<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, 1997 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, 1997
- ------------------------------- -------------------------------
Common stock, without par value 1,336,206
<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, 1997 (unaudited) and December
31, 1996 3
Consolidated Statements of Operations for the
three months ended March 31, 1997 and 1996
(unaudited) 5
Consolidated Statements of Cash Flows for the
three months ended March 31, 1997 and 1996
(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 11
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 1997 1996
- ------ ----------- --------
(Unaudited)
<S> <C> <C>
Cash $ 85,136 $138,711
Accounts receivable - trade 222,075 207,335
Costs and estimated earnings in excess of billings on
uncompleted codification contracts 152,155 120,057
Costs of uncompleted code supplements 40,708 39,161
Deferred taxes 22,073 24,762
Other assets 3,291 2,287
-------- --------
Total current assets 525,438 532,313
Deferred taxes 14,536 14,536
Property and equipment, net 67,417 58,312
Intangible asset, net of accumulated amortization of
$38,307 in 1997 and $37,272 in 1996 127,347 128,382
-------- --------
Total assets $734,738 $733,543
======== ========
(Continued)
</TABLE>
3
<PAGE> 4
WESTFORD GROUP, INC.
AND SUBSIDIARY
Consolidated Balance Sheets, Continued
<TABLE>
<CAPTION>
March 31, December 31,
Liabilities and Shareholders' Equity 1997 1996
- ------------------------------------ ----------- ----------
(Unaudited)
<S> <C> <C>
Current Liabilities:
Note payable - bank $ 3,575 $ 3,575
Accounts payable 55,931 53,453
Accrued salaries, commissions and payroll taxes
payable 62,792 66,185
Billings in excess of costs and estimated earnings on
uncompleted codification contracts (note 2) 10,707 16,626
Current portion of capital lease obligations 5,253 5,130
----------- -----------
Total current liabilities 138,258 144,969
Capital lease obligations, less current portion 6,281 7,641
Debenture payable 50,000 50,000
----------- -----------
Total liabilities 194,539 202,610
----------- -----------
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 785,619 788,739
Accumulated deficit (1,091,426) (1,099,943)
----------- -----------
565,479 560,082
Less: Treasury stock, at cost (97,996 common
shares at March 31, 1997 and 112,996
at December 31, 1996) (25,280) (29,149)
----------- -----------
Total shareholders' equity 540,199 530,933
----------- -----------
Total liabilities and shareholders'
equity $ 734,738 $ 733,543
=========== ===========
</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,
1997 1996
---------- -----------
<S> <C> <C>
Sales $ 378,267 $ 353,478
Cost of sales 187,632 218,647
----------- -----------
190,635 134,831
----------- -----------
Selling, general and administrative expenses:
Salaries and related costs 95,712 67,645
Professional fees 15,609 27,466
Other 66,505 44,098
----------- -----------
177,826 139,209
----------- -----------
Non-operating expense:
Interest expense (1,603) (3,322)
----------- -----------
(1,603) (3,322)
----------- -----------
Income (loss) before federal income tax expense 11,206 (7,700)
Federal income tax benefit (expense) (2,689) 1,848
----------- -----------
Net income (loss) $ 8,517 $ (5,852)
=========== ===========
Net income (loss) per common share $ .01 $ (.01)
=========== ===========
Weighted average number of common shares and equivalents
outstanding 1,681,039 1,666,226
----------- -----------
</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,
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 8,517 $ (5,852)
Adjustments to reconcile net income (loss)
to cash provided by (used in) operating
activities:
Depreciation and amortization 10,525 6,938
Deferred federal income tax (benefit) expense 2,689 (1,848)
(Increase) decrease in accounts receivable - trade (14,740) 4,189
(Increase) decrease in costs and estimated earnings
in excess of billings on uncompleted codification
contracts (32,098) 43,519
Increase in costs of uncompleted code supplements (1,547) (4,419)
Increase in other assets (1,004) (1,061)
Increase in accounts payable 2,478 14,853
Increase (decrease) in accrued salaries,
commissions, and payroll taxes payable (3,393) 6,748
Decrease in billings in excess of costs
and estimated earnings on uncompleted
codification contracts (5,919) (28,132)
-------- --------
Net cash provided by (used in)
operating activities (34,492) 34,935
-------- --------
Cash flows from investing activities:
Purchase of property and equipment (18,595) (8,476)
-------- --------
Net cash used in investing activities (18,595) (8,476)
-------- --------
(Continued)
</TABLE>
6
<PAGE> 7
WESTFORD GROUP, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows, Continued
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
---------- ---------
<S> <C> <C>
Cash flows from financing activities:
Proceeds from note payable to bank $ - $ 58,981
Repayment of note payable to bank - (80,000)
Principal payments under capital lease obligations (1,238) (5,490)
Issuance of treasury stock 750 -
--------- ---------
Net cash used in financing activities (488) (26,509)
--------- ---------
Net decrease in cash (53,575) (50)
--------- ---------
Cash at December 31 138,711 26,794
--------- ---------
Cash at March 31 $ 85,136 $ 26,744
========= =========
Supplemental cash flow disclosure:
Interest paid $ 1,603 $ 3,322
========= =========
</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, 1997, the Consolidated
Statements of Income for the three months ended March 31, 1997 and 1996, 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, 1997 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,
1996. The results of operations for the period ended March 31, 1997 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,
1997-96
-------
<S> <C>
Sales $ 24,789
Cost of sales (31,015)
Selling, general and administrative expenses 38,617
</TABLE>
Results of Operations
- ---------------------
The Company's business is principally carried on through its wholly-owned
subsidiary, ALP Corporation. ALP Corporation's sales increased 7.0% during the
first quarter of 1997 as compared to the first quarter of 1996, primarily due to
production efficiencies resulting from introduction of electronic technologies.
Codification revenue remained relatively constant during the first quarter of
1997 as compared the first quarter of 1996. Subscription services on existing
codes of ordinance increased 8.1% due to increased subscription sales in
electronic formats. Gross margin increased in 1997 as compared to the first
quarter of 1996 as sales increased and cost of sales declined primarily due to
reductions in production salaries and supplies. Selling, general and
administrative expenses increased 27.7% in the first quarter of 1997 as compared
to the first quarter of 1996 due to increases in administrative salaries and
related costs, licensing and filing fees, and sales related expenses.
Liquidity and Capital Commitments
- ---------------------------------
Although it is impossible to estimate accurately the future cash flow from the
operations of the Registrant's codification business, management believes the
Registrant's effective capital costs may increase. Management is actively
exploring further avenues for preserving capital and improving liquidity. As of
March 31, 1997, the Company had a revolving credit agreement with a bank to
provide a $250,000 note. The credit facility has a maturity date of May 1, 1997,
and bears interest at the banks prime rate (8.5% per annum at March 31, 1997).
The Company anticipates such agreement will be renewed. Management does not know
of any trends, events or uncertainties that will have or that are reasonably
likely to have material effect on the Registrant's liquidity, capital resources
or results of operations.
Deferred Taxes
- --------------
The Company has substantial tax loss carryforwards and temporary differences at
March 31, 1997, 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 deferred tax asset
and, accordingly, the net deferred tax asset is reduced by a valuation
allowance.
Intangible Asset
- ----------------
The excess of net assets acquired in a business combination over the purchase
price of approximately $160,000 was allocated to a database acquired. The
database is comprised of the municipal code data and related files. Provision
for amortization of the database is based on an estimated useful life of forty
years reflecting the long lives nature of municipal codes.
9
<PAGE> 10
WESTFORD GROUP, INC.
AND SUBSIDIARY
Management's Discussion and Analysis of Financial
Condition and Results of Operations, Continued
Inflation
- ---------
Management does not consider the impact of changing prices to be material in the
analysis of the Company's overall operation.
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 include 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.
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.
10
<PAGE> 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Two discrimination charges were filed by an employee against ALP Corporation
with the Federal Equal Employment Opportunity Commission ("EEOC"). In the first
charge, filed on June 21, 1996, the employee alleged discrimination in pay on
the basis of age, sex and disability. The employee also alleged denial of
accommodation for alleged disabilities and oral intimidation and harassment in
retaliation for the employee's internal complaints. In the second discrimination
charge, filed on November 21, 1996, the employee claimed American Legal
Corporation has retaliated against the employee for pursuing the first charge.
ALP Corporation has submitted responses to both discrimination charges. No
determination has been made as yet by the EEOC on either charge.
On or about January 27, 1997, a tort claim was filed on behalf of the same
employee of ALP Corporation, in the Court of Common Pleas, Hamilton County,
Ohio. The Complaint alleges that the employee's supervisors are guilty of
"intentional or negligent infliction of emotional distress" by their "verbal and
emotional abuse" of the employee. The Complaint also alleges a claim on behalf
of the employee's spouse for loss of consortium. ALP Corporation has filed an
Answer and will contest these claims vigorously since it believes it has strong
defenses to the claims.
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, 1997.
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: May 2, 1997 By: Si Sokol
-------------------- -----------------------------------------
Si Sokol
President,
Chairman of Board of Directors,
and Chief Executive Officer
(Principal Executive Officer)
Date: May 2, 1997 By: Sally Cress
-------------------- -----------------------------------------
Sally Cress
Treasurer, Secretary,
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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 85,136
<SECURITIES> 0
<RECEIVABLES> 222,075
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 525,438
<PP&E> 187,974
<DEPRECIATION> 120,557
<TOTAL-ASSETS> 734,738
<CURRENT-LIABILITIES> 138,258
<BONDS> 0
<COMMON> 871,286
0
0
<OTHER-SE> (331,087)
<TOTAL-LIABILITY-AND-EQUITY> 734,738
<SALES> 378,267
<TOTAL-REVENUES> 378,267
<CGS> 187,632
<TOTAL-COSTS> 365,458
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,603
<INCOME-PRETAX> 11,206
<INCOME-TAX> 2,689
<INCOME-CONTINUING> 8,517
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,517
<EPS-PRIMARY> .01
<EPS-DILUTED> 0
</TABLE>
