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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission file Number 0-1590
December 31, 2000
THE WESTWOOD GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 190 V.F.W. PARKWAY 04-1983910
(state or other jurisdiction REVERE, MA 02151 (IRS Employer Identifier-
of incorporation or organization) (address of principal executive offices verification No.)
including zip code)
781-284-2600
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
Common Stock-$.01 par value
Indicate by check mark whether the registrant (1) 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 / /
Indicate by check mark if disclosure of delinquent filers pursuant to item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment of this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, computed by reference to the price at which the stock was sold, or
the average bid and asked prices of such stock, as of a specified date within 60
days prior to the date of filing, was:
TOTAL NO. OF SHARES
PRICING OF COMMON STOCK HELD BY AGGREGATE
VOTING STOCK NON-AFFILIATES MARKET VALUE
- ------------ -------------------- ------------
$0.75(1) 239,110(2) $179,333
(1) Reflects the price of shares of Common Stock, par value $0.01 per share,
traded on February 21, 2001 and March 23, 2001. The registrant's Common Stock
was removed from quotation through the NASDAQ system on July 29, 1988. There is
no established trading market for either the Company's Common Stock or Class B
Common Stock.
(2) Excludes shares held by Executive Officers and Directors of the registrant,
without admitting that any such Executive Officer or Director is an affiliate of
the registrant.
The number of shares outstanding of each of the registrant's classes of common
stock, as of March 10, 2001 was as follows:
Common Stock, $.01 par value: 351,210
Class B Common stock, $.01 par value: 912,015
DOCUMENTS INCORPORATED BY REFERENCE
None
Page 1 of 45
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THE WESTWOOD GROUP, INC.
CALENDAR YEAR 2000 10-K ANNUAL REPORT
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
PART I PAGE
ITEM 1. BUSINESS.................................................... 2
ITEM 2. DESCRIPTION OF PROPERTY..................................... 4
ITEM 3. LEGAL PROCEEDINGS........................................... 4
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS....... 4
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS..................................................... 5
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA........................ 5
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................... 7
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................. 14
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.................................... 34
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......... 34
ITEM 11. EXECUTIVE COMPENSATION...................................... 35
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.................................................. 37
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 40
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON
FORM 8-K.................................................... 41
SIGNATURES.................................................. 44
3
PART I
ITEM I. BUSINESS
(A) GENERAL
The Westwood Group, Inc. (the "Company" or "Westwood", which term as used
herein includes its wholly-owned subsidiaries) was incorporated in Delaware in
1984 as the successor to racing and restaurant operations which commenced in
1935 and 1968, respectively. The Company operates Wonderland Greyhound Park,
Inc., a pari-mutuel greyhound racing facility located in Revere, Massachusetts.
Until July, 1997, the Company also operated a pari-mutuel harness racing
facility located in Foxboro, Massachusetts. (see Item 3).
(B) BUSINESS SEGMENTS
For the three (3) years ended December 31, 2000, the Company's business was
principally conducted in the pari-mutuel greyhound racing industry.
(C) DESCRIPTION OF BUSINESS
The Company's wholly-owned subsidiary, Wonderland, owns and operates a
greyhound racetrack, located in the City of Revere, Massachusetts. Revere
adjoins the City of Boston. Wonderland Park is approximately five (5) miles
north of downtown Boston and is served directly by major transportation routes
and the Massachusetts Bay Transportation Authority rail line. The racetrack is
approximately two (2) miles from Boston's Logan International Airport.
In addition to the racetrack, the Company maintains and operates two (2)
full service restaurants, a sports bar and other concession facilities at the
racetrack to serve patrons of Wonderland Park. The racetrack facility can
accommodate 10,000 patrons. The average attendance per day in 2000 was
approximately 894 persons. The total attendance for the year was approximately
313,000 persons. The complex encompasses a total of approximately 35 acres,
including paved and lighted parking which has capacity for approximately 2,300
cars.
Wonderland was originally opened in 1935 and has operated continuously from
the same location since that time. Wonderland is authorized to conduct up to 520
live matinee and evening performances during the 2001 calendar year. In addition
to conducting 350 live racing performances during 2000, Wonderland provided its
patrons with simulcast wagering from twenty-eight (28) various greyhound,
thoroughbred and harness tracks throughout the country. In addition, Wonderland
broadcasts its simulcast signal to ninety-five (95) locations throughout the
country. The Company is continuing its efforts to penetrate new markets into
which it can broadcast its signal and to develop new ways to provide quality
racing entertainment to its on-track patrons. See "Government Regulation" for a
discussion of simulcast legislation.
The Company's annual revenues are mainly derived from the commissions that
it receives from wagers made by patrons during its racing performances and from
admission and concession charges at such performances. Wagers at Wonderland are
placed under the pari-mutuel wagering system, pursuant to which the winning
bettors in each race divide the total amount bet on the race in proportion to
the sums they wagered individually, after deducting certain percentages governed
by state law including amounts which are reserved for The Commonwealth of
Massachusetts, the owners of the winning greyhounds, and the racetrack.
The pari-mutuel commission is regulated by the state regulatory commission
in the jurisdiction of the individual race track. In addition, the net
pari-mutuel commission varies based upon the type of wager. Finally, the Company
generates commission revenue from other tracks for all amounts wagered on its
product at their facility. These commissions vary based upon contractual
arrangements.
The average gross pari-mutuel commission at Wonderland was approximately
24%, 24%, and 23% of each $1.00 wagered on track during 2000, 1999 and 1998,
respectively. Out of this amount approximately 6% is distributed to kennel
operators as purses paid, 5% is paid to The Commonwealth of Massachusetts in the
form of pari-mutuel tax and 0.5% each is deposited into the Capital Improvements
Trust Fund and Promotional Trust Fund.
Page 2 of 45
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The Commonwealth of Massachusetts State Racing Commission, as individuals,
are the trustees and Wonderland is the beneficiary of the Greyhound Capital
Improvements and Promotional Trust Funds which have been established in
accordance with Massachusetts law and are dedicated to reimbursement of capital
improvements and promotional expenses.
During July 1997, the Company's harness racing subsidiary, Foxboro Park,
Inc., was evicted from the Foxboro Raceway (see Item 3 and Note 5 of Notes to
Consolidated Financial Statements). As such, its operating results are reflected
as discontinued operations.
In February 1998 the Company executed an Assignment for the Benefit of
Creditors for Foxboro Park, Inc., Foxboro Harness, Inc. and Foxboro
Thoroughbred, Inc. The assignment was executed to provide a mechanism for the
liquidation of its assets and the distribution of proceeds to its creditors.
(D) COMPETITION AND MARKETING
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.
A Massachusetts state ballot initiative to ban greyhound racing was
narrowly defeated in November 2000. The advertising campaign directed at banning
greyhound racing has negatively affected the image of greyhound racing. For a
description of the ballot initiative, see Item 7, "Ballot Initiative to Ban
Greyhound Racing in Massachusetts."
(E) GOVERNMENT REGULATION
Wonderland operates under an annual license granted after application to,
and public hearings by, the Massachusetts State Racing Commission. Wonderland
received its first license in 1935 and has had its license renewed annually
since that date. The Racing Commission has certain regulatory powers with
respect to the dates and the number of performances granted to its licensees and
various other aspects of racetrack operations. In addition, the Massachusetts
state Racing Commission licenses certain key officials employed by Wonderland.
The failure to receive or retain the annual racing license would have a material
adverse effect on our business.
Alcoholic beverage control regulations require Wonderland to apply to a
state and local authority for a license or permit to sell alcoholic beverages on
the premises. The licenses must be renewed annually and may be revoked or
suspended for cause at any time. Alcoholic beverage control regulations relate
to numerous aspects of the daily operations of the restaurants and bars,
including minimum age of patrons and employees, hours of operation, advertising,
wholesale purchasing, inventory control and handling, and storage and dispensing
of alcoholic beverages. The failure to receive or retain, or a delay in
obtaining, a liquor license could adversely affect the Company's ability to
operate the restaurant facilities. The Company has not encountered any material
problems relating to alcoholic beverage licenses to date.
Page 3 of 45
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Various federal and state labor laws govern the Company's relationship with
its employees, including such matters as minimum wage requirements, overtime and
other working conditions. Significant additional government-imposed increases in
minimum wages, paid leaves of absence, mandated health benefits or increased tax
payment requirements in respect to employees who receive gratuities could,
however, have a material adverse effect on the Company's results of operations.
The current legislation which permits the Company to provide simulcast
broadcasting expires in June 2001. If the current legislation expires and new
legislation is not enacted, it would have a material adverse effect on the
revenues and business of the Company. Over the course of the last several
months, the Company and the owners of other Massachusetts race tracks have been
working to enact legislation which would permit the Company and those other race
tracks to provide simulcast broadcasting of thoroughbred racing on a more
frequent basis. Additionally, the Company and the other track owners are seeking
to amend the current racing statutes to provide for a decrease in the parimutuel
taxes paid to the Commonwealth. The Company and the other owners have proposed
that the funds available from the parimutuel tax decrease be made available for
increases in purses and the Capital Improvement and Promotional Trust Funds as
well as the establishment of a Greyhound Adoption Fund. Additionally, the
proposal provides for account wagering, satellite wagering and other revisions
to the racing statute. The Company cannot assure you that either the simulcast
or the parimutuel tax legislation will be adopted.
(F) EMPLOYEES
At March 10, 2001, the Company employed approximately 350 persons.
ITEM 2. DESCRIPTION OF PROPERTY
The racetrack facilities, which are located in Revere, Massachusetts,
include a one-quarter mile oval sand track, a physical plant consisting of a
climate controlled grandstand and clubhouse and a two-story administrative
center. The Company's Wonderland Park racing facility is mortgaged to secure the
indebtedness owed under a term loan to the Century Bank and Trust Company. (See
Item 1(C), "Description of Business", Item 7, "Liquidity and Capital Resources"
and Note 2 of Notes to Consolidated Financial Statements).
The executive offices are owned by the Company and are located at
Wonderland Greyhound Park in Revere, Massachusetts.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to various legal proceedings that arise in
the ordinary course of its business.
In 1996, litigation ensued between Foxboro Realty Associates, LLC, et al.
and the Company, its subsidiary Foxboro Park, Inc., et al. in Norfolk Superior
Court in Massachusetts, over Foxboro Park's right to occupy Foxboro Raceway. The
Court issued an execution pursuant to which Foxboro Park was evicted from the
racetrack on July 31, 1997. The parties appealed to the Appeals Court on January
27, 1998.
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.
On January 30, 2001, the above-mentioned cases were settled without
monetary damages to either party.
In January 2001, the Company lost at arbitration a claim brought against it
by a former totalisator vendor. The settlement amount was $468,000. This amount
has been recorded in "Other income (expense), net" as of the fourth quarter of
2000 and fully accrued in current liabilities. The arbitrator's decision has
been appealed in United States Federal District Court in Massachusetts.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Page 4 of 45
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a) MARKET PRICE
There is no established trading market for the Company's Common Stock or
the Company's Class B Common Stock.
The Company's Common Stock is traded on the pink sheets. The following
table sets forth for the periods indicated the high and low bid prices.
Such over-the-counter market quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
First Quarter Second Quarter Third Quarter Fourth Quarter
------------- -------------- ------------- --------------
Fiscal year ended
December 31, 2000:
sales price of
Common Stock
High $1.00 $1.01 $1.20 $1.50
Low $1.00 $1.00 $0.50 $0.50
Fiscal year ended
December 31, 1999:
sales price of
Common Stock
High $3.50 No $3.00 $1.125
Low $3.50 Sales $3.00 $1.125
(b) APPROXIMATE NUMBER OF RECORD HOLDERS OF COMMON STOCK AND CLASS B COMMON
STOCK
NUMBER OF
RECORD HOLDERS
AS OF
TITLE OR CLASS MARCH 15, 2001
- -------------- ----------------
Common Stock -- par value $.01 446
Class B Common Stock -- par value $.01 13
(c) DIVIDEND HISTORY
No dividends have been declared by the Company on its Common Stock during
2000, 1999, or 1998. The Company has not paid a cash dividend on its Class B
Common Stock to date. The Company does not intend to pay cash dividends on
either Common Stock or Class B Common Stock in the immediate future.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
The following table summarizes certain financial information derived from
the Consolidated Financial Statements of the Company. The Selected Consolidated
Financial Information as of and for the fiscal years ended December 31, 2000,
1999, 1998, 1997 and 1996 is derived from the Consolidated Financial Statements,
as audited by BDO Seidman, LLP, independent accountants. This information should
be read in conjunction with and is qualified by reference to the Consolidated
Financial Statements of the Company and the notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
included in the Company's prior years' Form 10-K and included herein.
Page 5 of 45
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------
2000 1999 1998 1997 1996
---------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS DATA (Dollars in Thousands Except Per Share and Share Amounts)
Operating Revenue $ 17,671 $ 17,545 $ 18,971 $ 21,046 $ 20,582
---------------------------------------------------------------------------
Expenses:
Operating expenses 16,750 16,361 17,506 18,509 18,161
Depreciation and amortization 523 584 700 529 828
---------------------------------------------------------------------------
Total Expenses 17,273 16,945 18,206 19,038 18,989
---------------------------------------------------------------------------
Income from operations 398 600 765 2,008 1,593
Interest expense, net (461) (499) (398) (387) (755)
Loss of sale of investment -- (1,809) -- -- --
Other income (expense), net (2) (692) 3 525 1,169 1,867
---------------------------------------------------------------------------
Income (loss) before income taxes (755) (1,705) 892 2,790 2,705
Provision for income taxes 94 91 83 0 13
---------------------------------------------------------------------------
Income (loss) from continuing operations before
operations of discontinued harness racing
subsidiary (849) (1,796) 809 2,790 2,692
Loss from operations of discontinued harness
racing subsidiary -- -- -- (2,412) (2,180)
Gain from operations of discontinued harness
racing subsidiary (net of income taxes of
$20,400 in 1998) 353 -- 1,001 2,581 --
---------------------------------------------------------------------------
Net income (loss) $ (496) $ (1,796) $ 1,810 $ 2,959 $ 512
===========================================================================
Basic per share data:
Income (loss) from continuing operations $ (0.67) $ (1.42) $ 0.63 $ 2.22 $ 2.15
Income (loss) from discontinued operations 0.28 0.00 0.81 0.14 (1.74)
---------------------------------------------------------------------------
Net income (loss) $ (0.39) $ (1.42) $ 1.44 $ 2.36 $ 0.41
===========================================================================
Basic weighted average common shares outstanding 1,263,225 1,263,225 1,261,252 1,255,225 1,255,225
===========================================================================
Diluted per share data:
Income from continuing operations $ (0.67) $ (1.42) $ 0.63 $ 2.19 $ 2.15
Income (loss) from discontinued operations 0.28 0.00 0.78 0.13 (1.74)
---------------------------------------------------------------------------
Net income (loss) $ (0.39) $ (1.42) $ 1.41 $ 2.32 $ 0.41
===========================================================================
Diluted weighted average common shares outstanding 1,263,225 1,263,225 1,281,243 1,275,225 1,255,225
===========================================================================
AS OF DECEMBER 31,
---------------------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
CONSOLIDATED BALANCE SHEET DATA
Working Capital (deficiency) $(2,186) $(1,543) $(3,381) $(9,309) $(17,105)
Total Assets 7,780 9,413 13,369 13,581 20,830
Long Term Debt (1) 4,096 4,392 5,551 997 3,435
Stockholders' equity (deficiency) (1,772) (1,259) 466 (1,551) (4,464)
(1) Long term debt at December 31, 2000, 1999 ,1998, 1997, and 1996 excludes
$295, $273, $351, $4,373, and $3,412 respectively, of long term debt
reclassified as current obligations ( see Note 2 of Consolidated Financial
Statements)
(2) The table above reflects the Company's accounting for its investment in
Back Bay Restaurant Group, Inc. ("BBRG") under the equity method. Other income
(expense), net contains income of approximately $157, $525, $337, and $86 from
the Company's investment in BBRG for 1999, 1998, 1997, and 1996, respectively.
Page 6 of 45
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Wonderland conducts live racing seven nights per week, and offers
simulcast wagering afternoons and evenings. The table below illustrates certain
key statistics for Wonderland, for each of the past three years:
2000 1999 1998
------ ------ -----
Performances 350 360 399
Simulcast Days 363 363 363
Pari-mutuel handle (millions):
Live-on track $ 23 $ 25 $ 31
Live-simulcast 40 42 39
Guest-simulcast 50 48 51
---- ---- ----
Total Handle $113 $115 $121
==== ==== ====
Total attendance (thousands) 313 348 407
==== ==== ====
Average per capita on site wagering $233 $210 $201
==== ==== ====
Wonderland has been granted a license to conduct up to 520 racing performances
during 2001.
BALLOT INITIATIVE TO BAN GREYHOUND RACING IN MASSACHUSETTS
In August 2000, animal rights activists were able to obtain the necessary
number of signatures in order to place a binding initiative petition to ban all
wagering on greyhound racing within Massachusetts effective June 1, 2001 on the
November 2000 Massachusetts ballot. If the initiative had passed, it would have
prohibited both live and simulcast wagering at Wonderland, thus, in all
likelihood, shutting down the Company's principal business. The initiative was
defeated in the November 7, 2000 election. Massachusetts Election laws prohibit
the placing of any substantially similar measure on the ballot in any year prior
to November 2006.
The Company spent approximately $881,000 on the campaign to defeat the
ballot initiative through December 31, 2000. The campaign was conducted jointly
with the dog track in Raynham, Massachusetts. These funds were used primarily
for acquisition of media time and the development and implementation of a media
campaign to promote the industry point of view. This amount was fully accrued at
December 31, 2000 and is included in administrative and operating expenses for
the year then ended.
Page 7 of 45
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OPERATING REVENUE
The Company is still experiencing a decline in total attendance and live-on
track handle caused by a variety of factors including a general decline in the
pari-mutuel racing industry, the negative effect of the ballot initiative on
greyhound racing's image, and strong competition for the wagered dollar from
the Massachusetts State Lottery and from the introduction of casino gambling and
slot machines in neighboring states.
2000 VERSUS 1999
Total operating revenue and parimutuel commissions remained relatively
unchanged as compared to 1999. Total handle in 2000 was $113 million as compared
to $115 million in 1999. Live-on track handle decreased by $2 million or 9% in
2000 as compared to 1999, while Live-simulcast handle decreased by $2 million or
4%. Guest-simulcast handle increased by approximately $1.3 million or 3% in 2000
as compared to 1999.
Wonderland had 10 fewer live racing performances in 2000 as compared to
1999, with a 10% decrease in attendance between 2000 and 1999.
Concessions revenue increased slightly to $1.6 million from $1.5 million
2000. Concessions revenue consists of food, beverage, parking, program sales,
and advertising income.
Other operating revenue remained essentially unchanged compared to 1999.
Revenue for 2000 includes $246,000 deposited into the Greyhound Promotional
Trust Fund and $244,000 deposited into the Greyhound Capital Improvements Trust
Fund. These funds are dedicated to reimbursement of promotional expenses and
capital improvements, respectively, incurred by Wonderland. These funds are
maintained through remittance by Wonderland of a percentage of the handle that
is retained by Wonderland after payment to bettors. Reimbursement is
periodically approved by The Commonwealth of Massachusetts to the extent that
the trust fund balance equals or exceeds the reimbursements applied for.
Page 8 of 45
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1999 VERSUS 1998
Total operating revenue decreased to $17.5 million in 1999 or 7.9% as
compared to $19.0 million in 1998. Pari-mutuel commissions decreased by
approximately $1.2 million to $14.2 million in 1999 from $15.4 million in 1998.
Total handle in 1999 was $115 million as compared to $121 million in 1998.
Live-on track handle decreased by $6 million or 19% in 1999 as compared to 1998,
while Live-simulcast handle increased by $3 million or 8%. Guest-simulcast
handle decreased by approximately $3 million or 6% in 1999 as compared to 1998.
Commission revenue was negatively impacted by a decline in live-on track
and Guest simulcast handle. Wonderland had 39 fewer live racing performances in
1999 as compared to 1998, with a 14% decrease in attendance between 1999 and
1998.
Concessions revenue decreased to $1.5 million in 1999 from $1.8 million in
1998. Such decline is largely attributable to the decline in total attendance.
Concessions revenue consists of food, beverage, parking, program sales, and
advertising income.
Other operating revenue remained essentially unchanged during 1999 compared
to 1998.
Revenue for 1999 includes $246,000 deposited into the Greyhound Promotional
Trust Fund and $202,000 deposited into the Greyhound Capital Improvements Trust
Fund.
OPERATING EXPENSES 2000 VERSUS 1999
Total operating expenses were $17.2 million and $16.9 million in 2000 and
1999, respectively. Purse expense declined by 4% because of the decline in
on-track handle. Purse expense is determined by contractual agreement with the
dog owners and statutory requirements of the Commonwealth of Massachusetts based
upon on-track handle.
During 2000, administrative and operating expenses increased by
approximately $626,000 compared to the same period in 1999. When deduction is
made for $881,000 of expenditures on the ballot initiative, baseline
administrative and operating expenses show a decrease of $255,000. (See "Ballot
Initiative to Ban Greyhound Racing in Massachusetts.")
OPERATING EXPENSES 1999 VERSUS 1998
Total operating expenses were $16.9 million and $18.2 million in 1999 and
1998, respectively. Purse expense declined approximately $170,000 in 1999 as
compared to 1998. The decrease in purse expense in 1999 is attributable to a
decline in on-track handle.
The decline in operating expenses of 7.0% was roughly in line with the
decline in operating revenue. This reflects the variable nature of certain
important cost components such as purses and salaries, as well as realized
savings in the marketing, utility, and occupancy cost areas.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization decreased in 2000 as compared to 1999 by
approximately $61,000 and decreased by approximately $116,000 in 1999 from 1998.
Certain assets reached the end of their depreciable lives during 2000, resulting
in the reduction in depreciation in 2000 from 1999. The Company continues to
replace capital items as they become obsolete.
Page 9 of 45
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INTEREST EXPENSE
During 2000, interest expense decreased by approximately $38,000 as
compared to 1999. The decrease is the result of decreasing interest as the
Century Bank note payable matures. During 1999, interest expenses increased by
approximately $101,000 as compared to 1998. The increase arose from inclusion in
expense of accrued interest on a note payable to a subsidiary that was sold (See
below at "EQUITY INCOME IN AND SALE OF INVESTMENT") during 1999.
OTHER INCOME (EXPENSE)
During 2000, other income (expense) decreased by approximately $695,000 as
compared to 1999. This decrease resulted from the accrual of various litigation
settlements in 2000 (See "LEGAL PROCEEDINGS").
EQUITY INCOME IN AND SALE OF INVESTMENT
During 1994, the Company and Back Bay Restaurant Group jointly pursued a series
of transactions, the effect of which resulted in the control of Back Bay
Restaurant Group no longer resting with the Company. Accordingly, the Company's
investment in Back Bay Restaurant Group was accounted for under the equity
method. The equity income in investments represented the Company's proportionate
share of Back Bay Restaurant Group's net earnings. (See Note 9 of Notes to
Consolidated Financial Statements).
On December 31, 1998, the Company owned approximately 673,000, or 19%, of
the outstanding shares of Back Bay Restaurant Group.
On September 24, 1999, the Company entered into a Stock Purchase Agreement
with Charles F. Sarkis, pursuant to which Mr. Sarkis purchased 450,518 shares of
common stock of Back Bay Restaurant Group, Inc., a Delaware corporation, owned
by the Company.
Immediately prior to consummation of the transactions contemplated by the
Stock Purchase Agreement and the Stock Repurchase Agreement, the Company was the
majority stockholder of Back Bay Restaurant Group, which had gone private in
April, 1999.
The aggregate purchase price of the stock was $2,703,108. In exchange for
the delivery of the shares, Mr. Sarkis delivered a promissory note in the amount
of the purchase price and a stock pledge agreement relating to the shares. Under
the terms of the note, $500,927 was paid on November 4, 1999, $500,000 was paid
on December 16, 1999, $351,554 was paid on January 31, 2000, $338,000 was paid
on December 1, 2000, and the remaining outstanding principal balance and all
accrued interest shall be paid in three equal installments of principal on
December 16, 2001, December 16, 2002 and December 16, 2003. The balance
outstanding under the note was $1,168,268 at December 31, 2000.
Simultaneously with the execution of the Stock Purchase Agreement, the
Company entered into a Stock Repurchase Agreement with Back Bay Restaurant Group
pursuant to which Back Bay Restaurant Group repurchased 222,933 shares of common
stock of Back Bay Restaurant Group in exchange for the cancellation of a certain
promissory note, dated May 2, 1994, issued by the Company in favor of Back Bay
Restaurant Group in the principal amount of $970,000 and accrued interest
thereon in the amount of $367,598.
The purchase price of the Back Bay Restaurant Group stock in the above
transaction was $6.00 per share. The per share book value of the Company's
investment in Back Bay Restaurant Group immediately prior to these transactions
was $8.92. The Company incurred a loss of $2.69 per share on the Purchase and
Repurchase transactions, for an aggregate loss of $1,809,000, net of $157,000 of
equity in the earnings of Back Bay Restaurant Group for 1999.
Page 10 of 45
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PROVISION FOR INCOME TAXES
The Company's provision for income taxes is less than the statutory federal
tax rate of 34% during 2000, 1999, and 1998 primarily due to the utilization of
available net operating loss carryforwards for which the related deferred tax
asset has been fully reserved. The provision for taxes of $ 93,605 in 2000,
$90,600 in 1999, and $82,400 in 1998 consists of the Federal alternative minimum
tax and state income taxes.
DISCONTINUED OPERATIONS
Foxboro Park, Inc. ("Foxboro", which term as used herein includes its
wholly-owned subsidiaries) conducted seasonal live harness racing generally two
evenings and two matinees per week, while simulcasting afternoons and evenings
through July 1997 (see Item 3 and Note 3 of Notes to Consolidated Financial
Statements).
The Company recognized a gain on the discontinuance of the Company's
harness racing business of $1.0 million for the year ended December 31, 1998.
Such gain is primarily comprised of the excess of occupancy and other
liabilities over non-recoverable net leasehold improvements and other assets.
In 2000, the Company recognized a gain of $353,000 resulting from the
reduction of liabilities related to discontinued operations.
Page 11 of 45
13
LIQUIDITY AND CAPITAL RESOURCES
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
unrestricted cash and cash equivalents totaled $141,000 at December 31, 2000,
compared with $343,000 at December 31, 1999. The Company generated a cash
deficit from operations of approximately $593,000 in 2000 as compared to a
deficit of $397,000 in 1999. Non-cash items included in the Company's net loss
in 2000 consist of depreciation and amortization expense of approximately
$524,000. Changes in working capital accounts including restricted cash,
accounts payable and other accrued liabilities used approximately $643,000 of
cash in 2000. Net cash used in investing activities in 2000 is comprised of
additions to property, plant and equipment of approximately $88,000. Financing
activities in 2000 include principal payments of debt of $273,000, short term
financing received and retired of $338,000, and proceeds of notes receivable
from officers of $752,000. The Company expects to fund any capital expenditures
for 2001 from internally generated cash. The Company expects cash flow from
operations in 2001 to be sufficient to cover the operating obligations of the
Company.
RACING SUBSIDIARY
In order to meet the requirements for renewal of racing licenses in 2002,
the Company's racing subsidiary must demonstrate that among other criteria, it
is a financially stable entity, capable of disposing of its obligations on an
annual basis. Although management is optimistic that it will be able to
demonstrate financial stability in the application for a 2002 racing license,
the Company cannot assure you 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 2002
racing license, the adverse impact on the Company's financial results and
position would be material.
The current legislation which permits the Company to provide simulcast
broadcasting expires in June 2001. If the current legislation expires and new
legislation is not enacted, it would have a material adverse effect on the
revenues and business of the Company. Over the course of the last several
months, the Company, along with other Massachusetts race tracks, has been
working to have legislation passed which would permit the Company to provide
simulcast broadcasting of thoroughbred racing on a more frequent basis.
Additionally, the Company and the other tracks are seeking to amend the current
racing statutes to provide for a decrease in the parimutuel taxes paid to the
Commonwealth. The Company and the other track owners have proposed that the
funds available from the parimutuel tax decrease be made available for increases
in purses and the Capital Improvement and Promotional Trust Funds as well as the
establishment of a Greyhound Adoption Fund. Additionally, the proposal provides
for account wagering, satellite wagering and other revisions to the racing
statute. The Company cannot assure you that either the simulcast or the
parimutuel tax legislation will be adopted.
OUTLOOK
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 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.
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.
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
"Accounting for Derivatives Instruments and Hedging Activities" ("SFAS No. 133")
which requires companies to recognize all derivatives contracts as either assets
or liabilities on the balance sheet and to measure them at fair value. If
certain conditions are met, a derivative may be specifically designated as a
hedge, the objective of which is to match the timing of gain or loss recognition
on the hedging derivative with the recognition of (i) the changes in the fair
value of the hedged assets or liability or (ii) the earnings effect of the
hedged forecasted transaction. For a derivative not designated as a hedging
instrument, the gain or loss is recognized in income in the period of change.
In June 1999, the Financial Accounting Standards Board issued SFAS No. 137,
which changed the SFAS No. 133 effective date of adoption for all fiscal
quarters of fiscal years beginning after June 15, 1999 to all fiscal quarters of
fiscal years beginning after June 15, 2000.
Historically, the Company has not entered into derivative contracts, either
to hedge existing risks or for speculative purposes. Accordingly, the adoption
of the new standard on January 1, 2001 did not materially affect the Company's
consolidated financial statements.
In March 2000, the FASB issued interpretation No. 44 ("FIN 44"),
"Accounting for Certain Transactions Involving Stock Compensation, an
interpretation of APB Opinion No. 25." FIN 44 clarifies the application of APB
NO. 25 for (a) the definition of employee for purposes of applying APB 25, (b)
the criteria for determining whether a plan qualifies as a noncompensatory plan,
(c) the accounting consequences of various modifications to the previously fixed
stock option or award, and (d) the accounting for an exchange of stock
compensation awards in a business combination. FIN 44 became effective July 1,
2000 but certain conclusions cover specific events that occur after either
December 15, 1998 or January 12, 2000. The Company has adopted FIN 44 in fiscal
2000 and it did not have a material effect on the Company's financial
statements.
Page 12 of 45
14
FORWARD-LOOKING STATEMENTS
Certain statements contained througout this annual report constitute
"forward-looking statements" as that term is defined under the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that may cause
the actual results, performance or achievements of the Company, or industry
results, to be materially different from those contemplated or projected,
forecasted, estimated or budgeted in or expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
general economic and business conditions; industry trends, changes in business
strategy or development plans; availability and quality of management; and
availability, terms and deployment of capital. SPECIAL ATTENTION SHOULD BE PAID
TO SUCH FORWARD-LOOKING STATEMENTS INCLUDING, BUT NOT LIMITED TO, STATEMENTS
RELATING TO (I) THE COMPANY'S ABILITY TO EXECUTE ITS BUSINESS STRATEGY, (II) THE
COMPANY'S ABILITY TO OBTAIN SUFFICIENT RESOURCES TO FINANCE ITS WORKING CAPITAL
AND CAPITAL EXPENDITURE NEEDS AND PROVIDE FOR ITS OBLIGATIONS, AND (III) THE
STATEMENTS CONTAINED IN THIS ITEM 7.
Page 13 of 45
15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS PAGE
REPORT OF INDEPENDENT CERTIFIED ACCOUNTANTS 15
CONSOLIDATED BALANCE SHEETS 16-17
CONSOLIDATED STATEMENTS OF OPERATIONS 18
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' DEFICIENCY 19
CONSOLIDATED STATEMENTS OF CASH FLOWS 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 21
Page 14 of 45
16
REPORT OF INDEPENDENT CERTIFIED ACCOUNTANTS
To the Board of Directors and Stockholders of
The Westwood Group, Inc. and Subsidiaries
Revere, Massachusetts
We have audited the accompanying consolidated balance sheets of The Westwood
Group, Inc. and Subsidiaries as of December 31, 2000 and 1999 and the related
consolidated statements of operations, changes in stockholders' deficiency and
cash flows for each of the three years in the period ended December 31, 2000.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits. We did not audit the financial statement of the investee which
was the basis for recording the Company's equity in earnings of the investment.
The equity in the income for the investor represents 29.0% of net income for the
year ended December 31, 1998. Those statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates to
the amounts included for such investment, is based solely on the report of the
other auditors.
We conducted our audits in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance as to whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors for
1998, the financial statements referred to above present fairly, in all material
respects the consolidated financial position of The Westwood Group, Inc. and
Subsidiaries as of December 31, 2000 and 1999, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2000, in conformity with generally accepted accounting
principles in the United States of America.
BDO SEIDMAN, LLP
Boston, Massachusetts
February 16, 2001
Page 15 of 45
17
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
2000 1999
-----------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 141,310 $ 343,109
Restricted cash 435,656 742,303
Accounts receivable 88,206 40,872
Prepaid expenses and other current assets 108,370 109,990
Notes receivable from officers, short-term portion (Note 11) 431,136 815,902
-----------------------------------
Total current assets 1,204,678 2,052,176
-----------------------------------
Property, plant and equipment (Note 2):
Land 348,066 348,066
Building and building improvements 18,593,939 18,550,474
Machinery and equipment 4,615,432 4,543,040
-----------------------------------
23,557,437 23,441,580
Less accumulated depreciation and amortization (18,443,132) (17,956,017)
-----------------------------------
Net property, plant and equipment 5,114,305 5,485,563
-----------------------------------
Other assets:
Deferred financing costs, less accumulated amortization of
$85,002 and $48,573 at December 31, 2000 and 1999 respectively 97,146 133,575
Other assets, net 48,871 58,841
Notes receivable from officers, long-term portion (Note 11) 1,315,208 1,682,467
-----------------------------------
Total other assets 1,461,225 1,874,883
-----------------------------------
Total assets $ 7,780,208 $ 9,412,622
===================================
The accompanying notes are an integral part of these consolidated financial
statements.
Page 16 of 45
18
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
DECEMBER 31,
2000 1999
----------------------------------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
Accounts payable and other accrued liabilities (Note 10) $ 2,108,881 $ 1,979,476
Discontinued operations (Note 3) 351,000 704,420
Outstanding parimutuel tickets 635,355 638,460
Current maturities of long-term debt (Note 2) 295,225 272,541
----------------------------------
Total current liabilities 3,390,461 3,594,897
Long-term debt, less current maturities (Note 2) 4,096,172 4,391,936
Accrued executive bonus, long-term portion 147,880 435,815
Other long-term liabilities (Notes 4 and 8) 1,917,521 2,249,408
----------------------------------
Total liabilities 9,552,034 10,672,056
----------------------------------
COMMITMENTS AND CONTINGENCIES (NOTE 5)
Stockholders' deficiency: (Note 6):
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 (7,020,652) (6,524,607)
Other comprehensive loss (194,237) (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 (1,771,826) (1,259,434)
----------------------------------
Total liabilities and stockholders' deficiency $ 7,780,208 $ 9,412,622
==================================
The accompanying notes are an integral part of these consolidated
financial statements.
Page 17 of 45
19
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31,
2000 1999 1998
- --------------------------------------------------------------------------------------------------------------------------------
OPERATING REVENUE:
Pari-mutuel commissions $14,215,269 $14,202,476 $15,373,562
Concessions and other 1,565,250 1,511,922 1,758,670
Other 1,890,289 1,830,984 1,839,100
-------------------------------------------------------
Total operating revenue 17,670,808 17,545,382 18,971,332
-------------------------------------------------------
Operating expenses:
Wages, taxes and benefits 6,302,820 6,344,951 7,248,903
Purses 4,108,685 4,301,987 4,470,893
Cost of food and beverage 461,648 464,267 524,296
Administrative and operating 5,876,152 5,250,234 5,262,415
Depreciation and amortization 523,545 584,273 700,106
-------------------------------------------------------
Total operating expenses 17,272,850 16,945,712 18,206,613
-------------------------------------------------------
Income from operations 397,958 599,670 764,719
-------------------------------------------------------
Other income (expense):
Interest expense, net (461,078) (499,264) (398,284)
Equity income in investments (Note 9) -- -- 525,292
Other income (expense), net (Note 5) (692,740) 2,900 --
Loss on sale of investment (Note 9) -- (1,809,108) --
-------------------------------------------------------
Total other income (expense) (1,153,818) (2,305,472) 127,008
-------------------------------------------------------
Income (loss) from operations before
provision for income taxes (755,860) (1,705,802) 891,727
Provision for income taxes 93,605 90,600 82,400
-------------------------------------------------------
Income (loss) from continuing operations (849,465) (1,796,402) 809,327
Gain from operations of discontinued harness racing subsidiary,
(net of income taxes of $20,400 in 1998) (Note 3) 353,420 -- 1,000,961
-------------------------------------------------------
Net income (loss) $ (496,045) $(1,796,402) $ 1,810,288
=======================================================
Basic per share data:
Income (loss) from continuing operations $ (0.67) $ (1.42) $ 0.63
Income from discontinued operations 0.28 -- 0.81
-------------------------------------------------------
Net income (loss) per share $ (0.39) $ (1.42) $ 1.44
=======================================================
Basic weighted average common shares outstanding 1,263,225 1,263,225 1,261,252
=======================================================
Diluted per share data:
Income (loss) from continuing operations $ (0.67) $ (1.42) $ 0.63
Income from discontinued operations net 0.28 -- 0.78
-------------------------------------------------------
Net income (loss) per share $ (0.39) $ (1.42) $ 1.41
=======================================================
Diluted weighted average common shares outstanding 1,263,225 1,263,225 1,263,225
=======================================================
The accompanying notes are an integral part of these consolidated
financial statements.
Page 18 of 45
20
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
CLASS B COMMON ADDITIONAL PAID-IN ACCUMULATED NOTE RECEIVABLE
COMMON STOCK STOCK CAPITAL DEFICIT FROM SHAREHOLDER
-----------------------------------------------------------------------------------------
Balance December 31, 1997 $19,364 $9,126 $13,355,355 $(6,538,493) $ (345,119)
Issuance of common stock 80 -- 23,920 -- --
Note reclassification -- -- -- -- 345,119
Comprehensive income (loss):
Net income -- -- -- 1,810,288 --
Pension liability adjustment -- -- -- -- --
----------------------------------------------------------------------------------------
Balance December 31, 1998 19,444 9,126 13,379,275 (4,728,205) --
Comprehensive income (loss):
Net loss -- -- -- (1,796,402) --
Pension liability adjustment -- -- -- -- --
----------------------------------------------------------------------------------------
Balance December 31, 1999 19,444 9,126 13,379,275 (6,524,607) --
Comprehensive (loss):
Net loss -- -- -- (496,045) --
Pension liability adjustment -- -- -- -- --
----------------------------------------------------------------------------------------
Balance December 31, 2000 $19,444 $9,126 $13,379,275 $(7,020,652) $ --
========================================================================================
TOTAL
OTHER COMPREHENSIVE STOCKHOLDERS'
LOSS TREASURY STOCK DEFICIENCY
-------------------------------------------------------------
Balance December 31, 1997 $ (86,079) $(7,964,782) $(1,550,628)
Issuance of common stock -- -- 24,000
Note reclassification -- -- 345,119
Comprehensive income (loss):
Net income -- -- 1,810,288
Pension liability adjustment (163,325) -- (163,325)
-------------------------------------------------------
Balance December 31, 1998 (249,404) (7,964,782) 465,454
Comprehensive income (loss):
Net loss -- -- (1,796,402)
Pension liability adjustment 71,514 -- 71,514
-------------------------------------------------------
Balance December 31, 1999 (177,890) (7,964,782) (1,259,434)
Comprehensive income (loss):
Net loss -- -- (496,045)
Pension liability adjustment (16,347) -- (16,347)
-------------------------------------------------------
Balance December 31, 2000 $(194,237) $(7,964,782) $(1,771,826)
=======================================================
The accompanying notes are an integral part of these consolidated financial
statements.
Page 19 of 45
21
THE WESTWOOD GROUP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
---------------------------------------------------
2000 1999 1998
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (496,045) $(1,796,402) $ 1,810,288
--------------------------------------------------
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Gain from discontinued operations of harness racing (353,420) -- (1,021,361)
Recovery of bad debts -- -- (77,548)
Depreciation and amortization 523,544 584,273 700,106
Change in liability estimate (Note 12) -- -- (445,161)
Equity in income from investments -- -- (525,292)
Loss on sale of investment -- 1,809,108 --
Minimum pension liability adjustment (16,347) 71,514 (163,325)
Changes in operating assets and liabilities:
Decrease (increase) in restricted cash 306,647 (572,251) 441,985
Decrease (increase) in accounts receivable (47,334) (76,217) 587,049
Decrease (increase) in prepaid expenses and other current assets 1,620 58,974 (7,462)
Decrease in other assets, net 9,970 -- 211,316
(Increase) in accounts payable and other accrued liabilities 129,405 (58,444) (2,058,545)
Increase (decrease) in outstanding parimutuel tickets (3,105) 16,013 --
Increase (decrease) in accrued executive bonus long-term portion (287,935) 2,592 --
Increase (decrease) in other long term liabilities (359,718) (436,106) 1,110,984
--------------------------------------------------
Total adjustments (96,673) 1,399,456 (1,247,254)
--------------------------------------------------
Net cash provided by (used in) operating activities (592,718) (396,946) 563,034
--------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Issuance of promissory notes receivable -- (2,703,108) --
Additions to property, plant and equipment (88,026) (128,129) (694,066)
Proceeds of sale of investment in subsidiary -- 2,703,108 --
--------------------------------------------------
Net cash used in investing activities (88,026) (128,129) (694,066)
--------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments for debt issue costs -- -- (182,098)
Proceeds from short-term debt 338,000 -- --
Repayments of short-term debt (338,000) -- --
Proceeds from notes payable -- -- 5,000,000
Principal payments of debt (273,080) (267,033) (4,814,008)
Decrease (increase) in notes receivable, officers 752,025 946,755 (82,692)
Issuance of common stock -- -- 24,000
--------------------------------------------------
Net cash provided by (used in) financing activities 478,945 679,722 (54,798)
--------------------------------------------------
Net increase (decrease) in cash and cash equivalents (201,799) 154,647 (185,830)
Cash and cash equivalents, beginning of year 343,109 188,462 374,292
--------------------------------------------------
Cash and cash equivalents, end of year $ 141,310 $ 343,109 $ 188,462
==================================================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 458,312 $ 463,396 $ 625,589
==================================================
Income taxes $ 230,379 $ 71,626 $ 84,970
==================================================
Non-cash investing activities:
During 1999 the Company sold an investment in a subsidiary for $4,040,706, of
which $1,337,598 was a cancellation of a note payable and related accrued
interest (See Note 9).
The accompanying notes are an integral part of these consolidated financial
statements.
Page 20 of 45
22
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
The Company operates primarily in one business segment through its
pari-mutuel racing subsidiary. Wonderland Greyhound Park, Inc. is a pari-mutuel
greyhound racing facility located in Revere, Massachusetts. The Company also
operated Foxboro Park, a pari-mutuel harness racing facility located in Foxboro,
Massachusetts through the date of eviction in July, 1997 (see Litigation at Note
5). The Company's Foxboro harness racing operations were discontinued during
1997 and is reported as a discontinued operation in the accompanying
consolidated financial statements (see Discontinued Operations at Note 3).
The Wonderland facility includes a one-quarter mile sand track, a physical
plant consisting of a climate controlled grandstand and clubhouse and a
two-story administrative center. The Company maintains and operates two full
service restaurants, a sports bar and other concession facilities at the
racetrack. The racetrack facility can accommodate 10,000 patrons. The average
attendance per performance in 2000 was approximately 894 persons. The complex
encompasses a total of approximately 35 acres, including paved and lighted
parking providing capacity for approximately 2,300 cars.
Wonderland provides its patrons with a variety of entertainment options
including live racing and full card simulcast wagering.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All material intercompany transactions have
been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
Cash investments with maturities of three months or less at the time of
their purchase are classified as cash equivalents.
RESTRICTED CASH
Restricted cash is related to the operations of Wonderland and includes
amounts held by The Commonwealth of Massachusetts in trust funds (for capital
improvements and advertising/promotion). Wonderland disburses these funds upon
approval by the Commonwealth. Restricted cash also includes a certificate of
deposit held as collateral for the Company's racing bond, as well as funds
dedicated to payment of the Company's liability for outstanding pari-mutuel
tickets. Unclaimed winnings from pari-mutuel wagering are held by Wonderland
until they become payable to the Commonwealth by the operation of unclaimed
property statutes.
Page 21 of 45
23
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and are depreciated using
the straight-line method over the following estimated useful lives:
ASSET CLASSIFICATION ESTIMATED USEFUL LIFE
- -------------------- ---------------------
Buildings and improvements 30 Years
Machinery and equipment 5-10 Years
Gains or losses are recognized upon the disposal of property, plant and
equipment, and the related accumulated depreciation and amortization are
adjusted accordingly. Losses are also recognized on buildings and improvements
in the event of a permanent impairment to their value, as determined by
Statement of Financial Accounting Standards No. 121 ("SFAS No. 121")
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of" issued by the Financial Accounting Standards Board. Maintenance,
repairs and betterments that do not enhance the value of or increase the life of
the assets are charged to operations as incurred.
Depreciation and amortization expense (including amortization of deferred
charges) of approximately $523,000, $584,000, and $700,000 was recorded for the
years ended December 31, 2000, 1999 and 1998, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
As of December 31, 2000 and 1999, the following methods and assumptions
were used to estimate the fair value of each class of financial instruments for
which it is practical to estimate. The carrying amount of cash equivalents
approximates the fair value due to short-term maturity of the cash equivalents.
The fair value of the Company's long-term debt is estimated based on the quoted
market prices for the same or similar issues or on the current rates offered to
the Company for debt of the same remaining maturities.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to credit risk
consist of cash equivalents and accounts receivable. The Company's policy is to
limit the amount of credit exposure to any one financial institution and place
investments with financial institutions evaluated as being creditworthy.
Concentration of credit risk, with respect to accounts receivable, is limited
due to the Company's credit evaluation process. The Company does not require
collateral from its customers. The Company's accounts receivable balance is
comprised principally of amounts due from other race tracks. Historically, the
Company has not incurred any significant credit related losses.
REVENUE RECOGNITION
The Company's annual revenues are mainly derived from the commission that
it receives from wagers made by patrons during its racing performances and from
admission and concession charges at such performances.
INCOME TAXES
The Company uses the liability method of accounting for income taxes. Under
this method, deferred income taxes are provided based on the estimated future
tax effects of differences between financial statement carrying amounts and the
tax basis of existing assets and liabilities. The Company's policy is to record
a valuation allowance against deferred tax assets unless it is more likely than
not that such assets will be realized in future periods. The Company considers
estimated future taxable income or loss and other available evidence when
assessing the need for its deferred tax asset valuation allowance.
INCOME (LOSS) PER COMMON SHARE
The Company follows Statement of Financial Accounting Standards No. 128
("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 are 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 or 1999 since the Company incurred a net
loss. Options excluded from the computation of income (loss) per share were
215,000, 241,334 and 241,334 for the years ended December 31, 2000, 1999 and
1998, respectively.
Page 22 of 45
24
USE OF ESTIMATES
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 periods. Actual results could differ from those estimates.
ADVERTISING
The Company expenses advertising costs as incurred. Advertising expense was
approximately $128,000, $99,000, and $219,000 for the years ended December 31,
2000, 1999, and 1998 respectively.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
"Accounting for Derivatives Instruments and Hedging Activities" ("SFAS No. 133")
which requires companies to recognize all derivatives contracts as either assets
or liabilities in the balance sheet and to measure them at fair value. If
certain conditions are met, a derivative may be specifically designated as a
hedge, the objective of which is to match the timing of gain or loss recognition
on the hedging derivative with the recognition of (i) the changes in the fair
value of the hedged assets or liability or (ii) the earnings effect of the
hedged forecasted transaction. For a derivative not designated as a hedging
instrument, the gain or loss is recognized in income in the period of change.
In June 1999, the Financial Accounting Standards Board issued SFAS No. 137,
which changed the SFAS No. 133 effective date of adoption for all fiscal
quarters of fiscal years beginning after June 15, 1999 to all fiscal quarters of
fiscal years beginning after June 15, 2000.
Historically, the Company has not entered into derivative contracts, either
to hedge existing risks or for speculative purposes. Accordingly, adoption of
the new standard on January 1, 2001 did not materially affect the Company's
consolidated financial statements.
In March 2000, the FASB issued interpretation No. 44 ("FIN 44"),
"Accounting for Certain Transactions Involving Stock Compensation, an
interpretation of APB Opinion No. 25." FIN 44 clarifies the application of APB
NO. 25 for (a) the definition of employee for purposes of applying APB 25, (b)
the criteria for determining whether a plan qualifies as a noncompensatory plan,
(c) the accounting consequences of various modifications to the previously fixed
stock option or award, and (d) the accounting for an exchange of stock
compensation awards in a business combination. FIN 44 became effective July 1,
2000 but certain conclusions cover specific events that occur after either
December 15, 1998 or January 12, 2000. The Company has adopted FIN 44 in fiscal
2000 and it did not have a material effect on the Company's financial
statements.
Page 23 of 45
25
2. LONG-TERM DEBT
At December 31, 2000 and 1999, long-term debt consisted of the following:
2000 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 $4,391,397 $4,660,506
Other -- 3,971
------------------------------
4,391,397 4,664,477
Less:
Current maturities 295,225 272,541
------------------------------
Long-term portion $4,096,172 $4,391,936
==============================
Page 24 of 45
26
The aggregate principal payments required to be made on long-term debt, for
the years subsequent to December 31, 2000 are as follows:
2001 $ 295,225
2002 325,000
2003 3,771,172
----------
$4,391,397
==========
The final payment on the loan is to be made on July 1, 2003 in the amount
of $3,568,204.
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 25 of 45
27
3. DISCONTINUED OPERATIONS
In 1996, litigation ensued between Foxboro Realty Associates, LLC, ET AL.
and the Company, its subsidiary Foxboro Park, Inc., ET AL., over Foxboro's right
to occupy Foxboro Raceway. The Court issued an execution pursuant to which
Foxboro was evicted from the racetrack on July 31, 1997 (see Litigation at Note
5 of Notes to Consolidated Financial Statements). As a result the Company
discontinued its harness racing operations. The gain on the discontinuance of
approximately $1.0 million for the year ended December 31, 1998, is primarily
comprised of the excess of occupancy and other liabilities over non-recoverable
net leasehold improvements and other assets. The 1998 gain also includes
approximately $445,000 for a change in a liability estimate. In the fourth
quarter of 2000, the Company recognized a gain of $353,000 resulting from the
reduction of liabilities related to discontinued operations.
4. OTHER LONG-TERM LIABILITIES
Other long-term liabilities include approximately $417,000 and $677,000 at
December 31, 2000 and 1999, respectively, of fees owed to a law firm primarily
related to the Foxboro litigation (see Litigation at Note 5 of Notes to
Consolidated Financial Statements). Such outstanding amounts are currently
payable at $5,000 per week. Current maturities of $260,000 are included in
accounts payable and accrued liabilities.
Page 26 of 45
28
5. COMMITMENTS AND CONTINGENCIES
PLEDGES OF ASSETS
A certificate of deposit for $139,000 had been pledged to collateralize a
performance bond for Wonderland, which is required annually by the Racing
Commission for all race tracks. The bond is for $125,000. To meet working
capital needs connected with the "Ballot Initiative" the Company gave, in
November 2000, a second mortgage to Century Bank & Trust Company of Medford, MA.
In return, Century Bank issued a letter of credit securing the Company's racing
bond with the Massachusetts State Racing Commission for the 2001 racing license.
In January 2001 this transaction was completed, enabling the certificate of
deposit that had previously been used to secure the racing bond to be used for
the Company's working capital needs.
RACING LICENSE
In order to meet the requirements for renewal of racing licenses,
Wonderland must demonstrate, on an annual basis, that it is a financially viable
entity, capable of disposing of its obligations on a timely basis. The racing
license has been granted for the 2001 calendar year. Although management is
optimistic that it will be able to demonstrate financial stability in their
applications for a year 2002 racing license, there can be no assurance that the
Racing Commission will continue to grant licenses to conduct racing on the
schedules presently maintained at Wonderland. In the event that the Company is
not successful in obtaining a year 2002 racing license, the adverse impact on
the Company would be material.
LEASE COMMITMENT
Totalisator equipment rent (which is primarily based on the handle per
performance) was approximately $292,000, $403,000, and $320,000 in 2000, 1999,
and 1998, respectively. The Company changed totalisator vendors in June 1999.
Future minimum payments are due at amounts calculated as a percentage of the
Company's total handle amounts.
The Company is also liable for numerous operating leases for automobiles
and other equipment which expire through 2001. The future minimum lease
commitments relating to noncancelable operating leases as of December 31, 2000
are immaterial.
In 2000 the Company entered into capital leases for various operating
equipment items.
As of December 31, 2000, future minimum lease payments under capital leases
were as follows:
Year ended December 31,
-----------------------
2001 $13,132
2002 13,132
2003 9,142
2004 6,292
2005 3,146
-------
Total maximum lease payments 44,844
Amount representing interest @ 10.5% (7,182)
-------
Present value of minimum lease payments $37,662
=======
Current portion of lease payments $ 9,832
Long-term portion of lease payments 27,830
-------
$37,662
=======
LITIGATION
The Company is subject to various legal proceedings that arise in the
ordinary course of its business.
In 1996 litigation ensued between Foxboro Realty Associates, LLC, et al.
and the Company, its subsidiary Foxboro Park, Inc., et al. in Norfolk Superior
Court in Massachusetts, over Foxboro Park's right to occupy Foxboro Raceway. The
Court issued an execution pursuant to which Foxboro Park was Evicted from the
racetrack on July 31, 1997. The parties appealed to the Appeals Court on January
27, 1998.
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.
On January 30, 2001, the above-mentioned cases were settled without
monetary damages to either party.
29
In January 2001, the Company lost at arbitration a claim brought against it
by a former totalisator vendor. The settlement amount was $468,000. This amount
has been recorded in "Other income (expense), net" as of the fourth quarter of
2000 and fully accrued in current liabilities. The arbitrator's decision has
been appealed in U.S. Federal District Court in Massachusetts.
The Company believes that the effect that these matters with have on the
consolidated financial statements, if any, will be immaterial.
Page 27 of 45
30
6. COMMON STOCK, STOCK OPTION AND GRANT PLANS
The Company follows SFAS No. 123, "Accounting for Stock-Based
Compensation". SFAS No. 123 allows the Company to account for its stock-based
compensation plans based upon either a fair value method or the intrinsic value
method. The Company has elected to follow the intrinsic value method of
accounting for stock-based compensations plans prescribed under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees".
Under SFAS No. 123, the Company is required to disclose the effects of applying
the fair value method on the net income or loss.
In October 1995, the Board of Directors approved and ratified the granting
of non-qualified stock options. These options were granted to the Directors of
the Company to purchase shares of common stock at an option price equal to the
fair market value of the Company's common stock at the date the options were
granted.
The Company's stock options activity is summarized as follows:
Number Exercise
of Shares Price
--------- --------
Balance, December 31, 1997 and 1998 288,834 $3.00
Granted -- --
Terminated (5,000) 3.00
--------
Balance, December 31, 1999 283,834 3.00
Granted --
Terminated (26,334) 3.00
--------
Exercisable, December 31, 2000 257,500 3.00
========
The Company's total stock options outstanding of 257,500 at December 31,
2000 expire as follows: 165,000 in 2002; 50,000 in 2005; and 42,500 in 2007.
The Company has computed the pro forma disclosures required under SFAS No.
123 for stock options using the Black-Scholes option pricing model prescribed by
SFAS No. 123.
The assumptions used and the weighted average information for the years
ended December 31, 2000 and 1999 are as follows:
Risk-free interest rates 7.5%
Expected dividend yield 2.5%
Expected lives 10 years
Expected volatility 45%
Weighted average fair value of
options on date of grant $3.01
Weighted-average exercise price $3.00
Weighed-average remaining
contractual life of options
outstanding 9 years
Page 28 of 45
31
The effect of applying SFAS No. 123 for the year ended December 31, 2000
and 1999, as follows:
2000 1999 1998
----------------------------------------------------------
Net income (loss) As reported $(496,045) $(1,796,402) $1,810,288
Pro Forma (624,131) $(1,924,488) $1,667,133
Net income (loss) per basic share As reported (0.39) $ (1.42) $ 1.44
Pro Forma (0.49) $ (1.52) $ 1.32
Net income (loss) per diluted share As recorded $ (0.39) $ (1.42) $ 1.42
Pro Forma $ (0.49) $ (1.52) $ 1.30
7. INCOME TAXES
The Company's provision for income taxes for the year ended December 31,
2000 represents state income taxes. The provision for years ended 1999 and 1998
represents alternative minimum federal taxes and state taxes.
The Company's effective tax rates differ from amounts computed by applying
the statutory federal income tax rate to income (loss) before income taxes, as
follows:
For the Year Ended 2000 1999 1998
- ---------------------------------------------------------------------------------
Statutory federal income tax rate (34.0)% (34.0)% 34.0%
(Increase) Decrease in deferred tax 34.0 34.0 (5.1)
Valuation allowance
State income taxes 23.3 0.5 7.6
Alternative minimum tax -- 4.8 2.0
Utilization of carryforward losses -- (29.3)
------ ------ ------
Income tax rate 23.3% 5.3% 9.2%
====== ====== ======
The tax effects of the significant temporary differences which comprise the
deferred tax assets and liabilities are as follows:
December 31,
2000 1999
-------------------------
DEFERRED TAX ASSETS (in thousands)
Net Operating Loss Carryforwards $ 2,308 $ 2,532
Fixed Assets 526 517
Deferred Compensation 47 50
Miscellaneous Operating Reserves 184 384
Deferred Pension 43 58
Capitalized expenses 20 60
-----------------------
Gross deferred assets 3,128 3,601
Less valuation allowance (3,128) (3,601)
-----------------------
Net deferred assets $ -- $ --
=======================
The Company's net operating loss carryforwards begin expiring as of
December 31, 2008. The net operating loss carryforwards, amounting to $5.77
million, expire as follows (in thousands) $1,744 in 2008, $43 in 2010, $437 in
2011, and $3,546 in 2012. The Company has fully reserved for all net deferred
tax assets as future realization of these assets is not presently determinable.
Page 29 of 45
32
8. PENSION PLANS AND RETIREMENT BENEFITS
The Company contributed $44,247, $80,778, $81,399 in 2000, 1999, and 1998,
respectively, to three multi-employer pension plans for employees covered by
collective bargaining agreements. These plans are not administered by the
Company and contributions are determined in accordance with the provisions of
negotiated labor contracts. The Company maintains a defined benefit retirement
plan for certain other union employees and one for non-union employees. The plan
provides a benefit of a flat dollar amount, determined by the collective
bargaining agreement with the union. Company contributions to this plan totaled
$123,170, $153,643, and $142,073 in 2000, 1999, and 1998, respectively. Benefits
under the plan are provided by a group annuity contract purchased from an
insurance carrier. The expense for this plan includes amortization of the cost
of providing plan benefits for past service over a period of approximately 14
years. The Company's funding policy is to contribute amounts annually to the
Plan, subject to the Internal Revenue Service and ERISA minimum required and
maximum allowable funding limitations. The following table sets forth the plan's
funded status at December 31, 2000 and 1999:
2000 1999
---------------------------------
Actuarial present value of benefit obligation: Accumulated
benefit obligation, including vested benefits of $1,264,282
and $1,301,197 for 2000 and 1999, respectively $(1,302,656) $(1,348,085)
=================================
Projected benefit obligation $(1,302,656) $(1,348,085)
Plan assets at fair value 1,000,096 953,249
Unrecognized net losses (194,237) (181,547)
Adjustment for minimum liability 194,237 181,547
---------------------------------
Adjusted accrued pension cost (included in other
long-term liabilities) $ (302,560) $ (394,836)
=================================
Net periodic pension cost included the following components:
For the years ended December 31,
-------------------------------------------------
2000 1999 1998
-------------------------------------------------
Service cost-benefits earned during the period $ -- $ -- $ --
Interest cost on projected benefit obligation 95,619 91,557 102,406
Actual return on plan assets (8,392) (95,989) (47,307)
Net gain (loss) during the year, deferred for later recognition (69,024) 37,361 (18,157)
----------------------------------------------
Net periodic pension cost $ 18,203 $ 32,929 $ 36,942
==============================================
Page 30 of 45
33
Assumptions used in accounting for the above pension information included a
discount rate of 7.25% for the years ended December 31, 2000 and 1999, and an
expected long-term rate of return of 8.5% for all years presented.
The following tables set forth pension obligations and plan assets as of
December 31, 2000 and 1999:
Change in benefit obligation:
2000 1999
--------------------------------
Benefit obligation as of January 1 $1,348,085 $1,348,030
Interest cost 95,619 91,557
Actuarial gain (56,333) (34,152)
Benefits paid (84,715) (57,350)
-------------------------------
Benefit obligation as of December 31 $1,302,656 $1,348,085
===============================
Change in plan assets:
Fair value as of January 1 $ 953,249 $ 760,967
Actual return on plan assets 8,392 95,989
Company contribution 123,170 153,643
Benefits paid (84,715) (57,350)
-------------------------------
Fair value as of December 31 $1,000,096 $ 953,249
===============================
The Company amended the defined benefit plan in connection with the renewal
of a collective bargaining agreement. The amendment provides that as of January
31, 1998, benefit accruals under the plan will be frozen for those active
employees who accrued benefits under the plan before January 31, 1998. The
amendment further provides that on and after January 31, 1998, employees hired
by Wonderland will no longer be eligible to join the plan. The Company will make
contributions on behalf of these employees at a fixed rate to the union 401(k)
plan based upon hours worked. These contributions commenced in 1998 and amounted
to approximately $4,300 in that year.
During 1997 the Company established separate 401(k) plans for union and
nonunion employees, respectively. The plans are administered by an insurance
company. The Company made contributions on behalf of certain union employees
based upon a fixed rate and performances worked. The total of these
contributions was approximately $71,000, $72,000, and $56,000 for the years
ended December 31, 2000, 1999, and 1998, respectively.
The Company also has employment contracts with certain retired employees
which provide for the payment of retirement benefits, the cost of which has been
accrued during their active employment.
Expense for all retirement plans of the Company for the years ended
December 31, 2000, 1999, and 1998 was approximately $278,000, $279,000, and
$436,000, respectively.
9. EQUITY INCOME IN AND SALE OF INVESTMENTS
During 1994, the Company and Back Bay Restaurant Group jointly pursued
a series of transactions, the effect of which resulted in the control of Back
Bay Restaurant Group no longer resting with the Company. Accordingly, the
Company began accounting for its investments in Back Bay Restaurant Group under
the equity method. The equity income in investments represents the Company's
proportionate share of Back Bay Restaurant Group's net earnings.
On December 31, 1998, the Company owed approximately 673,000, or 19%,
of the outstanding shares of Back Bay Restaurant Group.
On September 24, 1999, the Company entered into a Stock Purchase
Agreement which Charles F. Sarkis pursuant to which Mr. Sarkis purchased 450,518
shares of common stock of Back Bay Restaurant Group.
Immediately prior to consummation of the transactions contemplated by
the Stock Purchase Agreement and the Stock Repurchase Agreement, the Company was
the majority stockholder of Back Bay Restaurant Group, which had gone private in
April, 1999.
The aggregate purchase price of the stock was $2,703,108. In exchange
for the delivery of the shares, Mr. Sarkis delivered a promissory note in the
amount of the purchase price and a stock pledge agreement relating to the
shares. Under the terms of the note, Mr. Sarkis paid the Company $500,927 on
November 4, 1999, $500,000 was paid on December 16, 1999, $351,554 was paid on
January 31, 2000, and $338,000 was paid on December 1, 2000 and the remaining
outstanding principal balance and all accrued interest is to be paid in three
equal installments of principal on December 16, 2001, December 16, 2002 and
December 16, 2003. The balance outstanding under the note was $1,168,268 at
December 31, 2000.
Simultaneously with the execution of the Stock Purchase Agreement, the
Company entered into a Stock Repurchase Agreement with Back Bay Restaurant Group
pursuant to which Back Bay Restaurant Group repurchased 222,933 shares of common
stock of Back Bay Restaurant Group in exchange for the cancellation of a certain
promissory note, dated May 2, 1994, issued by the Company in favor of Back Bay
Restaurant Group in the principal amount of $970,000 and accrued interest
thereon in the amount of $376,598.
The purchase price of the Back Bay Restaurant Group stock in the above
transaction was $6.00 per share. The per share book value of the Company's
investment in Back Bay Restaurant Group immediately prior to these transactions
was $8.92. The Company incurred a non-cash loss of $2.69 per share on these
transactions, for an aggregate non-cash loss of $1,809,000 net of $157,000 of
equity in the earnings of Back Bay Restaurant Group for 1999.
Page 31 of 45
34
10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities as of December 31, 2000 and 1999
consisted of the following:
2000 1999
---------- ----------
Other accrued liabilities $1,057,775 $1,072,997
Accounts payable, trade 907,333 759,672
Accrued management bonus 143,773 146,807
---------- ----------
$2,108,881 $1,979,476
========== ==========
11. TRANSACTIONS WITH OFFICERS, EMPLOYEES AND RELATED PARTIES
In May 1994, the Company purchased all restaurant and concession operations
at Wonderland from Back Bay Restaurant Group for a sales price of $770,000.
Included in the term note of $970,000 were additional amounts owed to Back Bay
Restaurant Group for costs incurred under a Cross Indemnification Agreement
amounting to $200,000, and interest expense of approximately $58,000 for the
years ended December 31, 1999 and 1998. This note was cancelled during 1999 in
conjunction with the stock repurchase agreement entered into with Back Bay
Restaurant Group.
Upon the sale of Back Bay Restaurant Group common stock to Charles F.
Sarkis, the Company received a promissory note in the amount of $2,703,108. The
note bears interest of 9.5%. $500,927 was paid on November 4, 1999, $500,000 was
paid on December 16, 1999, $351,554 was paid on January 31, 2000, $338,000 was
paid on December 1, 2000, and the remaining outstanding principal and accrued
interest is payable in three equal annual installments due on December 16, 2001
through December 16, 2003. The balance outstanding under the note was $1,168,268
at December 31, 2000.
At December 31, 2000 and 1999, there are additional loans outstanding to
officers/stockholders including interest, of $578,076 and $742,017,
respectively. The loans have been restructured and are payable over five years
and bear interest at 8.0% per annum. Notes receivable and related interest, in
the amount of $248,751 are due from Charles Sarkis and $329,325 is due from
Richard P. Dalton, the Company's President and Chief Executive Officer. The
$384,434 was recorded as a note receivable at December 31, 1998. The accrued
bonus due to Mr. Sarkis of $241,420 at December 31, 2000 will be used to repay
the outstanding notes receivable balance as it becomes due. The current portion
of these bonus amounts are classified in Accounts payable and other accrued
liabilities at December 31, 2000.
In October 1999, the Company received a letter of credit from the Anglo
Irish Bank securitized by Mr. Charles Sarkis' property located on Boylston
Street in Boston, Massachusetts. The letter of credit was established on October
14, 1999 between Mr. Sarkis and the Anglo Irish Bank. The letter of credit
specifically stated that its purpose was to fund the unclaimed winning tickets
of the Wonderland Greyhound Park racetrack, i.e. the "outs" due to the state.
Subsequently, Mr. Sarkis refinanced the Boylston Street property and loaned the
Company $500,000. The Company designated this $500,000, which was wired into the
Company's Anglo Irish Bank account, to be used for the 1998 and 1999 outstanding
pari-mutuel tickets due to the state. The loan agreement between the Company and
Mr. Sarkis provided that the $500,000 due, at the option of the payee, could be
used to offset any amounts due from Mr. Sarkis, pursuant to the Promissory Note
dated September 24, 1999. Accordingly, the Company offset the first payment due
on the $2,703,108 loan due from Mr. Sarkis against the $500,000 loan payable to
him.
The Company has an accrued bonus due to A. Paul Sarkis, a former employee
and current stockholder, of $50,233 at December 31, 2000. This amount is
classified in Other accrued short-term liabilities at December 31, 2000.
In August 2000 animal rights activists were able to obtain the necessary
number of signatures in order to place on the November 2000 State ballot a
binding initiative petition to ban all wagering on dog racing within
Massachusetts effective June 1, 2001. The Company expended approximately
$881,000 on the campaign to defeat the ballot initiative through December 31,
2000. The campaign to defeat the ballot initiative was conducted jointly with
the dog track in Raynham, Massachusetts through a Ballot Question Committee
established in accordance with the campaign finance laws of Massachusetts. The
Company's President and CEO, Richard P. Dalton, served as the chairman of this
Ballot Question Committee. These funds were used primarily for the aquisition of
media time and the development and implementation of a media campaign to promote
the industry point of view.
On August 16, 2000, the Company entered into a Settlement Agreement and
Mutual Release with a stockholder of more than 5% of the Company's Common Stock
who agreed to cancel certain stock options in the Company held by him, sell his
shares of common stock in the Company to a third party and release the Company
and Charles Sarkis from certain claims in consideration for $140,755 and the
payment of his legal expenses. This amount has been recorded in "Other income
(expense), net" in the accompanying statement of operations.
Page 32 of 45
35
12. CHANGE IN LIABILITY
In prior years, Westwood recorded a liability of approximately $890,000 to
a supplier. During 1998, Westwood eliminated the recorded liability by recording
approximately half as discontinued operations on Foxboro and recording
approximately half against general operating expenses of Wonderland.
13. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table sets forth selected quarterly financial data for 2000
and 1999 (in thousands, except per share amounts):
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
2000
Revenues $4,239 $4,722 $ 4,636 $4,074
Operating income (loss) 787 423 (478) (334)
Net income (loss) 576 268 (670) (670)
Basic and Dilutive net income
(loss) per share 0.46 0.21 (0.53) (0.53)
1999
Revenues $4,265 $4,728 $ 4,565 $3,987
Operating income (loss) 636 27 453 (516)
Net income (loss) 484 (119) (1,754) (407)
Basic and Dilutive net income
(loss) per share 0.38 (0.09) (1.39) (0.32)
Page 33 of 45
36
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
NAME AGE SINCE POSITION
Charles F. Sarkis 61 1978 Chairman of the Board
Richard P. Dalton 53 1978 President, Chief Executive Officer, Director
Paul J. DiMare 58 1987 Director
CHARLES F. SARKIS has served as Chairman of the Board since 1978. He was
Chief Executive Officer of the Company from 1978 to 1992 and President from 1984
to 1992. He has been Chairman of the Board, President and Chief Executive
Officer of Back Bay Restaurant Group, Inc. (restaurant holding company),
formerly a wholly-owned subsidiary of the Company, for more than six years. He
also has been Chief Executive Officer of Sarkis Management Corporation
(restaurant management) for more than six years.
RICHARD P. DALTON has served as President and Chief Executive Officer of
the Company since 1993. He served as Executive Vice President of the Company
from 1988 to 1992 and Chief Operating Officer from 1989 until 1992. He was Vice
President from 1984 until 1987; Chief Financial Officer from 1988 to 1989;
Treasurer from 1974 to 1989; Assistant Secretary since 1984; and General Manager
from 1981 to 1983.
PAUL J. DIMARE has been President of DiMare Homestead, Inc. (agricultural
processing and packaging) and DiMare Management Corp. (agricultural management
and marketing) for over six years. He also is a director of First National Bank
of Homestead, Florida.
All of the directors and executive officers are citizens of the United
States. There are no arrangements or understandings between any of the directors
or executive officers of the Company and any other person pursuant to which such
director or executive officer was or will be selected as a director or officer
of the Company. Each of the executive officers of the Company holds office at
the pleasure of the Board of Directors.
Page 34 of 45
37
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE - The following table shows the cash and other
remuneration paid or accrued, in respect of services rendered to the Company and
its wholly-owned subsidiaries for the three years ended December 31, 2000, to
each of the Company's executive officers whose aggregate remuneration exceeded
$100,000.
Awards-
Compensation Payouts
- ------------------------------------------------------------------------------------------------------------------------------
NAME AND OTHER RESTRICTED
PRINCIPAL ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION AWARDS(S) SARS PAYOUTS COMPENSATION
- -------- ---- ------ ------ ------------ --------- ---- --------- ------------
Charles F. Sarkis
Chairman of the Board 2000 $250,000 -- -- -- -- -- --
1999 $250,000 -- -- -- -- -- --
1998 $200,000 $159,500 -- -- -- -- --
Richard P. Dalton
President and Chief
Executive Officer 2000 $205,000 -- -- -- -- -- --
1999 $205,000 -- -- -- -- -- --
1998 $205,000 -- -- -- -- -- --
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION-During the year
ended December 31, 2000, Messrs. Charles F. Sarkis and Richard P. Dalton served
as executive officers of the Company and as members of the Board of Directors of
the Company which performs the functions of a compensation committee.
REMUNERATION OF DIRECTORS -The Company pays to each nonemployee Director $2,000
per Board meeting attended with an additional fee of $1,000 for each Committee
meeting attended.
COMPENSATION PLAN - The Company has adopted an executive compensation plan. The
compensation plan is designed to provide an environment and opportunity for key
executives to be rewarded for individual achievement as well as for attaining
overall corporate goals. The compensation plan includes provisions for a base
salary, annual incentive and long term incentives. Base salary is determined
annually and is based upon the level and amount of responsibility in the context
of comparable companies. Additional annual incentives are to be distributed to
key executives from a bonus pool. A performance bonus equal to 10% of income
before tax will be allocated to the key executives at the discretion of the
Compensation Committee and Board of Directors. Additionally, a discretionary
bonus of up to 5% of income before income taxes will be available to reward an
employee's individual performance. Based on the Company's financial results, no
bonuses were granted during the 2000 fiscal year. Finally, long term incentives
will consist of stock options granted to key executives at the discretion of the
Compensation Committee and Board of Directors. In addition, a special
transaction bonus is available in the event the Chairman initiates and/or
negotiates an extraordinary transaction to enhance shareholder value, including
a merger, sale, acquisition or joint venture. The transaction bonus is equal to
2% of the value of any such transaction.
STOCK OPTION AGREEMENTS - During 1997, the Company issued to those certain
executives 47,500 options to purchase the Company's common stock at an exercise
price of $3.00 per share. During 1995, the Company awarded to Directors and
Former Directors of the Company, non-qualified stock options to purchase 241,334
shares of the Company's common stock at an exercise price of $3.00 per share.
All such options expire ten (10) years from the date of grant.
Page 35 of 45
38
Year-End Option Values
The table below shows the total number of unexercised options held at
December 31, 2000. There are no unexercised in-the-money options(1) at the
fiscal year-end. No options were exercised in the year-ended December 31, 2000.
Number of Value of
Securities Unexercised
Underlying In-the-money
Unexercised Options
Options at Fiscal Year End (#) At Year End ($) (1)
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
Charles F. Sarkis 95,000 -- -- --
Richard P. Dalton 40,000 -- -- --
(1) In-the-Money Options are those where the fair market value of the underlying
securities exceeds the exercise price of the option.
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39
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF COMMON STOCK
The following table sets forth certain information, as of March 10, 2001,
with respect to the beneficial ownership (1) of the Company's Common Stock by
each Director, by all Directors and officers of the Company as a group and by
persons known by the Company to own beneficially more than five percent (5%) of
the outstanding Common Stock. Unless otherwise noted, such stockholders have
full voting and investment power with respect to the shares listed as
beneficially owned by them.
NAME AND ADDRESS OF AMOUNT AND NATURE OF BENEFICIAL
BENEFICIAL OWNER OWNERSHIP PERCENT OF CLASS
- -----------------------------------------------------------------------------------------
Directors and Officers:
Richard P. Dalton 52,350(2) 13.38%
The Westwood Group, Inc.
190 VFW Parkway
Revere, MA 02151
Paul J. DiMare 143,300(3) 37.63%
P.O. Box 900460
Homestead, FL 33090
Charles F. Sarkis 906,866(5) 72.49%
The Westwood Group, Inc. --------- -----
190 VFW Parkway
Revere, MA 02151
All Directors and
Officers as a
group (three (3) persons) 1,102,516(6) 82.84%
========= =====
Holders of more than 5%, not included above
DiMare Homestead, Inc. 92,500(7) 27.00%
Michael S. Fawcett 25,600(8) 7.00%
Joseph J. O'Donnell 47,669(9) 12.90%
Pauline F. Evans 26,122(10) 7.60%
Patricia F. Harris 19,850(11) 5.80%
A. Paul Sarkis 48,609(4) 12.40%
(1) As used in this table, "beneficial ownership" means the sole or shared
power to vote, or to direct the voting of, a security, or the sole or
shared investment power with respect to a security (i.e., the power to
dispose of or to direct the disposition of, a security). For purposes of
this table a person is deemed to have "beneficial ownership" of any
security that such person has the right to acquire within 60 days,
including by conversion of such stockholder's shares of Class B Common
Stock into shares of Common Stock or by exercise of options. For purposes
of this table, any shares of Common Stock not outstanding which are subject
to such a right, or conversion privileges, are deemed to be outstanding for
the purposes of computing the percentage of outstanding shares owned by
such person or group, but are not deemed to be outstanding for the purposes
of computing such percentage owned by any other person or group.
(2) Includes presently exercisable options to purchase 40,000 shares.
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40
(3) Includes 92,500 shares held of record by DiMare Homestead Inc. over which
Mr. DiMare has voting and investment power, and presently exercisable
options and grants to purchase 40,000 shares.
(4) Includes presently exercisable options to purchase 32,500 shares and 16,109
shares issuable upon conversion of the shares of Class B Common Stock
beneficially owned by Mr. Sarkis. Mr. Sarkis' address is 599 East Sixth
St., Apt. 1, South Boston, MA 02127. Mr. Sarkis is a former Director and
officer of the Company.
(5) Consists of 804,616 shares issuable upon conversion of the shares of Class
B Common Stock beneficially owned by Mr. Sarkis, 7,250 shares of Common
Stock, as well as presently exercisable options to purchase 95,000 shares.
See footnote (2) to the table below showing beneficial ownership of Class B
Common Stock.
(6) Includes presently exercisable options to purchase 175,000 shares and
804,616 shares issuable upon conversion of shares of Class B Common Stock,
held by all directors and officers as a group.
(7) See Footnote (3)
(8) Includes presently exercisable options to purchase 25,000 shares. Mr.
Fawcett's address is c/o Dorman & Fawcett, P.O. Box 214, Hamilton,
Massachusetts 01936.
(9) Includes presently exercisable options to purchase 25,000 shares. Mr.
O'Donnell's address is c/o Boston Concessions Group, Inc., 111 6th Street,
Cambridge, Massachusetts 02141.
(10) Ms. Evans' address is 3600 Galt Ocean Drive, Fort Lauderdale, Florida
33308.
(11) Ms. Harris' address is 11 Royal Road, Brookline, Massachusetts 02146.
Page 38 of 45
41
(b) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF CLASS B COMMON STOCK
The following table sets forth certain information, as of February 28,
2001, with respect to the beneficial ownership of the Company's Class B Common
Stock by each Director, and named Executive Officer and by all Directors and
officers of the Company as a group and by persons known by the Company to own
beneficially more than 5% of the outstanding Class B Common Stock. Unless
otherwise noted, such stockholders have full voting power and investment power
with respect to the shares listed as beneficially owned by them.
SHARES OF CLASS B
COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) PERCENT OF CLASS
- --------------------------------------------------------------------------------------
Charles F. Sarkis 820,725(2) 90.00%
Back Bay Restaurant Group, Inc.
284 Newbury St
Boston, MA 02116
Richard P. Dalton 0 0%
The Westwood Group, Inc.
190 VFW Parkway
Revere, MA 02151
Paul J. Dimare 0 0%
P.O. Box 900460
Homestead, FL 33090
--------------------------------------
All Directors and Officers as a Group 820,725(2) 90.00%
(three persons) ======= =====
(1) As used in this table, "beneficial ownership" means the sole or shared
power to vote, or to direct the voting of, a security, or the sole or
shared investment power with respect to a security (i.e., the power to
dispose of, or to direct the disposition of, a security). In addition, for
purposes of this table a person is deemed to have "beneficial ownership" of
any security that such person has the right to acquire within 60 days.
(2) Includes shares held by Sarkis Management Corporation, which is
wholly-owned by Mr. Sarkis, and shares held by one of Mr. Sarkis' adult
children who has granted Mr. Sarkis a proxy to vote her shares. Does not
include 80,545 shares held by Mr. Sarkis' five (5) other adult children;
Mr. Sarkis disclaims beneficial ownership of such shares.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Based solely on the review of Forms 3, 4 and 5 and all amendments thereto
furnished to the Company with respect to its most recent fiscal year, it appears
that each Director, officer and 10% beneficial owner of Common Stock of the
Company complied with Section 16(a) of the Securities Exchange Act of 1934, with
the exception of former 10% beneficial owner of common stock, Jon M. Baker, who
failed to file on a timely basis a Form 4 for the month of August 2000, and
Charles Sarkis, who failed to file on a timely basis a Form 4 for the month of
December 2000.
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42
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In May 1994, the Company purchased all restaurant and concession operations
at Wonderland from Back Bay Restaurant Group for a sales price of $770,000.
Included in the term note of $970,000 were additional amounts owed to Back Bay
Restaurant Group for costs incurred under a Cross Indemnification Agreement
amounting to $200,000, and interest expense of approximately $58,000 for the
years ended December 31, 1999 and 1998. This note was cancelled during 1999 in
conjunction with the stock repurchase agreement entered into with Back Bay
Restaurant Group.
Upon the sale of Back Bay Restaurant Group common stock to Charles F.
Sarkis, the Company received a promissory note in the amount of $2,703,108. The
note bears interest of 9.5%. $500,927 was paid on November 4, 1999, $500,000 was
paid on December 16, 1999, $351,554 was paid on January 31, 2000, $338,000 was
paid on December 1, 2000, and the remaining outstanding principal and accrued
interest is payable in three equal annual installments due on December 16, 2001
through December 16, 2003. The balance outstanding under the note was $1,168,268
at December 31, 2000.
At December 31, 2000 and 1999, there are additional loans outstanding to
officers/stockholders including interest, of $578,076 and $742,017,
respectively. The loans have been restructured and are payable over five years
and bear interest at 8.0% per annum. Notes receivable and related interest, in
the amount of $248,751 are due from Charles Sarkis and $329,325 is due from
Richard P. Dalton, the Company's President and Chief Executive Officer. The
$384,434 was recorded as a note receivable at December 31, 1998. The accrued
bonus due to Mr. Sarkis of $241,420 at December 31, 2000 will be used to repay
the outstanding notes receivable balance as it becomes due. The current portion
of these bonus amounts are classified in Accounts payable and other accrued
liabilities at December 31, 2000.
In October 1999, the Company received a letter of credit from the Anglo
Irish Bank securitized by Mr. Charles Sarkis' property located on Boylston
Street in Boston, Massachusetts. The letter of credit was established on October
14, 1999 between Mr. Sarkis and the Anglo Irish Bank. The letter of credit
specifically stated that its purpose was to fund the unclaimed winning tickets
of the Wonderland Greyhound Park racetrack, i.e. the "outs" due to the state.
Subsequently, Mr. Sarkis refinanced the Boylston Street property and loaned the
Company $500,000. The Company designated this $500,000, which was wired into the
Company's Anglo Irish Bank account, to be used for the 1998 and 1999 outstanding
pari-mutuel tickets due to the state. The loan agreement between the Company and
Mr. Sarkis provided that the $500,000 due, at the option of the payee, could be
used to offset any amounts due from Mr. Sarkis, pursuant to the Promissory Note
dated September 24, 1999. Accordingly, the Company offset the first payment due
on the $2,703,108 loan due from Mr. Sarkis against the $500,000 loan payable to
him.
The Company has an accrued bonus due to A. Paul Sarkis, a former employee
and current stockholder, of $50,233 at December 31, 2000. This amount is
classified in "Other accrued short-term liabilities" at December 31, 2000.
In August 2000 animal rights activists were able to obtain the necessary
number of signatures in order to place on the November 2000 State ballot a
binding initiative petition to ban all wagering on dog racing within
Massachusetts effective June 1, 2001. The Company expended approximately
$881,000 on the campaign to defeat the ballot initiative through December 31,
2000. The campaign to defeat the ballot initiative was conducted jointly with
the dog track in Raynham, Massachusetts through a Ballot Question Committee
established in accordance with the campaign finance laws of Massachusetts. The
Company's President and CEO, Richard P. Dalton, served as the chairman of this
Ballot Question Committee. These funds were used primarily for the aquisition of
media time and the development and implementation of a media campaign to promote
the industry point of view.
On August 16, 2000, the Company entered into a Settlement Agreement and
Mutual Release with a stockholder of more than 5% of the Company's Common Stock
who agreed to cancel certain stock options in the Company held by him, sell his
shares of common stock in the Company to a third party and release the Company
and Charles Sarkis from certain claims in consideration for $140,755 and the
payment of his legal expenses. This amount has been recorded in "Other income
(expense), net" in the accompanying statement of operations.
Prior to 1995, the Company engaged a firm to assist management in the
planning and execution of a financial and operational reorganization of the
Company. As compensation for its services, the Company agreed to a success fee,
in addition to the basic fee, to grant options to acquire common stock totaling
6% of the total of the Company's capital stock at $3 per share (the "success
fee" option). The success fee also stipulated that Michael S. Fawcott, a
principal of such firm, who was a director of the Company at the time would be
required to return options to purchase 25,000 shares of the Company's common
stock if the success fee option is exercised. The Company has not granted the
success fee option to date.
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43
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
Included under Item 8 in Part II of this report:
Reports of Independent Accountants
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Changes in Stockholders' Deficiency
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
All financial statement schedules are omitted because they are not
applicable or the required information is shown in the consolidated
financial statements or notes thereto.
(3) Exhibits
3.1 Certificate of Incorporation of the Company.(1)
3.2 Amendment, dated May 15, 1987, to the Certificate of Incorporation of
the Company.(3)
3.21 Amendment, dated November 2, 1995, to the Certificate of
Incorporation of the Company.(7)
3.3 Bylaws of the Company.(1)
4.1 Indenture, dated as of August 15, 1987, between the Company and State
Street Bank and Trust Company, as trustee, relating to the Company's
Subordinated Notes.(2).
4.2 Supplemental Indenture, dated as of March 16, 1988, between the
Company and State Street Bank and Trust company, as trustee.(3)
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44
10.1 Totalisator Service Agreement, dated August 30, 1991, in connection
with an exclusive service contract, together with an amendment and
extension agreement dated April 2, 1992.(4)
10.2 Contract dated November 20, 1992, in connection with services to be
provided to the Company by an entity of which a former Director of
the Company is a principal, together with an amendment by letter
agreement, dated February 2, 1993.(4)
10.3 Collective Bargaining Agreement between the Company and United Food
and Commercial Workers' Union, Local 1445 AFL-CIO, CLC, dated June 1,
1993.(5)
10.4 Collective Bargaining Agreement between the Company and Local
25-Teamsters, effective January 1, 1993.(5)
10.5 Settlement of Litigation Agreement, dated October 12, 1994, between
Foxboro Park, Inc. and the trustee of the Creditor Trust and
Settlement Agreement, in connection with the restructuring of the
Creditor Trust and Settlement Agreement with related promissory
notes, dated July 7, 1994.(6)
10.6 Collective Bargaining Agreement between Wonderland Greyhound Park,
Inc. and Local 22 - Laborers' International Union, dated July 1,
1993.(6)
10.7 Collective Bargaining Agreement Extension between RFSC, Inc. and
Local 26 - Hotel and Restaurant Workers, effective January 1,
1994.(6)
10.8 Settlement Agreement between Wonderland Greyhound Park, Inc. and
Local 254 Service Employees International Union, dated September 19,
1994, in connection with a successor collective bargaining
agreement.(6)
10.9 Amendment to Term Note between certain subsidiaries of the Company
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45
and BBRG, dated March 17, 1995.(6)
10.10 Assignment for the Benefit of Creditors and Sharing Agreement
(Foxboro Harness).(8)
10.11 Assignment for the Benefit of Creditors and Sharing Agreement
(Foxboro Thoroughbred).(8)
10.12 Assignment for the Benefit of Creditors and Sharing Agreement
(Foxboro Park).(8)
10.13 Form of Executive Non-Qualified Stock Option Agreement.(8)
10.14 Form of Employee Non-Qualified Stock Option Agreement.(8)
10.15 Third Amendment to Term Note between certain subsidiaries of the
Company and BBRG, dated January 5, 1998.(8)
10.16 Voting and Shares Exchange Agreement, dated as of March 31, 1999.(9)
10.17 Stock Purchase Agreement, dated as of September 24, 1999, between
the Company and Charles Sarkis.(10)
10.18 Stock Repurchase Agreement dated as of September 24, 1999, between
the Company and BBRG.(10)
10.19 Term Loan Agreement between Wonderland Greyhound Park, Inc. and
Century Bank and Trust Company, dated June 30, 1998. (11)
21 Subsidiaries of the Company (filed herewith).
23.1 Consent of Independent Auditors (filed herewith).
- ---------------------
(1) Filed with the Company's Annual Report on Form 10-K for 1984 and
incorporated herein by reference.
(2) Filed with the Company's Registration Statement on Form S-2 No.
33-15344 filed on June 25, 1987 and incorporated herein by
reference.(3)
(3) Filed with the Company's Annual Report on Form 10-K for 1987 and
incorporated herein by reference.
(4) Filed with the Company's Annual Report on Form 10-K for 1992 and
incorporated herein by reference.
(5) Filed with the Company's Annual Report on Form 10-K for 1993 and
incorporated herein by reference.
(6) Filed with the Company's Annual Report on Form 10-K for 1994 and
incorporated herein by reference.
(7) Filed with the Company's Annual Report on Form 10-K for 1995 and
Page 43 of 45
46
incorporated herein by reference.
(8) Filed with the Company's Annual Report on Form 10-K for 1997 and
incorporated herein by reference.
(9) Filed with the Company's Annual Report on Form 10-K for 1998 and
incorporated herein by reference.
(10) Filed as an exhibit with Form 8-K, as filed by the Company on
October 12, 1999 and incorporated herein by reference.
(11) Filed with the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998 and incorporated herein by reference.
(b) REPORTS ON 8-K.
None
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) 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/ Charles F. Sarkis
----------------------------
Charles F. Sarkis
Chairman of the Board
Date: March 30, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Charles F. Sarkis
Date: March 30, 2001 -------------------------------------------
Charles F. Sarkis
Chairman of the Board
/s/ Richard P. Dalton
Date: March 30, 2001 -------------------------------------------
Richard P. Dalton
President, Chief Executive
Officer and Director
(Principal financial and accounting officer)
/s/ Paul J. DiMare
Date: March 30, 2001 --------------------------------------------
Paul J. DiMare
Director
Page 44 of 45