<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-8254
-------
For Quarter Ended September 30, 1995
------------------
WESTF0RD GROUP, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 31-0854431
- - - ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20 East Broad Street, Columbus, Ohio 43215
- - - ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(614) 228-2800
-------------------------------------------------
Registrant's telephone number including area code
Former name, former address and former fiscal year, if changed since last
report. None
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 twelve 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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date.
Class Outstanding at September 30, 1995
- - - ------------------------------- ---------------------------------
Common stock, without par value 1,321,226
1
<PAGE> 2
WESTFORD GROUP, INC.
AND SUBSIDIARY
INDEX
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Page No.
PART I - FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets as of
September 30, 1995 (unaudited) and December 31, 1994 3
Consolidated Statements of Operations for the three months
and nine months ended September 30, 1995 and 1994
(unaudited) 5
Consolidated Statements of Cash Flows for the
nine months ended September 30, 1995 and 1994
(unaudited) 6
Notes to Consolidated Financial Statement (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II - OTHER INFORMATION:
Item 1. Legal Proceedings Not Applicable
Item 2. Changes in Securities Not Applicable
Item 3. Default upon Senior Securities Not Applicable
Item 4. Submission of Matters to a Vote
of Security Holders Not Applicable
Item 5. Other Information Not Applicable
Item 6. Exhibits and Report on Form 8-K 11
Signatures 12
2
<PAGE> 3
WESTFORD GROUP, INC.
AND SUBSIDIARY
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
Assets 1995 1994
------ ------------- ------------
(Unaudited)
<S> <C> <C>
Current:
Cash $ 10,035 $ 37,305
Accounts receivable - trade 350,217 177,370
Costs and estimated earnings in excess of billings on
uncompleted codification contracts 143,044 129,511
Costs of uncompleted code supplements 26,695 28,365
Deferred taxes - 31,815
Other assets 2,680 2,068
------------- ------------
Total current assets 532,671 406,434
Deferred taxes 63,572 66,937
Property and equipment, net 70,891 59,323
Intangible asset, net of accumulated amortization of
$32,095 in 1995 and $28,989 in 1994 133,559 136,665
------------- ------------
$ 800,693 $ 669,359
============= ============
(Continued)
</TABLE>
3
<PAGE> 4
WESTFORD GROUP, INC.
AND SUBSIDIARY
Consolidated Balance Sheets, Continued
<TABLE>
<CAPTION>
September 30, December 31,
Liabilities and Shareholders' Equity 1995 1994
------------------------------------ ------------- ------------
(Unaudited)
<S> <C> <C>
Current Liabilities:
Note payable - bank $ 103,594 $ 10,009
Debenture payable 50,000 50,000
Accounts payable 55,200 42,024
Accrued salaries, commissions and payroll taxes
payable 54,563 72,930
Billings in excess of costs and estimated earnings on
uncompleted codification contracts 27,383 80,741
Current portion of capital lease obligations 19,221 20,718
------------- ------------
Total current liabilities 309,961 276,422
Capital lease obligations, less current portion 17,113 30,971
------------- ------------
Total liabilities 327,074 307,393
------------- ------------
Commitments
Series two serial redeemable preference stock, 500 shares
authorized - -
Shareholders' Equity:
Serial preference stock, without par value:
Series one serial preference, authorized 100 shares;
none issued - -
Class A preferred shares, par value $2,285; authorized
500 shares; none issued - -
Class B preferred shares, par value $500; authorized
4,000 shares; none issued - -
Common stock, without par value; authorized 2,000,000
shares; 1,434,202 shares issued 871,286 871,286
Additional paid-in capital 788,738 789,779
Accumulated deficit (1,157,261) (1,268,666)
------------- ------------
502,763 392,399
Less: Treasury stock, at cost (112,976 common shares
at September 30, 1995 and 117,976 at December 31,
1994) (29,144) (30,433)
------------- ------------
Total shareholders' equity 473,619 361,966
------------- ------------
$ 800,693 $ 669,359
============= ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
WESTFORD GROUP, INC.
AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine months Ended
September 30, September 30,
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales $ 377,819 $ 351,716 $1,082,057 $ 935,193
Cost of sales 209,558 208,716 609,366 541,158
--------- --------- --------- ---------
168,261 143,000 472,691 394,035
--------- --------- --------- ---------
Selling, general and administrative
expenses:
Salaries and related costs 45,260 49,470 147,991 144,890
Professional fees 9,196 11,087 35,157 35,336
Other 40,646 50,276 130,090 132,886
--------- --------- --------- ---------
95,102 110,833 313,238 313,112
--------- --------- --------- ---------
Nonoperating income (expense):
Interest expense (4,728) (5,124) (13,641) (15,667)
Other income 600 - 772 121
--------- --------- --------- ---------
Income before federal income tax
expense 69,031 27,043 146,584 65,377
Federal income tax expense 16,567 8,241 35,180 13,991
--------- --------- --------- ---------
Net income $ 52,464 $ 18,802 $ 111,404 $ 51,386
========= ========= ========= =========
Net income per common share $ .03 $ .01 $ .06 $ .03
========= ========= ========= =========
Weighted average number of common
shares and equivalents outstanding 1,666,226 1,661,226 1,664,376 1,661,226
--------- --------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
WESTFORD GROUP, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 111,404 $ 51,386
Adjustments to reconcile net income to cash
provided (used) by operating activities:
Net realized loss on sale of equipment - 189
Depreciation and amortization 25,188 20,272
Deferred federal income tax expense 35,180 13,991
Increase in accounts receivable - trade (172,847) (45,663)
Increase in costs and estimated earnings in
excess of billings on uncompleted
codification contracts (13,533) (17,300)
(Increase) decrease in costs of uncompleted
code supplements 1,670 (3,541)
(Increase) decrease in other assets (612) 70
Increase accounts payable 13,176 30,522
Decrease in accrued salaries, commissions,
and payroll taxes payable (18,367) (6,766)
Increase (decrease) in billings in excess of costs
and estimated earnings on uncompleted codification
contracts (53,358) 26,176
Increase in other liabilities - 1,390
---------- ----------
Net cash provided by (used in) operating
activities (72,099) 70,726
---------- ----------
Cash flows from investing activities:
Purchase of property and equipment (33,651) (14,271)
Sale of equipment - 210
---------- ----------
Net cash used in investing activities (33,651) (14,061)
---------- -----------
Cash flows from financing activities:
Proceeds from note payable to bank 163,585 77,309
Repayment of note payable to bank (70,000) (120,000)
Principal payments under capital lease obligations (15,355) (12,900)
Issuance of treasury stock 250 -
---------- ----------
Net cash provided by (used in) financing
activities 78,480 (55,591)
---------- ----------
Net increase (decrease) in cash (27,270) 1,074
Cash at beginning of year 37,305 16,774
---------- ----------
Cash at end of period $ 10,035 $ 17,848
========== ==========
Supplemental cash flow disclosure:
Interest paid $ 13,641 $ 15,667
========== ==========
</TABLE>
Supplemental schedule of non-cash investing and financing activities:
Capital lease obligations of $24,491 were incurred when the Company
entered into leases for new equipment in 1994.
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
WESTFORD GROUP, INC.
AND SUBSIDIARY
Notes To Consolidated Financial Statements (Unaudited)
1. The Consolidated Balance Sheet as of September 30, 1995, the Consolidated
Statements of Income for the three months and nine months ended September 30,
1995 and 1994, and the Consolidated Statements of Cash Flows for the nine
months then ended have been prepared by Westford Group Inc. (the "Company")
without an audit. In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flow at September 30, 1995 and for all
periods presented, have been made.
2. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these unaudited
Consolidated Financial Statements be read in conjunction with the financial
statements and notes thereto included in the Company's Form 10-K for the year
ended December 31, 1994. The results of operations for the period ended
September 30, 1995 are not necessarily indicative of the results of operations
for the full year.
(THIS SPACE INTENTIONALLY LEFT BLANK)
7
<PAGE> 8
WESTFORD GROUP, INC.
AND SUBSIDIARY
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Summary
- - - -------
The following table sets forth changes in certain items reflected in the
financial data as compared to the indicated prior period.
<TABLE>
<CAPTION>
Period to Period Increase
Nine Months Ended September 30,
1995-94 1994-93
--------- ---------
<S> <C> <C>
Sales $ 146,864 $ 130,836
Cost of sales 68,208 91,716
Selling, general and administrative expenses 126 59,904
</TABLE>
Results of Operations
- - - ---------------------
The Registrant's business is principally carried on through its wholly owned
subsidiary, ALP Corporation. ALP Corporation's sales increased 15.7% during
the first nine months of 1995 as compared to the first nine months of 1994.
Codification revenue increased 36.4% during the first nine months of 1995
compared to the first nine months of 1994 primarily due to the addition of
several significant customers and an accelerated marketing effort.
Subscription services on existing codes of ordinance increased 5.3% due to
increased production resulting from new codes prepared during 1994 and
production reorganization which resulted in accelerated project completions and
commencement of supplementation production. Cost of sales increased 12.6%
during the first nine months of 1995 as compared to the first nine months of
1994 due to increases in production salaries and related costs, supplies,
maintenance and shipping. Selling, general and administrative expenses
remained constant during the first nine months of 1995 as compared to the first
nine months of 1994.
ALP Corporation's sales increased 7.4% during the third quarter of 1995
compared to the third quarter of 1994. Codification revenue increased 30.2%
during the third quarter of 1995 compared to the third quarter of 1994 due to
the addition of several significant customers and the recognition of additional
revenues earned on contract escalator clauses. Subscription services on
existing codes of ordinance remained constant. Cost of sales remained constant
during the third quarter of 1995 compared to the third quarter of 1994.
Selling, general and administrative expenses decreased 14.2% during the third
quarter of 1995 as compared to the third quarter of 1994 due to decreases in
professional fees, commissions and insurance.
Liquidity and Capital Commitments
- - - ---------------------------------
Although it is impossible to estimate accurately the future cash flow from the
operations of the Company's codification business, management believes its
effective capital costs may increase. Management is actively exploring further
avenues for preserving capital and improving liquidity. As of September 30,
1995, the Company had a revolving credit agreement with a bank to provide a
$250,000 note. The credit facility has a maturity date of July 15, 1996, and
bears interest at the banks prime rate (8.75% per annum at September 30, 1995).
Management does not know of any trends, events or uncertainties that will have
or that are reasonably likely to have a material effect on the Company's
liquidity, capital resources or results of operations.
8
<PAGE> 9
WESTFORD GROUP, INC.
AND SUBSIDIARY
Management's Discussion and Analysis of
Financial Condition and Results of Operations, Continued
Deferred Taxes
- - - --------------
The Company has substantial tax loss carry forwards and temporary differences
which give rise to deferred tax assets. Based on an analysis of the likelihood
of realizing the Company's gross deferred tax asset, the Company has determined
that the recognition criteria set forth in SFAS No. 109, "Accounting for Income
Taxes", are not met for the entire gross deferred tax asset and, accordingly,
the gross deferred tax asset is reduced by a valuation allowance.
Management believes that it is more likely than not that the net deferred tax
asset at September 30, 1995 will be realized primarily through the generation
of taxable income during the loss carryforward period. This belief is derived
from an analysis of estimated future taxable income that incorporates an
increase in sales during the loss carryforward period generated by increases in
new contracts and case supplements related to the prior years' new contracts.
The Company will need to generate taxable income of approximately $95,000 a
year over the next two years in order to realize a significant portion of the
net deferred tax assets. After 1996, the amount of taxable income required to
realize the remaining net deferred tax assets is approximately $50,000 a year.
Historically, there has been an insignificant difference between pre- tax
earnings for financial reporting purposes and taxable income for income tax
purposes. As is the case with any estimate of future results, there will be
differences between assumed and actual economic and business conditions of
future periods. Moreover, the estimate may also be affected by unpredictable
future events, including, but not necessarily limited to, changes in the
Company's capital structure and future acquisitions and dispositions.
Therefore, the analysis of estimated future taxable income will be reviewed and
updated periodically and any required adjustments, which may increase or
decrease the net deferred tax asset, will be made in the period in which the
developments on which they are based become known. During 1993, the Company
reduced the valuation allowance to reflect managements's revised projection of
future taxable income resulting in a $133,837 increase to income in the fourth
quarter of 1993.
As of September 30, 1995, the Company has available unused operating loss
carryovers for Federal tax and financial statement purposes of approximately
$571,000 which expire as follows:
1995 $ 57,000 2000 $ 30,000
1996 $183,000 2001 $ 17,000
1997 $ 52,000 2002 $ 19,000
1998 $ 24,000 2003 $ 23,000
1999 $ 22,000 2005 $ 34,000
2009 $110,000
Intangible Asset
- - - ----------------
The excess of net assets acquired over the purchase price of approximately
$160,000 was allocated to the database acquired. The database is comprised of
the municipal code data and related files and has been developed internally.
Provision for amortization of the database is based on an estimated useful life
of forty years reflecting the long lived nature of municipal codes.
Inflation
- - - ---------
Despite relatively low inflation during 1995, the Company has experienced no
material adverse consequences with respect to its growth in sales.
9
<PAGE> 10
WESTFORD GROUP, INC.
AND SUBSIDIARY
Management's Discussion and Analysis of
Financial Condition and Results of Operations, Continued
Trends
- - - ------
The Company's results of operations have varied from quarter to quarter
principally because of fluctuations in production results. The Company's
experience indicates that sales increase during the second and third quarters
as a result of sales to basic code subscribers. The Company expects that such
quarterly fluctuations may lessen as the percentage of the Company's new sales
are made to clients with fiscal years other than December 31, although there
can be no assurance that this will occur.
(THIS SPACE INTENTIONALLY LEFT BLANK)
10
<PAGE> 11
WESTFORD GROUP, INC.
AND SUBSIDIARY
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
Item 27 Financial Data Scehdule
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed by the Registrant during the
quarter ended September 30, 1995.
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements 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.
WESTFORD GROUP, INC.
---------------------
(Registrant)
Date: November 3, 1995 By: Si Sokol
---------------------- -----------------------------------
Si Sokol
President,
Chairman of Board of Directors,
and Chief Executive Officer
(Principal Executive Officer)
Date: November 3, 1995 By: Sally Cress
---------------------- -----------------------------------
Sally Cress
Treasurer, Secretary, and
Chief Financial Officer
and Chief Accounting Officer
(Principal Financial and
Accounting Officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 10,035
<SECURITIES> 0
<RECEIVABLES> 350,217
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 532,671
<PP&E> 217,247
<DEPRECIATION> 146,356
<TOTAL-ASSETS> 800,693
<CURRENT-LIABILITIES> 309,961
<BONDS> 0
<COMMON> 871,286
0
0
<OTHER-SE> (397,667)
<TOTAL-LIABILITY-AND-EQUITY> 800,693
<SALES> 1,082,057
<TOTAL-REVENUES> 1,082,057
<CGS> 609,366
<TOTAL-COSTS> 715,929
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,641
<INCOME-PRETAX> 146,584
<INCOME-TAX> 35,180
<INCOME-CONTINUING> 111,404
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 111,404
<EPS-PRIMARY> .06
<EPS-DILUTED> 0
</TABLE>
