<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, 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 March 31, 2000 351,310 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
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ----------------------------
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
-----------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 389,238 $ 343,109
Restricted cash 770,050 742,303
Accounts receivable 126,420 40,873
Prepaid expenses and other current assets 80,852 109,990
Notes receivable from officers short term portion 406,962 815,902
------------- ------------
Total current assets 1,773,522 2,052,177
------------- ------------
Property, plant and equipment:
Land 348,066 348,066
Building and building improvements 18,444,234 18,550,474
Machinery and equipment 4,673,297 4,543,040
------------- ------------
23,465,597 23,441,580
Less accumulated depreciation and amortization (18,053,286) (17,956,017)
-------------- ------------
Net property, plant and equipment 5,412,311 5,485,563
------------- ------------
Other assets:
Deferred financing costs, less accumulated amortization 124,467 133,575
Other assets, net 56,422 58,840
Notes receivable from officers long term portion 1,742,519 1,682,467
------------- ------------
Total other assets 1,923,408 1,874,882
------------- ------------
Total assets $ 9,109,241 $ 9,412,622
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
PAGE 2 OF 14
<PAGE> 3
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
-----------------------------------------
CONSOLIDATED CONDENSED BALANCE SHEETS
-------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------- ------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
Accounts payable and other accrued liabilities $ 1,644,312 $ 1,979,476
Discontinued Operations 704,420 704,420
Outstanding parimutuel tickets 709,250 638,460
Current maturities of long-term debt 253,063 272,541
----------- -----------
Total current liabilities 3,311,045 3,594,897
Long-term debt, less current maturities 4,320,728 4,391,936
Other long-term liabilities 2,160,283 2,685,223
----------- -----------
Total liabilities 9,792,056 10,672,056
----------- -----------
Commitment and Contingencies
Stockholders' deficiency:
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 (5,947,988) (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' deficiency (682,815) (1,259,434)
----------- -----------
Total liabilities and stockholders' deficiency $ 9,109,241 $ 9,412,622
=========== ===========
</TABLE>
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)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
------------- ------------
<S> <C> <C>
OPERATING REVENUES:
Pari-mutuel commissions $ 3,440,323 $ 3,610,516
Concessions and other 742,483 586,177
Admissions 56,743 68,232
------------- ------------
Total operating revenue 4,239,549 4,264,925
------------- ------------
OPERATING EXPENSES:
Wages, taxes and benefits 1,469,944 1,365,277
Purses 965,476 1,042,229
Cost of food and beverage 81,126 98,456
Administrative & operating 806,361 947,920
Depreciation and amortization 128,878 175,381
------------- ------------
Total operating expenses 3,451,785 3,629,263
------------- ------------
Income from operations 787,764 635,662
------------- ------------
OTHER EXPENSE:
Interest expense, net (151,145) (81,574)
Equity loss in investments - (47,600)
------------- ------------
Total other expense (151,145) (129,174)
------------- ------------
Income from operations before
provision for income taxes 636,619 506,488
Provision for income tax 60,000 22,800
------------ ------------
Net income $ 576,619 $ 483,688
============= ============
Basic income & diluted income per share:
Net Income $ 0.46 $ 0.38
============= ============
Gain from discontinued operations net per share - -
Net income (Loss)
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 14
<PAGE> 5
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
-----------------------------------------
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 576,619 $ 483,688
--------- ---------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 128,878 175,381
Equity in (income) loss from investments _ 47,600
Changes in operating assets and liabilities:
Decrease (increase) in restricted cash (27,747) 112,492
(Increase) in accounts receivable (85,547) (9,411)
Decrease (increase) in prepaid expenses and
other current assets 29,138 (37,346)
Decrease in other assets, net 2,418 1,558
Decrease in notes receivable, officers 348,888 _
Decrease in accounts payable and other
accrued liabilities (335,164) (440,203)
Increase in outstanding parimutuel tickets 70,790
Increase (decrease) in other long-term liabilities (524,940) (266,765)
---------- ----------
Total adjustments (393,286) (416,694)
---------- ---------
Net cash provided by operating activities 183,333 66,994
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (46,518) (47,180)
---------- ---------
Net cash used in investing activities (46,518) (47,180)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of debt (90,686) (64,475)
--------- ----------
Net cash provided (used) in financing activities (90,686) (64,475)
--------- ---------
Net increase (decrease) in cash and cash equivalents 46,129 (44,661)
Cash and cash equivalents, beginning of period 343,109 188,462
--------- ---------
Cash and cash equivalents, end of period $ 389,238 $ 143,801
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 146,560 $ 135,404
========= =========
Income taxes $ 75,500 $ 28,000
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements
PAGE 5 OF 14
<PAGE> 6
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
-----------------------------------------
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
MARCH 31, 2000
--------------
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, 2000, and the results of its
consolidated operations and its consolidated cash flows for the three month
periods ended March 31, 2000 and 1999. 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 as of March
31, 2000 and December 31, 1999 and for the three month periods ended March 31,
2000 and 1999 include the accounts of the Company and its wholly-owned
subsidiaries. All material intercompany 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.
PAGE 6 OF 14
<PAGE> 7
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
-----------------------------------------
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
MARCH 31, 2000
--------------
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.
PAGE 7 OF 14
<PAGE> 8
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
-----------------------------------------
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
MARCH 31, 2000
--------------
2 DEBT
----
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C>
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. $4,573,791 $4,660,506
Other -- 3,971
---------- ----------
4,573,791 4,664,477
Less:
Current Maturities 253,063 272,541
---------- ----------
Long-term portion $4,320,738 $4,391,936
========== ==========
</TABLE>
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.
PAGE 8 of 14
<PAGE> 9
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
-----------------------------------------
MARCH 31, 2000
--------------
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, 2000
and 1999.
2000 1999
----------- ------------
Performances 85 85
Simulcast days 91 89
Pari-mutuel handle (thousands)
Live-on track $ 5,423 $ 6,155
Live-simulcast 10,223 10,903
Guest-simulcast 12,423 12,286
----------- ------------
Total $ 28,069 $ 29,344
=========== ============
Total attendance 77,585 86,086
=========== ============
Average per capita on site wagering $ 230 $ 214
=========== ============
OPERATING REVENUE
-----------------
Total operating revenue decreased slightly to $4.2 million in the quarter
ended March 31, 2000 as compared to $4.3 million in the same period of 1999.
Pari-mutuel commissions decreased by approximately $170,000 or 5% to $3.4
million for the three months ended March 31, 2000 from $3.6 million in 1999.
Total handle in first quarter of 2000 was approximately $28.1 million as
compared to $29.3 million in 1999. Guest-simulcast handle increased by
approximately $137,000 or 1% from $12.3 million in the first quarter of 1999 to
$12.4 million in the corresponding period in 2000. Live-on track handle
decreased by approximately $732,000 or 12% in 2000 as compared to 1999, while
Live-simulcast handle decreased by approximately $680,000 or 6.2%.
Wonderland had the same number of live racing performances in 2000 as
compared to 1999, with an average attendance of approximately 913 persons in
2000 compared to 1013 persons in 1999.
PAGE 9 OF 14
<PAGE> 10
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
-----------------------------------------
MARCH 31, 2000
--------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- -------------------------------------------------------------------------------
OF OPERATIONS (continued)
- -------------
Concessions revenue of approximately $589,000 for the three months ended
March 31, 2000 decreased by approximately $61,000 from approximately $528,000
for the three months ended March 31, 1999. Other operating revenue consists of
program sales, admissions, parking and gift shop sales. These revenues increased
by approximately $53,000 in 2000 as compared to 1999 to approximately
$209,000 from approximately $126,000.
Pari-mutuel commission for the three months ended March 31, 2000 included
approximately $64,000 deposited into the Greyhound Capital Improvements Trust
Fund and $57,000 deposited into the Greyhound Promotional Trust Fund.
OPERATING EXPENSES
------------------
Operating expenses of approximately $3.4 million for the three months
ended March 31, 2000 decreased by approximately $177,000 from approximately
$3.6 million for the three months ended March 31, 1999.
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 increased by approximately $69,000 for the three months
ended March 31, 2000 from $82,000 in the three months ended March 31, 1999 to
approximately $151,000 in the three months ended March 31, 2000.
PAGE 10 OF 14
<PAGE> 11
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
-----------------------------------------
MARCH 31, 2000
--------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- -------------------------------------------------------------------------------
OF OPERATIONS (continued)
- -------------
DEPRECIATION AND AMORTIZATION
-----------------------------
Depreciation and amortization decreased approximately $46,000 to $129,000
in the three months ended March 31, 2000, from $175,000 in the comparable period
in 1999. Depreciation and amortization are expensed on a straight-line basis
over the estimated life of the asset.
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 2000 and 1999 primarily due to the
utilization of available net operating loss carryforwards. The provision for
taxes of $60,000 and $22,800 in the first quarter of 2000 and 1999,
respectively, represents estimated state taxes and federal alternative minimum
tax.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
At March 31, 2000, the Company has a working capital deficit of
approximately $1.5 million and a stockholders' deficit of approximately
$683,000. 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 $389,000 at
March 31, 2000, compared with $343,000 at December 31, 1999. The Company
generated cash flows from operations of approximately $183,000 during the first
quarter of 2000 as compared to $67,000 during the corresponding period in 1999.
Non cash items included in the Company's net income in the first quarter of 2000
consist of depreciation and amortization expense of approximately $129,000.
Changes in working capital accounts including restricted cash, accounts payable
and other accrued liabilities provided approximately $5,000 of cash in the first
quarter of 2000. Net cash used in investing activities in 2000 of approximately
$46,000 represents investments and additions to the property, plant and
equipment. Financing activities in 2000 include $91,000 of funds used to reduce
outstanding balances on long term debt.
PAGE 11 OF 14
<PAGE> 12
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
-----------------------------------------
MARCH 31, 2000
--------------
RACING OPERATIONS
- -----------------
In order to meet the requirements for renewal of racing licenses in 2001,
the Company's racing subsidiary must demonstrate, among 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 2001 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 2001
racing license, the adverse impact on the Company's financial results and
position would be material.
PAGE 12 OF 14
<PAGE> 13
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
-----------------------------------------
MARCH 31, 2000
--------------
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 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
-----------------------------------------
MARCH 31, 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 May 15, 2000 /s/ Richard P. Dalton
--------------------------
Richard P. Dalton
President, Chief Executive
Officer and Director
(Principal Financial and
Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 389,238
<SECURITIES> 0
<RECEIVABLES> 126,420
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,773,522
<PP&E> 23,465,597
<DEPRECIATION> 18,053,286
<TOTAL-ASSETS> 9,109,241
<CURRENT-LIABILITIES> 3,311,045
<BONDS> 4,320,728
0
0
<COMMON> 28,570
<OTHER-SE> (711,385)
<TOTAL-LIABILITY-AND-EQUITY> 9,109,241
<SALES> 0
<TOTAL-REVENUES> 4,739,549
<CGS> 0
<TOTAL-COSTS> 3,451,785
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 151,145
<INCOME-PRETAX> 636,619
<INCOME-TAX> 60,000
<INCOME-CONTINUING> 576,619
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 576,619
<EPS-BASIC> .46
<EPS-DILUTED> .46
</TABLE>
