<PAGE> 1
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 SEPTEMBER 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 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 (1) 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 OCTOBER 31, 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> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
(Unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 318,191 $ 1,033,911
Restricted cash 283,146 1,021,221
Accounts receivable 177,110 641,345
Prepaid expenses and other
current assets 61,499 198,295
----------- -----------
Total current assets 839,946 2,894,772
----------- -----------
Property, Plant and Equipment:
Land 348,066 348,066
Buildings and building improvements 17,384,115 17,358,197
Machinery and equipment 4,391,939 5,034,426
Leasehold improvements -- 8,136,450
----------- -----------
22,124,120 30,877,139
Less: accumulated depreciation
and amortization (16,808,875) (18,919,632)
----------- -----------
Net property, plant and equipment 5,315,245 11,957,507
----------- -----------
Other assets:
Goodwill, less accumulated
amortization of $492,000
and $384,000 228,000 336,000
Investments 5,165,796 4,987,796
Notes receivable from officer 349,828 336,190
Other assets 255,451 317,736
----------- -----------
Total other assets 5,999,075 5,977,722
----------- -----------
Total assets $12,154,266 $20,830,001
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE> 3
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt $ 4,235,197 $ 2,226,973
Long-term obligations in default 285,000 1,185,500
Short-term borrowings 114,449 520,990
Accounts payable and other accrued liabilities 5,074,823 15,646,522
Outstanding pari-mutuel tickets 285,629 420,119
----------- -----------
Total current liabilities 9,995,098 20,000,104
----------- -----------
Long-term debt, less current maturities 934,871 3,434,758
Other long-term liabilities 3,389,368 1,859,378
----------- -----------
Total liabilities 14,319,337 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 (7,187,287) (9,497,349)
Note receivable from related party (341,488) (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 (2,165,071) (4,464,239)
----------- -----------
Total liabilities stockholders' deficit $12,154,266 $20,830,001
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, L997 AND L996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Operating revenue:
Pari-mutuel commissions $4,547,720 $4,524,290
Concessions and other 1,035,070 1,042,435
---------- ----------
Total operating revenue 5,582,790 5,566,725
---------- ----------
Operating expenses:
Wages, taxes and benefits 1,704,080 1,847,358
Purses 1,407,395 1,429,367
Cost of food and beverage 154,584 161,586
Administrative and general 1,351,157 1,349,952
Depreciation and amortization 127,948 216,176
---------- ----------
Total operating expenses 4,745,164 5,004,439
---------- ----------
Income from operations 837,626 562,286
---------- ----------
Other income/(expense):
Interest expense, net (135,542) (156,910)
Equity income in investments 80,340 13,431
Other income 44,167 44,166
---------- ----------
Total other expense (11,035) (99,313)
---------- ----------
Income from continuing operations
before provision for income taxes 826,591 462,973
Provision for income taxes -- --
---------- ----------
Income from continuing operations 826,591 462,973
Loss from operations of
discontinued harness racing
subsidiary (804,741) (346,633)
Gain on discontinuance of
harness racing subsidiary 2,580,676 --
---------- ----------
Net income $2,602,526 $ 116,340
========== ==========
Per share data:
Income from continuing
operations per share $ .66 $ .36
Income (loss) from discontinued
operations per share 1.41 (.27)
---------- ----------
Net income per share $ 2.07 $ .09
========== ==========
Weighted average common
shares outstanding 1,255,225 1,255,225
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Operating revenue:
Parimutuel commissions $13,140,857 $13,058,124
Concessions and other 3,038,424 3,049,722
------------ -----------
Total operating revenue 16,179,281 16,107,846
------------ -----------
Operating expenses:
Wages, taxes and benefits 5,015,601 5,469,370
Purses 3,954,234 4,102,296
Cost of food and beverage 425,252 440,059
Administrative and general 4,128,079 4,089,651
Depreciation and amortization 388,394 648,527
----------- -----------
Total operating expenses 13,911,560 14,749,903
----------- -----------
Income from operations 2,267,721 1,357,943
----------- -----------
Other income/(expense):
Interest expense, net (427,048) (593,767)
Equity income (loss) in investments 178,000 (13,469)
Other income 132,500 132,500
------------ -----------
Total other expense (116,548) (474,736)
------------ -----------
Income from continuing operations
before provision for income taxes 2,151,173 883,207
Provision for income taxes 10,000 --
------------ -----------
Income from continuing operations 2,141,173 883,207
Loss from operations of
discontinued harness racing
subsidiary (2,411,787) (843,482)
Gain on discontinuance of
harness racing subsidiary 2,580,676 --
----------- -----------
Net income $ 2,310,062 $ 39,725
=========== ===========
Per share data:
Income from continuing
operations per share $ 1.71 $ .70
Income (loss) from discontinued
operations per share .13 (.67)
----------- -----------
Net income per share $ 1.84 $ .03
----------- -----------
Weighted average common
shares outstanding 1,255,225 1,255,225
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 2,310,062 $ 39,725
----------- -----------
Adjustments to reconcile net income
to net cash provided by
operating activities -
Gain on discontinuance of harness
racing subsidiary (2,580,676) --
Depreciation and amortization 388,394 1,210,907
Equity (income) loss from investments (178,000) 13,469
Other income (132,500) (265,000)
Amortization of note -- (118,825)
Changes in operating assets
and liabilities -
Restricted cash 738,075 522,964
Accounts receivable 464,235 (349,329)
Prepaid expenses
and other current assets 136,796 (157,618)
Other assets (13,638) (39,912)
Accounts payable and other accrued
liabilities (2,016,518) 503,000
Outstanding pari-mutuel tickets (134,490) 488,820
Other long-term liabilities 1,529,990 (76,354)
---------- -----------
Total adjustments (1,798,332) 1,732,122
---------- -----------
Net cash provided by
operating activities 511,730 1,771,847
---------- -----------
Cash Flows From Investing Activities:
Additions to property, plant and equipment (272,435) (421,670)
---------- -----------
Net cash used in investing activities (272,435) (421,670)
---------- -----------
</TABLE>
(Continued)
The accompanying notes are an integral part of these consolidated condensed
financial statements.
6
<PAGE> 7
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<S> <C> <C>
Cash Flows From Financing Activities:
Proceeds from long-term debt 2,811 300,000
Principal payments of debt (957,826) (1,483,036)
---------- -----------
Net cash used in financing activities (955,015) (1,183,036)
---------- -----------
Net increase (decrease) in cash
and cash equivalents (715,720) l67,141
Cash and cash equivalents at beginning
of period 1,033,911 450,987
---------- -----------
Cash and cash equivalents at end of period $ 318,191 $ 618,128
========== ===========
Supplemental Disclosures of Cash
Flow Information:
Cash paid during the period for-
Interest $ 366,630 $ 716,394
========== ===========
Income taxes $ 19,462 $ 32,000
========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
7
<PAGE> 8
THE WESTWOOD GROUP INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INTERIM RESULTS
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of normal
recurring accruals and deferrals) necessary to present fairly the Company's
consolidated financial position as of September 30, 1997, and the results of its
operations and its cash flows for the three and nine month periods ended
September 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 nine month periods ended, September 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 4).
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.
8
<PAGE> 9
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 4).
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 operatonal management team, with the addition of an 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.
3. DISCONTINUED OPERATIONS
During July, 1997, the Company's harness racing subsidiary,
Foxboro Park, Inc. (including wholly owned subsidiaries), was evicted from the
Foxboro Raceway.
The gain on the discontinuance of the Company's harness racing
subsidiary of $2.6 million for the nine months ended September 30, 1997, is
primarily comprised of the excess of occupancy and other reserves of
approximately $8.9 million over non recoverable net leasehold improvements and
other assets of approximately $6.3 million. Net liabilities of the Company's
discontinued operations of approximately $1.2 million at September 30, 1997, is
included in accounts payable and other accrued liabilities in the accompanying
balance sheet. Such amount is primarily comprised of unsecured accounts payable
and amounts due under a Credit Trust Agreement.
9
<PAGE> 10
The loss from operations of the Company's discontinued harness
racing subsidiary is comprised of the following:
<TABLE>
<CAPTION>
Three months ended September 30, 1997 1996
----------- -----------
<S> <C> <C>
Operating revenue $ 1,033,530 $ 3,598,728
Operating expenses (1,838,271) (3,989,528)
Other income -- 44,167
----------- -----------
$ (804,741) $ (346,633)
=========== ===========
<CAPTION>
Nine months ended September 30, 1997 1996
----------- -----------
<S> <C> <C>
Operating revenue $ 6,476,083 $ 8,948,851
Operating expenses (8,976,203) (9,924,833)
Other income 88,333 132,500
----------- -----------
$(2,411,787) $ (843,482)
=========== ===========
</TABLE>
4. DEBT
At September 30, 1997 and December 31, 1996 debt consisted of the
following:
<TABLE>
<CAPTION>
September 30 December 31
1997 1996
------------ -----------
<S> <C> <C>
8.75% MSCGAF Realty 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. $2,421,981 $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. 1,600,000 1,744,000
</TABLE>
10
<PAGE> 11
<TABLE>
<S> <C> <C>
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. 12,000 120,000
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. 52,887 67,425
14-1/4% Subordinated Notes due
August, 1997 285,000 285,000
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. -- 900,500
--------- ----------
5,455,068 6,847,231
Less:
Current maturities 4,235,197 2,226,973
Long-term, obligations in
default 285,000 1,185,500
--------- ----------
Long-term debt, net of current
maturities and long-term
obligations in default $ 934,871 $3,434,758
========= ==========
</TABLE>
11
<PAGE> 12
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 $1,600,000, 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.
5. SHORT-TERM BORROWINGS
The Company had $114,449 and $520,990 outstanding at September 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 $114,449 and
$300,000 at September 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 6
below).
The Company also had a short-term note payable of $220,990 at
December 31, 1996, (interest at 12% per annum) which required weekly principal
and interest payments of $11,990 until maturity on May 16, 1997.
6. 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.
12
<PAGE> 13
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.
Foxboro Harness, Inc. returned its license to conduct a harness
horse racing meeting for calendar year 1997 to the Massachusetts State Racing
Commission on August 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
13
<PAGE> 14
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.
7. INVESTMENTS
During 1994, the Company and Back Bay 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 informaiton summarizes the
financial position and results of operations of BBRG, as of and for the periods
ended 1997 and 1996.
<TABLE>
<CAPTION>
Financial Information September 28, December 29,
(IN THOUSANDS) 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Balance sheet data
Current assets $ 3,309 $ 3,356
Noncurrent assets 38,816 40,555
Current liabilities 11,253 12,243
Noncurrent liabilities 4,782 6,466
Net equity 26,090 25,202
<CAPTION>
39 weeks ended
September 28, September 29,
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Earnings data
Net sales $69,877 $ 63,824
Gross profit 27,749 24,884
Net income (loss) 890 (83)
Company's equity in net
income (loss) of BBRG $ 178 $ (13)
</TABLE>
14
<PAGE> 15
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
WONDERLAND PARK
The table below illustrates certain key statistics for Wonderland
Park for the three and nine month periods ended September 30, 1997 and l996.
<TABLE>
<CAPTION>
Three months: 1997 1996
-------- --------
<S> <C> <C>
Performances 119 117
Simulcast days 92 92
Parimutuel handle (thousands)
Live-on track $ 11,146 $ 12,474
Live-simulcast 9,321 9,564
Guest-simulcast 13,453 13,050
-------- --------
Total $ 33,920 $35,088
-------- --------
Total attendance 134,310 145,297
-------- --------
Average per capita on-site wagering $ 183 $ 176
======== ========
<CAPTION>
Nine months: 1997 1996
-------- --------
<S> <C> <C>
Performances 346 342
Simulcast days 272 273
Pari-mutuel handle (thousands)
Live-on track $ 32,059 $ 35,830
Live-simulcast 25,246 18,881
Guest-simulcast 39,553 40,163
-------- --------
Total $ 96,858 $ 94,874
-------- --------
Total attendance 387,621 413,795
-------- --------
Average per capita on-site wagering $ 185 $ 184
======== ========
</TABLE>
OPERATING REVENUE
THREE MONTHS ENDED SEPTEMBER 30, 1997 VS 1996
Revenue from pari-mutuel commissions of approximately $4.5 million did
not change significantly during the three months ended September 30, 1997, as
compared to the same period in 1996. Total handle decreased by approximately
$1.2 million in the third quarter of 1997, as compared to 1996, due to declines
in live on- track and live-simulcast handles of approximately $1.3 million and
$243,000, respectively. These declines were partially offset by an increase in
guest-simulcast handle of approximately $403,000. Total
15
<PAGE> 16
revenues remained relatively unchanged, however, due to improved margins.
Concessions and other operating revenue remained consistent for the three
months ended September 30, 1997 from 1996 at approximately $1 million. Other
operating revenues consist of admissions, parking, lottery and other revenue
directly related to the racing performances.
NINE MONTHS ENDED SEPTEMBER 30, 1997 VS 1996
Revenue from pari-mutuel commissions increased by approximately $83,000
to approximately $13,141,000 during the nine months ended September 30, 1997, as
compared to approximately $13,058,000 for the corresponding period in 1996.
Total handle increased to approximately $96.9 million during the nine months
ended September 30, 1997, as compared to approximately $94.9 million for the
corresponding period in 1996. Decreases in live on-track and guest-simulcast
handles of approximately $3.8 million and $610,000 respectively, were offset by
an increase in live- simulcast handle of approximately $6.4 million.
Concession and other operating revenue remained consistent for the nine
months ended September 30, 1997 from 1996 at approximately $3 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.
OPERATING EXPENSES
THREE MONTHS ENDED SEPTEMBER 30, 1997 VS 1996
Operating expenses, excluding depreciation and amortization, of $4.6
million for the three months ended September 30, 1997 were approximately
$171,000 lower compared with the corresponding period in 1996. Decreases in
wages, purses and cost of food and beverage aggregating $172,000 were offset by
an increase in administrative and general expenses of approximately $1,000.
NINE MONTHS ENDED SEPTEMBER 30, 1997 VS 1996
Operating expenses, excluding depreciation and amortization, of $13.5
million for the nine months ended September 30, 1997 decreased by approximately
$600,000 from $14.1 million during the corresponding period in 1996. The Company
realized savings in wages, purses and cost of food and beverage aggregating
approximately $617,000. These savings were partially offset by increased
administrative and general expenses of approximately $38,000.
16
<PAGE> 17
The decrease in operating expense for both the three and nine month
periods is attributable to management's efforts toward cost containment.
INTEREST EXPENSE
Interest expense decreased by approximately $21,000 to approximately
$136,000 for the three months ended September 30, 1997 as compared to
approximately $157,000 for the three months ended September 30, 1996.
Interest expense decreased by approximately $167,000 to approximately
$427,000 from approximately $594,000 during the nine months ended September 30,
1997 as compared to the same period in 1996.
The decrease for both periods is due to the reduction of outstanding
debt. (See Liquidity and Capital Resourses - General).
DEPRECIATION AND AMORTIZATION
Depreciation and amortization decreased by approximately $88,000 to
$128,000 during the three months ended September 30, 1997 as compared to
approximately $216,000 for the three months ended September 30, 1996.
Depreciation and amortization decreased by approximately $260,000 to
$388,000 for the nine months ended September 30, 1997 as compared to
approximately $594,000 for the nine months ended September 30, 1996.
The decrease for both periods is due to certain assets reaching the end
of their depreciable lives.
The Company continues to replace capital items as they become obsolete.
Depreciation and amortization are expensed on a straight line basis over the
estimated life of the asset.
OTHER INCOME
Other income of approximately $44,000 for the three months ended
September 30, 1997 and $132,500 for the nine months ended September 30, 1997 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.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents totaled $318,191 at September 30,
1997, compared with $1.034 million at December 31, 1996. The Company generated
cash flows from operations of $511,730 during the nine months ended September
30, 1997, as compared to
17
<PAGE> 18
$1.8 million during the corresponding period in 1996. Non cash items included in
the Company's net income for the nine months ended September 30, 1997 consist of
gain on discontinuance of harness racing subsidiary of $2,580,676 depreciation
and amortization expense of $338,394 and other income of $132,500. Changes in
working capital accounts including restricted cash, accounts payable and other
accrued liabilities provided approximately $704,000 of cash. Net cash used in
investing activities in 1997 of $272,435 represents investments and additions to
the property, plant and equipment, principally at Wonderland. Financing
activities in 1997 include approximately $955,000 of funds used to reduce
outstanding balances on long term debt.
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 $4,520,197 and short-term borrowing
arrangements of $114,449. 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.
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.
The Company has outstanding a bank line of credit in the amount of
$1,600,000 (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.
DISCONTINUED OPERATIONS
During July, 1997, the Company's harness racing subsidiary, Foxboro Park,
Inc. (including wholly owned subsidiaries), was evicted from the Foxboro
Raceway.
The gain on the discontinuance of the Company's harness racing subsidiary
of $2.6 million for the nine months ended September 30, 1997, is primarily
comprised of the excess of
18
<PAGE> 19
occupancy and other reserves of approximately $8.9 million over non recoverable
net leasehold improvements and other assets of approximately $6.3 million. Net
liabilities of the Company's discontinued operations of approximately $1.2
million at September 30, 1997, is included in accounts payable and other accrued
liabilities in the accompanying balance sheet. Such amount is primarily
comprised of unsecured accounts payable and amounts due under a Credit Trust
Agreement.
RACING OPERATIONS
In order to meet the requirements for renewal of its racing license, the
Company's racing subsidiary must demonstrate it is a financially stable entity,
capable of disposing of its obligations on a timely basis. The Company has been
issued a racing license for Wonderland through the 1998 racing season.
19
<PAGE> 20
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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.
Foxboro Harness, Inc returned its license to conduct a harness horse
racing meeting for calendar year 1997 to the Massachusetts State Racing
Commission on August 12, 1997, as the
20
<PAGE> 21
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.
21
<PAGE> 22
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's 1997 Annual Meeting of Stockholders was held on October
7, 1997. Present or represented at the meeting by proxy were 219,853
of the 343,210 shares of common stock and 820,725 of the 912,015
shares of class B common stock, respectively. At the meeting, Richard
P. Dalton and A. Paul Sarkis were re-elected as directors. Mr. Dalton
was re-elected for a term of one year. Mr. Sarkis was re-elected for a
term of three years. There were 191,385 votes of commom stock, voting
as a separate class, cast for Mr Dalton and 28,468 votes withheld.
There were 1,011,810 votes of common and class B common stock cast for
Mr. Sarkis and 28,768 votes withheld.
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.
22
<PAGE> 23
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 November 19, 1997 /s/ Richard P. Dalton
----------------- --------------------------------
Richard P. Dalton
President
Date November 19, 1997 /s/ Richard G. Egan, Jr.
----------------- --------------------------------
Richard G. Egan, Jr.
Chief Financial Officer,
Treasurer
23
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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