<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 JUNE 30, 2000
------------------------------------------
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 AUGUST 9, 2000 351,210 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 14
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
June 30, December 31,
2000 1999
----------- ------------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 395,510 $ 343,109
Restricted cash 686,258 742,303
Accounts receivable 123,739 40,873
Prepaid expenses and other current assets 317,626 109,990
Notes receivable from officers 374,854 815,902
----------- -----------
Total current assets 1,897,987 2,052,177
----------- -----------
PROPERTY, PLANT AND EQUIPMENT:
Land 348,066 348,066
Building and building improvements 18,592,102 18,550,474
Machinery and equipment 4,548,252 4,543,040
----------- -----------
23,488,420 23,441,580
Less accumulated depreciation and
amortization (18,188,395) (17,956,017)
----------- -----------
Net property, plant and equipment 5,300,025 5,485,563
----------- -----------
OTHER ASSETS:
Intangibles, net 115,360 133,575
Investments -- --
Other assets, net 53,953 58,840
Notes receivable from officers 1,768,336 1,682,467
----------- -----------
Total other assets 1,937,649 1,874,882
----------- -----------
Total assets $ 9,135,661 $ 9,412,622
=========== ===========
The accompanying notes are an integral part of these consolidated condensed
financial statements.
PAGE 2 OF 14
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THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
June 30, December 31,
2000 1999
----------- ------------
(Unaudited)
CURRENT LIABILITIES:
Accounts payable and other accrued
liabilities $ 1,504,018 $ 1,979,476
Net liabilities of discontinued
operations 704,420 704,420
Outstanding pari-mutuel tickets 482,923 638,460
Current maturities of long-term debt 283,811 272,541
----------- ------------
Total current liabilities 2,975,172 3,594,897
LONG-TERM DEBT, less current maturities 4,223,125 4,391,936
OTHER LONG-TERM LIABILITIES 2,352,119 2,685,223
----------- ------------
Total liabilities 9,550,416 10,672,056
----------- ------------
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.01 par value; authorized
3,000,000 shares; 1,944,409 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 (5,679,928) (6,524,607)
Other comprehensive loss (177,890) (177,890)
Cost of 1,593,199 common and 600
Class B common shares in treasury (7,964,782) (7,964,782)
----------- ------------
Total stockholders' equity (deficit) (414,755) (1,259,434)
----------- ------------
Total liabilities and stockholders'
equity (deficit) $ 9,135,661 $ 9,412,622
=========== ===========
The accompanying notes are an integral part of these consolidated condensed
financial statements.
PAGE 3 OF 14
<PAGE> 4
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
For The
Three Months Ended
June 30,
-------------------------------------
2000 1999
----------- ------------
OPERATING REVENUE:
Pari-mutuel commissions $ 3,823,005 $ 3,815,197
Concessions 841,998 844,891
Admissions 56,743 68,232
----------- -----------
Total operating revenue 4,721,746 4,728,320
----------- -----------
OPERATING EXPENSES:
Wages, taxes and benefits 1,667,415 1,924,306
Purses 1,141,985 1,174,321
Cost of food and beverage 112,951 126,494
Administrative & operating 1,253,733 1,299,078
Depreciation and amortization 121,716 176,940
----------- -----------
Total operating expenses 4,297,800 4,701,139
----------- -----------
Income from operations 423,946 27,181
----------- -----------
OTHER INCOME (EXPENSE):
Interest expense, net (83,109) (118,005)
Other income, net -- 1,900
----------- -----------
Total other expense, net (83,109) (116,105)
----------- -----------
INCOME (LOSS) FROM OPERATIONS BEFORE
PROVISION FOR INCOME TAXES 340,837 (88,924)
PROVISION FOR INCOME TAXES 72,777 30,000
----------- -----------
NET INCOME (LOSS) $ 268,060 $ (118,924)
=========== ===========
BASIC AND DILUTED PER SHARE DATA:
NET INCOME (LOSS) $0 .21 $(0.09)
====== ======
BASIC AND DILUTED WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING 1,263,225 1,263,225
=========== ===========
The accompanying notes are an integral part of these consolidated condensed
financial statements.
PAGE 4 OF 14
<PAGE> 5
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
For The
Six Months Ended
June 30,
------------------------------------
2000 1999
----------- -----------
OPERATING REVENUE:
Pari-mutuel commissions $7,263,328 $7,425,713
Concessions 1,572,293 1,411,750
Admissions 125,674 155,782
---------- ---------
Total operating revenue 8,961,295 8,993,245
---------- ---------
OPERATING EXPENSES:
Wages, taxes and benefits 3,137,359 3,289,583
Purses 2,107,461 2,216,550
Cost of food and beverage 194,077 224,950
Administrative & Operating 2,060,094 2,246,998
Depreciation and amortization 250,594 352,321
---------- ---------
Total operating expenses 7,749,585 8,330,402
---------- ---------
Income from operations 1,211,710 662,843
---------- ---------
OTHER INCOME (EXPENSE):
Interest expense, net (234,254) (199,579)
Equity loss in investments -- (47,600)
Other income, net -- 1,900
---------- ---------
Total other expense, net (234,254) (245,279)
---------- ---------
INCOME FROM OPERATIONS BEFORE
PROVISION FOR INCOME TAXES 977,456 417,564
PROVISION FOR INCOME TAX 132,777 52,800
---------- ---------
NET INCOME $ 844,679 $ 364,764
========== =========
BASIC AND DILUTED PER SHARE DATA:
NET INCOME $0.67 $0.29
===== =====
BASIC AND DILUTED WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING 1,263,225 1,263,225
========== ==========
The accompanying notes are an integral part of these consolidated condensed
financial statements.
PAGE 5 OF 14
<PAGE> 6
THE WESTWOOD GROUP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months
Ended June 30
----------------------------------
2000 1999
-------- ------
Cash Flows from Operating Activities
Net income $ 844,679 $ 364,764
--------- ---------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 250,594 352,321
Equity in loss from investments -- 47,600
Decrease in restricted cash 56,045 16,778
(Increase) in accounts receivable (82,868) (210,478)
(Increase) in prepaid expenses and
other current assets (207,636) (275,609)
Decrease in other assets, net 4,888 19,525
Decrease in notes receivable, officers 355,179 265,895
(Decrease) increase in accounts payable
and other accrued liabilities (475,458) 1,300,249
(Decrease) in outstanding parimutuel
tickets (155,537) (97,320)
(Decrease) in other long-term
liabilities (333,104) (1,598,032)
--------- ---------
Total adjustments (587,897) (179,071)
--------- ---------
Net cash provided by operating
activities 256,782 185,693
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant
and equipment (46,840) (91,804)
--------- ---------
Net cash used in investing
activities (46,840) (91,804)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of debt (157,541) (130,463)
--------- ---------
Net cash used in
financing activities (157,541) (130,463)
--------- ---------
Net increase (decrease) in cash and
cash equivalents 52,401 (36,574)
Cash and cash equivalents, beginning
of period 343,109 188,462
--------- ---------
Cash and cash equivalents, end of period $ 395,510 $ 151,888
========= =========
Supplemental disclosures of cash
flow information:
Cash paid during the period for:
Interest $ 254,661 $ 230,640
========= =========
Income taxes $ 61,300 $ 58,000
========= =========
PAGE 6 OF 14
<PAGE> 7
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
JUNE 30, 2000
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INTERIM RESULTS
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of normal
recurring accruals and deferrals) necessary to present fairly the Company's
consolidated financial position as of June 30, 2000, and the results of its
consolidated operations and its consolidated cash flows for the three and six
month periods ended June 30, 2000 and 1999. The preparation of financial
statements in conformity with generally accepted accounting principals requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Operating results from interim periods are not necessarily indicative
of the results that may be expected for the entire fiscal year. Accordingly,
these interim statements should be read in conjunction with the consolidated
financial statements included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1999.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated condensed financial statements include the
accounts of the Company and its wholly-owned subsidiaries. All material
inter-company accounts and transactions have been eliminated in consolidation.
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 2000 and
1999 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.
The amount of potentially dilutive common shares issuable under the
Company's stock options, if any, are determined based on the treasury stock
method.
PAGE 7 OF 14
<PAGE> 8
2. DEBT
Long - term debt consisted of the following:
June 30, 2000 December 31,1999
---------------------------------
9.5% Century Bank and Trust Company
("Century Bank") term loan, requiring
60 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. $4,506,936 $4,660,506
Other -- 3,971
----------- -------------
4,506,936 4,664,477
Less:
Current maturities 283,811 272,541
----------- -------------
Long - term portion $ 4,223,125 $4,391,936
=========== =============
PAGE 8 OF 14
<PAGE> 9
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
JUNE 30,2000
(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 June 30, 2000
and June 30, 1999.
2000 1999
-------- --------
Performances 91 91
Simulcast days 91 91
Pari-mutuel handle (thousands)
Live-on track $ 6,211 $ 6,648
Live-simulcast 10,431 10,095
Guest-simulcast 13,406 12,871
------- -------
$30,048 $29,614
======= =======
Total attendance 83,723 93,117
Average per capita on site wagering $ 234 $ 210
OPERATING REVENUE
Total operating revenue was unchanged at $4.7 million in the quarter ended
June 30, 2000 as compared to the same period of 1999. Pari-mutuel commissions
also remained essentially unchanged at $3.8 million for the three months ended
June 30, 2000 compared to the similar period in the prior year. Total handle in
the second quarter of 2000 was approximately $30.0 million as compared to $29.6
million in 1999. Guest-simulcast handle increased by approximately $535,000 or
4.2% from $12.9 million in the second quarter of 1999 to $13.4 million in the
corresponding period in 2000. Live-on track handle in the second quarter
decreased by approximately $437,000 or 6.6% in 2000 as compared to 1999, while
Live-simulcast handle increased by approximately $336,000 or 3.3%. As of June 30
Wonderland has the same number of live racing performances in 2000 as compared
to 1999, with an average attendance of approximately 920 persons in 2000
compared to 1,023 persons in 1999.
PAGE 9 OF 14
<PAGE> 10
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
JUNE 30,2000
(UNAUDITED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
Concessions and other operating revenue consists of program sales,
admissions, parking and gift shop sales. It stood at approximately $899,000 for
the three months ended June 30, 2000 decreasing by approximately $14,000 from
approximately $913,000 for the three months ended June 30, 1999. Pari-mutuel
commissions for the three months ended June 30, 2000 included approximately
$64,000 deposited into each of the Greyhound Capital Improvements Trust Fund and
the Greyhound Promotional Trust Fund, compared to $67,000 for the same period in
1999.
OPERATING EXPENSES
Operating expenses were approximately $4.3 million for the three months
ended June 30, 2000 decreased by approximately $400,000 from approximately $4.7
million for the three months ended June 30, 1999. The Company realized savings
in general operating expenses due to lower wages and benefits costs. The Company
also incurred lower purse expense due to the decrease in on-track handle. In
addition, there were cost savings associated with administrative and food costs.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization decreased approximately $55,000 to $122,000
in the three months ended June 30, 2000, from $177,000 in the comparable period
in 1999. Depreciation and amortization are expensed on a straight-line basis
over the estimated life of the asset.
INTEREST EXPENSE
Interest expense decreased by approximately $35,000 for the three months
ended June 30, 2000 from $118,000 in the three months ended June 30, 1999 to
approximately $83,000 in the three months ended June 30, 2000.
INCOME TAX PROVISION
The Company's provision for income taxes was less than the statutory
federal tax rate of 34% during the second quarter of 2000 and 1999 primarily due
to the utilization of available net operating loss carryforwards. The provision
for taxes of $73,000 and $30,000 in the second quarter of 2000 and 1999,
respectively, represents estimated state taxes and federal alternative minimum
tax.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2000, the Company had a working capital deficit of
approximately $1,077,000, and a stockholders' deficit of approximately
$415,000. 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 $396,000 at June 30, 2000,
compared with $343,000 at December 31, 1999. The Company generated cash flows
from operations of approximately $73,000 during the second quarter of 2000 as
compared to $119,000 during the corresponding period in 1999. Non cash items
included in the Company's net income in the second quarter of 2000 consist of
depreciation and amortization expense of approximately $122,000. Working capital
accounts including restricted cash, accounts payable and other accrued
liabilities increased by approximately $177,000 in the second quarter of 2000.
There were no material investing activities in the second quarter of 2000.
PAGE 10 OF 14
<PAGE> 11
Financing activities in 2000 include $67,000 of funds used to reduce outstanding
balances on long-term debt.
The table below illustrates certain key statistics for Wonderland Park, the
Company's greyhound racing operation, for the six months ended June 30, 2000 and
June 30, 1999.
2000 1999
---- ----
Performances 176 176
Simulcast days 182 178
Pari-mutuel handle (thousands)
Live-on track $11,988 $12,894
Live-simulcast 21,049 21,559
Guest-simulcast 26,214 25,519
------ ------
$59,251 $59,972
====== ======
Total attendance 161,308 179,203
Average per capita on site wagering $ 237 $ 214
OPERATING REVENUE
Total operating revenue was unchanged at $9.0 million in the six months
ended June 30, 2000 as compared to the same period of 1999. Pari-mutuel
commissions decreased $162,000 or 2.2% for the six months ended June 30, 2000.
Total handle in the first half of 2000 was approximately $59.2 million as
compared to $60.0 million in the first half of 1999. Guest-simulcast handle
increased by approximately $695,000 or 2.8% from $25.5 million in the first half
of 1999 to $26.2 million in the corresponding period in 2000. Live-on track
handle decreased by approximately $906,000 or 7.0% in 2000 as compared to 1999,
while Live-simulcast handle decreased by approximately $510,000 or 2.4%. As of
June 30 Wonderland has the same number of live racing performances in 2000 as
compared to 1999, with an average attendance of approximately 917 persons in
2000 compared to 1,018 persons in 1999.
PAGE 11 OF 14
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
Concessions and other operating revenue consists of program sales,
admissions, parking and gift shop sales. These results were approximately
$1,698,000 for the six months ended June 30, 2000 increasing by approximately
$131,000 from approximately $1,567,000 for the six months ended June 30, 1999.
Pari-mutuel commissions for the six months ended June 30, 2000 included
approximately $128,000 deposited each into the Greyhound Capital Improvements
Trust Fund and the Greyhound Promotional Trust Fund, compared to $129,000 for
the same period in 1999.
OPERATING EXPENSES
Operating expenses of approximately $7.7 million for the six months ended
June 30, 2000 decreased by approximately $580,000 from approximately $8.3
million for the six months ended June 30, 1999. The Company realized savings in
general operating expenses due to lower wages and benefits costs. The Company
also incurred lower purse expense due to the decrease in on-track handle. In
addition, there were cost savings associated with administrative and food costs.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization decreased approximately $101,000 to $251,000
in the six months ended June 30, 2000, from $352,000 in the comparable period in
1999. Depreciation and amortization are expensed on a straight-line basis over
the estimated life of the asset.
INTEREST EXPENSE
Interest expense increased by approximately $35,000 for the six months
ended June 30, 2000 from $199,000 in the six months ended June 30, 1999 to
approximately $234,000 in the six months ended June 30, 2000.
INCOME TAX PROVISION
The Company's provision for income taxes was less than the statutory
federal tax rate of 34% during the second quarter of 2000 and 1999 primarily due
to the utilization of available net operating loss carryforwards. The provision
for taxes of $133,000 and $53,000 in the second quarter of 2000 and 1999,
respectively, represents estimated state taxes and federal alternative minimum
tax.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated cash flows from operations of approximately $257,000
during the first half of 2000 as compared to $186,000 during the corresponding
period in 1999. Non-cash items included in the Company's net income consist of
depreciation and amortization expense of $251,000. Working capital accounts
including restricted cash, accounts payable and other accrued liabilities
increased by approximately $466,000 in the second half of 2000.
Net cash used in investing activities in 2000 of approximately $47,000
represents investments and additions to the property, plant and equipment.
Financing activities in 2000 include $157,000 of funds used to reduce
outstanding balances on long term debt.
PAGE 12 OF 14
<PAGE> 13
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
JUNE 30,2000
(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 ensued between Foxboro Realty Associates, LLC, and other
parties. ("FRA") and the Company, its subsidiary Foxboro Park, Inc., and other
parties, in Norfolk Superior Court in Massachusetts over the aforementioned
entities' ("Foxboro") 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 2000.
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 (27) Financial Data Schedule
(b) Reports on Form 8-K None
PAGE 13 OF 14
<PAGE> 14
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
JUNE 30,2000
(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 August 15, 2000 --------------------------
Richard P. Dalton President,
Chief Executive Officer and
Director (Principal Financial and
Accounting Officer)
PAGE 14 OF 14
