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 March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EX0CHANGE 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
incorporation or organization) Identification No.)
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 X No
As of May 15, 1997 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
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
March 31, December 31,
1997 1996
(Unaudited)
Current assets:
Cash and cash equivalents $ 1,169,304 $ 1,033,911
Restricted cash 679,246 1,021,221
Accounts receivable 645,373 641,345
Prepaid expenses and other
current assets 137,266 198,295
----------- ---------
Total current assets 2,631,189 2,894,772
Property, Plant and Equipment:
Land 348,066 348,066
Buildings 14,680,143 14,630,088
Machinery and equipment 5,042,351 5,034,426
Leasehold improvements 10,864,559 10,864,559
---------- ----------
30,935,119 30,877,139
Less: accumulated depreciation
and amortization 19,154,048 18,919,632
---------- ----------
Net property, plant and equipment 11,781,071 11,957,507
Other assets:
Goodwill, less accumulated
amortization of $420,000 and
$384,000 300,000 336,000
Investments 4,970,352 4,987,796
Notes receivable from officer 340,735 336,190
Other assets, less accumulated
amortization of $909,100 and
$871,732 280,368 317,736
--------- ---------
Total other assets 5,891,455 5,977,722
----------- -----------
Total assets $20,303,715 $20,830,001
=========== ===========
The accompanying notes are an integral part of these consolidated
condensed financial statements.
<PAGE> 2
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' DEFICIT
March 31, December 31,
1997 1996
(Unaudited)
Current liabilities:
Current maturities of
long-term debt $ 4,539,516 $ 2,226,973
Long-term obligations in default 1,128,689 1,185,500
Short-term borrowing's 370,833 520,990
Accounts payable and other accrued
liabilities 15,400,880 15,646,522
Outstanding pari-mutuel tickets 479,012 420,119
---------- ----------
Total current liabilities 21,918,930 20,000,104
Long-term debt,
less current maturities 1,012,817 3,434,758
Other long-term liabilities 1,827,756 1,859,378
---------- ----------
Total liabilities 24,759,503 25,294,240
Commitments and contingencies
Stockholders' deficit:
Common Stock, $.01 par value;
Authorized 3,000,000 shares
1,936,409 shares issued and
outstanding 19,364 19,364
Class B Common stock, $.01 par value;
Authorized 1,000,000 shares;
912,615 shares issued and outstanding 9,126 9,126
Additional paid-in capital 13,355,355 13,355,355
Accumulated deficit ( 9,485,266) ( 9,497,349)
Note receivable from related party ( 334,226) ( 330,594)
Minimum pension liability adjustment( 55,359) ( 55,359)
Less cost of 1,593,199 common and 600
class B common shares in treasury ( 7,964,782) ( 7,964,782)
----------- -----------
Total stockholders' deficit ( 4,455,788) ( 4,464,239)
Total liabilities, minority
interest and stockholders' ------------ -----------
deficit $20,303,715 $20,830,001
============ ===========
The accompanying notes are an integral part of these consolidated
condensed financial statements.
<PAGE> 3
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
For the three months ended March 31, l997 and l996
(Unaudited)
1997 1996
Operating revenue:
Pari-mutuel commissions $ 6,435,816 $ 5,813,067
Concessions 609,844 541,831
Other operating 658,478 502,565
---------- ---------
Total operating revenue 7,704,138 6,857,463
Operating expenses:
Wages, taxes and benefits 2,263,594 2,359,236
Purses 1,736,010 1,691,107
Cost of food and beverage 171,851 181,524
Administrative 1,114,131 536,238
General operating 2,027,932 1,952,535
Depreciation and amortization 307,784 399,595
--------- ---------
Total operating expenses 7,621,302 7,120,235
--------- ----------
Income (loss) from operations 82,836 ( 262,772)
Other income/(expenses):
Interest expense, net ( 131,646) ( 198,652)
Equity income (loss) in investment ( 17,444) ( 63,500)
Other income 88,333 88,333
---------- -----------
Total other income (expenses)( 60,757) ( 173,819)
---------- -----------
Income (Loss) before provision
for income taxes 22,079 ( 436,591)
Provision for income tax 10,000 -
---------- -----------
Net Income (Loss) $ 12,079 $( 436,591)
=========== ============
Net income (loss) per share $ .01 $( .35)
=========== ============
Weighted average common
shares outstanding 1,255,255 1,255,225
The accompanying notes are an integral part of these consolidated
condensed financial statements.
<PAGE> 4
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1997 and l996
(Unaudited)
1997 1996
Cash flows from operating activities:
Net income (loss) $ 12,079 $( 436,591)
Adjustments to reconcile
net income (loss) to net cash
provided by operating
activities -
Depreciation and amortization 307,784 399,591
Equity in loss from investments 17,444 63,500
Deferred revenue ( 88,333) ( 88,333)
Changes in operating assets
and liabilities -
Restricted Cash 341,975 7,878
Accounts Receivables ( 4,028) 349,183
Prepaid expenses
and other current assets 61,029 78,900
Other assets ( 4,545) ( 9,652)
Accounts payable
and other accrued liabilities, ( 98,412) 243,765
Other long-term liabilities ( 35,254) 2,956
----------- ----------
Total adjustments 497,660 1,047,788
Net cash provided by ----------- ----------
operating activities 509,739 611,197
----------- ----------
Cash flows from investing activities:
Additions to property,
plant and equipment ( 57,980) ( 30,818)
------------ -----------
Net cash used in
investing activities $( 57,980) $( 30,818)
------------ ------------
(Continued)
The accompanying notes are an integral part of these consolidated
condensed financial statements.
<PAGE> 5
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1997 and l996
(Unaudited)
(Continued)
1997 1996
Cash flows from financing activities:
Proceeds from long-term debt $ 2,811 $ 300,000
Principal payments of debt ( 319,177) ( 536,508)
------------- ------------
Net cash used in
financing activities ( 316,366) ( 236,508)
------------ ------------
Net increase in cash and cash
equivalents 135,393 343,871
Cash and cash equivalents at
beginning of period 1,033,911 450,987
------------ -----------
Cash and cash equivalents at
end of period $ 1,169,304 $ 794,858
============ ============
Supplemental Disclosures of Cash
Flow Information:
Cash paid during the period for-
Interest $ 137,013 $ 250,839
============ ============
Income taxes $ 13,280 $ 18,208
============ ============
The accompanying notes are an integral part of these consolidated
condensed financial statements.
<PAGE> 6
THE WESTWOOD GROUP INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997
(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 March 31, 1997, and the results of its
operations and its cash flows for the three month periods ended
March 31, 1997 and 1996. 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 three months ended, March 31, 1997
and 1996 include the accounts of the Company and its wholly-owned
subsidiaries.
Financial Statements for the Year Ended December 31, 1996
The consolidated balance sheet at December 31, 1996 is
presented for comparative purposes and was taken from the audited
consolidated financial statements for the year ended December 31,
1996. Certain prior year amounts have been reclassified to
conform with current period presentation.
Debt
Long-term obligations which are in default have been
classified as current liabilities. (See Note 3).
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
period. Common share equivalents consist of dilutive stock
options and warrants under the treasury stock method.
<PAGE> 7
THE WESTWOOD GROUP INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997
(Unaudited)
2. Results of Operations and Management's Plans
The Company's consolidated condensed financial statements
have been prepared on the basis that it will continue in
existence. The Company has encountered substantial cash flow and
liquidity problems, has a signigicant working capital deficiency
and stockholders' deficit and is in default on certain debt
obligations (See Note 3). The improvement in the Company's
results during the three months ended March 31, 1997 compared to
the corresponding period in 1996 is due to an increase in
operating income of approximately $346,000 and a decrease in
interest expense of approximately $67,000. These improvements are
attributable to the reorganization plan discussed below.
The Company has implemented certain reorganization plans to
address its cash flow and liquidity problems. the above factors,
however, raise substantial doubt about its ability to continue as
a going concern.
In June of 1995, the Company reorganized and restructured
its financial and operational management team, with the addition
of a Executive vice-president, Chief Financial Officer and
Controller. Management has continued to monitor cost containment
and seek ways to improve operational profitability. Also,
Management is continuing to negotiate existing obligations and
commitments to reduce the burden on current cash flow from
operations. Management is looking for new opportunities to grow
and expand its current product, through increasing new markets
via simulcast wagering and adding new entertainment options at
its facilities.
The Company's ability to continue as a going concern depends
on future events, including its continued success in its
reorganization effort.
<PAGE> 8
THE WESTWOOD GROUP INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997
(Unaudited)
3. Debt
At March 31, 1997 December 31, 1996 debt consisted of the
following:
March 31 December 31
1997 1996
8-3/4% MSCGAF Reality Trust term
loan requiring monthly payments
of principal and interest
of $42,298 until maturity in January
1998, collateralized by a
mortgage and security interest
in all real estate and personal
property located at Wonderland
Park, by all of the stock of
Wonderland Park, and guaranteed
by three subsidiaries of the
Company, including Wonderland Park. $2,593,142 $2,644,632
Line of credit, interest at 10%
requiring monthly payments of
interest plus $16,000
principal until maturity at
June 1, 1997, final payment of
$1,648,000 due July 1997,
collateralized by a second mortgage
and security interest in all real
estate and personal property located
at Wonderland Park and by
approximately 401,000 shares of BBRG
common stock held by the Company. 1,712,000 1,744,000
<PAGE> 9
THE WESTWOOD GROUP INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997
(Unaudited)
6% BBRG Term Note, payable in equal
payments of principal
and interest of approximately $36,000
beginning April 1, 1998, collateralized
by certain tangible personal property
and licenses. 970,000 970,000
6% Promissory Notes, payable in
monthly payments of principal
plus interest at $9,000 per
month until April, 1996 and
$12,000 per month until maturity
in October, 1997. Collateralized
by 60,333 shares of BBRG common
stock held by the Company. 96,000 120,000
Margin agreement due on demand
collateralized by 88,000 shares
of BBRG stock held by the Company. 118,485 115,674
7.5% Promissory Note, payable in 60
monthly payments of principal and
interest of $2,003, commencing
April,1995. 62,706 67,425
14-1/4% Subordinated Notes due
August, 1997 285,000 285,000
<PAGE> 10
THE WESTWOOD GROUP INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997
(Unaudited)
Creditor Trust Agreement
Promissory obligation, non-interest
bearing, with a quarterly
minimum graranteed amount,
of all distributions from
Foxboro Capital Improvements
Trust Funds applicable to the
period beginning January 1, 1994,
until paid in full. 843,689 900,500
6,681,022 6,847,231
Less:
Current maturities 4,539,516 2,226,973
Long-term obligations in default
which have been classified as
a current liability. 1,128,689 1,185,500
Long-term debt, net of current
maturities and long-term obligations. $1,012,817 $3,434,758
<PAGE> 11
THE WESTWOOD GROUP INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997
(Unaudited)
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,
which was paid in full. 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 Foxboro Park Capital Improvement
Trust Funds as payment towards these amounts. The Company did not
make the minimum quarterly payments in 1996 and is currently in
default of this obligation. All distributions of the Foxboro
Park Capital Improvements Trust Fund have been paid towards this
obligation and the Company is currently renegotiating this
agreement. The outstanding balance included in the current
portion of long term debt at March 31, 1997 is $843,689.
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. 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. These Notes remain in default.
<PAGE> 12
THE WESTWOOD GROUP INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997
(Unaudited)
4. Short-Term Borrowings
The company had $370,833 and $520,990 outstanding at
March 31, 1997 and December 31, 1996, respectively, in short-term
borrowing arrangements. An unsecured Line of Credit for $1
million was established in 1996 solely for the purpose of funding
the payment of pari-mutuel outs tickets due to the Commonwealth
of Massachusetts. The line of credit matures in November, 1997,
bears interest at 12% per annum and has an outstanding balance of
$300,000 at March 31, 1997 and December 31, 1996. The Company
also has a short-term note payable of $70,833 and $220,990 at
March 31, 1997 and December 31, 1996, respectively, bearing
interest at 12% per annum and requiring weekly principal and
interest payments of $11,900 until maturity on May 16, 1997.
5. Contingencies
The Company is subject to various claims and legal
actions that arise in the ordinary course of its business.
On October 3, 1996, Foxboro Realty Associates, LLC,
Foxboro Stadium Associates Limited Partnership, and New England
Patriots, L.P. filed a complaint against Foxboro Park, Inc.,
Foxboro Harness, Inc and The Westwood Group, Inc. (collectively
"Foxboro Park") in Norfolk Superior Court in Massachusetts. The
complaint seeks a declaratory judgment with respect to the right
to occupy the Foxboro Raceway, as well as specific performance of
an agreement relating to the use of hospitality facilities at the
Raceway.
On October 8, 1996, Foxboro filed an answer to the
complaint as well as counterclaims which assert that Foxboro Park
has a long-term right to occupy the Raceway and is entitled to
substantial monetary damages. On that day, Foxboro Park also
filed a related complaint in Norfolk Superior Court against
Robert K. Kraft, Foxboro Realty Associates LLC, New Foxboro
Corp., and Thomas L. Aronson and moved to consolidate that case
with the earlier filed case. Foxboro also moved to add Robert K.
Kraft as a party defendant to the counterclaims in the earlier
case.
<PAGE> 13
THE WESTWOOD GROUP INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997
(Unaudited)
On November 17, 1996, Foxboro Realty Associates LLC
filed a summary process complaint against The Westwood Group,
Inc., Foxboro Park, Inc and Foxboro Harness, Inc. in Norfolk
Superior Court. This complaint seeks to evict Foxboro from the
Foxboro Raceway. On November 18, 1996, Foxboro filed an answer
asserting numerous defenses and counterclaims against Foxboro
Realty Associates LLC and moved to consolidate this case with the
first action.
On December 5, 1996, the Court consolidated the three
actions referred to above and scheduled trial for March 11, 1997.
The court subsequently rescheduled the trial of the consolidated
actions to April 16, 1997.
Trial commenced on a jury waived basis on April 16,
1997. On April 25, 1997, the Court entered an order finding,
inter alia that Foxboro Park is not entitled to possession of the
premises. The court refused, however, to enter a separate
judgment on the issue of occupancy. Accordingly, Foxboro Park
remains in possession of the premises. On April 30, 1997, trail
of Foxboro Park's fraud and related claims commended. That trial
was still ongoing as of the date hereof.
<PAGE> 14
THE WESTWOOD GROUP INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997
(Unaudited)
6. Investments
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. Accordingly, the Company's investment in BBRG has
been accounted for under the equity method.
The following unaudited financial information
summarizes the financial position and results of operations of
BBRG, as of and for the periods ended 1997 and 1996.
Financial Information March 30, December 29,
(In thousands) 1997 1996
Balance sheet data
Current assets $ 2,980 $ 3,356
Noncurrent assets 40,365 40,555
Current liabilities 11,735 12,243
Noncurrent liabilities 6,495 6,466
Net equity 25,115 25,202
March 30, March 31,
1997 1996
Earnings data
Net sales $ 21,896 $ 20,483
Gross profit 2,190 1,940
Net loss ( 89) ( 324)
Company's equity in net income
loss of BBRG $( 20) $( 64)
<PAGE> 15
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Three months ended March 31, 1997 compared to three months ended
March 31, 1996
Wonderland Park
The table below illustrates certain key statistics for
Wonderland Park, the Company's greyhound racing operation, for
the three months ended March 31, 1997 and l996.
1997 1996
Performances 113 108
Simulcast days 90 89
Pari-mutuel handle (thousands)
Live-on track $ 9,953 $10,692
Live-simulcast 8,603 3,911
Guest-simulcast 12,747 13,430
Total $31,303 $28,033
Total attendance 117,044 123,919
Average per capita on site wagering $ 194 $ 195
Foxboro Park
The table below presents certain key statistics for
Foxboro Park for the three months ended March 31, 1997 and l996.
1997 1996
Performances 31 -
Simulcast days 87 91
Pari-mutuel handle (thousands)
Live-on track $ 1,118 -
Live-simulcast 5,800 -
Guest-simulcast 11,852 $11,113
Total $18,770 $11,113
Total attendance 55,209 45,597
Average per capita on site wagering $ 235 $ 244
<PAGE> 16
Operating Revenue
Revenue from parimutuel commissions increased to
approximately $6.44 million for the three months ended March 31,
1997 compared to $5.81 million for the three months ended March
31, 1996. The increase of approximately $623,000 is comprised of
$549,000 and $74,000 of additional revenue at Foxboro and
Wonderland, respectively. Foxboro generated approximately $2.28
million in commission revenue during the three months ended March
31, 1997, compared to $1.73 million in the corresponding three
month period of 1996. The improved revenue at Foxboro is
attributable to an increase in guest simulcast handle of
approximately $739,000 and the handle associated with 31 live
racing performances during February and March of 1997 which
generated approximately $1.1 million in on-track handle and
approximately $5.8 million in live-simulcast handle. Foxboro did
not conduct any live racing performances during the three months
ended March 31, 1996.
Wonderland generated approximately $4.15 million in
commission revenue during the three months ended March 31 1997 as
compared to $4.08 million in the corresponding three months of
1996. Increased live-simulcast handle of approximately $4.7
million was offset by decreases of approximately $739,000 and
$683,000 in live on-track and guest-simulcast handle,
respectively. The improved live-simulcast handle results is
attributable to an expansion of the Wonderland simulcasting
network during the first quarter of 1997 as compared to 1996.
The decline in on-track wagering at Wonderland is due to lower
attendance.
Parimutuel commission for the three months ended March
31, 1997 included approximately $81,290 deposited each into the
Greyhound Promotional Trust Fund and the Greyhound Capital
Improvements Trust Fund. Additionally, revenue for this period
includes approximately $31,931 deposited into the Harness and
Thoroughbred Promotional Trust Funds combined and $92,134
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 and Foxboro Park.
Concession revenue increased $68,000 for the three
months ended March 31 1997, from approximately $542,000 in the
three months ended 1996 to $610,000. The increase was due to
additional group function revenue at Foxboro Park in the first
quarter of 1997.
Other operating revenues consist of admissions,
parking, lottery and other revenue directly related to the racing
performances. Other operating revenues increased by
approximately $146,000 for the three months ended March 31, 1997
compared to 1996 due to additional racing performances at Foxboro
and increased pricing at Wonderland.
<PAGE> 17
Operating Expenses
Operating expenses of $7,621,302 for the three months
ended March 31 1997 increased by approximately $501,000 from
$7,120,235 for the three months ended March 31, 1996. Foxboro
Park's operating expenses increased by $850,000, from $2,023,000
in 1996 to $2,873,000 in 1997. This increase is due to the
February 1 opening in 1997 compared to an April 1 opening in 1996
for live racing as well as increased legal costs of approximately
$625,000 associated with litigation (See Footnote 5.). Cost
associated with live racing include purses, audio-visual
expense and utilities. These costs increased approximately
$225,000 at Foxboro Park in the first quarter of 1997 as compared
to the corresponding period in 1996. Wonderland Greyhound Park's
operating expenses decreased by approximately $287,000 in 1997,
from approximately $4,305,000 in 1996 to $4,018,000 in 1997 due
to Wonderland Greyhound Park's effective cost containment
efforts. These decreases include operating efficiencies in
payroll related expenses of $180,000 and a reduction of purses
and audio-visual costs of $100,000.
Interest Expense
Interest expense decreased by approximately $67,000 in
the three months ended March 31, 1997, from $199,000 in the three
months ended March 31, 1996 to $132,000 in the three months ended
March 31, 1997. The decrease is due to the reduction of
outstanding debt. (See Liquidity and Capital Resources-General).
Depreciation and Amortization
Depreciation and amortization decreased approximately
$92,000 to $308,000 in the three months ended March 31, 1997,
from $400,000 in the comparable period in l996. Depreciation and
amortization are expensed on a straight line basis over the
estimated life of the asset. Depreciation has decreased as
certain assets have exceeded their estimated useful life.
Other Income
Other income increased by approximately $36,000 in 1997
from $24,834 in the first three months ended March 31, 1996, to
$60,889 in the first three months ended March 31, 1997. This
increase is attributed to the improved operating results of the
equity investment in BBRG in 1997.
Liquidity and Capital Resources
The Company's cash and cash equivalents totaled $1.169
million at March 31, 1997, compared with $1.034 million at
December 31, 1996. The Company generated cash flows from
operations of $510,000 during the first quarter of 1997, as
compared to $611,000 during the corresponding period in 1996.
Non cash items included in the Company's net income in
the first quarter of 1997 consist of depreciation and
amortization expense of $308,000 and amortization of deferred
revenue of $88,000. Changes in working capital accounts including
restricted cash, accounts payable and other accrued liabilities
provided $261,000 of cash in the first quarter of $1997. Cash
payments for rent commenced in 1997. Net cash used in investing
activities in 1997 of $58,000 represents investments and
additions to the property, plant and equipment,
principally at Wonderland. Financing activities in 1997 include
approximately $319,000 of funds used to reduce outstanding
balances on long term debt.
<PAGE> 18
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 $1,712,00 (the "Term Note"). The Term Note is
collateralized by a pledge of approximately 336,000 of the
Company's shares of BBRG common stock (the "Collateral").
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. The Company had a
shortfall for the quarter ended, December 31, 1995. The Company
has only remitted payments in the amount of the distributions of
the Capital Improvements Trust Fund and is currently negotiating
to restructure the minimum payment requirements.
The Company and its subsidiaries have several immediate
needs for cash. Financing arrangements consist of current
maturities of long-term debt, including obligations in default,
totaling $5,668,000 and short-term borrowing arrangements of
$371,000. Additionally, pursuant to the terms and conditions of
its license, the Company is required to make monthly rent
payments for the Foxboro facility of $87,500 ($1,050,000
annual requirements). There can be no assurance that the
Company's efforts to provide additional liquidity or to renew and
extend existing financial arrangements will be successful.
Management anticipates that unless its efforts are successful,
the Company may not have sufficient cash to cover operating
expenses and scheduled debt payments during 1997.
<PAGE> 19
Racing Operations
In order to meet the requirements for renewal of racing
licenses for 1998, 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 1998 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.
PART II - OTHER INFORMATION
Item l. Legal Proceedings
The Company is subject to various claims and legal
actions that arise in the ordinary course of its business.
On October 3, 1996, Foxboro Realty Associates, LLC,
Foxboro Stadium Associates Limited Partnership, and New England
Patriots, L.P. filed a complaint against Foxboro Park, Inc.,
Foxboro Harness, Inc and The Westwood Group, Inc. (collectively
"Foxboro Park") in Norfolk Superior Court in Massachusetts. The
complaint seeks a declaratory judgment with respect to the right
to occupy the Foxboro Raceway, as well as specific performance of
an agreement relating to the use of hospitality facilities at the
Raceway.
On October 8, 1996, Foxboro filed an answer to the
complaint as well as counterclaims which assert that Foxboro Park
has a long-term right to occupy the Raceway and is entitled to
substantial monetary damages. On that day, Foxboro Park also
filed a related complaint in Norfolk Superior Court against
Robert K. Kraft, Foxboro Realty Associates LLC, New Foxboro
Corp., and Thomas L. Aronson and moved to consolidate that case
with the earlier filed case. Foxboro also moved to add Robert K.
Kraft as a party defendant to the counterclaims in the
earlier case.
On November 17, 1996, Foxboro Realty Associates LLC
filed a summary process complaint against The Westwood Group,
Inc., Foxboro Park, Inc and Foxboro Harness, Inc. in Norfolk
Superior Court. This complaint seeks to evict Foxboro from the
Foxboro Raceway. On November 18, 1996, Foxboro filed an answer
asserting numerous defenses and counterclaims against Foxboro
Realty Associates LLC and moved to consolidate this case with the
first action.
On December 5, 1996, the Court consolidated the three
actions referred to above and scheduled trial for March 11, 1997.
The court subsequently rescheduled the trial of the consolidated
actions to April 16, 1997.
<PAGE> 20
Trial commenced on a jury waived basis on April 16,
1997. On April 25, 1997, the Court entered an order finding,
inter alia that Foxboro Park is not entitled to possession of the
premises. The court refused, however, to enter a separate
judgment on the issue of occupancy. Accordingly, Foxboro Park
remains in possession of the premises. On April 30, 1997, trail
of Foxboro Park's fraud and related claims commended. That trial
was still ongoing as of the date hereof.
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
27.00 Financial data schedules.
(b) Reports on Form 8-K.
None.
<PAGE> 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 May 19, 1997 /s/ Richard P. Dalton
Richard P. Dalton
President
Date May 19, 1997 /s/ Richard G. Egan, Jr.
Richard G. Egan, Jr.
Chief Financial Officer,
Treasurer
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