UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________________ to _________________
Commission File Number: 0-1590
THE WESTWOOD GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-1983910
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
190 V.F.W. Parkway, Revere, Massachusetts 02151
(Address of principal executive offices) (Zip Code)
617-284-2600
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (l) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes No X
As of May 15, 1995 343,210 shares of the Registrant's common stock,
par value $.01 per share and 912,015 shares of the Registrant's Class B
common stock, par value $.01 per share, were outstanding.
Page 1 of 21 Pages
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
June 30, December 31,
1995 1994
(Unaudited)
Current assets:
Cash $ 162,789 $ 812,424
Restricted cash 1,371,217 1,399,726
Accounts receivable 1,095,084 689,741
Prepaid expenses and other
current assets 380,816 244,739
Total current assets 3,009,906 3,146,630
Land 348,066 348,066
Buildings 19,377,265 19,237,102
Machinery and equipment 4,903,391 4,782,061
Leasehold improvements 10,588,879 10,596,672
35,217,601 34,963,901
Less: accumulated depreciation
and amortization (18,190,591) (17,567,344)
Net property, plant and equipment 17,027,011 17,396,557
Other assets:
Goodwill, less accumulated
amortization of $168,000 and
$96,000 552,000 624,000
Intangible assets, less accumulated
amortization of $49,999 and $33,333 16,666
Investment in unconsolidated subsidiary 5,388,141 5,453,631
Accounts receivable from officers,
employees and related party 308,913 480,578
Other assets 607,725 705,212
Total other assets 6,856,779 7,280,087
Total assets $26,893,696 $27,823,274
The accompanying notes are an integral part of these consolidated
condensed financial statements.
PAGE 2 OF 21
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THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' DEFICIT
June 30, December 31,
1995 1994
(Unaudited)
Current liabilities:
Current portion of long-term debt $ 4,534,043 $ 1,881,321
Long-term obligations in default 400,000 2,504,168
Subordinated notes payable 285,000 285,000
Accounts payable and other accrued expenses 13,354,971 12,500,675
Outstanding pari-mutuel tickets 1,656,203 1,239,251
Total current liabilities 20,230,217 18,410,415
Long-term debt, less current maturities 8,711,386 9,549,586
Other long-term liabilities 1,614,111 2,815,664
Total liabilities 30,555,714 30,775,665
Commitments and contingencies
Stockholders' deficit:
Common Stock, $.01 par value;
Authorized 5,000,000 shares
1,936,409 shares issued and
outstanding 19,364 19,364
Class B Common stock, $.01 par value;
Authorized 5,000,000 shares;
912,615 shares issued and
outstanding 9,126 9,126
Additional paid-in capital 13,355,355 13,355,355
Accumulated deficit (8,657,087) (7,954,721)
Note receivable from related party (308,812) (301,551)
Minimum pension liability adjustment (115,182) (115,182)
Less cost of 1,593,199 common and 600
class B common shares in treasury (7,964,782) (7,964,782)
Total stockholders' deficit (3,662,018) (2,952,391)
Total liabilities, minority
interest and stockholders'
deficit $26,893,696 $27,823,274
The accompanying notes are an integral part of these consolidated
condensed financial statements.
PAGE 3 OF 21
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THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
For the three months ended June 30, l995 and l994
(Unaudited)
1995 1994
Operating revenue:
Parimutuel commissions $ 7,237,135 $ 7,645,291
Concessions 879,711 1,176,646
Other operating 633,634 363,284
Total operating revenue 8,750,480 9,185,221
Operating expenses:
Wages, taxes and benefits 2,737,909 2,989,867
Purses 2,524,627 2,880,423
Cost of food and beverage 305,165 308,224
Administrative 769,424 726,928
General operating 2,534,165 2,628,230
Depreciation and amortization 401,124 409,761
Total operating expenses 9,272,414 9,943,433
Income (loss) from operations ( 521,934) ( 758,212)
Other income/(expenses):
Interest expense ( 130,451) ( 449,660)
Equity income (loss) in
unconsolidated subsidiary ( 30,525) 129,870
Other income 88,330 88,332
Net gain on investment 296,343
( 72,646) 64,885
Loss before provision for income taxes
and extraordinary item ( 594,580) ( 693,327)
Provision for income tax ( 30,000) -
Loss before extraordinary item ( 564,580) ( 693,327)
Extraordinary item-gain on elimination
of debt, net 15,266,601
Net income (loss) $( 564,580) $14,573,274
Income (loss) per share
Loss before extraordinary item (.45) (.55)
Extraordinary item 12.16
Net income (loss) per share (.45) $ 11.61
Weighted average common
shares outstanding 1,255,225 1,255,225
The accompanying notes are an integral part of these consolidated condensed
financial statements.
PAGE 4 OF 21
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THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
For the six months ended June 30, l995 and l994
(Unaudited)
1995 1994
Operating revenue:
Parimutuel commissions $13,308,147 $13,188,492
Concessions 1,435,035 1,596,794
Other operating 1,163,912 651,187
Total operating revenue 15,907,094 15,436,473
Operating expenses:
Wages, taxes and benefits 5,057,510 5,320,090
Purses 4,014,982 4,430,368
Cost of food and beverage 489,475 383,444
Administrative 1,392,977 1,313,460
General operating 4,588,014 4,752,368
Depreciation and amortization 809,981 825,404
Total operating expenses 16,352,939 17,025,134
Income (loss) from operations ( 445,845) ( 1,588,661)
Other income/(expenses):
Interest expense ( 367,695) ( 1,582,973)
Equity income (loss) in
unconsolidated subsidiary ( 65,490) 169,767
Other income 176,664 176,666
Net gain on investment 296,343
( 256,521) ( 940,197)
Loss before provision for income taxes
and extraordinary item ( 702,366) ( 2,528,858)
Provision for income tax - -
Loss before extraordinary item ( 702,366) ( 2,528,858)
Extraordinary item-gain on elimination
of debt, net 15,266,601
Net income (loss) $( 702,366) $12,737,743
Income (loss) per share
Loss before extraordinary item (.56) (2.01)
Extraordinary item 12.16
Net income (loss) per share (.56) $ 10.15
Weighted average common
shares outstanding 1,255,225 1,255,225
The accompanying notes are an integral part of these consolidated condensed
financial statements.
PAGE 5 OF 21
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THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1995 and l994
(Unaudited)
1995 1994
Cash Flows From Operating Activities:
Net income (loss) $( 702,366) $ 12,737,743
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities -
Depreciation and amortization 809,981 825,404
Equity in (income) loss of
unconsolidated subsidiary 65,490 ( 169,767)
Deferred revenue ( 176,668) -
Amortization of restructured note 79,215 -
Extraordinary gain on elimination of
debt, net (15,266,601)
Changes in operating assets and liabilities -
Restricted Cash 28,509 ( 102,818)
Receivables ( 240,939) 123,104
Prepaid expenses
and other current assets ( 136,077) 44,794
Other assets ( 581) ( 116,070)
Accounts payable
and other accrued liabilities,
including interest and taxes 1,271,248 2,888,469
Other long-term liabilities (1,024,885) ( 207,354)
Total adjustments 675,293 (11,980,839)
Net cash provided by, (used in)
operating activities ( 27,073) 756,904
Cash Flows From Investing Activities:
Additions to property, plant and equipment ( 253,700) ( 162,814)
Net sales of marketable securities 96,343
Other 100,000
Net cash provided by (used in)
investing activities $( 253,700) 33,529
(Continued)
The accompanying notes are an integral part of these consolidated
condensed financial statements.
PAGE 6 OF 21
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THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1995 and l994
(Unaudited)
(Continued)
1995 1994
Cash Flows From Financing Activities:
Proceeds from long-term debt $ - $ 300,000
Principal payments of debt ( 368,862) (249,613)
Net cash (used in) provided by
financing activities ( 368,862) 50,387
Net increase, (decrease) in cash
and cash equivalents ( 649,635) 840,820
Cash and cash equivalents at
beginning of period 812,424 354,391
Cash and cash equivalents at
end of period $ 162,789 $ 1,195,211
Supplemental Disclosures of Cash
Flow Information:
Cash paid during the period for-
Interest: $ 321,128 $ 521,361
Income taxes $ - $ -
Non-cash investing and financing
activities: Acquisition of
Concessions operation by incurring
direct liabilities of the operation. $ 770,000
The accompanying notes are an integral part of these consolidated
condensed financial statements.
PAGE 7 OF 21
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THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1995
(Unaudited)
1. Summary of Significant Accounting Policies
Interim Results
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of normal
recurring accruals and deferrals) necessary to present fairly the Company's
consolidated financial position as of June 30, 1995, and the results of its
operations and cash flows for the six and three month periods ended June 30,
1995 and 1994. See the Company's Annual Report on Form 10-K for a summary of
the significant accounting policies applied in the preparation of the
accompanying consolidated condensed financial statements.
Principles of Consolidation
The accompanying consolidated condensed financial statements as of,
and for the six and three months ended, June 30, 1995 and 1994 include the
accounts of the Company and its wholly-owned subsidiaries. During 1994, the
Company and Back Bay Restaurant Group, Inc. ("BBRG"), jointly pursued a
series of transactions, the effect of which resulted in the control of BBRG
no longer resting with the Company; the Company had previously owned 42.9%
of BBRG. Accordingly, the Company's investment in BBRG for the six and
three months ended June 30, 1995 and 1994 has been accounted for under the
equity method. (See Note 4 Investment in Affiliate).
Financial Statements for the Year Ended December 31, 1994
The consolidated condensed balance sheet at December 31, 1994 is
presented for comparative purposes and was taken from the audited consolidated
financial statements for the year ended December 31, 1994.
Debt
Long-term obligations which are in default have been classified as
current liabilities. See Note 3 for debt defaults.
PAGE 8 OF 21
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THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1995
(Unaudited)
(Continued)
Income (Loss) per Common Share
Income (loss) per share amounts are based on the weighted average
number of common and Class B common shares and common share equivalents
outstanding (if dilutive) during each year. Common share equivalents consist
of dilutive stock options and warrants under the treasury stock method.
2. Results of Operations and Management's Plans
The Company's consolidated condensed financial statements have been
prepared on the basis that it will be able to continue in existence. The
Company incurred a consolidated net loss of approximately $534,000 and
$693,000 in the three months ended June 30, 1995 and 1994, respectively.
For the period beginning in November 1992 through February 1995, the
Company engaged the professional services of a corporate advisor (the "Advisor")
to assist management in the planning and execution of a corporate
reorganization. Since their engagement, the Advisor has undertaken the
following activities in conjunction with and on behalf of management:
- Managing the Company within its cash constraints,
including the creation of a cash flow forecasting
system;
- Developing an immediate short-term cost reduction and
cash generation program;
- Reorganizing operations and renegotiating
certain service contracts and agreements
in order to achieve operational efficiencies;
- Negotiating with existing and potential
lenders and creditors in an effort to
restructure the Company's debt and to secure
new sources of capital (See Note 4);
PAGE 9 OF 21
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THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1995
(Unaudited)
(Continued)
- Restructuring certain assets including the
identification of assets to be held for
disposition;
- Assisting the Board of Directors as requested.
Since such engagement, the Company has retired or restructured
approximately $32.5 million of debt, eliminated non-performing non-core
assets, and significantly reduced certain operating expenses. The Company
continues to pursue ways of improving operations, and of retiring or
restructuring its remaining indebtedness.
3. Debt
In May 1994, holders of approximately $19,300,000 of the Company's
14.25% Subordinated Notes (the "Notes") exchanged them for approximately
887,000 shares of BBRG common stock. Holders of approximately $285,000
of the Notes elected not to participate in the exchange. These Notes remain
in default.
The shares were exchanged in full settlement of principal, accumulated
interest and default premiums due in respect of such Notes. The transaction
resulted in an extraordinary gain of approximately $15,266,000 net of
applicable income taxes. The net extraordinary gain includes forgiveness of
interest and indebtedness reduced by related expenses and the write-off of
remaining bond issuance fees. The net gain applicable to the forgiveness
of indebtedness was further reduced by related expenses during the period
July 1, 1994 through December 31, 1994. The net gain included in the results
of operation for the year ended December 31, 1994 was approximately $11,159,000.
PAGE 10 OF 21
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THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1995
(Unaudited)
(Continued)
The Company has outstanding a bank line of credit in the amount of
$2,000,000 (the "Term Note"). The Term Note was collateralized by a pledge
of approximately 336,000 of the Company's shares of BBRG common stock
(the "Collateral").
In March 1995, the Company and the bank reached an agreement to
restructure the Term Note. The agreement became effective in April 1995.
The new terms provide for the pledge of an additional 65,000 shares of BBRG
common stock and for the maintenance of a loan to collateral value ratio of 75%.
The new terms also provide for interest only payments until August 31, 1995
and principal payments of $16,000 per month, plus interest, thereafter until
maturity on June 1, 1996. The interest rate will be fixed at 10% for the
remainder of the Term Note.
In March 1995, the loan to collateral value ratio fell below 75%.
The Company has not, however, made any reductions to the principal balance
of the Term Note, nor has the Company received any notice of default from
the bank.
Outstanding indebtedness under a margin agreement was approximately
$207,000 and $361,000 at June 30, 1995 and 1994, respectively. The
indebtedness is collateralized by 88,000 shares of BBRG common stock.
In June l993, the Company defaulted on its obligation under a
non-recourse promissory note (the "Promissory Note") which was collateralized
by a second mortgage on the building owned by the Company. The Promissory
Note, which matured in June 1993, required a combined payment of principal
and interest totalling $600,000. The Company remains in default on such
obligation.
In April 1995, the Company reached an agreement to modify and extend
a 5% Promissory Note in the amount of $110,000. The terms of the new agreement
require sixty (60) monthly payments of principal and interest of $2,003. The
annual interest rate is 7.5%, but is increased to 12% in the event of a default.
PAGE 11 OF 21
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THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1995
(Unaudited)
(Continued)
In May 1995, the Company reached an agreement with a related party to
restructure a 6% Promissory Note (the "Note") in the amount of $318,000. The
new terms provide for the pledge of an additional 33,000 shares of BBRG
common stock. The new terms also provide for principal payments, plus
interest at 3/4 of 1% per month, of $9,000 per month until April 1996 and
$12,000 per month from May 1996 until maturity in November 1996.
In December 1994, as part of the agreement to sell land owned
collectively by the Company and the Revere Realty Group, Inc., the Company
was loaned $300,000 evidenced by a promissory Note and Second Mortgage.
In conjunction with the loan, a portion of the sales price in the amount of
$300,000 was contingent upon the buyer obtaining certain permits for
construction. The proceeds from this contingent payment are to be used
to extinguish the obligation on the related loan. During August 1995, the
buyer received the applicable permits and the Company is seeking relief of
this obligation.
In May 1994, the Company entered into an agreement with BBRG to
transfer the operations under the Concessions Agreement and the Management
Agreement to the Company in return for a six year term note in the amount of
$970,000. In April 1995 the Note was amended requiring equal quarterly payments
of principal and interest beginning April 1, 1996 of approximately $36,000 with
interest at 6%.
In October 1994, the Company entered into a Loan Restructuring
Agreement with the Mortgagee of property located at 284 Newbury St. The
new agreement ("Loan Restructure Agreement") reduced the principal amount
from approximately $4.3 million to $4.1 million and released outstanding
interest of approximately $300,000. In consideration of the above, the
Company has assigned all of the rents it receives from BBRG to the Mortgagee.
The Loan Restructure Agreement requires interest only payments through
Maturity on September 1, 1998. Interest charged at 5.50% thru October 1995
and 8.29% thereafter.
PAGE 12 OF 21
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THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1995
(Unaudited)
(Continued)
As part of the Loan Restructure Agreement, the Company maintains a
non-recourse guarantee in the amount of $400,000, which is collateralized by
30,000 of the Company's shares of BBRG. The guarantee is reduced by $50,000
per year for three years beginning March 1996. In addition, the Company has
pledged 15,000 of its BBRG shares to the Mortgagee as indemnification against
past due real estate taxes owed to the City of Boston. Such share will be
released to the Company on a pro-rata basis as the past due real estate taxes
are satisfied.
In May 1994, the Company settled certain litigation regarding the
Creditor Trust Agreement and entered into a Settlement Agreement of
approximately $2.2 million. Under the Settlement Agreement, the balance was
divided into two non-interest bearing notes.
The first note included a principal balance of $200,000 and four equal
monthly installments through September 15, 1994. The second note included a
principal balance of $2 million, and requires minimum quarterly payments of
$105,000 in 1994, $145,000 in 1995, $150,000 in 1996 and $230,000 through
maturity in September 1997. The Company has pledged 100% of the distributions
of the Capital Improvement Trust Funds as payment towards these amounts.
In December 1994, the Company entered into an amended loan agreement
restructuring a $4.5 million term loan agreement dated November 1993. The new
agreement was divided into two new notes. The first note included a principal
balance of $1.0 million which was paid in full. The second note in the amount
of $3.5 million, requires monthly payments of interest only, until June 1995
at an annual rate of 8.75% and, thereafter, monthly payments of principal and
interest of $42,298 until maturity in June 1996.
PAGE 13 OF 21
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THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1995
(Unaudited)
(Continued)
4. Investment in Affiliate
The following unaudited financial information summarizes the financial
position and results of operations of BBRG, as of and for the six months ended
June 25, 1995. The Company's investment in BBRG is accounted for under the
equity method. (See Note 1 Principles of Consolidation).
Financial Information June 25 December 25,
(In thousands) 1995 1994
Balance sheet data
Current assets $ 4,849 $ 4,486
Noncurrent assets 42,438 42,828
Current liabilities 9,384 9,665
Noncurrent liabilities 10,720 10,112
Net equity 27,183 27,537
Six Months Ended June 25,
1995 1994
Earnings data
Net sales $ 45,013 $40,499
Gross profit 4,565 5,489
Net income (loss) ( 354) 795
Company's equity in net income
(loss) of BBRG $ (65) $ 170
The Company maintained and operated its restaurant and concession
facilities at Wonderland through BBRG, pursuant to a concessions agreement
(the "Concessions Agreement") which became effective in 1992. The Company
entered into an agreement with BBRG to transfer the operations under the
Concessions Agreement which became effective on May 2, 1994.
PAGE 14 OF 21
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Three months ended June 30, 1995 compared to three months ended June 30, 1994
Wonderland Park
The table below illustrates certain key statistics for Wonderland Park,
the Company's greyhound racing operation, for the three months ended June 30.
1995 1994
Live performances 133 131
Simulcast days 91 91
Parimutuel handle (thousands)
Live-on track $17,456 $19,947
Live-simulcast 7,979 -
Guest-simulcast 12,860 12,358
Total $38,295 $32,305
Total attendance 177,043 214,805
Average per capita wagering $ 143 $ 150
Foxboro Park
The table below presents certain key statistics for Foxboro Park for
the three months ended June 30.
1995 1994
Total live performances 41 53
Total simulcast days 88 88
Parimutuel handle (thousands)
Live-on track $ 2,857 $ 3,817
Live-off track 6,517 4,423
Guest-simulcast 10,377 11,351
Total $19,751 $19,591
Total attendance 72,977 58,674
Average per capita wagering $ 182 $ 258
PAGE 15 OF 21
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Operating Revenue
Revenue from parimutuel commissions decreased to approximately
$7,240,000 for the three months ended June 30, 1995 from $7,645,000 in the
comparable period in l994, a decrease of $405,000 or 5.3%. This decrease is
attributable to the decrease in live handles at Wonderland, as a result of
the reduction in attendance. At Foxboro, the live handle decreased as a
result in the reduction of number of live performances. The total handle
results were consistent for the three months ended June 30, 1995 compared
to the comparable period in 1994 due to an increase in the live, off track
simulcast wagering. The commission rate on live, off track wagering is
significantly lower than the commission earned on live and guest handle
amounts.
Revenue from parimutuel commissions for the six months ended June 30,
1995 increased by approximately $120,000 or 1% to approximately $13,308,000
from the comparable period in 1994 of approximately $13,188,000. This
increase is attributable to the increase in live and guest simulcast handle
results in the first quarter of 1995. This increase in handle was
attributable to a greater attendance in the first quarter of 1995 compared
to 1994 and the addition of live - simulcasting in 1995. The attendance
increased as a result of better weather conditions in the first quarter of 1995.
Parimutuel commission revenue for the six months ended June 30, 1995
includes approximately $228,000 deposited each into the Greyhound Promotional
Trust Fund and the Greyhound Capital Improvements Trust Fund. Additionally,
revenue for this period includes approximately $66,000 deposited into the
Harness and Thoroughbred Promotional Trust Funds combined and $193,000
deposited into the Harness and Thoroughbred Capital Improvement Trust funds
combined. These funds are dedicated to reimbursement of promotional expenses
and capital improvements, respectively, incurred by Wonderland Park and
Foxboro Park.
Concessions revenue decreased to approximately $880,000 for the three
months ended June 30, 1995 from $1,177,000 in the comparable period in 1994, a
decrease of $297,000 or 25.2%. This decrease is attributable to a reduction
in the number of live performances at Foxboro and a reduction in the
attendance at Wonderland.
Concessions revenue decreased to approximately $1,435,000 for the six
months ended June 30, 1995 from $1,596,000 in the comparable period in 1994, a
decrease of $161,000 or 10%. This decrease is attributable to the conditions
of the second quarter of 1995.
PAGE 16 OF 21
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Other operating revenues consist of admissions, parking and program
revenue directly related to the racing performances. Other operating revenues
increased to approximately $1,163,000 in the six months ending June 30, 1995
compared to $651,000 for the comparable period in 1994, an increase of
$512,000 or 78%. Other operating revenues for 1994 only includes approximately
one month of program sales. The program revenues were maintained and operated
through BBRG through May of 1994 at which point the Company entered into an
agreement with BBRG to transfer the program operations under the control of
the Company.
Operating Expenses
Operating expenses of $9,272,000 for the three months ended June 30,
1995 decreased from the comparable period in l994 of $9,943,000, a reduction of
$671,000 or 6.7%. This decrease is attributable to a reduction in the number of
performances at Foxboro as well as additional efforts to reduce costs. In
addition, the purse expenses have decreased approximately $356,000
as a direct result in the reduction in the live handle amounts at Wonderland.
Interest Expense
Interest expense decreased to approximately $130,000 in the three
months ended June 30, 1995, from $450,000 in the three months ended June 30,
1994. The decrease is primarily due to the elimination of interest associated
with the majority of the Company's 14.25% Subordinated Notes. (See Liquidity
and Capital Resources-General).
Depreciation and Amortization
Depreciation and amortization decreased slightly to approximately
$402,000 in the three months ended June 30, 1995, from $410,000 in the
comparable period in l994.
Other Income
Other income of approximately $88,000 is attributable to the
recognition of revenue related to advances made to the Company by a vendor
in consideration of the exclusive right to supply specified equipment to
Wonderland and Foxboro.
PAGE 17 OF 21
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Liquidity and Capital Resources
Historically, the Company's primary sources of capital to finance its
businesses have been its cash flow from operations and credit facilities. The
Company's capital needs are primarily for the maintenance and enhancement of
the racing facilities at Wonderland Park and Foxboro Park, and for debt service
requirements, including those relating to debt incurred in connection with
capital expenditures at Foxboro Park during l992.
General
In May 1994 holders of approximately 98.6%, or $19,300,000, of the
Company's 14.25% Subordinated Notes (the "Notes") delivered them to the Company
in consideration for approximately 887,000 shares of BBRG common stock. The
shares were exchanged in full settlement of principal, accumulated interest
and default premiums due in respect of such Notes. Holders of approximately
$285,000 of the Notes elected not to participate in the exchange and these
notes remain in default.
The Company has outstanding a bank line of credit in the amount of
$2,000,000 (the "Term Note"). The Term Note was collateralized by a pledge
of approximately 336,000 of the Company's shares of BBRG common stock
(the "Collateral").
In March 1995, the Company and the bank reached an agreement to
restructure the Term Note. The agreement became effective in April 1995.
The new terms provide for the pledge of an additional 65,000 shares of BBRG
common stock and for the maintenance of a loan to collateral value ratio of 75%.
The new terms also provide for interest only payments until August 31, 1995
and principal payments of $16,000 per month, plus interest, thereafter until
maturity on June 1, 1996. The interest rate will be fixed at 10% for the
remainder of the Term Note.
In March 1995, the loan to collateral value ratio fell below 75%.
The Company has not, however, made any reductions to the principal balance
of the Term Note, nor has received any notice of default from the bank.
In June l993, 284 Newbury defaulted on its obligation under a non-
recourse promissory note (the "Promissory Note") which was collateralized by
a second mortgage on the building owned by 284 Newbury. The Promissory Note,
which matured in June, required a combined payment of principal and interest
totalling $600,000. 284 Newbury remains in default on such obligation.
PAGE 18 OF 21
<PAGE>
In November 1992 the Company engaged the professional services of a
related party to assist management in the planning and execution of a financial
and operational reorganization of the Company. The reorganization was
substantially complete at December 31, 1994. During such engagement, the
Company retired or restructured approximately $32.5 million of debt, eliminated
non-performing non-core assets, and significantly reduced certain operating
expenses. The Company continues to pursue ways of improving operations, and
of retiring or restructuring its remaining indebtedness.
Racing Operations
In May 1994, Foxboro settled certain litigation regarding the Foxboro
Creditor Trust Agreement and entered into a Settlement of Litigation Agreement
with the Trustee (the "Settlement Agreement"). The outstanding note
(the" Note") requires the payment of 100% of the distributions from
Foxboro's Harness Horse and Running Horse Capital Improvements Trust Funds
("Trust Funds"). To the extent that quarterly payments in respect of the
calendar years 1994, 1995, 1996 and the period January 1, 1997 through
August 31, 1997 aggregate less than $105,000, $145,000, $150,000 and
$230,000, respectively, Foxboro shall be required to make up the shortfall.
For the quarter ended December 31, 1994, the shortfall was
approximately $26,500, which payment was made by Foxboro in March 1995.
For the quarter ended June 30, 1995, the shortfall was approximately $78,000
which payment was made, by Foxboro before September 31, 1995, as required
by the Settlement Agreement. For the quarter ended September 31, 1995
the shortfall is anticipated to be approximately $60,000, which will be
paid from the Capital Improvements Trust Fund by December of 1995.
In order to meet the requirements for renewal of racing licenses in
1996, the Company's racing subsidiaries must demonstrate that they are
financially stable entities, capable of disposing of their obligations on a
timely basis. Although management is optimistic that it will be able to
demonstrate financial stability in their applications for 1996 racing
licenses, there can be no assurance that the Racing Commission will continue
to grant licenses to conduct racing on the schedules presently maintained at
Wonderland and Foxboro Park.
PAGE 19 OF 21
<PAGE>
PART II - OTHER INFORMATION
Item l. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.80 Modification and Extension of Note between
the Company and Charles Sarkis
collectively, and Garden Square Shoppes,
Ltd., dated April 10, 1995.
10.81 Secured Promissory Note and related Pledge
Agreement between the Company and The
McCarthy Family Trust - 1989, dated
January 18, 1995.
10.82 Secured Promissory Note and related Pledge
Agreement between the Company and
Corporate Rebuilding Managers, L.P., dated
January 18, 1995.
(b) Reports on Form 8-K.
None.
PAGE 20 OF 21
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of l934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
THE WESTWOOD GROUP, INC.
Date August 11, 1995 /s/ Richard P. Dalton
Richard P. Dalton
President
Date August 11, 1995 /s/ Anthony V. Boschetto
Anthony V. Boschetto
Controller
PAGE 21 OF 21
