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, 2001
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 NOVEMBER 10, 2001, 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.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 150,441 $ 141,310
Restricted cash 249,177 435,656
Accounts receivable 43,027 88,206
Prepaid expenses and other current assets 239,765 108,370
Notes receivable from officers short - term portion 332,913 431,136
------------ ------------
Total current assets 1,015,323 1,204,678
------------ ------------
PROPERTY PLANT AND EQUIPMENT:
Land 348,066 348,066
Building and building improvements 18,630,832 18,593,939
Machinery and equipment 4,682,884 4,615,432
------------ ------------
23,661,782 23,557,437
Less accumulated depreciation and amortization (18,773,469) (18,443,132)
------------ ------------
Net property, plant and equipment 4,888,313 5,114,305
------------ ------------
OTHER ASSETS:
Notes receivable from officers long term portion 1,048,730 1,315,208
Deferred financing costs, less accumulated amortization of
$112,325 and $85,002 at September 30, 2001 and December 31,
2000, respectively 69,823 97,146
Other assets, net 53,952 48,871
------------ ------------
Total other assets 1,172,505 1,461,225
------------ ------------
Total assets $ 7,076,141 $ 7,780,208
============ ============
The accompanying notes are an integral part of these consolidated condensed
financial statements.
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
September 30, December 31,
2001 2000
------------- ------------
CURRENT LIABILITIES: (Unaudited)
Accounts payable and other accrued liabilities $ 2,151,979 $ 2,108,881
Discontinued operations 351,000 351,000
Outstanding parimutuel tickets 543,229 635,355
Current maturities of long-term debt 316,938 295,225
------------ ------------
Total current liabilities 3,363,146 3,390,461
LONG-TERM DEBT LESS CURRENT MATURITIES 3,856,220 4,096,172
ACCRUED EXECUTIVE BONUS LONG - TERM PORTION 77,725 147,880
OTHER LONG - TERM LIABILITIES 638,454 1,917,521
------------ ------------
Total liabilities 7,935,545 9,552,034
------------ ------------
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 (6,108,230) (7,020,652)
Other comprehensive loss (194,237) (194,237)
Cost of 1,593,199 common and 600 Class B
common shares in treasury (7,964,782) (7,964,782)
------------ ------------
Total stockholders' deficiency (859,404) (1,771,826)
------------ ------------
Total liabilities and stockholders' deficiency $ 7,076,141 $ 7,780,208
============ ============
The accompanying notes are an integral part of these consolidated condensed
financial statements
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited) For the Three Months Ended
September 30, September 30,
2001 2000
------------- -------------
OPERATING REVENUES:
Pari-mutuel commissions $ 3,395,105 $ 3,746,456
Other 790,463 816,469
Admissions 57,129 73,002
----------- -----------
Total operating revenue 4,242,697 4,635,927
----------- -----------
OPERATING EXPENSES:
Wages, taxes and benefits 1,624,707 1,601,395
Purses 941,735 1,138,391
Cost of food and beverage 158,062 118,751
Administrative and operating 1,251,491 2,124,087
Depreciation and amortization 100,894 132,133
----------- -----------
Total operating expenses 4,076,889 5,114,757
----------- -----------
Income (loss) from operations 165,808 (478,830)
----------- -----------
OTHER INCOME (EXPENSE):
Interest expense, net (92,290) (110,085)
Litigation settlement expense -- (118,837)
Settlement of estimated liability 1,058,007 --
----------- -----------
Total other income (expense) 965,717 (228,922)
----------- -----------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES 1,131,525 (707,752)
PROVISION FOR INCOME TAXES 19,100 36,879
----------- -----------
NET INCOME (LOSS) $ 1,112,425 $ (670,873)
----------- -----------
BASIC PER SHARE DATA:
NET INCOME (LOSS) PER SHARE $ 0.88 ($ 0.53)
=========== ===========
BASIC WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: 1,263,225 1,263,225
=========== ===========
DILUTED PER SHARE DATA:
NET INCOME (LOSS) PER SHARE $ 0.87 $ (0.53)
=========== ===========
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: 1,281,111 1,263,225
=========== ===========
The accompanying notes are an integral part of these consolidated condensed
financial statements.
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited) FOR THE NINE MONTHS ENDED
September 30, September 30,
2001 2000
------------- -------------
OPERATING REVENUES:
Pari-mutuel commissions $ 10,467,895 $ 11,009,784
Other 2,274,090 2,388,762
Admissions 161,916 198,676
------------ ------------
Total operating revenue 12,903,901 13,597,222
------------ ------------
OPERATING EXPENSES:
Wages, taxes and benefits 4,868,669 4,738,754
Purses 2,978,350 3,245,852
Cost of food and beverage 382,160 312,828
Administrative and operating 4,018,414 4,184,181
Depreciation and amortization 357,660 382,727
------------ ------------
Total operating expenses 12,605,253 12,864,342
Income from operations 298,648 732,880
------------ ------------
OTHER INCOME (EXPENSE):
Interest expense, net (384,675) (344,339)
Other expense, net (7,458) (118,837)
Settlement of estimated liability 1,058,007 --
------------ ------------
Total other income (expense) 665,874 (463,176)
------------ ------------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES 964,522 269,704
PROVISION FOR INCOME TAX 52,100 95,898
------------ ------------
NET INCOME $ 912,422 $ 173,806
============ ============
BASIC PER SHARE DATA
NET INCOME $ 0.72 $ 0.14
============ ============
BASIC AND WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 1,263,225 1,263,225
============ ============
DILUTED PER SHARE DATA
NET INCOME PER SHARE $ 0.71 $ 0.14
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 1,281,111 1,281,111
============ ============
The accompanying notes are an integral part of these consolidated condensed
financial statements.
THE WESTWOOD GROUP AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
For the Nine Months Ended
September 30, September 30,
2001 2000
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 912,422 $ 173,806
---------- ---------
Adjustments to reconcile net income to
net cash provided (used) by operating activities:
Depreciation and amortization 357,660 382,727
Change in accounting estimate (1,058,007) --
Changes in operating assets and liabilities:
Decrease in restricted cash 186,479 245,992
Decrease (increase) in accounts receivable 45,179 (27,931)
Increase in prepaid expenses and other current assets (131,395) (124,005)
Decrease (increase) in other assets, net (5,081) 7,403
(Decrease) increase in accounts payable and other
accrued liabilities 43,098 (553,242)
(Decrease) in outstanding parimutuel tickets (92,126) (63,702)
(Decrease) in accrued executive bonus long-term portion (70,155) --
(Decrease) in other long-term liabilities (221,060) (440,311)
---------- ---------
Total adjustments (945,408) (211,980)
---------- ---------
Net cash provided (used) by operating activities (32,986) (38,174)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (104,345) (99,712)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of debt (218,239) (223,919)
Decrease in notes receivable, officers 364,701 361,089
Short term financing -- 338,000
---------- ---------
Net cash provided (used) by financing activities 146,462 114,081
---------- ---------
Net increase (decrease) in cash and cash equivalents 9,131 (23,805)
Cash and cash equivalents, beginning of period 141,310 343,109
---------- ---------
Cash and cash equivalents, end of period $ 150,441 $ 319,304
========== =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 322,561 $ 369,403
========== =========
Income taxes $ 42,265 $ 122,411
========== =========
The accompanying notes are an integral part of these consolidated condensed
financial statements.
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
SEPTEMBER 30, 2001
(Unaudited)
1. BASIS OF PRESENTATION
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 of operations for the interim periods presented. 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 on 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 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, 2000.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated condensed financial statements as of
September 30, 2001 and December 31, 2000 and for the three and nine month
periods ended September 30, 2001 and 2000 include the accounts of the Company
and its wholly-owned subsidiaries. All material inter-company accounts and
transactions have been eliminated in consolidation.
INCOME (LOSS) 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 (loss) per share of common
stock is computed by dividing the net income (loss) 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 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.
2. DEBT
Long - term debt consisted of the following:
September 30, December 31,
2001 2000
----------------------------------
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. $4,173,158 $4,391,397
Less current maturities 316,938 295,225
---------- ----------
Long - term portion $3,856,220 $4,096,172
=========== ==========
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
SEPTEMBER 30, 2001
(Unaudited)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Cash shortages as of November 15, 2001 raise doubts as to the ability
of the Company to continue as a going concern without substantial changes in its
financial structure or line of business. These shortages have arisen because of
declines in revenue - See below under "Operating Revenue."
The current legislation which permits the Company to provide simulcast
broadcasting is still under extension as of November 15, 2001. New legislation
was passed by both the Massachusetts House and Senate and awaits signature by
the Governor of Massachusetts as of November 15, 2001. This legislation
provides for a decrease in the parimutuel taxes paid to the Commonwealth and a
redirection of these funds for increases in thoroughbred, standard bred, and
greyhound purses as well as the establishment of a Greyhound Adoption Council.
Additionally, the proposal provides for account wagering and provides for
Wonderland Greyhound Park to conduct additional thoroughbred simulcasting.
The Company cannot be assured that the Governor will concur with the
Legislature nor can the Company ensure enactment of the legislation in its
current form.
The Company is trying to adapt and survive in a dramatically changing
environment, one in which the Company and the racing industry nationally have
experienced significant declines in on-site attendance and dollars wagered. The
Company continues to be negatively impacted by a strong Massachusetts state
lottery, two Indian Casinos in Connecticut and slot machines at the Lincoln,
Rhode Island, greyhound track. The casinos and track are in close proximity to
the Massachusetts border and therefore rely upon their ability to attract
Massachusetts patrons. Wonderland is at a competitive disadvantage when compared
with other New England greyhound racetracks in that it can offer only a very
limited amount of simulcasting from thoroughbred racetracks. Management has
worked diligently over the last several years in attempting to convince the
Governor and the Legislature of The Commonwealth of Massachusetts of the need to
allow the Commonwealth's commercial racetracks to offer their patrons expanded
gaming opportunities. The Massachusetts state legislature took no action on
gaming in the year 2000 and no gaming legislation is anticipated in 2001. The
Company cannot predict whether such legislation will ever be enacted or enacted
on favorable terms.
Management has taken steps to bring the Company's expense structure in
line with the reduced revenue levels being achieved. The Company has begun to
pursue several opportunities to lease parcels of its real property surrounding
the Wonderland racing facility to third parties for non-racing activities. The
Company believes that such leasing arrangements, if achieved, will provide the
Company with a new viable source of revenue which will enhance its overall
revenue levels. Management has also begun to implement a cost reduction
program, pursuant to which the Company has identified certain operational and
administrative costs that it believes can be reduced, and has taken steps to
implement such reductions. These reductions had a noticeable favorable effect
on operating expenses during the third quarter of 2001. The Company will
continue to use its commercially reasonable efforts to reduce its costs to meet
forecasted revenues.
There can be no assurance that the Company will succeed in achieving
these revenue enhancing and cost reduction objectives, and its failure to do so
may have a material adverse effect on its business, prospects, financial
condition, and operating results and the Company's ability to continue as a
going concern.
Management continues to examine the full range of strategic
alternatives available in an effort to maximize shareholder value, including the
benefits and disadvantages of remaining a public company, particularly in light
of the lack of a meaningful trading market for its common stock.
The table below illustrates certain key statistics for Wonderland Park,
the Company's greyhound racing operation, for the three months ended September
30, 2001 and 2000.
2001 2000
---- ----
Performances 88 84
Simulcast days 92 92
Pari-mutuel handle (thousands)
Live-on track $ 5,610 $ 7,070
Live-simulcast 8,724 10,466
Guest-simulcast 11,703 12,616
------- -------
$26,037 $30,152
======= =======
Total attendance 76,762 83,819
Average per capita on site wagering $226 $228
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
SEPTEMBER 30, 2001
(Unaudited)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
OPERATING REVENUE
Total operating revenue declined by $393,000 to $4.24 million in the
quarter ended September 30, 2001 as compared to the quarter ended September 30,
2000. Parimutuel commissions declined by 9% from $3.75 million to $3.40 million
during the same period. Total handle in the third quarter of 2001 was
approximately $26.0 million as compared to $30.2 million in 2000. Live-on track
handle decreased 20.7% or about $1.46 million from $7.1 million to $5.6 million
in 2001, with an average daily attendance of approximately 872 persons in 2001
compared to 998 persons in 2000. Live-simulcast handle decreased by $1.7 million
or 16.6% in the third quarter of 2001 compared to the third quarter of 2000.
Guest-simulcast handle decreased by $913,000 or 7.2% from 2000.
Net admissions revenue decreased by 21.7%. Most of this decrease is
associated with decreased handle, and the remainder with increased promotional
discounts. Other operating revenue consists of food and beverage, program sales,
lottery, parking and gift shop sales. It stood at approximately $790,000 for the
three months ended September 30, 2001 decreasing by approximately $26,000 from
approximately $816,000 for the three months ended September 30, 2000. Parimutuel
commissions for the three months ended September 30, 2001 included approximately
$57,000 deposited each into the Greyhound Capital Improvements Trust Fund and
the Greyhound Promotional Trust Fund. During same period of 2000 this figure
amounted to $67,000.
OPERATING EXPENSES
Operating expenses of approximately $4.1 million for the three months
ended September 30, 2001 decreased by approximately $1.0 million from
approximately $5.1 million for the three months ended September 30, 2000. This
decrease includes $635,000 of expenses related to the 2000 ballot initiative to
end greyhound racing that was defeated in the fall of 2000. The remaining
decrease is the result of the decline in purse expense related to handle
decline, as well as cost saving measures implemented by the Company during the
quarter ended September 30, 2001.
INTEREST EXPENSE
Interest expense decreased by approximately $18,000 for the three
months ended September 30, 2001 from $110,000 in the three months ended
September 30, 2000 to approximately $92,000 in the three months ended September
30, 2001.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization decreased approximately $31,000 to
$101,000 in the three months ended September 30, 2001, from approximately
$132,000 in the comparable period in 2000.
INCOME TAX PROVISION
The Company's provision for income taxes was less than the statutory
federal tax rate of 34% during the first three months of 2001 and 2000 primarily
due to the utilization of available net operating loss carryforwards in 2001 and
the net loss in 2000. The provision for taxes of $19,100 and the tax benefit of
$36,879 in the first three months of 2001 and 2000, respectively, represents
state taxes.
OTHER INCOME
The Company realized $1,058,000 in income from a change in accounting
estimate related to a long-term liability.
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
SEPTEMBER 30, 2001
(Unaudited)
The table below illustrates certain key statistics for Wonderland Park, the
Company's greyhound racing operation, for the nine months ended September 30,
2001 and 2000.
2001 2000
---- ----
Performances 259 270
Simulcast days 272 276
Pari-mutuel handle (thousands)
Live-on track $ 16,427 $ 18,414
Live-simulcast 26,360 31,118
Guest-simulcast 37,467 38,328
-------- --------
$ 80,254 $ 87,860
======== ========
Total attendance 224,203 247,380
Average per capita on site wagering $ 240 $ 229
OPERATING REVENUE
Total operating revenue declined by $693,000 to $12.9 million in the
nine months ended September 30, 2001 as compared to the nine months ended
September 30, 2000. Parimutuel commissions declined by 4.9% from $11.0 million
to $10.5 million during the same period. Total handle in the first nine months
of 2001 was approximately $80.3 million as compared to $87.9 million in 2000.
Live-on track handle decreased 10.8% or about $2.0 million from $18.4 million in
2000 to $16.4 million in 2001, with an average attendance of approximately 866
persons in 2001 compared to 916 persons in 2000. Live-simulcast handle decreased
by $4.8 million or 15.3% in the first nine months of 2001. Guest-simulcast
handle decreased by $861,000 or 2.2% from 2000.
Net admissions revenue decreased by 18.5%. Most of this decrease is
associated with decreased handle, and the remainder with increased promotional
discounts. Other operating revenue consists of food and beverage, program sales,
lottery, parking and gift shop sales. It stood at approximately $2.3 million for
the nine months ended September 30, 2001 decreasing by approximately $115,000
from approximately $2.4 million for the nine months ended September 30, 2000.
Parimutuel commission for the nine months ended September 30, 2001 included
approximately $176,000 deposited each into the Greyhound Capital Improvements
Trust Fund and the Greyhound Promotional Trust Fund. This figure amounted to
approximately $188,000 for the same period in 2000.
OPERATING EXPENSES
Operating expenses of approximately $12.6 million for the nine months
ended September 30, 2001 decreased by approximately $259,000 from approximately
$12.9 million for the nine months ended September 30, 2000. This decrease
includes $635,000 of expenses related to the 2000 ballot initiative to end
greyhound racing that was defeated in the fall of 2000. The remaining baseline
increase of $376,000 is mainly the result of increased utility costs. This
increase was offset by certain cost savings realized in the third quarter of
2001.
INTEREST EXPENSE
Interest expense increased by approximately $41,000 for the nine months
ended September 30, 2001 from $344,000 in the nine months ended September 30,
2000 to approximately $385,000 in the nine months ended September 30, 2001. The
increase is the result of interest accrued on the litigations settlement with a
totalisator vendor that is described in "Legal Proceedings" in the Company's
Annual Report on Form 10-K for the year ended December 31, 2000.
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
SEPTEMBER 30, 2001
(Unaudited)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
DEPRECIATION AND AMORTIZATION
Depreciation and amortization decreased approximately $25,000 to
$358,000 in the nine months ended September 30, 2001, from $383,000 in the
comparable period in 2000.
INCOME TAX PROVISION
The Company's provision for income taxes was less than the statutory
federal tax rate of 34% during the first nine months of 2001 and 2000 primarily
due to the utilization of available net operating loss carryforwards in 2000 and
the net loss in 2001. The provision for taxes of $52,000 and $96,000 in the
first nine months of 2001 and 2000, respectively, represents estimated state
taxes.
OTHER INCOME
The company realized $1,058,000 in income from a change in accounting
estimate related to a long-term liability.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2001, the Company had a working capital deficit of
approximately $2.3 million, and a stockholders' deficit of approximately
$859,000. 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 for maintenance and enhancement of the
racing facility at Wonderland, and for debt service requirements. The Company's
cash and cash equivalents totaled approximately $150,000 at September 30, 2001,
compared with $141,000 at December 31, 2000. The Company generated cash flows
from operations of approximately $332,000 during the first nine months of 2001
as compared to a deficit of $38,000 during the corresponding period in 2000.
Non-cash items included in the Company's net income in the first nine months of
2001 consist of depreciation and amortization expense of $358,000. Changes in
working capital accounts including restricted cash, accounts payable and other
accrued liabilities created approximately $271,000 of cash in the first nine
months of 2001.
In August 2001 a payment was made to the Company on a note receivable
from officers of $300,000. By the terms of the note agreement this payment had
been scheduled for December, 2001.
Net cash used in investing activities in 2001 of approximately $104,000
represents additions to property, plant and equipment. Financing activities in
2001 include $218,000 of funds used to reduce outstanding balances on long term
debt.
Cash shortages as of November 15, 2001 raise doubts as to the ability of
the Company to continue as a going concern without substantial changes in its
financial structure or line of business. See above under "Operations."
IMPACT OF INFLATION AND CHANGING PRICES
Certain of the Company's operating expenses, such as wages and
benefits, equipment repair and replacement, and inventory and marketing costs,
increase with general inflation. In order for the Company to cope with
inflation, it must, to the extent permitted by competition and patron
acceptance, pass increased cost on by periodically increasing prices. The
Company is limited in its ability to offset the effects of inflation by
increasing its percentage of handle because this percentage is governed by
statute.
FORWARD LOOKING INFORMATION
The matters discussed in this report contain forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from those discussed herein. Such statements are made
pursuant to the safe harbor provisions of the "Private Securities Litigation
Reform Act of 1995." The preceding discussion of the financial condition and
results of operations of the Company should be read in conjunction with the
interim condensed consolidated financial statements and the notes thereto
included in Part I, Item 1 of this Quarterly Report on Form 10-Q and the
consolidated financial statements and notes thereto contained in the Company's
Annual Report on Form 10-K for the year ended December 31, 2000.
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
SEPTEMBER 30, 2001
(Unaudited)
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
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) Exhibits None
(b) Reports on Form 8-K None
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
SEPTEMBER 30, 2001
(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.
/s/ Richard P. Dalton
Date November 14, 2001 -------------------------
Richard P. Dalton President,
Chief Executive Officer and
Director (Principal Financial
and Accounting Officer)