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, 1997
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 (I.R.S. Employer Identification No.)
jurisdiction ofincorporation
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 X No
As of August 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 23 Pages
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
June 30, December 31,
1997 1996
(Unaudited)
Current assets:
Cash and cash equivalents $ 840,542 $ 1,033,911
Restricted cash 358,136 1,021,221
Accounts receivable 294,706 641,345
Prepaid expenses and other
current assets 224,734 198,295
Total current assets 1,718,118 2,894,772
Property, Plant and Equipment:
Land 348,066 348,066
Buildings 14,699,172 14,630,088
Machinery and equipment 5,078,536 5,034,426
Leasehold improvements 10,864,559 10,864,559
30,990,333 30,877,139
Less: accumulated depreciation
and amortization 19,382,852 18,919,632
Net property, plant and equipment 11,607,481 11,957,507
Other assets:
Goodwill, less accumulated
amortization of $456,000 and
$384,000 264,000 336,000
Investments 5,085,456 4,987,796
Notes receivable from officer 345,282 336,190
Other assets,
less accumulated
amortization of $946,468 and
$871,732 243,000 317,736
Total other assets 5,937,738 5,977,722
Total assets $19,263,337 $20,830,001
The accompanying notes are an integral part of these consolidated
condensed financial statements.
<PAGE>
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' DEFICIT
June 30, December 31,
1997 1996
(Unaudited)
Current liabilities:
Current maturities of long-term $ 4,355,747 $ 2,226,973
debt
Long-term obligations in default 1,128,689 1,185,500
Short-term borrowing's 287,828 520,990
Accounts payable and other accrued
liabilities 15,153,742 15,646,522
Outstanding pari-mutuel tickets 300,637 420,119
Total current liabilities 21,226,643 20,000,104
Long-term debt, less current
maturities 975,191 3,434,758
Other long-term liabilities 1,825,469 1,859,378
Total liabilities 24,027,303 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 ( 9,789,813) ( 9,497,349)
Note receivable from related
party ( 337,857) ( 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 ( 4,763,966) ( 4,464,239)
Total liabilities, minority
interest and stockholders'
deficit $19,263,337 $20,830,001
The accompanying notes are an integral part of these consolidated
condensed financial statements.
<PAGE>
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
For the three months ended June 30, l997 and l996
(Unaudited)
1997 1996
Operating revenue:
Pari-mutuel commissions $ 7,115,500 $7,485,054
Concessions 746,389 848,436
Other operating 473,017 700,291
Total operating revenue 8,334,906 9,033,781
Operating expenses:
Wages, taxes and benefits 2,389,727 2,559,368
Purses 2,211,081 2,351,929
Cost of food and beverage 220,265 326,720
Administrative 1,351,882 683,592
General operating 2,227,808 2,233,585
Depreciation and amortization 302,174 405,340
Total operating expenses 8,702,937 8,560,534
Income (loss) from operations ( 368,031) 473,247
Other income/(expenses):
Interest expense, net ( 139,949) (238,205)
Equity income (loss) in investment 115,104 36,600
Other income 88,333 88,333
Total other income (expenses) 63,488 (113,272)
Income (Loss) before provision
for income taxes ( 304,543) 359,975
Provision for income taxes - -
Net Income (Loss) $( 304,543) $359,975
Net income (loss) per share $( .24) $ .29
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>
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
For the six months ended June 30, l997 and l996
(Unaudited)
1997 1996
Operating revenue:
Pari-mutuel commissions $13,551,316 $13,298,121
Concessions 1,356,233 1,390,267
Other operating 1,131,495 1,202,856
Total operating revenue 16,039,044 15,891,244
Operating expenses:
Wages, taxes and benefits 4,653,321 4,918,604
Purses 3,947,091 4,043,036
Cost of food and bev 392,116 508,244
Administrativ 2,466,013 1,219,930
General operating 4,255,740 4,186,120
Depreciation and amortization 609,958 804,935
Total operating expenses 16,324,239 15,680,769
Income (loss) from
operations ( 285,195) 210,475
Other income/(expenses):
Interest expense, net ( 271,595) ( 436,857)
Equity income (loss) in investment 97,660 ( 26,900)
Other income 176,666 176,666
Total other income (expenses) 2,731 ( 287,091)
Income (Loss) before provision
for income taxes ( 282,464) ( 76,616)
Provision for income taxes 10,000 -
Net Income (Loss) $( 292,464) $(76,616)
Net income (loss) per share $( .23) $( .06)
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>
THE WESTWOOD GROUP, INC. AND
SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1997 and l996
(Unaudited)
1997 1996
Cash flows from operating activities:
Net income (loss) $( 292,464) $( 76,616)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities -
Depreciation and amortization 609,958 804,935
Equity in (income) loss from inve ( 97,660) 26,900
Deferred revenue ( 176,666) ( 176,666)
Changes in operating assets and liabilities -
Restricted Cash 663,085 477,199
Accounts Receivables 346,639 ( 209,346)
Prepaid expenses
and other current assets ( 26,439) ( 94,931)
Other assets ( 9,092) ( 230)
Accounts payable
and other accrued liabilities,( 442,861) 321,123
Other long-term liabilities ( 33,909) ( 80,307)
Total adjustments 833,055 989,460
Net cash provided by
operating activities 540,591 912,844
Cash flows from investing activities:
Additions to property, plant and equipment
( 113,194) ( 221,678)
Net cash used in investing
activities $( 113,194) $ ( 221,678)
(Continued)
The accompanying notes are an integral part of these consolidated
condensed financial statements.
<PAGE>
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 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 ( 623,577) ( 765,357)
Net cash used in
financing activities ( 620,766) ( 465,357)
Net increase in cash and cash
equivalents ( 193,369) 225,809
Cash and cash equivalents at
beginning of period 1,033,911 450,987
Cash and cash equivalents at
end of period $ 840,542 $ 676,796
Supplemental Disclosures of Cash
Flow Information:
Cash paid during the period for-
Interest $ 241,079 $ 481,462
Income taxes $ 13,280 $ 18,208
The accompanying notes are an integral part of these consolidated
condensed financial statements.
<PAGE>
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, 1997, and the results of its
operations and its cash flows for the three and six month periods
ended June 30, 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 and six month periods ended,
June 30, 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).
<PAGE>
THE WESTWOOD GROUP INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
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.
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 significant working capital
deficiency and stockholders' deficit and is in default on certain
debt obligations (See Note 3).
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>
THE WESTWOOD GROUP INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
3. Debt
At June 30, 1997 and December 31, 1996 debt consisted of the
following:
June 30, 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. $2,493,896 $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. 1,648,000 1,744,000
<PAGE>
THE WESTWOOD GROUP, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
6% BBRG Term Note, payable in equal
quarterly 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. 48,000 120,000
Margin agreement due on demand
collateralized by 88,000 shares
of BBRG stock held by the Company. 113,200 115,674
7.5% Promissory Note, payable in 60
monthly payments of principal and
interest of $2,003, commencing
April,1995. 57,842 67,425
14-1/4% Subordinated Notes due
August, 1997 285,000 285,000
<PAGE>
THE WESTWOOD GROUP INC., AND SUBSIDIARIES
CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
Creditor Trust Agreement
Promissory obligation, non-interest
bearing, with a quarterly
minimum guaranteed 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
6,459,627 6,847,231
Less:
Current maturities 4,355,747 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. $ 975,191 $3,434,758
<PAGE>
THE WESTWOOD GROUP INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 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 June 30, 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 matured on August 15,
1997, and remain in default.
The line of credit with a balance of $1,648,000, bearing
interest at 10% per annum, matured in July, 1997. The Company is
currently negotiating with the lender to renew and extend this
credit facility.
<PAGE>
THE WESTWOOD GROUP INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
4. Short-Term Borrowings
The Company had $287,828 and $520,990 outstanding
at June 30, 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 $287,828 and $300,000 at June 30, 1997 and
December 31, 1996, respectively. As of July 28, 1997, the
Company is no longer able to borrow under the line of credit due
to the court order for eviction at Foxboro (See further
discussion in Footnote 5 below).
The Company also had a short-term note payable of
$220,990 at December 31, 1996, (interest at 12% per annum)
required 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 sought 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 asserted that Foxboro
Park had a long-term right to occupy the Raceway and was 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>
THE WESTWOOD GROUP INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 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 sought 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. On June 24, 1997, the Court entered judgment against
Foxboro Park in the declaratory judgment and summary process
actions. After denying Foxboro Park's motion for a new trial and
request for a stay of judgment in those actions, the Court issued
an execution pursuant to which Foxboro Park was evicted from the
Raceway on July 31, 1997. Foxboro Park has not occupied the
Raceway since that date and is in the process of completing its
move from the property.
Foxboro Harness, Inc. returned its license to conduct a
harness horse racing meeting for calendar year 1997 to the
Massachusetts State Racing Commission on Aguust 12, 1997, as the
eviction at Foxboro Park prevents it from completing its racing
meeting. The Company has net property plant and equipment of
approximately $6.4 million associated with the Foxboro facility.
The Company can not determine at this time the amount it will
realize from the removal and sale of these assets; however, does
not anticipate incurring a loss on disposal as liabilities and
reserves exceed assets.
On April 30, 1997, Foxboro Park's fraud and related
claims commenced. On May 29, 1997, the jury returned its verdict
in favor of Robert Kraft on Foxboro Park's fraud claim against
him. The jury returned a verdict in favor of Foxboro Park on
Foxboro Realty Associate's claim against Foxboro Park for use and
occupancy charges for the period from May 29, 1997 through
December 31, 1997. On June 13, 1997, the Court issued findings
against Foxboro Park on its remaining claims with the exception
of Foxboro Park's claim against Foxboro Stadium Associates and
New England Patriots L.P. for breach of contract. With respect
to that claim, the Court entered judgment in favor of Foxboro
Park in the amount of $74,842.65. Foxboro Park has moved for
a new trial on its fraud and related claims. That motion is
still pending.
<PAGE>
THE WESTWOOD GROUP, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 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 June 29, December 29,
(In thousands) 1997 1996
Balance sheet data
Current assets $ 4,120 $ 3,356
Noncurrent assets 40,091 40,555
Current liabilities 10,960 12,243
Noncurrent liabilities 7,531 6,466
Net equity 25,720 25,202
June 29, June 30,
1997 1996
Earnings data
Net sales $ 46,018 $ 42,648
Gross profit 33,238 30,521
Net Income (loss) 514 ( 151)
Company's equity in net income 98 ( 27)
(loss) of BBRG
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Three months ended June 30, 1997 compared to three months ended
June 30, 1996
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, 1997 and l996.
1997 1996
Performances 114 117
Simulcast days 90 91
Pari-mutuel handle (thousands)
Live-on track $10,960 $12,664
Live-simulcast 7,323 5,405
Guest-simulcast 13,354 13,684
Total $31,637 $31,753
Total attendance 136,267 144,579
Average per capita on site wagering $ 178 $ 182
Foxboro Park
The table below presents certain key statistics for
Foxboro Park for the three months ended June 30, 1997 and 1996.
1997 1996
Performances 39 61
Simulcast days 89 89
Pari-mutuel handle (thousands)
Live-on track $ 1,706 2,776
Live-simulcast 15,972 12,843
Guest-simulcast 11,650 $12,182
Total $29,328 $27,801
Total attendance 66,448 75,087
Average per capita on site wagering $ 201 $ 199
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Six months ended June 30, 1997 compared to six months ended June
30, 1996
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, 1997 and l996.
1997 1996
Performances 227 225
Simulcast days 180 181
Pari-mutuel handle (thousands)
Live-on track $20,913 $23,356
Live-simulcast 15,926 9,317
Guest-simulcast 26,101 27,113
Total $62,940 $59,786
Total Attendance 253,311 268,498
Average per capita on site wagering $ 186 $ 188
Foxboro Park
The table below presents certain key statistics for
Foxboro Park for the three months ended June 30, 1997 and 1996.
1997 1996
Live Performances 70 61
Simulcast days 176 180
Pari-mutuel handle (thousands)
Live-on track $ 2,824 2,776
Live-simulcast 21,772 12,843
Guest-simulcast $23,502 $23,295
Total $48,098 $38,914
Total attendance 121,657 120,684
Average per capita on site wagering $ 216 $ 216
<PAGE>
Operating Revenue
Revenue from parimutuel commissions decreased from
$7.49 million for the three months ended June 30, 1996 to $7.12
million from the three months ended June 30, 1997.
Wonderland generated approximately $4.4 million in
commission revenue during each of the three month periods ended
June 30, 1997 and 1996. Increased live-simulcast handle of
approximately $1.9 million was offset by decreases of
approximately $1.7 million and $330,000 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
two quarters of 1997 as compared to 1996. The decline in
on-track wagering at Wonderland is due to lower attendance.
Foxboro generated approximately $2.7 million in
commission revenue during the three months ended June 30, 1997 as
compared to approximately $3.0 million during the corresponding
period in 1996. Total on track handle declined by $1.6 million
during the quarter ended June 30, 1997 compared to the same
period in 1996, live simulcast handle increased by approximately
$3.1 million, however, over the same period from $12.8 million
during the second quarter in 1996 to $15.9 million in the same
period in 1997. Foxboro ran twenty-two fewer live performances
during the three months ended June 30, 1997 compared to
the same period in 1996.
Parimutuel commission for the six months ended June 30,
1997 included approximately $180,700 deposited each into the
Greyhound Promotional Trust Fund and the Greyhound Capital
Improvements Trust Fund. Additionally, revenue for this period
includes approximately $83,000 deposited into the Harness and
Thoroughbred Promotional Trust Funds combined and $115,000
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 remained consistent for the six
months ended June 30, 1997 from 1996 at approximately $1.4
million. This level of consistent revenues is encouraging given
the reduction in attendance. These results were attributable to
better product offerings and an increased effort by
management to improve customer service and satisfaction.
Other operating revenues consist of admissions,
parking, lottery and other revenue directly related to the racing
performances. Other operating revenues decreased by
approximately $71,000 for the six months ended June 30, 1997
compared to 1996.
<PAGE>
Operating Expenses
Operating expenses of $8.7 million for the three months
ended June 30, 1997 increased modestly from $8.6 million for the
three months ended June 30, 1996. Reductions in all expense
categories, other than administrative, were realized during the
quarter. Administrative expense increased by approximately
$668,000 in the quarter ended June 30, 1997 as compared to the
corresponding period in 1996 due to the legal costs incurred in
connection with the Kraft Litigation (See further discussion in
Footnote 5 to the Financial Statements and Item 1. Legal
Proceedings).
Operating expenses increased by approximately $643,000
in the six months ended June 30, 1997 to $16.3 million as
compared to $15.7 million during the corresponding period in
1996. The increase was substantially due to higher expenses, in
the aggregate, during the first quarter of 1997 as compared
to 1996.
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. 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 for the quarter ended June 30, 1997
was $140,000 as compared to $238,000 for the corresponding period
in 1996, a decrease of approximately $98,000. Interest expense
decreased by approximately $165,000 in the six months ended June
30, 1997, as compared to the six months ended June 30, 1996 from
approximately $437,000 to $272,000. The decrease for both
periods is due to the reduction of outstanding debt. (See
Liquidity and Capital Resources-General).
<PAGE>
Depreciation and Amortization
Depreciation and amortization decreased by
approximately $103,000 to $302,000 for the quarter ended June 30,
1997 as compared to $405,000 for the corresponding period in
1996. Depreciation and amortization decreased approximately
$195,000 to $610,000 in the six months ended June 30, 1997, from
$805,000 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 in each
of these periods as certain assets have exceeded their estimated
useful life and certain assets have been disposed.
Other Income
Other income of approximately $88,333 and $176,666 for
the three month and six month periods ended June 30, 1997 and
1996 is attributable to the amortization of deferred 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.
Liquidity and Capital Resources
The Company's cash and cash equivalents totaled
$841,000 at June 30, 1997, compared with $1.034 million at
December 31, 1996. The Company generated cash flows from
operations of $541,000 during the six months ended June 30, 1997,
as compared to $913,000 during the corresponding period
in 1996. Non cash items included in the Company's net income
consist of depreciation and amortization expense of $610,000 and
amortization of deferred revenue of $177,000. Changes in working
capital accounts including restricted cash, accounts payable and
other accrued liabilities provided $540,000 of cash in the first
quarter of 1997. Net cash used in investing activities in 1997
of $113,000 represents investments and additions to the property,
plant and equipment, principally at Wonderland. Financing
activities in 1997 include approximately $621,000 of funds used
to reduce outstanding balances on long term debt.
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. These notes matured on August 15,
1997 and remain in default.
<PAGE>
The Company has outstanding a bank line of credit in
the amount of $1,648,000 (the "Term Note"). The Term Note is
collateralized by a pledge of approximately 401,000 of the
Company's shares of BBRG common stock (the "Collateral"). This
line of credit matured in July, 1997. The Company is currently
negotiating with the lender to renew and extend this credit
facility.
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 $5,484,000 and short-term borrowing arrangements of
$287,000. 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.
Racing Operations
In order to meet the requirements for renewal of its
racing license at Wonderland Greyhound Park for 1998, the
Company's racing subsidiary must demonstrate that it is
financially stable and capable of disposing of its obligations on
a timely basis. Although management is optimistic that it will
be able to demonstrate financial stability in their application
for a 1998 racing license, there can be no assurance that the
Racing Commission will continue to grant a license to conduct
racing on the schedule presently maintained at Wonderland.
<PAGE>
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 sought 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 asserted that Foxboro
Park had a long-term right to occupy the Raceway and was 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 sought 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. On June 24, 1997, the Court entered judgment against
Foxboro Park in the declaratory judgment and summary process
actions. After denying Foxboro Park's motion for a new trial and
request for a stay of judgment in those actions, the Court issued
an execution pursuant to which Foxboro Park was evicted from the
Raceway on July 31, 1997. Foxboro Park has not occupied the
Raceway since that date and is in the process of completing
its move from the property.
<PAGE>
On April 30, 1997, Foxboro Park's fraud and related
claims commenced. On May 29, 1997, the jury returned its verdict
in favor of Robert Kraft on Foxboro Park's fraud claim against
him. The jury returned a verdict in favor of Foxboro Park on
Foxboro Realty Associate's claim against Foxboro Park for use and
occupancy charges for the period from May 29,1997 through
December 31, 1997. On June 13, 1997, the Court issued findings
against Foxboro Park on its remaining claims with the exception
of Foxboro Park's claim against Foxboro Stadium Associates and
New England Patriots L.P. for breach of contract. With respect
to that claim, the Court entered judgment in favor of Foxboro
Park in the amount of $74,842.65. Foxboro Park has moved for a
new trial on its fraud and related claims. That motion is still
pending.
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>
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 19, 1997 /s/ Richard P. Dalton
Richard P. Dalton
President
Date August 19, 1997 /s/ Richard G. Egan, Jr.
Richard G. Egan, Jr.
Chief Financial Officer,
Treasurer
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