<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 June 30, 1997 Commission File Number 0-8254
---------------------- -------------------------------
WESTFORD 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 June 30, 1997
- -------------------------------- -------------------------------
Common stock, without par value 1,336,206
<PAGE> 2
WESTFORD GROUP, INC.
AND SUBSIDIARY
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
June 30, 1997 (unaudited) and December 31, 1996 3
Consolidated Statements of Operations for the three months
and six months ended June 30, 1997 and 1996 (unaudited) 5
Consolidated Statements of Cash Flows for the
six months ended June 30, 1997 and 1996 (unaudited) 6
Notes to Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
PART II - OTHER INFORMATION AND SIGNATURES
Item 1. Legal Proceedings 10
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
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
--------------------
WESTFORD GROUP, INC.
AND SUBSIDIARY
Consolidated Balance Sheets
<TABLE>
<S> <C> <C>
<CAPTION>
June 30, December 31,
Assets 1997 1996
- ------ ------ ---------
(Unaudited)
Cash $ 136,914 $ 138,711
Accounts receivable - trade 221,600 207,335
Costs and estimated earnings in excess of billings on
uncompleted codification contracts 139,324 120,057
Costs of uncompleted code supplements 42,801 39,161
Deferred taxes 13,147 24,762
Other assets 2,654 2,287
----------- ------------
Total current assets 556,440 532,313
Deferred taxes 14,536 14,536
Property and equipment, net 67,907 58,312
Intangible asset, net of accumulated amortization of
$39,343 in 1997 and $37,272 in 1996 126,312 128,382
----------- ------------
Total assets $ 765,195 $ 733,543
=========== ============
</TABLE>
(Continued)
3
<PAGE> 4
WESTFORD GROUP, INC.
AND SUBSIDIARY
Consolidated Balance Sheets, Continued
<TABLE>
<S> <C> <C>
<CAPTION>
June 30, December 31,
Liabilities and Shareholders' Equity 1997 1996
- ------------------------------------ ----------- ------------
(Unaudited)
Current liabilities:
Note payable - bank $ 3,575 $ 3,575
Accounts payable 49,498 53,453
Accrued salaries, commissions and payroll taxes
payable 75,299 66,185
Billings in excess of costs and estimated earnings on
uncompleted codification contracts 14,012 16,626
Current portion of capital lease obligations 5,379 5,130
----------- ------------
Total current liabilities 147,763 144,969
Capital lease obligations, less current portion 4,888 7,641
Debenture payable 50,000 50,000
----------- ------------
Total liabilities 202,651 202,610
----------- ------------
Commitments
Series two serial redeemable preference stock, 500 shares
authorized; none issued - -
----------- ------------
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 (1,069,081) (1,099,943)
----------- ------------
587,824 560,082
Less: Treasury stock, at cost (97,996 common shares at
June 30, 1997 and 112,996 at December 31, 1996) (25,280) (29,149)
----------- ------------
Total shareholders' equity 562,544 530,933
----------- ------------
Total liabilities and shareholders' equity $ 765,195 $ 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 Six Months Ended
June 30, June 30,
---------------------------------------------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales $ 384,016 $ 404,422 $ 762,283 $ 757,900
Cost of sales 206,793 218,413 394,425 437,060
--------- --------- --------- ---------
177,223 186,009 367,858 320,840
--------- --------- --------- ---------
Selling, general and administrative expenses:
Salaries and related costs 83,211 66,551 178,923 134,196
Professional fees 14,622 6,966 30,231 34,432
Other 46,529 67,392 113,034 111,490
--------- --------- --------- ---------
144,362 140,909 322,188 280,118
--------- --------- --------- ---------
Non-operating expense:
Interest expense 1,590 2,887 3,193 6,209
--------- --------- --------- ---------
Income before federal income tax
expense 31,271 42,213 42,477 34,513
Federal income tax expense 8,926 10,131 11,615 8,283
--------- --------- --------- ---------
Net income $ 22,345 $ 32,082 $ 30,862 $ 26,230
========= ========= ========= =========
Net income per common share $ .01 $ .02 $ .02 $ .01
========= ========= ========= =========
Weighted average number of common
shares and equivalents
outstanding 1,681,206 1,666,226 1,681,123 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>
Six Months Ended
June 30,
1997 1996
---------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 30,862 $ 26,230
Adjustments to reconcile net loss to cash
provided by operating activities:
Net realized gain on disposal of equipment - (29)
Depreciation and amortization 17,505 14,284
Deferred federal income tax expense 11,615 8,283
(Increase) decrease in accounts receivable - trade (14,265) 52,859
(Increase) decrease in costs and estimated earnings
in excess of billings on uncompleted codification
contracts (19,267) 24,721
Increase in costs of uncompleted code supplements (3,640) (1,210)
Increase in other assets (367) (632)
Decrease in accounts payable (3,955) (4,361)
Increase in accrued salaries,
commissions, and payroll taxes payable 9,114 9,555
Decrease in billings in excess of costs and estimated
earnings on uncompleted codification contracts (2,614) (20,350)
---------- -----------
Net cash provided by operating activities 24,988 109,350
---------- -----------
Cash flows from investing activities:
Purchase of property and equipment (25,031) (11,999)
Sale of equipment - 120
----------- -----------
Net cash used in investing activities (25,031) (11,879)
---------- -----------
Cash flows from financing activities:
Proceeds from note payable to bank - 68,981
Repayment of note payable to bank - (149,000)
Principal payments under capital lease obligations (2,504) (9,622)
Issuance of treasury stock 750 -
---------- ----------
Net cash used in financing activities (1,754) (89,641)
---------- ----------
Net increase (decrease) in cash (1,797) 7,830
Cash at December 31 138,711 26,794
---------- ----------
Cash at June 30 $ 136,914 $ 34,624
========== ==========
Supplemental cash flow disclosure:
Interest paid $ 3,193 $ 6,209
========== ==========
</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 Sheet as of June 30, 1997, the Consolidated
Statements of Operations for the three and six months ended June 30, 1997 and
1996, and the Consolidated Statements of Cash Flows for the six 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 June 30, 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 June 30, 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.
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
Six Months Ended June 30,
1996-97
<S> <C>
Sales $ 4,383
Cost of sales (42,635)
Selling, general and administrative expenses 42,070
</TABLE>
Results of Operations
- ---------------------
The Company's business is principally carried on through its wholly-owned
subsidiary, ALP Corporation. ALP Corporation's sales remained relatively
constant during the first six months of 1997 as compared to the first six
months of 1996 and sales decreased 5.0% during the three months ended June 30,
1997 as compared to the three months ended June 30, 1996. Codification revenue
of $245,352 decreased 3.9% during the first six months of 1997 as compared to
$255,206 during the first six months of 1996. Codification revenue decreased
from $130,835 for the three months ended June 30, 1996 as compared to $114,798
for the three months ended June 30, 1997. Subscription services on existing
codes of ordinance increased 2.8% due to revenue generated from subscription
sales in electronic formats. Subscriptions services on existing codes of
ordinances remained relatively constant during the three months ended June 30,
1997 as compared to the three months ended June 30, 1996. Gross margin
increased 14.7% during the first six months of 1997 as compared to the first
six months of 1996 due to reduced overhead and production-related expenses.
Gross margin decreased 4.7% in the three months ended June 30, 1997 as compared
to the three months ended June 30, 1996. Cost of sales decreased 9.8% during
the first six months of 1997 as compared to the first six months of 1996 due to
cost-cutting measures implemented in an effort to reduce overhead and
production-related expenses. Cost of sales decreased 5.3% due to decreases in
production salaries and related costs and supplies during the three months
ended June 30, 1997 when compared to the same period ended June 30, 1996.
Selling, general and administrative expenses increased 15.0% during the first
six months of 1997 as compared to the first six months of 1996 due to increases
in administrative salaries and related costs, and sales related expenses
associated with reassignments of production staff to sales related positions.
Selling, general and administrative expenses increased 2.5% for the three
months ended June 30, 1997 as compared to the three months ended June 30, 1996.
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
June 30, 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 April 30,
1998, and bears interest at the banks prime rate (8.5% per annum at June 30,
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
reasonable likely to have material effect on the Registrant'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 at
June 30, 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 gross deferred tax
asset and, accordingly, the gross 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-lived nature of municipal codes.
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 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's 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.
9
<PAGE> 10
WESTFORD GROUP, INC.
AND SUBSIDIARY
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 Publishing 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 emotion 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 June 30, 1997.
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.
---------------------------
(Registrant)
Date: August 6, 1997 By: Si Sokol
--------------------- ------------------------
Si Sokol
President,
Chairman of Board of Directors,
and Chief Executive Officer
(Principal Executive Officer)
Date: August 6, 1997 By: Sally Cress
--------------------- ------------------------
Sally Cress
Treasurer, Secretary,
Chief Financial Officer
and Chief Accounting Officer
(Principal Financial and Accounting Officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 136,914
<SECURITIES> 0
<RECEIVABLES> 221,600
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 556,440
<PP&E> 194,411
<DEPRECIATION> 126,504
<TOTAL-ASSETS> 765,195
<CURRENT-LIABILITIES> 147,763
<BONDS> 0
0
0
<COMMON> 871,286
<OTHER-SE> (308,742)
<TOTAL-LIABILITY-AND-EQUITY> 765,195
<SALES> 762,283
<TOTAL-REVENUES> 762,283
<CGS> 394,425
<TOTAL-COSTS> 716,613
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,193
<INCOME-PRETAX> 42,477
<INCOME-TAX> 11,615
<INCOME-CONTINUING> 30,862
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,862
<EPS-PRIMARY> .02
<EPS-DILUTED> 0
</TABLE>
