<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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, 1999
----------------------------------
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 (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
190 V.F.W. PARKWAY, REVERE, MASSACHUSETTS 02151
- -------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
781-284-2600
- -------------------------------------------------------------------
(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 march 31, 1999 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 16
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ----------------------------
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
-----------------------------------------
CONSOLIDATED CONDENSED BALANCE SHEETS
-------------------------------------
ASSETS
------
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 143,801 $ 188,462
Restricted cash 57,560 170,052
Accounts receivable 32,907 23,496
Prepaid expenses and other current assets 206,310 168,964
Notes receivable from officers 151,377 151,377
------------- ------------
Total current assets 591,955 702,351
------------- ------------
PROPERTY, PLANT AND EQUIPMENT:
Land 348,066 348,066
Building and building improvements 18,430,225 18,466,838
Machinery and equipment 4,582,340 4,498,547
------------- ------------
23,360,631 23,313,451
Less accumulated depreciation and amortization (17,591,427) 17,458,993
-------------- ------------
Net property, plant and equipment 5,769,204 5,854,458
------------- ------------
OTHER ASSETS:
Deferred financing costs, less accumulated
amortization of $17,829 and $10,883, respectively 164,319 171,265
Investments 5,802,214 5,849,814
Notes receivable from officers 742,016 742,016
Other assets, net 12,000 49,559
------------- ------------
Total other assets 6,720,549 6,812,654
------------- ------------
Total assets $ 13,081,708 $ 13,369,463
============= ============
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
PAGE 2 OF 16
<PAGE> 3
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
-----------------------------------------
CONSOLIDATED CONDENSED BALANCE SHEETS
-------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------- ------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and other accrued liabilities $ 1,955,315 $ 2,395,518
Outstanding pari-mutuel tickets 387,847 622,447
Net liabilities of discontinued operations 704,420 704,420
Current maturities of long-term debt 354,838 350,663
Debt obligations in default 10,000 10,000
------------- ------------
Total current liabilities 3,412,420 4,083,048
LONG-TERM DEBT, less current maturities 5,482,197 5,550,847
OTHER LONG-TERM LIABILITIES 3,237,951 3,270,114
------------- ------------
Total liabilities 12,132,568 12,904,009
------------- ------------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; authorized
3,000,000 shares, 1,936,409 shares issued 19,444 19,444
Class B Common stock, $.01 par value; authorized
1,000,000 shares; 912,615 shares issued 9,126 9,126
Additional paid-in capital 13,379,275 13,379,275
Accumulated deficit (4,244,519) (4,728,205)
Other comprehensive loss (249,404) (249,404)
Cost of 1,593,199 common and 600 Class B
common shares in treasury (7,964,782) (7,964,782)
------------- ------------
Total stockholders' equity 949,140 465,454
------------- ------------
Total liabilities and stockholders' equity $ 13,081,708 $ 13,369,463
============= ============
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
PAGE 3 OF 16
<PAGE> 4
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
-----------------------------------------
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
-------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
------------- ------------
<S> <C> <C>
OPERATING REVENUE:
Pari-mutuel commissions $ 3,610,516 $ 4,102,084
Concessions 332,610 398,828
Other 321,799 371,642
------------- ------------
Total operating revenue 4,264,925 4,872,554
------------- ------------
OPERATING EXPENSES:
Wages, taxes and benefits 1,365,277 1,623,215
Purses 1,042,229 1,218,500
Cost of food and beverage 98,456 115,770
Administrative 292,431 326,335
General operating 655,489 888,499
Depreciation and amortization 175,381 146,290
------------- ------------
Total operating expenses 3,629,263 4,318,609
------------- ------------
Income from operations 635,662 553,945
------------- ------------
OTHER INCOME (EXPENSE):
Interest expense, net (81,574) (101,388)
Equity income (loss) in investments (47,600) 67,600
Other income, net - 99,439
------------- ------------
Total other income (expense) (129,174) 65,651
INCOME FROM OPERATIONS BEFORE
PROVISION FOR INCOME TAXES 506,488 619,596
PROVISION FOR INCOME TAX 22,800 26,000
NET INCOME $ 483,688 $ 593,596
============= ============
BASIC AND DILUTED PER SHARE DATA:
Net income $ .38 $ .47
============= ============
BASIC AND DILUTED WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING $ 1,263,225 $ 1,263,225
============= ============
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
PAGE 4 OF 16
<PAGE> 5
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
-----------------------------------------
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
For The
Three Months Ended
March 31,
1999 1998
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 483,688 $ 593,596
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 175,380 146,290
Equity in (income) loss from investments 47,600 (67,600)
Changes in operating assets and liabilities:
Restricted cash 112,492 12,921
Accounts receivables (9,411) (30,531)
Prepaid expenses and other current assets (37,346) 41,625
Other assets 1,559 (10,680)
Accounts payable
and other accrued liabilities (440,203) 114,669
Other long-term liabilities (266,765) (60,895)
------------- ------------
Total adjustments (416,694) 145,799
------------- ------------
Net cash provided by operating activities 66,994 739,395
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (47,180) (138,934)
------------- ------------
Net cash used in investing activities (47,180) (138,934)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt - 2,795
Principal payments of debt (64,475) (297,296)
Issuance of common stock - 24,000
------------- ------------
Net cash used in financing activities (64,475) (270,501)
------------- ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS (44,661) 329,960
CASH AND CASH EQUIVALENTS, beginning of period 188,462 374,292
------------- ------------
CASH AND CASH EQUIVALENTS, end of period $ 143,801 $ 704,252
============= ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period
for:
Interest $ 135,404 $ 112,650
Income taxes $ 28,000 $ 26,561
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements
PAGE 5 OF 16
<PAGE> 6
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
-----------------------------------------
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
MARCH 31, 1999
--------------
(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, 1999, and the results of its
operations and its cash flows for the three month periods ended March 31, 1999
and 1998. 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 March
31, 1999 and December 31, 1998 and for the three month periods ended March 31,
1999 and 1998 include the accounts of the Company and its wholly-owned
subsidiaries. All material intercompany accounts and transactions have been
eliminated in consolidation.
RECLASSIFICATIONS
-----------------
Certain reclassifications were made to the 1998 financial statement amounts
to conform with the 1999 presentation.
FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1998
---------------------------------------------------------
The consolidated balance sheet at December 31, 1998 is presented for
comparative purposes and was taken from the audited consolidated financial
statements for the year ended December 31, 1998.
DEBT
----
Long-term obligations which are in default have been classified as current
liabilities (see Note 4).
INCOME PER COMMON SHARE
-----------------------
The Company follows Statement of Financial Accounting Standards (SFAS) No.
128, Earnings per Share, issued by the Financial Accounting Standards Board.
Under SFAS No. 128, the basic and diluted net income per share of common stock
is computed by dividing the net income by the weighted average number of common
shares outstanding during the period, including potentially dilutive stock
options. The Company's stock options did not have a dilutive effect in 1999 and
1998 since the option prices per share were deemed to be equal to or higher than
the estimated average per share market price of the Company's common stock.
PAGE 6 OF 16
<PAGE> 7
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
-----------------------------------------
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
MARCH 31, 1999
--------------
(Unaudited)
---------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
------------------------------------------
INCOME PER COMMON SHARE (continued)
-----------------------
The amount of potentially dilutive common shares issuable under the
Company's stock options, if any, are determined based on the treasury stock
method.
2. DISCONTINUED OPERATIONS
-----------------------
In 1996 litigation ensued between Foxboro Realty Associates, LLC, ET AL.
("FRA") and the Company, its subsidiary Foxboro Park, Inc., ET AL., over
Foxboro's right to occupy Foxboro Raceway. The Court issued an execution
pursuant to which Foxboro was evicted from the racetrack on July 31, 1997 (see
Legal Proceedings at Item 1). As a result, the Company discontinued its harness
racing operations.
The remaining liabilities of the Company's discontinued operations at March
31, 1999, are comprised of the following:
<TABLE>
<CAPTION>
MARCH 31, 1999
--------------
<S> <C>
Creditors Trust Agreement Promissory $ 174,451
Obligations and other liabilities
Trade Payables 53,598
Outstanding pari-mutuel tickets 476,371
------------
$ 704,420
============
</TABLE>
In February 1998 the Company executed an Assignment for the Benefit of
Creditors ("AFBC") for Foxboro Park, Inc., Foxboro Harness, Inc. and Foxboro
Thoroughbred, Inc. (collectively, the "Foxboro Entities"). The AFBC was executed
to provide a mechanism for the liquidation of its assets and the distribution of
proceeds to its creditors. Provided that 70% in amount and 50% in number of the
Foxboro Entities creditors become Assenting Creditors, the Company will
subordinate its claims except for those claims relating to certain contingent
litigation matters. Creditors must file a written assent with the Assignee in
order to become an Assenting Creditor. Assenting Creditors agree that the
submission of an assent to this AFBC will operate as a release of any claims,
that could be asserted by an Assenting Creditor seeking to avoid the corporate
separateness of the Company or any affiliate of the Company and the Foxboro
Entities.
Additionally Assenting Creditors agree not to institute or continue a suit
against the Foxboro Entities or any other proceeding at law or in equity or
otherwise on account of any debt due and owing to the Assenting Creditor from
the Foxboro Entities, nor will the Assenting Creditor transfer its claim without
the written approval of the Assignee. Each Assenting Creditor accepts in lieu of
its claim against the Foxboro Entities the rights acquired in the AFBC.
PAGE 7 OF 16
<PAGE> 8
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
-----------------------------------------
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
MARCH 31, 1999
--------------
(Unaudited)
---------
4. DEBT
----
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------- ------------
<S> <C> <C>
9.5% Century Bank and Trust Company ("Century Bank") term loan, requiring
84 monthly payments of principal and interest of $58,319 beginning
August 1, 1998 collateralized by a mortgage and security interest in
all real estate and personal property located at Wonderland Greyhound
Park and by 125,000 shares of BBRG common stock held by the Company. $ 4,845,897 $ 4,904,828
6% BBRG Term Note, payable in equal quarterly payments of principal and
interest beginning in 1999, collateralized by certain tangible
personal property and licenses. 970,000 970,000
7.5% Promissory Note, payable in 60 monthly payments of principal and
interest of $2,003, commencing April, 1995. 21,138 26,682
14-1/4% Subordinated Notes, due August, 1997 10,000 10,000
------------- ------------
$ 5,847,035 $ 5,911,510
Less:
Current maturities 354,838 350,663
Debt obligations in default 10,000 10,000
------------- ------------
Long-term portion $ 5,482,197 $ 5,550,847
============= ============
</TABLE>
In May 1994, the Company entered into an agreement with BBRG to transfer
the operations under the Concessions Agreement and the Management Agreement to
the Company in return for a six year term note in the amount of $970,000. In
1997 the Note was amended requiring equal quarterly payments of principal and
interest beginning April 1, 1999 of approximately $36,000 with interest at 6%.
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. As of March 31, 1999, a balance of $10,000 remains unpaid and in
default.
PAGE 8 of 16
<PAGE> 9
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
-----------------------------------------
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
MARCH 31, 1999
--------------
(Unaudited)
---------
3. DEBT (continued)
----
In July 1998, the Company obtained long-term debt financing for $5,000,000
with Century Bank. The proceeds were used to repay previously outstanding
indebtedness, including approximately $275,000 of subordinated debt, $2,381,000
of a realty trust term loan, $1,568,000 of a line of credit note, $118,000 on a
margin agreement, and $356,000 of a short-term note payable. The remaining
proceeds were used to pay other liabilities. The note agreement contains certain
restrictive covenants including the maintenance of certain financial ratios and
debt coverage requirements. The note is collateralized by a mortgage and
security interest in all real estate and personal property at Wonderland
Greyhound Park and by 125,000 shares of BBRG common stock held by the Company.
4. 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. (see Note 5)
The following unaudited financial information summarizes the financial
position and results of operations of BBRG:
<TABLE>
<CAPTION>
March 28 December 27
1999 1998
------------- ------------
<S> <C> <C>
(In thousands)
Balance Sheet data
Current assets $ 3,517 $ 4,848
Property and equipment, net 33,120 33,043
Noncurrent assets 8,751 8,754
Current liabilities 12,505 12,531
Noncurrent liabilities 3,304 4,298
Stockholders' equity 29,579 29,816
Thirteen Weeks Ended
March 28 March 29
1999 1998
------------- ------------
(In thousands) Earnings data:
Net sales $ 24,879 $ 23,126
Income from restaurant operations 3,323 2,618
Net income (loss) (243) 356
Company's equity in net income (loss) (48) 68
</TABLE>
PAGE 9 OF 16
<PAGE> 10
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
-----------------------------------------
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
MARCH 31, 1999
--------------
(Unaudited)
---------
5. SUBSEQUENT EVENT
----------------
On March 26, 1999, a majority of BBRG's shareholders approved a merger
agreement (the "Merger Agreement"), by and between BBRG and SRC Holdings,
Inc. (the "Acquiror"), a Delaware corporation formed by Charles F. Sarkis,
BBRG's Chairman and Chief Executive Officer, pursuant to which the Acquiror
would be merged (the "Merger) with and into BBRG, with BBRG being the
surviving company. The Merger was consummated April 15, 1999. Pursuant to
the Merger, the holders of BBRG';s common stock, other than the Company,
Mark L. Hartzfeld, Francis P. Bissaillon, Ann Marie Lagrotteria and Richard
P. Dalton (collectively, the "Affiliated Shareholders"), received $10.25 in
cash in exchange for each share of common stock of BBRG held by them. The
Affiliated Shareholders continued to own stock of the surviving
corporation. As of the date of the Merger, the Company holds 48,64% of the
common stock of BBRG on a fully diluted basis. Following the Merger, BBRG
no longer meets the requirements of a public company and its shares are no
longer listed or traded in the public market.
PAGE 10 OF 16
<PAGE> 11
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
-----------------------------------------
MARCH 31, 1999
--------------
(UNAUDITED)
---------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- -------------------------------------------------------------------------------
OF OPERATIONS
- -------------
The table below illustrates certain key statistics for Wonderland Park, the
Company's greyhound racing operation, for the three months ended March 31, 1999
and 1998.
1999 1998
----------- ------------
Performances 85 103
Simulcast days 89 90
Pari-mutuel handle (thousands)
Live-on track $ 6,155 $ 8,283
Live-simulcast 10,903 9,796
Guest-simulcast 12,286 13,500
----------- ------------
Total $ 29,344 $ 31,579
=========== ============
Total attendance 86,086 103,821
=========== ============
Average per capita on site wagering $ 214 $ 210
=========== ============
OPERATING REVENUE
-----------------
The Company is still experiencing a decline in total attendance, caused by
a variety of factors including a general decline in the pari-mutuel racing
industry and strong competition for the wagered dollar, from the Massachusetts
State Lottery and from the introduction of casino gambling and slot machines in
neighboring states.
Total operating revenue decreased to $4.265 million in the quarter ended
March 31, 1999 as compared to $4.873 million in the same period of 1998.
Pari-mutuel commissions decreased by approximately $491,000 or 12% to $3.611
million for the three months ended March 31, 1999 from $4.102 million in 1998.
Total handle in first quarter of 1999 was approximately $29.3 million as
compared to $31.6 million in 1998. Guest-simulcast handle decreased by
approximately $1,214,000 or 9% from $13.5 million in the first quarter of 1998
to $12.3 million in the corresponding period in 1999. Live-on track handle
decreased by approximately $2.1 million or 25.7% in 1999 as compared to 1998,
while Live-simulcast handle increased by approximately $1.1 million or 11.3%.
The decrease in pari-mutuel commission revenue is attributable to the
decrease in Live-on track handle and guest-simulcast handle which was partially
offset by an increase in Live-simulcast handle and Guest-simulcast handle as
well as an increase in the commission rate. Wonderland had eighteen fewer live
racing performances in 1999 as compared to 1998, with an average attendance of
approximately 1,013 persons, while average attendance was approximately 1,008
persons in 1998.
PAGE 11 OF 16
<PAGE> 12
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
-----------------------------------------
MARCH 31, 1999
--------------
(UNAUDITED)
---------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- -------------------------------------------------------------------------------
OF OPERATIONS (continued)
- -------------
Concessions revenue of approximately $333,000 for the three months ended
March 31, 1999 decreased by approximately $65,000 from approximately $398,000
for the three months ended March 31, 1999. Other operating revenue consists of
program sales, admissions, parking and gift shop sales. These revenues decreased
by approximately $50,000 or 13% in 1999 as compared to 1998 to approximately
$322,000 from approximately $372,000.
Pari-mutuel commission for the three months ended March 31, 1999 included
approximately $63,000 deposited each into the Greyhound Promotional Trust Fund
and the Greyhound Capital Improvements Trust Fund.
OPERATING EXPENSES
------------------
Operating expenses of approximately $3.629 million for the three months
ended March 31 1999 decreased by approximately $690,000 from approximately
$4.319 million for the three months ended March 31, 1998.
The Company realized savings in general operating expenses due to lower
audio-visual, utility and occupancy costs. The Company also incurred lower purse
expense due to the decrease in on-track handle. In addition, there were cost
savings associated with wages, administrative and food costs.
INTEREST EXPENSE
----------------
Interest expense decreased by approximately $19,000 for the three months
ended March 31, 1999 from $101,000 in the three months ended March 31, 1998 to
approximately $82,000 in the three months ended March 31, 1999. The decrease is
due to the reduction of outstanding debt. (See Liquidity and Capital
Resources-General).
EQUITY INCOME (LOSS) IN INVESTMENTS
-----------------------------------
At December 31, 1998, the Company owned approximately 673,000 or 19% of the
outstanding shares of the Back Bay Restaurant Group, Inc. ("BBRG"). During 1994,
the Company and 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 equity income (loss) in investments represents the Company's
proportionate share of BBRG's net earnings (see Note 5).
PAGE 12 OF 16
<PAGE> 13
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
-----------------------------------------
MARCH 31, 1999
--------------
(UNAUDITED)
---------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- -------------------------------------------------------------------------------
OF OPERATIONS (continued)
- -------------
OTHER INCOME, NET
-----------------
Other income, net decreased by approximately $99,000 to $ 0 during the
first quarter of 1999 as compared to approximately $99,000 for the corresponding
period in 1998. The decrease is attributable to the realization of asset
recovery proceeds in the first quarter of 1998.
DEPRECIATION AND AMORTIZATION
-----------------------------
Depreciation and amortization increased approximately $29,000 to $175,000
in the three months ended March 31, 1999, from $146,000 in the comparable period
in 1998. Depreciation and amortization are expensed on a straight-line basis
over the estimated life of the asset Depreciation has increased as additions
have been made to fixed assets.
INCOME TAX PROVISION
--------------------
The Company's provision for income taxes is less than the statutory federal
tax rate of 34% during the first quarter of 1999 and 1998 primarily due to the
utilization of available net operating loss carryforwards. The provision for
taxes of $22,800 and $26,000 in the first quarter of 1999 and 1998,
respectively, represents estimated state taxes and federal alternative minimum
tax.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
At March 31, 1999, the Company has a working capital deficit of
approximately $2.8 million, a stockholders' surplus of approximately $949,000
and is in default on certain debt obligations totalling approximately $10,000.
Historically, the Company's primary sources of capital to finance its businesses
have been its cash flow from operations and credit facilities. The Company's
capital needs are primarily from maintenance and enhancement of the racing
facility at Wonderland, and for debt service requirements.
The Company's cash and cash equivalents totaled approximately $144,000 at
March 31, 1999, compared with $188,000 at December 31, 1998. The Company
generated cash flows from operations of approximately $66,994 during the first
quarter of 1999 as compared to $739,000 during the corresponding period in 1998.
Non cash items included in the Company's net income in the first quarter of 1999
consist of depreciation and amortization expense of $175,000 and equity in
income (loss) from investments of approximately ($48,000). Changes in working
capital accounts including restricted cash, accounts payable and other accrued
liabilities used approximately $640,000 of cash in the first quarter of 1999.
Net cash used in investing activities in 1999 of $47,180 represents investments
and additions to the property, plant and equipment. Financing activities in 1999
include $64,475 of funds used to reduce outstanding balances on long term debt.
PAGE 13 OF 16
<PAGE> 14
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
-----------------------------------------
MARCH 31, 1999
--------------
(UNAUDITED)
---------
RACING OPERATIONS
- -----------------
In order to meet the requirements for renewal of racing licenses in 2000,
the Company's racing subsidiary must demonstrate, amongst other criteria, it is
a financially stable entity, 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 2000 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.
In the event that the Company is not successful in obtaining a Year 2000
racing license, the adverse impact on the Company's financial results and
position would be material.
PAGE 14 OF 16
<PAGE> 15
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
-----------------------------------------
MARCH 31, 1999
--------------
(UNAUDITED)
---------
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- -------------------------
The Company is subject to various claims and legal actions that arise in
the ordinary course of its business.
In 1996 litigation ensured between Foxboro Realty Associates, LLC, ET AL.
("FRA") and the Company, its subsidiary Foxboro Park, Inc., ET AL., in Norfolk
Superior Court in Massachusetts over Foxboro's right to occupy Foxboro Raceway.
The Court issued an execution pursuant to which Foxboro was evicted from the
racetrack on July 31, 1997. The parties appealed to the Appeals Court on January
27, 1998. The Company expects the appeals to be decided sometime during calendar
year 1999.
On July 8, 1998, Foxboro Route 1 Limited Partnership, ET AL., filed a civil
action in Suffolk Superior Court in Massachusetts against The Westwood Group,
Inc., Wonderland Greyhound Park, Inc., ET AL., seeking payment for use and
occupancy of Foxboro Raceway, and other damages, from 1992 through July 1997.
The ultimate outcome of such pending litigation cannot be determined at
this time, however it is the opinion of the Company's management, any liability
under such pending litigation would not materially affect its financial
condition or operations.
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) Exhibit
None
(b) Reports on Form 8-K
None
PAGE 15 OF 16
<PAGE> 16
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
-----------------------------------------
MARCH 31, 1999
--------------
(UNAUDITED)
---------
Pursuant to the requirement of the Securities Exchange Act of 1934, 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 14, 1999 /s/ Richard P. Dalton
--------------------------
Richard P. Dalton
President, Chief Executive
Officer and Director
(Principal Financial and
Accounting Officer)
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