Canterbury Park Holding Corporation

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Canterbury Park Holding Corporation

1100 Canterbury Road
Shakopee, Minnesota 55379
U.S.A.
Telephone: (952) 445-7223
Toll Free: (800) 340-6361
Fax: (952) 496-6400
Web site: http://www.canterburypark.com

Public Company
Incorporated: 1994
Employees: 700
Sales: $32.5 million (2000)
Stock Exchanges: NASDAQ
Ticker Symbol: TRAK
NAIC: 711212 Race Tracks

Canterbury Park Holding Corporation owns and operates the Canterbury Park Racetrack and Card Club in Shakopee, Minnesota, a short drive south from both Minneapolis and St. Paul. The company’s primary business operations are parimutuel horse racing and unbanked card games (in which patrons play against one another, rather than the house). Canterbury Park conducts live thoroughbred, quarterhorse, and harness racing with approximately 60 live-race days annually from May to September. It is the state’s only parimutuel horseracing facility. Canterbury Park also offers patrons daily simulcast races from around the country for wagering. Simulcast race proceeds are used to subsidize onsite racing purses. In 2000, the Canterbury Card Club began offering unbanked card games 24 hours a day, seven days a week. Since 1998, the track has hosted the Annual Claiming Crown meet, giving Canterbury Park national exposure. The company also rents its facilities for special events and hosts community-oriented celebrations.

Early 1980s: An Idea Becomes Reality

The idea of creating a horse-racing industry in Minnesota began to take shape in 1982 when State Representative Dick Kostohryz pushed Minnesota voters to approve a constitutional amendment allowing parimutuel betting in the state. As soon as the amendment passed, Kostohryz introduced a parimutuel bill in the legislature and Minnesota’s horseracing industry was out of the starting gate. Two years later ground was broken for Minnesota’s first track, Canterbury Downs.

Brooks Fields and his nephew Brooks Hauser, of Minnesota Racetrack, Inc., were granted the first license by the Minnesota Racing Commission. They planned to build in Shakopee. The initial investors included, among others, owners of the Santa Anita track in southern California and the City of Shakopee, which granted $6 million in tax-increment bond financing. The facility was built for a controversial $67 million, making it one of the most expensive tracks in a decade.

In addition to authorizing parimutuel betting, the Minnesota legislature created the Racing Commission to oversee licensing of tracks and help advance the industry in Minnesota. To help strengthen Minnesota’s struggling breeding enterprises, the legislature added a breeders’ incentive provision to the parimutuel law, which allocated a portion of funds raised to go toward a breeders’ fund. The state would reap the benefits of the additional tax revenues.

The owners of the new track were concerned early on about how Minnesotans would embrace horseracing when few had knowledge of the parimutuel industry. Prior to the track’s opening, therefore, racetrack officials worked to educate potential customers about horseracing and parimutuel wagering. Minnesota Racetrack hired Stan Bowker, an experienced track manager in Omaha, to serve as general manager of the new track. Bowker spent months visiting other tracks to persuade respected trainers to race their horses at Canterbury Downs during its inaugural season.

Success of Canterbury Downs hinged on attendance numbers and how much visitors were willing to wager. Owners speculated that they would see daily attendance figures of 10,500. Projected handle amounts—the total amount wagered on the race—were based on each patron betting an average of $120. By Minnesota law, the purses, or the prize monies, were set at 5 percent of the total handle.

The track opened in 1985 with a great deal of excitement and fanfare. Attendance figures after two weeks showed an impressive average of 13,661 visitors, but wagering was well below projections, amounting to just $57 per patron. The track also suffered from a smaller than expected number of horses competing, which limited the number and sizes of races. In its first season Canterbury Downs attracted average daily attendance of 13,163 but posted a loss of $1.4 million.

In the track’s second year the numbers surpassed those of the inaugural year, but they were still below projections. A total of $135 million was wagered, but average attendance slipped slightly to 9,104 visitors. Minnesota gained more than $7 million for the state’s general fund, but Canterbury Downs lost $11 million.

The following year Stan Bowker left to start a racetrack consulting business. Mike Manning, from the Santa Anita Track in California, replaced Bowker as general manager. The track set an attendance record of 27,439 on June 28, 1987, but the operation still fell short of its revenue goals. The per capita average wager was up to $108, but attendance continued to slip to 8,570 per race day. Discouraged by the shrinking purses, horse owners were looking elsewhere to race.

1990: New Ownership

Despite Canterbury’s losses, the impact of the track on the state’s horse breeding industry was growing. Breeding farms were sprouting up all over the state, and there was talk of opening a second track in the Little Falls area northwest of the Twin Cities. In an effort to increase wagering revenues and ultimately purse amounts, horse breeders and Canterbury Downs owners asked the legislature to allow Canterbury Downs races to be televised at off-track locations simulcast around the state.

Canterbury Downs’ finances were still shaky at the close of the 1989 season. Average attendance dipped to 7,239, just over half of the 1985 attendance. Purse amounts were decreased to combat financial problems. Several prospective buyers for Canterbury Downs began to make headlines as speculation about the track being sold ebbed and flowed throughout the 1989 live-racing season. Finally, in 1990 the track was purchased by Ladbroke Racing Corporation, the U.S. subsidiary of British hotel and racing giant Ladbroke Group PLC, for about $21 million.

In the previous legislative season, track officials had been lobbying legislators for permission to simulcast races for wagering from other tracks, which would draw patrons to Canterbury Downs year round. In 1990, regular simulcast race wagering began at Canterbury. Patrons were able to watch and bet on simulcast races from other parts of the country via television at Canterbury Downs. With simulcasting races, the track received a portion of the money bet on each race. The simulcasting revenues helped generate additional revenue for the company, but live racing attendance dipped to a low of 6,054 daily visitors.

Adding to the track’s woes, competition for gaming dollars in the state was increasing. The Minnesota State Lottery was launched in 1990. A year later Native American casinos began to open up on reservations around the state. Racetrack gambling fell to only 1-2 percent of gambling revenues in the state.

Canterbury Downs’ annual losses continued to be in the millions, while attendance continued to slide, so much so that in 1992 a live-race card was cancelled because small purses did not attract enough competitors.

Ladbroke and the previous owners had been lobbying for the off-track provision in the state for several years to increase statewide exposure for Canterbury Downs and increase wagering on live races. After a nod of approval of off-track betting by the Minnesota Legislature, the Minnesota State Supreme Court ruled unanimously in July 1992 that off-track betting on horse races at Canterbury Downs was unconstitutional. As the Star Tribune reported on July 31, “the court said it was compelled to abide by the ‘literal and unambiguous meaning’ of a 1982 constitutional amendment approved by voters. That ballot question specifically authorized ‘on-track’ parimutuel betting.”

With losses mounting and little hope for off-track betting, Ladbroke would not guarantee the Minnesota Racing Commission a live meet the following season. The Racing Commission responded by outlawing simulcasting of horse races. Ladbroke Group closed the track and decided to sell.

Prospective buyers began to surface in 1993, and in early 1994 Minnesota businessman Irwin Jacobs bought Canterbury Downs for $9 million from Ladbroke. His purchase came after a drawn out court battle with a North Dakota woman who claimed previous rights to buy the track. Jacobs commented to City Business in January 1994 that he bought the property because he felt it was undervalued. Jacobs considered other options for the Canterbury site, such as a car racetrack, amphitheater, convention center, or a casino to supplement track finances.

1994: Resale and Public Offering

After having done their financial homework on the viability of operating the track, Curt Sampson and Dale Schenian bought Canterbury Downs from Jacobs for $9 million in March 1994, establishing Canterbury Park Holding Corporation. In August the new owners took the company public to generate working capital and help offset debt, raising $4.8 million through the initial offering.

Company Perspectives:

Canterbury Park strives to provide a premier, diverse entertainment center, where guests and employees are treated with respect and experience a unique, enjoyable place to work and play .

Sampson had a background in the industry as the son of a horse breeder and former president of the Minnesota Thoroughbred Association. The new owners’ commitment to and involvement in the Minnesota horse industry helped them win community and political support. To make live racing more financially feasible in Minnesota, Sampson proposed shortening the live racing season and offering simulcast racing year-round. He planned to offer less than 60 days of live racing each year, with 365 days of simulcast racing, compared to 283 offered in 1992.

In April 1994 the new owners hired Stan Bowker back as general manager of the track. Bowker was committed to returning Canterbury to the level of racing it had in 1985 and 1986. Randy Sampson, Curt’s son, became president.

That first year back in business, Canterbury Downs offered only simulcast racing, giving the new owners an opportunity to raise revenue to invest in purses the next season. Under the new ownership, the early numbers were promising. In the first four days, the 10,000 people who visited the track wagered more than $1.5 million. The new owners were hoping the earnings from the simulcast races would ensure a minimum daily purse of $40,000 for the 1995 live-race season.

The new owners also worked the political angle of the business. The legislature had approved a statewide public referendum to add a constitutional amendment to legalize off-track betting in Minnesota. Proponents of the amendment worked hard to educate Minnesotans about the referendum, especially since each blank ballot was considered a no vote. The referendum was narrowly defeated. It would have allowed the company to expand the number of live racing days, increase horseracing revenues, and ultimately would have benefited breeders in the state.

The return to live racing in 1995 began with the owners officially unveiling the new Canterbury Park logo and name. The new name for the racetrack was intended to symbolize a more family-friendly atmosphere and help bolster attendance. Canterbury Park developed more of an entertainment focus, with frequent music, pony rides, a paddock, and a large playground.

The track’s 55 days of live racing drew nearly 4,000 bettors per day, but overall handle was low. Owners offered patrons year-round simulcast races, and for the first time, Canterbury Park races were simulcast to out of state tracks as well. Sampson pushed hard to attract more special events to the facility, such as craft shows, snowmobile races, boat shows, food festivals, rodeos—all drawing additional revenue and people to Canterbury Park.

1996: Turning the Corner

Canterbury Park’s finances improved in 1996 because of tax relief legislation signed by Governor Arne Carlson. The new state law exempted Canterbury’s first $12 million of parimutuel revenue from the 6 percent Minnesota parimutuel tax and allowed the company to keep all uncashed winning tickets (which were previously turned over to the racing commission). The law, which was set to expire in three years, became effective during the last half of the 1996 fiscal year, reducing the company’s expenses by approximately $435,000 and providing an additional $122,000 contribution to the purse fund.

Thanks to the tax break, Canterbury Park Holding Corporation reported its first profitable year in 1996, earning $71, 149, compared with a loss of more than $800,000 in 1995. The owners continued lobbying for additional revenue sources such as slot machines or poker.

In 1997 Canterbury gained the full benefit of the tax law changes, reducing expenses by $841,000 and providing $240,000 in additional revenue to the purse fund. Attendance was on the rise, and Canterbury Park reported a net profit for the 1997 fiscal year of $135,788 on revenues of $18.2 million. The company was unsuccessful, however, at gaining legislative approval for casino-style slots at Canterbury Park. The proceeds would have helped fund a Minnesota Twins baseball stadium.

Owners continued to build on the Park’s off-season usage. Beginning in 1997 Canterbury Park hosted a highly successful Holiday in Lights for families, which featured holiday light displays, a sliding hill, ice skating, and sled dog racing. During the warmer seasons Canterbury hosted motorcycle races and motocross events.

In 1998 Canterbury Park was helped by an omnibus tax bill which allowed the tax relief legislation from 1996 to become permanent. This significantly added to the company’s outlook for long-term stability. Track executives continued to increase the number of live racing days, and purses grew to $70,000 per day in 1999, up from a low of $20,000 in 1992.

The highlight of 1999 was Canterbury’s hosting of a new national event—the first annual Claiming Crown—a championship for claiming horses, or the best of the horses competing at the lower levels. Canterbury Park received nationwide revenue as well as nationwide exposure for hosting. The track saw a record handle and attendance for Canterbury Park that day. The Claiming Crown was so well received at Canterbury that it was scheduled to be held at the site through 2007. The company reported a profit that year of $386,619, the company’s third consecutive year of profit.

Key Dates:

1982:: Minnesota voters approve parimutuel betting.
1984:: Minnesota Racetrack, Inc. breaks ground for Canterbury Downs.
1985:: Live horse racing begins at Canterbury Downs.
1990:: Ladbroke Group PLC buys Canterbury Downs business.
1991:: Minnesota legislature approves off-track betting, but Minnesota Supreme Court declares it unconstitutional.
1992:: Canterbury Downs closes.
1994:: Curtis Sampson and Dale Schenian purchase Canterbury Downs; Canterbury Park Holding Corporation goes public.
1995:: Live racing returns to Minnesota; name of track officially changes to Canterbury Park.
1996:: Minnesota legislature passes legislation exempting some parimutuel revenues from tax.
1999:: Inaugural Claiming Crown race is held at Canterbury Park.
2000:: Canterbury Park Card Club begins operations.

Canterbury officials soon found some success in the political arena when the Minnesota legislature gave approval for implementation of a 24-hour-a-day Unbanked Card Club. In April 2000 the Canterbury Card Club started dealing, and the impact was even greater than owners anticipated. With “unbanked games” Canterbury Park collected a small amount from each hand for operating the Card Club, but patrons played against one another rather than the house. The legislation governing the Card Club stipulated that Canterbury Park was the only location in Minnesota allowed to have a card club. A portion of the proceeds from the Card Club were earmarked for purse increases and the state breeders’ fund. The Card Club made available 42 tables where guests could play poker variations such as Texas Hold’em, Omaha, and 7-card Stud, as well as Pai Gow Poker, Super Nine, Let it Ride, Caribbean Stud, and Minnesota 21, a version of Blackjack.

The Card Club was popular immediately, and allowed the track to subsidize purses twice by 10 percent during the 2000 season. The track experienced promising growth that season in both attendance and handle size. Since 1996 live racing days increased from 51 to 60 days. Total purses paid grew from $4.1 million to $6.5 million. On-track wagering on live races increased 12.8 percent from the previous year. The track’s success was obvious. In August 2000, Minneapolis-St. Paul CityBusiness magazine reported that “industry insiders say Canterbury Park, which not long ago nearly became an amphitheater, is on the verge of becoming an elite second-tier racecourse.”

At the end of 2000, Canterbury Park reported its most successful racing season in company history. Attendance rose 11 percent, and on-track handle increased 5 percent. The second Claiming Crown set another attendance record of 15,000. It was the fifth consecutive year of record operating results, due in part to the addition of the Card Club.

For the 2001 season, track officials increased the Card Club to the allowed maximum of 50 tables, added more card games, and improved food and beverage service. Live racing days were increased to 63, with the third annual Claiming Crown highlighting the summer season. Canterbury Park was becoming a preferred track of owners and trainers as well. For the 2001 season, track executives received a record number of stall applications—2,200 for 1,600 stalls. They planned to offer average daily purses of more than $120,000.

Canterbury Park continued to explore new possibilities for hosting events. It also purchased a new, moveable structure, the “Paddock Pavilion,” to expand the indoor available space in the grandstand area, thus increasing possibilities for hosting events in the unpredictable Minnesota climate.

Although the Minnesota legislature was not eager to expand gambling in the state, Canterbury Park officials and horse breeders continued to pursue legislative avenues for off-track betting, slot machines, and more, all in an effort to support the state’s growing horse breeding and racing industry.