBITDA nor adjusted
EBITDA is a measure of performance calculated in accordance with
generally accepted accounting principles ("GAAP"), and should not
be considered an alternative to, or more meaningful than, net
income as an indicator of our operating performance. We have
presented EBITDA as a supplemental disclosure because it is a
widely used measure of performance and basis for valuation of
companies in our industry. Other companies that provide EBITDA
information may calculate EBITDA differently than we do. We have
presented Adjusted EBITDA as a supplemental disclosure because it
enables investors to understand our results excluding the effect of
these items.
About Canterbury Park
Canterbury Park Holding Corporation (Nasdaq: CPHC) owns and
operates Canterbury Park Racetrack and Card Casino in Shakopee, Minnesota, the only thoroughbred and
quarter horse racing facility in the State. The Company generally
offers live racing from May to September. The Card Casino hosts
card games 24 hours a day, seven days a week, dealing both poker
and table games. The Company also conducts year-round wagering on
simulcast horse racing and hosts a variety of other entertainment
and special events at its Shakopee
facility. The Company is redeveloping 140 acres of
underutilized land surrounding the Racetrack in a project known as
Canterbury Commons™. The Company is pursuing several mixed-use
development opportunities for this land, directly and through joint
ventures. For more information about the Company, please visit
www.canterburypark.com.
Cautionary Statement
From time to time, in reports filed with the Securities and
Exchange Commission, in press releases, and in other communications
to shareholders or the investing public, we may make
forward-looking statements concerning possible or anticipated
future financial performance, business activities or plans. These
statements are typically preceded by the words "believes,"
"expects," "anticipates," "intends" or similar expressions. For
these forward-looking statements, we claim the protection of the
safe harbor for forward-looking statements contained in federal
securities laws. Shareholders and the investing public should
understand that these forward-looking statements are subject to
risks and uncertainties which could affect our actual results and
cause actual results to differ materially from those indicated in
the forward-looking statements. We report these risks and
uncertainties in our Annual Report on Form 10-K filed with the SEC
and subsequently filed Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K. They include, but are not limited to: the
effect that the COVID-19 coronavirus pandemic and resulting
precautionary measures may have on us as an entertainment venue or
on the economy generally, including the fact that we temporarily
suspended all card casino, simulcast, and special events operations
at Canterbury Park from March 16,
2020 through June 9, 2020,
that since June 9, 2020 we have been
open and operating on a much more limited basis to comply with
state law and health protocols, reductions in the number of
visitors due to their COVID-19 concerns, and that we operated a
reduced schedule consisting of a 53-day live race meet in 2020;
material fluctuations in attendance at the Racetrack; material
changes in the level of wagering by patrons; any decline in
interest in the unbanked card games offered in the Card Casino;
competition from other venues offering unbanked card games or other
forms of wagering; competition from other sports and entertainment
options; increases in compensation and employee benefit costs;
increases in the percentage of revenues allocated for purse fund
payments; higher than expected expense related to new marketing
initiatives; the impact of wagering products and technologies
introduced by competitors; the general health of the gaming sector;
legislative and regulatory decisions and changes; our ability to
successfully develop our real estate, including our reliance on our
current and future development partners; temporary disruptions or
changes in access to our facilities caused by ongoing
infrastructure improvements; and other factors that are beyond our
ability to control or predict.
Investor Contacts:
Randy
Dehmer
Vice President and
Chief Financial Officer
Canterbury Park
Holding Corporation
952-233-4828 or
investorrelations@canterburypark.com
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Richard Land, Jim
Leahy
JCIR
212-835-8500 or
cphc@jcir.com
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- Financial tables follow –
CANTERBURY PARK
HOLDING CORPORATION'S
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SUMMARY OF
OPERATING RESULTS
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(UNAUDITED)
|
|
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Three months
ended
|
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Nine months
ended
|
|
September
30,
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September
30,
|
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2020
|
|
2019
|
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2020
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2019
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Net Operating
Revenues
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$13,300,014
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$18,600,641
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$27,016,828
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$46,624,515
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Operating
Expenses
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(12,245,399)
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(17,127,279)
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($28,139,097)
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($43,869,142)
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Gain on Transfer of
Land
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2,275,458
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|
-
|
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2,275,458
|
|
-
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Income from
Operations
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3,330,073
|
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1,473,362
|
|
1,153,189
|
|
2,755,373
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Other Operating
(Loss) Income, net
|
(343,064)
|
|
96,065
|
|
($159,655)
|
|
$204,623
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Income Tax
Expense
|
(1,137,997)
|
|
(418,942)
|
|
($70,498)
|
|
($795,164)
|
Net Income
|
$1,849,012
|
|
$1,150,485
|
|
$923,036
|
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$2,164,832
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Basic Net Income Per
Common Share
|
$0.39
|
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$0.25
|
|
$0.20
|
|
$0.47
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Diluted Net Income
Per Common Share
|
$0.39
|
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$0.25
|
|
$0.20
|
|
$0.47
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RECONCILIATION OF
NET INCOME TO EBITDA AND ADJUSTED EBITDA
|
(UNAUDITED)
|
|
|
|
|
Three months
ended
|
|
|
Nine months
ended
|
|
|
September
30,
|
|
September
30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
NET INCOME
|
|
$
|
1,849,012
|
|
$
|
1,150,485
|
|
$
|
923,036
|
|
$
|
2,164,832
|
Interest
income, net
|
|
|
(168,552)
|
|
|
(96,065)
|
|
|
(501,600)
|
|
|
(204,623)
|
Income tax
expense
|
|
|
1,137,997
|
|
|
418,942
|
|
|
70,498
|
|
|
795,164
|
Depreciation
|
|
|
655,003
|
|
|
785,327
|
|
|
2,065,496
|
|
|
1,987,067
|
EBITDA
|
|
|
3,473,460
|
|
|
2,258,689
|
|
|
2,557,430
|
|
|
4,742,440
|
Gain on
insurance recoveries
|
—
|
|
|
—
|
|
|
—
|
|
|
(198,874)
|
Gain on
transfer of land
|
|
(2,275,458)
|
|
|
—
|
|
|
(2,275,458)
|
|
|
—
|
Loss on
disposal of assets
|
|
13,407
|
|
|
6,376
|
|
|
13,407
|
|
|
114,413
|
ADJUSTED
EBITDA
|
|
$
|
1,211,409
|
|
$
|
2,265,065
|
|
$
|
295,379
|
|
$
|
4,657,979
|
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SOURCE Canterbury Park Holding Corporation