Canterbury Park Holding Corp
For the period ended Dec 31, 2024. Filed Mar 11, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 11, 2025
CPHC$15.73-0.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-12.
0001437749-24-007400
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-11.
0001437749-25-006992
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 81 previous paragraphs and 81 current paragraphs.
38 unchanged; 27 reworded; 14 added; 16 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 28 previous and 26 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (14)
Current report
Total Casino revenue decreased $1,006,000, or 2.5%, in 2024 compared to 2023.The decrease can be primarily attributed to both a decrease in drop and a lower average collection revenue rate in table games, somewhat offset by an increase in our other table games revenue related to our progressive jackpot administration revenue.
Current report
Food and beverage revenues increased $139,000, or 1.8%, to $7,968,000 for the year ended December 31, 2024 compared to 2023. The increase in food and beverage revenues is primarily due to increased catering operations related to hosting large scale special events as well as the one additional live race day year-over-year mentioned above.
Current report
Other revenues, consisting of admission revenues, corporate sponsorships, space rentals, and other miscellaneous activities, increased $1,020,000, or 18.3%, to $6,593,000 in 2024 compared to 2023. The increase is primarily due to admission revenue increases related to our first ever rodeo, our first comedy series, and our live racing events.
Current report
Total purse expense increased $308,000, or 4.1%, in 2024 compared to 2023. The increase is primarily due to the expenses incurred as part of our recruiting and participation incentives paid in 2024 under our annual live race meet and purse fund contribution agreement dated December 21, 2023. See Note 9 for further details of the agreement. No recruiting and participation incentives are planned for the 2025 live race meet. The table below notes the various components of both purse expense and the Minnesota Breeders' Fund expense.
Current report
Cost of food and beverage and other sales increased $133,000, or 4.3%, in 2024 compared to 2023. The increase is primarily due to the increased food and beverage revenues related to increased catering operations as noted above.
Current report
Depreciation and amortization increased $476,000, or 15.1%, in 2024 compared to 2023. The increase is primarily due to placing larger fixed assets into service towards the second half of 2023 as well as placing assets into service related to the first and second phases of our barn relocation and redevelopment plan in the second quarter of 2024.
Current report
Advertising and marketing costs decreased $719,000, or 34.8%, in 2024 compared to 2023. The decrease is primarily due to intentionally reducing overall spend in an effort to reduce costs.
Current report
Professional and contracted service expenses decreased $320,000, or 5.4%, in 2024 compared to 2023. The decrease is primarily due to higher costs in 2023 related to long-term strategic growth initiatives.
Current report
During 2024, the Company recorded a gain on transfer of land of $1,732,000 as result of transferring approximately 3.5 acres of land to the Trackside Investments joint venture. See Note 11 for further details.
Current report
INCOME TAXES
Current report
NET INCOME
Current report
The Company recorded net income of $2,113,000, or $0.42 per basic and diluted share for 2024. The Company recorded net income of $10,563,000, or $2.15 per basic and $2.13 per diluted share for 2023.
Current report
Cash provided by operating activities for 2024 was $6,488,000, primarily as a result of the following: the Company reported net income of $2,113,000, depreciation of $3,621,000, loss on equity investment of $5,468,000 and stock-based compensation and 401(k) match totaling $1,447,000, offset by a gain on land transfer of $1,732,000. The Company experienced an increase in cash related to a decrease in income taxes receivable and prepaid income taxes of $897,000, offset by an increase in other long-term receivables of $1,597,000, related to the 2024 purse fund contribution agreement, an increase in TIF receivable of $681,000 and a decrease in accounts payable, net of land, buildings, and equipment funded through accounts payable of $2,121,000, primarily related to payments for our barn relocation and redevelopment plan.
Current report
As of December 31, 2024, the Company has completed phases one and two of the barn relocation and redevelopment plan with phase three currently underway, with estimated remaining costs of approximately $2,500,000. In addition, the Company expects to spend the remaining $2,042,000 in tax increment financing over the next six months for the completion of tax increment related improvements.
Removed paragraphs (16)
Previous report
EMPLOYEE RETENTION CREDIT
Previous report
The employee retention credit (“ERC”), as originally enacted on March 27, 2020 by the CARES Act, is a refundable tax credit against certain employment taxes equal to 50% of the qualified wages an eligible employer pays to employees after March 12, 2020, and before January 1, 2021. The Taxpayer Certainty and Disaster Tax Relief Act (the “Relief Act”), enacted on December 27, 2020, amended, and extended the ERC. The Relief Act extended and enhanced the ERC for qualified wages paid after December 31, 2020 through June 30, 2021. Under the Relief Act, eligible employers may claim a refundable tax credit against certain employment taxes equal to 70% of the qualified wages an eligible employer pays to employees after December 31, 2020 through June 30, 2021. The purpose of the ERC is to encourage employers to keep employees on the payroll, even if they are not working during the covered period because of the coronavirus outbreak.
Previous report
The Company qualified for federal government assistance through the ERC provisions for the second, third, and fourth quarters of 2020, as well as the first and second quarters of 2021. We recognize government grants for which there is a reasonable assurance of compliance with grant conditions and receipt of credits. The Company's expected one-time refunds at December 31, 2023 and 2022 were $0 and $6,103,236, respectively, and are included on the Consolidated Balance Sheets as an employee retention credit receivable. As indicated, the Company received its remaining employee retention credit receivable in 2023.
Previous report
Total Casino revenue decreased $438,000, or 1.1%, in 2023 compared to 2022.The decrease is primarily due to a decrease in live race days year-over-year.
Previous report
Food and beverage revenue decreased $398,000, or 4.8%, to $7,829,000 for the year ended December 31, 2023 compared to 2022. The decrease in food and beverage revenues is primarily due to Twin Cities Summer Jam not taking place in 2023 as it did during the third quarter of 2022.
Previous report
Other revenue, consisting of admission revenues, corporate sponsorships, space rentals, and other miscellaneous activities, decreased $1,847,000, or 24.9%, to $5,573,000 in 2023 compared to 2022. The decrease is primarily due to the expiration of the CMA as marketing funds received from the agreement were used and subsequently recorded in other revenues as well as being recorded as operating expenses, primarily advertising and marketing.
Previous report
Total purse expense decreased $930,000, or 10.9%, in 2023 compared to 2022. The decrease is due primarily to the decrease in pari-mutuel revenues. This also resulted in a decrease in Minnesota Breeders' Fund (the "MBF") expense (shown below). As discussed in greater detail in Item 1 above, Minnesota law requires us to allocate a portion of Casino revenues, wagering handle on simulcast and live horse races, and ADW source market fees for future payment as purses for live horse races and other authorized uses. While most of these amounts were paid into the purse funds for thoroughbred and quarter horse races, Minnesota law requires that a portion of the amounts allocated for purses be paid into the MBF.
Previous report
Cost of food and beverage sales decreased $209,000, or 6.4%, in 2023 compared to 2022. The decrease is primarily due to the decreased food and beverage revenue due to Twin Cities Summer Jam not taking place in 2023 as noted above.
Previous report
Advertising and marketing costs decreased $1,030,000, or 33.2%, in 2023 compared to 2022. The decrease is primarily attributable to the expiration of the Cooperative Marketing Agreement mentioned above in the other revenues section.
Previous report
Professional and contracted service expenses increased $1,209,000, or 25.3% in 2023 compared to 2022. The increase is primarily attributable to long-term strategic growth initiatives being pursued as part of the execution on our five-year strategic plan focused on growing Casino revenue.
Previous report
Net income for the years 2023 and 2022 was $10,563,000 and $7,513,000, respectively.
Previous report
COOPERATIVE MARKETING AGREEMENT
Previous report
The amounts received from the marketing payments under the CMA were recorded as a component of other revenue and the related expenses were recorded as a component of advertising and marketing expense and depreciation in the Company’s consolidated statements of operations. For the year ended December 31, 2022, the Company recorded $1,920,000 in other revenue and incurred $1,698,000 in advertising and marketing expense and $222,000 in depreciation related to the SMSC marketing payment.
Previous report
The CMA expired by its terms on December 31, 2022. Accordingly, for the year ended December 31, 2023, there were no purse enhancement payments or marketing payments under the CMA.
Previous report
Cash provided by operating activities for 2022 was $11,217,000 as a result of net income of $7,513,000 and was increased by 2022 noncash charges from depreciation of $2,981,000, stock-based compensation expense of $450,000, stock-based employee match contribution of $619,000, and loss from equity investment of $1,568,000. Cash from operating activities in 2022 was reduced by a gain on sale of land of $12,000. The Company also experienced a decrease in Casino accruals of $573,000 and an increase in income taxes receivable of $788,000 in 2022 as compared to 2021. This was partially offset by an increase in our TIF receivable of $792,000 and a decrease in employee retention credit receivable of $211,000.
Previous report
Additionally, we also have finalized our stable area improvement plan, andhave begun construction on our barn demo and relocation. We expect to invest approximately $15 million in the stable area improvement plan as currently designed, staged over the course of the next two years.
Reworded paragraphs (27)
Previous wording
In 2023, Canterbury Development continued to pursue various development opportunities that began in 2015 for its underutilized land in a project known as Canterbury Commons. These development opportunities have included contributions of land to joint ventures, three as of the end of December 2023, and sales of parcels of land to third parties that will then develop the property. Our long-term strategic direction is to continue to enhance our Racetrack as a unique gaming and entertainment destination and develop the approximately 40 acres ofunderutilized land not needed for our Racetrack Operations.
Current wording
In 2024, Canterbury Development continued to pursue various development opportunities that began in 2015 for its underutilized land in a project known as Canterbury Commons. These development opportunities have included contributions of land to joint ventures, four as of the end of December 2024, and sales of parcels of land to third parties that will then develop the property. Our long-term strategic direction is to continue to enhance our Racetrack as a unique gaming and entertainment destination and develop the approximately 35 acres of underutilized land not needed for our Racetrack Operations.
Previous wording
EBITDA represents earnings before interest income, income tax expense, 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. We present EBITDA as a supplemental disclosure for our Racetrack Operations because it is a widely used measure of performance of and basis for valuation of companies in the gaming industry. Other companies that provide EBITDA information may calculate EBITDA differently than we do. We also compute Adjusted EBITDA, a non-GAAP measure, which reflects additional adjustments to EBITDA to eliminate unusual or non-recurring items, as well as items relating to our real estate development operations. For the year ended December 31, 2023, Adjusted EBITDA excluded from EBITDA stock-based compensation (which includes the Company's 401(k) match in stock contribution), the gain on sale of land, loss on disposal of assets, insurance proceeds received by the Company's equity investment and depreciation, and amortization and interest related to equity investments. For the year ended December 31, 2022, Adjusted EBITDA excluded from EBITDA stock-based compensation (which includes the Company's 401(k) match in stock contribution), the gain on saleof land, loss on disposal of assets, and depreciation, and amortization and interest related to equity investments.
Current wording
EBITDA represents earnings before interest income, net, income tax expense, 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. We present EBITDA as a supplemental disclosure for our Racetrack Operations because it is a widely used measure of performance of and basis for valuation of companies in the gaming industry. Other companies that provide EBITDA information may calculate EBITDA differently than we do. We also present Adjusted EBITDA, a non-GAAP measure, as a supplemental disclosure because we believe it enables investors to understand and assess our core operating results excluding the effect of unusual or non-recurring items, as well as items relating to our real estate development operations, allowing greater transparency related to a significant measure used by management in its financial and operational decision-making. Adjusted EBITDA has economic substance because it is used by management as a performance measure to analyze the performance of our business and provides a perspective on the current effects of operating decisions For the year ended December 31, 2024, Adjusted EBITDA excluded from EBITDA stock-based compensation (which includes the Company's 401(k) match in Company stock contribution), the gain on transfer of land, loss on disposal of assets, and depreciation and amortization and interest related to equity investments. For the year ended December 31, 2023, Adjusted EBITDA excluded from EBITDA stock-based compensation (which includes the Company's 401(k) match in stock contribution), the gain on sale of land, loss on disposal of assets, insurance proceeds received by the Company's equity investment and depreciation, and amortization and interest related to equity investments.
Previous wording
Adjusted EBITDA decreased $5,764,000, or 35.6%, for 2023 compared to 2022. For 2023, Adjusted EBITDA as a percentage of net revenue was 17.0%. For 2022, Adjusted EBITDA as a percentage of net revenue was 24.3%.
Current wording
Adjusted EBITDA decreased $212,000, or 2.0%, for 2024 compared to 2023. For 2024, Adjusted EBITDA as a percentage of net revenue was 16.6%. For 2023, Adjusted EBITDA as a percentage of net revenue was 17.0%.
Previous wording
Total net revenues for 2023 were $61,437,000, a decrease of $5,387,000, or 8.1%, compared to total net revenues of $66,824,000 for 2022. For 2023 as compared to 2022, total pari-mutuel revenue decreased 24.7%, Casino revenue decreased 1.1%, food and beverage revenue decreased 4.8%, and other revenue decreased 24.9%. See below for a further discussion of our sources of revenues for each of our pari-mutuel, Casino, food and beverage, and other revenues.
Current wording
Total net revenues for 2024 were $61,562,000, an increase of $125,000, or 0.2%, compared to total net revenues of $61,437,000 for 2023. For 2024 as compared to 2023, total pari-mutuel revenue decreased 0.3%, Casino revenue decreased 2.5%, food and beverage revenue increased 1.8%, and other revenue increased 18.3%. See below for a further discussion of our sources of revenues for each of our pari-mutuel, Casino, food and beverage, and other revenues.
Previous wording
The primary source of Casino revenue is a percentage of the wagers received from the players as compensation for providing the Casino facility and services, referred to as “collection revenue.” Other Revenue presented above includes fees collected for the administration of tournaments and amounts earned as reimbursement of the administrative costs of maintaining jackpot funds. Casino revenue represented 64.8% and 60.2% of the Company’s net revenues for the years ended December 31, 2023 and 2022, respectively.
Current wording
The primary source of Casino revenue is a percentage of the wagers received from the players as compensation for providing the Casino facility and services, referred to as “collection revenue.” Other revenue presented above includes fees collected for the administration of tournaments and amounts earned as reimbursement of the administrative costs of maintaining jackpot funds. Casino revenue represented 63.0% and 64.8% of the Company’s net revenues for the years ended December 31, 2024 and 2023, respectively.
Previous wording
Total 2023 pari-mutuel revenue decreased $2,704,000, or 24.7%, compared to 2022. The decrease in revenue in 2023 compared to 2022 is primarily due to a decrease in live race days year-over-year (53 race days in 2023 compared to 64 race days in 2022) as well as decreased guest fees from out-state-handle on our live racing product on a per day basis due to decreased field size.
Current wording
Total 2024 pari-mutuel revenue decreased $28,000, or 0.3%, compared to 2023. The slight decrease in revenue in 2024 compared to 2023 is primarily due to a decrease in simulcast handle, somewhat offset by increased guest fees from out-state-handle on our live racing product on a per day basis due to increased field size and one additional live race day.
Previous wording
Total operating expenses increased $483,000, or 0.9%, to $56,426,000 in 2023, from $55,943,000 in 2022. An explanation of changes in specific categories of operating expense is set forth below. Total operating expenses as a percentage of net revenues increased to 91.8% in 2023 from 83.7% in 2022, which was a result of decreased net revenues for 2023 as compared to 2022.
Current wording
Total operating expenses increased $436,000, or 0.8%, to $56,862,000 in 2024, from $56,426,000 in 2023. An explanation of changes in specific categories of operating expense is set forth below. Total operating expenses as a percentage of net revenues increased to 92.4% in 2024 from 91.8% in 2023, which was a result of increased operating expenses for 2024 as compared to 2023.
Previous wording
Salaries and benefits expense increased $1,136,000, or 4.7%, in 2023 compared to 2022. The increase is primarily due to an increase in our wage-rate structure for seasonal as well as year-round employees to attract and retain front-line workers. The Company also increased its 401(k) match percentage, effective January 1, 2023.
Current wording
Salaries and benefits expense increased $651,000, or 2.6%, in 2024 compared to 2023. The increase is primarily due to an increase in our wage-rate structure for seasonal as well as year-round employees to attract and retain front-line workers.
Previous wording
During 2023, the Company recorded a gain on sale of land of $6,490,000 as of result of the sale of approximately 37 acres of land to an affiliate of Swervo Development for approximately $8,800,000 in total consideration. During 2022, the Company recorded a gain on sale of land of $12,000 as of result of the sale of approximately 4.2 acres of land for approximately $1,200,000 in gross proceeds.
Current wording
During 2023, the Company recorded a gain on sale of land of $6,490,000 as of result of the sale of approximately 37 acres of land to an affiliate of Swervo Development for approximately $8,800,000 in total consideration.
Previous wording
During 2023, the Company performed a review of any fixed assets that were no longer in service at December 31, 2023. As a result of this review, management determined to dispose of assets resulting in a loss on disposal of $223,000 during the fourth quarter of 2023. In addition to this write-off, the Company had multiple additional asset disposals for a gain of $66,000, resulting in a net loss on disposal of assets of $157,000 for the year ended December 31, 2023. During 2022, the Company performed a review of any fixed assets that were no longer in service at December 31, 2022. As a result of this review, management determined to dispose of assets resulting in a loss on disposal of $175,000 during the fourth quarter of 2022. In addition to this write-off, the Company had multiple additional asset disposals for a gain of $18,000, resulting in a net loss on disposal of assets of $157,000 for the year ended December 31, 2022.
Current wording
During 2024, the Company performed a review of any fixed assets that were no longer in service at December 31, 2024. As a result of this review, management determined to dispose of assets resulting in a loss on disposal of $56,000 during the fourth quarter of 2024. In addition to this write-off, the Company had multiple additional asset disposals for a gain of $7,000, resulting in a net loss on disposal of assets of $49,000 for the year ended December 31, 2024. During 2023, the Company performed a review of any fixed assets that were no longer in service at December 31, 2023. As a result of this review, management determined to dispose of assets resulting in a loss on disposal of $223,000 during the fourth quarter of 2023. In addition to this write-off, the Company had multiple additional asset disposals for a gain of $66,000, resulting in a net loss on disposal of assets of $157,000 for the year ended December 31, 2023.
Previous wording
Other income, net, for the year ended December 31, 2023 was $3,479,000, an increase of $4,137,000, compared to an other loss, net, of $658,000 for the year ended December 31, 2022. The increase for the 2023 is primarily due to our share of a gain recognized on insurance proceeds received on a claim by Doran Canterbury I. The Company's portion of the gain on insurance proceeds recognized by Doran Canterbury I was $4,228,000. Also contributing to the 2023 increase was increased interest income of approximately $1,068,000 year-over-year, due to the Company transferring available cash into certificates of deposit and money market funds as well as increasing interest rates related to our member loans to Doran Canterbury I and Doran Canterbury II.
Current wording
Other loss, net, for the year ended December 31, 2024 was $3,396,000, a decrease of $6,875,000, compared to an other income, net, of $3,479,000 for the year ended December 31, 2023. The decrease for 2024 is primarily due to our share of a gain recognized on insurance proceeds received on a claim by Doran Canterbury I during 2023. The Company's portion of the gain on insurance proceeds recognized by Doran Canterbury I was $4,228,000. The loss on equity investments for the year ended December 31, 2024 is primarily due to non-cash expenses from depreciation and amortization. This was slightly offset by increased interest income of approximately $93,000 year-over-year, due to the Company transferring available cash into certificates of deposit and money market funds as well as increasing balances related to both our member loans to Doran Canterbury I and Doran Canterbury II and our increase in TIF receivable.
Previous wording
The Company recorded a provision for income taxes of $4,417,000 and $2,722,000 for 2023 and 2022, respectively. The increase in our tax expense for 2023 compared to 2022 is due to an increase in income before taxes from operations, primarily related to the gain on land sale mentioned above. Our effective tax rate was 29.5% and 26.6% for 2023 and 2022, respectively.
Current wording
The Company recorded a provision for income taxes of $924,000 and $4,417,000 for 2024 and 2023, respectively. The decrease in our tax expense for 2024 compared to 2023 is due to a decrease in income before taxes from operations, primarily related to the 2023 gain on land sale mentioned above. Our effective tax rate was 30.4% and 29.5% for 2024 and 2023, respectively.
Previous wording
As of December 31, 2023, the Company recorded a TIF receivable of approximately $13,973,000, which represents $11,307,000 of principal and $2,666,000 of interest. The TIF receivable requires significant management estimates and judgement pertaining to expected future tax revenue, the Company's development cost on infrastructure improvements, and whether an allowance for doubtful accounts is necessary. The TIF receivable was generated in connection with the Contract for Private Redevelopment, in which the City of Shakopee has agreed that a portion of the future tax increment revenue generated from the developed property around the Racetrack will be paid to the Company to reimburse it for expenses in constructing public infrastructure improvements.
Current wording
As of December 31, 2024, the Company recorded a TIF receivable of approximately $18,898,000, which represents $15,551,000 of principal and $3,347,000 of interest. The TIF receivable requires significant management estimates and judgement pertaining to expected future tax revenue, the Company's development cost on infrastructure improvements, and whether an allowance for doubtful accounts is necessary. The TIF receivable was generated in connection with the Contract for Private Redevelopment, in which the City of Shakopee has agreed that a portion of the future tax increment revenue generated from the developed property around the Racetrack will be paid to the Company to reimburse it for expenses in constructing public infrastructure improvements.
Previous wording
The Company typically performs an annual collectability analysis of the TIF receivable in the fourth quarter of each year, or more frequently if indicators of the receivable to be potentially uncollectable exist. The Company utilizes a third party to assist with the projected tax increments. The quantitative analysis includes assumptions based on the market values of the completed development projects within Canterbury Commons, which derives the future projected tax increment revenue. The Company uses the analysis to determine if expected future tax increment revenue will exceed the Company's development costs on infrastructure improvements. As a result of our analysis for the year ended December 31, 2023, management believes the TIF receivable will be fully collectible and no allowance related to this receivable is necessary.
Current wording
The Company typically performs an annual collectability analysis of the TIF receivable in the fourth quarter of each year, or more frequently if indicators of the receivable to be potentially uncollectable exist. The Company utilizes a third-party to assist with the projected tax increment revenues. The quantitative analysis includes assumptions based on the market values of the completed development projects within Canterbury Commons, which derives the future projected tax increment revenue. The Company uses the analysis to determine if expected future tax increment revenue will exceed the Company's development costs on infrastructure improvements. As a result of our analysis for the year ended December 31, 2024, management believes the TIF receivable will be fully collectible and no allowance related to this receivable is necessary.
Previous wording
Effective December 21, 2021, the Company entered into a Contribution and Indemnity Agreement ("Indemnity Agreement") with affiliates of Doran Companies ("Doran") relating to debt financing by Doran Canterbury I, LLC as borrower, which is guaranteed by Doran affiliates. Under the Indemnity Agreement, the Company is obligated to reimburse and indemnify each loan guarantor for any amounts paid by such loan guarantor to the lender on debt financing by Doran Canterbury I, LLC, up to a maximum of $5,000,000. Effective October 27, 2022, the Indemnity Agreement was amended to increase the maximum indemnification by an additional $700,000. Effective December 12, 2023, the Indemnity Agreement was amended to increase the maximum indemnification by an additional $1,300,000, bringing the total to a maximum of $7,000,000.
Current wording
Effective December 21, 2021, the Company entered into a Contribution and Indemnity Agreement (“Indemnity Agreement”) with affiliates of Doran Companies (“Doran”) relating to debt financing by Doran Canterbury I, LLC as borrower, which is guaranteed by Doran affiliates. Under the Indemnity Agreement, the Company is obligated to reimburse and indemnify each loan guarantor for any amounts paid by such loan guarantor to the lender on debt financing by Doran Canterbury I, LLC, up to a maximum of $5,000,000. Effective October 27, 2022, the Indemnity Agreementwas amended to increase the maximum indemnification by an additional $700,000. Effective December 12, 2023, the Indemnity Agreement was amended to increase the maximum indemnification by an additional $1,300,000. Effective December 18, 2024, the Indemnity Agreement was amended to increase the maximum indemnification by an additional $500,000, bringing the total to a maximum of $7,500,000.
Previous wording
Effective December 21, 2023, the Company entered into its annual live race meet and purse fund contribution agreement with the Minnesota Horsemen’s Benevolent & Protective Association (“MNHBPA”) and the Minnesota Quarter Horse Racing Association (“MQHRA”) regarding the upcoming 2024 live race meet. In an effort to increase field size and improve the quality of racing for the 2024 season, the Company has guaranteed purses for overnight races at $23,000 per race. The parties recognize there is likely to be a significant financial cost to the Company in establishing a 2024 thoroughbred purse structure intended to average $23,000 per conducted overnight race and that to maintain that average purse structure, the Company will be making an overpayment that may be repaid to the Company through reimbursement in subsequent racing years. This anticipated overpayment of purses by the Company is intended to create a short-term bridge until additional purse supplements can be obtained from other sources. In the event that additional purse revenue is secured within the next five years through additional forms of gaming at the Company, new revenue streams, or legislative action, the Company will be eligible for reimbursement of the actual 2024 overpayment amount from those purse supplements.
Current wording
Effective January 31, 2025, the Company entered into its annual live race meet and purse fund contribution agreement with the MNHBPA and the MQHRA regarding the upcoming 2025 live race meet. In an effort to maintain field size and improve the quality of racing for the 2025 season, the Company has guaranteed an additional $500,000 of purse monies to be distributed above the minimum amount defined in Minnesota Statutes Chapter 240. In the event that additional purse revenues are secured throughout the duration of the 2025 live race agreement through additional forms of gaming at the Company, new revenue streams, or legislative action, the Company has agreed to provide additional purse monies of up to $1,500,000, to a total of $2,000,000 in potential overpayment of purses to support the 2025 live race meet. The parties recognize there is likely to be a significant financial cost to the Company in establishing this 2025 thoroughbred purse structure and that to maintain that average purse structure, the Company will be making an overpayment that may be repaid to the Company through reimbursement in subsequent racing years. This anticipated overpayment of purses by the Company is intended to create a short-term bridge until additional purse supplements can be obtained from other sources. In the event that additional purse revenue is secured within the five years following the 2025 live race meet through additional forms of gaming at the Company, new revenue streams, or legislative action, the Company will be eligible for reimbursement of the actual 2025 overpayment amount from those purse supplements.
Previous wording
Cash provided by operating activities for 2023 was $11,537,000, primarily as a result of the following: the Company reported net income of $10,563,000, depreciation of $3,145,000, deferred income taxes of $2,826,000, and stock-based compensation and 401(k) match totaling $1,379,000, offset by a gain from equity investment of $1,501,000 and a gain on land sale of $6,490,000. The Company experienced an increase in cash related to an employee retention credit receivable of $6,103,000, offset by a decrease in accounts payable, net of land, buildings, and equipment funded through accounts payable, of $1,465,000, and an increase in income taxes receivable of $2,031,000.
Current wording
Cash provided by operating activities for 2023 was $11,537,000, primarily as a result of the following: the Company reported net income of $10,563,000, depreciation of $3,145,000, deferred income taxes of $2,826,000, and stock-based compensation and 401(k) match totaling $1,379,000, offset by a gain from equity investment of $1,501,000 and a gain on land sale of $6,490,000. The Company experienced an increase in cash related to a decrease in employee retention credit receivable of $6,103,000, offset by a decrease in accounts payable, net of land, buildings, and equipment funded through accounts payable, of $1,465,000, and an increase in income taxes receivable of $2,031,000.
Previous wording
Net cash used in investing activities for 2022 of $9,275,000 was used primarily for additions to land, buildings, and equipment of $4,997,000, an increase in related party receivable of $377,000, purchases of short-term investments of $5,000,000, and an equity investment contribution of $398,000. This was partially offset by proceeds received from the sale of land $1,160,000 and cash dividends received from investments of $337,000.
Current wording
Net cash used in investing activities for 2024 of $17,349,000 was used primarily for additions to land, buildings, and equipment of $11,984,000, primarily related to our barn relocation and redevelopment plan, additions for TIF eligible improvements of $4,244,000, an increase in related party receivable of $1,218,000, primarily due to additional member loans and interest related to the member loans, and purchases of short-term investments of $7,000,000. This was partially offset by proceeds from the sale of short-term investments of $7,000,000.
Previous wording
Net cash used in financing activities for 2022 was $1,435,000 primarily due to the reinstituted quarterly cash dividend as well as payments for taxes of equity awards, partially offset by proceeds from the issuance of common stock.
Current wording
Net cash used in financing activities for 2024 was $1,293,000 primarily due to cash dividends paid to shareholders and payments for taxes of equity awards, partially offset by proceeds from the issuance of common stock.
Previous wording
At December 31, 2023, we had cash, cash equivalents, and restricted cash of $25,842,000 compared to $16,106,000 at December 31, 2022. This $9,736,000 increase consisted of $11,537,000 of net cash provided by operating activities in 2023, offset by $455,000 of net cash used in financing activities in 2023 and $1,345,000 of net cash used in investing activities in 2023. We believe our existing cash and cash equivalents, along with our short-term investments and cash flow from operations and availability of borrowing under our revolving line of credit agreement, will be sufficient to meet our liquidity and working capital requirements beyond the next 12 months.
Current wording
At December 31, 2024, we had cash, cash equivalents, and restricted cash of $13,687,000 compared to $25,842,000 at December 31, 2023. This $12,155,000 decrease consisted of $6,488,000 of net cash provided by operating activities in 2024, offset by $17,349,000 of net cash used in investing activities in 2024 and $1,293,000 of net cash used in financing activities in 2024. We believe our existing cash and cash equivalents, along with our short-term investments and cash flow from operations and availability of borrowing under our revolving line of credit agreement, will be sufficient to meet our liquidity and working capital requirements beyond the next 12 months.
Previous wording
We also expect that we will see higher than historic use of cash for guaranteed overnight purses for the 2024 live racing season, which are guaranteed under our annual live race meet and purse fund contribution agreement with the MHBPA and MQHRA, which may be repaid to the Company through reimbursement in subsequent racing years.
Current wording
We also expect that we will see higher than historic use of cash for guaranteed purses for the 2025 live racing season, which are guaranteed under our annual live race meet and purse fund contribution agreement with the MNHBPA and MQHRA, which may be repaid to the Company through reimbursement in subsequent racing years. See note 9 for further details.
Previous wording
The Company offers unbanked table games that refer to a wagering system or game where wagers “lost” or “won” by the host are accumulated into a “player pool” to enhance the total amount paid back to players in any other card game. The Company is required to return accumulated player pool funds to the players through giveaways, promotional items, prizes, or by other means. The player pool liability was $1,055,000 and $1,064,000 at December 31, 2023 and 2022, respectively. Additionally, the table games jackpot pool was $524,000 and $309,000 at December 31, 2023 and 2022, respectively.
Current wording
The Company offers unbanked table games that refer to a wagering system or game where wagers “lost” or “won” by the host are accumulated into a “player pool” to enhance the total amount paid back to players in any other card game. The Company is required to return accumulated player pool funds to the players through giveaways, promotional items, prizes, or by other means. The player pool liability was $542,000 and $1,055,000 at December 31, 2024 and 2023, respectively. Additionally, the table games jackpot pool was $696,000 and $524,000 at December 31, 2024 and 2023, respectively.
Previous wording
The Company also maintains a poker promotional pool where a portion of the poker "rake" is collected and accumulated into a promotional pool to enhance the total amount paid back to poker players. The Company is required to return accumulated poker promotional pool funds to the players through poker jackpots, giveaways, promotional items, prizes, or by other means. The poker promotional pool liability was $339,000 and $576,000 at December 31, 2023 and 2022, respectively.
Current wording
The Company also maintains a poker promotional pool where a portion of the poker “rake” is collected and accumulated into a promotional pool to enhance the total amount paid back to poker players. The Company is required to return accumulated poker promotional pool funds to the players through poker jackpots, giveaways, promotional items, prizes, or by other means. The poker promotional pool liability was $364,000 and $339,000 at December 31, 2024 and 2023, respectively.
Previous wording
The Casino offers progressive jackpots for poker games. Amounts collected for these jackpot funds are accrued as liabilities until paid to winners. At December 31, 2023 and 2022, accrued jackpot funds totaled $172,000 and $132,000, respectively. The MRC regulates the operation of the player pool and progressive jackpot pools. These liabilities have the potential for significant fluctuation on a daily basis.
Current wording
The Casino offers progressive jackpots for poker games. Amounts collected for these jackpot funds are accrued as liabilities until paid to winners. At December 31, 2024 and 2023, accrued jackpot funds totaled $88,000 and $172,000, respectively. The MRC regulates the operation of the player pool and progressive jackpot pools. These liabilities have the potential for significant fluctuation on a daily basis.
Previous wording
All games in the Casino are played using chips. The value of chips issued and outstanding, referred to as the “outstanding chip liability,” was $558,000 and $587,000 at December 31, 2023 and 2022, respectively. This liability has the potential for significant fluctuation on a daily basis depending upon the demand for chip redemptions and sales.
Current wording
All games in the Casino are played using chips. The value of chips issued and outstanding, referred to as the “outstanding chip liability,” was $447,000 and $558,000 at December 31, 2024 and 2023, respectively. This liability has the potential for significant fluctuation on a daily basis depending upon the demand for chip redemptions and sales.
Previous wording
Our second largest individual operating expense item is purse expense. Pursuant to an agreement with the MHBPA, we transferred into a trust account or paid directly to the MHBPA, approximately $7,133,000 and $7,846,000 in purse funds related to thoroughbred races for 2023 and 2022, respectively. Minnesota law provides that amounts transferred into this trust account are the property of the trust and not the Company. There were no unpaid purse fund obligations due to the MHBPA at December 31, 2023 or 2022.
Current wording
Our second largest individual operating expense item is purse expense. Pursuant to an agreement with the MNHBPA, we transferred into a trust account or paid directly to the MNHBPA, approximately $8,288,000 and $7,133,000 in purse funds related to thoroughbred races for 2024 and 2023, respectively. Minnesota law provides that amounts transferred into this trust account are the property of the trust and not the Company. There were no unpaid purse fund obligations due to the MNHBPA at December 31, 2024 or 2023.
Previous wording
In March 2014, the Company entered into a seven-year agreement with a new totalizator provider, which was extended an additional year in 2021. In March 2022, the Company entered into a five-year agreement with a new totalizator provider. Pursuant to the agreement, the vendor provides totalizator equipment and related software that records and processes all wagers and calculates odds and payoffs. Under the new agreement, $166,400 was charged to operations in 2023. The future minimum purchase obligations under the new agreement are $166,400 per year for each of the next four years. The amounts charged to operations for totalizator expenses for the years ended December 31, 2023 and 2022 were $205,000 and$253,000, respectively.
Current wording
In March 2022, the Company entered into a five-year agreement with a totalizator provider. Pursuant to the agreement, the vendor provides totalizator equipment and related software which records and processes all wagers and calculates odds and payoffs. The future minimum purchase obligations under the new agreement are $166,400 per year. The amounts charged to operations for totalizator expenses for the years ended December 31, 2024 and 2023 were $200,000 and $205,000, respectively.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Effective December 18, 2024, the Company entered into an Indemnity Agreement with affiliates of Doran relating to debt financing by Doran Canterbury II, LLC as borrower, which is guaranteed by Doran affiliates. Under the Indemnity Agreement, the Company is obligated to reimburse and indemnify each loan guarantor for any amounts paid by such loan guarantor to the lender on debt financing by Doran Canterbury II, LLC, up to a maximum of $1,000,000.
Current report — wording carried from elsewhere
Effective December 21, 2023, the Company entered into its annual live race meet and purse fund contribution agreement with the Minnesota Horsemen’s Benevolent & Protective Association (“MNHBPA”) and the Minnesota Quarter Horse Racing Association (“MQHRA”) regarding the 2024 live race meet. In an effort to increase field size and improve the quality of racing for the 2024 season, the Company guaranteed purses for overnight races at $23,000 per race. The parties recognized there was likely to be a significant financial cost to the Company in establishing a 2024 thoroughbred purse structure intended to average $23,000 per conducted overnight race and that to maintain that average purse structure, the Company made an overpayment that may be repaid to the Company by the MNHBPA through reimbursement in subsequent racing years. This overpayment of purses by the Company was intended to create a short-term bridge until additional purse supplements can be obtained from other sources. At the conclusion of the 2024 live race meet, the Company recorded a receivable related to the overpayment of 2024 purses in the amount of $1,597,463, which is presented on the Company's balance sheet as of December 31, 2024. In the event that additional purse revenue is secured within the five years following the 2025 live race meet through additional forms of gaming at the Company, new revenue streams, or legislative action, the Company will be eligible for reimbursement of the actual 2024 overpayment amount from those purse supplements. Management believes it is likely that additional purse supplements will ultimately be obtained when considering both the length of time to secure such funds (five years following the 2025 live race meet) and the fact that legislation has been introduced in both chambers of the Minnesota legislature that would provide those supplements through revenues from taxes paid by sports wagering licenses. Accordingly, management believes no allowance related to this receivable is necessary at December 31, 2024. In addition, the Company agreed to allocate approximately $400,000 to be used as recruiting and participation incentives to attract thoroughbred trainers, owners, and stables for the 2024 live meet in an effort to generate additional pari-mutuel handle through improved field size. For the year ended 2024, the Company recognized expenses of $418,000 related to these incentives.