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Previous: LOWE BROCKENBROUGH & TATTERSALL INC, SC 13G/A, 1996-05-14 |
Next: TEXAS NEW MEXICO POWER CO, 10-Q, 1996-05-14 |
<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 MARCH 31, 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.
Class Outstanding at March 31, 1996
- ------------------------------- -------------------------------
Common stock, without par value 1,321,226
<PAGE> 2
WESTFORD GROUP, INC.
AND SUBSIDIARY
INDEX
-----
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I - FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 1996 (unaudited) and December 31, 1995 3
Consolidated Statements of Operations for the
three months ended March 31, 1996 and 1995 (unaudited) 5
Consolidated Statements of Cash Flows for the
three months ended March 31, 1996 and 1995 (unaudited) 6
Notes to Consolidated Financial Statements (unaudited) 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
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 11
Signatures 12
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
WESTFORD GROUP, INC.
AND SUBSIDIARY
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1996 1995
------ ----------- -------------
(Unaudited)
<S> <C> <C>
Cash $ 26,744 $ 26,794
Accounts receivable - trade 312,263 316,452
Costs and estimated earnings in excess of billings on
uncompleted codification contracts 110,688 154,207
Costs of uncompleted code supplements 32,080 27,661
Deferred taxes 26,796 24,948
Other assets 3,266 2,205
----------- -----------
Total current assets 511,837 552,267
Deferred taxes 42,225 42,225
Property and equipment, net 66,617 64,044
Intangible asset, net of accumulated amortization of
$34,166 in 1996 and $33,131 in 1995 131,488 132,524
----------- ------------
Total assets $ 752,167 $ 791,060
=========== ============
(Continued)
</TABLE>
3
<PAGE> 4
WESTFORD GROUP, INC.
AND SUBSIDIARY
Consolidated Balance Sheets, Continued
<TABLE>
<CAPTION>
March 31, December 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1996 1995
------------------------------------ ----------- -------------
(Unaudited)
<S> <C> <C>
Note payable - bank $ 62,575 $ 83,594
Accounts payable 74,698 59,845
Accrued salaries, commissions and payroll taxes
payable 69,732 62,984
Billings in excess of costs and estimated earnings on
uncompleted codification contracts 13,395 41,527
Current portion of capital lease obligations 13,947 18,200
---------- ------------
Total current liabilities 234,347 266,150
Capital lease obligations, less current portion 11,534 12,771
Debenture payable 50,000 50,000
---------- -----------
Total liabilities 295,881 328,921
---------- ------------
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 (1,174,596) (1,168,743)
----------- ------------
485,429 491,282
Less: Treasury stock, at cost (112,976 common shares) (29,143) (29,143)
----------- ------------
Total shareholders' equity 456,286 462,139
----------- ------------
Total liabilities and shareholders' equity $ 752,167 $ 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
March 31,
1996 1995
---------- ----------
<S> <C> <C>
Sales $ 353,478 $ 303,092
Cost of sales 218,647 196,329
---------- ----------
134,831 106,763
---------- ----------
Selling, general and administrative expenses:
Salaries and related costs 67,645 55,171
Professional fees 27,466 17,401
Other 44,098 42,670
---------- ----------
139,209 115,242
---------- ----------
Non-operating income (expense):
Interest expense (3,322) (3,980)
Other income - 172
---------- ----------
(3,322) (3,808)
---------- ----------
Loss before income tax benefit (7,700) (12,287)
Federal income tax benefit 1,848 2,949
---------- ----------
Net loss $ (5,852) $ (9,338)
========== ==========
Net loss per common share $ (.01) $ (.01)
========== ==========
Weighted average number of common shares and equivalents
outstanding 1,666,226 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>
Three Months Ended
March 31,
1996 1995
---------- -----------
Cash flows from operating activities:
<S> <C> <C>
Net loss $ (5,852) $ (9,338)
Adjustments to reconcile net loss to cash
provided by (used in) operating activities:
Depreciation and amortization 6,938 7,144
Deferred Federal income tax benefit (1,848) (2,948)
(Increase) decrease in accounts receivable - trade 4,189 (36,795)
(Increase) decrease in costs and estimated earnings
in excess of billings on uncompleted codification
contracts 43,519 (15,311)
(Increase) decrease in costs of uncompleted code
supplements (4,419) 30
Increase in other assets (1,061) (1,029)
Increase in accounts payable 14,853 17,266
Increase (decrease) in accrued salaries,
commissions, and payroll taxes payable 6,748 (17,826)
Increase (decrease) in billings in excess of costs
and estimated earnings on uncompleted
codification contracts (28,132) 739
---------- -----------
Net cash provided by (used in)
operating activities 34,935 (58,068)
---------- -----------
Cash flows from investing activities:
Purchase of property and equipment (8,476) (5,872)
---------- -----------
Net cash used in investing activities (8,476) (5,872)
---------- -----------
(Continued)
</TABLE>
6
<PAGE> 7
WESTFORD GROUP, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows, Continued
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
---------- -----------
<S> <C> <C>
Cash flows from financing activities:
Proceeds from note payable to bank 58,981 57,314
Repayment of note payable to bank (80,000) -
Principal payments under capital lease obligations (5,490) (4,998)
---------- ----------
Net cash provided by (used in)
financing activities (26,509) 52,316
---------- ----------
Net decrease in cash (50) (11,624)
---------- ----------
Cash at December 31 26,794 37,305
---------- ----------
Cash at March 31 $ 26,744 $ 25,681
========== ==========
Supplemental cash flow disclosure:
Interest paid $ 3,322 $ 3,694
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE> 8
WESTFORD GROUP, INC.
AND SUBSIDIARY
Notes To Consolidated Financial Statements (Unaudited)
1. The Consolidated Balance Sheet as of March 31, 1996, the Consolidated
Statements of Operations for the three months ended March 31, 1996 and 1995, and
the Consolidated Statements of Cash Flows for the three 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 March 31, 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 March 31, 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.
8
<PAGE> 9
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 (Decrease)
Quarter Ended March 31,
1995-96
-------
<S> <C>
Sales $ 50,386
Cost of sales 22,318
Selling, general and administrative expenses 23,967
</TABLE>
Results of Operations
- ---------------------
The Company's business is principally carried on through its wholly-owned
subsidiary, ALP Corporation. ALP Corporation's sales increased 16.6% during the
first quarter of 1996 as compared to the first quarter of 1995. Codification
revenue of $124,371 remained relatively constant during the first quarter of
1996 as compared to $123,233 during the first quarter of 1995. Subscription
services on existing codes of ordinance increased 27.4% due to production
reorganization due to increased use of technologies. Gross margin increased
during the first quarter of 1996 as compared to the first quarter of 1995 due to
reduced overhead and production-related expenses. Cost of sales increased 11.4%
during the first quarter of 1996 as compared to the first quarter of 1995 due to
increases in production salaries and related costs, supplies and rent. Selling,
general and administrative expenses increased 20.8% during the first quarter of
1996 as compared to the first quarter of 1995 due to increases in administrative
salaries and related costs, audit, legal and professional and advertising.
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 Company's
effective capital costs may increase. Management is actively exploring further
avenues for preserving capital and improving liquidity. As of March 31, 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 July 15, 1996, and bears
interest at the banks prime rate (8.25% per annum at March 31, 1996). Management
does not know of any trends, events or uncertainties that will have or that are
reasonably likely to have material effect on the Company's liquidity, capital
resources or results of operations.
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.
9
<PAGE> 10
WESTFORD GROUP, INC.
AND SUBSIDIARY
Management's Discussion and Analysis of Financial
Condition and Results of Operations, Continued
Deferred Taxes (continued)
- --------------------------
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 know. 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 March 31, 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>
<CAPTION>
<S> <C> <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>
Inflation
- ---------
Management does not consider the impact of changing prices to be material in the
analysis of the Company's overall operations.
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.
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 Schedule
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed by the Registrant during the
quarter ended March 31, 1996.
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.
--------------------
(Company)
Date: MAY 10, 1996 By: /s/ Si Sokol
----------------------------- ----------------------------------------
Si Sokol
President,
Chairman of Board of Directors,
and Chief Executive Officer
(Principal Executive Officer)
Date: MAY 10, 1996 By: /s/ 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 26,744
<SECURITIES> 0
<RECEIVABLES> 312,263
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 511,837
<PP&E> 225,400
<DEPRECIATION> 158,783
<TOTAL-ASSETS> 752,167
<CURRENT-LIABILITIES> 234,347
<BONDS> 0
<COMMON> 871,286
0
0
<OTHER-SE> (415,000)
<TOTAL-LIABILITY-AND-EQUITY> 752,167
<SALES> 353,478
<TOTAL-REVENUES> 353,478
<CGS> 218,647
<TOTAL-COSTS> 357,856
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,322
<INCOME-PRETAX> (7,700)
<INCOME-TAX> (1,848)
<INCOME-CONTINUING> (5,852)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,852)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> 0
</TABLE>
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