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 September 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
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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 October 29, 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 13
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
September 30, December 31,
2000 1999
------------- ------------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 319,304 $ 343,109
Restricted cash 496,311 742,303
Accounts receivable 68,803 40,873
Prepaid expenses and other current assets 233,995 109,990
Notes receivable from officers 413,765 815,902
------------ ------------
Total current assets 1,532,178 2,052,177
------------ ------------
PROPERTY, PLANT AND EQUIPMENT:
Land 348,066 348,066
Building and building improvements 18,593,939 18,550,474
Machinery and equipment 4,599,287 4,543,040
------------ ------------
23,541,292 23,441,580
Less accumulated depreciation and
amortization (18,311,422) (17,956,017)
------------ ------------
Net property, plant and equipment 5,229,870 5,485,563
------------ ------------
OTHER ASSETS:
Intangibles, net 106,253 133,575
Other Assets, Net 51,438 58,840
Notes receivable from officers 1,723,515 1,682,467
------------ ------------
Total other assets 1,881,206 1,874,882
------------ ------------
Total assets $ 8,643,254 $ 9,412,622
============ ============
The accompanying notes are an integral part of these
consolidated condensed financial statements.
Page 2 of 13
3
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
September 30, December 31,
2000 1999
------------- ------------
(Unaudited)
CURRENT LIABILITIES:
Accounts payable and other accrued liabilities $ 1,426,234 $ 1,979,476
Net liabilities of discontinued operations 704,420 704,420
Outstanding pari-mutuel tickets 574,758 638,460
Short-term non-collateralized debt 338,000 --
Current maturities of long-term debt 267,401 272,541
------------ ------------
Total current liabilities 3,310,813 3,594,897
LONG-TERM DEBT, less current maturities 4,173,157 4,391,936
OTHER LONG-TERM LIABILITIES 2,244,912 2,685,223
------------ ------------
Total liabilities 9,728,882 10,672,056
------------ ------------
COMMITMENTS 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 (6,350,801) (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 (1,085,628) (1,259,434)
------------ ------------
Total liabilities and stockholders' deficiency $ 8,643,254 $ 9,412,622
============ ============
The accompanying notes are an integral part of these
consolidated condensed financial statements.
Page 3 of 13
4
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
For The
Three Months Ended
September 30,
---------------------------------
2000 1999
----------- -----------
OPERATING REVENUE:
Pari-mutuel commissions $ 3,746,456 $ 3,717,952
Concessions 816,469 768,843
Admissions 73,002 78,026
----------- -----------
Total operating revenue 4,635,927 4,564,821
----------- -----------
OPERATING EXPENSES:
Wages, taxes and benefits 1,601,395 1,473,630
Purses 1,138,391 976,248
Cost of food and beverage 118,751 125,236
Administrative & operating 2,124,087 1,407,540
Depreciation and amortization 132,133 129,235
----------- -----------
Total operating expenses 5,114,757 4,111,889
----------- -----------
Income (loss) from operations (478,830) 452,932
----------- -----------
OTHER INCOME (EXPENSE):
Interest expense, net (110,085) (205,106)
Equity income in investments -- 204,600
Litigation settlement expense (118,837) --
Loss on sale of investment -- (1,966,108)
----------- -----------
Total other income (expense) (228,922) (1,966,614)
----------- -----------
LOSS BEFORE PROVISION FOR
INCOME TAXES (707,752) (1,513,682)
PROVISION FOR INCOME TAXES (BENEFIT) (36,879) 240,200
----------- -----------
NET LOSS $ (670,873) $(1,753,882)
=========== ===========
BASIC AND DILUTED PER SHARE DATA:
NET LOSS $ (0.53) $ (1.39)
=========== ===========
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 13
5
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
For The
Nine Months Ended
September 30,
-----------------------------------
2000 1999
------------ ------------
OPERATING REVENUE:
Pari-mutuel commissions $ 11,009,784 $ 11,143,665
Concessions 2,388,762 2,180,593
Admissions 198,676 233,808
------------ ------------
Total operating revenue 13,597,222 13,558,066
------------ ------------
OPERATING EXPENSES:
Wages, taxes and benefits 4,738,754 4,763,213
Purses 3,245,852 3,192,798
Cost of food and beverage 312,828 350,186
Administrative & operating 4,184,181 3,654,538
Depreciation and amortization 382,727 481,556
------------ ------------
Total operating expenses 12,864,342 12,442,291
------------ ------------
Income from operations 732,880 1,115,775
------------ ------------
OTHER INCOME (EXPENSE):
Interest expense, net (344,339) (404,685)
Equity income in investments -- 157,000
Litigation settlement (118,837) --
Other (expense) income, net -- 1,900
Loss on sale of investment -- (1,966,108)
------------ ------------
Total other income (expense) (463,176) (2,211,893)
------------ ------------
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES 269,704 (1,096,118)
PROVISION FOR INCOME TAXES 95,898 293,800
------------ ------------
NET INCOME (LOSS) $ 173,806 $ (1,389,118)
============ ============
BASIC AND DILUTED PER SHARE DATA:
NET INCOME (LOSS) $ 0.14 $ (1.10)
============ ============
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 13
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THE WESTWOOD GROUP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months
Ended September 30
---------------------------
2000 1999
----------- -----------
Cash Flows from Operating Activities
Net income (loss) $ 173,806 $(1,389,118)
----------- -----------
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 382,727 481,556
Equity in (income) from investments -- (157,000)
Loss on sale of investment in subsidiary -- 1,966,108
Interest expense on payable -- 84,594
Changes in operating assets and liabilities:
Decrease (increase) in restricted cash 245,992 (582,201)
(Increase) decrease in accounts receivable (27,931) 19,541
(Increase) in prepaid expenses and other current
assets (124,005) (89,790)
Decrease in other assets, net 7,403 --
Decrease in notes receivable from officers 361,089 42,158
(Decrease) increase in accounts payable and other
accrued liabilities (553,242) 497,345
(Decrease) in outstanding pari-mutuel tickets (63,702) (33,178)
(Decrease) in other long-term liabilities (440,311) (501,063)
----------- -----------
Total adjustments (211,980) 1,728,070
----------- -----------
Net cash (used) provided by operating
activities (38,174) 338,952
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (99,712) (147,738)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of debt (223,919) (198,004)
Short-term financing 338,000 --
----------- -----------
Net cash provided (used) in financing activities 114,081 (198,004)
----------- -----------
Net (decrease) in cash and cash equivalents (23,805) (6,790)
Cash and cash equivalents, beginning of period 343,109 188,462
----------- -----------
Cash and cash equivalents, end of period $ 319,304 $ 181,672
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 369,403 $ 343,811
=========== ===========
Income taxes $ 122,411 $ 37,426
=========== ===========
Page 6 of 13
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THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
SEPTEMBER 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 only of
normal recurring adjustments, considered necessary for a fair statement of
results have been included in the consolidated financial statements for the
interim periods presented. All significant intercompany accounts and
transactions have been eliminated. The preparation of financial statements in
conformity with generally accepted accounting principles 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 for interim periods are not necessarily indicative of results
that may be expected for an entire fiscal year. Accordingly, these interim
period consolidated financial statements should be read in conjunction with the
consolidated financial statements contained 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 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 13
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THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
SEPTEMBER 30, 2000
(Unaudited)
2. DEBT
Long-term debt consisted of the following:
September 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 $4,440,558 $4,660,506
Other -- 3,971
---------- ----------
4,440,558 4,664,477
Less current maturities 267,401 272,541
---------- ----------
Long-term portion $4,173,157 $4,391,936
========== ==========
Short-term non-collateralized debt, consisted of a note payable to an
individual for $338,000. The note bears interest of 12%. Principal and interest
are to be paid in one lump sum of $346,334 on December 1, 2000.
In late October 2000 the Company gave a second mortgage on its track
facility to Century Bank. This mortgage was given as security for a letter of
credit issued by Century Bank in favor of the Massachusetts State Racing
Commission. In turn, this letter of credit will be security for the surety
company underwriting the $125,000 racing bond that is a condition for the
renewal each year of the Company's license to conduct greyhound racing. The
purpose of this transaction was to help fund the ballot initiative campaign by
freeing up some $138,000 that had previously served as collateral for the racing
bond surety. The letter of credit transaction is expected to be concluded in
late November 2000.
Page 8 of 13
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THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
SEPTEMBER 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 September 30,
2000 and 1999.
2000 1999
---- ----
Performances 84 88
Simulcast days 92 92
Pari-mutuel handle (thousands)
Live-on track $ 6,676 $ 7,039
Live-simulcast 10,288 10,125
Guest-simulcast 12,429 12,055
------- -------
$29,393 $29,219
======= =======
Total attendance 83,819 95,374
Average per capita on site wagering $ 228 $ 200
The table below illustrates certain key statistics for Wonderland Park, the
Company's greyhound racing operation, for the nine months ended September 30,
2000 and 1999.
2000 1999
---- ----
Performances 270 269
Simulcast days 276 273
Pari-mutuel handle (thousands)
Live-on track $ 18,436 $ 19,747
Live-simulcast 30,940 31,684
Guest-simulcast 38,245 37,574
-------- --------
$ 87,621 $ 89,005
======== ========
Total attendance 247,380 273,421
Average per capita on site wagering $ 229 $ 210
BALLOT INITIATIVE TO BAN GREYHOUND RACING IN MASSACHUSETTS
In August 2000 out-of-state animal rights activists placed on the November
2000 state ballot a binding initiative petition ("ballot initiative") for a law
to ban all wagering on dog racing within Massachusetts effective June 1, 2001.
If the initiative had passed, it would have prohibited both live and simulcast
wagering, thus shutting down the Company's principal business. The initiative
was defeated in the election on November 7, 2000. Furthermore, election
regulations prohibit the placing of any substantially similar measure on the
ballot before November 2006.
Approximately $765,000 was committed to the political campaign to contest
the ballot initiative through November 7, 2000. The political campaign was
conducted jointly with Raynham Greyhound Park, the other dog track in
Massachusetts. These funds were used primarily for the acquisition of media time
and the development and implementation of a media campaign to promote the
industry point of view. This figure is fully accrued in administrative and
operating expenses for the three months and nine months ended September 30,
2000. Also, certain short-term financing arrangements intended to fund working
capital needs related to the ballot initiative were executed or entered into as
discussed above in "Debt" and below in "Liquidity And Capital Resources."
Page 9 of 13
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THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
SEPTEMBER 30, 2000
(UNAUDITED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
OPERATING REVENUE
Total operating revenue was unchanged at $4.6 million in the quarter ended
September 30, 2000 as compared to the same period of 1999. Pari-mutuel
commissions also remained essentially unchanged at $3.7 million for the three
months ended September 30, 2000. Total handle in the third quarter of 2000 was
$29.4 million as compared to $29.2 million in 1999. Guest-simulcast handle
increased by $374,000 or 3.1% from $12.0 million in the third quarter of 1999 to
$12.4 million in the corresponding period in 2000. Live-on track handle
decreased by $363,000 or 5.2% in 2000 as compared to 1999 (from $7.0 million to
$6.7 million), while Live-simulcast handle increased by $163,000 or 1.6%, (from
$10.1 million to $10.3 million). Wonderland had four fewer live racing
performances in third quarter 2000 as compared to 1999, with an average
attendance of 998 persons in 2000 compared to 1,084 persons in 1999.
Total operating revenue was unchanged at $13.6 million in the nine months
ended September 30, 2000 as compared to the same period of 1999. Pari-mutuel
commissions decreased $134,000 or 1.2% for the nine months ended September 30,
2000. Total handle in this period was $87.6 million as compared to $89.0 million
in 1999. Guest-simulcast handle increased by $671,000 or 1.8% from $37.6 million
in 1999 to $38.2 million in the corresponding period in 2000. Live-on track
handle decreased by $1,311,000 or 6.6% in 2000 as compared to 1999, while
Live-simulcast handle decreased by $744,000 or 2.4%. Wonderland had the one more
live racing performance in 2000 as compared to 1999, with an average attendance
of 916 persons in 2000 compared to 1,016 persons in 1999.
Concessions and other operating revenue consists of program sales,
admissions, parking and gift shop sales. It stood at $889,000 for the three
months ended September 30, 2000 increasing by $42,000 from $847,000 for the
three months ended September 30, 1999. Pari-mutuel commissions for the three
months ended September 30, 2000 included $50,000 deposited each into the
Greyhound Capital Improvements Trust Fund and the Greyhound Promotional Trust
Fund.
For the nine months ended September 30, 2000 concessions and other
operating revenue was $2,587,000 increasing by $173,000 from $2,414,000 for the
nine months ended September 30, 1999. Pari-mutuel commission for the nine months
ended September 30, 2000 included $138,000 deposited each into the Greyhound
Capital Improvements Trust Fund and the Greyhound Promotional Trust Fund.
OPERATING EXPENSES
During the three months ended September 30, 2000 operating expenses
increased by approximately $1,003,000 compared to the same period in 1999. Purse
expense for the same period in 1999 was understated by $150,000 because of a
quarterly accrual variance. Administrative and operating expense increased by
$717,000. When deduction is made for $765,000 of spending on the ballot
initiative as well as the 1999 understatement of purse expense, baseline
operating expenses show an increase of $87,000. For the nine months ended
September 30, 2000, cost savings were realized in all operating expense
categories, when the $765,000 of ballot initiative expenses are excluded from
the $422,000 increase in operating expenses.
Page 10 of 13
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THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
SEPTEMBER 30, 2000
(UNAUDITED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
INTEREST EXPENSE
Interest expense decreased by approximately $95,000 for the three months
ended September 30, 2000 and by $60,000 during the corresponding nine month
period. This change is the result of the recording of interest expense as the
result of the September 1999 Stock Repurchase Agreement (see 1999 Form 10-K for
a complete description of this transaction), and reduced overall borrowings.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization were flat in the three months ended September
30, 2000, from the comparable period in 1999, but decreased $99,000 for the
corresponding nine month period. Depreciation and amortization are expensed on a
straight-line basis over the estimated life of the asset.
INCOME TAX PROVISION
The estimated income tax benefit of $37,000 for the third quarter of 2000
results from the net loss for the period. The provision for income taxes for the
nine months ended September 30, 2000 is computed at the statutory rate. Tax
expense for the third quarter of 1999 and the nine months ended September 30,
2000 reflects the difference between book and tax cost basis on the investment
in the Back Bay Restaurant Group that was sold in September 1999 (see "Stock
Purchase Agreement" and "Stock Repurchase Agreement" in the 1999 Form 10-K).
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000, the Company had a working capital deficit of
$1,779,000, and a stockholders' deficiency of $1,085,000.
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 $319,000 at September 30, 2000, compared with
$343,000 at December 31, 1999, a decrease of $24,000.
The Company generated a cash deficit from operations of $38,000 during the
nine months ended September 30, 2000 as compared to $339,000 positive cash flow
during the corresponding period in 1999. Non-cash items included in the
Company's net income in the nine months ended September 30, 2000 consisted of
depreciation and amortization expense of $383,000. Changes in working capital
accounts including restricted cash, accounts payable and other accrued
liabilities (but not including cash) provided $212,000 of cash in the nine
months ended September 30, 2000.
On September 19, 2000 the Company incurred a short-term borrowing in the
amount of $338,000. This amount is to be repaid December 1, 2000, and bears
interest at 12%. The purpose of the borrowing was to fund activities related to
the ballot initiative.
Net cash used in investing activities in 2000 of approximately $100,000
represents investments and additions to the property, plant and equipment.
Financing activities in 2000 include $224,000 of funds used to reduce
outstanding balances on long term debt.
Page 11 of 13
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THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
SEPTEMBER 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 ensured between Foxboro Realty Associates, LLC, and
other named parties ("FRA") and the Company, its subsidiary Foxboro Park, Inc.,
and other named parties, 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, and other named
parties, filed a civil action in Suffolk Superior Court in Massachusetts against
The Westwood Group, Inc., Wonderland Greyhound Park, Inc., and other named
parties, 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, that 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 12 of 13
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THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
SEPTEMBER 30, 2000
(Unaudited)
- --------------------------------------------------------------------------------
(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 November 14, 2000 /s/ Richard P. Dalton
-----------------------------------
Richard P. Dalton President,
Chief Executive Officer and
Director (Principal Financial and
Accounting Officer)
Page 13 of 13