<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, 1999 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, 1999
- ------------------------------- -------------------------------
Common stock, without par value 1,368,706
<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, 1999 (unaudited) and December
31, 1998 3
Consolidated Statements of Operations for the
three months ended March 31, 1999 and 1998
(unaudited) 5
Consolidated Statements of Cash Flows for the
three months ended March 31, 1999 and 1998
(unaudited) 6
Notes to Consolidated Financial Statements (unaudited) 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About
Market Risk Not Applicable
PART II - OTHER INFORMATION AND SIGNATURES
Item 1. Legal Proceedings Not Applicable
Item 2. Changes in Securities and Use of Proceeds 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 1999 1998
- ------ ----------- -------------
(Unaudited)
<S> <C> <C>
Cash $ 341,485 $ 400,983
Accounts receivable - trade 331,624 260,340
Estimated earnings in excess of billings on
uncompleted codification contracts 141,009 135,364
Costs of uncompleted code supplements 16,540 13,331
Other assets 6,221 5,853
----------- ------------
Total current assets 836,879 815,871
Property and equipment, net 87,206 42,571
Intangible asset, net of accumulated amortization of
$46,590 in 1999 and $45,555 in 1998 119,064 120,100
----------- ------------
Total assets $ 1,043,149 $ 978,542
=========== ============
(Continued)
</TABLE>
3
<PAGE> 4
WESTFORD GROUP, INC.
AND SUBSIDIARY
Consolidated Balance Sheets, Continued
<TABLE>
<CAPTION>
March 31, December 31,
Liabilities and Shareholders' Equity 1999 1998
- ------------------------------------ ----------- -------------
(Unaudited)
<S> <C> <C>
Current Liabilities:
Accounts payable $ 76,107 $ 95,557
Accrued salaries, commissions and payroll taxes
payable 99,449 102,577
Accrued legal and professional - 6,845
Billings in excess of estimated earnings on
uncompleted codification contracts 83,488 39,142
Current portion of capital lease obligations 502 2,002
Deferred taxes 17,740 3,293
Deferred revenue 745 15,323
Other accrued liabilities 10,369 8,352
---------- ------------
Total current liabilities 288,400 273,091
Debenture payable 50,000 50,000
---------- ------------
Total liabilities 338,400 323,091
---------- ------------
Commitments and contingent liabilities
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 782,360 782,499
Accumulated deficit (932,001) (976,925)
---------- ------------
721,645 676,860
Less: Treasury stock, at cost (65,496 common
shares at March 31, 1999 and 82,996
at December 31, 1998) (16,896) (21,409)
----------- ------------
Total shareholders' equity 704,749 655,451
----------- ------------
Total liabilities and shareholders'
equity $ 1,043,149 $ 978,542
=========== ============
</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,
1999 1998
---------- ----------
<S> <C> <C>
Sales $ 488,291 $ 417,962
Cost of sales 234,352 204,383
---------- ----------
253,939 213,579
---------- ----------
Selling, general and administrative expenses:
Salaries and related costs 96,336 72,030
Professional fees 28,162 31,290
Other 68,790 47,110
---------- ----------
193,288 150,430
---------- ----------
Non-operating expense:
Interest expense (1,281) (1,497)
---------- ----------
(1,281) (1,497)
---------- ----------
Income before federal income tax expense 59,370 61,652
Federal income tax expense 14,448 14,974
---------- ----------
Net income $ 44,922 $ 46,678
========== ==========
Net income per common share $ .03 $ .03
========== ==========
Net income per common share, assuming dilution $ .03 $ .03
========== ==========
</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,
1999 1998
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 44,922 $ 46,678
Adjustments to reconcile net income
to cash provided by (used in) operating
activities:
Depreciation and amortization 7,457 6,875
Deferred federal income tax expense 14,448 14,976
Employee stock awards 4,375 750
Increase in accounts receivable - trade (71,284) (31,143)
Increase in estimated earnings in excess of
billings on uncompleted codification contracts (5,645) (1,171)
(Increase) decrease in costs of uncompleted code
supplements (3,209) 7,971
Increase in other assets (368) (1,079)
Increase (decrease) in accounts payable (19,450) 5,449
Decrease in accrued salaries, commissions, and payroll
taxes payable (3,128) (10,195)
Decrease in accrued legal and professional (6,845) (24,000)
Increase in billings in excess of estimated earnings
on uncompleted codification contracts 44,346 5,348
Decrease in deferred revenue (14,578) (10,555)
Increase in other accrued liabilities 2,017 -
----------- ----------
Net cash provided by (used in)
operating activities (6,942) 9,904
----------- ----------
Cash flows from investing activities:
Purchase of property and equipment (51,061) (724)
----------- ----------
Net cash used in investing activities (51,061) (724)
----------- ----------
(Continued)
</TABLE>
6
<PAGE> 7
WESTFORD GROUP, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows, Continued
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
- 1999 1998
---------- ----------
<S> <C> <C>
Cash flows from financing activities:
Principal payments under capital lease obligations $ (1,495) $ (1,360)
---------- ----------
Net cash used in financing activities (1,495) (1,360)
---------- ----------
Net increase (decrease) in cash (59,498) 7,820
---------- ----------
Cash at December 31 400,983 195,371
---------- ----------
Cash at March 31 $ 341,485 $ 203,191
========== ==========
Supplemental cash flow disclosure:
Interest paid $ 1,281 $ 1,497
========== ==========
</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 Sheets as of March 31, 1999, the Consolidated
Statements of Income for the three months ended March 31, 1999 and 1998, 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 flows at March 31, 1999 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,
1998. The results of operations for the period ended March 31, 1999 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.
3. Supplemental Disclosure For Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
---------- ----------
<S> <C> <C>
Net income $ 44,922 $ 46,678
---------- ----------
Income available to common stockholders,
assuming dilution $ 44,922 $ 46,678
---------- ----------
Weighted average common shares outstanding 1,366,373 1,350,539
Adjustments for dilutive securities:
Conversion of debentures 345,000 345,000
---------- ----------
Diluted common shares 1,711,373 1,695,539
========== ==========
Net income per common share $ .03 $ .03
Net income per common share, assuming dilution $ .03 $ .03
</TABLE>
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
Three Months Ended March 31,
-------------------------------
1998-99
-------------------------------
Amount % Change
--------- --------
<S> <C> <C>
Sales $ 70,329 16.8%
Cost of sales 29,969 14.7%
Selling, general and administrative
expenses 42,858 28.5%
</TABLE>
Results of Operations
- ---------------------
The Company's business is principally carried on through American Legal
Publishing Corporation ("ALP Corporation"), a consolidated subsidiary. ALP
Corporation's sales increased 16.8% from $417,962 during the first quarter of
1998 to $488,291 during 1999 principally due to increases in codification,
subscriber and supplementation sales. Codification revenue increased 36.1% from
$108,932 to $148,252 during the first quarter of 1998 as compared to the same
period in 1999, respectively, principally due to expanding sales in the
Company's key growth areas coming into 1999. Subscription services provided both
to governmental and emerging private industry markets increased 68.6% from
$50,219 during the first quarter of 1998 as compared to $84,703 during the same
period in 1999, respectively, due to higher subscription sales of expanded
search and retrieval software products including city league law handbooks, city
production and zoning manuals, and state statutes and manuals on CD rom.
Supplementation services on existing codes of ordinance increased 4.5% from
$261,616 during the first quarter of 1998 as compared to $273,268 during the
same period in 1999, respectively, due to maximizing revenue from existing
clients and accelerated job completions. Gross margin increased 18.9% in the
first quarter of 1999 compared to the first quarter of 1998 as sales increased
at a higher percentage rate than the percentage rate increase in cost of sales,
mainly reflecting lower costs resulting from production efficiencies. Cost of
sales increased 14.7% from $204,579 in the first quarter of 1998 as compared to
$234,352 in 1999, respectively, primarily due to increases in production
salaries, insurance and outside printing.
Liquidity and Capital Resources
- -------------------------------
Although it is impossible to estimate accurately the future cash flow from the
operations of the Company's codification business, management believes the
Company's effective capital costs may increase. All of the capital expenditures
for 1999 were funded from the Company's cash flow from operations. Equipment
additions in 1999 approximated $50,000 and were funded from the Company's cash
flow from operations. As of March 31, 1999, the Company had a revolving credit
agreement with a bank to provide a $250,000 note. The credit facility has a
maturity date of June 30, 1999 with renewal provisions, and bears interest at
the banks primary rate (7.75% per annum at March 31, 1999). 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.
9
<PAGE> 10
WESTFORD GROUP, INC.
AND SUBSIDIARY
Item 2. Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of Operations (Continued)
---------------------------------------------------------
Intangible Asset
- ----------------
The excess of net assets acquired in a business combination over the purchase
price of approximately $165,000 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 operations.
Impact of the Year 2000 Issue
- -----------------------------
The Company utilizes management information systems and software technology that
may be affected by Year 2000 issues throughout its business. During fiscal 1997,
the Company began to implement plans at both of its locations to ensure those
systems continue to meet its internal and external requirements. During fiscal
1997, the Company's Corporate office completed the installation and testing of
its internal financial systems and is Year 2000 compliant. The Corporate office
utilizes the latest version of Year 2000 compliant Platinum SQL software for its
internal financial system. All of ALP Corporation's Folio products are Year 2000
compliant. During the fourth quarter of 1998, ALP Corporation purchased the
network enhancement pack which contained Year 2000 compliance patches. The
invoicing database software is not Year 2000 compliant. The Company is in the
data gathering phase with regard to applications, database software and
hardware. The Company has a MCSE (Microsoft Certified Systems Engineer) on staff
to review the impact of its Year 2000 risks. Continuing evaluation by our MCSE
in developing contingency plans and to complete remediation work on separate
portions of the project are on-going. Expected completion of all phases is
anticipated by third quarter end, 1999. If the Company is unable to achieve Year
2000 compliance for its invoice database system, the Year 2000 would not have a
material impact on the operations of the Company as billings would be produced
with alternative procedures. The Company is developing a contingency plan for
its database software. Those plans include adapting and expanding the Company's
existing database system to be Year 2000 compliant. The cost of making these
adaptations is not expected to be material and will be expensed in the period
incurred.
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 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.
Forward-Looking Information
- ---------------------------
Statements in the preceding discussion that indicate the Company's or
management's intentions, hopes, beliefs, expectations or predictions of the
future are forwardlooking statements. Additional information concerning factors
that could cause actual results to differ materially from those suggested in the
forward-looking statements is continued under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998 filed
with the Securities and Exchange Commission, as the same may be amended from
time to time.
10
<PAGE> 11
WESTFORD GROUP, INC.
AND SUBSIDIARY
Item 2. Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of Operations (Continued)
---------------------------------------------------------
Forward-looking statements are not guarantees for performance. They involve
risks, uncertainties and assumptions. The future results and shareholder values
of the Company may differ materially from those expressed in these
forward-looking statements. Many factors that will determine these results and
values are beyond the Company's ability to control or predict. Shareholders are
cautioned not to put undue reliance on forward-looking statements. In addition,
the Company does not have an intention or obligation to update forward-looking
statements after the date hereof, even if new information, future events, or
other circumstances have made them incorrect or misleading. For those
statements, the Company claims the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995.
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 Company during the
quarter ended March 31, 1999.
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
WESTFORD GROUP, INC.
--------------------
(Company)
<TABLE>
<CAPTION>
<S> <C>
Date: May 7, 1999 By: Si Sokol
---------------------------- -------------------------------
Si Sokol
President and
Chairman of Board of Directors
(Principal Executive Officer)
Date: May 7, 1999 By: Sally Cress
----------------------------- -----------------------------------------
Sally Cress
Treasurer and Secretary
(Principal Financial and Accounting Officer)
</TABLE>
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 341,485
<SECURITIES> 0
<RECEIVABLES> 331,624
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 836,879
<PP&E> 258,051
<DEPRECIATION> 170,845
<TOTAL-ASSETS> 1,043,149
<CURRENT-LIABILITIES> 288,400
<BONDS> 0
0
0
<COMMON> 871,286
<OTHER-SE> (166,537)
<TOTAL-LIABILITY-AND-EQUITY> 1,043,149
<SALES> 488,291
<TOTAL-REVENUES> 488,291
<CGS> 234,352
<TOTAL-COSTS> 427,640
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,281
<INCOME-PRETAX> 59,370
<INCOME-TAX> 14,448
<INCOME-CONTINUING> 44,922
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 44,922
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
