ITEM 2:
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
|
|
CONDITION AND RESULTS
OF OPERATIONS
|
The following Management’s Discussion and Analysis of
Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand Canterbury Park
Holding Corporation, our operations, our financial results and financial condition and our present business environment. This MD&A
is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and the
accompanying notes to the financial statements (the “Notes”).
Overview:
Canterbury Park Holding Corporation (the “Company,”
“we,” “our,” or “us”) conducts pari-mutuel wagering operations and hosts “unbanked”
card games at its Canterbury Park Racetrack and Card Casino facility (the “Racetrack”) in Shakopee, Minnesota, which
is approximately 25 miles southwest of downtown Minneapolis. The Racetrack is the only facility in the State of Minnesota that
offers live pari-mutuel thoroughbred and quarter horse racing.
The Company’s pari-mutuel wagering operations include
both wagering on thoroughbred and quarter horse races during live meets at the Racetrack each year from May through September,
and year-round wagering on races held at out-of-state racetracks that are televised simultaneously at the Racetrack (“simulcasting”).
Unbanked card games, in which patrons compete against each other, are hosted in the Card Casino at the Racetrack. The Card Casino
operates 24 hours a day, seven days a week. The Card Casino offers both poker and table games at up to 80 tables. The Company also
derives revenues from related services and activities, such as concessions, parking, advertising signage, publication sales, and
from other entertainment events and activities held at the Racetrack.
Recent Reorganization
. The Company
was incorporated as a Minnesota corporation in October 2015. The Company is a successor corporation to another corporation, also
named Canterbury Park Holding Corporation, that was incorporated in 1994 (“CPHC”). Effective as of the close of business
on June 30, 2016, CPHC’s business and operations were reorganized into a holding company structure (the “Reorganization”)
pursuant to an Agreement and Plan of Merger dated as of March 1, 2016 that was approved by CPHC’s shareholders on June 28,
2016.
Further information regarding the Reorganization
is set forth at Note 1 in the Notes to Condensed Consolidated Financial Statements under Part I above and in the Company’s
Registration Statement on Form S-4 (File No. 333-210877) filed with the SEC on April 22, 2016, which information is incorporated
herein by reference.
For purposes of this Report on Form 10-Q,
when the term “Company” is used with reference to information covering or related to periods up to and including June
30, 2016, such term refers to the operations of CPHC prior to the Reorganization.
Operations Review for the Three and Nine Months Ended
September 30, 2017:
EBITDA
EBITDA represents earnings before interest, income tax expense,
and depreciation and amortization. EBITDA is not a measure of performance or liquidity calculated in accordance with generally
accepted accounting principles in the United States of America (“GAAP”), and should not be considered an alternative
to, or more meaningful than, net income as an indicator of our operating performance or cash flows from operating activities as
a measure of liquidity. EBITDA is presented as a supplemental disclosure because it is a widely used measure of performance and
a basis for valuation of companies in our industry. Moreover, other companies that provide EBITDA information may calculate EBITDA
differently than we do. Adjusted EBITDA reflects additional adjustments to net income to eliminate unusual items. For the three
months ended September 30, 2016, adjusted EBITDA excluded the gain on insurance recoveries. For the nine months ended September
30, 2016, adjusted EBITDA excluded the gain on sale of land and gain on insurance recoveries.
The following table sets forth a reconciliation of net income,
a GAAP financial measure, to EBITDA and adjusted EBITDA (defined above) which are non-GAAP financial measures, for the three and
nine months ended September 30, 2017 and 2016:
Summary of EBITDA Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
NET INCOME
|
|
$
|
952,635
|
|
|
$
|
925,837
|
|
|
$
|
2,182,218
|
|
|
$
|
3,511,490
|
|
Interest (income) expense, net
|
|
|
(13,575
|
)
|
|
|
(538
|
)
|
|
|
(37,178
|
)
|
|
|
48,488
|
|
Income tax expense
|
|
|
597,753
|
|
|
|
633,606
|
|
|
|
1,444,753
|
|
|
|
2,419,447
|
|
Depreciation
|
|
|
646,050
|
|
|
|
672,465
|
|
|
|
1,869,048
|
|
|
|
1,866,975
|
|
EBITDA
|
|
|
2,182,863
|
|
|
|
2,231,370
|
|
|
|
5,458,841
|
|
|
|
7,846,400
|
|
Gain on insurance recoveries
|
|
|
0
|
|
|
|
(592,276
|
)
|
|
|
0
|
|
|
|
(592,276
|
)
|
Gain on sale of land
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
(3,990,519
|
)
|
ADJUSTED EBITDA
|
|
$
|
2,182,863
|
|
|
$
|
1,639,094
|
|
|
$
|
5,458,841
|
|
|
$
|
3,263,605
|
|
Adjusted EBITDA increased $544,000 or 33.2%, and increased as
a percentage of net revenues to 12.4% from 9.9% for the three months ended September 30, 2017 as compared to the same period in
2016. Adjusted EBITDA increased $2,195,000, or 67.3%, and increased as a percentage of net revenues to 12.2% from 8.0% for the
nine months ended September 30, 2017 as compared to the same period in 2016. The increase for the three and nine months ended September
30, 2017 is primarily due to the increase in revenues compared to the same periods in 2016.
Revenues:
Total net revenues for the three months ended September 30,
2017 were $17,667,000, an increase of $1,036,000, or 6.2%, compared to total net revenues of $16,630,000 for the three months
ended September 30, 2016. This increase primarily consists of increases in pari-mutuel and card casino revenue of 8.8% and 8.9%,
respectively, partially offset by a decrease in food and beverage revenue of 7.6%. Total net revenues for the nine months ended
September 30, 2017 were $44,956,000, an increase of $4,094,000, or 10.0%, compared to total net revenues of $40,863,000 for the
nine months ended September 30, 2016. This increase primarily consists of increases in pari-mutuel, food and beverage and card
casino revenue of 11.7%, 2.1% and 11.0%, respectively. See below for a further discussion of our sources of revenues.
Pari-Mutuel Data Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Simulcast
|
|
$
|
1,407,000
|
|
|
$
|
1,315,000
|
|
|
$
|
4,386,000
|
|
|
$
|
4,422,000
|
|
Live Racing
|
|
|
1,392,000
|
|
|
|
1,349,000
|
|
|
|
2,335,000
|
|
|
|
2,086,000
|
|
Guest Fees
|
|
|
783,000
|
|
|
|
772,000
|
|
|
|
1,279,000
|
|
|
|
1,210,000
|
|
Other Revenue (1)
|
|
|
284,000
|
|
|
|
119,000
|
|
|
|
902,000
|
|
|
|
253,000
|
|
Total Pari-Mutuel Revenue
|
|
$
|
3,866,000
|
|
|
$
|
3,555,000
|
|
|
$
|
8,902,000
|
|
|
$
|
7,971,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Racing Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Simulcast only racing days
|
|
|
52
|
|
|
|
46
|
|
|
|
206
|
|
|
|
205
|
|
Live and simulcast racing days
|
|
|
40
|
|
|
|
46
|
|
|
|
67
|
|
|
|
69
|
|
Total Number of Racing Days
|
|
|
92
|
|
|
|
92
|
|
|
|
273
|
|
|
|
274
|
|
1 – Includes source market fees received pursuant to Advanced
Deposit Wagering (ADW) legislation effective November 1, 2016.
Total pari-mutuel revenue increased $311,000, or 8.8%, for the
three months ended September 30, 2017, compared to the same period in 2016. The increase in other pari-mutuel revenue is due to
receipt of $155,000 in source market fees received under Advanced Deposit Wagering (ADW) legislation that took effect on November
1, 2016. The ADW legislation allows Minnesota residents to engage in pari-mutuel wagering on out-of-state horse races online with
a prefunded account through an ADW provider. The Company receives a percentage of monies wagered (generally 3.25% to 5.0%) by Minnesota
residents through the ADW provider as a source market fee. The Company receives 72% of the gross source market fees less the amount
of at least 50% for purses and breeders’ awards. The percentage of source marketing fee retained by the Company is recorded
as operating revenue and the percentage to the purses and breeders’ awards are recorded as operating expenses. Simulcast
revenue increased $92,000 primarily due to a small group of individual players who placed a significantly high volume of bets in
the quarter. Total pari-mutuel revenue increased $931,000, or 11.7%, for the nine months ended September 30, 2017 compared to the
same period in 2016 primarily due to $655,000 received in ADW source market fees in the first nine months of 2017. Additionally,
on-track live racing revenue increased $249,000 primarily due to an increase in statutory take-out levels as compared to 2016 when
the Company reduced the take-out on its live races as a promotion to increase wagering dollars (“handle”), but also
resulted in substantially reduced revenue.
Card Casino Revenue:
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Poker Games
|
|
$
|
2,172,000
|
|
|
$
|
2,238,000
|
|
|
$
|
6,719,000
|
|
|
$
|
6,953,000
|
|
Table Games
|
|
|
5,121,000
|
|
|
|
4,475,000
|
|
|
|
15,022,000
|
|
|
|
12,557,000
|
|
Total Collection Revenue
|
|
|
7,293,000
|
|
|
|
6,713,000
|
|
|
|
21,741,000
|
|
|
|
19,510,000
|
|
Other Revenue
|
|
|
687,000
|
|
|
|
612,000
|
|
|
|
2,056,000
|
|
|
|
1,935,000
|
|
Total Card Casino Revenue
|
|
$
|
7,980,000
|
|
|
$
|
7,325,000
|
|
|
$
|
23,797,000
|
|
|
$
|
21,445,000
|
|
The primary source of Card Casino revenue is a percentage of
the wagers received from the players as compensation for providing the Card Casino facility and services, which is referred to
as “collection revenue.” Other Revenue presented above includes fees collected for the administration of tournaments
and amounts earned as reimbursement of the administrative costs of maintaining jackpot funds.
As indicated in the table above, total Card Casino revenue increased
$655,000, or 8.9%, and $2,352,000 or 11.0%, for the three and nine months, respectively, ended September 30, 2017 compared to the
same periods in 2016. The increases are a result of increased play on table games. In management’s judgement, increased play
is attributable to players spending more money due to a stronger economy, as well as an overall increase in card casino marketing
initiatives. Also, higher jackpots on certain games drove increased play.
Food and Beverage Revenue:
Food and beverage revenue decreased $262,000, or 7.6%, for the
three months ended September 30, 2017 compared to the same period in 2016. The decrease is attributable to six less live racing
days compared to the 2016 third quarter. Additionally, there was a decline in attendance for a concert conducted in the 2017 third
quarter compared to the 2016 third quarter. Food and beverage revenue increased $143,000, or 2.1%, for the nine months ended September
30, 2017 compared to the same period in 2016 due to hosting more special events in the nine months ended September 30, 2017 compared
to the same period in 2016.
Other Revenue:
Compared to the same periods in 2016, other revenue increased
$335,000, or 14.3%, and $682,000, or 14.2% for the three and nine months, respectively, ended September 30, 2017 compared to the
same periods in 2016. The increases are due to increased admission revenue from a greater number of premium priced live racing
days during 2017 and event admission revenue from a greater number of special events hosted. Also, the Company received higher
payments under the CMA for joint marketing efforts with the SMSC. See “Cooperative Marketing Agreement” below. The
amounts earned from the marketing payments are offset by an increase in other expenses related to RiverSouth, which is an area
wide marketing association that promotes Shakopee entertainment venues.
Operating Expenses:
The Company’s operating expenses during the 2017 third
quarter were $16,130,000, an increase of $1,058,000, or 7.0%, from the third quarter 2016 expenses of $15,072,000, and the Company’s
operating expenses during the nine months ended September 30, 2017 were $41,367,000, an increase of $6,483,000, or 18.6%, from
$34,883,000 in the nine months ended September 30, 2016. Operating expenses in the 2016 third quarter included an insurance recovery
of $592,276 related to storm damage in 2014 that was accounted for as a reduction in operating expense. The 2016 year-to-date operating
expenses reflect the previously reported $3,990,519 pretax gain on sale of land in the 2016 second quarter that was also accounted
for as a reduction in operating expense. Excluding insurance recoveries from 2016, operating expenses for the third quarter 2017
increased $396,000 or 2.5%. Excluding insurance recoveries and gain on sale of land from 2016, operating expenses for the nine
month period ended September 30, 2017 increased $1,781,000 or 4.5%. The following paragraphs provide further detail regarding certain
operating expenses.
Purse expense increased $97,000, or 4.5%, and $427,000, or 8.5%
for the three and nine months, respectively, ended September 30, 2017 compared to the same periods in 2016. Also, Minnesota Breeders’
Fund expense increased $33,000, or 13.1%, and $169,000, or 26.6%, for the three and nine months, respectively, ended September
30, 2017 compared to the same periods in 2016. The increases are primarily due to increased Card Casino revenues and increased
purse fund payments due to ADW source market arrangements.
Salaries and benefits increased $330,000, or 5.3%, and $739,000,
or 4.3%, for the three and nine months, respectively, ended September 30, 2017 compared to the same periods in 2016. The increases
are partially due to the State of Minnesota mandated increase of $0.50 in the minimum wage effective August 2016, as well as an
increase in employee incentive compensation resulting from an increase in performance from operations.
The gain
on sale of land is due to the sale of approximately 24 acres of land adjacent to the Racetrack for a total consideration of $4.3
million.
During 2014, the Company incurred damage to buildings from multiple
severe storms at the Racetrack. As of September 30, 2016, the Company recognized a $592,000 insurance recoveries gain in the Consolidated
Statements of Operations as “Gain on insurance recoveries.”
Professional and contracted services increased $20,000, or 1.3%,
and $237,000, or 7.1%, for the three and nine months, respectively, ended September 30, 2017 compared to the same periods in 2016.
The nine month increase is primarily due to increased live racing contracted services as a result of additional live racing weeks
and increased consulting fees, primarily related to development initiatives.
Advertising and marketing increased $286,000, or 28.2% and other
expenses decreased $165,000, or 11.4%, for the three months ended September 30, 2017 compared to the same period in 2016. This
is due to a reclassification of expenses associated with RiverSouth.
Income tax expense decreased $36,000, or 5.7%, and $975,000,
or 40.3% for the three and nine months, respectively, ended September 30, 2017 compared to the same periods in 2016. The decreases
related to tax expense associated with the gain on sale of land and gain on insurance recoveries in 2016 that did not recur in
2017. The effective rate was approximately 41% for both periods ended September 30, 2017 and 2016.
Net income for the three months ended September 30, 2017 and
2016 was $953,000 and $926,000, respectively. Net income for the nine months ended September 30, 2017 and 2016 was $2,182,000 and
$3,511,000, respectively.
Contingencies:
The Company
entered into a Cooperative Marketing Agreement (the “CMA”) with the Shakopee Mdewakanton Sioux Community which became
effective on June 4, 2012, and was amended in January 2015, 2016, and 2017, and will expire December 31, 2022. The CMA contains
certain covenants which, if breached, would trigger an obligation to repay a specified amount related to such covenant. At this
time, management believes that the likelihood that the breach of a covenant would occur and that the Company would be required
to pay the specified amount related to such covenant is remote.
The Company continues to analyze the feasibility of various
options related to the development of our underutilized land. The Company may incur substantial costs during the feasibility and
predevelopment process, but the Company believes available funds are sufficient to cover the costs. See Liquidity and Capital Resources
for more information on liquidity and capital resource requirements.
Liquidity and Capital Resources:
Net cash provided by operating activities for the nine months
ended September 30, 2017 was $5,104,000 primarily from net income of $2,182,000, depreciation of $1,869,000, and stock-based compensation
and 401(k) match totaling $614,000. The Company also experienced an increase in accounts payable and deferred revenue of $623,000
and a decrease in income taxes receivable of $511,000. This was partially offset by an increase in restricted cash of $769,000.
Net cash provided by operating activities for the nine months
ended September 30, 2016 was $2,543,000 primarily as a result of the following: The Company reported net income of $3,511,000,
depreciation of $1,867,000, and deferred income taxes of $973,000. The Company also experienced an increase in accounts payable
and deferred revenue of $1,634,000 and Card Casino accruals of $621,000. This was partially offset by an increase in restricted
cash of $574,000 and due from Minnesota horsemen associations of $1,101,000, and partially offset by the gain on disposal of assets
relating to the sale of land of $3,990,000 and gain on insurance recoveries of $592,000.
Net cash used in investing activities for the first nine months
of 2017 was $3,219,000, primarily for building remodel projects. Net cash used in investing activities for the first nine months
of 2016 was $3,777,000, primarily for building remodel projects and the purchase of land.
Net cash used in financing activities during the first nine
months of 2017 was $499,000, primarily for cash dividends to shareholders, partially offset by proceeds from purchases of stock
through the Employee Stock Purchase Plan and proceeds received upon the exercise of stock options. Net cash used in financing activities
during the first nine months of 2016 was $2,589,000, primarily for principal payments of capital lease obligations and payment
of cash dividends to shareholders.
The Company has a general credit and security agreement with
Bremer Bank, which provides a revolving credit line of up to $6,000,000. This agreement was amended on September 30, 2017 to extend
the maturity date to September 30, 2018. The line of credit is collateralized by all receivables, inventory, equipment, and general
intangibles of the Company. As of September 30, 2017, there were no borrowings under this agreement
The Company’s cash and cash equivalent balance at September
30, 2017 was $7,685,000 compared to $6,299,000 at December 31, 2016. The Company believes that unrestricted funds available in
its cash accounts, amounts available under its revolving line of credit, along with funds generated from operations, will be sufficient
to satisfy its liquidity and capital resource requirements for regular operations, as well as predevelopment expenses during 2017.
However, if the Company engages in any significant real estate development, additional financing would more than likely be required.
Critical Accounting Policies and Estimates:
The preparation of consolidated financial statements in accordance
with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.
We base our assumptions, estimates, and judgments on historical experience, current trends, and other factors that management believes
to be relevant at the time the consolidated financial statements are prepared. On a regular basis, management reviews the accounting
policies, assumptions, estimates, and judgments to ensure that our financial statements are presented fairly and in accordance
with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from
our assumptions and estimates, and such differences could be material.
Our significant accounting policies are included in Note 1 to
our consolidated financial statements in our 2016 Annual Report on Form 10-K. We believe the following critical accounting policies
affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.
Property and Equipment
- We have significant capital
invested in our property and equipment, which represents 68.9% of our total assets at September 30, 2017. We utilize our judgment
in various ways including: determining whether an expenditure is considered a maintenance expense or a capital asset; determining
the estimated useful lives of assets; and determining if or when an asset has been impaired or has been disposed. Management periodically
reviews the carrying value of property and equipment for potential impairment by comparing the carrying value of these assets with
their related expected undiscounted future net cash flows. If the sum of the related expected future net cash flows is less than
the carrying value, management would determine how much of an impairment loss would be measured by the amount by which the carrying
value of the asset exceeds the fair value of the asset. To date, we have determined that no impairment of these assets exists.
Stock-Based Compensation –
Accounting guidance
requires measurement of services provided in exchange for a share-based payment based on the grant date fair market value. We utilize
our judgment in determining the assumptions used to determine the fair value of equity instruments granted using a Black-Scholes
model.
Commitments and Contractual Obligations:
The Company entered into the CMA with the SMSC on June 4, 2012,
that was amended in January 2015, 2016 and 2017 and expires December 31, 2022. See “Cooperative Marketing Agreement”
below.
Legislation:
Minimum Wage Legislation
Legislation that was enacted into law in 2014 increased the
minimum wage that must be paid to most company employees from $7.25 to $8.00 on August 1, 2014, and from $8.00 to $9.00 per hour
on August 1, 2015. A further increase from $9.00 to $9.50 per hour went into effect on August 1, 2016. In addition, starting January
1, 2018, the minimum wage will increase at the beginning of each year by the rate of inflation with a maximum increase of up to
2.5% per year. Prior to August 1, 2014, the Company employed a large number of individuals who received an hourly wage equal to
or slightly above $7.25 per hour. As a result, this legislation has had an adverse financial impact in 2016 and 2017 and will continue
to have an adverse impact. We have implemented measures to partially mitigate the impact of this increase by raising our prices
and/or reducing our employee count. However, these measures could themselves have an adverse effect because higher prices and diminished
service levels may discourage customers from visiting the Racetrack.
Cooperative Marketing Agreement:
On June 4, 2012, the Company entered into the CMA with the SMSC.
The primary purpose of the CMA is to increase purses paid during live horse racing at Canterbury Park’s Racetrack in order
to strengthen Minnesota’s thoroughbred and quarter horse industry. Under the CMA, as amended, this is achieved through “Purse
Enhancement Payments to Horsemen” paid directly to the MHBPA. Such payments have no direct impact on the Company’s
consolidated financial statements or operations.
Under the terms of the CMA, as amended, the SMSC paid the horsemen
$7.2 million and $6.7 million in the first nine months of 2017 and 2016, respectively, primarily for purse enhancements for the
live race meets in the respective years.
Under the CMA, as amended, SMSC also agreed to make “Marketing
Payments” to the Company relating to joint marketing efforts for the mutual benefit of the Company and SMSC, including signage,
joint promotions, player benefits and events. Under the CMA, the SMSC paid the Company $1,581,000 and $1,197,000 for marketing
purposes during the three months ended September 30, 2017 and 2016, respectively.
In each of January 2015, 2016, and 2017 the
CMA was amended three times to adjust the payment amounts between the “Purse Enhancement Payments to Horsemen” and
“Marketing Payments to Canterbury Park.” SMSC is currently obligated to make the following purse enhancement and marketing
payments for 2018 through 2022:
Year
|
|
Purse Enhancement Payments to Horsemen
|
1
|
|
Marketing Payments to Canterbury Park
|
|
2018
|
|
|
7,380,000
|
|
|
|
1,620,000
|
|
2019
|
|
|
7,380,000
|
|
|
|
1,620,000
|
|
2020
|
|
|
7,380,000
|
|
|
|
1,620,000
|
|
2021
|
|
|
7,380,000
|
|
|
|
1,620,000
|
|
2022
|
|
|
7,380,000
|
|
|
|
1,620,000
|
|
|
|
|
|
|
|
|
1
Includes $100,000 each year payable to various horsemen associations
|
The amounts earned from the marketing payments are recorded
as a component of other revenue and the related expenses are recorded as a component of advertising and marketing expense and depreciation
in the Company’s consolidated statements of operations. For the three and nine months ended September 30, 2017, the Company
recorded $672,000 and $1,298,000 in other revenue and incurred $569,000 and $1,128,000 in advertising and marketing expense and
$57,000 and $170,000 in depreciation related to the SMSC marketing payment. For the three and nine months ended September 30, 2016,
the Company recorded $366,000 and $610,000 in other revenue and incurred $312,000 and $440,000 in advertising and marketing expense
and $57,000 and $170,000 in depreciation related to the SMSC marketing payment. The excess of amounts received over revenue is
reflected as deferred revenue which is included on the consolidated balance sheets.
Under the CMA, the Company has agreed for the 10 ½ year
term of the CMA expiring December 31, 2022 that it will not promote or lobby the Minnesota legislature for expanded gambling authority
and will support the SMSC’s lobbying efforts against expanding gambling authority.
Forward-Looking Statements:
From time-to-time, in reports filed with the
Securities and Exchange Commission, in press releases, and in other communications to shareholders or the investing public, we
may make forward-looking statements concerning possible or anticipated future financial performance, prospective business activities
or plans which are typically preceded by words such as “believes,” “expects,” “anticipates,”
“intends” or similar expressions. For such 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 such
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. Such risks and uncertainties include, but are not
limited to: material fluctuations in attendance at the Racetrack, decline in interest in wagering on horse races at the Racetrack,
at other tracks, or on unbanked card games offered at the Card Casino, competition from other venues offering unbanked card games
or other forms of wagering, greater than anticipated expenses or a lower than anticipated return on the development of our underutilized
land, competition from other sports and entertainment options, increases in compensation and employee benefit costs, increases
in the percentage of revenues allocated for purse fund payments, higher than expected expenses related to new marketing initiatives,
the impact of wagering products and technologies introduced by competitors, legislative and regulatory decisions and changes, the
general health of the gaming sector, and other factors that are beyond our ability to control or predict.