<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
For Quarter Ended September 30, 1996 Commission File Number 0-8254
---------------------------- -------------------------------
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)
Registrant's telephone number including area code (614) 228-2800
----------------
None
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
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.
<TABLE>
<CAPTION>
Class Outstanding at September 30, 1996
- ------------------------------- -----------------------------------
<S> <C>
Common stock, without par value 1,321,206
</TABLE>
<PAGE> 2
WESTFORD GROUP, INC.
AND SUBSIDIARY
INDEX
-----
<TABLE>
<CAPTION>
Page
<S> <C>
PART I - FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets as of September
30, 1996 (unaudited) and December 31, 1995 3
Consolidated Statements of Operations for the three months
and nine months ended September 30, 1996 and 1995 (unaudited) 5
Consolidated Statements of Cash Flows for the
nine months ended September 30, 1996 and 1995 (unaudited) 6
Notes to Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II - OTHER INFORMATION AND SIGNATURES
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 Matter to a Vote
of Security Holders Not Applicable
Item 5. Other Information Not Applicable
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
WESTFORD GROUP, INC.
AND SUBSIDIARY
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
Assets 1996 1995
------ ------------- ------------
(Unaudited)
<S> <C> <C>
Current:
Cash $108,536 $ 26,794
Accounts receivable - trade 258,287 316,452
Costs and estimated earnings in excess of billings
on uncompleted codification contracts 125,357 154,207
Costs of uncompleted code supplements 36,308 27,661
Deferred taxes 577 24,948
Other assets 2,765 2,205
-------- --------
Total current assets 531,830 552,267
Deferred taxes 42,225 42,225
Property and equipment, net 57,910 64,044
Intangible asset, net of accumulated amortization of
$36,237 in 1996 and $33,131 in 1995 129,417 132,524
-------- --------
$761,382 $791,060
======== ========
</TABLE>
(Continued)
3
<PAGE> 4
WESTFORD GROUP, INC.
AND SUBSIDIARY
Consolidated Balance Sheets, Continued
<TABLE>
<CAPTION>
September 30, December 31,
Liabilities and Shareholders' Equity 1996 1995
------------------------------------ ----------- -----------
(Unaudited)
<S> <C> <C>
Current Liabilities:
Note payable - bank $ 3,575 $ 83,594
Accounts payable 65,628 59,845
Accrued salaries, commissions and payroll taxes
payable 65,593 62,984
Billings in excess of costs and estimated earnings on
uncompleted codification contracts 20,168 41,527
Current portion of capital lease obligations 8,143 18,200
----------- -----------
Total current liabilities 163,107 266,150
Capital lease obligations, less current portion 8,969 12,771
Debenture payable 50,000 50,000
----------- -----------
Total liabilities 222,076 328,921
----------- -----------
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 788,739 788,739
Accumulated deficit (1,091,569) (1,168,743)
----------- -----------
568,456 491,282
Less: Treasury stock, at cost (112,996 common shares
at September 30, 1996 and 112,976 at December
31, 1995) (29,150) (29,143)
----------- -----------
Total shareholders' equity 539,306 462,139
----------- -----------
$ 761,382 $ 791,060
=========== ===========
</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,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $ 414,813 $ 377,819 $ 1,172,713 $ 1,082,057
Cost of sales 195,063 209,558 632,123 609,366
----------- ----------- ----------- -----------
219,750 168,261 540,590 472,691
----------- ----------- ----------- -----------
Selling, general and administrative expenses:
Salaries and related costs 86,438 45,260 220,634 147,991
Professional fees 20,207 9,196 54,639 35,157
Other 44,266 40,646 155,785 130,090
----------- ----------- ----------- -----------
150,911 95,102 431,058 313,238
----------- ----------- ----------- -----------
Nonoperating income (expense):
Interest expense (1,806) (4,728) (8,015) (13,641)
Other income -- 600 29 772
----------- ----------- ----------- -----------
Income before federal income tax
expense 67,033 69,031 101,546 146,584
Federal income tax expense 16,088 16,567 24,371 35,180
----------- ----------- ----------- -----------
Net income $ 50,945 $ 52,464 $ 77,175 $ 111,404
=========== =========== =========== ===========
Net income per common share $ .03 $ .03 $ .05 $ .06
=========== =========== =========== ===========
Weighted average number of common
shares and equivalents outstanding 1,666,217 1,661,226 1,666,223 1,664,376
----------- ----------- ----------- -----------
</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,
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 77,175 $ 111,404
Adjustments to reconcile net loss to cash
provided by (used in) operating activities:
Net realized gain on disposal of equipment (29) --
Depreciation and amortization 21,686 25,188
Deferred federal income tax expense 24,371 35,180
(Increase) decrease in accounts receivable - trade 58,165 (172,847)
(Increase) decrease in costs and estimated earnings
in excess of billings on uncompleted codification
contracts 28,850 (13,533)
(Increase) decrease in costs of uncompleted code
supplements (8,647) 1,670
Increase in other assets (560) (612)
Increase in accounts payable 5,783 13,176
Increase (decrease) in accrued salaries,
commissions, and payroll taxes payable 2,609 (18,367)
Decrease in billings in excess of costs and estimated
earnings on uncompleted codification contracts (21,359) (53,358)
--------- ---------
Net cash provided by (used in)
operating activities 188,044 (72,099)
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment (12,538) (33,651)
Sale of equipment 120 --
--------- ---------
Net cash used in investing activities (12,418) (33,651)
--------- ---------
Cash flows from financing activities:
Proceeds from note payable to bank 68,981 163,585
Repayment of note payable to bank (149,000) (70,000)
Principal payments under capital lease obligations (13,858) (15,355)
Acquisition of treasury stock (7) 250
--------- ---------
Net cash provided by (used in)
financing activities (93,884) 78,480
--------- ---------
Net increase (decrease) in cash 81,742 (27,270)
Cash at December 31 26,794 37,305
--------- ---------
Cash at September 30 $ 108,536 $ 10,035
========= =========
Supplemental cash flow disclosure:
Interest paid $ 8,015 $ 13,641
========= =========
</TABLE>
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 Sheets as of September 30, 1996, the Consolidated
Statements of Operations for the three and nine months ended September 30, 1996
and 1995, 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 the Company's 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, 1996
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,
1995. The results of operations for the period ended September 30, 1996 are not
necessarily indicative of the results of operations for the full year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
7
<PAGE> 8
WESTFORD GROUP, INC.
AND SUBSIDIARY
Item 2.
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,
-------------------------------
1995-96
-------
<S> <C>
Sales $ 90,656
Cost of sales 22,757
Selling, general and administrative expenses 117,820
</TABLE>
Results of Operations
- ---------------------
The Company's business is principally carried on through its wholly-owned
subsidiary, ALP Corporation. ALP Corporation's sales increased 8.4% during the
first nine months of 1996 as compared to the first nine months of 1995 and sales
increased 9.8% during the three months ended September 30, 1996 as compared to
the three months ended September 30, 1995, primarily due to new subscription
sales in electronic formats. Codification revenue of $398,805 decreased 6.3%
during the first nine months of 1996 as compared to $425,493 during the first
nine months of 1995. Codification revenue increased from $134,718 for the three
months ended September 30, 1995 as compared to $143,599 for the three months
ended September 30, 1996. Subscription services on existing codes of ordinance
increased 17.9% due to production reorganization resulting from increased use of
technologies. Subscriptions services on existing codes of ordinances increased
11.6% during the three months ended September 30, 1996 as compared to the three
months ended September 30, 1995. The increase is primarily due to revenues
generated from new sales of city codes in electronic formats. Gross margin
increased 14.4% during the first nine months of 1996 as compared to the first
nine months of 1995 due to reduced overhead and production-related expenses.
Gross margin increased 30.6% in the three months ended September 30, 1996 as
compared to the three months ended September 30, 1995. Cost of sales increased
3.7% during the first nine months of 1996 as compared to the first nine months
of 1995 due to increases in production salaries and related costs, supplies and
rent. Cost of sales decreased 6.9% due to decreases in printing, supplies and
insurance during the three months ended September 30, 1996 when compared to the
same period ended September 30, 1995. Selling, general and administrative
expenses increased 37.6% during the first nine months of 1996 as compared to the
first nine months of 1995 due to increases in administrative salaries and
related costs, audit, legal and professional and sales related expenses.
Selling, general and administrative expenses increased 58.7% for the three
months ended September 30, 1996 as compared to the three months ended September
30, 1995 due to increased administrative salaries and related costs, legal and
profession and sales related expenses.
Liquidity and Capital Commitments
- ---------------------------------
As of September 30, 1996, the Company had a revolving credit agreement with a
bank to provide a $250,000 note. The credit facility has a maturity date of
April 30, 1997, and bears interest at the banks prime rate (8.25% per annum at
September 30, 1996). 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 carryforwards 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.
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.
As of September 30, 1996, the Company has available unused operating loss
carryovers for federal tax and financial statement purposes of approximately
$436,000 which expire as follows:
<TABLE>
<S> <C> <C> <C>
1996 $104,000 2001 $ 17,000
1997 $ 53,000 2002 $ 19,000
1998 $ 24,000 2003 $ 23,000
1999 $ 22,000 2005 $ 34,000
2000 $ 30,000 2009 $110,000
</TABLE>
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.
Safeharbor Statement Under the Private Securities Litigation Reform Act of 1995
- -------------------------------------------------------------------------------
Except for the historical information contained herein, the matters discussed in
this Form 10-Q includes forward-looking statements that involve risks and
uncertainties, including, but not limited to, quarterly fluctuations in results,
the management of growth, and other risks detailed from time to time in the
Company's Securities and Exchange Commission filings. Actual results may differ
materially from management expectations.
Inflation
- ---------
Management does not consider the impact of changing prices to be material in the
analysis of the Company's overall operations.
9
<PAGE> 10
WESTFORD GROUP, INC.
AND SUBSIDIARY
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
Item 27 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed by the Registrant during the
quarter ended September 30, 1996.
10
<PAGE> 11
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.
--------------------
(Company)
Date: November 4, 1996 By: Si Sokol
-------------------------- ---------------------------------------
Si Sokol
President,
Chairman of Board of Directors,
and Chief Executive Officer
(Principal Executive Officer)
Date: November 4, 1996 By: Sally Cress
-------------------------- ---------------------------------------
Sally Cress
Treasurer, Secretary, and
Chief Financial Officer
and Chief Accounting Officer
(Principal Financial and Accounting Officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 108,536
<SECURITIES> 0
<RECEIVABLES> 258,287
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 531,830
<PP&E> 228,590
<DEPRECIATION> 170,680
<TOTAL-ASSETS> 761,382
<CURRENT-LIABILITIES> 163,107
<BONDS> 0
<COMMON> 871,286
0
0
<OTHER-SE> (331,980)
<TOTAL-LIABILITY-AND-EQUITY> 761,382
<SALES> 1,172,713
<TOTAL-REVENUES> 1,172,742
<CGS> 632,123
<TOTAL-COSTS> 1,063,181
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,015
<INCOME-PRETAX> 101,546
<INCOME-TAX> 24,371
<INCOME-CONTINUING> 77,175
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 77,175
<EPS-PRIMARY> .05
<EPS-DILUTED> 0
</TABLE>
