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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
-------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to ___________________
Commission File Number: 0-1590
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THE WESTWOOD GROUP, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-1983910
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
190 V.F.W. Parkway, Revere, Massachusetts 02151
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
781-284-2600
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(Registrant's telephone number, including area code)
Not Applicable
--------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (l) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- -------
As of August 14, 2002, 351,210 shares of the Registrant's common stock, par
value $.01 per share and 912,015 shares of the Registrant's Class B common
stock, par value $.01 per share, were outstanding.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30 December 31,
2002 2001
------------- ------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 72,680 $ 12,355
Restricted cash 510,425 345,294
Escrowed Cash 165,990 180,608
Accounts receivable 17,430 42,825
Prepaid expenses and other current assets 333,208 136,730
Notes receivable from officers short term portion 525,442 468,939
------------ ------------
Total current assets 1,625,175 1,186,751
------------ ------------
Property, plant and equipment:
Land 348,066 348,066
Building and building improvements 18,900,466 18,663,406
Machinery and equipment 4,965,654 4,697,751
------------ ------------
24,214,186 23,709,223
Less accumulated depreciation and amortization (19,213,413) (18,942,335)
------------ ------------
Net property, plant and equipment 5,000,773 4,766,888
------------ ------------
Other assets:
Deferred financing costs, less accumulated amortization of $139,647 and
$121,432 June 30, 2002 and December 31, 2001
respectively 42,501 60,716
Other assets, net 13,098 51,171
Notes receivable from officers long term portion 681,621 847,593
------------ ------------
Total other assets 737,220 959,480
------------ ------------
Total assets $ 7,363,168 $ 6,913,119
============ ============
The accompanying notes are an integral part of these consolidated
financial statements.
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30 December 31,
2002 2001
------------- ------------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities
Accounts payable and other accrued liabilities $ 1,239,171 $ 1,452,237
Outstanding parimutuel tickets 519,219 611,107
Settlement liability, current 406,066 --
Purse liability 300,657 --
Note Payable 165,792 --
Current maturities of long-term debt 340,249 324,525
Short-term advance from officer/stockholder 309,468 --
------------ ------------
Total current liabilities 3,280,622 2,387,869
------------ ------------
Long-term debt, less current maturities 3,598,038 3,772,186
Accrued executive bonus, long-term portion 7,583 54,352
Other long-term liabilities 801,654 1,104,145
------------ ------------
Total liabilities 7,687,897 7,318,552
------------ ------------
COMMITMENTS AND CONTINGENCIES
Stockholders' Deficiency:
Common stock, $.01 par value; authorized
3,000,000 shares, 1,944,409 shares issued 19,444 19,444
Class B Common stock, $.01 par value; authorized
1,000,000 shares; 912,615 shares issued 9,126 9,126
Additional paid-in capital 13,379,275 13,379,275
Accumulated deficit (5,512,941) (5,593,645)
Other comprehensive loss (254,851) (254,851)
Cost of 1,593,199 common and 600 Class B
common shares in treasury (7,964,782) (7,964,782)
------------ ------------
Total stockholders' deficiency (324,729) (405,433)
------------ ------------
Total liabilities and stockholders' deficiency $ 7,363,168 $ 6,913,119
============ ============
The accompanying notes are an integral part of these consolidated
financial statements.
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended For the Three Months Ended
June 30 June 30
(Unaudited) 2002 2001
- ------------ ---------- ----------
OPERATING REVENUES:
Pari-mutuel commissions $3,392,600 $3,666,121
Admissions 46,245 59,113
Other 770,124 819,845
---------- ----------
Total operating revenue 4,208,969 4,545,079
---------- ----------
Operating expenses:
Wages, taxes and benefits 1,502,137 1,644,452
Purses 893,996 1,079,761
Cost of food and beverage 171,992 121,596
Administrative and Operating 1,372,575 1,528,597
Depreciation and amortization 155,386 128,383
---------- ----------
Total operating expenses 4,096,086 4,502,789
---------- ----------
Income from operations 112,883 42,290
---------- ----------
Other expense:
Interest expense, net (92,911) (184,027)
Other expense, net (1,890) 2
---------- ----------
Total other expense (94,801) (184,025)
---------- ----------
Income (Loss) from operations before 18,082 (141,735)
provision for income taxes
Provision for income tax 10,303 33,000
---------- ----------
Net income (Loss) $ 7,779 $ (174,735)
========== ==========
Basic and diluted per share data:
Net income (Loss) $ 0.01 $ (0.14)
========== ==========
Basic and diluted weighted average
common shares outstanding 1,263,225 1,263,225
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended
June 30 June 30
(Unaudited) 2002 2001
- ------------ ---------- ----------
OPERATING REVENUES:
Pari-mutuel commissions $6,718,299 $7,072,790
Admissions 88,654 104,787
Other 1,432,798 1,483,627
---------- ----------
Total operating revenue 8,239,751 8,661,204
---------- ----------
Operating expenses:
Wages, taxes and benefits 3,057,149 3,243,960
Purses 1,756,092 2,036,615
Cost of food and beverage 282,115 224,098
Administrative & Operating 2,488,401 2,766,923
Depreciation and amortization 289,293 256,766
---------- ----------
Total operating expenses 7,873,050 8,528,362
---------- ----------
---------- ----------
Income from operations 366,701 132,842
---------- ----------
Other expense:
Interest expense, net (227,208) (292,385)
Other expense, net (31,344) (7,458)
---------- ----------
Total other expense (258,552) (299,843)
---------- ----------
Income (Loss) from operations before 108,149 (167,001)
provision for income taxes
Provision for income tax 27,445 33,000
---------- ----------
Net income (Loss) $ 80,704 $ (200,001)
========== ==========
Basic and diluted per share data:
Net income (Loss) $ 0.06 $ (0.16)
========== ==========
Basic and diluted weighted average
common shares outstanding 1,263,225 1,263,225
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
THE WESTWOOD GROUP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Six Months Ended
June 30
---------------------------
2002 2001
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 80,704 ($200,001)
--------- ---------
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 289,293 256,766
Changes in operating assets and liabilities:
(Increase) decrease in restricted cash (165,131) 55,901
Decrease in escrowed cash 14,618 --
Decrease in accounts receivable 25,395 43,276
(Increase) decrease in prepaid expenses and other current
assets 52,210 (229,476)
Decrease (increase) in other assets, net 38,073 (13,915)
Increase in accounts payable and other accrued
liabilities 229,560 232,191
Increase (decrease) in outstanding parimutuel tickets (91,888) 140,434
(Decrease) in accrued executive bonus long term
portion (46,769) (47,714)
(Decrease) in other long term liabilities (28,926) (168,573)
--------- ---------
Total adjustments 316,435 268,890
--------- ---------
Net cash provided by operating activities 397,139 68,889
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (504,963) (45,508)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of debt (241,320) (168,272)
Decrease in notes receivable, officers 109,469 16,260
Short-term advances 300,000 --
--------- ---------
Net cash provided by (used in) financing activities 168,149 (152,012)
--------- ---------
Net increase (decrease) in cash and cash equivalents 60,325 (128,631)
Cash and cash equivalents, beginning of period 12,355 141,310
--------- ---------
Cash and cash equivalents, end of period $ 72,680 $ 12,679
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 202,661 $ 254,661
========= =========
Income taxes $ 25,000 $ 61,300
========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
JUNE 30, 2002
1. BASIS OF PRESENTATION
INTERIM RESULTS
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments, consisting only of
normal recurring adjustments, considered necessary for a fair statement of
results of operations for the interim periods presented. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities on the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. Operating results for interim periods are not necessarily
indicative of results that may be expected for an entire fiscal year.
Accordingly, these interim consolidated financial statements should be read in
conjunction with the consolidated financial statements contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 2001.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated condensed financial statements as of June
30, 2002 and December 31, 2001 and for the three and six month periods ended
June 30, 2002 and 2001 include the accounts of the Company and its wholly-owned
subsidiaries. All material inter-company accounts and transactions have been
eliminated in consolidation.
INCOME PER COMMON SHARE
The Company follows Statement of Financial Accounting Standards (SFAS)
No. 128, Earnings per Share, issued by the Financial Accounting Standards Board.
Under SFAS No. 128, the basic and diluted net income and loss per share of
common stock is computed by dividing the net income (loss) by the weighted
average number of common shares outstanding during the period, including
potentially dilutive stock options. The Company's stock options did not have a
dilutive effect in 2002 since the option prices per share were deemed to be
equal to or higher than the estimated average per share market price of the
Company's common stock. Stock options were not considered in 2001 since the
company had a net loss and their effect would be antidilutive.
The amount of potentially dilutive common shares issuable under the
Company's stock options, if any, are determined based on the treasury stock
method.
2. DEBT
Long-term debt consisted of the following:
June 30, 2002 December 31, 2001
-------------- -----------------
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. $3,938,287 $4,096,711
Less current maturities 340,249 324,525
---------- ----------
Long-term portion $3,598,038 $3,772,186
========== ==========
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. The Company is currently
negotiating refinancing of this loan.
In the event that a new credit facility is not entered into, the final
payment on the loan is to be made July 1, 2003 in the amount of $3,568,204.
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
JUNE 30, 2002
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
On November 17, 2001, the "Act Providing for Improvements to the Horse
and Greyhound Racing Industry in the Commonwealth and the Regulation Thereof"
was signed into law by the acting governor of Massachusetts. Under this new
statute, the Company and the other area racetracks are permitted to continue to
provide simulcast broadcasting of thoroughbred racing to their patrons until
December 2005. The new legislation also provides that the Company is required to
pay premiums for the right to simulcast out-of-state thoroughbred and harness
racing ranging from 3% to 7% for the benefit of the purse accounts at the
Commonwealth's two commercial horse racetracks. In addition to the extension and
expansion of simulcast broadcasting, this statute provides for a "purse pool",
which will be funded by taxes, fees and assessments with a minimum of $400,000
being credited to the purse accounts of each racetrack with any remaining
portion being apportioned among the racetracks pursuant to a formula to be
devised by the State Racing Commission. All unclaimed simulcast wagers collected
at each racetrack are to be deposited with the Massachusetts State Racing
Commission for payment to the purse accounts of the individual racetracks
responsible for such unclaimed wagers. Finally, the new statute authorizes
account wagering at each of the individual racetracks and establishes a nine
member special commission to study the feasibility of an off-track betting
program in Massachusetts.
Despite the enactment of this legislation and the potential for
increases in cash flow from such legislation, management does not believe that
this new legislation in its current state will materially benefit the Company's
overall racing operations.
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. Furthermore, Wonderland is at a
competitive disadvantage when compared with other New England greyhound
racetracks in that the simulcast legislation only permits it to offer a very
limited amount of simulcasting from thoroughbred racetracks due to its proximity
to the Suffolk Downs thoroughbred racetrack.
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 2002. Gaming legislation was
defeated in the Massachusetts House of Representatives in May 2002. 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.
Wonderland currently conducts live racing seven nights per week.
Wonderland also offers simulcast wagering afternoons and evenings throughout the
year.
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
JUNE 30, 2002
The table below illustrates certain key statistics for Wonderland Park,
the Company's greyhound racing operation, for the three months ended June 30,
2002 and 2001.
QUARTER ENDED JUNE 30,
2002 2001
-------- -------
Performances 91 91
Simulcast days 91 91
Pari-mutuel handle (thousands)
Live-on track $ 4,757 $ 5,833
Live-simulcast 8,500 8,597
Guest-simulcast 12,728 13,282
------- -------
$25,985 $27,712
======= ========
Total attendance 70,297 78,607
Average per capita on site wagering $249 $243
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
JUNE 30, 2002
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
OPERATING REVENUE
Total operating revenue declined by $336,000 or 7% to $4.21 million in
the quarter ended June 30, 2002 as compared to the quarter ended June 30, 2001.
Parimutuel commissions declined by $280,000 or 7% from $3.67 million to $3.39
million during the same period. Total handle in the second quarter of 2002 was
approximately $25.9 million as compared to $27.7 million in 2001. Live-on track
handle decreased 18% or about $1.07 million from $5.8 million to $4.8 million in
2001, with an average daily attendance of approximately 772 persons in 2002
compared to 864 persons in 2001. Live-simulcast handle decreased by $97,000 or
1% in the second quarter of 2002 compared to the second quarter of 2001.
Guest-simulcast handle decreased by $554,000 or 4% from 2002 to 2001.
The decrease in admissions revenue, when associated discounts are added
back, approximates the decline in attendance of 11%. Other operating revenue
consists of food and beverage, program sales, lottery, parking and gift shop
sales. It stood at approximately $770,000 for the three months ended June 30,
2002 decreasing by approximately $50,000 from approximately $820,000 for the
three months ended June 30, 2001. Parimutuel commission for the three months
ended June 30, 2002 included approximately $34,000 deposited into the Greyhound
Capital Improvements Trust Fund, $52,000 deposited into the Greyhound
Promotional Trust Fund, and $24,000 deposited into the Greyhound Adoption Trust
Fund. During same period of 2001 these figures amounted to $64,000, $64,000, and
$0, respectively.
OPERATING EXPENSES
Operating expenses of approximately $4.1 million for the three months
ended June 30, 2002 decreased by approximately $406,000 from approximately $4.5
million for the three months ended June 30, 2001. A credit of approximately
$140,000 on utilities costs related to prior years and salary cost reductions
were primarily responsible for the decrease.
INTEREST EXPENSE
Interest expense decreased by approximately $91,000 for the three
months ended June 30, 2002 from $184,000 in the three months ended June 30, 2001
to approximately $92,000 in the three months ended June 30, 2002. The decrease
is the result of interest accrued in 2001 on the litigations settlement with a
totalisator vendor that is described in "Legal Proceedings" in the Company's
Annual Report on Form 10-K for the year ended December 31, 2001.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased approximately $27,000 to
$155,000 in the three months ended June 30, 2002, from $128,000 in the
comparable period in 2001. The increase is the result of capital additions to
the racing facility.
INCOME TAX PROVISION
The Company's provision for income taxes was less than the statutory
federal tax rate of 34% during the first six months of 2002 and 2001 primarily
due to the utilization of available net operating loss carryforwards in 2002 and
the net loss in 2001. The provision for taxes of $27,000 and $33,000 in the
first six months of 2002 and 2001, respectively, represents estimated state
taxes.
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
JUNE 30, 2002
The table below illustrates certain key statistics for Wonderland Park,
the Company's greyhound racing operation, for the six months ended June 30, 2002
and 2001.
2002 2001
-------- --------
Performances 167 172
Simulcast days 181 180
Pari-mutuel handle (thousands)
Live-on track $8,717 $10,818
Live-simulcast 16,349 17,636
Guest-simulcast 25,313 25,764
-------- --------
$ 50,379 $54,218
======== ========
Total attendance 135,850 147,441
Average per capita on site wagering $250 $248
OPERATING REVENUE
Total operating revenue declined by $421,000 to $8.24 million in the
six months ended June 30, 2002 as compared to $8.66 million in the six months
ended June 30, 2001. Parimutuel commissions declined by 5.0% from $7.07 million
to $6.72 million during the same period. Total handle in the first six months of
2002 was approximately $50.4 million as compared to $54.2 million in 2001.
Live-on track handle decreased 19% or about $2.1 million from $10.8 million in
2001 to $8.7 million in 2002, with an average attendance of approximately 813
persons in 2002 compared to 857 persons in 2001. Live-simulcast handle decreased
by $1.3 million or 7% in the first six months of 2002. Guest-simulcast handle
decreased by $451,000 or 2% from 2001.
The decrease in admissions revenue, when associated discounts are added
back, approximates the decline in attendance of 8%. Other operating revenue
consists of food and beverage, program sales, lottery, parking and gift shop
sales. It stood at approximately $1,432,000 for the six months ended June 30,
2002 decreasing by approximately $51,000 from approximately $1,484,000 for the
six months ended June 30, 2001. Parimutuel commission for the six months ended
June 30, 2002 included approximately $68,000 deposited into the Greyhound
Capital Improvements Trust Fund, $100,000 deposited into the Greyhound
Promotional Trust Fund, and $44,000 deposited into the Greyhound Adoption Trust
Fund. During same period of 2001 these figures amounted to $124,000, $124,000,
and $0, respectively.
OPERATING EXPENSES
Operating expenses of approximately $7.9 million for the six months
ended June 30, 2002 decreased by approximately $655,000 from approximately $8.5
million for the six months ended June 30, 2001. A credit on utilities costs of
approximately 140,000 related to prior years and salary cost reductions were
primarily responsible for the increase.
INTEREST EXPENSE
Interest expense decreased by approximately $65,000 for the six months
ended June 30, 2002 from $292,000 in the six months ended June 30, 2001 to
approximately $227,000 in the six months ended June 30, 2002. The increase is
the result of interest accrued in 2001 on the litigations settlement with a
totalisator vendor that is described in "Legal Proceedings" in the Company's
Annual Report on Form 10-K, for the year ended December 31, 2001.
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
JUNE 30, 2002
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased approximately $32,000 to
$289,000 in the six months ended June 30, 2002, from $257,000 in the comparable
period in 2001. The increase is the result of capital additions to the racing
facility.
INCOME TAX PROVISION
The Company's provision for income taxes was less than the statutory
federal tax rate of 34% during the first six months of 2002 and 2001 primarily
due to the utilization of available net operating loss carryforwards in 2002 and
the net loss in 2001. The provision for taxes of $27,000 and $33,000 in the
first six months of 2002 and 2001, respectively, represents estimated state
taxes.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2002, the Company had a working capital deficit of
approximately $1.7 million, and a stockholders' deficiency of approximately
$325,000. Historically, the Company's primary sources of capital to finance its
businesses have been its cash flow from operations and credit facilities. The
Company's capital needs are primarily for maintenance and enhancement of the
racing facility at Wonderland, and for debt service requirements. The Company's
cash and cash equivalents totaled approximately $73,000 at June 30, 2002,
compared with $12,000 at December 31, 2001. The Company generated cash flows
from operations of approximately $397,000 during the first six months of 2002 as
compared to $69,000 during the corresponding period in 2001. Non-cash items
included in the Company's net income in the first six months of 2002 consist of
depreciation and amortization expense of $289,000. Changes in working capital
accounts including restricted cash, accounts payable and other accrued
liabilities generated approximately $27,000 of cash in the first six months of
2002.
Net cash used in investing activities in 2002 of approximately $505,000
represents investments and additions to the property, plant and equipment.
Financing activities in 2002 include $241,000 of funds used to reduce
outstanding balances on long-term debt.
The Company is currently undertaking a capital improvements program to
improve its track and patron facilities. It is anticipated that these
expenditures will be fully funded by the Capital Improvement Trust fund and a
1999 grant program contained in the racing bill that was passed by the
legislature in November 2001.
The Company has recently received a commitment letter for a $6,500,000
loan from a financial institution. A portion of the proceeds of this loan will
be used to refinance the Company's current credit facility. The Company
anticipates that this transaction will be consummated in the third quarter of
2002, subject to the satisfaction of the terms and conditions set out in the
commitment letter.
The Company received a short-term working capital advance from Charles
F. Sarkis, an officer of the Company, of $300,000 in March 2002. This funding
accrues interest at a rate of 12% and is payable on demand. It is anticipated
that a portion of the proposed $6,500,000 loan will be used to repay this
capital advance.
The Company believes that it will generate enough cash from operations
to satisfy its anticipated obligations during 2002.
CRITICAL ACCOUNTING POLICIES
In accordance with the U.S. Securities and Exchange Commission Release
Nos. 33-8040, 34-45149 and FR-60, the Company's Critical Accounting Policies
are as follows:
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
JUNE 30, 2002
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. Estimates that could impact on the Company's results of
operations include those relating to settlement of liabilities related to
discontinued operations, contractual obligations and other accrued expenses.
Actual results could differ from those estimates.
ESCROWED CASH
Escrowed 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 funds these costs and
requests reimbursements from the trust funds. Wonderland is reimbursed upon
approval by the Commonwealth.
REVENUE RECOGNITION
The Company's annual revenues are mainly derived from the net
commission that it receives from wagers made by patrons during its live-on track
racing performances, live and guest-simulcast racing performances and from
admission and concession charges at such performances. Inter-track receivables
and payables are dependent on the accuracy of an independent totalistar vendor.
This vendor's system has been independently reviewed and deemed reliable.
FORWARD-LOOKING STATEMENTS
Certain statements contained throughout this quarterly 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
foward-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 employment 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 EXPENDITURES NEEDS AND PROVIDE FOR ITS OBLIGATIONS, AND (III) THE
STATEMENTS CONTAINED IN THIS ITEM.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has no material exposure to market risk that could affect
its future results of operations and financial condition. Risks and
uncertainties, including those not presently known to us or that we currently
deem immaterial, may impair our business. The Company does not use derivative
products and does not have any material monetary assets. (See Item 2, "Liquidity
and Capital Resources").
The preceding discussion of the financial condition and results of
operations of the Company should be read in conjunction with the interim
condensed consolidated financial statements and the notes thereto included in
Part I, Item 1 of this Quarterly Report on Form 10-Q and the consolidated
financial statements and notes thereto contained in the Company's Annual Report
on Form 10-K for the year ended December 31, 2001.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
JUNE 30, 2002
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit
Exhibit
Number Description
------- -----------
(27) Financial Data Schedule.
(99.1) Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
None
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
JUNE 30, 2002
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
JUNE 30, 2002
- --------------------------------------------------------------------------------
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE WESTWOOD GROUP, INC.
/s/ Richard P. Dalton
Date August 14, 2002 --------------------------------------
Richard P. Dalton President,
Chief Executive Officer and
Director (Principal Financial and
Accounting Officer)